First American Title Insurance Co. v. Combs

or as- any organization successor (and the signs.” Citigroup established it is dispute) a succes-

Nickells do Barney, and thus organization

sor to Smith contracts and the

fell heir to Nickells’

arbitration clauses within them. to show Citi-

Because the Nickells failed right to its contractual arbi-

group waived

tration, conditionally grant Citigroup’s we

petition for writ mandamus without Tex.R.App. see

hearing argument, oral P.

52.8(c), compel the trial court to and direct are confident

arbitration. We comply, and our promptly

trial court will if only it does not.

writ will issue TITLE

FIRST AMERICAN INSUR- Republic

ANCE COMPANY Old Company,

National Title Insurance

Petitioners,

v. COMBS, Comptroller of Public

Susan

Accounts State

Greg Attorney Abbott, of Tex- General

as, Respondents.

No. 05-0541.

Supreme Court of Texas.

Argued April 16, 2008. May

Decided 29, 2008.

Rehearing Aug. Denied Otto, Sneed, Eudy,

Ron K. Patricia Vine P.C., Perry, & R. Phillips, Thomas Kennon Peterson, Botts, LLP, Lathem Baker Aus- tin, TX, Zinn, Reed, Matthew J. Steven Johnson, LLP, Steptoe Kry, & Robert K. Blott, LLP, DC, Washington, Baker for Petitioners. Monzingo,

Christine Office the Attor- Division, ney General of Texas-Taxation Abbott, Texas, Greg Attorney General of McBee, Burbach, Barry Ross Edward D. General, Attorney Office of the E. William Storie, Attorney Office of the General-Tax- Sullivan, Dept., ation Kent C. Fisrt Assis- General, Morales, Attorney tant David S. and Texas the United States rights under Attorney General Office and, accord- disagree Austin, TX, We Respondents. Constitutions. appeals’ judg- the court ingly, affirm Fryer, Heath B. Bickerstaff Catherine ment. Scott, Caroom, LLP, Caroline Pollan & TX, LLP, Austin, Wynne Sewell Gardere Background Curiae. I.

for Amicus Compa- Title Insurance First American opinion delivered the Justice WILLETT American) (First Na- ny Republic and Old Court, in which Chief Justice (Old Re- Company tional Title Insurance O’NEILL, JEFFERSON, Justice Justice title public) are out-of-state joined. GREEN, and Justice JOHNSON in Texas. First doing business companies century, a Texas For has taxed over and issues American is California-based poli- title insurance premiums collected on through policies directly and also Texas long, as Texas sold here.1 For almost cies agents; Republic Old independent “retaliatory” tax imposed an additional has policies Minnesota-based issues necessary equalize bur- when through independent agents. Texas foreign-based by Texas and dens borne entities, business agents Title are distinct system This companies.2 title insurance liability usually corporations or limited operated change with minimal until a has in title insurance companies, engage that ago Comptroller rein- years when the few com- independent of title insurance work terpreted statute panies. liability way sharply the tax increased of certain non-Texas insurers. of Insurance Department The Texas (TDI) that insur- prescribes challenge

Two of those insurers in- for title may charge policyholders ers interpretation,3 revised poli- issues title insurer surance.4 When plain it contravenes arguing TDI through independent agent, cies controlling statutes and meaning how the insurance equal protection prescribes the insurers’ also violates 4, 1223, 25, See, 13, 1905, May by of amended Act e.g., approved May 29th Act 1224— 9.07, 6, 1, 219, 1, C.S., 1967, R.S., Leg., § § Leg., ch. Tex. Gen. Laws ch. art. 1st 60th 427, by (amending 490, 493-94, statute 427-28 an earlier amended Gen. Laws 1967 Tex. compa- specifically including 1975, R.S., title insurance 31, Leg., ch. May 64th Act of scheme). nies in the 1065-67, 1063, 409, 4,§ Laws 1975 Tex. Gen. 1, 1987, Leg., of 70th Act June amended 2, 1935, R.S., May Leg., 44th ch. See Act R.S., 1073, 6,§ Gen. Laws 1987 Tex. ch. 307, 713, 713-14, 1,§ 1935 Tex. Gen. Laws 30, 3610, 3627-28, May by Act of amended 23, 1951, Leg., May repealed by 52nd Act 685, 16.02, 1993, R.S., § Leg., ch. art. 73rd 4, 868, R.S., 491, § ch. 1951 Tex. Gen. Laws 2677-78, 2559, 9.07, Tex. Gen. Laws 1995, 7, Leg., May 74th Act amended 949, Respondent appeal original R.S., to this was 3. The § Laws 1995 Tex. Gen. ch. Comptroller. present predecessor 22, 2003, 949-51, May 78th repealed Act of left office before As former R.S., 26(b)(4), 2003 Tex. Leg., ch. of, public offi- appeal disposed "the was (current version at Gen. Laws automatically substituted." cer's successor 2703.151(a)). Although the rele- Ins.Code Tex.R.App.P. 7.2(a). recodified, we statutes have since been vant were written to them as will refer R.S., 7, 1951, Leg., 52nd ch. Act of June controversy years in the tax 2001 to 1,§ Laws 1951 Tex. Gen. here. 970-71, by Act of June 54th amended R.S., Leg., Gen. Laws ch. 1955 Tex. taxes, fees, and the agent premium.5 should divide the burdensome and other obli- During ease, period relevant to this gations on Texas title in- selling insurers TDI keep allowed 85% of than surance there Texas on for- policyholders ums collected from and remit selling eign title insurers insurance here.10 remaining 15% to the insurer.6 Texas “principal purpose” behind subjects insurance law the full amount of taxes, Supreme as the United States Court tax;7 logis- to a explained upheld when it their constitu- simplicity, tical the title insurers remit the tionality, promote “is the interstate full amount tax on these domestic deterring All title companies State.8 enacting discriminatory other States from State, operating within the Texas-based or against foreign or excessive taxes” insur- not, subject premium to the tax.9 companies.11 ance Retaliatory taxes are ubiquitous, having “been a common feature premium

