The "license fee" laid by Wisconsin on domestic "level premium"
life insurance companies doing business in the state of 3% of the
gross income from all sources during the year, except rents from
real estate and premiums collected outside Wisconsin on policies of
nonresidents, as construed by the supreme court of the state, is a
commutation tax in lieu of all other taxes on the personal property
of the companies taxable in Wisconsin.
Assuming, but not deciding, that the foreign investment business
of such a company, involving shipments of securities,
correspondence, etc., beyond the state, amounts to interstate
commerce, such a tax casts no burden upon such commerce where the
gross receipts are in effect used as a fair measure of the value of
the property and franchise taxable, but not otherwise taxed, within
the state.
A tax on life insurance business is not a tax on interstate
commerce.
Page 247 U. S. 133
It is not an arbitrary discrimination against domestic life
insurance corporations amounting to a denial of the equal
protection of the law for a state to tax them by taking a
percentage of their gross receipts, while exacting a fixed and
comparatively light fee from similar foreign corporations for the
privilege of doing local business of the same kind.
Southern
Ry. Co. v. Greene, 216 U. S. 400,
distinguished.
Neither is such arbitrary discrimination involved in imposing a
license or privilege tax upon domestic old-line level premium
companies while exempting fraternal societies having lodge
organizations and insuring only the lives of their own members.
163 Wis. 48 affirmed.
The case is stated in the opinion.
MR. JUSTICE DAY delivered the opinion of the Court.
This suit was brought to recover certain taxes or license fees
paid by the Northwestern Mutual Life Insurance Company to the State
of Wisconsin; the same were paid under protest, and this action was
to recover $482,193.23 paid in 1912, and $505,643.22 in 1913. The
case was decided in the Supreme Court of Wisconsin upon demurrer to
the original and amended complaints, and judgment was rendered in
favor of the state. 163 Wis. 484.
The taxes in question were collected under the statutes of
Wisconsin. Section 1220, Wis.Stats. of 1911, being § 51.32 of the
later Stats.; § 1221, now § 51.33, being the so-called retaliatory
law; § 1222, subsec. 5 of § 1947, and § 1948.
The substance of the statute immediately involved is thus stated
by the plaintiff in error:
Page 247 U. S. 134
"Every company . . . transacting the business of life insurance
within this state (excepting only such fraternal societies as have
lodge organizations and insure only the lives of their own members)
shall annually, on or before March 1, pay"
"in lieu of all taxes for any purpose authorized by the laws of
this state (except taxes on real estate), certain prescribed
license fees for transacting such business."
It appears that fraternal societies with lodge organizations
insuring only the lives of their own members are not subject to
this tax, and foreign level premium companies, similar to the
plaintiff in error, are subject to an annual tax of but $300.00,
liable to increase under the so-called retaliatory law according as
other states impose like taxes on similar companies of Wisconsin.
Assessment and stipulated premium companies, domestic and foreign,
are taxed $300.00, or as to foreign companies such larger amounts
as may be proposed under the retaliatory law. The license, when
granted, authorizes the company to transact business until the
first of March of the ensuing year unless sooner revoked or
forfeited.
The contentions of a federal nature raised by the plaintiff in
error are that this license tax imposes an unlawful burden upon
interstate commerce in contravention of § 8, Article I, of the
federal Constitution; that it violates the Fourteenth Amendment in
denying the equal protection of the laws to the Northwestern
Company by arbitrarily discriminating against it and in favor of
foreign insurance companies and between it and fraternal
associations, both domestic and foreign; that it violates the
Fourteenth Amendment in imposing an arbitrary, discriminatory, and
confiscatory burden upon the Northwestern Company.
As to the annual license fee, it is made up as follows:
"Domestic Companies. (1) If such company, corporation, or
association is organized under the laws of this
Page 247 U. S. 135
state, and is not purely an assessment or stipulated premium
plan company under chapter 270, Laws of 1899 (sec. 1955-1), three
percentum of its gross income from all sources for the year ending
December thirty-first, next prior to said first day of March,
excepting therefrom income from rents of real estate, upon which
said company, corporation, or association has paid the taxes
assessed thereon, and excepting also premiums collected outside of
the State of Wisconsin on policies held by nonresidents of the
State of Wisconsin. In ascertaining the income upon which such
license fee shall be computed as aforesaid, no deduction shall be
made from premiums, whether paid in cash or premium notes, on
account of dividends allowed or paid to the insured."
The statute also provides that such license fee shall be in lieu
of all taxes for any purpose authorized by the laws of the state,
except taxes on real estate. The Northwestern Company was thus
obliged to pay three percent of its gross income less income from
rents of real estate, and less premium receipts from outside of the
state.
Before entering upon a consideration of the errors assigned, the
nature and effect of this system of taxation must be borne in mind.
