[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *577 The Michigan Millers Mutual Fire Insurance Company filed a bill of complaint in the circuit court of Cook county against Joseph B. McDonough, the treasurer and ex-officio collector of Cook county, by which it prayed that the assessment made against its net receipts for the year 1930 be declared void, and that the collection of the taxes extended on the assessment be enjoined. The Central Manufacturers Mutual Insurance Company filed an amended bill in the same court against the board of commissioners and the treasurer and ex-officio collector of Cook county for like relief from the same taxes and for an injunction pendente lite restraining the prosecution of an action of debt to recover them. Demurrers were interposed to the bills by the respective defendants and the demurrers were sustained. The complainants elected to abide by their bills and decrees were entered dismissing them for the want of *578 equity. From these decrees, the complainants prosecute the present appeals and, for the purposes of a hearing, the causes are consolidated.
By their bills, the Michigan Millers Mutual Fire Insurance Company and the Central Manufacturers Mutual Insurance Company allege that they are organized under the laws of the States of Michigan and Ohio, respectively; that they are licensed to transact business in this State under the provisions of the Mutual Insurance act of 1915; that each maintains and operates an agency in the city of Chicago; that through these agencies they hold themselves out as qualified to write fire insurance, motor vehicle insurance against theft, collision and property damage, and hail, windstorm, cyclone, tornado, earthquake, use and occupancy, and sprinkler-leakage insurance; that the Central Manufacturers Mutual Insurance Company also announces itself qualified to write insurance against damage to aircraft or resulting from riot, civil commotion and explosion; that during the year ending April 30, 1930, both companies, through their respective agencies, wrote fire, tornado, windstorm, cyclone and sprinkler-leakage insurance, and that the Central Manufacturers Mutual Insurance Company, during that year, also wrote motor vehicle insurance against fire, theft, collision and property damage.
Additional allegations of the bills are that the board of assessors of Cook county required returns of net premium receipts collected by the appellants' agencies during the taxable year ending April 30, 1930; that in requiring these returns the board acted under the purported authority of section 30 of the Fire, Marine and Inland Navigation Insurance Companies act of 1869, as amended in 1879; that they filed their returns, under protest, and that upon the basis of these returns the taxes for which liability is denied were extended. Both appellants charge that section 30 of the act of 1869, as amended, is not applicable to mutual insurance companies governed by and operating under *579 the Mutual Insurance act of 1915, and that if section 30 does apply to mutual insurance companies, the assessments against the appellants, under the terms of that section, should have allowed deductions for the operating expenses of their local agencies and the proportions of their general operating expenses attributable to these agencies.
By the amended bill of the Central Manufacturers Mutual Insurance Company, it is further charged that section 30, if applicable to the company, deprives it of due process of law in violation of the Federal and State constitutions and denies it the equal protection of the laws guaranteed by the fourteenth amendment to the Federal constitution. The basis of the charge is that the company, as a foreign corporation authorized to write fire insurance, is subjected to taxes upon its net receipts derived from automobile insurance other than fire and from tornado and sprinkler-leakage insurance, whereas other foreign insurance companies and particularly casualty insurance corporations, are exempt from taxation upon their net receipts from the same types of insurance for the sole reason that they are not foreign fire insurance corporations.
The amended bill of the Central Manufacturers Mutual Insurance Company also charges that it, as a foreign fire insurance corporation, is subjected to taxes upon its net receipts derived from fire and all other insurance, whereas the net receipts of competing unincorporated foreign insurers, whether partnerships, associations, individuals or aggregations of individuals, are not subjected to the same taxes or to any other tax in lieu thereof, and that the sole basis for this discrimination is the fact that the appellant is a foreign corporation, while the other insurers mentioned are foreign unincorporated bodies or individuals.
Concluding allegations of the Michigan Millers Mutual Fire Insurance Company's bill are that the treasurer andex-officio collector has threatened to levy a distress warrant upon its personal property for the purpose of effecting collection *580 of the challenged taxes and that because of its failure to pay them, its license to do business in this State may be subjected to cancellation. The Central Manufacturers Mutual Insurance Company charges that some of the issues presented by it with respect to claimed deductions cannot be determined in an action of debt and that unless it invokes the interposition of a court of equity, its authority to transact business in the State may be revoked.
