292 U.S. 535 | SCOTUS | 1934
Lead Opinion
delivered the opinion of the Court.
This was an action of debt brought by the State of Illinois, in a court of that State, against the Concordia Fire Insurance Company, to recover taxes levied on the net receipts of the latter from its insurance agencies in Cook County, Illinois, during annual periods ending April 30 in each of the years 1923-1927. The defendant interposed a plea of nil 3-ebet. The cause was heard by the court without a jury under a stipulation entitling the defendant to introduce any evidence which would be admissible in equity under appropriate pleadings, and enabling the court to give effect to equitable principles and render judgment in conformity to the evidence. The court found the issues for the defendant and gave judgment accordingly. The Supreme Court of the State disapproved that judgment and in its stead entered one awarding the plaintiff a recovery of smaller taxes than were claimed for the years ending April 30 in 1923-1926 and of the full tax claimed for the year ending April 30 in 1927. 350 Ill. 365; 183 N.E. 241. The defendant then sought and was allowed an appeal to this Court— the ground for the appeal being that the state court overruled the defendant’s claim that the state statute, under which the taxes were levied, when construed and applied as sustaining them (it was so construed and applied by that court), conflicts with the equal protection clause of the Fourteenth Amendment to the Constitution of the United States.
The defendant is a Wisconsin insurance corporation and, conformably to its charter and to licenses from lili
The taxes in question were levied under § 30 of a statute of March 11, 1869,
Throughout the years 1923-1927, and before, it was the uniform practice of officers and boards engaged in listing and assessing personal property for taxation to treat and list 60% of the fair cash value as the “ full value”; and in the years 1923-1926 these officers and boards, pursuant to the direction of a statute of 1919,
In the years 1923-1926 the defendant made returns of its net receipts from fire, marine and inland navigation insurance. The amounts so returned were accepted by the assessing officers as correct, but were not scaled down to 60% or further reduced to one-half of 60%, as was done in the assessment of other property. On the contrary, taxes were levied on the full amounts reported in the returns.
In 1927 the defendant made a return of its net receipts from fire, marine and inland navigation insurance, the amount reported being $76,291.00. It arrived at this amount by deducting operating expenses from gross receipts, the former being treated in the computation as 54% of the latter. On this basis its gross receipts were $165,850.00.
• In November, 1927, the defendant was cited by the board of review to appear before it on December 15 at a hearing on a proposed reassessment of the net receipts in the years covered by the returns of 1923-1926, and also on a review of the assessment by the board of assessors
At the hearing the defendant had full opportunity to support and supplement its returns by a further showing respecting its gross receipts and the deductions rightly to be made in determining the net receipts. But it chose to stand on its returns and made no additional showing. It freely conceded that the returns included receipts from fire, marine and inland navigation insurance but not from casualty insurance. And it also conceded that the deductions made by it in computing the net receipts included some items, such as overhead expenses and reinsurance costs, the deduction of which had been and still was the subject of diverging opinions.
A full report of the hearing before the board was produced in evidence at the trial of this cause and is set forth in the record. The report shows that — apart from a con-, troversy over the construction and constitutional validity of the taxing statute — the matters brought to the board’s attention were (1) defendant’s failure to include and state separately in its returns the receipts from casualty insurance; (2) defendant’s failure to specify with greater particularity the expenses deducted by it in computing the net receipts; (3) a contention that the receipts from casualty insurance should be included in the computation of the taxable net receipts; and (4) a contention that the deductions made for operating expenses were excessive.
One participant in the hearing, who had investigated and studied the matter, made evidential statements to the board tending to show that the defendant’s receipts from fire, marine and inland navigation insurance were about 75% of its total receipts, the remainder coming from casualty insurance, and that the operating-expenses of an
Because of a contention which will be noticed later on it should be stated in this connection that in the hearing before the board the defendant neither claimed that losses paid to policy holders should be deducted in determining net receipts nor presented any showing or statement of the amount of such losses.
After the hearing the board made corrected assessments of the net receipts for the years covered by the returns of 1923-1926; but as the Supreme Court of the State held this action of the board was of no effect, save as it brought the original assessments forward and attached them to the 1927 roll without affecting their original validity or force, the corrected assessments do not require further notice.
Coming to the net receipts for the year ending April 30, 1927, the board fixed their amount at $121,550.00, instead of $76,291.00 as stated in the return; and without scaling or debasing the amount so fixed the board listed it as their assessed value.
