169 So. 3d 1069
Ala. Civ. App.2015Background
- American Equity Investment Life Insurance Co., an out-of-state insurer doing business in Alabama, filed Alabama Business Privilege Tax (BPT) returns for 2008–2009 using an apportionment factor derived from Schedule T figures (life-insurance premiums + annuity considerations).
- ADOR audited the returns and recalculated the apportionment factor excluding annuity considerations, relying on the Insurance Premium Tax Reform Act definition of “premiums” (which excludes annuity considerations).
- ADOR assessed additional BPT, penalties, and interest for 2008–2009; the taxpayer appealed to St. Clair Circuit Court.
- The trial court granted summary judgment for the taxpayer, holding ADOR erred in excluding annuity considerations and noting potential constitutional problems if ADOR’s construction were correct.
- On appeal, the Alabama Court of Civil Appeals reviewed statutory construction issues: (1) whether §40-14A-24(a) incorporates §27-4A-2(8)’s restrictive definition of “premiums,” and (2) whether agency deference justified ADOR’s interpretation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether annuity considerations on Schedule T must be excluded from the BPT apportionment factor under §40-14A-24(a) | American Equity: §40-14A-24(a) requires using Schedule T totals (premiums and annuity considerations); §27-4A-2(8) applies only to Chapter 4A and cannot be imported | ADOR: Chapter 4A definition of “premiums” (excluding annuity considerations) applies in pari materia and thus annuity considerations should be excluded | Held for taxpayer: §40-14A-24(a) does not require excluding annuity considerations; Schedule T and other Alabama provisions treat annuity payments as premiums/consideration, and §27-4A-2(8) is limited to Chapter 4A |
| Whether ADOR’s longstanding administrative interpretation merits deference so as to sustain its exclusion of annuity considerations | Taxpayer: ADOR’s interpretation is unreasonable and contrary to the statutory text and context, so deference is not owed | ADOR: agency administration of tax statutes merits favorable consideration/deference | Held: Agency deference is limited; ADOR’s construction was unreasonable here and not entitled to deference |
Key Cases Cited
- John Deere Co. v. Gamble, 523 So.2d 95 (Ala. 1988) (statutory-construction principles and legislative intent analysis)
- Norandal USA, Inc. v. State Dep’t of Revenue, 545 So.2d 792 (Ala. Civ. App. 1989) (tax statutes ambiguous between constructions should favor taxpayer)
- Bean Dredging, L.L.C. v. Alabama Dep’t of Revenue, 855 So.2d 513 (Ala. 2003) (agency statutory interpretations generally entitled to favorable consideration)
- Ex parte State Dep’t of Revenue, 683 So.2d 980 (Ala. 1996) (limits on deference where agency interpretation is unreasonable)
- Boswell v. Abex Corp., 317 So.2d 317 (Ala. 1975) (administrative interpretations not controlling when clearly erroneous)
- Chism v. Jefferson Cnty., 954 So.2d 1058 (Ala. 2006) (court should avoid deciding constitutional questions when a nonconstitutional ground disposes of the case)