75 Pa. Commw. 463 | Pa. Commw. Ct. | 1983
Opinion by
We have consolidated the tax appeals of Affiliated F. M. Insurance Company and Providence Washington Insurance Company from decisions of the Board of Finance and Revenue sustaining the settlements by the Department of Revenue of the gross premium tax of each for the years ending respectively December 31, 1977, and December 31, 1976.
The facts in both cases have been stipulated of record. We adopt these as our findings of fact. The stipulations are identical except with respect to the numerical details concerning the refunds and settlement of each petitioner. In the course of our discussion we shall refer to such of the stipulated facts as we deem essential to disposition of the appeal.
Each of the petitioners is incorporated in Rhode Island and each does business in Pennsylvania. Both are subject to the tax of two percent on gross premiums on sales of insurance within Pennsylvania, including workmen’s compensation insurance, which Pennsylvania imposes on all insurance companies doing
In addition to paying a two percent gross premiums tax on all workmen’s compensation insurance sold in Rhode Island, that State, pursuant to Section 28-38-5 of the General Laws of Rhode Island, requires all insurance companies writing or renewing workmen’s compensation insurance in Rhode Island to contribute one and one-half percent of the gross premiums received from workmen’s compensation insurance written or renewed by it within Rhode Island or subject to the jurisdiction of Rhode Island during the previous calendar year into the special treasury department fund known as the Dr. John E. Donley Rehabilitation Fund. This fund is used for the care and maintenance of the Dr. John E. Donley Rehabilitation Center located in Providence, Rhode Island. The center’s only source of funding is the contribution of the one and one-half percent of the workmen’s compensation insurance premiums. Treatment at the center is free to injured Rhode Island workers whose employers have complied with the provisions of the Workmen’s Compensation Act of Rhode Island and is available on the same terms to workers whose employers are policy holders with Pennsylvania insurance carriers. Further, there are no charges for the services rendered at the center, either to the carrier or to the worker patient, regardless of the services rendered or the length of time during which such services may be needed.
The center provides physical therapy, psychotherapy and occupational therapy to injured workers and provides such workers modern curative treatment, rehabilitation and therapy under the supervision of
Under no circumstances are injured Pennsylvania workers entitled to free treatement at the Donley Center, although they may be insured by a Pennsylvania insurance carrier writing or renewing workmen’s compensation insurance in Rhode Island and which pays the additional one and one-half percent charge to Rhode Island.
The Commonwealth of Pennsylvania established the Hiram G. Andrews Center in Johnstown, Pennsylvania, which provides similar rehabilitative services to the Donley Center. The Andrews Center charges fees to the patient, the patient’s employer, or to the employer’s insurance carrier to pay for the services rendered. The Andrews Center was constructed by general funds of the Commonwealth of Pennsylvania. Since 1959 it has been a self-supporting government institution. There is no special assessment made against insurance carriers who sell workmen’s compensation insurance to fund this facility.
The Donley Center, as a result of treatment, therapy and rehabilitation rendered there, tends to reduce lost time from the job attributable to workers’
For the tax year ending December 31, 1976, Providence Washington filed in Pennsylvania its gross premium return and duly paid the tax of two percent on gross premiums from the sale of insurance. For the tax year ending December 31, 1976, Affiliated F. M. also filed its Pennsylvania gross premium return and paid the tax of two percent on gross premiums. Both companies filed a retaliatory tax information return with the Pennsylvania Department of Revenue indicating that no retaliatory tax was due.
By settlement made by the Department of Revenue, each company was assessed a one and one-half percent retaliatory tax on workers compensation premiums collected in Pennsylvania during the pertinent tax year because the department determined that Rhode Island charged an additional one and one-half percent on gross premiums on Pennsylvania companies doing business in Rhode Island for the funding of the Donley Center. Both companies paid the retaliatory tax under protest. Providence Washington filed a petition for resettlement of its insurance but resettlement was refused by the Resettlement Board. Affiliated F. M. filed a petition for a refund the prayer of which the Board of Finance ¿nd Revenue refused.
Discussion
The Pennsylvania retaliatory tax imposed by Section 212 of The Insurance Department Act of 1921 (Act), Act of May 17, 1921, P.L. 789, as amended, 40 P.S. §50 is responsive to the burdens imposed on Pennsylvania insurers by the insurance tax laws of other jurisdictions. The rate of tax is set at an amount equal
If any other state imposes any burdens or prohibitions on insurance companies, or agents of this state doing business in such other state, which are in addition to, or in excess of, the burdens or prohibitions imposed by this Commonwealth on insurance companies and agents, like burdens and prohibitions shall be imposed on all insurance companies and agents of such other state doing business in this Commonwealth, so long as the burdens and prohibitions of such other state remain in force. In applying this section to an insurance company of another state, such company shall not be required to pay any taxes and fees which are greater in aggregate amount than those which would be imposed by the laws of such other state and any political subdivision thereof upon a like company of this Commonwealth transacting the same volume and kind of business in such other state. (Emphasis added.)