The Northwestern Mutual Life Insurance Company is a corporation of
the State of Wisconsin having large reserves in that state having a
taxable situs therein. Of this statute, the Supreme Court of
Wisconsin said:
"It covers all the contributions which the state demands from
the company or its business except real estate taxes, which are
relatively small in amount. It is common knowledge that all of the
great level premium insurance companies of the present day have
vast reserve funds, to protect their liabilities on policies,
running up into the hundreds of millions of dollars, and that these
reserves are invested in interest-bearing securities, of
Page 247 U. S. 136
which real estate loans secured by mortgage generally form the
largest part. In the complaint in the present case, it appears
that, on December 31, 1911, the plaintiff had outstanding loans
secured by real estate mortgages amounting to $153,562,654.39, of
which only $5,654,369.10 covered real estate in Wisconsin. It also
appears that the plaintiff's income from real estate mortgages for
the year ending on said last-named date amounted to $7,446,393.10,
and its income from bonds to $3, 172,489.58. These securities are
all credits,
i.e., personal property of an intangible
character, the situs of which for the purposes of taxation is in
this state at the residence of the corporation."
And, in the opinion on the filing of the amended complaint,
added:
"In this connection, it is argued that, if a personal property
tax had been levied on the plaintiff's reserve, consisting of
securities and credits, there would have been deducted from the
amount thereof, under the existing policy of the state with regard
to the taxation of such property, its liabilities to policy
holders,
i.e., the present value of its outstanding
policies valued as required by law, which is about ninety percent,
of the reserve. It is also argued that, if the plaintiff had been
subjected to income taxation under the state law, it would have
paid much less than under the three percent license fee
requirement."
"We do not regard either contention as well founded. Our
statutes governing the taxation of securities and credits for many
years provided that there should be exempted from taxation so much
thereof as 'shall equal the amount of
bona fide and
unconditional debts by him owing.' This provision was repealed by
the Income Tax Law, which marked the abandonment of the attempt to
levy personal property taxes upon that species of property. Ch.
658, Laws 1911."
"It seems entirely clear that the liability to policyholders
Page 247 U. S. 137
which the plaintiff refers to is not in any sense an
'unconditional debt,' and, as the policy of the state has never
extended the exemption to any liability short of an unconditional
debt, we are unable to see any sound basis for the argument
made."
"As to the contention that, if the plaintiff were taxed under
the income tax system, its tax burden would be far less than under
the present license system, we shall not attempt to go into the
arguments and figures presented in detail. It is sufficient to say
that we do not think it appears from the allegations of the amended
complaint that the plaintiff now pays substantially greater sums
than it would pay under either the income taxation system or the
former personal property taxation system."
"At all events, there does not affirmatively appear to be any
such disparity as would condemn the law as arbitrarily
discriminatory."
While these views of the nature and effect of the law are not
conclusive upon us, they are accepted unless they appear to be ill
founded, and we find no reason to reject them. The tax in question
is therefore not only one for the privilege of doing life insurance
business within the state, but is in effect a commutation tax,
levied by the state in place of all other taxation upon the
personal property of the company in the State of Wisconsin.
It is insisted that, because of the foreign investment business
of the company, large in amount and involving shipments of
securities, correspondence, etc., beyond the state, this law
burdens interstate commerce. We need not reiterate the reasoning
upon which this Court has repeatedly held that a state may not, by
its system of taxation, impose burdens upon interstate commerce,
the cases have been recently reviewed and the doctrine reaffirmed.
Looney v. Crane Co., 245 U. S. 178;
International Paper Co. v. Massachusetts, 246 U.
S. 135;
Cheney Bros. Co. v. Massachusetts,
246 U. S. 147
Page 247 U. S. 138
.
The construction of the act by the state court brings the case
within the decisions of this Court in
U.S.
Express Co. v. Minnesota, 223 U.
S. 335;
Cudahy Packing Co. v. Minnesota,
246 U. S. 450. In
the former case, a commutation tax upon gross receipts of the
express company from state and interstate business was sustained as
casting no burden upon interstate commerce. In the
Cudahy
Packing Company case, a tax of like character was held not a
burden upon interstate commerce, although much of the gross
receipts, which measured the property tax, was derived from such
commerce. In both of these cases, following the previous decisions
of this Court, the tax was held to be within the authority of the
state, and the inclusion in the measure of taxation of the receipts
partly derived from interstate commerce was held not to invalidate
the tax, its amount not being in excess of what would be legitimate
as an ordinary tax on the property taken at its value.
