328 U.S. 408 (1946), 707, Prudential Insurance Co. v. Benjamin

Docket NºNo. 707
Citation328 U.S. 408, 66 S.Ct. 1142, 90 L.Ed. 1342
Party NamePrudential Insurance Co. v. Benjamin
Case DateJune 03, 1946
CourtUnited States Supreme Court

Page 408

328 U.S. 408 (1946)

66 S.Ct. 1142, 90 L.Ed. 1342

Prudential Insurance Co.



No. 707

United States Supreme Court

June 3, 1946

Argued March 8, 11, 1946



1. A Statute of South Carolina imposed on foreign insurance companies as a condition on their doing business within the State an annual tax of three percent of premiums from business done within the State, without reference to the character of the transactions as interstate or local. No similar tax was imposed on South Carolina corporations.

Held, in view of the provisions of the Act of Congress of March 9, 1945, 59 Stat. 33, authorizing state regulation and taxation of the business of insurance, that the tax was not in violation of the Commerce Clause of the Federal Constitution, notwithstanding this Court's ruling in United States v. South-Eastern Underwriters Assn., 322 U.S. 533 (1944). Pp. 410-411, 422.

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2. A state tax or regulation discriminating against interstate commerce, which would be invalid under the Commerce Clause in absence of action by Congress, may be validated by the affirmative action of Congress consenting thereto. Pp. 421-427.

3. The Commerce Clause is not a limitation upon the power of Congress over interstate and foreign commerce, but a grant to Congress of plenary and supreme authority over those subjects. P. 423.

4. The state tax here involved is clearly sustained by the Act of March 9, 1945, the purpose of which was broadly to give support to the existing and future state systems for regulating and taxing the business of insurance. Pp. 427-433.

5. The power of Congress over commerce is not restricted, except as the Constitution expressly provides, by any limitation which forbids it to discriminate against interstate commerce and in favor of local trade. P. 434.

6. If authority over interstate commerce is exercised by Congress in conjunction with the States, their joint action is limited only by those provisions in the Constitution which forbid action altogether by any power or combination of powers in our governmental system. P. 434.

7. In validating the state tax here involved, the Act of March 9, 1945, is not in violation of the due process clause of the Fifth Amendment, nor of the first clause of Art. I, § 8, requiring that "all Duties, Imposts and Excises shall be uniform throughout the United States," nor of Art. I, § 1, conferring the legislative power on Congress, nor of the Tenth Amendment. Pp. 437-439.

8. As here construed, the Act of March 9, 1945, does not involve an unconstitutional delegation by Congress of its power to the States. P. 439.

207 S.C. 324, 35 S.E.2d 586, affirmed.

By an original proceeding in the Supreme Court of South Carolina, appellant challenged the validity under the Federal Constitution of a state statute which imposed a tax upon foreign insurance companies. The state court upheld the tax, 207 S.C. 324, 35 S.E.2d 586, and an appeal was taken to this Court. Affirmed, p. 440.

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RUTLEDGE, J., lead opinion

MR. JUSTICE RUTLEDGE delivered the opinion of the Court.

This case and Robertson v. California, post, p. 440, bring not unexpected sequels to United States v. South-Eastern Underwriters Assn., 322 U.S. 533. In cycle reminiscent conversely of views advanced there and in Paul v. Virginia, 8 Wall. 168, claims are put forward on the basis of the South-eastern decision to sustain immunity from state taxation and, in the Robertson case, from state regulation of the business of insurance.

The specific effect asserted in this case is that South Carolina no longer can collect taxes from Prudential, a New Jersey corporation, which, for years prior to 1945, the state had levied and the company had paid. The tax is laid on foreign insurance companies. and must be paid annually as a condition of receiving a certificate of authority to carry on the business of insurance within the state. The exaction amounts to three percent of the aggregate of premiums received from business done in South Carolina, without reference to its interstate or local character.1

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No similar tax is required of South Carolina corporations.2

Prudential insists that the tax discriminates against interstate commerce and in favor of local business, since it is laid only on foreign corporations and is measured by their gross receipts from premiums derived from business done in the state, regardless of its interstate or local character. Accordingly, it says the tax cannot stand consistently with many decisions of this Court outlawing state taxes which discriminate against interstate commerce.3 South Carolina denies that the tax is discriminatory4 or

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has been affected by the South-Eastern decision. But, in any event, it maintains that the tax is valid, more particularly [66 S.Ct. 1146] in view of the McCarran Act,5 by which it is claimed Congress has consented to continuance of this form of taxation, and thus has removed any possible constitutional objection which otherwise might exist. This Prudential asserts Congress has not done, and could not do.

