Equitable Life Assur. Soc. of United States v. Hobbs

• Decision Date: 26 June 1941
• Docket Number: 34462.
• Citation: 114 P.2d 871,154 Kan. 1
• Parties: EQUITABLE LIFE ASSUR. SOC. OF UNITED STATES v. HOBBS, Com'r of Insurance.
• Court: Kansas Supreme Court

114 P.2d 871

154 Kan. 1

EQUITABLE LIFE ASSUR. SOC. OF UNITED STATES v. HOBBS, Com'r of Insurance.

No. 34462.

Supreme Court of Kansas

June 26, 1941

Syllabus by the Court.

Tax statutes will not be extended by implication beyond the clear import of language employed therein, and their operation will not be enlarged so as to include matters not specifically embraced.

Where there is reasonable doubt as to the meaning of a taxing statute, the statute will be construed most favorably to the taxpayer.

The rule of strict construction with reference to a tax statute must be applied with due regard to the intention of the Legislature as expressed in the statute, with a view of carrying out the Legislature's purpose and intent, and in order to ascertain such purpose and intent, the provisions of tax laws, like those of other statutes, must be given a reasonable construction.

Under the statute setting forth the fees and taxes which every insurance company or fraternal benefit society organized under the laws of the state or doing business in the state must pay on premiums and under other sections of the insurance code, "annuity contracts" are "insurance contracts", and "considerations for annuity contracts" are included within the term "premiums", so that considerations received by insurance companies for annuity contracts are taxable in the same manner as premiums received for insurance. Gen.St.1935 17-202(9), 40-201, 40-252, 40-401, 40-409, 40-420.

1. Tax statutes will not be extended by implication beyond the clear import of language employed therein and their operation will not be enlarged so as to include matters not specifically embraced. Where there is reasonable doubt as to the meaning of a taxing act, it will be construed most favorably to the taxpayer.

2. The rule of strict construction must be applied with due regard to the intention of the legislature, as expressed in the statutes, with a view of carrying out their purpose and intent and in order to ascertain such purpose and intent the provisions of tax laws, like those of other statutes, must be given a reasonable construction.

3. The provisions of G.S.1935, 40-252, and other statutory provisions of the 1927 insurance code, examined, and held the lawmakers intended to include "considerations for annuity contracts" under the term "premium" and considerations received by insurance companies for "annuity contracts", are therefore taxable in the same manner as premiums received for insurance.

Original mandamus proceeding by the Equitable Life Assurance Society of the United States against Charles F. Hobbs, as Commissioner of Insurance of the State of Kansas, to require the defendant to issue a certificate of authority to the plaintiff to do business in the state for the insurance year beginning May 1, 1939, and ending May 1, 1940. Twenty-six other insurance companies stipulated to abide by the decision.

Writ denied.

WEDELL, SMITH, and HOCH, JJ., dissenting.

J. L. Hunt, Lester M. Goodell, Margaret McGurnaghan, John H. Hunt, and Geo. M. Brewster, all of Topeka, for plaintiff.

Jay S. Parker, Atty. Gen., C. Glenn Morris, Sp. Asst. Atty. Gen., and Oscar Raines, Ralph F. Glenn, Wendell B. Garlinghouse, and Warren W. Shaw, all of Topeka, for defendant.

WEDELL Justice.

This is an original proceeding in mandamus brought by the Equitable Life Assurance Society of the United States, a New York corporation, against Charles F. Hobbs, as commissioner of insurance of the state of Kansas, to require him to issue a certificate of authority to plaintiff to do business in the state of Kansas for the insurance year beginning May 1, 1939, and ending May 1, 1940.

