Mutual Life Insurance Company v. Insurance Bureau

Brickley, J.

In this case, we are asked to decide whether the Mutual Life Insurance Company of New York (mony), a foreign insurance company doing business in Michigan, is required to pay a premium tax, imposed by MCL 500.440(l)(a); MSA 24.1440(l)(a), on employee contributions paid toward a group life insurance program mony provides to its Michigan employees. We hold that the employee contributions toward their own participatory benefit plan, even though supplied by mony *659on a nonprofit, nonactuarial basis, constitute taxable premiums within the meaning of §§ 440 and 441 of the Michigan Insurance Code, and we therefore reverse the judgment of the Court of Appeals.

I

The facts are not in dispute, and they were aptly stated by the Court of Appeals, 121 Mich App 386, 388-390; 328 NW2d 638 (1982):

Mony is a mutual life insurance company, incorporated in the State of New York and licensed to engage in the insurance business in Michigan. As part of its employee fringe benefit package, mony provides its employees and field underwriters with insurance benefits for death, illness, disability, and medical expenses. The plans constitute "employee welfare benefit plans” under § 3(1) of the Employee Retirement Income Security Act of 1974 (erisa), 29 USC 1001 et seq., and involve contractual relations of such a nature that they meet the definition of insurance contracts. The benefit plans are participatory, with the bulk of the expenses being borne by mony. The employees’ and field underwriters’ share of the expenses are established by the fringe benefit plans and are generated by payroll deductions. Any employee or field underwriter may terminate participation in these plans and withdraw his authorization for payroll deductions. The portion of the costs borne by mony varies from year to year because mony contributes the difference between the actual annual cost of the benefit plans and the aggregate cost portion borne by its employees and field underwriters. Computation of the cost of these benefit plans is different from the basis on which mony computes the cost of commercially sold insurance providing similar benefits because there is no allocation for mony’s expenses or profit.
The Commissioner of Insurance (bureau) is charged with determining and collecting the pre*660mium tax under §§ 440-445 of the Insurance Code of 1956, MCL 500.440 et seq.; MSA 24.1440 et seq. The premium tax is a tax imposed on foreign insurers as a condition precedent to the privilege of conducting insurance business within the State of Michigan. The tax is two percent of each insurer’s gross premiums. In 1965, the Attorney General opined that employer and employee contributions to the cost of providing group life insurance for employees of insurance companies constituted gross premiums within the meaning of §§ 440 and 441 and was, therefore, taxable. OAG, 1965-1966, No 4431, pp 61, 66-67 (April 19, 1965). On September 10, 1965, a letter was sent to all insurers, informing them of the opinion and its applicability to computation of the 1965 premium tax. On February 6, 1975, the bureau notified mony that its records indicated the existence of life, accident, and health plans for the insurer’s employees and field underwriters. Mony notified the bureau on February 19, 1975, that neither its portion nor the employees’ portion of the benefit plans had been included as gross premiums for the purpose of computing the premium tax. The bureau sent a tax delinquency notice to mony on March 15, 1975.
On April 13, 1976, mony initiated a declaratory judgment action. Mony maintained that the premium tax was inapplicable to portions of the costs of benefit plans borne by either itself or its employees and field underwriters. The bureau contended that both portions of the costs were subject to the premium tax. On February 8, 1980, the trial court issued an opinion, holding that the premium tax was applicable only to the contributions made by mony’s employees and field underwriters. Oral arguments were held relative to mony’s motion for reconsideration on August 7, 1980. At that time, the bureau conceded that the trial court was correct in determining that mony’s contributions to the employee benefit plans were not includable in the computation of gross premiums. On October 14, 1980, the court affirmed its earlier opinion. Oral argument was heard on November 19, 1980, *661regarding the issue of whether erisa pre-empted application of the premium tax in the instant case. A third opinion was issued on December 9, 1980; the trial court held that the State of Michigan was not pre-empted by the federal government from regulating insurance fringe benefit policies of employee benefit plans. The court issued a declaratory judgment on June 8,1981.