The State Supreme Court has held the continued exaction of the tax not to be in violation of the commerce clause or affected by the ruling made in the South-Eastern case. 35 S.E.2d 586. That holding presents the principal basis for this appeal.


The versatility with which argument inverts state and national power, each in alternation to ward off the other's incidence,6 is not simply a product of protective self-interest. It is a recurring manifestation of the continuing necessity in our federal system for accommodating the two great basic powers it comprehends. For this Court's

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part, from Gibbons v. Ogden, 9 Wheat. 1, no phase of that process has been more continuous or at times perplexing than reconciling the paramount national authority over commerce, created by Article I, § 8 of the Constitution, with appropriate exercise of the states' reserved powers touching the same or related subject matter.7

The continuing adjustment has filled many of the great constitutional gaps of Marshall's time and later.8 But not all of the filling has been lasting. Great emphases of national policy swinging between nation and states in historic conflicts have been reflected, variously and from time to time, in premise and therefore in conclusion of particular dispositions.9 In turn, their sum has shifted and reshifted the general balance of authority, inevitably producing some anomaly of logic and of result in the decisions.

No phase has had a more atypical history than regulation of the business of insurance. This fact is important for the problems now presented. They have origin in that history. Their solution cannot escape its influence. Moreover, in law as in other phases of living, reconciliation

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of anomalous behavior, long continued, with more normal attitudes is not always easy when the time for that adjustment comes.

Essentially the problems these cases tender are of that character. It is not necessary to renew the controversy presented in [66 S.Ct. 1147] South-Eastern. Whether or not that decision properly has been characterized as "precedent-smashing,"10 there was a reorientation of attitudes toward federal power in its relation to the business of insurance conducted across state lines. Necessarily, this worked in two directions. As the opinion was at pains to note, 322 U.S. 533, 545 ff., no decision previously had held invalid an Act of Congress on the ground that such business was beyond reach of its power, because previously no attempted exercise of that authority had been brought here in litigation. But, from Paul v. Virginia to New York Life Ins. Co. v. Deer Lodge County, 231 U.S. 495, negative implication from the commerce clause was held not to place any limitation upon state power over the business, however conducted with reference to state lines. And, correlatively, this was taken widely, although not universally, to nullify federal authority until the question was squarely presented and answered otherwise in the South-Eastern case.

Whether Paul v. Virginia represented, in its day, an accommodation with or a departure from the preexisting evolution of commerce clause law, and whether its ruling, together with later ones adhering to it, remained consonant with the subsequent general development of that law, may still be debated. But all may concede that the Paul case created for the business of insurance a special, if not a wholly unique, way of thinking and acting in the regulation of business done across state lines. See Ribble, State and National Power over Commerce (1937) 89, 186-187.

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The aegis of federal commerce power continued to spread over and enfold other business so conducted, in both general and specific legislative exertions. Usually this was with judicial approval, and, despite notable instances of initial hostility, the history of judicial limitation of congressional power over commerce, when exercised affirmatively, has been more largely one of retreat than of ultimate victory.11 The plain words of the grant have made courts cautious, except possibly in some of the instances noted, about nullifying positive exertions of Congress' power over this broad and hard-to-define field. At the same time, physical and economic change in the way commerce is carried on has called forth a constantly increasing volume of legislation exercising that power.12

Concurrently with this general expansion, however, from Paul to South-Eastern, the states took over exclusively the function of regulating the insurance business in its specific legislative manifestations. Congress legislated only in terms applicable to commerce generally, without particularized reference to insurance. At the same time, on the rationalization that insurance was not commerce, yet was business...

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