The Michigan Millers Mutual Fire Insurance Company reported net premium receipts of $16,856.97, but claimed a deduction of $5996.27 for its local agency's proportion of the expenses of the home office. Taxes amounting to $429.11 were extended against the company. By its return the Central Manufacturers Mutual Insurance Company reported net receipts aggregating $44,879.67. Of this sum, $9463.70 represented premiums derived from motor vehicle theft, collision and property damage, tornado and sprinkler-leakage insurance and $5689.21, the share of the expenses of the home office incurred in writing fire insurance and charged to the local agency. The assessed value was fixed at $16,607 which represented substantially thirty-seven per cent of $44,879.67, the total reported. The taxes extended against this company amounted to $1142.57.
Five contentions are urged by the appellants to obtain a reversal of the decrees. Of these three require consideration. The first is that section 30 of the act entitled "An act to incorporate and to govern fire, marine and inland navigation insurance companies doing business in the State of Illinois," approved March 11, 1869, as amended, (Cahill's Stat. 1933, p. 1617; Smith's Stat. 1933, p. 1620), cannot be applied to those receipts of foreign fire insurance companies which are produced by risks incurred for insurance other than against fire when such other types of insurance may be written by foreign casualty companies without being subjected to the same taxes or to any tax in lieu thereof; that the application of section 30 to the net receipts *581 of foreign fire insurance companies, without regard to their source, results in discrimination, confers a special privilege or immunity upon foreign casualty insurance corporations and deprives foreign fire insurance corporations of due process of law in violation of the State constitution and that such application of section 30 also violates the due process of law and the equal protection of the laws provisions of the fourteenth amendment to the Federal constitution.
A tax on the receipts of insurance companies was first imposed by section 22 of the Revenue act of 1853 and applied to the gross receipts of all foreign insurance companies. (Laws of 1853, p. 46). In 1869, the provision was removed from the Revenue act and inserted as section 30 of the Fire, Marine and Inland Navigation Insurance Companies act and limited to the net receipts derived from insurance authorized to be written by foreign insurance companies operating under that act. The risks originally included only those arising out of fire and marine and inland navigation and transportation. Since 1869, the General Assembly, both by amendments to the Fire, Marine and Inland Navigation Insurance Companies act and by independent statutes, has extended the powers of fire insurance companies enabling them to incur risks against lightning, tornadoes, windstorms, hailstorms, cyclones, the leakage of sprinklers, pumps and other fire apparatus, and the theft of automobiles as well as their damage by fire and collision. All present powers of fire insurance companies, stock and mutual, to write insurance other than fire, marine and inland navigation, rest upon an independent act approved June 30 and effective July 1, 1925. (Laws of 1925, p. 436; Cahill's Stat. 1933, p. 1619; Smith's Stat. 1933, p. 1636). This act expressly empowers fire insurance companies to insure against automobile theft and property damage but prohibits them from insuring against loss resulting from bodily injury to the person. *582
By an act concerning the business of casualty insurance, approved April 21 and effective July 1, 1899, as amended, (Cahill's Stat. 1933, p. 1672; Smith's Stat. 1933, p. 1676), casualty insurance companies may be organized and authorized to issue policies insuring persons against bodily injury, disability or death resulting from accident; against loss or damage resulting from accident to, or injury suffered by, an employee or other person for which accident or injury the person insured is liable; against loss by burglary or theft or both; upon glass against breakage; upon steam boilers and pipes, engines and machinery connected therewith or operated thereby; against explosion and accident and loss, injury or damage resulting therefrom; upon elevators and machinery; against any hazard resulting from the ownership, maintenance or use of automobiles or other vehicles; against any other casualty or insurance risk specified in the articles of organization lawfully the subject of insurance and not otherwise authorized, and indemnifying merchants, traders and all others engaged in business from loss by giving or extending credit to customers. Upon compliance with the requirements prescribed by section 7 of the act any casualty insurance corporation organized under the laws of any other State or a foreign country may be admitted to transact business in this State. The act contains no provision imposing a tax on the net receipts of foreign casualty insurance corporations.
Section 30 of the Fire, Marine and Inland Navigation Insurance Companies act, as amended, to the extent that it is pertinent to this inquiry, reads: "Every agent of any insurance company, incorporated by the authority of any other State or government, shall return to the proper officer of the county, town or municipality in which the agency is established, in the month of May, annually, the amount of the net receipts of such agency for the preceding year, which shall be entered on the tax lists of the county, town and municipality, and subject to the same rate of taxation, *583
for all purposes, — State, county, town and municipal — that other personal property is subject to at the place where located; said tax to be in lieu of all town and municipal licenses." All net receipts of foreign fire insurance companies including their receipts from casualty business have been deemed taxable under this section. (People v. Concordia FireIns. Co.