Besides Texas also of for century,”12 tax on insurance taxation over a foreign title like they every except First American and exist Ha- Old Re- public if their home states more waii.13 4, 1967, R.S., 219, May Leg., of 9.59, Act 60th ch. 8. Former Tex. Ins.Code art. 5. 8(b). § 1, 9.30, 490, 504, § art. 1967 Tex. Gen. Laws 31, 1975, by May Leg., amended Act of R.S., 64th §9. 409, 12, § ch. 1975 Tex. Gen. Laws 1063, 1069-70, 1, by amended Act of June 22, 1957, R.S., May Leg., 10. Act of 55th ch. 1987, R.S., 1073, 8, 9.30, Leg., § 70th ch. art. 396, 1, 1184, 1184-85, § 1957 Tex. Gen. Laws 3610, 3630-31, 1987 Tex. Laws Gen. amended 30, 1983, by May Leg., amended Act of 68th 7, 1995, R.S., by May Leg., Act of 74th ch. R.S., 622, 16, § ch. 1983 Tex. Gen. Laws 127, 11, 949, 952, § 1995 Tex. Gen. Laws 3891, 3929-31, 3, by July Act amended of 22, 2003, repealed by May Leg., Act of 78th 1984, C.S., 31, 4, 5, Leg., § 68th 2nd ch. Art. R.S., 1274, 26(b)(4), § ch. 2003 Tex. Gen. 221, 193, by 1984 Tex. Gen. Laws amended (current 3611, Laws 4139 at version 28, 1989, R.S., 237, Tex. Ins. May Leg., Act of 71st ch. 2502.054(b)(1)). § 3, 1106, Code 1102, § 1989 Tex. Gen. Laws amend- 22, 1989, R.S., by May Leg, ed ofAct 71st ch. § (adopting 28 Tex. Admin. Code 9.1 Basic 6, 242, 1151, 1154, § 1989 Tex. Gen. Laws Rules, Rates, Manual of and Forms for the 18, 1995, by May Leg., amended Act of R.S., 74th Writing of Title Insurance which is 279, 9, 2619, § ch. 1995 Tex. Gen. Laws http://www.tdi.state.tx.us/title/ available at 2622, 20, 1999, by May amended Act of 76th specifies titlem4d.html# P-23 and a 15/85 R.S., 852, 4, Leg., § ch. 1999 Tex. Gen. Laws split premium between insurer and 3520, 3521-22, 22, repealed by May Act of agent). R.S., 2003, 1274, 26(a)(1), Leg., § ch. 78th 3611, (current R.S., 1, 1987, 2003 Tex. Gen. Laws 4138 Leg.,

7. Act of June 70th ch. 281.001-.007) 9.59, §§ 1073, 22, version § art. Tex. Gen. Laws Tex. Ins.Code 21.46], 3638-39, 30, Former Tex. Ins.Code art. 3610, [hereinafter May amended Act of 1993, R.S., 685, 3.19, Leg., § 73rd ch. 2559, 2591, Equali- 11. W. & S. v. Ins. Co. State Bd. Gen. Tex. Laws amended Act Life of zation, 648, 668, 2070, 1997, R.S., 1423, 22, May Leg., 451 U.S. 101 S.Ct. of 75th ch. (1981). 5329, 5390, L.Ed.2d 514 § 1997 Tex. Gen. Laws May Leg., amended Act of 76th 852, R.S., 3, 3520, § ch. 1999 Tex. Gen. Laws 2001, 3521, 26, May amended Act of 77th R.S., Leg., (granting See ch. Tex. Gen. Laws 431:7-206 Haw.Rev.Stat. 1501, 1502-03, May repealed companies a Act of domestic insurance tax credit for R.S., 26(b)(4), Leg., paid 78th ch. the amount of states); (current 2003 Tex. Gen. Laws Co. Am. v. Prudential Ins. Comm’r Revenue, 223.001-.011) §§ version at Tex. 429 Mass. 709 N.E.2d Ins.Code 9.59], (1999). [hereinafter Former 1100 n. 7 Ins.Code the excess court to recover remit- district Republic American and Old First as a result of incurred payments taxes premium and ted retaliatory tax calculating the Comptroller, new case, full amount of on the owed based In each taliatory tax statute. Thus, State. they remitted to the cross- Comptroller filed and the they included not in each summary judgment; motions paid 15% of the summary case, awarded judge trial paid earned but also without elab- Comptroller judgment to the by inde- earned the 85% of ap- appealed; their Both insurers oration. However, pendent agents. in 1996 consolidated; and the court peals were adopted new rule that rec- Comptroller affirmed, Comp- holding that the appeals for “tax- agent’s responsibility ognized interpretation of the stat- troller’s revised agent’s portion due on the es and constitutional.15 utes was reasonable resulted a new change um.” This calculating the tax. method of of Review II. Standard ti- reasoned that because keep only argue 15% of tle insurers The insurers agent-issued policies plain change collected offends interpretive re- only despite of the 15% Insurance Code meaning the relevant of tax — to the State— mitting the entire 100% equal pro- also violates provisions and only that could count foreign of the States tection clauses United of retaliato- figuring 15% when the amount should Since “cases Texas Constitutions. of math: ry tax owed. The result this new narrow, non-constitutional decided on liability premium tax insurers’ begin we possible,”16 grounds whenever compared with what other states dropped claim, examining the statutory with the insurers, imposed on thus substan- Texas years in tax 2001- they existed statutes as tially increasing the insurers’ retal- dispute. time of this liability. iatory tax a a The construction of statute Comptroller’s interpretive change The novo.17 law review de question of we pay an extra required First American to statute, look first we interpreting When $1,432,580.76 retaliatory inter- taxes and meaning plain of the and foremost 2002, which years est for tax 2001 and is clear and “If the statute words used.18 protest. under Old paid First American its words unambiguous, apply we must $219,626.40 Republic of paid total meaning”19 in a according to their common taliatory year for tax 2002 based taxes clause, word, every way gives effect to method, protest. under the new also when di- ordinarily, in and sentence.20 And separate lawsuits insurers then filed (1996), Reg. adopted 21 Tex. Id. 21 Tex. (codified Reg. 3948 34 Admin. 3.831(3)(B)) (current at 34 version Code 3.831(4)(B)). Tex. Admin. Code Uncertain, City City v. Marshall of 298, 302-03, 313. 15. 169 S.W.3d (Tex.2006) City (quoting S.W.3d Woods, of Boeme, City 111 S.W.3d v. 222 S.W.3d San Antonio 16. VanDevender v. (Tex.2007). (Tex.2003)). Shumdke, 199 S.W.3d v. 17. State (Tex.2006).

vining legislative intent, “the truest man- enforcement these ifestation” of what lawmakers intended is statutes, uphold we will her enacted, they what “the literal they text long “so as the construction is reasonable voted on.”21 and does not plain language contradict the of the statute.”27 argue that,

The insurers because the retaliatory provision “penal”

nature, strictly we interpret should lan its III. Discussion guage any and resolve ambiguities against First American and Old Republic con- the Comptroller. Supreme Court has tend that Comptroller’s interpretation cast doubt on whether improperly tax scheme penal are in nature: principal purpose “the portion excludes a tax that promote tax laws is to obligated to pay under the interstate business of domestic insurers provision, um tax ultimately resulting in object ... ‘their ultimate is not punish artificially high retaliatory taxes. Article foreign corporations doing business in the ”22 21.46 of the Insurance Code—the retaliato- Furthermore, state.’ although we have ry provision operative at the time this applied “a stricter construction” to tax dispute requires the Comptroller to past, statutes in the we have done so arose— impose a retaliatory tax on an when out-of-state [the “doubt about applica statute’s] tion still remains after when the financial bur- dominant rules of construction den applied.”23 have been on Texas insurers a for- One those “dominant rules eign of construction” re aggregate exceeds the of taxes quires give us to “serious consideration” to and other obligations “directly imposed” of a statute by “[construction the ad on insurers The par- Texas.28 agency charged ministrative en its agree ties that the principal obligation “di- forcement.” The tax statute rectly imposed” on title insurers in Texas states that comptroller “the impose” shall premium is the tax. tax.25 The tax premium provides

