Western & Southern Life Ins. Co. v. State Bd. of Equalization
| Decision Date | 30 January 1970 |
| Citation | 84 Cal.Rptr. 88,4 Cal.App.3d 21 |
| Court | California Court of Appeals Court of Appeals |
| Parties | The WESTERN AND SOUTHERN LIFE INSURANCE COMPANY, a corporation, Plaintiff and Appellant, v. STATE BOARD OF EQUALIZATION of the State of California, Defendant and Respondent. Civ. 33497. |
Frank M. Gunter, Beverly Hills, O. C. Sattinger, Los Angeles, and Lillian S. Sattinger, Beverly Hills, for plaintiff and appellant.
Thomas C. Lynch, Atty. Gen., and Harold B. Haas, Asst. Atty. Gen., for defendant and respondent.
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This is an appeal by plaintiff, an Ohio based life insurance company, from a judgment denying its claim for refund of $120,303.93, which sum was paid by it under protest as the result of a 'Retaliatory Tax' assessment levied against it. The action seeks reimbursement thereof by credit or refund through special statutory remedy. The claim for refund was duly filed; plaintiff exhausted its administrative remedies and seeks to have determined by judgment its right to recover the amount as set forth in the claim.
The cause was tried upon a stipulation of facts and documentary evidence. No question of construction of the documents received in evidence is involved. In these circumstances only questions of law are presented here for determination. (W. E. Hall Co. v. Franchise Tax Board, 260 Cal.App.2d 179, 183, 66 Cal.Rptr. 911.)
Plaintiff is, and at all relevant times was, a mutual life and disability insurer incorporated under the laws of, and having its principal place of business in, the State of Ohio. It was first admitted and authorized to transact business in the State of California in the year 1955. In the year 1956, pursuant to section 701 of the Insurance Code as amended by the statutes of 1955, plaintiff was issued by the Department of Insurance a certificate of authority for an indefinite term. This authorization, by the terms of the amended code section, had its expiration fixed 'with the expiration or termination of (the) corporate existence of the holder thereof.' Such certificate of authority has never been revoked or modified and is in full force and effect.
At the time of the issuance of the certificate of authority to plaintiff in 1956, for the term of its corporate existence, article XIII, section 14 4/5 of the Constitution of the State of California imposed a premiums tax, referred to as the California Basis Tax, applicable to foreign and domestic insurers alike without discrimination between them. This section of the Constitution provided that this nondiscriminatory premiums tax was 'in lieu of all other taxes' except, among other exceptions, 'When by the laws of any other state or country any taxes, fines, penalties, licenses, fees, deposits of money or securities or other obligations or prohibitions are imposed on insurers of this State doing business in such other state or country, or upon their agents therein, in excess of those imposed upon insurers of such other state or country or upon their agents therein, so long as such laws continue in force, the same obligations and prohibitions of whatsoever kind may be imposed by the Legislature upon insurers of such other state or country doing business in this State, or upon their agents herein.' (Cal. Const. art. XIII, § 14 4/5, subd. (f)(3).) This tax is referred to as a 'Retaliatory Tax.'
The State of Ohio does not, and did not at any time relevant here, discriminate in favor of its domestic insurers against a California insurer doing a similar business in the State of Ohio. For that reason, in other actions brought by the plaintiff, 'Retaliatory Tax' assessments levied against it in the years prior to 1965 were finally adjudicated to be invalid and the plaintiff heretofore recovered final judgment for its claim of refund.
