EQUITABLE LIFE ASSURANCE SOC. OF US v. United States, 559-58-563-58

• Decision Date: 14 October 1966
• Docket Number: No. 559-58-563-58,253-60.,559-58-563-58
• Citation: 177 Ct. Cl. 55,366 F.2d 967
• Parties: The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES v. The UNITED STATES.
• Court: U.S. Claims Court

177 Ct. Cl. 55, 366 F.2d 967 (1966)

The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES v. The UNITED STATES.

Nos. 559-58-563-58, 253-60.

United States Court of Claims.

Decided October 14, 1966.

Daniel M. Gribbon, Washington, D. C., attorney of record, for plaintiff, Robert E. O'Malley, Covington & Burling, Washington, D. C., Stuart McCarthy, New York City, of counsel.

Martin B. Cowan, Washington, D. C., with whom was Asst. Atty. Gen. Mitchell Rogovin, for defendant, Lyle M. Turner and Philip R. Miller, Washington, D. C., of counsel.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS and COLLINS, Judges.

OPINION

DURFEE, Judge.^*

In these six cases, plaintiff is suing for refunds of income taxes paid for the years 1950-1955. Each case covers a different year.

Each of the first five cases (Nos. 559-58 through 563-58, covering the years 1950-1954) originally involved a foreign tax credit issue (paragraph 5 of the respective petitions), a prepayment fees issue (paragraphs 6 and 7 of the respective petitions), a contributions issue (paragraph 8 of the respective petitions), a depreciation issue (paragraphs 9 and 11 of the respective petitions), and an adjustment for certain reserves issue (paragraph 10 of the respective petitions). The prepayment fees issue in the five cases was considered by the court on motions by plaintiff and by defendant for a partial summary judgment. The court's decision, rendered on March 2, 1960, was favorable to defendant, with the result that plaintiff's motion for a partial summary judgment was denied, defendant's motion was allowed, and paragraphs 6 and 7 of the respective petitions were dismissed (Equitable Life Assurance Society of United States v. United States, 181 F.Supp. 241, 149 Ct. Cl. 316, cert. denied 364 U.S. 829, 81 S.Ct. 68, 5 L.Ed.2d 56 (1960)). Subsequently, the contributions and depreciation issues in the five cases were settled administratively pursuant to an agreement of the parties, and a stipulation of dismissal with respect to paragraphs 8, 9 and 11 of the respective petitions was filed on May 27, 1964.

The developments previously mentioned have left for disposition by the court the foreign tax credit issue and the adjustment for certain reserves issue in the first five cases. The sixth case (No. 253-60), covering the year 1955, involves only the foreign tax credit issue.

A joint trial was held in October 1964 for the reception of evidence bearing on the issues that had not been disposed of theretofore.

Neither side presented any evidence at the trial relative to the adjustment for certain reserves issue. Since plaintiff, as the party seeking a tax refund, has the burden of proving its right to recover on this issue (United States v. Anderson, 269 U.S. 422, 443, 46 S.Ct. 131, 70 L.Ed. 347 (1926)), paragraph 10 of the respective petitions in cases Nos. 559-58 through 563-58 are hereby dismissed for lack of prosecution. Both sides presented evidence at the trial relative to the foreign tax credit issue now before us which is involved in all six cases.

This issue is whether taxes paid by an American mutual life insurance company during the years 1950 through 1955 to Canadian provinces and the Dominion of Canada, which are based upon a percentage of premiums collected within these tax jurisdictions, are taxes paid "in lieu of a tax upon income," under Section 131 of the Internal Revenue Code of 1939, as amended. This section provided in subsections (a) and (h) that, in the case of a domestic corporation, its income tax "shall be credited with * * the amount of any income * * * taxes paid or accrued during the taxable year to any foreign country," and that "the term `income * * * taxes' shall include a tax paid in lieu of a tax upon income * * * otherwise generally imposed by any foreign country" (56 Stat. 856, 858). When the 1939 Code was superseded by the Internal Revenue Code of 1954, the provisions referred to in the preceding sentence were incorporated without substantial change in Sections 901 and 903 of the 1954 Code (68A Stat. 285, 287).

In the case of Prudential Insurance Company of America v. United States, 319 F.2d 161, 162 Ct.Cl. 55 (1963), this court found that under the pertinent Canadian statutes, Prudential in 1949 was excused from paying the respective income taxes imposed by the Dominion of Canada, and by Ontario and Quebec on the net income or net revenue of corporations, but that Prudential was required to pay, and did pay to each of these jurisdictions a tax measured by a fixed percentage of total life insurance premiums received therein.

