Untitled Texas Attorney General Opinion

Hon. William A. Harrison Opinion No. WW-525
Commissioner of Insurance
State Board of Insurance Re: Proper interpretation of
Austin, Texas Article 21.46, Texas
Insurance Code--retalia-
Dear Sir: tory statute.

You have requested an opinion of this office concerning the
proper construction of Article 21.46 of the Insurance Code, Acts
55th Leg., R.S. 1957, p. 1184, ch. 396, Sec. 1. This article provides:

“Whenever by the laws of any other state or
territory of the United States any taxes, licenses, fees,
fines, penalties, deposit requirements or other obliga-
tions, prohibitions or restrictions are imposed upon
any insurance company organized in this State and li-
censed and actually doing business in such other state
or territory which, in the aggregate are in excess of
:fzsagdgregate of taxes, licenses, fees, fines, penal-
eposlt requirements or other obllgatlons, pro-
hibiiions or restrictions directly imposed upon a simi-
lar insurance company of such other state or territory
doing business in this State, the Board of Insurance
Commissioners of this State shall impose jupon any
similar company of such state or territory in the same
manner and for the same purpose, the same taxes, li-
censes, fees, fines, penalties, deposit requirements or
other obligations, prohibitions or restrictions; pro-
vided, however, the a gre ate of taxes, licenses, fees,
fines, penalties or oaations imposed by this
State pursuant to this Article 21.46 on an insurance
company of another state or territory shall not exceed
the aggregate of such charges imposed by such other
state or territory on a similar insurance company of
this State actually licensed and doing business therein;
. . .”

In your opinion request you state:

“We find it quite difficult to find the ‘aggregate’
of such diverse items as taxes, licenses, fees, fines,
penalties, deposit requirements, obligations, prohibi-
tions or restrictions. It is much like trying to find the
aggregate of apples, oranges, bananas, potatoes and
tomatoes.
Hon. William A. Harrison, page 2 (WW-525)

“We are of the opinion that the only practical
construction and interpretation of the statute is that
each enumerated item contained in the statute must
be viewed and computed separately, determine the
aggregate of such separate item, and apply the re-
taliatory law to each separate item. In other words,
it is our opinion that proper construction of the stat-
ute would be to consider and total all taxes as such,
determine the aggregate of the taxes, and then apply
the retaliatory law to these taxes. We would then
consider all licenses to determine the aggregate of
such licenses, and apply the retaliatory law to li-
censes. A similar procedure would then be used
with respect to each of the other items enumerated
and mentioned in Article 2 1.46.”

Your first question is whether this interpretation is correct.
It is the opinion of this office that the construction as stated is in-
correct,

The legislative history of this article is pertinent: In 1909
the Legislature enacted a statute which was designated as Article
4758, V.C.S. (Acts 1909, p, 192, $ 29 as amended in Acts 44th Leg.,
1935, p. 713. ch. 307, $ 1) which was also a retaliatory act. Article
4758 did not expressly require an “aggregate” method of computa-
tion; however, the Attorney General in Opinion No. 0-1997-A ap-
proved July 11, 1940, held that a construction of the statute compar-
ing fees against fees, taxes against taxes, penalties against penalties,
was erroneous and the total or aggregate of all taxes, fines, penal-
ties, fees and other charges imposed by the foreign state should be
compared with the aggregate imposed by the Texas law on a foreign
corporation for the purpose of applying the act. Although Article
4758 was repealed in 1951 (Acts 1951, 52nd Leg., p, 868, ch. 491,
5 4) substantially identical language to that of Article 4758 was in-
corporated in House Bill 278, Section 1 (later enacted as Article
21.46) when it was introduced. The word “aggregate” was later
added by committee amendments and by House floor amendments
(Daily House Journal, pp. 2407. 2409. April 29, 1957) which incorpo-
rated substantially the language now set out in the text of Article
21.46. Therefore, the construction placed by our former opinion
would apply to the bill as it was originally introduced and the addi-
tion of the amendments would further militate for the construction
set out in Attorney General’s Opinion 0-1997-A.