The record makes it plain that the board in fixing the net receipts for that year at an amount much larger than was stated in the return proceeded on the theory and conviction that the receipts from casualty insurance, which were omitted from the return, should be included in computing the taxable net receipts, and that the deductible operating expenses, which the defendant had regarded as 54% of the gross receipts, were only about 30% of such receipts.
“ Section 30 provides that ‘ net receipts shall be subject to the same rate of taxation . . . that other personal property is subject to at the place where located.’ The use of the word ‘ other ’ indicates that the net receipts were to be considered as personal property and treated the same as other personal property. Clearly, this provision means that not only the percentage of the rate but the basis of the valuation shall be the same. Taxing by a uniform rule requires uniformity not only in the rate of taxation but also uniformity in the mode of the assessment upon the taxable valuation. Uniformity in taxing implies equality in the burden of taxation, and this equality of burden cannot exist without uniformity in the mode of the assessment as well as in the rate per cent of taxation. (Green v. L. & I. R.R. Co., 244 U.S. 499; Boyer v. Boyer, 113 id. 889; Cummings v. National Bank, 101 id. 153; Exchange Bank v. Hines, 3 Ohio St. 1.) Section 30 and the law of 18987 should be construed together, and*543 when the net receipts are placed upon the tax list they are to be treated as personal property valuation, and are to be scaled, debased and treated the same as other personal property by the taxing officials.”
In that connection the court approvingly quoted from its decision in People v. Cosmopolitan Fire Ins. Co., 246 Ill. 442, 448; 92 N.E. 922, as follows:
“ The net receipts are personal property and are to be listed by the board of assessors and board of review and taxed the same as other property.”
In the present case that court in dealing with the original assessments made in 1923-1926, after the returns in those years were received, said (350 Ill. 372; 183 N.E. 241):
“ Such returns were received and accepted as correct by the assessor, acted upon by the taxing bodies and the taxes extended thereon. The taxes extended were not legal, for the reason that the amounts returned as net receipts were not scaled and debased as the returns of other personal property were in the extension of the taxes.”
But while the court ruled that the taxes so extended were not legal, it referred to the stipulation whereby judgment was to be rendered in conformity with the evidence and equitable principles, and held that the plaintiff, while not entitled to recover all that was extended, was entitled to a judgment for what would have been due had the net receipts been “ scaled and debased in conformity with the assessments on other personal property” and had the taxes been computed and extended on the resulting assessments.
Respecting the tax on net receipts for the year ending April 30, 1927, that court considered several objections,
From the outset the defendant has insisted as part of its defense that the taxing act, if construed and applied as sustaining the taxes in question, denies to it the equal protection of the laws contrary to the prohibition of the Fourteenth Amendment. This appears in the stipulation under which the case was tried, in the opening statement of counsel at the trial, and elsewhere in the record. The Supreme Court, in the opinion, recites that this contention was made, and disposes of it by saying that a like contention was considered and overruled in Hanover Fire Ins. Co. v. Harding, 327 Ill. 590; 158 N.E. 849; and People v. Franklin National Ins. Co., 343 Ill. 336; 175 N.E. 431.
Of course the question in this Court is whether the act as applied by the state court in this case arbitrarily and prejudicially discriminates against the defendant and in favor of others in circumstances fairly admitting of equal treatment. The particulars in which it is claimed that the act works such a discrimination will be taken up separately.
Whether a state statute is valid or invalid under the equal protection clause of the Fourteenth Amendment often depends on how the statute is construed and applied. It may be valid when given a particular application and invalid when given another. Here the application which was made of § 30 in respect of the taxation of the net receipts of 1927, i.e., the application made by the assessing officers and sustained by the Supreme Court, brought the section into conflict with the prohibition of that clause. This means that as so applied it is invalid, notwithstanding its validity in some different applications.
It is said that § 30 works an unreasonable discrimination against the foreign corporations named therein in that it taxes their net receipts without permitting in the computation of such receipts a deduction of paid insurance losses, whereas competing domestic corporations are taxed only on what remains of their receipts on April 1 of each year after insurance losses, as well as operating expenses, are paid. But the defendant is not in a position to press this claim. Neither in its return nor in the hearing before the board of review did it make any showing respecting paid insurance losses or ask that such losses be deducted in arriving at its net receipts. The amount of these receipts — whether one sum or another — was primarily, at least, to be determined by the assessing officers. And as the matter was not presented to them it was not admissible, according to the decision of the Supreme Court, for the' defendant to make it a ground for asking the court to reject or revise their finding respecting the amount of the receipts.
