Northwestern Mut Life Ins Co v. State of Wisconsin

• Decision Date: 21 November 1927
• Docket Number: 76,Nos. 75,s. 75
• Citation: 275 U.S. 136,48 S.Ct. 55,72 L.Ed. 202
• Parties: NORTHWESTERN MUT. LIFE INS. CO. v. STATE OF WISCONSIN (two cases)
• Court: U.S. Supreme Court

275 U.S. 136

48 S.Ct. 55

72 L.Ed. 202

NORTHWESTERN MUT. LIFE INS. CO.

v STATE OF WISCONSIN (two cases).

Nos. 75, 76.

Argued Oct. 27, 1927.

Decided Nov. 21, 1927.

Messrs. Sam T. Swansen and George Lines, both of Milwaukee, Wis., for plaintiff in error.

Mr. Franklin Bump, of Madison, Wis., for the State of Wisconsin.

[Argument of Counsel from page 137 intentionally omitted] Mr. Justice McREYNOLDS delivered the opinion of the Court.

These two causes, originally brought in the circuit court of Dane county, present the same question. The plaintiff company, a corporation under the laws of Wisconsin, has long carried on therein the business of insuring lives. It seeks to recover excess taxes exacted by the state for the five years, 1918-1923. The courts below held that the exaction was proper under section 76.34, Wisconsin Statutes 1923 (section 1211.35, Stat. 1919; section 51.32, Stat. 1917). And they definitely denied the contention that so construed and applied the statute conflicted with the Constitution or laws of the United States.

Section 76.34 provides:

'Life Insurance Companies to Pay Annual License. Every company, corporation or association transacting the business of life insurance within this state, excepting only such fraternal societies as have lodge organizations and insure the lives of their own members, and no others, shall, on or before the first day of March, in each year, pay into the state treasury as an annual license fee for transacting such business the amounts following:

'(1) Domestic Companies; Three per Cent. of Gross Income. If such company, corporation or association is organized under the laws of this state, three 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 said the taxes assessed thereon, and excepting also premiums collected on policies of insurance and contracts for annuities. * * *

'(3) Power Granted by License; License Fee in Lieu of Other Taxes. Such license, when granted shall author- ize the company, corporation or association to whom it is issued to transact business until the first day of March of the ensuing year, unless sooner revoked or forfeited. The payment of such license fee shall be in lieu of all taxes for any purpose authorized by the laws of this state, except taxes on such real estate as may be owned by such company, corporation or association.'

In annual reports the company disclosed all receipts derived from interest on United States bonds and claimed they were exempt from taxation under the Constitution and laws of the United States. The revenue officers acted upon another view, and both courts below have held that they rightly disregarded the source of the receipts and properly assessed sums reckoned upon the company's entire gross income.

Counsel for the state maintain that the effect of section 76.34 is to impose upon domestic insurance companies a privilege or franchise tax, and not one on property or income; that no charge is laid upon bonds of the United States, but the fee exacted is for granted privileges, including exemption from personal property taxation and right to do business; that the state may require domestic corporations to pay privilege, franchise or license taxes measured by gross income, although partly derived from United States bonds; and that in no proper sense can the challenged tax be regarded as one directly imposed upon gross income.

They also suggest that this court has interpreted the statute and pointed out its real nature. Northwestern Mutual Life Ins. Co. v. State of Wisconsin, 247 U. S. 132, 137, 38 S. Ct. 444, 62 L. Ed. 1025. Speaking there of this same statute we did declare:

'The tax in question is, therefore, not only one for the privilege of doing life insurance business within the state, but is in effect a commutation tax, levied by the state in place of all other taxation upon the personal property of the company in the state of Wisconsin.'

But no question was then raised concerning taxation of income derived from United States bonds. The point now presented was not involved.

It cannot be denied (and denial is not attempted) that bonds of the United States are beyond the taxing power of the states. Home Savings Bank v. City of Des Moines, 205 U. S. 503, 509, 27 S. Ct. 571, 51 L. Ed. 901; Farmers & Mechanics Bank v. Minnesota, 232 U. S. 516, 34 S. Ct. 354, 58 L. Ed. 706; and First National Bank v. Anderson, 269 U. S. 341, 347, 46 S. Ct. 135, 70 L. Ed. 295. Certainly since Gillespie v. Oklahoma, 257 U. S. 501, 505, 42 S. Ct. 171, 66 L. Ed. 338, it has been the settled doctrine here that where the principal is absolutely...