### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

NO. 03-04-00342- CV

F irst Am eric an Ti tle Insurance Com pany an d Old Republi c Nat ional

Title Insu rance C om pany, Ap pellants

v. Ca r ole K e e to n St r ay hor n, C om pt r oll e r of P ublic Ac c ount s o f the St at e of Te xa s a nd

Gr egg Abbott, At torney G eneral of the State of Texas, Appellees

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 201ST JUDICI AL DISTRICT NO. GN301692 , HO NORAB LE MARGARET A. COO P ER, JUDGE PRESIDI NG

O P I N I O N

First Americ an Title I nsuranc e Company and Old Republic National Title I nsuranc e Com pa ny sel l title ins ur anc e in T e xas b ut a re inc or po rate d in

oth e r s ta te s. Th e y

are se e kin g to

rec over ta x es they

argue we re unlawfully imposed upon them. Texas imposes a tax on t he amount of pr e mium col le c te d fr om titl e ins ur anc e po lic ie s. I n a dd iti on , f or e ig n ti tle ins ur anc e c omp a nie s, lik e F ir st A me ri c an a

nd Ol d Re pu

bli c , are re qu ir e d to pa

y an a dd iti on a l ta x if the ir state s o f o ri g in impose financia l burdens on Te x as insuranc e compa nies selling title insuranc e in the fore ign states that are highe r than the f

inancial bur dens Texas imposes upon fore ign insurance companies se lling ti tl e in s u r an c e h e r e . T h is a d d it io n a l t a x is c a ll e d a r e ta li a to r y tax. Previously

title insurance companies have bee n allowed to include 100% of the total premium tax paid as part of their i mposed financ ial burden f or the purpose of dete rmining w hetherBoth First Americ an and O ld Republic filed suits seeking to rec over ta x es they had paid. 1 After the district court g rante d summary judgme nt in favor of

t h e C omptroller, both case s were c on so lid a te d in to t

his a pp e a l. 2 a re taliatory

tax needs to be paid. Howe ver, the Comptroller chang ed thi s p re v ious interpretation and conc luded that, bec ause insura nce c ompanies pay

only 15% o f t h e p remium tax, i nsuranc e companies should include only 15% of the pr emium tax as par t of their total imposed financ ial burden. U nder this new inter pretation, foreig n title insurance c ompanies will be re quired to pay sig nif ic antl y mor e in r e ta liator

y ta xes. First Amer ican a

nd Old Republic contend that the Comptroller’s new inter pretation is wrong and seek to rec over tax es t hey claim were unlawfully assessed unde r the Comptroller’s ne w interpre tation. The dist rict court g rante d summary judgme nt in favor of the Comptroller, and w e

1 will affirm the judg ment.

F ACTUAL AND P ROCEDURAL BACK GR OUND F ir st A me ri c an is a

Ca lif or nia -b a se d ti tle ins ur anc e c omp any , an d Old Re pu bli c is a Minne so ta -b a se d title ins ur anc e c omp any . Ti tle ins ur anc e c omp anie s (“ ins ur e rs ” ) a re re sp on sib le for issuing title insurance policie s, fo r i nsuring title risks, and for pa y ing c laims and providing defe nses to claims if ne ce s s ary . Both F irst America n and Old Republic e ng ag e in title insurance business within the St ate of Texas. F ir st A me ri c an is su e s ti tle po lic ie s th ro ug h ti tle a g e nts and thr ou g h d ir e c t op e ratio ns . Old Republic issues title policies through title ag ents alone. Title ag ents are leg al entities, such as corpor ations, that are separ ate f rom insurers a

nd that are licensed to c lose rea l estate title insuranc e transac tions on behalf of one or m ore insurers. Title ag ents may be affiliated with an insurer or may3

be c omp le te ly

ind e pe nd e nt. I f a

n in sure r b e c ome s li c e ns e d a s a dir e c t operato r, th en it

may c los e ins ur anc e tr ans a c tio ns on its ow n w ith ou t an a g e nt. Article 9.59 of the i nsuranc e code (“the premium tax s tatute”) require s titl e insurer s to remit to the s tate a tax on insurance premiums collecte d while eng ag ed in business in Texas. See Tex. I ns. Code Ann. ar