statute that “the commissioner A. The Premium Tax Provision comptroller, may as appropriate, adopt rules, Article 9.59 of the Insurance Code re- regulations, standards, minimum quires and title insurance company “[e]ach limitations that are fair and reason may receiving appropriate premiums able as aug from the business of implementation mentation and title pay comptroller this artic insurance shall to the Legislature charged le.”26 Because tax premiums provided on those as in Servs., Moore, Mgmt. 21. Alex Appraisal L.P. v. John- 24. Tarrant Dist. v. Sheshunoff son, (Tex.2006). 209 S.W.3d (Tex. 1993). S.W.2d & Equali- W. S. Ins. Co. v. State Bd. Life 21.46, 1(a). 25. Former Tex. Ins.Code art. zation, 451 U.S. 101 S.Ct. Vartanian, (quoting L.Ed.2d 514 P.H. 9.59, 3(c). 26. Former Tex. Ins.Code art. Annotation, Construction, Constitutionality, Operation, and Retaliatory Statutes Effect Dist., Appraisal 27. Tarrant 845 S.W.2d at 823. Against Foreign Corporations Doing Business State, (1934)). Within 91 A.L.R. Ann. 795 1(a). 28. Former Ins.Code Co., Pipe 23. Calvert v. Tex. Line 517 S.W.2d (Tex. 1974). the pre- remits 85% company “all insurance applies This tax article.”29 an administrative State as tax to the this mium premium to be amounts defined reality bears title insur- and economic Chapter, paid to the mechanism whether burden, in- the insurer by the title the tax only or retained 15% of company ance defines a tax in its agent.”30 Chapter The surance include 15% can premiums imposed.” as “the total amount of premium “directly of taxes calculation year taxable on title insur- received for the Thus, hinges on whether the dispute in this property on located ance written “directly imposed” premium tax is full doing insurers state.”31 Title under the retal- companies title insurance to file an annual required Texas are iatory provision. amount of and remit the total

return pre- application of The Comptroller.32 Title directly due agents reasonable mium tax to insurance agents do not file returns or insurance plain harmony with the statute’s and in directly: premium taxes out, Article point meaning. As the collec- State of Texas facilitates company, not requires the insurance 9.59 premium premium tion of the pay35 agent, report34 the insurance agent by setting the retained premium premiums all earned tax on premium between insurer division of of title insurance.36 provision from the agent that the insurer receives so recognizes also But the statute agent’s tax due on the explicitly it premiums, and receive it remits portion of the tax is lev- “The premiums: those the State.33 to be on all amounts defined ied parties agree that Article 9.59 taxes paid to the title Chapter, whether in this provision all earned from the by the title or retained company insurance, by an in- whether earned agent.”37 agent, surance or an insurance Nevertheless, contend the insurers disagree on the tax parties but the whom all applied to while that the argue is The insurers imposed. earned, on imposed the is not only obligated by Article parties are the tax is levied premium agent “[t]he because tax, pay premium the full 9.59 to the so ... premium all defined to be on amounts includ- payment amount of their should be the in lieu of the tax on being such The tax calculation. ed the agent.”38 Taken by the retained premium although the responds that exempts isolation, phrase arguably pre- remits the company insurance entire premium the agents paying insurance tax, merely as a acts mium the insurer of Subsection But the full context tax. which premium 85% of the conduit for 8(b) understanding. The a different yields agent. actually paid by the insurance that the State very provides the next sentence because According Comptroller, to the § 1. § 1. 35. art. 29. Former Tex. Ins.Code 8(b). §

30. § 2. 36. § 2.

31. added). 8(b) (emphasis 37. 5, 8(b). §§ 32. Id. 38. 8(b).

33. § 5. “facilitates the premium most, collection of the At the compulsion obligation tax on premium the agent” retained the required regard the with to 85% by dividing the premium between insurer premium tax is to write a check agent “so that the insurer money receives agent— drawn on remitted agent’s tax due portion of day, the end of the the insurer’s bank premium.”39 The State would have no negatively account is not impacted. This need to ensure that companies insurance administrative acting burden of aas con- agent’s portion receive the of the for agents’ duit tax payments does not tax if the tax not imposed were rise to the level of a imposition” “direct Rather, agents. “in lieu creating of’ a and therefore cannot be counted as bur- separate system tax collection for insur- meriting den inclusion in the ance agents, Legislature implemented tax calculation.

an integrated system of taxation with the B. Noncompliance Penalties for company insurance acting as the central the Premium Tax Statute point.40 collection ap- plies earned the agent, However, point the insurers out that requires Article 9.59 agent to bear requires Article 9.59 more of title insur- agent’s burden for the portion of the check; companies writing ance than taxes: “the insurer receives the premium statute further states that insur- “[a] title tax due on the agent’s portion of the pre- ance failing pay to all taxes im- mium and remits it to the State.”41 posed by this article subject is also

Article 9.59 describes the insurer’s role Article 4.05 of this code.”43 Article 4.05 a pass-through as entity requires relied on companies insurance their State to prior “facilitatef] collection of the receiving a certifícate of premium tax”42 from the agent. state; insurance authority to do business in the (internal 1993) (Bkrtcy.N.D.Ill. quotation omitted))). marks system up by Legisla This taxation set ture, whereby party one serves as a collection 9.59, 8(b). Former Tex. Ins.Code agent or transfer actually a tax that that, argue spite plain lan- another, paid by on and is not novel. 8(b), guage of Subsection do Federal and state tax schemes abound with portion not remit their tax systems; example, similar collection fed companies. support To their con- personal eral income taxes are tention, point the insurers to forms used employees, though individual employers even setting premium TDI the division. The title remit govern the bulk of these taxes the premium insurer form lists 100% of the tax as through withholding ment the mechanism expense; agent an the title form does not list liability and face for their failure to so. do premium argument tax at all. This does not 6672(a) (2006); See I.R.C. Oída. Tax persuade agent us. The title form does con- Nation, Comm'n v. Chickasaw 515 XJ.S. expense tain an line for the amount of 115 S.Ct. 132 L.Ed.2d 400 insurer, ums remitted to the title and the (acknowledging proposition the settled that statutory language makes clear that the employees, employers, not bear the burden of agent’s portion premium of the tax tois tax); City income Farrell v. Sharon Steel Furthermore, included in that remittance. (3d Corp., Cir.1994) 41 F.3d 97 n. 6 plain language TDI cannot override the of the (“[T]he (like theory of trust fund taxes income premium tax statute. withholding) tax is that the tax is (for party example, employee), one is but 42. Id. (for party collected and held another ex ample, employer).” (quoting the In re Markos P’ship, 43.§ Gurnee & 4 B.R. n. Contrary to earned. to all Comptroller plies also authorizes statute claims, insur- Rule 3.831 does against insurers’ collection action institute underreport gross premium up set payment that mechanism ers alter the Thus, argue insurers that of the ceipts.44 9.59; plain terms under Article are taxed on their agents if insurance in- liability even “if the Rule, applies separate alone run premiums, portion the tax due to remit fails surer failing for risk of Article 4.05 sanctions Thus, com- Rule 3.831 agent’s portion.”46 tax. premium the full amount of the remits 9.59—the insurer with Article ports the insurer tax for both premium risk Comptroller alleviated this The party clarifying that each agent along with her policies new implementing —while portion of only for the held liable will be statutes. of the tax new owes. tax that it premium responsibility policies These allocate premium according nonpayment tax burdens borne Retaliatory respective