It is said that § 30 arbitrarily discriminates against foreign fire, marine and inland navigation insurance corporations and in favor of competing domestic corporations, in that it taxes the net receipts of the former, while the latter are not subjected to such a tax or to any equivalent tax. It appears to be conceded that no tax is laid directly on the net receipts of the domestic corporations; but it is denied that those corporations are not subjected to an equivalent tax.
“ Under the previous decisions of the Supreme Court of Illinois, when the net receipts were treated as personal property and the assessment thereon as a personal property tax subjected to the same reductions for equalization and debasement, it might well have been said that there was no substantial inequality as between domestic corporations and foreign corporations, in that the net receipts were personal property acquired during the year and removed by foreign companies out of the State, and could be required justly to yield a tax fairly equivalent to that which the domestic companies would have to pay on all their personal property, including their net receipts or what they were invested in.”
Counsel differ as to whether that statement was necessary to the decision of the case in hand. Be this as it may, the statement recognizes that substantial equality and fair equivalence are important factors in determining the presence or absence of arbitrary discrimination in such situations; and in this respect the statement is in accord with repeated decisions of this Court. Mathematical equivalence is neither, required nor attainable; nor is identity in mere modes of taxation of importance where there is substantial equality in the resulting burdens.
By reason of the presumption of validity which attends legislative and official action one who alleges unreasonable discrimination must carry the burden of showing it. This has not been done as respects the claim now being considered. The defendant recognizes that the domestic
It is said that § 30 requires foreign fire insurance corporations to pay the tax not alone on their net receipts from fire, marine and inland navigation insurance but also on their net receipts from casualty insurance, whereas foreign casualty insurance corporations severally conducting a casualty insurance business in direct competition with the foreign fire insurance corporations are not required to pay a tax on their net receipts qr any equivalent tax. The factual premises of this claim are stipulated. The Supreme Court of the State has construed § 30 as taxing the foreign fire insurance companies on their net receipts from casualty insurance,
This statement shows that § 30, as the state court construes and applies it, works a very real and prejudicial discrimination against the fire insurance companies and in favor of the casualty companies in respect of competitive casualty businesses of the same character, conducted in the same way and in the same territory. The companies are all foreign corporations, and all are for present purposes equally within the jurisdiction of the State and subject to her power to tax. There is no basis or reason for making a distinction between them that has any pertinence to the imposition of a property tax such as is in question. The net receipts which are taxed are not different from those which are not taxed; and both come from the same source. Such a discrimination in respect of the taxation of real or tangible personal property obviously would be essentially arbitrary. In principle it is not different with the net receipts. They are property and the tax which § 30 imposes is, as the state court holds, a property tax. It follows that the section, when construed and applied in the way just described, is in conflict with the equal protection clause of the Constitution. Full support for this conclusion is found in prior decisions.
When the views expressed in this opinion are applied to the judgment under review the result, shortly stated, is as follows: The taxes of 1923-1926, as reduced by the Supreme Court, were only on net receipts from fire,
Affirmed in part.
Reversed in part.
Ill. Laws 1869, 209, 228; Ill. Laws 1874, 179; Cahill's Ill. Rev. Stat., c. 73, § 159.
Act June 30, 1919; Ill. Laws 1919, p. 727.
Hanover Fire Ins. Co. v. Harding, 327 Ill. 590, 594-595.
Act July 7, 1927; Ill. Laws of 1927, p. 745; Cahill's Ill. Rev. Stat. 1933, c. 120, §§ 328, 329.
In one of the briefs this amount is given as $165,670.00.
This was the second decision of that court in the case. An earlier decision reported in 317 Ill. 366; 148 N.E. 23 had been reversed in 272 U.S. 494 and the case had been remanded for further proceedings.
Sections 17 and 18 of the Act of February 25, 1898, Ill. Laws 1898, p. 32, directed assessing officers to take one-third of the listed
People v. Concordia Fire Ins. Co., 350 Ill. 365; 183 N.E. 241.
Fidelity & Casualty Co. v. Board of Review, 264 Ill. 11; 105 N.E. 704.
Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389; Louisville Gas & Electric Co. v. Coleman, 277 U.S. 32; Cumberland Coal Co. v. Board of Revision, 284 U.S. 23; Iowa-Des Moines National Bank v. Bennett, 284 U.S. 239, Royster Guano Co. v. Virginia, 253 U.S. 412; Kentucky Finance Corp. v. Paramount Auto Exchange, 262 U.S. 544; Power Manufacturing Co. v. Saunders, 274 U.S. 490.