t. 9.59 (West Supp. 2004-05), repeale d by Act of A pril 30, 2003, 78th L eg ., R.S., ch. 1274, § 26(b)(4) , 2003 Tex. Ge n. L aws 3611, 4139 (ef fec tive April 1, 2005). I n addition, article 21.46 of the insura nce c ode (“ the re tali at ory tax s tatute”) require s the impositi on of an additional tax on fore ign insurers doing business within Te x as if the fore ign state imposes financia l burdens on Te x as-ba sed insurers doing business in the fore ign state that ar e hig her tha n the financ ial burdens Texas pla ces on the fore ign state’s insurer s doing business he re. See Tex. I ns. Code Ann. art. 21.46 (West Supp. 2004-05), repeale d by Ac t of April 30, 2003, 78th L eg ., R.S., ch. 1274, § 26(b)( 4), 2003 Tex. Gen. L aws 3611, 4139 (e ffe ctive Apr il 1, 2005). The principal purpose of a reta li a to r y tax la w is to f a c il it a te th e a

b il it y o f in s u r e r s to c o n d

u c t b u s in e s s a c r o s s s tate lines by deter ring states from e nactingdiscriminatory or ex ce s s ive taxes ag ainst fore ign insure rs. See W este rn & S. LifeIn s. Co. v . S tat e Bd . o f E qu ali za tio n o f Ca l. , 451 U. S . 648, 668 (1981). I n th e la te 19 90 s, the Com ptr oll e r t oo k th e po si ti on that th e pr e mium ta x sta tut e

re qu ir e d tit le ins ur anc e a g e nts to pa y a po rt ion of the pr e mium ta xes du e and tha t th e pa y me nt o f t itl e insurance premium taxes is not solely the obligation of insurers. Previously , in s u re rs h ad bee n allowe d to in c lu d e 1 0 0 % o f th e p r e mi u m tax p a id a s th e in s u r e r s ’ tax b u r d e n f o r th e p u r poses of deter mining whe ther a

reta liatory tax would be imposed on an insurer . Under the new c alculation method, an insurer

may only count 15% of the premium tax as its financial burde n when de termining the amount of re taliatory

taxes due, if any

.The tax y ear s of 1998-2000 a re not at issue in this case . 2 4 After audit ing F irst America n’s 1998-2001 insura

nce ta x repor

ts, the Comptroll er assessed a fee of $175,383.77 in reta liatory taxes and int ere st ag ainst First American for t he 2001 tax y ear , which F irst America n paid in Marc h 2003 under protest. I n addition, First Amer ican pa id, 2 under protest, $1,257,196.99 in reta liatory taxes for 2002. Simi larly , afte r an a udit, the Compt roller assessed r etaliatory

taxes ag ainst Old Republic. Old Republic paid, under protest, $219,626.40 as reta liatory

taxes for 2002.

P ROCEDURAL HISTORY Appellants filed separ ate lawsuits ag ainst the Comptroller and the Attorne y Gene ral of Texas (cumulatively

the “Comptroller” ) to rec over w hat they claim wer e unlawf

ully assessed

re ta liator y ta xes t hat w e re pa id u

nd e r p ro te st. Th e a

pp e lla nts and the Com

ptr oll e r b oth

fi le d c ro ssm o t i o n s f o r s u m m ar y j u d g m e n t i n t h e s e p ar a t e c a s e s , w h i c h t h e t r i a l c o u rth e ar d s i m u l t an e o u s l y. Th e tr ia l c ourt

g ra nte d s umm ary

jud g me nt i n f

a vo r of the Com

ptr oll e r in both ca se s. B oth a pp e lla nts appea led the dec ision of the trial court, a nd the two ca ses wer e consolidate d into this appea l.

STA ND AR

D O F RE VI EW The standa

rds for r eview of a tra ditional summ ary judgme nt are well established: the movant must show that there is no g enuine issue of materia l fac t and that it is entitl ed to judg ment as a matter of law ; in deciding whether there is a disputed materia l fac t issue prec luding summary jud g me nt, the c ourt mu st take e vid e nc e fa vo ra ble to t he no nmo va

nt a s tr ue , a nd the c ourt mus t indulge ever

y rea sonable infe renc e in favor of the nonmova nt and re solve any

do u bts in the5

nonmovant’s favor. Se rg e an t E nte rs. , I nc . v . S tra y ho rn , 11 2 S.W. 3d 24 1, 24 5 ( Te x. Ap p. —A us tin 2 0 0 3 , n o p et
. ) ( ci t i n g Cat

he yv . B oo th , 90 0 S. W.2 d 3 39 , 3 41 (T e x. 19 95 ); Nix on v . M r. Pr op . M

gm t. Co. , 690 S.W .2d 546, 548-49 (Te x . 1985)). We re view the tria l court’s decision to g rant summary judgme nt de novo. Id. (c i t i n g Natividad v. Alexsis, Inc

. , 875 S.W .2d 695, 699 (Tex. 1994)).

