Commissioner of Corporations & Taxation v. Metropolitan Life Ins. Co.

• Decision Date: 03 July 1951
• Citation: 327 Mass. 582,99 N.E.2d 866
• Parties: COMMISSIONER OF CORPORATIONS & TAXATION v. METROPOLITAN LIFE INS. CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 866

99 N.E.2d 866

327 Mass. 582

COMMISSIONER OF CORPORATIONS & TAXATION v. METROPOLITAN LIFE INS. CO.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Feb. 6, 1951.

Decided July 3, 1951.

H. W. Radosky, Asst. Atty. Gen. for Commissioner.

W. A. Ryan, Boston, R. C. Evarts, Boston, for taxpayer.

Before QUA, C. J., and LUMMUS, SPALDING and WILLIAMS, JJ.

QUA, Chief Justice.

The commissioner appeals from a decision of the Appellate Tax Board abating an excise tax assessed by him upon Metropolitan Life Insurance Company, a mutual company incorporated under the laws of New York and doing business in this Commonwealth, for the year 1947, in excess of an amount previously paid by the company for that year.

The tax was assessed under G.L. (Ter.Ed.) c. 63, § 20, as appearing in St.1943, c. 531, § 1, upon premiums received by the company. In so far as here pertinent this section provides as follows: 'Every life insurance company * * * shall annually pay an excise * * * of two per cent upon all new and renewal premiums received during the preceding calendar year for all policies allocable to this commonwealth, as hereinafter provided. * * * 'The word 'premiums' as used in this section shall include all amounts received as consideration for life insurance policies without deduction for amounts paid to other companies for reinsurance and shall include dividends applied to purchase additional insurance or to shorten the premium paying period. * * * In determining the amount of the excise payable hereunder there shall be deducted, to the extent that they are properly allocable to premiums taxable hereunder, (a) all premiums returned to policyholders during said preceding calendar year but not including cash surrender values, and (b) dividends which during said year have been paid or credited to policyholders or applied to purchase additional insurance or to shorten the premium paying period.'

The company issued so called industrial weekly premium policies containing the following provision or one of identical import, 'Refund on Direct Payment of Premiums If * * * notice is given to any Office of the Company which maintains an account for receiving direct payment of premiums, that premiums will in future be paid directly to such an Office, and if premiums are so paid continuously for a period of one year without default beyond the grace period, the Company will, at the end of such year refund 10 percent of the total of the year's premiums of paid * * *.' Further details of this refunding clause are not here material. The justification for the insertion of such a clause in weekly premium industrial policies can be appreciated readily enough from the common knowledge that such policies are usually issued for small amounts to persons of limited means, and the premiums, perhaps measured in cents rather than in dollars, are commonly collected by agents who visit the homes of policyholders for that purpose. If a holder of a policy will make regular weekly payments at offices of the company without the intervention of a collecting agent the calculated cost of carrying his policy will be reduced, and he may be given the benefit of a repayment.

During the tax year in question the company repaid to holders of industrial policies who had paid their premiums at its offices, according to the provision quoted above and contained in their policies, the sum of $699,752.78 and contends that that sum represented 'premiums returned to policyholders' and so was deductible from the 'premiums received' in calculating the tax. The commissioner contends that this sum does not represent 'premiums returned,' but that rather it is a payment to the policyholder in consideration of his doing something that reduces the company's cost of operation. And so the issue is drawn.

In our opinion the statute was designed to measure the excise for the privilege of doing business in this Commonwealth by the amount of all premiums received from policyholders and not in some manner offset by repayment to policyholders. Not only does the statute expressly provide for deduction of 'all premiums returned to policyholders' (not including cash surrender values) but it provides further for the deduction of dividends paid or in any way credited to policyholders. Dividends are of course in a broad sense repayment of premiums which have proved to be larger than the safety of the policies requires. There has been a widespread tendency, at least as to life insurance companies, to hold that where an excise is measured by premiums, only such premiums are to be included as have been retained by the company and not returned. This tendency has extended even to instances where the statute bases the excise upon gross premiums, and it has also led to deduction of dividends, even where the statute has no express provision for such deduction. Some of the cases are collected in the footnote. ¹ In our own case of American Mutual Liability Ins. Co. v....