Hon. William A. Harrison Opinion No. WW-525 

Commissioner of Insurance 

State Board of Insurance Re: Proper interpretation of 

Austin, Texas Article 21.46, Texas 

Insurance Code--retaliaDear Sir: tory statute. 

You have requested an opinion of this office concerning the 

proper construction of Article 21.46 of the Insurance Code, Acts 

55th Leg., R.S. 1957, p. 1184, ch. 396, Sec. 1. This article provides: 

“Whenever by the laws of any other state or 

territory of the United States any taxes, licenses, fees, 

fines, penalties, deposit requirements or other obligations, prohibitions or restrictions are imposed upon 

any insurance company organized in this State and licensed and actually doing business in such other state 

or territory which, in the aggregate are in excess of 

:fzsagdgregate of taxes, licenses, fees, fines, penaleposlt requirements or other obllgatlons, prohibiiions or restrictions directly imposed upon a similar insurance company of such other state or territory 

doing business in this State, the Board of Insurance 

Commissioners of this State shall impose jupon any 

similar company of such state or territory in the same 

manner and for the same purpose, the same taxes, licenses, fees, fines, penalties, deposit requirements or 

other obligations, prohibitions or restrictions; provided, however, the a gre ate of taxes, licenses, fees, 

fines, penalties or oaations imposed by this 

State pursuant to this Article 21.46 on an insurance 

company of another state or territory shall not exceed 

the aggregate of such charges imposed by such other 

state or territory on a similar insurance company of 

this State actually licensed and doing business therein; 

” 

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In your opinion request you state: 

“We find it quite difficult to find the ‘aggregate’ 

of such diverse items as taxes, licenses, fees, fines, 

penalties, deposit requirements, obligations, prohibitions or restrictions. It is much like trying to find the 

aggregate of apples, oranges, bananas, potatoes and 

tomatoes. 
Hon. William A. Harrison, page 2 (WW-525) 

“We are of the opinion that the only practical 

construction and interpretation of the statute is that 

each enumerated item contained in the statute must 

be viewed and computed separately, determine the 

aggregate of such separate item, and apply the retaliatory law to each separate item. In other words, 

it is our opinion that proper construction of the statute would be to consider and total all taxes as such, 

determine the aggregate of the taxes, and then apply 

the retaliatory law to these taxes. We would then 

consider all licenses to determine the aggregate of 

such licenses, and apply the retaliatory law to licenses. A similar procedure would then be used 

with respect to each of the other items enumerated 

and mentioned in Article 2 1.46.” 

Your first question is whether this interpretation is correct. 

It is the opinion of this office that the construction as stated is incorrect, 

The legislative history of this article is pertinent: In 1909 

the Legislature enacted a statute which was designated as Article 

4758, V.C.S. (Acts 1909, p, 192, $ 29 as amended in Acts 44th Leg., 

1935, p. 713. ch. 307, $ 1) which was also a retaliatory act. Article 

4758 did not expressly require an “aggregate” method of computation; however, the Attorney General in Opinion No. 0-1997-A approved July 11, 1940, held that a construction of the statute comparing fees against fees, taxes against taxes, penalties against penalties, 

was erroneous and the total or aggregate of all taxes, fines, penalties, fees and other charges imposed by the foreign state should be 

compared with the aggregate imposed by the Texas law on a foreign 

corporation for the purpose of applying the act. Although Article 

4758 was repealed in 1951 (Acts 1951, 52nd Leg., p, 868, ch. 491, 

5 4) substantially identical language to that of Article 4758 was incorporated in House Bill 278, Section 1 (later enacted as Article 

21.46) when it was introduced. The word “aggregate” was later 

added by committee amendments and by House floor amendments 

(Daily House Journal, pp. 2407. 2409. April 29, 1957) which incorporated substantially the language now set out in the text of Article 

21.46. Therefore, the construction placed by our former opinion 

would apply to the bill as it was originally introduced and the addition of the amendments would further militate for the construction 

set out in Attorney General’s Opinion 0-1997-A. 