Gene rally , a par

ty cannot a ppeal t h e d enial of a

motion for summary

judgme nt beca use i t is an int erloc utory order and, thus, not appea lable. Id. (c i t i n g Cincinnati Life Ins. Co. v. Cates , 927 S.W .2d 623, 625 (Tex. 1996)). Howeve r, when both parties move f or summary

judgme nt

and the dis tr ic t c ourt

g ra nts on e mot ion

and de nie s th e oth e r, the un su c c e ssf ul p art y may a pp e a l bo th the g rant of the preva iling party ’s motion and the denial of its own. Id. (c i t i n g Holmes v . Morales , 924 S.W .2d 920, 922 (Tex. 1996)). I n such a case , we will revie w t he sum mary judgme nt evidence offe red by

both sides, d et er m i n e all questions pre sented, a nd rende r the judg ment the trial cour t should have re ndere d. Id. (c i t i n g FM Pr op s. Op e ra tin g Co. v. City of A us tin , 22 S.W .3d 868, 872 (T e x. 20 00 ); Commissioners Court v. Agan , 940 S.W .2d 77, 81 (Tex. 1997)). B eca use the district court did not state the ba sis for g ranting summary judgme nt, the appellants must neg ate a ll gr ounds that support the judg ment. Id. (c i t i n g State Farm Fire &Cas. Co. v. S.S. , 8 5 8 S. W. 2 d 3 7 4 , 3 8 1 ( T e x. 1993)). Howeve r, i f the a

ppellants fail to neg ate e ach g round on which the judgme nt may have be en rende red, w e must uphold the summary judgme nt. Id. (c i t i n g Car r , 776 S.W .2d at 569). This ca s e involves interpr eting the title insurance premium tax st atute and the reta liatory

tax s tatute, and, ther efor e, we apply a de novo sta

ndard. Lopez v. Texas W

orkers’ Comp. Ins. Fund , 1 1 S

. W

. 3 d

4 9 0 , 4 9 4 (T ex . Ap p . —

Au s t i n 2 0 0 0 , p et
. d en i ed ) ( ci t i n g J oh ns on v . Ci ty

of F or t W or th , 774 S.W .2d 653, 656 (Tex. 1989)). When construing a statute, the c ourt must construe the6

statute as wr itten a

nd must, if possibl e, dete rmine the leg islature’s intention from the la ng uag e that was used in the statute. Del Indus., I nc. v. Tex as W

orkers’ Comp. I

ns. Fund, 973 S.W .2d 743, 745 (Tex. App.—Austin 1998), aff’d , 3 5 S. W.3 d 59 1 (T e x. 20 00 ). Whe n d e te rm ini ngle g isl a tiv e int e nt, the entire act, not isolated portions of t he act, must be conside red. Jones v . Fowler , 969 S.W .2d 429, 432 (Tex. 1998). Courts should first look to t he plain mea ning of the words in the statute a

nd, if the meaningis unambiguous, inter pret the statute so that it c omports with the plain meaning expressed. City of San Antonio v. Ci ty of Boerne , 1 11 S.W .3d 2 2 , 2 5 (Tex. 2003). Ever y word, phra se, and expression used in a statute should be re ad as if it we re de liberate ly used. See G ables Realty Lt d. P’ sh ip v . Trav is C

e nt. Ap prais al D ist

. , 81 S.W .3d 869, 873 (Tex. App.—Austin 2002, pet. denied). I f t wo sta tut e s are in p ari ma te ri a

or a dd re ss t he same su

bje c t, t he n a n e ff ort sh ou ld be made t o harmonize and g ive ef

fec t to both st atutes. Br e e din g v . S tat e , 7 6 2 S. W. 2 d

7 3 7 , 7 3 9 ( T e x. Ap p . — Am ar i l l o 1 9 8 8 , p et
. re f’ d ) ( ci t i n g Che ne yv . S tat e , 755 S.W .2d 123 (Tex. Crim. App. 1988)). Whe n e na c tin g a