to the Tax Provision C. companies. agents and insurance that Nevertheless, insurers contend a new Comptroller published In premium of the if the full amount even making directly to the agents liable policy them, “directly imposed” is not por- if to remit their Comptroller they fail still fail must Comptroller’s interpretation This tion of the tax to insurers. portions of it with various conflicts because understanding solidified in was further provision. fol- added the when operative provision Tax Rule lowing provision to Insurance arose, Article 21.46 dispute at the time this 3.831: Code, Comp- allows of the Insurance are and title both Title insurers retaliatory tax on an troller subject maintenance insurer out-of-state proportional tax on their share of separately liable for premiums and are any by the laws [w]henever if the fails to remit the the tax territory of the United States or portion.45 the agent’s tax due on fines, licenses, fees, taxes, pen- any ... alties, or other ob- rule, deposit requirements cannot Under this new title insurers of the restrictions ligations, prohibitions liable for nonpayment be held upon any tax —insur- agent’s portion of the statutory consequences if and li- organized will face in this State ers of the portion fail to remit their own or that doing censed premium tax. other state or may in such do business which, aggregate are territory in the Rule con- argue

The insurers 3.831 taxes, ... aggregate excess 9.59, which tradicts Section 1 of Article licenses, fees, fines, deposit penalties, pay the companies to requires insurance obligations, prohi- or other requirements 2 of Article and Section directly imposed restrictions bitions or ap- which clarifies that the R.S., 7, 1951, Leg., (current ch. Ins. Code 52nd at Tex. 44. Act of June version 868, 1, 4.05, 203.002). § § Tex. Gen. Laws art. by May 73rd Act of amended 3.10, 4.05, R.S., 3, § Leg., art. ch. Art. 3.831(4)(C). § 34 Tex. Admin. 45. Code repealed Tex. Gen. Laws R.S., Leg., May ch. 78th Act of Id. 26(a)(1), § Tex. Gen. Laws upon a similar full tax qualify do not as “other obligations” such other or territory doing under busi- Article 21.46.52 ness in this State.... Response D. A to the Dissent argue The insurers that the retaliatory tax The insurers’ arguments center on one provision just require does not underlying theme: in- companies compare imposed the taxes terpretation improperly foreign credits ti- states, provi- Texas and their home tle insurers with a lower requires sion also them to compare “other (15%) payment than what actually obligations directly imposed” by ... this (100%), pay in which an improperly results insurers, State.48 According to the high retaliatory tax burden. The dissent Comptroller does not give them credit for frames the differently: issue Comp- bear; all of the burdens they namely, the troller’s interpretation “compare[s] other Comptroller excludes from consideration states’ on taxes total premiums with Texas’ obligation report49 and remit50 the tax on only share,” the insurer’s 15% full amount of the tax to the sulting in an unfair equal “as comparison State. as 15 is to argument 100.”53 The dissent’s premised understanding that the (a) The last clause Subsection retaliatory tax originally scheme was provides a clearer meaning context for the based on a comparison of “the obligations”: “other “the aggregate of premiums” total imposed by Texas and taxes, licenses, fees, fines, penalties or oth states, other and that the tax is obligations er this pursu State only fair if it takes into consideration the ant to this Article ... shall not exceed the placed burdens “on the insurance indus- aggregate of by try” charges such the insurer and associated —both Here, such other state.”51 the Legislature agents.54 Comparing the tax burden im- replaced laundry taxes, fees, list of and posed on the entire industry title insurance obligations other with the words “such state, in a hypothetical Texas and charges,” indicating that the “other obli dissent concludes that the gations” meant to be included the retal has artificially lowered the effective iatory calculations financial way um tax rate in a that ensures that all charges “directly imposed” on title insur taxes, insurers will Thus, ers. responsibili the administrative generating thus additional revenue for the filling ties of out remitting forms and the State.55 21.46, 1(a) 47. Former Tex. art. earned operating insurers Ins.Code added). (emphasis Texas exceeds the total taxes on earned operating Texas title insurers else-

48. Id. argument depends upon where. This an in- terpretation of Article 9.59 that credits the 49. Former Tex. Ins.Code art. 9.59, payment. insurers 100% Having rejected interpretation of Article 1, 8(b). §§ 9.59, reject argument. we also 1(a) Former Ins.Code 53. 258 S.W.3d at 646. added). (emphasis 54. argue Comptrol- 52. The insurers also that the ler’s new hypothetical compares 55. The dissent's two $1,000 express scheme similarly earning violates mandate of Arti- situated cle 21.46 premiums. because the total taxes on operating The Texas insurer a retaliatory scheme on tax por- cus agree the dissent’s with We cannot company. entity insurance single be- retaliatory tax scheme trayal of the —the express the comport it fails cause focus dictated the same employ we Once statute. tax language the bur- Legislature comparing — a employing accuses us The dissent compa- title insurance only by borne dens gives the statute that “myopic” view of numbers out. balance nies—the dissent’s to an “artificial allocation” credence Texas hypothetical, a Under dissent’s payor,56but tax burden based on premium pays operating out-of-state $20 insurer matters. payor 21.46 is clear: the Article taxes; insurer out-of-state premium tax was “[t]his assertion that The dissent’s and premium tax pays also $20-$2.0S imposed ... on the based on the burden Thus, tax. the retal- $17.97 industry” ignores the statute’s insurance equalizer its role as an iatory tax fulfills “relatively un- language.57 The plain insurers. similarly situated title between retaliatory tax language of the changed” Furthermore, proper we focus when com- Comptroller to statute instructs the pre- insurer’s foreign $150 tax base—the any “imposed upon the tax burdens pare tax rate mium—the effective company” insurance operat- from Texas statutorily designated mains 1.35%—the tax burdens “di- ing elsewhere with the borne As tax burden rate.61 for the $11.47 similar insurance a upon rectly imposed agent oper- foreign agent, a Texas company” from operating elsewhere amount pay the same ating in Texas would operating If a insurer out- Texas.59 Texas foreign operations and the state bears a heavier tax burden side the agents are not foreign of either Texas Comptrol- comparison, under this then the ag- Article 21.46 neither at issue because retaliatory tax impose” “upon ler a “shall nor im- tax burdens gregates agent’s ” company long as the ... similar so any agents. The retaliatory tax on poses the “on an Comp- taxes Texas that the concern expresses dissent ” company from out-of-state do exceed of the tax scheme troller’s “on a imposed by another state tax on an insurer impose would ” similar Texas.60 tax awith lower from a state Thus, only mis- tax is concern is rate than but a based on the other 21.46 does not placed. on insurers Article rates; Comp- it comparative burdens borne insurers. tax based on burdens. not, cannot, compare comparative troller does based on does so another If, example, dissent’s total take into consid- as premiums, taxes on larger to a tax rate applies or look to state a lower paid by agents, the taxes eration a Texas requires way in a industry as tax base burden borne taxes, then more total the fo- insurer Legislature set whole because subject Id. state is in another 2% 57. state, resulting pay- $20 in a tax in that foreign agent Id. ment. subject to a operating in Texas are 1.35% 21.46, 1(a) pays $2.03 on its tax—the insurer art. 59. Former Tex. Ins.Code share, added). agent pays $11.47 on its (emphasis 15% pays insurer also share. The 85% added). retaliatory tax. S.W.3d (emphasis $17.97 in Ins.Code Former § 4. S.W.3d at 645. 56. 638

retaliatory properly tax would apply to Comptroller’s current interpretation may equalize paid. the total taxes represent change past from practice, but it is squarely in line with the legisla- 1987