The Court of Appeals, in a two-to-one decision, reversed the ruling of the trial court. The Court reasoned:

As previously discussed, the tax in question is imposed on foreign insurers for the privilege of doing insurance business in this state. The term "business” generally connotes the carrying on of a commercial or mercantile activity as a means of livelihood. In providing the participatory benefit plans to its employees and field underwriters, mony is not engaged in the exercise of doing insurance business within the common meaning of the phrase. This is supported by the stipulation that mony provides the insurance contracts on a nonprofit, nonactuarial basis. The plans are a negotiated benefit incident to the employer-employee relationship. For providing the benefits, the employer expects to maintain a harmonious working environment, as well as to attract and retain key employees. Because the policies were offered on a nonprofit, nonactuarial basis incident to the employer-employee relationship as opposed to being offered in the furtherance of mony’s profit-making insurance business within the state, the contributions of mony’s employees and field underwriters should not be included in the calculation of gross premiums subject to the premium tax. [121 Mich App 394-395.]

We reverse the judgment of the Court of Appeals and remand the case to that Court for consideration of the question whether the Employee *662Retirement Income Security Act, 29 USC 1001 et seq. (erisa), preempts the tax imposed by the Insurance Code.

II

A premium tax applicable to foreign life insurance companies is a tax levied as a condition precedent to, and in exchange for, the privilege enjoyed by a foreign insurance company of engaging in insurance business. Such taxes, frequently called excise, privilege, or franchise taxes, relate directly to the exercise of the privilege of conducting an insurance business in the taxing state.

MCL 500.440; MSA 24.1440, in imposing the premium tax, provides in pertinent part:

Section 440. Every foreign insurer of the classes enumerated in this section, admitted to do and doing insurance business in this state as a condition precedent to the privilege of doing business, shall pay to the commissioner for prompt deposit with the state treasurer ... a premium tax upon its insurance carrier services written in this state under the authority of the commissioner for the year ending December 31, computed as follows: (a) Life insurers, a tax of 2% on the gross premiums excluding considerations for original annuities. [Emphasis added.]

MCL 500.441; MSA 24.1441, in defining taxable premiums, provides:

Section 441. The taxes on premiums from insurers shall be upon all premiums, whether upon business written or renewed, which are received by any insurer or by any person acting as agent therefor, both upon policies issued by agents in this state or policies issued at the oíñce of the insurers, upon application of subagents or others, *663or for any individuals or association of individuals, not incorporated or authorized by the laws of this state, to effect insurance against fire, inland, marine, life, casualty, title, or other risks .... [Emphasis added.]

These sections specifically and unambiguously state that a tax of two percent is to be paid upon all gross premiums collected from policies written within the State of Michigan.

When it negotiated a benefit plan with its employees, we agree with the Court of Appeals that mony was acting as an employer. However, once the agreement was reached and the plaintiff decided to furnish its own insurance to its employees rather than to contract with an outside insurance company, as any non-insurance company employer would have done, it ceased to act as an employer and began to act as an insurer. Accordingly, the premiums received by plaintiff from its own employees are every bit as taxable as the share of premiums paid by the employees of another company to which mony sold insurance as part of that company’s employee-benefit package. As Judge Allen stated in his dissent in the Court of Appeals,

Mony would be unable to furnish insurance to its employees absent the franchise to conduct insurance business in the state, and, thus, the amounts paid by the employees result from doing business in the state. [121 Mich App 396.]

We do not agree with the Court of Appeals rationale that, because the insurance plan was sold to mony’s employees on a "nonprofit, nonactuarial basis incident to the employer-employee relationship,” id., 395, mony was not doing business in the state within the meaning of the gross premiums tax statute. Certainly, mony could supply *664insurance less expensively than if it were required to purchase it at a "regular price” from an outside insurance company, presumably saving money by providing its own insurance at cost, notwithstanding its claim that the plan was "nonprofit.”

MCL 500.440; MSA 24.1440 is not a gross-profits tax. It is a tax on gross premiums, i.e., the less premiums received, the less tax liability. The fact that the plaintiff, in selling insurance to its own employees, did not collect its share of the cost of the insurance benefits from itself — and thereby paid no taxes on the share of the premiums it did not charge itself — does not excuse it from paying taxes on those premiums collected from its employees as consideration for the insurance it provides them.

Ill

We recognize that courts of other jurisdictions, construing similar provisions, have reached the opposite result. However, we find those cases to be sufficiently distinguishable that we do not feel constrained to follow them.

