Union Cent. Life Ins. Co. v. Lowe

• Decision Date: 07 October 1932
• Docket Number: 21267.,Nos. 21266,s. 21266
• Citation: Union Cent. Life Ins. Co. v. Lowe, 349 Ill. 464, 182 N.E. 611 (Ill. 1932)
• Parties: UNION CENT. LIFE INS. CO. v. LOWE, Director of Department of Trade and Commerce.
• Court: Illinois Supreme Court

349 Ill. 464

182 N.E. 611

UNION CENT. LIFE INS. CO.

v.LOWE, Director of Department of Trade and Commerce.

Nos. 21266, 21267.

Supreme Court of Illinois.

June 24, 1932.

As Modified on Denial of Rehearing Oct. 7, 1932.

Separate suits by the Union Central Life Insurance Company against Leo H. Lowe, Director of the Department of Trade and Commerce.From adverse decrees, the complainant appeals in each of the cases which were consolidated in the Supreme Court.

Decrees affirmed.

Appeals from Circuit Court, Sangamon County; Charles G. Briggle and Frank W. Burton, Judges.

Brown, Hay & Stephens, of Springfield (Logan Hay and Robert A. Stephens, Jr., both of Springfield, of counsel), for appellant.

Oscar E. Carlstrom, Atty. Gen. (B. L. Catron, of Springfield, of counsel), for appellee.

JONES, J.

The Union Central Life Insurance Company filed a bill of complaint in the circuit court of Sangamon county against Leo H. Lowe, as director of the department of trade and commerce, for a restraining order commanding him to hold to the credit of complainant the sum of $11,166.14 paid under protest as a portion of its privilege tax for the year beginning July 1, 1930, and not to pay it to the treasurer of the state of Illinois.It also filed a similar bill concerning $46,268.69 paid under protest as a part of its privilege tax for the year beginning July 1, 1931.In each case a demurrer was sustainedto the bill as amended, and the bill was dismissed for want of equity.The two proceedings come to this court by separate appeals, and have been consolidated here.

The question at issue is the proper interpretation and application of the statutes relating to the franchise or privilege tax.Appellant is a life insurance company organized under the laws of Ohio and authorized as a foreign corporation to transact business in Illinois.Section 1 of the act in relation to the taxation of nonresident insurance companies (Cahill'sRev. St. 1931, c. 73, par. 79) provides that ‘each non-resident corporation, * * * licensed and admitted to do an insurance business in this State shall, except as herein otherwise provided, pay an annual State tax for the privilege of doing an insurance business in this State, equal to two per centum on the gross amount of premiums received during the preceding calendar year on contracts covering risks within this State, * * * after deducting from such gross amount of premiums the amount of returned premiums on canceled policies covering risks within this State * * * also the amount paid for reinsurance of risks within this State to companies duly licensed to transact business in this State, and also the amount returned to holders of policies on risks within this State as dividends paid in cash or applied in the reduction of premiums.’Section 2 of the act(Cahill'sRev. St. 1931, c. 73, par. 80) provides: ‘If the laws of another state or territory shall require of insurance corporations, companies or associations organized under the laws of this State, and doing business in such other state or territory, payments for taxes, fines, penalties, certificates of authority, license fees or otherwise, on a basis or rate which will produce amounts greater than would be produced by the application of the basis or rate provided for herein and by any other laws of this State, then and in every such case insurance corporations, companies and associations of such state or territory, when admitted and licensed to do an insurance business in this State, shall be required to pay for such privilege on the same basis or rate as is imposed by the laws of such state or territory upon similar insurance corporations, companies and associations organized under the laws of this State.In the imposition of any privilege tax under this section all of the provisions of this Act, so far as applicable, shall be observed.’

The Ohio Code, § 5432, provides that every insurance company incorporated by authority of another state or government shall in its annual report set forth the gross premiums received by it from policies covered by risks in the state of Ohio during the preceding calendar year without deduction for commissions, return premiums, considerations paid for reinsurance, or any deductions whatever, together with the amount of return premiums paid for cancellations and considerations received for reinsurance in that state.Section 5433, as amended by ActMay 11, 1927, 112 Ohio Laws, p. 429, and ActFeb. 19, 1929, 113 Ohio Laws, p. 7, provides for a tax upon the business transacted in that state for the period shown by the annual statement required under section 5432, after deducting return premiums and the amount received for reinsurance.The statute fixed the rate at 3 per cent. up to February 19, 1929, and 2 1/2 per cent. after that date.It makes no provision for allowing the deduction of dividends paid in any manner.

The provisions of the statutes of both states are alike, in that they allow a deduction for returned premiums on canceled policies.They are different, in that the amount paid for reinsurance is a deductible allowance in Illinois, while in Ohio the amount received for reinsurance is deductible.In Illinois, dividends paid in cash or applied in the reduction of premiums are allowable deductions, but the Ohio statute has no such provision.

Appellant's annual report for the calendar year 1929 showed gross premiums of $4,033,869.97.Upon this sum the director of trade and commerce assessed a tax of $103,655.83.The appellant company protested the payment of $11,166.14 thereof, which it claimed should be allowed as a deduction for money paid out on reinsurance.The assessment was made under the provisions of section 2 of the Illinois act, and the tax was assessed on the basis and rate provided by the Ohio statute.Appellant insists that the tax should have been assessed under section 1 of the act, but claims that, even if the assessment was made under section 2, the company should have credit for $11,166.14 on account of amounts paid by it for reinsurance.It contends that the reinsurance companies also paid a tax of $11,166.14 on the reinsurance premiums, and therefore the assessment against appellant to that amount constitutes double taxation and is void.

As to the 1931 tax, appellant's annual report for 1930 showed gross premiums of $3,992,854.26.A deduction of $9,760.36 is claimed because the company paid out $485,318.01 for reinsurance.A deduction is also claimed on account of dividends paid out.The total tax of 1931 was calculated and assessed on the gross amount received at the rate of 2 1/2 per cent., and amounts to $99,821.36.It is likewise the contention of appellant that this tax should have been computed under section 1 of the Illinois statute at the rate of 2 per cent. on the gross amount, less the amount paid for reinsurance and...