Northwestern Mut Life Ins Co v. State of Wisconsin

• Decision Date: 20 May 1918
• Docket Number: No. 240,240
• Citation: 38 S.Ct. 444,247 U.S. 132,62 L.Ed. 1025
• Parties: NORTHWESTERN MUT. LIFE INS. CO. v. STATE OF WISCONSIN
• Court: U.S. Supreme Court

247 U.S. 132

38 S.Ct. 444

62 L.Ed. 1025

NORTHWESTERN MUT. LIFE INS. CO.

v STATE OF WISCONSIN.

No. 240.

Argued March 22, 1918.

Decided May 20, 1918.

Mr. Harry L. Butler, of Madison, Wis., for plaintiff in error.

Mr. Walter Drew, of Milwaukee, Wis., for the State of Wisconsin.

Mr. Justice DAY delivered the opinion of the Court.

This suit was brought to recover certain taxes or license fees paid by the Northwestern Mutual Life Insurance Company to the state of Wisconsin; the same were paid under protest, and this action was to recover $482,193.23 paid in 1912, and $505,643.22 in 1913. The case was decided in the Supreme Court of Wisconsin, upon demurrer to the original and amended complaints, and judgment was rendered in favor of the state. 163 Wis. 484, 155 N. W. 609, 158 N. W. 328.

The taxes in question were collected under the statutes of Wisconsin. Section 1220, Wis. Stats. of 1911, being section 51.32 of the later Stats.; section 1221, now section 51.33, being the so-called retaliatory law; section 1222, subsec. 5 of section 1947; and section 1948.

The substance of the statute immediately involved is thus stated by the plaintiff in error:

'Every company * * * transacting the business of life insurance within this state (excepting only such fraternal societies as have lodge organizations and insure only the lives of their own members) shall annually, on or before March 1, pay 'in lieu of all taxes for any purpose authorized by the laws of this state (except taxes on real estate), certain prescribed license fees for transacting such business."

It appears that fraternal societies with lodge organizations insuring only the lives of their own members are not subject to this tax, and foreign level premium companies, similar to the plaintiff in error, are subject to an annual tax of but $300.00 liable to increase under the so-called retaliatory law according as other states impose like taxes on similar companies of Wisconsin. Assessment and stipulated premium companies, domestic and foreign, are taxed $300.00, or as to foreign companies such larger amounts as may be proposed under the retaliatory law. The license when granted authorizes the company to transact business until the first of March of the ensuing year unless sooner revoked or forfeited.

The contentions of a federal nature, raised by the plaintiff in error, are that this license tax imposes an unlawful burden upon interstate commerce in contravention of section 8, article 1 of the federal Constitution; that it violates the Fourteenth Amendment in denying the equal protection of the laws to the Northwestern Company by arbitrarily discriminating against it and in favor of foreign insurance companies, and between it and fraternal associations, both domestic and foreign; that it violates the Fourteenth Amendment in imposing an arbitrary, discriminatory, and confiscatory burden upon the Northwestern Company.

As to the annual license fee, it is made up as follows:

'Domestic Companies. (1) If such company, corporation or association is organized under th laws of this state, and is not purely an assessment or stipulated premium plan company under chapter 270, Laws of 1899 (section 1955-1), 3 per centum of its gross income from all sources for the year ending December thirty-first, next prior to said first day of March, excepting therefrom income from rents of real estate, upon which said company, corporation or association has paid the taxes assessed thereon, and excepting also premiums collected outside of the state of Wisconsin on policies held by nonresidents of the state of Wisconsin. In ascertaining the income upon which such license fee shall be computed as aforesaid, no deduction shall be made from premiums, whether paid in cash or premium notes, on account of dividends allowed or paid to the insured.'

The statute also provides that such license fee shall be in lieu of all taxes for any purpose authorized by the laws of the state except taxes on real estate. The Northwestern Company was thus obliged to pay 3 per cent. of its gross income less income from rents of real estate, and less premium receipts from outside of the state.

Before entering upon a consideration of the errors assigned the nature and effect of this system of taxation must be borne in mind. The Northwestern Mutual Life Insurance Company is a corporation of the state of Wisconsin, having large reserves in that state, having a taxable situs therein. Of this statute the Supreme Court of Wisconsin said:

'It covers all the contributions which the state demands from the company or its business except real estate taxes, which are relatively small in amount. It is common knowledge that all of the great level premium insurance companies of the present day have vast reserve funds, to protect their liabilities on policies, running up into the hundreds of millions of dollars, and that these reserves are invested in interest-bearing securities, of* which real estate loans secured by mortgage generally form the largest part. In the complaint in the present case it appears that on December 31, 1911, the plaintiff had outstanding loans secured by real estate mortgages amounting to $153,562,-654.39, of which only $5,654,369.10 covered real estate in Wisconsin. It also appears that the plaintiff's income from real estate mortgages for the year ending on said last-named date amounted to $7,446,393.10 and its income from bonds to $3,172,489.58. These securities are all credits, i. e., personal property of an intangible character, the situs of which for the purposes of taxation is in this state at the residence of the corporation.'

And in the opinion on the filing of the amended complaint, added:

'In this connection it is argued that if a personal property tax had been levied on the plaintiff's reserve, consisting of securities and credits, there would have been deducted from the amount thereof, under the existing policy of the state with regard to the taxation of such property, its liabilities to policy holders, i. e., the present value of its outstanding policies valued as required by law, which is about 90 per cent., of the reserve. It is also argued that if the plaintiff had been subjected to income taxation under the state law it would have paid much less than under the 3 per cent. license fee requirement.

'We do not regard either contention as well founded. Our statutes governing the taxation of securities and credits for many years provided that there should be exempted from taxation so much thereof as 'shall equal the amount of bona fide and unconditional debts by him owing.' This provision was repealed by the Income Tax Law, which marked the abandonment of the attempt to levy personal property taxes upon that species of property. Chapter 658, Laws 1911.

'It seems entirely clear that the liability to policy holders which the plaintiff refers to is not in any sense an 'unconditional debt,' and as the policy of the state has never extended the exemption to any liability short of an unconditional debt we are unable to see any sound basis for th argument made.

'As to the contention that if the plaintiff were taxed under the income tax system its tax burden would be far less than under the present license system, we shall not attempt to go into the arguments and figures presented in detail. It is sufficient to say that we do not think it appears from the allegations of the amended complaint that the plaintiff now pays substantially greater sums than it would pay under either the income taxation system or the former personal property taxation system.

'At all events there does not affirmatively appear...