Many other states have retaliatory statutes which are similar
in language as well as in nature. The cases hold that the purpose of
the retaliatory statutes is to provide that an insurance corporation
incorporated under the laws of the retaliating states can enter into
and operate in other states on parity with their domestic insurance
Hon. William A. Harrison, page 3 (WW-525)

corporations. They are calculated to equalize the burden a foreign
corporation must carry with that imposed by the state of its domi-
cile upon a domestic corporation of the retaliating state doing busi-
ness in that foreign state. The statutes are based on the principle
of comity between the states. State v. Reinmund, 45 Ohio State 214,
13 N.E. 30 (1887). Lie and Casualty Insurance Company of Tennessee
v. Coleman, 233 Ky. 350, 25 S W 2d 748 (1930) timployers Casualty
Company v. Hobbs, 149 Kansa; ;74, 89 P.2d 9i3 (1939) Occidental
Life Insurance Company v. Holmes, 80 P.2d 383 (Mont&a Sup.Ct.
1938) Pacific Mutual Life Insurance Company v. State, 161 Wash.
135. i96 P. 813 (1931). Thus, the statute is designed to place on the
foreign corporation coming into Texas a burden equal to the burden
imposed by the state of such foreign corporation’s domicile upon any
similar Texas insurance company licensed to do business and actually
doing business in the foreign, state. It is the total and ultimate effect
of the “taxes, licenses, fees, fines, penalties, deposit requirements or
other obligations, prohibitions or restrictions” directly imposed by
the foreign state upon a similar Texas corporation which must be com-
pared with the total and :iltimate effect of the “taxes, licenses, fees,
etc.,” which would be directly imposed by the Texas statutes other
than Article 21.46 .Ipon the foreign insurance company. An item by
item comparison of the aggregate taxes with aggregate taxes, aggre-
gate fees with aggregate fees, etc. does not total burdens. While the
aggregate taxes imposed by the foreign state might exceed the aggre-
gate taxes imposed by Texas in the absence of Article 21.46, the ag-
gregate fees imposed by the foreign state might be so much less than
the aggregate fees imp,osed by Texas so that the excess of the aggre-
gate Texas fees over the aggrega.te foreign fees vyozid exceed the ex-
cess of the aggregate foreign tax over the aggregate Texas tax. The
construction suggested by your department wcl;ld not allow for this
offset and would not be a comparison of the total burdens with an aim
towards equalizing them, and thus would not be in harmony with the
purposes of the stakte.

In the case’ of Employers Casualty Company v. Hobbs, 149
Kansas 774. 89 P.2d 923, 926 (1939). the Court exoresslv reiected a
construction of the Kansas statute in the manner your opinion request
suggests is the proper construction for the Texas statute. The Court
stated:

“There can be no equalization of the burden
unless the taxes levied or the obligations imposed are
the same in the aggregate.”

The Court in that case held that the total of fees, taxes, li-
censes, etc., shoald be aggregated or totaled. The Kansas statute
significantly does not expressly require aggregation.

Occidental Life Insurance Company v. Holmes, 80 P.Zd 383
(Sup.Ct.Mont. 1938). concerned the construction of the Montana statute.
.‘.

Hon. William A. Harrison, page 4 (WW-525)

The issue was whether the statute should be applied at all. The
company contended the proper construction was one involving a
totaling of all exactions imposed. The Court in upholding the com-
pany’s position said:

“To arrive at a fair and equitable adjust-
ment and to give the statute such an effect, the
total exactions must be taken into account irre-
spective of how such exactions may be character-
ized or named.‘

The Maryland statute, apparently, has also been construed
to require computation of the total or aggregate of ‘taxes, fees,
fines, penalties, licenses, deposit requirements or other obligations,
prohibitions or restrictions’. See 38 Opin. A.C. 202, Dec. 21, 1953,
wherein examination fees of a Texas corporation doing business in
Maryland paid to the Maryland Department of Insurance were allowed
as an offset against the retaliatory tax calculated on the base of the
excess of Texas tax over Maryland tax; and see also 39 Opin. A.G.
191, Sept. 7, 1954, which allows an offset the cost of publication of an
annual statement against the retaliatory tax.

In Arizona the Attorney General (Opin. 56-l 19, dated July 3,
1956) has held that their retaliatory statute and the use of the phrase
“aggregate . ~. requirements or other obligations , . . directly im-
posed upon similar insurers . D . ”, is conclusive that the intent of the
Legislature was to allow for all burdens directly imposed upon com-
panies to be deducted.

We recognize the administrative difficulties involved in mak-
ing such a comparison. We also recognize that a comparison of the
total of all burdens was intended by the Legislature instead of the
method presently used.

Your second question is predicated upon a negative answer to
the first. You ask us as to the proper interpretation and construction
of the statute. Because there is no specific fact situation submitted
with the request, we will not be able to answer the question.

