#### Mutual Life Insurance Company of New York *v.*The State of Ohio.

*Tax upon foreign insurance company*— Section *¿745, Revised Statutes, construed.*

Section 274S, Revised Statutes, does not require a foreign insurance company to pay to the state, annually, two and one-half per centum on the business done by it within the state, or of the net amount of premiums received by it from the state, but only such per centum of the net amount of premiums received by it in the state.

(No. 11379

Decided January 26, 1909.)

Error to the Circuit Court of Franklin county.

The facts are stated in the opinion.

*Mr. Janies McKeen*and *Messrs. Arnold, Morton & Irvine,*for plaintiff ill error.

Premiums sent by Ohio policyholders to the home office of plaintiff in error, and there received by it, are not “received by it in the state,” and are not subject to taxation under Section 2745, Revised Statutes.

The general assembly has chosen the. simple and certain way of defining the premiums upon which laxes shall be paid when it says such as are “received in the state.” The premiums having been received in the state, that is, have been paid to an agent or at an office of the company in the state, the place of payment and receipt are definitely fixed, and the means of determining the accuracy of the company’s reports are to be found within the state, viz., by examination of the agents’ and branch office records. *People*v. *In*
      *306
      *surance Co., 27*Hun. 188; *State*v. *Insurance Co.,*106 Tenn., 282.

The Tennessee Act of 1897, Chapter 2, Section 5, provides that insurance companies shall pay a tax of “two and one-half per cent, on gross premium receipts in this state.”

These are the only decisions of which we have any knowledge construing premium taxation statutes which seem to be applicable to the case at bar, and the principles there announced are opposed to the contentions made for the state. *Building & Loan Assn.*v. *Norman, Auditor,*98 Ky., 294, and *Insurance Co.*v. *Hendricks, Supt.,*41 Misc. (N. Y.), 479, are persuasive of the construction of Section 2745, Revised Statutes, contended for by plaintiff in error.

In giving construction to the section the rule must be observed, that, where there is ambiguity in a statute with respect to -whether a tax, or public burden of that nature, is imposed, or authorized to be imposed, it should receive that construction which is most favorable to the citizen or subject sought to be charged with the burden. Cooley on Taxation (3 ed.), 453; *Pretzinger*v. *Sunderland, Treas.,*63 Ohio St., 132; *Cincinnati*v. *Connor,*55 Ohio St., 82; *Rice*v. *United States,*53 Fed. Rep., 910; *United States*v. *Wigglesworth, 2*Story, 369.

In *Powers*v. *Barney,*5 Blatch., 202, Mr. Justice Nelson said, “duties are never imposed upon the citizens upon vague or doubtful interpretations.”

The revenue laws are not to be so construed as to extend their meaning beyond the clear im*307port of the words used. *United States*v. *Watts,*1 Bond, 580.

Statutes which impose restrictions upon trade or common occupations, or which levy an excise or tax upon them, must be construed strictly. *Sewall*v. *Jones, 9*Pick., 412; *Pegues*v. *Ray,*50 La. An., 574; *Moseley*v. *Tift, 4*Fla., 402; *Barnes*v. *Doe, 4*Ind., 132; *Cahoon*v. *Coe,*57 N. H., 557; *Paving Co.*v. *Watt,*51 La. An., 1345; *Brown*v. *Commonwealth,*98 Va., 366; *Supervisors*v. *Tallant,*96 Va., 723; *Turnpike Road Co.*v. *Thomas,*3 S. W. Rep.,*907; Rice*v. *United States,*53 Fed. Rep., 910.

It is interesting to note the history of Section 2745, Revised Statutes.

Previous to the act of April 29, 1902 (95 O. L., 290), insurance companies in Ohio were not required to pay the tax to the state. The act of March 27, 1894 (91 O. L., 91, which had been previously amended several times), provided that “every agency of an insurance company incorporated by the authority of any other state or government, shall return to the auditor of each county in which such company does business, or from which it collects premiums, on or before the first day of May, annually, the amount of the gross premium receipts of such agency for the previous calendar year in such counties.”

By the act of April 29, 1902 (95 O. L, 290), the section was so amended that the company is required to report all premiums “received by it in the state” and to pay the tax thereon directly to the state, in lieu of the provision under which returns were made by the agents of the premiums *308received by them at their respective agencies, and upon which the tax was paid to the respective counties. It is clear* that the general assembly intended to limit the taxes to the premiums actually received in the state, as was the rule under this section previous to the amendment of April 29, 1902.

*Mr. U. G. Denman,*attorney general; *Mr. Smith W. Bennett*and *Mr. J. M.*Sheets, for defendant in error.

The tax enacted is a tax on the privilege of doing business in the state of Ohio. *Insurance Co.*v. *Bowland, Treas.,*196 U. S., 611.

In giving a construction to any statute, the court must consider its policy, and give it such an interpretation as may appear best calculated to advance its object by effecting the design of the legislature. *Wilber*v. *Paine,*1 Ohio, 251.

It is the duty of courts in the interpretation of statutes, unless restrained by the letter, to adopt that view which will avoid absurd consequences, injustice or great inconvenience, as none of these can be presumed to have been within the legislative intent. *Moore*v. *Given,*39 Ohio St., 661.

These rules of construction are elementary, and need no further elaboration.

The object and purpose of enacting Section 2745, Revised Statutes, was to raise revenue for the state, and it has resulted in 'an annual income to the state of over $1,000,000.