The argues dissent also Comp- that the tive amendments that first established the troller’s fails comply agent pass-through premium tax the directive of 21.46 impose Article —insurer system, collection which all we require.62 tax “in the same manner and for the purpose” same as the taxes im- sum, In First Repub- American and Old posed on Texas by foreign states. lic failed have to show that the full amount Specifically, the dissent asserts that of the title tax is “di- Comptroller’s compares scheme the insur- rectly imposed” upon them for purposes of er’s 15% tax burden in Texas Article 21.46. The Comptroller’s interpre- with the full tax imposed burden tation of the com- scheme in other flatly states. The record contra- ports with the plain language premi- dicts this assertion: um provisions worksheet filled out First American Code; therefore, reject Insurance we provides earned, for gross premiums statutory insurers’ claim. recognizing California, First then — state, American’s home splits the ums between agents insurers and Equal Rights IV. Protection —allows “[pjremiums a reduction for retained First Republic American and Old fur- companies,” underwritten title what Texas argue ther that the Comptroller’s interpre- Thus, “[tjotal would call title agents. tation of the retaliatory tax scheme vio- subject premiums to tax” are only those equal protection lates their rights under retained the title insurance the United States Texas Constitutions. company precisely the “apples-to-apples” — “[Tjhe analytical federal approach applies comparison the dissent calls for. Not all equal protection challenges under the split states burden between insur- Constitution,”63 Texas so resolution of the California, ers and like Texas and equal protection federal claim will also noted, already but as we have Article 21.46 equal protection solve the State claim. We charges the Comptroller with assessing conclude that the interpreta- the retaliatory tax based on the burdens tion of the relevant statutes does not vio- on the insurer alone. If other equal protection rights. late the insurers’ states choose to the full insurer, tax on the then the equal protection The clause of out-of-bounds—indeed she is fol-

lowing statutory the Fourteenth compar- Amendment forbids a state mandate — ing “denyfingj any tax to the tax person within its jurisdiction insurer’s 15% equal protection Texas. Moore, Appraisal taliatory began See Tarrant Dist. v. years tax scheme less than ten (Tex. 1993); Sharp S.W.2d v. House after the 1987 amendments to Article 9.59. Inc., 1, 1987, R.S., Lloyd, (Tex. Leg., 815 S.W.2d See of June Act 70th ch. 1991) (upholding Comptroller's change in Gen. Laws for 3638- (amended ty-two year practice 2001 and franchise tax collection 2003); repealed supra change when note 13. was line with "the clear Legislature.”). intent of the Nor is the Tex., change Lloyd. here as drastic as in House v. Bell Low Income Women (Tex.2002). Comptroller’s reinterpretation of the re S.W.3d by much tax rates as However, Supreme Court to reduce the laws.”64 tax burden the match differenti- as 80% recognized that “most laws has law as cur- by Texas imposed on insurers of classes some fashion between ate in Comptroller. interpreted by the rently therefore, a unless classification persons”; states will that other The insurers contend of a fundamental “jeopardizes exercise lowering premium likely respond of an the basis right categorizes or on against counter-retaliating tax rates but characteristic,” law inherently the suspect insurers. Texas rationally it is upheld long will as as interest.65 legitimate

related effects that these disagree We requires review us This rational-basis impermissible necessarily demonstrate “(1) questions: Does the chal- answer two Comptroller’s underlying the con purpose legitimate pur- lenged legislation have a retaliatory tax scheme. struction of for the pose? Was it reasonable develop Comptroller did not The chal- lawmakers to believe that use of the as a revenue-rais independently scheme promote lenged classification would discussed, already have ing plan; as we purpose?”66 is consis interpretation Comptroller’s already noted, Supreme statutory developed Court As we scheme tent with Furthermore, upheld provi- Legislature. previously retalia holding that construction of the Comptroller’s sion to Article similar tory system impermissibly does not provision legitimate purpose the tax had a insurers. against foreign title industry by deter- discriminate promoting “domestic operating ring to interstate All title barriers business.”67 subject that, foreign, are argue unlike the whether domestic The insurers Cali- More Supreme premium tax division. by the upheld fornia statute 85/15 over, are not taxed Court, foreign title insurers Comptroller’s application they foreign; pro- merely because Texas tax scheme neither im states only if their home title insurers nor deters are taxed motes domestic taxation; rather, obligations financial on Texas pose higher the Texas law has foreign foreign raising insurers than Texas purpose and effect of revenue Comptroller’s application The insurers. insurers. expense at the may result retaliatory tax scheme their the insurers support argument, To retaliatory taxes collect in an increase in point Comptroller’s new inter- out much ed, depends just as the increase nearly three times more but pretation raises charged by other premium tax rates prior than the in- on retaliatory tax revenue cred states as it does terpretation and taxes the 85% (once iting 15% title insurers premium-tax twice at the portion Therefore, payment. retaliatory-tax at total stage and once exerts insurers, Comptroller’s these stage). According to the foreign tax pressure do not deter some downward changes raise revenue but rates, regardless of how other states taxing in- Texas-based other states respond. have choose because states would surers Equali- XIV, v. State 3d. W. S. Ins. Co. & Const, amend. 64. U.S. Life zation, 101 S.Ct. 451 U.S. (1981). L.Ed.2d Hahn, Nordlinger v. 505 U.S. (1992). 120 L.Ed.2d S.Ct. S.Ct. 2070. implementation of similarly. Comptroller’s interpreta- may scheme have unforeseen or unintend- tion of the tax scheme equalizes results, ed but “the courts not em- the tax burdens borne title in a insurers powered second-guess the wisdom of way that is rationally related legiti- to a policies. state Our review is confined to purpose; therefore, mate reject state we the legitimacy the purpose.”68 of equal pro- insurers’ federal and state Comptroller’s interpretation demonstrates tection claims. legitimate purpose state protecting of Texas title pressuring other V. Conclusion keep states their taxes low. implemented pre- prong equal protec- As the second of mium and provisions analysis, tion challenged interpretation way comports plain meaning that with the will survive “if we that conclude [the of offending those statutes without Comptroller] rationally could have believed United States or Texas Constitutions. We that promote tax would its therefore affirm appeals’ the court of judg- objective.”69 The insurers do not chal- ment. lenge point, and we have no trouble

concluding that the Comptroller rationally Justice a dissenting HECHT filed could have that reducing pre- believed WAINWRIGHT, opinion, in which Justice mium tax burdens on imposes Texas BRISTER, Justice and Justice MEDINA insurers operating encourage here would joined. other impose states to lower financial obli- HECHT, joined by Justice Justice gations on operating Texas title insurers WAINWRIGHT, BRISTER, Justice and elsewhere. The dissent disagrees, stating MEDINA, Justice dissenting. that “there no compar- rational basis for states,1 like most other taxes ing 100% another state’s gross premiums for insurance of risks and premium taxes,”70

