94 N.E.3d 802
Mass.2018Background
- Dental Service of Massachusetts, Inc. (Delta-affiliate) sold dental coverage via preferred provider arrangements (PPAs) to Massachusetts-based employers; some covered employees lived outside Massachusetts.
- G. L. c. 176I, § 11 imposes an annual excise (2.28%) on "gross premiums received . . . for coverage of covered persons residing in this Commonwealth."
- "Covered person" is defined in G. L. c. 176I, § 1 as "any policy holder or other person on whose behalf the organization is obligated to pay for or provide health care services."
- Dental Service paid the excise on total premiums from Massachusetts employers for tax years 2006–2008, then sought refunds for premiums covering employees who resided outside Massachusetts.
- The Commissioner denied refunds; the Appellate Tax Board granted abatements, holding "covered persons" meant the individual enrollees (natural persons). The Commissioner appealed to the SJC.
Issues
| Issue | Plaintiff's Argument (Dental Service) | Defendant's Argument (Commissioner) | Held |
|---|---|---|---|
| Whether "covered persons" in § 11 refers to individual enrollees only or can include employer policy‑holders | Term refers to natural persons receiving health care (employees and dependents); tax should be on premiums for enrollees who reside in MA | "Policy holder" in definition includes employer organizations, so tax applies to all premiums received from MA‑based employers regardless of where employees live | Held for plaintiff: "covered persons" means natural persons (individual enrollees and dependents), not employer entities |
| Whether statutory language and context support taxing employers as "covered persons" | Definition and usage throughout the chapter refer to persons who receive health care services, not entities | Legislative use of "policy holder" and "reside" can encompass corporate policy holders; administrative convenience favors taxing whole group premiums | Held: statutory syntax, surrounding provisions, and regulatory practice indicate the term contemplates natural persons; tax construed strictly against the taxing authority |
| Whether administrative interpretation (Division of Insurance) supports Commissioner's view | N/A (plaintiff relied on statutory text and strict construction) | Commissioner relied on policy and administrative ease; pointed to employer residency usage in other statutes | Held: Division of Insurance treats "covered persons" as individual members in reporting and that practice supports plaintiff's interpretation |
| Whether ambiguity, if any, should be resolved for taxpayer | Tax statute ambiguity should be resolved in taxpayer's favor | Commissioner urged deference and practical administration favoring taxing entire group premiums | Held: any ambiguity resolved for taxpayer; statutory text and context unambiguous that term denotes natural persons |
Key Cases Cited
- Commissioner of Revenue v. Oliver, 436 Mass. 467 (tax statutes construed strictly; ambiguity resolved for taxpayer)
- Bridgewater State Univ. Found. v. Assessors of Bridgewater, 463 Mass. 154 (questions of statutory construction reviewed de novo)
- Bulger v. Contributory Retirement Appeal Bd., 447 Mass. 651 (statutory definitions limit meaning)
- Commonwealth v. Brooks, 366 Mass. 423 (statutory words considered in their statutory context)
- Manning v. Boston Redev. Auth., 400 Mass. 444 (avoid constructions producing absurd results)
- Casseus v. Eastern Bus Co., Inc., 478 Mass. 786 (look to other parts of statute for meaning of terms)
- Foster v. Group Health Inc., 444 Mass. 668 (industry practice: employer as policy holder in group plans)
- Springfield v. Department of Telecomm. & Cable, 457 Mass. 562 (deference to agency with primary administration responsibility)