Should the court give this section the construction contended for by counsel for plaintiff in error, it would place it within the power of the foreign *309insurance companies doing business in the state to avoid the payment of any excise tax whatever and thereby make the state more than a million dollars poorer annually.

We are* willing to accept the conclusion of the court in *People*v. *Insurance Co., 27*Hun, 188, that the words “premiums received on business done in the state,” are properly understood to embrace only premiums on property situated in this state.

So in life insurance, “business done by it in said state,” embraces premiums received on the lives of persons resident of this state.

The tax, as already suggested, is not on the gross premium receipts, but is a tax on the privilege of doing business in Ohio. The gross premium receipts furnish merely the tapeline by which the privilege tax is measured.

The principle here involved is exactly the same as that involved in the act (Sections 2780-17 to 22, Kevised Statutes), taxing express, telegraph, telephone companies, etc., at the rate of one per cent, of their gross annual receipts for the privilege of doing business in the state of Ohio. *Express Co.*v. *State,*55 Ohio St., 69.

Summers, J.

This was a suit by the state to recover from the defendant, now plaintiff in error, a life insurance company organized under the laws of New York, a tax of two and one-half per centum on the premiums received by it, for the five years 1901 to 1905, both inclusive, at the home office in the city .of New York directly from policyholders resident in the state of Ohio and *310not paid to any agent of the company in the state of Ohio. No question is made as to the tax upon the premiums received by it in the state

The court of common pleas overruled a demurrer to the petition and entered judgment against the company, and on error the judgment was affirmed.

By Section 3604, Revised Statutes, insurance companies organized under the laws of other states, or by act of congress, are required to obtain from the superintendent of insurance a license to do business in this state, and by Section 2745, Revised Statutes, foreign insurance companies are required to pay to the state annually two and one-half per centum of the amount of premiums received by them in the state during the preceding year as a tax upon the business done by them within the state.

The part of the section to be interpreted reads as follows:

> “Every insurance company, incorporated by the authority of any other state or government shall, in its annual statement to the superintendent of insurance, set forth the gross amount of premiums received by it in the state during the preceding calendar year, without deductions for commissions, return premiums on considerations paid for reinsurance, or any deductions, whatever; and shall, also, therein set forth, .in separate items, return premiums paid for cancellations and, also, considerations received from other companies for reinsurances in this state, during such year.

> “The superintendent of insurance shall examine such report of every such company, and if he finds *311the same correct, shall, prior to the month of November in each and every year, compute an amount of two and one-half per centum on the balance (of) on such gross amount after deducting such return premiums and considerations received for reinsurances as shown by the next preceding annual statement, and charge (the) to same to such company as a tax upon the business done by it within said state for the period as shown by said annual statement.”

Counsel for the state contend that the tax is not a tax on the premiums but a tax on the privilege of doing business in the state, and that the premiums received by the company for business done in the state, whether received in the state or at its home office, indicate the amount of business done in the state and constitute the basis for determining the amount of the tax. The general assembly might have exacted a per centum of the value of the business done in the state as a tax for the privilege, and then it might be necessary to determine what is business done in the state, or it might have provided that the tax should be a per centum of thé premiums received by the company from business done in the state, or it might have made the amount of the tax determinable on some other basis, but it has not done so, but has expressly provided that the company shall pay two and one-half per centum of the gross amount of premiums (less the specified deductions) *received by it in the state.*The fact, if it be a fact, that there is no apparent reason why the amount of premiums received *in*the state, rather than the amount of premiums received *from*the state, *312should be the basis of the amount of the tax, or the fact, if it be a fact, that the adoption of the former basis rather than the latter will afford an opportunity to evade the tax, does not empower the courts to change the statute. There is nci ambiguity in the statute, and if there was, the rule is that “statutes imposing taxes and public burdens of that nature are to be strictly construed; and where there is ambiguity which raises a doubt as to the legislative intent, that doubt must be resolved in favor of the subject or citizen on whom the burden is sought to be imposed.” *City of Cincinnati*v. *Connor,*55 Ohio St., 82-91; *Pretzinger*v. *Sunderland, Treasurer,*63 Ohio St., 132-139; Cooley on Taxation, 454. If the statute needs amendment the remedy is with the general assembly. The conclusion is supported by an examination of the changes in the statute. As the section read in the Revised Statutes of 1880, and as it was prior to the amendment of April 29, 1902 (95 O. L., 290), the agency of such company in the several counties was required to return to the county auditor the amount of the premium receipts of the ageñcy and the company was required to pay to the county a tax upon that amount at the same rate that was levied upon other personal property.' The basis of the tax was the premium receipts of the agencies, and not the premium receipts of the company from the state. In 1902 the section was changed so as to require the company to report the premiums received by it in the state and to pay to the state a per centum of that amount. There is nothing in the amendment of 1902, or in the subsequent *313amendments, to indicate an intention to change the basis of the tax, but the manifest purpose was merely to divert the revenue from the county treasuries to the state treasury, which was effected by requiring the companies to report to the superintendent of insurance premiums received by it in the state, in lieu of the requirement that the agencies in the respective counties should report to the county auditors the premium receipts of the agencies. Whether the amount of premiums received in the state, rather than from the state, was made the basis of the tax upon an assumption that that was the extent of the business done in the state, or from oversight, or for convenience in bookkeeping, or for other reasons, is, as already suggested, so far as it may affect our determination, merely idle conjecture.

The judgments are reversed, the demurrer sustained and the cause remanded.

*Reversed.*

Crew, C. J., Spear, Davis, Shauck and Price, JJ-, concur.