with 15% of Texas’ but state,2 property every in the and like again, comparison the correct is between Hawaii,3 state but Texas addi- the taxes companies, tional tax on out-of-state insur- not insurance or insurance in- doing ers Texas whose home equal dustries. The protection clause does, states guarantees heavily tax more than similarly Texas per- situated similarly things sons—not all other being equal.4 situated tax schemes Such retalia- similarly or situated industries —be treated tory taxes have been “a common feature of (citation Id. of Rev., at 101 S.Ct. 2070 omit- 3. Prudential Ins. Co. Am. v. Comm’r ted). 429 Mass. 709 N.E.2d (1999). 7n. Id. at (emphasis 101 S.Ct. 2070 omit- ted). 281.001-.052, § § formerly Tex Ins.Code pro- Tex. Ins.Code art. 21.46. The 70. 258 S.W.3d at 646. compares just premium vision taxes but charges, prohi- "the sum of the taxes or other Guide, ¶ 88, 1. CCH State Tax All States bitions, imposed” restrictions an in- (2006) (stating gross premiums tax- ("The 281.004(a)(2) §§ comptroller surer. es are "the most common form of insurance impose charge shall a tax and collect or other "imposed every tax” and are prohibition aor or restriction on a upon compa- state kind of some engage insurer authorized to in business in ny”)- this state if ... the sum of the taxes or other §§ charges, prohibitions, 221.001-228.007. and restrictions im- Ins.Code century”,5 foreign corporations than those insurance taxation for over a the dis- corporations, unless on domestic they obviously impinge on in- though domestic crimination between commerce, implicate do not terstate relation to a a rational corporations bears “implied power limitation princi- purpose.”7 “[T]he legitimate burdens States interfere with is to retaliatory tax laws pal purpose commerce” in the on interstate contained of domes- the interstate business promote Commerce Clause the United States by deterring other States tic insurers “Congress removed Constitution because discriminatory or excessive tax- enacting on the all Commerce Clause limitations Supreme Court The United States es.”8 authority regulate to and tax States legitimate is and purpose has that this held passed insurance when it the business of rationally related to McCarran-Ferguson Act.”6 But Protection.9 Equal it not violate does Equal Fourteenth Amendment Protection in guaranty permit does not states to first enacted Texas’ consistently until this applied taxes or other burdens 193510 and “more onerous taxes, fines, penalties, of au- certificates posed by is for that other state more than fees, charges, prohibi- thority, policies, license or valuation of sum of the taxes or other otherwise, tions, imposed, directly any special burden is and that this state or restrictions insurer.”), required by foreign greater the laws of this 281.052 than is obligation”, corporations (providing penalty "a their for or other similar or State for circumstances, companies under certain to match the agents, ... of such the insurance penalty obligation imposed on a domestic governments or shall be and States or organ- insurer insurer’s state of to hereby required precedent as a condition ization). only State, This case involves taxes. transacting business in this their purposes deposit for like ... and make a like & 5. Western S. Ins. Co. v. State Bd. taxes, fines, Life penalties, certifi- ... 668, 648, Equalization, 451 S.Ct. U.S. 101 authority, policies, li- valuation cates of 2070, (1981). L.Ed.2d 514 68 equal a rate to such fees and otherwise cense charges imposed by the laws of payments and 2070; 654, 652-653, S.Ct. id. at 101 upon corporations of similar such other State ("The squarely S.Ct. 2070 Court has 101 thereof.”) (amending this State and jected argument discriminatory state (1925)), 4758 Stax. art. former Tex.Rev.Civ. may challenged insurance taxes under 28, 1945, Leg., May 49th repealed Act despite Commerce Clause the McCarran-Fer- 442, 279, 4, R.S., Gen. Laws ch. 1945 Tex. guson (citing Ben- Act.” Prudential Ins. Co. v. 23, 1951, 445, May Leg., 52d by Act of 1142, 408, 414, jamin, U.S. 66 S.Ct. 90 328 868, 491, 4, R.S., Tex. Gen. Laws ch. (1946), Co. v. L.Ed. 1342 and Prudential Ins. retaliatory provision appears The first Hobbs, 822, 1360, U.S. 66 S.Ct. 90 L.Ed. 1909, it in but referred to have been enacted curiam))). (per security deposit requirements only different states, Act not different taxes. different in (internal punctua- 7. Id. at 101 S.Ct. 2070 R.S., Leg., ch. approved 31 st Mar. omitted). tion 108, § Tex. Gen. Laws (1911), formerly Stax TexRev.Civ. 8. Id. (1925). the Stax art. 4758 then TexRev.Civ. premiums, just insurer’s taxes on total 671-672, Id. at 101 S.Ct. exactly years ago, A it is not clear share. few when, Comptroller the first R.S., decided for Leg., May 44th ch. 10. Act of total compare states’ taxes on time Laws 713-714 Tex. Gen. the insur- with Texas’ tax on ("Whenever, by any law in force without Comptroller Simply put, the State, share. er’s corporation ... of this 15% means position that "total” takes the required any now agent to make State or thereof every in Texas. other state and 15% payment in deposit ... or to make 100% of securities case, squarely falls Supreme within the against nates doing out-of-state insurers case, holding. Court’s But in this in For example, suppose Texas. reinterpreted has the statute an insurer from a state with a 2% insurers, as it applies multiplying to title in rate does business where the the tax transforming due and it into a $1,000 premium, rate 1.35%. On a penalty on nonresident doing insurers total tax would be in the other state $20 business in This sudden departure Texas. in Requiring Texas. out-of- $13.50 application the settled of the retalia- to pay $6.50 tory tax prompted by any legisla- was not on its equalizes Texas business the tax tive any change revision statute burden the two insurers’ business in retaliatory taxation in other states. The each other’s state. Each insurer its only apparent purpose Comptrol- for the would, respective agents together, pay $20 position generate ler’s new is to revenue in taxes and collect But revenue. $980 from nonresident title simply be- view, the Comptroller’s view, cause my nonresident. In tax is by determined the difference be- the Comptroller has misconstrued the tax the tween other state’s $20 statute so that it Equal now violates Pro- and the insurer’s 15% share of Texas’ tection. Because the I disagrees, Court difference $13.50 $2.03—a tax — respectfully dissent. Hence, the out-of-state insurer $17.97. together agents pays with its respective

When insurance is sold through an in $31.47 taxes and collects in reve- agent, $969.73 the agent insurer and the share the Comptroller’s nue. The new math increas- premium revenue. For title insurance in es the out-of-state title bur- insurer’s tax the revenue set division is the merely den because the insurer is During Commissioner of out-of- Insurance.11 the case, state. times material to this that division has been 15% to the insurer and 85% to By artificially reducing the size of Texas’ agent.12 decades, retaliatory For tax, Comptroller’s posi- new tax in Texas and other states has been tion impose retaliatory dictates that Texas by comparing determined taxes even when insurers hail from states