In Mutual Life Ins Co of New York v New York State Tax Comm, 32 NY2d 348; 345 NYS2d 475; 298 NE2d 632 (1973), the New York Court of Appeals interpreted a statute imposing a tax on "all gross direct premiums” received by domestic life insurance companies, and it held that employee contributions toward the life insurance policies supplied by the employer-insurer were not taxable.

In determining that the insurer’s contributions to the costs of employee life and health insurance benefits were not subject to the New York premium tax, however, the New York Court of Appeals relied in part upon the longstanding administrative interpretation to that effect. After finding *665that the employer’s contributions were nontaxable, the court cursorily held that the nontaxability of employee contributions "follow[ed].” Id. at 354.

In Michigan, however, no such administrative interpretation of the nontaxability of insurer or employee cost exists. Indeed, in 1965 the Attorney General, noting the lack of prior precedent, concluded that both the employer’s share and the employee’s share of the cost of life insurance programs were taxable. OAG, 1965-1966, No 4431, p 63 (April 19, 1965). Pursuant to that opinion, the Insurance Commissioner notified all insurers of the state’s position that the costs are taxable.

We also note that the New York MONY case was not unanimous. We find the better reasoning in the dissenting opinion, which states:

The simple fact remains evident — that the employees pay cash premiums to the company for which, in return, they receive life insurance policies. This is doing insurance business, pure and simple. [Mutual Life at 355 (Gabrielli, J., dissenting).]

We likewise find the other cases cited by the Court of Appeals and the dissent distinguishable.1

IV

The Court of Appeals correctly stated that, when a statute is ambiguous, it must be construed in favor of the taxpayer. Ecorse Screw Machine Products Co v Corporation & Securities Comm, 378 *666Mich 415, 418; 145 NW2d 46 (1966).2 However, this statute is not ambiguous. It unequivocally states that "all premiums” are subject to the two percent tax. Accordingly, we do not have the latitude to engage in speculation as to whether the Legislature may have intended to exempt employee contributions to the insurance company/employer-provided insurance package. When the legislative intent can be discerned from the express language of a statute, no further interpretation is warranted. Lamphere Schools v Lamphere Federation of Teachers, 400 Mich 104, 110; 252 NW2d 818 (1977); Kalamazoo Ed Ass’n v Kalamazoo Public Schools, 406 Mich 579, 603; 281 NW2d 454 (1979).

Our conclusion in this regard is buttressed by the fact that the Legislature has specifically exempted premiums for group insurance policies for persons age sixty-five or over from the premium tax. MCL 500.3726; MSA 24.13726. The presence of the specific legislative exemption in MCL 500.3726; MSA 24.13726 should caution this Court against preempting the legislative power by creating a judicial exemption from the tax imposed by MCL 500.441; MSA 24.1441 on "all premiums, whether upon business written or renewed, which are received by any insurer or by any person acting as agent therefor . . . .” (Emphasis added.)

V

The judgment of the Court of Appeals is reversed, and the case remanded to that Court for consideration of the erisa question. We do not retain jurisdiction._

*667Williams, C.J., and Levin and Boyle, JJ., concurred with Brickley, J.

See, e.g., California-Western States Life Ins Co v State Bd of Equalization, 151 Cal App 2d 559; 312 P2d 19 (1957) (state attempted to analogize group retirement plan to insurance contract); State Tax Comm v John Hancock Mutual Life Ins Co, 341 Mass 555; 170 NE2d 711 (1960) (retirement pension benefit plan; court found applicable statute ambiguous); Metropolitan Life Ins Co v State Bd of Equalization, 32 Cal 3d 649; 186 Cal Rptr 578; 652 P2d 426 (1982) (insurance company attempted to avoid premium tax by offering reduced-rate coverage whereby employer would pay all claims up to a "trigger point”).

See also Ready-Power Co v City of Dearborn, 336 Mich 519, 525; 58 NW2d 904 (1953); Consumers Power Co v Corporation & Securities Comm, 326 Mich 643, 648; 40 NW2d 756 (1950); Standard Oil Co v Michigan, 283 Mich 85, 88; 276 NW 908 (1937).