The defendant commissioner refused to issue the certificate unless plaintiff first paid back taxes he claimed to be due on "annuity contracts" sold by plaintiff in Kansas between January 1, 1927, and December 31, 1938, inclusive. It was defendant's contention plaintiff was required by the provisions of G.S.1935, 40-252, to pay annually a two percent tax on considerations received by it for "annuity contracts" sold in this state. His contention was based upon the theory such considerations constituted "premiums" within the intent of the statute. It was plaintiff's contention the statute did not expressly provide for the payment of a tax on "considerations received for annuity contracts" and was intended to require only a tax on "premiums" paid for insurance contracts, and that the "annuity contracts" in issue were not insurance contracts and in no event insurance upon the lives of persons therein named. Plaintiff further contended that considerations received from annuitants on "annuity contracts" did not constitute premiums in the proper sense of that term. It refused to pay the tax and the instant action followed. This court granted an alternative writ and issued a temporary order authorizing the company to continue business pending the determination of this lawsuit. The order included other companies similarly situated. Twenty-six other insurance companies have stipulated to abide by the instant decision. A list of such companies is appended to this opinion and is made a part hereof as fully and to the same extent as if the names were incorporated herein.

G.S.1935, 40-252, is a part of the 1927 insurance code. The first demand by defendant on plaintiff to pay a tax on "considerations received for annuity contracts" was made on May 25, 1936. At all times prior and subsequent thereto plaintiff paid the required tax on premiums collected for life insurance policies sold in this state.

The general character of the particular contracts involved will be stated presently. We shall first consider plaintiff's general contentions. It concedes its survivorship annuity contracts are essentially life insurance policies and that considerations it has received for such policies are taxable under the statute. Taxes on those contracts have always been paid by plaintiff and are not in dispute in the instant case. Plaintiff contends its other annuity contracts are essentially provisions for life, and not for death. It argues they are not properly speaking indemnities for death, as are life insurance policies, but are essentially investments for life, and that the consideration received by it for such annuity contracts is not a premium in the proper acceptation of that term. The statute involved is G.S.1935, 40-252. The pertinent portions thereof provide: "Every insurance company or fraternal benefit society organized under the laws of this state or doing business in this state shall pay to the commissioner of insurance fees and taxes specified in the following schedules: ***."

Subdivision B thereof reads: "As a condition precedent to the issuance of the annual certificate of authority, provided in this code, every company organized under the laws of any other state of the United States or of any foreign country shall pay a tax upon all premiums received during the preceding year at the rate of two percentum per annum: Provided, however, In the computation of the gross premiums all such companies shall be entitled to deduct therefrom any premiums returned on account of cancellation and all premiums received for reinsurance from any other company authorized to do business in this state."

The statute further provides: "For the purposes of insuring the collection of the tax upon premiums as set out in subsection B hereof, every insurance company or association shall at the time it files its annual statement, as required by the provisions of section 40-225, make a return, verified by affidavits of its president and secretary or other chief officers, to the commissioner of insurance, stating the amount of all premiums received by the companies in this state, whether in cash or notes, during the year ending on the thirty-first day of December next preceding. Upon the receipt of such returns the commissioner of insurance shall verify the same and assess the taxes upon such companies or associations on the basis and at the rate provided herein and such taxes shall thereupon become due and payable." (Italicized portions represent emphasis placed on statute by plaintiff.)

Plaintiff contends the statute clearly discloses the lawmakers did not contemplate or intend to tax "considerations for annuity contracts" or they would have said so in plain language. It asserts this intent is further clearly indicated by subdivision B, which in part pertains to the computation of gross premiums and provides for deductions of premiums returned on account of cancellations and all premiums received from reinsurance from any other company authorized to do business in this state.

Plaintiff insists the legislature of this state has always distinguished between the insurance of human life and the business of dealing in annuities. It directs our attention to the statute which declares the separate and distinct purposes for which corporations may be created and to the statute which specifies the purposes for which insurance companies may be created. The pertinent portion of G.S.1935, 17-202, provides: "The purpose for which private corporations may be formed are: *** (9) The insurance of human life and dealing in annuities."

The pertinent portion of G.S.1935, 40-401, reads: "Any ten or more persons, a majority of whom are citizens of this state, may associate in accordance with the provisions of this code and form an incorporated company, upon either the stock or mutual plan, to make insurance upon the lives of persons and every insurance appertaining thereto or connected therewith, and to grant, purchase or dispose of annuities: ***." (Emphasis supplied.)

Plaintiff urges the definite separation by the lawmakers of those two distinct purposes...