Many other states have retaliatory statutes which are similar 

in language as well as in nature. The cases hold that the purpose of 

the retaliatory statutes is to provide that an insurance corporation 

incorporated under the laws of the retaliating states can enter into 

and operate in other states on parity with their domestic insurance 
Hon. William A. Harrison, page 3 (WW-525) 

corporations. They are calculated to equalize the burden a foreign 

corporation must carry with that imposed by the state of its domicile upon a domestic corporation of the retaliating state doing business in that foreign state. The statutes are based on the principle 

of comity between the states. State v. Reinmund, 45 Ohio State 214, 

13 N.E. 30 (1887). Lie and Casualty Insurance Company of Tennessee 

v. Coleman, 233 Ky. 350, 25 S W 2d 748 (1930) timployers Casualty 

Company v. Hobbs, 149 Kansa; ;74, 89 P.2d 9i3 (1939) Occidental 

Life Insurance Company v. Holmes, 80 P.2d 383 (Mont&a Sup.Ct. 

1938) Pacific Mutual Life Insurance Company v. State, 161 Wash. 

135. i96 P. 813 (1931). Thus, the statute is designed to place on the 

foreign corporation coming into Texas a burden equal to the burden 

imposed by the state of such foreign corporation’s domicile upon any 

similar Texas insurance company licensed to do business and actually 

doing business in the foreign, state. It is the total and ultimate effect 

of the “taxes, licenses, fees, fines, penalties, deposit requirements or 

other obligations, prohibitions or restrictions” directly imposed by 

the foreign state upon a similar Texas corporation which must be compared with the total and :iltimate effect of the “taxes, licenses, fees, 

etc.,” which would be directly imposed by the Texas statutes other 

than Article 21.46 .Ipon the foreign insurance company. An item by 

item comparison of the aggregate taxes with aggregate taxes, aggregate fees with aggregate fees, etc. does not total burdens. While the 

aggregate taxes imposed by the foreign state might exceed the aggregate taxes imposed by Texas in the absence of Article 21.46, the aggregate fees imposed by the foreign state might be so much less than 

the aggregate fees imp,osed by Texas so that the excess of the aggregate Texas fees over the aggrega.te foreign fees vyozid exceed the excess of the aggregate foreign tax over the aggregate Texas tax. The 

construction suggested by your department wcl;ld not allow for this 

offset and would not be a comparison of the total burdens with an aim 

towards equalizing them, and thus would not be in harmony with the 

purposes of the stakte. 

In the case’ of Employers Casualty Company v. Hobbs, 149 

Kansas 774. 89 P.2d 923, 926 (1939). the Court exoresslv reiected a 

construction of the Kansas statute in the manner your opinion request 

suggests is the proper construction for the Texas statute. The Court 

stated: 

“There can be no equalization of the burden 

unless the taxes levied or the obligations imposed are 

the same in the aggregate.” 

The Court in that case held that the total of fees, taxes, licenses, etc., shoald be aggregated or totaled. The Kansas statute 

significantly does not expressly require aggregation. 

Occidental Life Insurance Company v. Holmes, 80 P.Zd 383 

(Sup.Ct.Mont. 1938). concerned the construction of the Montana statute. 
.‘. 

Hon. William A. Harrison, page 4 (WW-525) 

The issue was whether the statute should be applied at all. The 

company contended the proper construction was one involving a 

totaling of all exactions imposed. The Court in upholding the company’s position said: 

“To arrive at a fair and equitable adjustment and to give the statute such an effect, the 

total exactions must be taken into account irrespective of how such exactions may be characterized or named.‘ 

The Maryland statute, apparently, has also been construed 

to require computation of the total or aggregate of ‘taxes, fees, 

fines, penalties, licenses, deposit requirements or other obligations, 

prohibitions or restrictions’. See 38 Opin. A.C. 202, Dec. 21, 1953, 

wherein examination fees of a Texas corporation doing business in 

Maryland paid to the Maryland Department of Insurance were allowed 

as an offset against the retaliatory tax calculated on the base of the 

excess of Texas tax over Maryland tax; and see also 39 Opin. A.G. 

191, Sept. 7, 1954, which allows an offset the cost of publication of an 

annual statement against the retaliatory tax. 

In Arizona the Attorney General (Opin. 56-l 19, dated July 3, 

1956) has held that their retaliatory statute and the use of the phrase 

“aggregate . ~ . requirements or other obligations , . . directly imposed upon similar insurers . D . ” , is conclusive that the intent of the 

Legislature was to allow for all burdens directly imposed upon companies to be deducted. 

We recognize the administrative difficulties involved in making such a comparison. We also recognize that a comparison of the 

total of all burdens was intended by the Legislature instead of the 

method presently used. 

Your second question is predicated upon a negative answer to 

the first. You ask us as to the proper interpretation and construction 

of the statute. Because there is no specific fact situation submitted 

with the request, we will not be able to answer the question. 