On November 3, 1964, subdivision (f) of section 14 4/5 of article XIII of the Constitution was amended in pertinent part as follows: 'The tax imposed on insurers by this section is in lieu of all other taxes and licenses, state, county, and municipal, upon such insurers and their property, except:
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'(3) When by or pursuant to the laws of any other state or foreign country any taxes, licenses and other fees, in the aggregate, and any fines, penalties, deposit requirements or other material obligations, prohibitions or restrictions are or would be imposed upon California insurers, or upon the agents or representatives of such insurers, which are in excess of such taxes, licenses and other fees, in the aggregate, or which are in excess of the fines, penalties, deposit requirements or other obligations, prohibitions, or restrictions directly imposed upon similar insurers, or upon the agents or representatives of such insurers, of such other state or country under the statutes of this state; so long as such laws of such other state or country continue in force or are so applied, the same taxes, licenses and other fees, in the aggregate, or fines, penalties or deposit requirements or other material obligations, prohibitions, or restrictions, of whatever kind shall be imposed upon the insurers, or upon the agents or representatives of such insurers, of such other state or country doing business or seeking to do business in California. * * *
'The provisions of this paragraph (3) of subdivision (f) shall not apply as to personal income taxes, nor as to ad valorem taxes on real or personal property nor as to special purpose obligations or assessments heretofore imposed by another state or foreign country in connection with particular kinds of insurance, other than property insurance; except that deductions, from premium taxes or other taxes otherwise payable, allowed on account of real estate or personal property taxes paid shall be taken into consideration in determining the propriety and extent of retaliatory action under this paragraph (3) of subdivision (f).'
Plaintiff had built its California insurance business to a volume producing premiums in California in excess of five million dollars. In the year 1964, and continuously thereafter, plaintiff's principal office in the State of California was, and now is located in Los Angeles, California, on real property owned by plaintiff and on which plaintiff constructed a building for such purpose and on which it paid, before delinquency, in the year 1964 the real estate taxes thereon duly assessed. Such real property consisted of only one building on which such office was located, the land on which the building then stood, and so much of the adjacent land as was required for the convenient use and occupation thereof. The real estate tax paid thereon in 1964 was the sum of $108,722.05.
The special findings disclose that in arriving at the tax levied against the plaintiff the following formula was used: 'The net base for calculating plaintiff's taxes on earned premiums for 1964 in California was $5,450,937.56, resulting in a gross premiums tax of $126,944.97 on the California Basis, exclusive of any Retaliatory Tax. From this, the realty tax in the sum of $108,722.05 on plaintiff's Principal Office building in California was deducted, leaving a net premium tax other than Retaliatory of $18,222.92. To this was added the annual Filing Fees of $25.00 and $10.00 for a Renewal Certificate, giving a total tax of $18,257.92 which was paid by plaintiff.
'To determine whether a Retaliatory Tax should be assessed, the same amount of business as plaintiff's was assumed by the California Department of Insurance and defendant for a hypothetical California insurer doing business in Ohio for the same year, and the method and rates for determining the Ohio tax on this volume of business was provided by plaintiff. The computations were made by the California Department of Insurance and defendant with this result:
1. Ohio Tax on Premiums ................... $138,539.85
2. Renewal Fee--Certificate of Authority ........ $2.00
3. Filing Annual Statement--Fee ................ $20.00
4. Total Ohio Taxes ....................... $138,561.85
From this was deducted the California premium tax of $18,257.92, previously assessed against and paid by plaintiff, leaving an excess in the hypothetical Ohio tax over the California tax in the sum of $120,303.93. This amount was assessed by defendant against plaintiff as the Retaliatory Tax for 1964 and was paid by it under protest. The total tax so assessed by defendant against plaintiff and paid by it computed on its 1964 business in California was the total of the Ohio taxes, to wit, $138,561.85. Plaintiff was denied the right to deduct from said total tax of $138,561.85 the amount of real estate taxes in the sum of $108,722.05 paid by it in the year 1964 before, or within thirty days after, becoming delinquent, on the real property owned by plaintiff at the time of payment, and in which was located in that year its Principal Office in the State of California.'
The taxes, licenses and fees in the aggregate which the State of Ohio would impose upon California insurers similar to plaintiff for the privilege of doing business and computed on the business done by plaintiff in California during the period from and including November 4, 1964, the effective date of the amendment to the California Constitution here under consideration, to and including December 31, 1964, would be the sum of $13,425.23, plus $22 fees, and taxes and license fees on the California Basis on such business, exclusive of retaliatory assessment, would be $12,197.72, plus $35 fees.
The trial court concluded that 'The provisions of Section 14 4/5 of Article (X)III of the Constitution of the State of California, as amended November 3, 1964 (which amendment is hereinafter referred to as the 'amendment of November 3, 1964'), and of Section 685 through 685.4, inclusive, of the Insurance Code of this State, apply to the...
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