We recognize that a foreign state may impose on a Texas com-
pany a burden such as a recommendation that the company be licensed
in doing business in Texas for five years prior to its admission to the
foreign state. Since we have declined to answer your second question,
this opinion should not be construed as prescribing how burdens such
as this, which by their nature may not be capable of being reduced to
a common denominator with other burdens for the purpose of compari-
son. should be treated when applying Article 21.46 except to say that
the present interpretation of the Department of Insurance is incorrect.
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Hon. William A. Harrison, page 5 (WW-525)

In your third question you inquire as to the data and time when
such items are to be aggregated. The statute is silent insofar as this
matter is concerned. Article 21.46 and Senate Bill 222, Acts 55th Leg.,
R.S. 1957. p. 1454. ch. 499, when construed together vest enforcement
of Article 21.46 in the State Board of Insurance and direct that the du-
ties therein set out be executed and carried out by the Commissioner
of Insurance who acts under the supervision and rules and regulations
of the State Board of Insurance. (Art. 1.04(b) and Art. 1.09(a)) Senate
Bill 222 empowers the State Board of Insurance to make rules and
regulations for the purpose of carrying out its duties and functions.
(Art. 1.04(c)) It is our opinion that this is a matter lying within the
sound discretion of the State Board of Insurance and the Commissioner
and may properly be resolved by adoption’of appropriate rules and regu-
lations; provided, however, that the rules and regulations conform to
the language and purposes of Article 21.46 and other applicable statutes.

In your opinion request you state:

“As mentioned above, Article 21.46 became ef-
fective on January 1, 1958. As we understand Attorney
General’s Gpinion dated August 16, 1949, written by
Assistant Attorney General Ned McDaniel to the Honor-
able George B. Butler, Chairman of the Board of Insur-
ance Commissioners, and Attorney General’s Opinion
dated December 3, 1936, appearing in book 374, page
496, written by the Honorable W. W. Heath,to the Hon-
orable R. L. Daniel, Chairman of the Board of Insurance
Commissioners, the taxes which are now due from for-
eign casualty and fire companies under Article 7064,
Revised Civil Statutes, would be subject to the retalia-
tory law. These same opinions lead us to the concl-sion
that taxes now due from foreign life insurance companies
under Article 4769, Revised Civil Statutes, would not be
subject to the retaliatory law.”

Your final question is whether the present interpretation and
construction of these opinions and the construction of Article 21.46 is
correct.

We have carefully examined the opinions referred to, together
with the present text of Article 4769 and Article 7064, Vernon’s Civil
Statutes. It is the opinion of this office that basic features of both of
these tax statutes have not been changed since the issuance of these
two opinions. The principles stated in those opinions are still appli-
cable. Therefore, since the gross premium tax levied under Article
7064 is an occupation tax for the privilege of doing business in this
State, payable in advance, the tax presently due under this article
would be a tax for doing business during 1958, subsequent to the ef-
fective date of the retaliatory act. Accordingly, these taxes should
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Hon. William A. Harrison, page 6 (WW-525)

be taken into consideration in applying the retaliatory act. In con-
trast, the taxes now due under Article 4769 are imposed for doing
business in 1957 prior to the effective data of the retaliatory act
and should not be taken into consideration in applying the retaliatory
act.

SUMMARY

The Retaliatory Act, Article 21.46, requires
a comparison of total burdens imposed by
Texas laws on a foreign insurance company
with the total burdens imposed by the State
of its domicile upon similar Texas corpora-
tions licensed to do business and actually
doing business in the foreign state; accord-
ingly, the method of “‘aggregating” the items
enumerated in Article 21.46 that are set out
in the opinion request are incorrect. The
date and time on which these vari.ous items
are to be aggregated rest within the discre-
tion of the State Board of Insurance and may
be determined by rules and regulations. The
Retaliatory Act should be applied to the taxes
now due p,ursuant to Article 7064, Vernon’s
Civil Statutes, but should not be applied to
the taxes now due under Article 4769, Vernon’s
Civil Statutes.

Very txly yozs,

w ILL w ILSON
Attorney Gene

WPF:lm BY

APPROVED: Assistant

OPINION COMMITTEE:

Geo. P. Blackburn, Chairman

J. C. Davis, Jr.
Tom I. McFarling
L. P. Lollar

REVIEWED FOR THE ATTORNEY GENERAL
BY:
W. V. Geppert