Williams v. Thomas Jefferson Ins. Co.

• Decision Date: 06 January 1965
• Citation: 385 S.W.2d 908,215 Tenn. 356,19 McCanless 356
• Parties: Albert WILLIAMS, Commissioner, etc., et al. v. THOMAS JEFFERSON INSURANCE COMPANY. 19 McCanless 356, 215 Tenn. 356, 385 S.W.2d 908
• Court: Tennessee Supreme Court

Page 908

385 S.W.2d 908

Albert WILLIAMS, Commissioner, etc., et al. v. THOMAS JEFFERSON INSURANCE COMPANY.

19 McCanless 356, 215 Tenn. 356, 385 S.W.2d 908

Supreme Court of Tennessee.

Jan. 6, 1965.

Marne S. Matherne, Edgar P. Calhoun, Asst. Attys. Gen., Nashville, for Commissioner.

Thomas Wardlaw Steele, of Gullett, Steele & Sanford, Nashville, for Thomas Jefferson Ins. Co.

BURNETT, Chief Justice.

The insurance company filed two original bills seeking to recover certain taxes paid under protest to the Commissioner of Insurance and Banking of the State of Tennessee. These cases were consolidated for trial and involved the same factual situation and legal principles although they covered various taxable periods.

In July, 1963, the Commissioner made deficiency assessments against the insurance company, and as a result thereof, after certain conferences and letters, the company paid this deficiency under protest, and these suits followed. The Chancellor found in favor of the insurance company and allowed a recovery plus interest. By a memorandum opinion he ruled that the two statutes in question, the Reciprocity Statute, TCA Sec. 56-423, and the Investment Credit Statute, TCA Sec. 56-414, must be construed so as to give both statutes effect. From this decision the Commissioner has appealed, able briefs have been filed, and arguments heard. After spending some days considering the matter, we are now in a position to dispose of it.

The major tax imposed upon an insurance company is set forth in TCA Sec. 56-408, Code Supplement, and is a tax on gross premiums of two per cent except for domestic life insurance companies who are required to pay only one and three-fourths per cent on gross premium receipts.

Involved in this litigation is TCA Sec. 56-414, which provides in essence for a reduction or credit upon its gross premiums tax for investments in Tennessee property and securities by an insurance company, domestic or foreign, the amount of such reduction or credit being up to the insurance company to make claim for as provided by the statute.

The other statute involved in this litigation is Sec. 56-423, TCA Supplement, and is known as the Reciprocity of Treatment Statute. This statute, in substance, provides that when the sum total of all taxes, fees, etc., imposed by a foreign state upon a Tennessee Company doing business in such foreign state is greater than the sum total of all such taxes, fees, etc., imposed by the State of Tennessee upon a foreign insurance company doing the same amount of business in Tennessee, then the sum total of the foreign state's taxes and fees shall be imposed upon such foreign insuror doing business in Tennessee.

This insurance company is chartered in the State of Kentucky and is qualified to do business in the State of Tennessee. A group of residents of Tennessee bought control of the company and, after making certain plans, they were advised of Sec. 56-414, TCA, providing for a credit against the gross premium tax for investment in Tennessee securities. As a result of this, this company immediately began to invest in Tennessee securities which come under Sec. 56-414, TCA, which sets out securities approved by this State, and provides if they invest in such securities they are given an incentive to do so, because they by reason of this section are allowed a credit against the gross premium tax which they would otherwise have to pay. This company made large investments in this State, and as a result they began in 1959 to make claims pursuant to the statute so that they might have credit against the gross premium tax that they would otherwise have to pay. This arrangement went on and the company continued to pay the tax until 1963, when the Commissioner upon advice of the Attorney General concluded that a foreign, or out of state insurance company, as this one was, which was subject to the retaliatory or reciprocity statute (Sec. 56-423, TCA Supplement) was not entitled to such credit as provided under Sec. 56-414, TCA. It was then that the deficiency assessments, as said above, were made, eventually paid and this suit brought.

We are thus called upon to construe these two statutory provisions and determine what was the legislative intent with reference thereto. Both statutory provisions involved were enacted at the same time and in the same statute, Chapter 49, Public Acts of 1953. The retaliatory section was slightly amended but that doesn't affect the question here involved, by Chapter 185 of the Public Acts of 1957.

The preamble to the 1953 Act shows very clearly that the Legislature determined and annunciated two definite and distinct policies, to-wit, (1) granted an incentive to insurance companies, both domestic and foreign, to invest in Tennessee securities, and (2) a reciprocity or retaliation statute against foreign insurance companies chartered in states which place heavy burdens by taxation on Tennessee companies doing business therein. We will not quote these Acts as they are readily accessible to anyone who desires to read them.

It seems to us in view of the preamble to the Act, and what is said in the Act, that both of these annunciated policies of the Legislature must be given effect if the legislative intent and will is to be followed. Both Acts and the policies in both were passed for the purpose of increasing the State revenue. This is shown by the preamble to both Acts.

The retaliatory or reciprocity section of the Act was intended to equalize the tax burden which each state imposed by virtue of its sovereign authority to tax. It seems to us that this section has no connection whatsoever with the incentive section, Sec. 56-414, TCA. The taking of credit under the last section mentioned is entirely optional with the tax paying insurance company, both domestic and foreign. As to whether or not an insurance company gains benefit for credit allowed by this statute is entirely in control of this question--not the Commissioner of Insurance and Banking. The amount of tax payable by insurance companies, both domestic and foreign, in a given period, is not made to depend upon the amount to tax levied by the State of Tennessee, which is fixed by statute, Sec. 56-408, TCA, and is made uniform against all taxpayers falling under the levy, but is made to depend upon permissive action of the taxpayers in making investments in Tennessee securities. To this extent, the insurance company (taxpayer) in Tennessee controls not the amount of the tax levied upon it by the State, but the amount of tax payable by it to the State according to its voluntary investments in Tennessee securities.

The Commissioner mandatorily fixes the tax as required by Sec. 56-423, TCA Supplement, and the insurance company is fully subject to all the tax levy that has been specified in the Act, Sec. 56-408, TCA. After this tax has been levied, according to these statutes, Sec. 56-414, TCA, the taxpayer is given an incentive to invest in Tennessee securities and such an incentive is credit against 'its gross premiums tax', which credit is entirely optional with the taxpayer insurance company and is wholly under this taxpayer's...