The court concluded that the taxes on insurance premiums which Prudential paid to the three Canadian jurisdictions came within the meaning of the phrase, "a tax paid in lieu of a tax upon income," as used in Section 131(h) of the 1939 Code, as amended, and that plaintiff was entitled to utilize the premiums taxes paid in Canada as a credit against its 1949 United States income tax.

Subsequently, in Prudential Insurance Company of America v. United States, 337 F.2d 651, 167 Ct.Cl. 598 (1964), this court again considered the foreign tax credit issue with respect to premiums taxes of two percent which Prudential had paid to the Province of Ontario for the years 1950 and 1951, to the Province of Quebec for the period 1950-1956, and to the Dominion of Canada for the period 1950-1956. The foreign tax credit issue was presented to the court on motions by the parties for a partial summary judgment.

Subsections (a) and (h) of Section 131 of the 1939 Code, as amended, were superseded by Sections 901 and 903 of the 1954 Code for the latter part of the period involved in the second Prudential case, but, as indicated earlier in this opinion, there actually was no change of substance in the pertinent provisions of United States law.

The court, in its second Prudential opinion, observed (337 F.2d pp. 652, 653, 167 Ct.Cl. pp. 600-601) that the Quebec statute involved in the second case was the same statute that had been involved in the first Prudential case; that although the Ontario statute involved in the first Prudential case had been replaced by a new statute in 1950, the provisions of the two statutes relevant to the issue before the court were almost identical; and that the Dominion statutes applicable to the first Prudential case were either identical with, or very similar to, the Dominion statutes pertinent to the second Prudential case. Defendant had also argued that no mutual insurance company was regarded in Canada as a profit-making concern and subject to income tax. The court decided that American mutual life insurance companies were regarded as taxable profit-making concerns under Canadian law.

The court concluded that the decision in the first Prudential case should govern the disposition of the second case under the rule of stare decisis. Accordingly, the court granted plaintiff's motion for a partial summary judgment on the foreign tax credit issue, and denied defendant's cross-motion.

The present litigation involves claims by another American insurance company, The Equitable Life Assurance Society of the United States, for income tax refunds on the basis of premiums taxes which plaintiff paid at the rate of two percent to the Province of Ontario for the period 1950-1952, to the Province of Quebec for the period 1950-1955, and to the Dominion of Canada for the period 1950-1955. Thus, the present litigation involves the same years 1950-1955, that were involved in the second Prudential decision, except that the latter also covered the year 1956 in addition to the period 1950-1955; and it also involves a mutual life insurance company.

Although the relevant facts and statutes now before us are identical or closely similar to those in the two previous Prudential decisions, the Government now urges that the history of premiums taxes and income taxes in Canada should cause us to reverse our former position. Defendant has presented a long and exhaustive analysis of this tax history, purporting to show that as a matter of historical fact, plaintiff and other American insurance companies doing business in Canada were not exempted from the payment of Canadian income taxes because they paid premiums taxes there, and conversely, that the imposition of Canadian premiums taxes on plaintiff and other similar American insurance companies was not due to the circumstance that they were exempted from the payment of Canadian income taxes.

The Government again urges, as it did in the earlier Prudential cases, that historical analysis of the tax statutes demonstrates that Canadian premiums taxes did not come within our statutory category of "a tax paid in lieu of a tax upon income." This historical tax record was as readily available to the Government in its defense of the two previous Prudential cases as it is now in the present case. Much of this same record was presented by defendant in these two prior cases, and considered by the court. As we said in the second Prudential case (337 F.2d at p. 654, 167 Ct.Cl. at p. 604):

* * * we are persuaded by the history and terms of the various Canadian taxing acts that these premiums taxes were paid "in lieu of" income taxes imposed on others. Emphasis supplied.

Certainly, the essential element of legal continuity applicable to these three identical cases would justify us to again invoke the rule of stare decisis.

There is nothing before us to cause the court to now view either of the prior Prudential decisions as being in error; in fact, the Government never sought reconsideration or review of either decision. It is now rather late in the game for defendant to ask the court to reconsider the same issue, but in view of numerous important cases pending before the court involving the same point, public policy in this instance warrants a full review of the more extensive record of the legislative history of the Canadian tax statutes now before us.

As we...