People ex rel. City of Chicago v. Kent

• Decision Date: 22 December 1921
• Docket Number: No. 13855.,13855.
• Citation: 300 Ill. 324,133 N.E. 276
• Parties: PEOPLE ex rel. CITY OF CHICAGO v. KENT.
• Court: Illinois Supreme Court

300 Ill. 324

133 N.E. 276

PEOPLE ex rel. CITY OF CHICAGO

v.KENT.

No. 13855.

Supreme Court of Illinois.

Dec. 22, 1921.

Petition by the People, on the relation of the City of Chicago, for a writ of mandamus against Charles F. Kent. Petition dismissed, and relator appeals.

Reversed and remanded.Appeal from Circuit Court, Cook County; Frank Johnston, Jr., judge.

Samuel A. Ettelson, Corp. Counsel, and Bulkley, More & Tallmadge, all of Chicago, for appellant.

Ekern & Meyers and David K. Tone, all of Chicago, for appellee.

DUNN, J.

On July 20, 1920, a petition was filed in the circuit court of Cook county in the name of the people, on the relation of the city of Chicago, against Charles F. Kent, averring that he was the agent of 19 foreign insurance companies, which were named; that his agency and place of business were in the city of Chicago, in Cook county, and each of the insurance companies of which he was agent was doing business in the state of Illinois through his agency for the year prior to April 30, 1920, and was subject to taxation on the net receipts of his agency; that he had neglected and refused to make returns of the receipts of his agency and stated that he did not intend to do so. The petition averred that the books of the board of assessors had been passed over to the board of review, and prayed that the writ of mandamus issue against the respondent commanding him to make the return to the board of review. The respondent demurred to the petition, his demurrer was sustained, the petition was dismissed, and the relator has appealed.

The action was founded upon section 30 of the act of 1869, ‘to incorporate and govern fire, marine and inland navigation insurance companies doing business in the state of Illinois.’ Hurd's Stat. 1917, p. 1701. That section is as follows:

‘Every agent of any insurance company, incorporated by the authority of any other state or government, shall return to the proper officer of the county, town or municipality in which the agency is established, in the month of May, annually, the amount of the net receipts of such agency for the preceding year, which shall be entered on the tax lists of the county, town and municipality and subject to the same rate of taxation, for all purposes-state, county, town and municipal-that other personal property is subject to at the place where located; said tax to be in lieu of all town and municipal licenses; and all laws and parts of laws inconsistent herewith are hereby repealed: Provided, that the provisions of this section shall not be construed to prohibit cities having an organized fire department from levying a tax, or license fee, not exceeding two per cent, in accordance with the provisions of their respective charters, on the gross receipts of such agency, to be applied exclusively to the support of the fire department of such city.’

This section imposed on every foreign insurance company doing business in this state a tax different in kind from the ordinary personal property tax provided for by the general Revenue Law (Hurd's Rev. St. 1917, c. 120), which requires personal property to be listed and assessed with reference to the quantity held and owned on the 1st day of April in each year, to be assessed at a certain percentage of its full value and to be equalized by the board of review. The tax has no reference to the amount held and owned on the 1st day of April or any other day. It refers to net receipts throughout the year, only a small part of which-perhaps none-would be held or owned in this state on the 1st day of April. No provision is made for the assessment of such net receipts at less than their actual amount or their equalization with other property. On the contrary, it is directed that the amount of such net receipts shall be entered on the tax lists and subject to the same rate of taxation as other personal property. The tax is not levied on the property of the corporation by valuation, but on the net receipts of its business. The legislative authority for such a tax not by valuation is found in the enumeration in section 1 of article 9 of the Constitution of certain objectsand subjects of taxation, among which are insurance interests or business, which may be taxed by the Legislature in such manner as it shall from time to time direct by general law uniform as to the class on which it operates.

The net receipts for the year are not subject to taxation under the general Revenue Act, which refers only to such property as has a situs in the state. That act authorizes the listing and taxation only of such part of the net receipts as is on hand or in banks in the county on April 1 of each year, but does not authorize the taxation of net receipts which may have been absorbed by losses or transmitted to the home office of the company in another state before April 1. Fidelity & Casualty Co. v. Board of Review, 264 Ill. 11, 105 N. E. 704. Such part of the net receipts is taxable, not as and because it is net receipts, but as and because it is cash on hand. The effect of this decision is that, if section 30 is given the plain meaning of its language, the tax on annual net receipts is not a property tax, but a tax on the business of insurance. The case of National Fire Ins. Co. v. Hanberg, 215 Ill. 378, 74 N. E. 377, decided only that the ‘net receipts,’ as used in section 30, meant gross receipts less operating expenses, and did not authorize the deduction of fire losses. In that case the insurance company filed a bill against the county collector for an injunction against the collection of all tax extended on assessment of its net receipts under section 30 in question here. It was not possible to determine how the board of review arrived at the amount of the assessment, but, as on the complainant's own showing the amount of its net receipts was greater than the amount of the assessment unless it was entitled to deduct fire losses, the consideration of the case was limited to that one question. The bill was dismissed, but it was not decided that the method of assessment was right. In the case of People v. Cosmopolitan Fire Ins. Co., 246 Ill. 442, 92 N. E. 922, it was stated that--

‘The net receipts are personal property and are to be listed by the board of assessors and board of review and taxed the same as other property.’

This statement referred to the rate of taxation and was in accordance with section 30, which directed that the net receipts should be entered on the tax lists and subject to the same rate of taxation that other personal property is subject to. It did not refer to the character of the tax, the manner of its collection, or the question of assessment.

Net receipts are, of course, personal property and a tax on net receipts a personal tax. Every tax on property in the state of Illinois is required by the Constitution to be based upon a valuation to be made by some person or persons to be elected or appointed in such manner as the General Assembly shall direct, and the requirement of the statute is that every taxpayer shall furnish a schedule to the assessor of his taxable personal property, which it is made the duty of the assessor to appraise, and all property in the state must be listed and assessed to the owner with reference to the quantity held or owned on the 1st day of April. These regulations have no application to the tax in question here. Instead of referring to the quantity held or owned on April 1, reference is made to the total amount of the net receipts for the year ending April 30, and this, not as the subject-matter of assessment, but as the basis for computing the tax required to be paid by the insurance company, not on its property or on its profits, but upon the amount of its business.

Foreign insurance companies enjoy important privileges in the state by the exercise of which they receive large sums of money. Their business interests are very extensive, and they should contribute to the public burdens. Their physical property held or owned in the state is of slight value compared with the amount of the income derivedfrom their business. This income is not held within the state for any considerable time, and at the date fixed by law for the assessment of property for taxation none of it may be so held. Different modes of taxation have been adopted in different states at various times. In some cases a fixed annual sum has been required to be paid into the state treasury; in others an assessment of property actually held or owned; and in others the amount of business transacted by the corporation has been made the basis of taxation. The statute in question here did not require the payment of a fixed sum, but adopted as a basis for taxation, not the property of the corporation, not the net receipts on hand at a particular day or the number of policies issued or the value of property insured, but the total net receipts of the corporation for the year, regardless of the amount of losses incurred or the manner in which those net receipts have been invested or paid out or whether they are held by the corporation within the state or elsewhere. The existence of power in the Legislature to adopt any of these methods is beyond doubt, and it rests with the Legislature to determine what method shall be...