Ordinarily, everything bigger in Tex- imposing lower taxes than Texas. as, here, and though “total” is now smaller Suppose an insurer from a state with a 1% taxes have Comptroller’s increased. The premium tax does in business Texas. On math”, it, $1,000 “new as the Court refers to premium, would retaliatory multiplies the tax and compare discrimi- insurer’s share $2.03 2502.054(b)(1)(B) ("This Rules, § 11. Tex. 12. See Basic Manual of Rates and Ins.Code subchapter prohibit Writing of Forms for the Title Insurance in does not ... a title insur- IV, P-23(f) ("During the State of Texas arranging ance from ... for a divi- changed by and thereafter until premiums agent sion of with the as set Commissioner, on all title insurance written ....”), formerly commissioner Ins.Code agents, pre- the division 9.30, B(l) ("This may Article not be companies miums between title insurance prohibiting foreign construed as ... or do- agents and title insurance shall be as follows: company doing mestic title insurance busi- (1) companies title insurance shall receive making ness in this ... state from ... premium, each tide insurance 15% arrangement premiums for division of title insurance shall receive 85% of agent as shall set the commission- ”), adopted each title insurance .... er_”). http:// 28 Tex. Admin. Code available at P-23. www.tdi.state.tx.us/title/titlem4d.html# position The new premium tax in the insurers. Texas tax to the $10 in surcharge. any change the law. assess a is not other state and based $7.97 essence, applying purposes statutory provisions In have The relevant tax, retaliatory Comptroller has for decades. materially the same been gross tax rate duced Texas’ “a tax retaliatory imposes tax statute The 85%, Virtually ev- 1.85% to 0.2025%. from foreign ... if ... on a gross but ery premiums, ... organization imposes insurer’s state of a rate. The tax now none has so low similar domestic insurer a tax ... on a doing to all out-of-state insurers applies than the this state [tax] ... more they are merely business in Texas because insurer.”13 directly imposes companies. The not domestic “impose[d] must be tax, construed, longer operates no thus manner and for ... in the same collected] discourage excessive taxation in other tax on the insur- purpose” the same as the states; discourage for- operates it now provisions, er in the other state.14 These in Tex- eign doing 2008,15 in were enacted recodified as. first and derived from the The premium 1935.17 statute enacted Comptroller’s change position pre- a “tax ... on all tax statute long a transforms title insur- the business of miums from equalizing means of tax burdens on domes- to a ance”,18 paid of “regardless whether in foreign doing tic and business retained a company or against a out-of-state title insurance penalty into taxes, 281.004(a) ("The any territory li- comptrol- § of the United States 13. Tex Ins.Code fines, censes, fees, deposit require- impose penalties, a tax or ler shall and collect other prohibition charge prohibitions a on a obligations, or or restriction or or other ments engage foreign authorized to in busi- upon any insurer insurance restrictions are foreign ness in this state if: insurer’s organized company in this State and licensed organization by imposes law a tax or state of actually doing in such other and charge prohibition other or a or restriction on which, territory aggregate in the state or may a insurer that is or be similar domestic taxes, licenses, aggregate in excess of the of engage in that other authorized business in fees, fines, requirements deposit penalties, or state; (2) the of the taxes or other and sum or obligations, prohibitions restrictions other charges, prohibitions, im- and restrictions directly imposed upon a similar posed by that other state more than the territory doing company such state or of charges, prohibi- sum of the taxes or other State, Insurance the Board of business in this tions, directly that this state and restrictions impose shall of this State Commissioners insurer."). company upon any of such state or similar territory and for the in the same manner ("The 281.004(b) comptroller § shall 14. Id. fees, taxes, licenses, purpose, the same same charge, the tax or other and collect fines, deposit requirements or other penalties, prohibition, or restriction under Subsection obligations, prohibitions or restrictions (a) manner and for the same in the same ”), formerly Ins.Code art. 21.46. .... Tex of or- purpose as the insurer’s state ganization.”). Supra note 10. 22, R.S., 2003, May Leg., ch. 78th 15. Act of 223.003(a) ("An § annual tax 18. Tex Ins.Code 3611, 1274, 1,§ Laws 3638- 2003 Tex. Gen. premiums from the business on all 3641, 4138. the tax is 1.35 The rate of of title insurance. premiums R.S., taxable 22, 1957, percent title insurance May Leg., ch. 55th 16. Act of premiums including any year, for a calendar § Laws 1957 Tex. Gen. agent”.). ("Whenever by a title insurance any or retained by the laws of other state agent”,19 paid title insurance tory statute, though even the insurer must remit insurer.20 These the tax. In furtherance provisions, also of its recodi- view, the in Comptroller adopted 2003,21 in 2007,22 fied and amended in were limiting rule liability insurer’s for the enacted in prior 198723 and derived from premium tax to the amount due on its statutes, premium tax dating first one share.25 The Comptroller acknowledges to 1893.24 that no one took position forty argues premi- that the years phrase after the “directly imposes” 85% share of um tax agent’s premi- adopted statute, was the 1957 or in the “directly impose[d]” ums is not years ten after the premium imposition meaning within the of the retalia- provisions collection were detailed ("Premiums 223.005(a) Id. agent by setting received premi- division of from the business of title insurance are sub- um agent between insurer and so that ject chapter regardless to the tax under this insurer receives the tax due on the paid whether to a company agent’s title insurance portion and remits it agent, State.”). retained a title insurance with the being premiums in lieu of the tax on the agent.”). retained title insurance 11, 1893, approved May 24. Act Leg., 23d R.S., 1,§ ch. Gen. Laws 156. ("The 223.005(b) state facilitates the frequent statutes have been collection of the tax on the amended, ly years and codified over the as ums retained agent by a title insurance (1895) (taxing Stat. art. 5243e Tex.Rev.Civ. establishing premiums division of be- life, fire, "gross premium receipts” "every company tween the title insurance and title marine, accident, company”), or other insurance agent so that the receives (1911), Tex R.ev.Civ. Stat. agent’s portion tax due on the (1925). Stat. art. 7064 Article Tex.Rev.Civ. state.”). and remits it to the by 844, May 7064 was Act amended R.S., Leg., 67th ch. 1981 Tex. Gen. May Leg., 21. Act of 78th ch. Laws 3212-3215 later recodified as 1, 3611, 26(b)(4), §§ 2003 Tex. Gen. Laws (applicable articles 4.10 to title insurance 3622-3624, 4139. companies) and 4.11 of Insurance Code. 31, 1981, R.S., 389, May Act Leg., of 67th ch. 27, 2007, R.S., May Leg., Act of 80th ch. 36, 1490, § 1981 Tex. Gen. Laws 1780-1784. 