Standard Ins. Co. v. State Tax Commission

• Decision Date: 18 April 1962
• Citation: 370 P.2d 608,230 Or. 461
• Parties: STANDARD INSURANCE COMPANY, a corporation, Appellant, v. STATE TAX COMMISSION, Respondent.
• Court: Oregon Supreme Court

Page 608

370 P.2d 608

230 Or. 461

STANDARD INSURANCE COMPANY, a corporation, Appellant, v. STATE TAX COMMISSION, Respondent.

Supreme Court of Oregon, In Banc.

Argued and Submitted March 8, 1962.

Decided April 18, 1962.

Herbert C. Hardy, Portland, argued the cause for appellant. With him on the briefs were Cake, Jaureguy, Hardy, Buttler & McEwen, Portland.

Ira W. Jones, Asst. Atty. Gen., Salem, argued the cause for respondent. With him on the brief were Robert Y. Thornton, Atty. Gen., and Donald H. Burnett, Asst. Atty. Gen., Salem.

Before McALLISTER, C. J., and ROSSMAN, PERRY, SLOAN, O'CONNELL and GOODWIN, JJ.

SLOAN, Justice.

Plaintiff appeals from an order and decree of the circuit court which affirmed an order of defendant subjecting plaintiff to the Oregon corporation excise tax. A recitation of the historical beckground of the case is necessary to explain the basis of our decision.

Plaintiff was originally organized as a capital stock life insurance company in 1906. In 1929 the legislature adopted an act which permitted such a company to change its form of organization to that of a mutual life insurance company. Laws 1929, c. 308. Plaintiff utilized the right created by the act and immediately changed from a stock company to a mutual life insurance company. It has since remained. It is the only domestic mutual life insurance company in Oregon. There have been no significant changes in the scope or character of its business since 1931. Its name has been changed from Oregon Mutual Life Insurance Company to Standard Insurance Company.

Also in 1929 the legislature enacted the first corporate excise tax act. Our consideration of this case requires that we particularly notice only the section of that act which granted exemptions to the tax imposed. We are concerned with subsection 11(g) of Chapter 427, p. 622, Oregon Laws 1929. It read:

'Farmers' or other mutual hail, cyclone, fire or life insurance companies, mutual ditch or irrigation companies, mutual or cooperative telephone companies or like organizations of a purely local character, the income of which companies consists solely of assessments, dues and fees collected from the members for the sole purpose of meeting expenses.'

That subsection, including subsequent amendments, is not codified at ORS 317.080(8). It was last amended in 1957 and now reads:

'Farmers' or other mutual hail, cyclone, fire or life insurance companies, mutual ditch or irrigation companies, mutual or cooperative telephone or mutual or cooperative electric companies or like organizations, but only if 85 percent or more of the income of which companies consists of assessments, dues and fees collected from the members for the sole purpose of meeting expenses. The 1957 amendments to this subsection apply to all taxable years ending on and after August 3, 1955.'

After the excise tax act was passed in 1929, representatives of plaintiff and defendant conferred in respect to plaintiff's status as an exempt business organization within the meaning of subsection 11(g) above set out. Later, plaintiff filed a return for the year 1930 and claimed to be exempt. This return was answered by defendant with a letter dated April 1, 1931. This letter advised plaintiff that:

'Satisfactory evidence having been filed showing that Oregon Mutual Life Insurance Company comes within the class entitled to exemption under Section 11(g) [now ORS 317.080(8)], no further return will be required until the nature of its business changes, in which case a full report should be made to this office.

'Very truly yours,

'STATE TAX COMMISSION

'by /s/ RALPH WIRTH,

Auditor'

That determination remained unchanged and unquestioned until some time in 1954 or 1955. Within those years it appears that defendant's auditors reviewed plaintiff's tax status and requested that returns be filed for all years after and including 1952.

In January 1956, a conference was held between representatives of plaintiff and the tax commissioner who was then charged with the responsibility of administering the income and excise tax division of defendant. In March 1956, that commissioner orally advised the president of plaintiff to 'forget about the returns.'

In 1958 defendant's representatives made further demand on plaintiff to file returns. In order to test the matter and to avoid any sanction that might be imposed, plaintiff filed returns for the years 1954 and 1957. At the same time if filed petitions for rebate and challenged the tax before the Commission. Following a hearing defendant, on May 2, 1959, entered an opinion and order adverse to plaintiff's claim of exemption. Plaintiff sought review in the circuit court with the result already mentioned.