statut e , th e le g isl a tur e is p re su me d to hav e int e nd e d to com ply wi th both the state and the fede ral c onstitut ions. Brad yv . F ou rte e nth Cou rt o

f A pp e als , 795 S.W .2d 712, 715 (Tex. 1990). There fore , when construing a s tatute, courts should interpre t a statute so that the statute’s mea

ning is c onsistent with all constitutional requireme nts if possible. Id. I n addition, when an adminis trative ag ency

is charg ed with a statute’ s enfor ceme nt and also construe s the statute, the ag ency ’s construction of the statute is entitled to serious consideration as long a s the construc tion is reasona ble and doe s not contradict the pla in meaning o f t h e s t atut e. Tarrant Apprai sal Dist. v. Mo or e , 845 S.W .2d 820, 823 (Tex. 1993).7 STATUT ORY F RAMEWORK Be fore addre ssing the me rits of the appellants’ claims, it will be helpful to descr ibe t h e s t a t u t o ry s ch em e in qu es t i o n i n t h i s ca s e an d t h e C o mp t ro l l er ’s cu rr en t i n t er p re t at i o n o f i t
. In 1907, the leg islature first imposed a title ins uranc e premium tax upon insurers. See Act of Ma y 16, 1907, 30th L eg ., 1st C.S ., ch. 18, § 8, 1907 Te x . Gen. L aws 479, 482. In 1987, the insuranc e premium tax statutes wer e amended. Act of June 17, 1987, 70th L eg ., R.S., 1987 Tex . Gen. L aws 3610, 3638-40 (c odified as Te x . I ns. Code Ann. art. 9.59). A s part of the amendment, a provision calling for the division of pre mium between insure rs and tit le ag ents and a provision requiring insurers to obtain an a g ent’s portion of the pr emium tax and to remit i t to the state wer e adde d. Id

. Th e re le va

nt p or tio ns of the pr e mium ta x sta tut e re a d a s f oll ow s:
Sec. 1. Eac h title insurance c o m p an y re ce i v i ng premiums . . . shall pay to the Comptroller a tax on those premiums . . . . Sec. 2. I n this article premium means the total a mount of premiums rec eived f or the ta xab le y e ar o n ti tle ins ur anc e wr itt e n on pr op e rt y loc a te d in thi s st a te

. . . .

. . . Se c . 4. Th e re is imp os e d on a ll pr e mium on tit le ins ur anc e an annua l ta x e qu a l to

1. 35 pe rc e nt. Sec. 5. Eac h title ins u ra n ce company that is liable under this article to remit tax

on premium shall file a ta x return a nnually

. . . .

. . . S e c . 8 ( a ) T i t l e i n s u r an c e c o mp an i e s an d t i t l e i n s u r an c e a g e n t s s u b j ec t t o t h e t ax le v ie d b ythi s ar ti cle may

no t bere qu ire d to pa

yan yad dit ion al t ax in pr op or tio n to their gr os s pr e mi um re c e ipt s levied by

this state or any8 county or municipality except as otherw ise provided by this code and the L abor Code. . . . ( b ) Th e pr e miu m ta x i s l e v i e d o na l l am o u n t s d e f

i n e d t o b e p r e m i u m i nt h is Chapter, whe ther pa id to the titl e insuranc e compa ny or re tained by

the title insurance a g ent, such tax being in lieu of t he tax on the premium reta ined by

the ag ent. The State of Texas fac ilitates the collection of the premium tax on the premium reta ined by the ag ent by

setting the division of the pr e mium betwe e n insure r a nd a g e nt so that the insurer receiv es the premium tax dueon the agent’s porti on of the pr emium and remits it to the Sta te . Tex. I ns. Code Ann. ar

t. 9.59 (West Supp. 2004-05) (emphasis adde d). The pre mium tax statute exempts t itle ag ents, which a re subjec t to tax ation under the statute, from pa

y ing a n additional

tax based on g ross premium re ceipts. Id. § 8 (a ). I n a dd iti on to the sec tion 8(a) e x emption, section 171.052 of the Te x as Tax Code exempts age nts and insurers f rom fra nchise taxes beca