The first section of the fourteenth amendment to the Federal constitution declares that "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty or property without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws." The Supreme Court of the United States, in Yick Wo v. Hopkins,
The fourteenth amendment neither denies a State the right justly to exert its taxing power nor prevents it from adjusting its legislation to differences in situation and to that end to make a justifiable classification. It does, however, require that the classification shall be based on a real *585
and substantial difference having a rational relation to the subject of the particular legislation. (Power Manufacturing Co.
v. Saunders,
Supplementing the equal protection provision of the fourteenth amendment, section 22 of article 4 of the constitution of this State prohibits the passage of a special law granting to any corporation, association or individual any special or exclusive privilege, immunity or franchise whatever. The purpose of this provision is to prevent the enlargement of the rights of one or more persons and the impairment of or discrimination against the rights of others. To avoid falling within the constitutional inhibition of special legislation the classification of subjects or objects must be based upon some reasonable and substantial difference in kind, situation or circumstance bearing a proper relation to the purposes to be attained by the statute. Marallis v. City of Chicago,
To sustain the imposition of the taxes prescribed by section 30 of the act of 1869 on the net receipts of all insurance written by foreign fire insurance corporations *586
while no tax is imposed upon the net receipts of foreign casualty insurance corporations, the appellees place reliance on People v. Concordia Fire Ins. Co.
The appellants are foreign fire insurance corporations and by virtue of their licenses are authorized to do business in this State. Foreign fire and foreign casualty insurance corporations, when writing the same types or classes of insurance, are in direct competition with each other and are alike entitled to the equal protection of the laws. The exercise of the same lawful power or authority by foreign fire and foreign casualty insurance corporations does not justify the taxation of the resulting net receipts of the former and not of the latter. The taxes in question were levied upon the net receipts of the appellants from all types of insurance. To the extent that these taxes were laid upon their net receipts from insurance other than fire, marine and inland navigation, they result in a discrimination against the appellants and arepro tanto invalid. Section 30 of the Fire, Marine and Inland Navigation Insurance Companies act, when so applied, arbitrarily discriminates against the insurance corporation subjected to the illegal portion of the taxes imposed and, by denying the equal protection of the laws and granting a special privilege or immunity to a particular class, transcends, to the extent indicated, the Federal and the State constitutions.
The second contention to be considered is that section 30 of the act of 1869 is vulnerable to the constitutional objections urged in the preceding contention for the additional reason that the section imposes taxes on the net *588
receipts of foreign fire insurance corporations while unincorporated foreign insurers which are competitors of such corporations are exempt from the burden of section 30 and of any parallel or equivalent charge. The question whether section 30 makes an invalid discrimination between incorporated and unincorporated foreign fire insurers was presented inPeople v. Franklin Nat. Ins. Co.
The remaining contention of the appellants is that, for the purposes of assessment, they should have been allowed to deduct from the net receipts of their domestic agencies, the shares of their general operating expenses, which, in apportioning the whole, were attributable to these agencies. To determine this question, the pertinent portion of section 30 of the Fire, Marine and Inland Navigation Insurance Companies act must be considered. It reads: "Every agent of any insurance company, incorporated by the authority of any other State or government, shall return to the proper officer of the county, town or municipality in which the agency is established, in the month of May, annually, the amount of the net receipts of such agency for the preceding year." The return, it will be observed, is required to show "the amount of the net receipts" of a particular agency, and it is made to the proper officer of the county, town or municipality in which the agency is established. A disbursement by the principal office of a foreign insurance corporation toward the cost of its operation and without a domestic agency's participation in the transaction, constitutes, for the purposes of taxation, no part of such agency's receipts. It may be conceded that, to determine the net profits of a certain agency, its proportion of the company's whole and entire cost of operation should enter into the calculation. Net receipts and net profits, however, are not synonymous (National Fire Ins. Co. v. Hanberg,
The decrees of the circuit court of Cook county are reversed and the causes are remanded to that court, with directions to proceed in conformity with the views expressed in this opinion.
Reversed and remanded, with directions.