Although decision has not been easy in this case, the issues presented are relatively direct and simple. The issue is: Does ambiguity exist in the corporation excise tax statutes when applied to the peculiar characteristics of this mutual life insurance company? Defendant contends that there is no ambiguity. And that since there is no ambiguity the court is not 'permitted to interpret that which has no need of interpretation.' State v. Young, 1915, 74 Or. 399, 403, 145 P. 647, 649. Defendant would, therefore, bar us from looking at the legislative history and administrative interpretations of the statutes. Plaintiff, of course, finds ambiguity in several aspects of the statutes. It insists that the entire act is unworkable in respect to plaintiff's business and that legislative history and administrative interpretation compel a construction of the statutes that would exclude plaintiff from the tax. The trial court agreed with defendant and held that no ambiguity was present. In a written opinion on the case the trial judge stated that if he were permitted to review the legislative history of the act he would have decided in favor of plaintiff. We take it that defendant would not seriously challenge that same conclusion.

Plaintiff first points to ORS 317.010 to demonstrate that it is not a corporation or taxpayer as defined in that section. Although a determination that plaintiff is within the definitions contained in ORS 317.010 is not free from doubt we conclude that the decision in Central Lincoln P. U. D. v. State Tax Comm., 1960, 221 Or. 398, 405, 351 P.2d 694, would bring plaintiff within the limits of those definitions. We turn our attention, then, to the exemption statute, ORS 317.080(8). For this opinion we will look at the statute as it was amended in 1957. Material changes were made by the 1957 amendments but they do not change the basis for our decision. We should mention here, however, that the record before us of the legislative considerations of the 1957 amendments provides some evidence to support our judgment that the legislature intended plaintiff to be included in the exemption statute.

It is our conclusion that the exemption statute is not free from ambiguity. Specifically, we think a question is presented as to whether or not the limitation that '85 percent or more of the income of which companies consists of assessments, dues and fees collected from the members, for the sole purpose of meeting expenses' qualifies the 'Farmers' or other mutual hail, cyclone, fire or life insurance companies,' who are exempt from the tax. We realize that if we were to look at the statute with blinders on and see nothing more than the words written in that particular section our decision might be otherwise. But we think that we must look to the facts available to us and to other statutes which define and govern the organization and operation of the insurance companies named in the exemption statute. 2 Sutherland, Statutory Construction (Horack 3rd Ed., 1943), Ch. 45, 314 et seq.; Southern Pacific Co. v. Brown et al., 1956, 207 Or. 222, 231, 295 P.2d 861; Cabell v. Markham, 148 F.2d 737, 739 (2d Cir. 1945); Borella v. Borden Co., 145 F.2d 63, 64, 65 (2d Cir. 1945); Tillinghast v. Tillinghast, 58 App.D.C., 25 F.2d 531, 533, 534 (D.C.App.1928).

For the convenience of the reader we again copy the pertinent subsection of the exemption statute, ORS 317.080(8):

'Farmers' or other mutual hail, cyclone, fire or life insurance companies, mutual ditch or irrigation companies, mutual or cooperative telephone or mutual or cooperative electric companies or like organizations, but only if 85 percent or more of the income of which companies consists of assessments, dues and fees collected from the members for the sole purpose of meeting expenses. The 1957 amendments to this subsection apply to all taxable years ending on and after August 3, 1955.'

The statute lists five categories of business organizations that are to be exempt; some of them radically different than others in purpose and statutorily permissible organization. They are: (1) mutual insurance companies; (2) mutual ditch and irrigation companies; (3) mutual or cooperative telephone companies; (4) cooperative electric companies; (5) like organizations. As stated, the problem is created by the qualifying words 'but only if 85 percent or more of the income of which companies consists of assessments, dues and fees collected from members for the sole purpose of meeting expenses.'

Reference to the statute as it was originally enacted in 1929 discloses that the qualifications then read: '* * * or like organizations of purely local character * * *' all of whose income was from dues and assessments collected from its members. The statute was amended in 1939 as well as in 1957. The 1939 amendment reduced the dues and assessment qualifications to 85 percent of the organization's total income. The 1957 amendment added the mutual or cooperative electric companies and eliminated the 'purely local character' requirement.

We think that we cannot read this...