6 Pa. Commw. 532 | Pa. Commw. Ct. | 1972
Opinion by
Occidental Life Insurance Company of California (Occidental) is a California insurance company authorized to do business in Pennsylvania. Because California’s gross premium tax rate was higher than the rate in Pennsylvania,
The gross premiums tax owed by a foreign company is determined by first ascertaining the rate that company’s home state imposes on insurance companies. If that rate is the same or less than Pennsylvania’s, the company’s tax is ascertained by applying the Pennsylvania tax rate. If the rate of tax in the home state exceeds that in Pennsylvania, the foreign company is taxed at the Pennsylvania rate, but, in addition, another tax is imposed using as a rate the difference between the home state rate and Pennsylvania’s rate. This latter is the “retaliatory tax.”
At issue in this case is the right of Occidental to deduct from its total gross premiums tax and retaliatory tax the use taxes which it paid to Pennsylvania during the year ending December 31, 1968. California exempts insurance companies from the payment of its sales and use tax,
The purpose of a retaliatory charge is to bring about equality of treatment. Foreign insurance companies are to be treated by Pennsylvania in precisely the same manner as Pennsylvania companies are treated by their home state. Since Massachusetts first passed a Retaliatory Insurance Tax Act in 1856, they have been enacted in virtually every state. Their constitutionality has been almost uniformly upheld,
This issue has recently been considered in two other states. In Arizona, the Supreme Court held that taxing a foreign insurance company in any manner so as to place a higher burden on it than is placed on a local company operating in that foreign company’s home state would defeat the entire premise of equalizing taxation. This case involved ad valorem taxes on real or personal property. Pacific Mutual Life Insurance Company v. Bushnell, 97 Ariz. 18, 396 P. 2d 253 (1964). In Illinois, the Court held that its Retaliatory Tax Act did not permit deduction of personal property taxes. The specific basis for this holding, however, was that
It is our opinion that the language of Section 212 mandates that Occidental must be given credit for use taxes paid to Pennsylvania. Section 212 provides that the terms “Burdens and Prohibitions” shall include “taxes, fines, penalties, licenses, fees, rules, regulations, obligations, and prohibitions. . . .” It further provides that in applying the section to a foreign company, “such company shall not be required to pay a/ny taxes and fees which are greater in aggregate amount than those which would be imposed by the laws of such other state . . . [upon a Pennsylvania company].” (Emphasis added.) There is certainly no indication that Section 212 was intended to limit “any” taxes to only those taxes upon the right to engage in business in Pennsylvania. It has been said that, “in approaching this question, it seems to have been uniformly decided that ‘retaliatory’ statutes must be strictly construed.” Farm Bureau Mutual Automobile Insurance Company v. Neel, 55 Dauph. 325, 329 (1944), and a strict construction of Section 212 requires us to find that Occidental may deduct from its retaliatory tax the use taxes it has paid to Pennsylvania.
The intent of a retaliatory statute such as Section 212 is to establish an equality of treatment between foreign corporations doing business in Pennsylvania and Pennsylvania corporations doing business in their home state. If Occidental were not to be permitted to deduct the use taxes it paid from its retaliatory tax it
We, therefore, make the following
Conclusions of Law
1. Section 212 of the Act of May 17, 1921, P. L. 789, as amended, 40 P.S. §50, permits a foreign insurance company to deduct from the “retaliatory tax” imposed by that Section sales and use taxes paid to Pennsylvania which are not in turn imposed on Pennsylvania insurance companies doing business in its home state.
2. The Commonwealth incorrectly settled the 1968 gross premiums tax and “retaliatory tax” of Occidental Life Insurance Company of California.
Order
And Now, October 17, 1972, the order of February 24, 1970 of the Board of Finance and Revenue relative to the Occidental Life Insurance Company of California is reversed and the Commonwealth is directed to resettle said company’s 1968 gross premiums tax in the following manner:
Gross Premiums Tax $168,779.78
Retaliatory Tax 25,374.59
Less Tax Paid—
City of Philadelphia (4,247.65)
Less Use Tax Paid—
Commonwealth of Pennsylvania (994.19)
$188,912.53
The rate in California was 2. 35%. California Gross Premiums Tax Act, 1943, c. 856, p. 2833, §3, as amended. Pennsylvania’s rate in 1968 was 2%. Act of February 21, 1961, P. L. 33, 72 P.S. §2270.1 et seq., repealed by Act of March 4, 1971, P. L. , No. 2, Art. IX, §905, 72 P.S. §7905.
California Constitution, Art. 13, §14 4/5 (f).
The sole exception appears to be Alabama. State v. Firemen’s Fund Insurance Co., 223 Ala. 134, 134 So. 858 (1931).
Cases from other jurisdictions considering such point include: Employer's Casualty Co. v. Hobbs, 149 Kan. 774, 89 P. 2d 923 (1939) ; John Hancock Mutual Life Insurance Company of Boston v. Pink, 276 N.Y. 421, 12 N.E. 2d 529 (1938) ; Life & Casualty Insurance Co. of Tennessee v. Coleman, 233 Ky. 350, 25 S.W. 2d 748 (1930).