Dissenting Opinion
dissenting in part.
I am unable to concur in the opinion of the court to the extent of its holding that the tax upon the net receipts of premiums for casualty insurance is a denial to the appellant of the equal protection of the laws.
The validity of a tax depends upon- its nature, and not upon its name. St. Louis Compress Co. v. Arkansas, 260 U.S. 346, 348; Federal Land Bank v. Crosland, 261 U.S. 374, 378; Louisville Gas Co. v. Coleman, 277 U.S. 32, 38; Educational Films Corp. v. Ward, 282 U.S. 379, 387.
In the State of Illinois there has long been a usage, reinforced by statute until 1927, whereby property subject to an ad valorem tax is to be assessed at 30% or later 60% of its value, and no more. The highest court of that state held for many years that within the meaning of this rule of debasement, the tax upon the net receipts
No descriptive epithet applied to the tax by the Illinois court or any other can transform the essential nature of the tax into something other than it is. St. Louis Compress Co. v. Arkansas, supra; Federal Land Bank v. Crosland, supra; Educational Films Corp. v. Ward, supra. No descriptive epithet can make a tax upon the net receipts of the business of the whole year the same as one upon the property located on a particular day of the year within the area of the taxing district, or the same as one upon the capital or income of investments. If the foreign corpo
This court did not hold in Hanover Ins. Co. v. Harding, supra, that if the tax was an excise, it would be void for that reason, though the assessment were to be debased. All that was held was that calling it an excise would not save it if the benefit of debasement was withheld in a discriminatory way. By the same, token, calling it a property tax does not condemn it if debasement is allowed. The Illinois court did not hold, in retracting the description of a tax upon a privilege, that a tax upon investments is identical with a tax upon the net receipts of the business of the year. Things so essentially different would not become the same even if a court were to confuse them and speak of them as one. The Illinois court held no more than this, that whatever the differences between the taxes, the two would be viewed as if they were taxes upon property for the purpose of applying the prescribed percentage’ of debasement. If the tax upon net receipts, including casualty insurance premiums, would not effect a denial of the equal protection of the laws in the event that the
Now, plainly, a tax on the net receipts of a business of a particular kind is not condemned as void for the reason that a like tax or an equal one is not laid on the net receipts of every other kind of business. Bell’s Gap R. Co. v. Pennsylvania, 134 U.S. 232, 237; Pacific Express Co. v. Seibert, 142 U.S. 339, 351, 353; Adams Express Co. v. Ohio, 165 U.S. 194, 223, 228; Southwestern Oil Co. v. Texas, 217 U.S. 114; Oliver Iron Co. v. Lord, 262 U.S. 172; Stebbins v. Riley, 268 U.S. 137, 142; Ohio Oil Co. v. Conway, 281 U.S. 146, 159; Union Bank v. Phelps, 288 U.S. 181. Not even the appellant makes any contention to the contrary. If it did, it would be driven to maintain that the whole statute must fall, and not merely so much as affects the casualty premiums. To say that a tax on the net receipts of one kind of business is void because a like tax is not laid on different forms of business would mean that the net receipts of insurance companies may not be taxed without laying a like tax on manufacturers and merchants. The cases above cited make it clear to the point of demonstration that this is not the law. “ The state may tax real and personal property in a different manner.” Bell’s Gap R. Co. v. Pennsylvania, supra; Ohio Oil Co. v. Conway, supra. “ It may impose different specific duties upon different trades and professions, and may vary the rate of excise upon different products.” Ibid. Nowhere is it' intimated that what was approved would have been condemned if there had been in the statute a glossary that gave the tax another name.
Fire insurance companies in Illinois, though organized in other states, have never been allowed to do a general casualty business. It is misleading to argue about them on the assumption that they are appropriately described as casualty insurers. For a long time they were restricted to the risks of fire, lightning and tornadoes, and those of inland navigation and transportation. Act of March 11, 1869; Act of May 31, 1879; Act of June 30, 1885. Then in 1905 (Act of May 16, 1905), they were permitted to insure against the leakage of sprinklers, pumps, and other apparatus of that order. In 1912 (Act of June 11, 1912), the list was increased by adding the risk of damage to property through the use of motor vehicles, but not the risk of liability for damage to the person. In 1925 (Act of June 30, 1925), there was a revision of the form of the then existing statutes, but with little change of substance. After the revision just as formerly the casualty policies written by the fire companies were confined with negligible exceptions to liability for loss through the use of pumps and sprinklers, and liability for damage to property through the use of motor vehicles. They occupied only a small part of the total casualty business.