We have said thus much as to the alleged invalidity of this
license tax as a burden upon interstate commerce without deciding,
as we do not find it necessary to decide, whether the so-called
foreign investment business of the company does or does not of
itself amount to interstate commerce. If it amounts to commerce of
that character, no burden is cast upon it by such tax as is here
involved, since the gross receipts coming from that character of
business are used only as a measure of the value of the property
and franchise lawfully taxable in the state.
That the tax upon the life insurance business which is the
subject matter of the license tax here involved is not a tax upon
interstate commerce is established by a reference to the recent
full consideration of the subject by this Court.
New York Life
Insurance Co. v. Deer Lodge Co., 231 U.
S. 495.
This brings us to the question whether the statute denies to the
company the equal protection of the laws. That
Page 247 U. S. 139
the state is not because of the Fourteenth Amendment required to
tax all property alike, and may classify the subjects selected for
taxation, is too well established to require citation of the many
ases in this Court which have so held. The classification may not
be arbitrary, and must rest upon real differences -- subject to
these qualifications the state has a wide discretion. In this
connection, the Northwestern Company contends that the tax upon it
is so different from that imposed upon foreign level premium
companies doing a like business within the state that an arbitrary
discrimination amounting to a denial of equal protection is
exercised as against it and in favor of the foreign company. As we
have already said, the foreign companies of like character pay a
privilege or occupation tax in the sum of $300.00 per annum. The
state court held, and we think properly so, that foreign insurance
companies occupy a relation to the state which is different from
that of a domestic company. The latter has within the borders and
taxing jurisdiction of the state a large amount of personal
property, receiving protection, and subject to taxation. The
foreign company has its reserves in the state of its domicile, and
there subject to local taxation, which is of itself a substantial
difference. Moreover, we have held that it is no denial of equal
protection for a state to impose a different rate upon one of its
own corporations than that imposed upon a foreign corporation, for
the privilege of doing business within its borders.
Kansas
City, Memphis & Birmingham R. Co. v. Stiles, 242 U.
S. 111,
242 U. S. 118.
In the case of
Cheney Brothers Co. v. Massachusetts,
supra, this Court said:
". . . a state does not surrender or abridge its power to change
and revise its taxing system and tax rates by merely licensing or
permitting a foreign corporation to engage in local business and
acquire property within its limits, and, second, that"
"a state may impose a
Page 247 U. S. 140
different rate of taxation upon a foreign corporation for the
privilege of doing business within the state than it applies to its
own corporations upon the franchises which the state grants in
creating them."
"
Kansas City, Memphis & Birmingham R. Co. v.
Stiles, 242 U. S. 111,
242 U. S.
118."
But it is said that these decisions are opposed to the decision
of this Court in
Southern Railway Co. v. Greene,
216 U. S. 400. In
that case, the railway corporation of another state came into the
State of Alabama in compliance with its laws, paid the license and
property tax imposed upon other corporations doing business within
the state, under sanction of the laws of the state acquired a large
amount of railroad property therein, when it was attempted to
subject it to a further tax for the privilege of doing business as
a foreign corporation, which tax was not imposed upon domestic
corporations doing the same kind of business in the same manner,
and it was held that such classification was arbitrary and void
under the Fourteenth Amendment. In that case, we laid stress upon
the fact that the tax related to railroad property not susceptible
of other uses which, placed in the state, had to remain there
permanently, and could not be withdrawn at the pleasure of its
owners. Under such circumstances, and dealing with that character
of property, we held that the particular tax constituted such
discrimination as to deny to the company the equal protection of
the laws. That case was distinguished in the decision in
Kansas
City, Memphis & Birmingham R. Co. v. Stiles, supra, and
also in disposing of the case of the White Company involved in
Cheney Brothers Company v. Massachusetts, supra. The
difference between the
Southern Railway Company case and
the one under consideration is quite obvious.
As to the alleged discrimination between old-line level premium
companies and beneficial associations, which are exempted from
taxation under this statute, we think the differences are plain.
The fraternal and beneficial
Page 247 U. S. 141
features are wanting in organizations like that of the
Northwestern Company. The ascertainment and collection of premiums
and payments for insurance are upon wholly different plans. As to
the alleged discrimination in favor of stipulated premium companies
and assessment companies, the plaintiff in error in its brief says
that no domestic company of these classes, and but one foreign
company, existed in Wisconsin in 1912, and that, as to this, its
argument as to discrimination in favor of foreign level premium
companies applies. What we have already said disposes of that
contention. We find no reason to disagree with the Supreme Court of
Wisconsin in the conclusion that differences upon which
classification rests in this statute are not fanciful, but real and
substantial, and that the dissimilarities in treatment fall short
of that arbitrary classification which amounts to a denial of the
equal protection of the laws.
We find no error in the judgment of the Supreme Court of
Wisconsin.
Affirmed.
MR. JUSTICE CLARKE took no part in the consideration or decision
of this case.