The Act defines “burdens and prohibitions” to include: “taxes, fines, penalties, licenses, fees, rules, regulations, obligations, and prohibitions,....”
The petitioners contend that the one and one-half percent assessment by Rhode Island to create a special fund for the financial support of the Dr. John E. Donley Rehabilitation Center does not constitute a “burden or prohibition” within the meaning of Section
The United States Supreme Court in Western & S.L.I. Co. v. Board of Equalization, 451 U.S. 648 (1981) stated that the purpose of retaliatory tax laws “is to promote the interstate business of domestic insurers by deterring other states from meeting discriminatory or excessive taxes,” and quoted Annot. 91 A.L.R. 795 (1934):
[WJhatever their character, it is obvious ... that their ultimate object is not to punish foreign corporations doing business in the state, or retort the action of the foreign state in placing upon corporations of the enacting state doing business therein burdens heavier than those imposed upon corporations of such foreign state doing business in the enacting state, but to induce such foreign state to show the same consideration to corporations of the enacting state doing business therein as is shown to corporations of such foreign state doing business in the enacting state.
Id. at 668-69. The Pennsylvania Supreme Court wrote in Commonwealth v. Fireman’s Fund Insurance Co., 369 Pa. 560, 87 A.2d 255 (1952) that:
It [the retaliatory tax] is certainly not a revenue raising measure. In fact, its success might be said to depend on how little is collected under its terms rather than how much. It is designed to bring about equality of treatment between domestic and foreign corporations and to break down interstate barriers.
Id. at 564, 87 A.2d at 258.
The petitioners relying on Fireman’s Fund Insurance Co. contend that the payments made to the Donley Center by foreign insurance companies are the quid pro quo for benefits received by the insurance
It [assessment by Patrol] is not levied by the Commonwealth but by the Patrol itself and it is collected and disbursed by that organization, a private body and not a part of the government. The Commonwealth in no way controls the amount, collection or use of the funds.
Id. at 567, 87 A.2d at 259. The Court in Fireman’s Fund Insurance Co. also observed that the fire insurance companies were benefitted directly from the payments because the Patrol prevented further fire losses resulting in savings for the insurance companies. “Thus the payments made to the Patrol are a quid pro quo for the benefits received and as such are not within the. meaning of Section 212.” Id. at 567, 87 A.2d at 259.
Although the parties have stipulated that the Donley Center tends to reduce time lost from the job by injured workers and the expense of treatment of in
Also, in Fireman’s Fund Insurance Co., the Supreme Court was engaged in interpreting Section 212 of the Act as it existed after the section was amended by the Act of May 24, 1933, P.L. 988. The section was still later amended
In applying this section to an insurance company of another state, such company shall not be required to pay any taxes and fees which are greater in aggregate amount than those which would be imposed by the laws of such other state and any political subdivision thereof upon a like company of this Commonwealth transacting the same volume and kind of business in such other state. (Emphasis added.)
Conclusions of Law
1. Providence Washington Insurance Company and Affiliated F. M. Insurance Company are insurance companies incorporated in the State of Rhode Island and licensed to and do conduct business in the State of Pennsylvania.
2. Both Rhode Island and Pennsylvania impose a tax of two percent on gross premiums received from business done within each respective state.
3. Rhode Island also requires that for the privilege of writing or renewing workmen’s compensation insurance in Rhode Island, an insurer shall annually pay one and one-half percent of the gross premiums received from workmen’s compensation insurance to the Dr. John E. Donley Rehabilitation Center fund.
5. Resettlement by the Department of Revenue to include a one and one-half percent retaliatory tax on workmen’s compensation premiums collected in Pennsylvania was lawful and proper.
6. In accordance with the stipulation in paragraph 26 judgment is entered in favor of the Commonwealth and against Providence Washington Insurance Company in the amount of $26,991.09, together with interest and costs according to law; subject to credit for the amount of tax heretofore paid; and the order appealed from is affirmed, unless exceptions be filed within thirty (30) days.
7. In accordance with the stipulation in paragraph 26, judgment is entered in favor of the Commonwealth and against Affiliated F. M. Insurance Company in the amount of $90,284.30, together with interest and costs according to law, subject to credit for the amount of tax heretofore paid; and the order appealed from is affirmed, unless exceptions be filed within thirty (30) days.
Orders affirmed.
Order in 594 C.D. 1979
And Now, this 13th day of July, 1983, the order of the Board of Finance and Revenue in the above-captioned matter is affirmed and judgment is entered for the Commonwealth and against Providence Washington Insurance Company in the amount of $26,991.09, together with interest and costs according to law and subject to credit for the amount of tax heretofore paid unless exceptions be filed hereto within thirty (30) days.
And Now, this 13th day of July, 1983, the order of the Board of Finance and Revenue in the above-captioned matter is affirmed and judgment is entered for the Commonwealth and against Affiliated F. M. Insurance Company in the amount of $90,284.30, together with interest and costs according to law and subject to credit for the amount of tax heretofore paid unless exceptions be filed within thirty (30) days.
Section 2 of the Act of May 25, 1951, P.L. 406.