The accuracy of this statement is perceived upon a survey of the activities of the casualty companies. These companies insure against bodily injury, disability or death as a consequence of accident. They indemnify merchants and other business men against loss by reason of giving credit to customers. They guarantee against loss by burglary or theft or the breakage of glass. They insure against any hazard resulting from the maintenance or use of automobiles or other vehicles, whether there is
A study of the reports to the Insurance Department of Illinois exposes the overlapping segments in their comparative dimensions. Thus, in 1927, the foreign fire stock-companies of Illinois received premiums from all sources of $68,741,901.34, of which $48,266,624.47 came from fire policies, $680,645.43 from ocean marine insurance, $4,018,503.22 from inland navigation and transportation, $7,866.42 from insurance against earthquakes, $5,743,891.81 from tornado policies, $171,833.15 from insurance against damage by hail, $327,933.61 from riot insurance, $48,414.68 from miscellaneous policies; and $9,476,188.55 from the two fields where the business of fire companies and casualty companies overlap, i.e., motor vehicle property damage and sprinkler leakage ($9,207,-980.43 for the one and $268,208.12 for the other). 60th Annual Insurance Report, part I, pp. 96-105. During the same year the foreign casualty companies received premiums of $7,384,454.72 from accident and health policies, $12,728,070 from workmen’s compensation insurance, $3,274,293.63 from fidelity insurance premiums, $7,879,541.48 from automobile liability insurance, exclusive of property damage, $3,047,350.53 from liability insurance not connected with automobiles, $3,957,757.69 from insurance against burglary and theft, $4,371,869.46 from surety bonds, $1,961,445.08 from plate glass insurance, $442,020.20 from steam- boiler insurance, $161,-862.91 from engine and machinery insurance, $370,040.02 from credit insurance, $111,164.20 from property damage not connected with motor vehicles, $22,676.10 from insurance of live stock, $794,119.43 from miscellaneous policies, and finally $3,199,397.92 from motor vehicle policies covering damage to property and $44,267.48 from sprink
This comparison makes it clear that the business of fire insurance companies as carried on in Illinois is essentially a different one from the business generally known as that of casualty insurance, though the spheres coincide for the space of a small segment. A phase or department of one business may be akin to a phase or department of another, and still the kindred branches may bear unequal taxes. Coincidence of some of the parts is not enough unless the parts are so many as to determine the identity of the whole. The vice of any different principle may be known from its consequences. The drug store of today supplies many things besides medicines and surgical appliances. ■ It has a counter where sandwiches and salads and ice cream and many other edibles are furnished to its customers. If a tax were to be laid upon the earnings of a drug store, the acceptance of the appellant’s argument would drive us to a holding that the receipts from the sale of edibles must be excluded from the reckoning in the absence of a like tax upon the proprietors of restaurants. Dealers of ready made clothing have a department of their business in which clothes are made to order. The appellant would have us say that the earnings from that department are exempt under the constitution from a tax upon receipts unless a like tax is laid upon the earnings of the merchant tailor. The legislature in that view may no longer classify the forms of business with an eye to a composite group of uniformities and differences. There must be a segregation of forms of business into their constituent activities, which, to the extent that there is identity, must be taxed for any one group as they are taxed for any other. Immunity from tax laws of unequal operation has never
By the very law of their being, companies whose principal business is to provide insurance against fire, but who provide casualty insurance in a very narrow field, are in a class of their own, with capacities and opportunities essentially diverse from those of companies who are incompetent to provide insurance against fire, but who do insure against almost every other imaginable risk. The state is not called upon to explain the reasons for taxing the members of the one class more heavily than it does the members of the other. The burden is on the appellant who would strike the statute down, and not on the state which invokes the presumption of validity. Weaver v. Palmer Bros. Co., 270 U.S. 402, 410; Detroit Bridge Co. v. Tax Board, 287 U.S. 295, 297. “As underlying questions of fact may condition the constitutionality of legislation of this character, the presumption of constitutionality must prevail in the absence of some factual foundation of record for overthrowing the statute.” O’Gorman & Young, Inc. v. Hartford Fire Insurance Co., 282 U.S. 251, 257; Lawrence v. State Tax Commission, 286 U.S. 276, 283; Williams v. Mayor, 289 U.S. 36, 42. Here the foundation fails, and with it the assault.
Nothing that was determined in Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389, is at war with this conclusion. There the business done by the taxpayer was the same as that done by others to whom an exemption was allowed. Here they are not the same, though at places they overlap.