932, 3, 3194, 2007 Tex. Gen. Laws 3195 was, turn, by in Article 4.10 amended Act of (amending 223.003(a), previ- Section which 30,1983, R.S., 283, May Leg., 68th ch. 1983 ously read: "An annual tax is on 24, Tex. Gen. May Laws 1367 and Act of company each title insurance that receives 1985, R.S., 161, 3-4, Leg., §§ 69th ch. 1985 premiums from the business of title insur- 715, Eventually, Tex. Gen. Laws in percent ance. The of the is rate tax 1.35 of 1987, separate provisions for title insurance company’s premi- the title insurance taxable were enacted and codified at art. Act of 9.59. year, including ums for any premi- a calendar 1, 1987, 1073, R.S., 22, Leg., §§ June 70th ch. agent”.). ums retained a title insurance 23, 3610, 1987 Tex. Gen. Laws 3638-3641. Currently, 1, 1987, R.S., provisions gross premium Leg., 23. Act of June 70th ch. 1073, 22, 3610, on various of kinds insurance are found in 1987 Tex. Gen. Laws 3638- 3640, Chapters through 221 226 of the Insurance formerly §§ art. 9.59 1 Tex Ins.Code R.S., ("Each May Leg., Act Code. of 78th company receiving pre- title insurance 1274, 1,§ ch. 2003 Tex. Gen. Laws 3611. miums from the business of title insurance premi- shall ... an annual tax on those ...."), ("The 8(b) 3.831(4)(c) ("Title ums is levied 25. 34 Tex. Admin. Code ..., all agents on defined be subject amounts to insurers and are both to paid whether the title to insurance and maintenance tax on their agent.... proportional or retained the title share and are separately State Texas facilitates the collection of liable for the tax if the fails retained agent’s portion.”). to remit the due on the Comptroller’s interpreta- if only- But Comptroller’s position not even 1987. The “directly were entitled imposed” tion of settled, application discards a decades-old consideration, plain lan- serious more revisited statutory provisions frequently rest of the statute makes guage of the by the substantively unchanged left and is unrea- new interpretation that the clear purpose it Legislature, contradicts clearly requires the The statute sonable.30 place tax in since at least 1935. This com- apples-to-apples make Comptroller to burden was based 281.004 instructs parisons. Section industry on the insurance and states collect the re- the tax burden on an artificial allocation of taliatory manner and for tax “in the same agents. their between insurers and foreign insurer’s as the purpose” the same Comptrol- The Court concludes retal- that the tax. The Court insists is due reinterpretation ler’s of the statute compa- iatory tax focuses on the Dis- Appraisal deference under Tarrant but it is ny agents, exclusion of agency’s v. an initial trict Moore.26 While revenue as gross to view tax myopic interpretation of a “is not carved statute only participants affecting some stone”,27 depart agency’s an decision business who must share that revenue. from a is enti- longstanding cannot assume that One un- “considerably tled to less deference” in other states do not share provides has a agency merely less some reasonable because Texas um revenues par- for the This how must do so. explanation change.28 specifying statute Indeed, ticularly in- must that insurers agency’s so where the earlier one assume paid and to share terpretation accompanied by legislative agents expect If insurer’s premium revenue. acquiescence.29 532, (Tex.1993) ("[C]on- (Tex.App.- Sys., 74 S.W.3d 544-545 26. 845 S.W.2d Ret. denied) (an agency pet. must Austin struction of a statute administrative depart longstand- explain from a agency charged its a decision to enforcement is enti- consideration, policy); City El v. El Paso Elec. long ing Paso tled to serious so as the Co., (Tex.App.-Austin S.W.2d con- construction is reasonable and does not denied). statute.”). plain language writ tradict Butler, Sullivan, v. 142 Tex. See 27. Rust v. 500 U.S. 111 29. Stanford (1944) (contemporaneous (quoting L.Ed.2d 233 S.W.2d S.Ct. 837, USA, NRDC, charged with of an act those Inc. v. 467 U.S. construction Chevron " 863, 2778, (1984)); 'worthy of consid- is serious 694 its enforcement 104 S.Ct. L.Ed.2d particular- interpretation, as an aid to & Tobacco eration see also FDA v. Brown Williamson has been sanctioned Corp., ly where the construction 120 S.Ct. 529 U.S. Although contempo- (2000) (an acquiescence. a ample by long agency has L.Ed.2d is practical construction not abso- adapt rulings policies or to its or to raneous latitude circumstances). persuasive controlling, lutely it has much changing great weight in deter- is entitled force and ambiguous meaning mining of an or Alaska, 259, 273, 101 Watt v. 451 U.S. (citations ") omitted). provision.' doubtful (1981); Pauley see 68 L.Ed.2d 80 S.Ct. Mines, Inc., BethEnergy v. 501 U.S. Downs, 81 S.W.3d Cas. Co. v. 30. Continental 115 L.Ed.2d 111 S.Ct. (Tex.2002) (“Construction of a stat- reinterpret (though agency a an decision deference, charged its enforce- agency such ute entitled Chevron statute is Rust, only consideration entitled serious interpretation persuasive”); "less ment is is (the not is and does agency that construction reasonable if U.S. at 111 S.Ct. 1759 (ci- plain language.") statute's support contradict the analysis” to its provided "reasoned omitted). changed Employees tations interpretation); Flores v. lature”,32 share of the tax Texas is to be but the fact is that Comptrol- considered, then that must com- ler share and others who administered the retal- pared to the iatory thought contrary insurer’s share of the tax for decades a um tax by compar- in the other state. But required by was the statute. ing the insurer’s Comptroller share of the Texas The Court adds that “[t]he premium tax to not develop independently another state’s undivided did this scheme revenue-raising plan”,33 and as a no but other collects the a advanced, in different for basis the “scheme” has been manner and for a purpose apparent. Comptroller’s different than and none is imposing the other state in and collecting multiplication sudden its tax. legitimate cannot serve the state purpose of discouraging excessive taxation in other There another equally important rea states because even when state’s tax rate reject son to Comptroller’s new inter is a fraction the rate in pretation: it In makes no sense. Western must, Comptroller’s from that state in the Southern, Supreme & Court acknowl view, pay retaliatory tax. edged legitimate that a state ahas interest agree I with the Court that whether promoting interstate commerce “de may way other react in a states terring enacting other States from dis insurers, ultimately unfavorable to Texas criminatory or taxes.”31 excessive But Comptroller’s may whether the position there is no rational for comparing basis have other “unforeseen or unintended 100% another state’s sults”, is none our business. But it is with 15% of Texas’ taxes to de certainly our business that per- to ensure termine whether the other state’s taxes similarly sons situated are afforded the legitimate are excessive. Texas’ interests equal protection guaranteed by of the law deterring excessive taxation the Fourteenth Amendment. The Court by retaliating states are served when concludes that the tax remains industry-wide ever another state’s equalizer “an similarly between situated would exceed Texas’ tax some of the Comptroller’s insurers.”34 treat- participants, or another whenever doing ment Texas title insurers business employs accounting a different method in other states and out-of-state title insur- calculating assessing premium taxes. doing ers equal Texas is as as by retaliating Nor is it against served 15 is to 100. states total whose taxes are low er than Texas’. Under the I Comptroller’s posi- would hold that the construction, provi new permitted by tion is not text sions into a have been transformed means retaliatory tax statute or the Four- for blatant and unapologetie discrimination Accordingly, teenth Amendment. I re- against parochial out-of-state insurers and spectfully dissent.

protectionism. Comptrol- Court asserts that “the

ler’s is consistent with the

statutory developed by Legis- scheme

31. 451 at U.S. 101 S.Ct. 2070. Ante Ante, at 639. 34. Ante at 637.

Case Details

Case Name: First American Title Insurance Co. v. Combs

Court Name: Texas Supreme Court

Date Published: May 16, 2008

Citation: 258 S.W.3d 627

Docket Number: 05-0541

Court Abbreviation: Tex.