We recognize that a foreign state may impose on a Texas company a burden such as a recommendation that the company be licensed 

in doing business in Texas for five years prior to its admission to the 

foreign state. Since we have declined to answer your second question, 

this opinion should not be construed as prescribing how burdens such 

as this, which by their nature may not be capable of being reduced to 

a common denominator with other burdens for the purpose of comparison. should be treated when applying Article 21.46 except to say that 

the present interpretation of the Department of Insurance is incorrect. 
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Hon. William A. Harrison, page 5 (WW-525) 

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In your third question you inquire as to the data and time when 

such items are to be aggregated. The statute is silent insofar as this 

matter is concerned. Article 21.46 and Senate Bill 222, Acts 55th Leg., 

R.S. 1957. p. 1454. ch. 499, when construed together vest enforcement 

of Article 21.46 in the State Board of Insurance and direct that the duties therein set out be executed and carried out by the Commissioner 

of Insurance who acts under the supervision and rules and regulations 

of the State Board of Insurance. (Art. 1.04(b) and Art. 1.09(a)) Senate 

Bill 222 empowers the State Board of Insurance to make rules and 

regulations for the purpose of carrying out its duties and functions. 

(Art. 1.04(c)) It is our opinion that this is a matter lying within the 

sound discretion of the State Board of Insurance and the Commissioner 

and may properly be resolved by adoption’of appropriate rules and regulations; provided, however, that the rules and regulations conform to 

the language and purposes of Article 21.46 and other applicable statutes. 

In your opinion request you state: 

“As mentioned above, Article 21.46 became effective on January 1, 1958. As we understand Attorney 

General’s Gpinion dated August 16, 1949, written by 

Assistant Attorney General Ned McDaniel to the Honorable George B. Butler, Chairman of the Board of Insurance Commissioners, and Attorney General’s Opinion 

dated December 3, 1936, appearing in book 374, page 

496, written by the Honorable W. W. Heath,to the Honorable R. L. Daniel, Chairman of the Board of Insurance 

Commissioners, the taxes which are now due from foreign casualty and fire companies under Article 7064, 

Revised Civil Statutes, would be subject to the retaliatory law. These same opinions lead us to the concl-sion 

that taxes now due from foreign life insurance companies 

under Article 4769, Revised Civil Statutes, would not be 

subject to the retaliatory law.” 

Your final question is whether the present interpretation and 

construction of these opinions and the construction of Article 21.46 is 

correct. 

We have carefully examined the opinions referred to, together 

with the present text of Article 4769 and Article 7064, Vernon’s Civil 

Statutes. It is the opinion of this office that basic features of both of 

these tax statutes have not been changed since the issuance of these 

two opinions. The principles stated in those opinions are still applicable. Therefore, since the gross premium tax levied under Article 

7064 is an occupation tax for the privilege of doing business in this 

State, payable in advance, the tax presently due under this article 

would be a tax for doing business during 1958, subsequent to the effective date of the retaliatory act. Accordingly, these taxes should 
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Hon. William A. Harrison, page 6 (WW-525) 

be taken into consideration in applying the retaliatory act. In contrast, the taxes now due under Article 4769 are imposed for doing 

business in 1957 prior to the effective data of the retaliatory act 

and should not be taken into consideration in applying the retaliatory 

act. 

SUMMARY 

The Retaliatory Act, Article 21.46, requires 

a comparison of total burdens imposed by 

Texas laws on a foreign insurance company 

with the total burdens imposed by the State 

of its domicile upon similar Texas corporations licensed to do business and actually 

doing business in the foreign state; accordingly, the method of “‘aggregating” the items 

enumerated in Article 21.46 that are set out 

in the opinion request are incorrect. The 

date and time on which these vari.ous items 

are to be aggregated rest within the discretion of the State Board of Insurance and may 

be determined by rules and regulations. The 

Retaliatory Act should be applied to the taxes 

now due p,ursuant to Article 7064, Vernon’s 

Civil Statutes, but should not be applied to 

the taxes now due under Article 4769, Vernon’s 

Civil Statutes. 

WPF:lm 

APPROVED: 

OPINION COMMITTEE: 

Geo. P. Blackburn, Chairman 

J. C. Davis, Jr. 

Tom I. McFarling 

L. P. Lollar 

Very txly yozs, 

w ILL w ILSON 

Attorney Gene 

BY 

Assistant 

REVIEWED FOR THE ATTORNEY GENERAL 

BY: 

W. V. Geppert