use both are require d to pay a tax based on g ross premium rec eipts. Tex. Tax Code Ann. § 171.052 (We st Su pp . 2 00 4- 05 ). Spe c if

ic a lly , s e c tio n 1 71 .0 52 pr ov ide s a s f oll ow s:
An insuranc e org anization , t i t le insuranc e compa ny , or title insurance ag ent authorized to eng ag e in insura nce business in this state now re quired to pay an annua l ta x und e r C ha

pte r 4 or 9, I ns ur anc e Cod e , mea sure d b y its g ro ss p re mium r e c e ipt s is exempted from the fr anchise tax. . . .

Id. The prem ium tax statute also states that pre miums collected ar e divided betwe en insurers and ag ents in such a w ay that insurers r ece ive the ag ents’ shar es of the pr emium tax in the

a mou nt c oll e c te d f

ro m th e a g e nts . T e x. I ns . Co de Ann . a rt . 9 .5 9 § 8( b) . H owthe pr e mium is divided betwee n insurers a nd ag ents and what premium rate s are char g ed are both questions decidedI n this appeal, we are not fac ed wi th and do not addre ss whether the spec ific division of 3 premium betwe en ag ents (85%) and insurer s (15%) is re asonable

. 9 by the Texas D epar

tment of I nsuranc e (the “De partment” ). See T e x. I ns. Code Ann. ar ts. 9.07(b), (c) and 9.30(B )(1) (West Supp. 2004-05). In deter mining re asonable premium rate s, the Depa rtment is require d to consider all rele vant i ncome and expenses of t itle ag ents and insurer s. Id. art. 9.07(b) , (c ). B e tw e e n 2 00 1 a

nd 20 02 , th e tim e pe ri od in i ssu e in t his c a se , th e De pa

rtme nt a llo we d ti tle

a g e nts to k e e p 8 5% of the pr e miums c oll e c te d fr om po lic y ho lde rs and re qu ir e d ti tle a g e nts to r e mit 15% of the premiums to title insurers. 28 Tex. Admin. C ode § 9.1 (2004) (adopting Ba sic Manual 3 of Rules, Rates, and F orms for the Writing of Title I nsu ra n ce i n T exas) ( available at www.tdi.state.tx.us/ company /titl em4d.html#P-23). I n a dd iti on

to p ay ingpr e mium ta xes, ins ur e rs fr om a fo re ig n s ta te do ingbu sin e ss i n Texas may

be re quired to pay

a re taliatory

tax. The retaliatory

tax s tatute imposes an additional tax upon a fore ign insurer doing business in the state of Texas if the fore ign state i m p o s es fi nancia l burdens on Te x as-ba sed insurer s doing business in the fore ign state that are highe r than the f inancial burdens Te x as place s on the fore ign state’s insurer s doing business in Te x as. The r eleva nt portion of the re ta liator

y ta x sta tut e re a ds a s f

oll ow s: Whether by the l aws of any state or ter ritory of the United States a

ny taxes, including ma int e na nc e or sim ilar r e g ulator

y fe e s, inc ome and

c or po ra te fr anc his e , li c e ns e s, fee s, fines, pena lties, deposit requireme nts or other oblig ations, prohib i t i ons or re str ic tio ns are imp os e d up on any ins ur anc e c omp any that is or g anize d in thi s State and license d and is doing business or that may do b u s i n es s i n s uch other state or territory which, in the ag g reg ate are in e x cess of the ag g reg ate of

the taxes, including ma int e na nc e or sim ila r r e g ulator

y fe e s, income and

c or po ra te fr anc his e , li c e ns e s, fee s, fi n es, penalties, deposit require ments or other oblig ations, prohibitions or re str ic tio ns dir e c tly

imp os e d u

po n a sim ilar i ns uranc e c omp any of su c h o the r s ta te10

or terr itory

doing business in this State, the comptroller sha ll impos e upon and c ollect from any simil ar company of such state or territory in the same manne r and f or the same purp os e , th e same ta xes, lic e ns e s, fe e s, fi nes, pe na lti e s, de po sit re qu ir e me nts or other obligations, prohibit ions or restrictions; provided, however, the ag g reg ate of ta x es, lic e ns e s, fe e s, fi ne s, pe na lti e s o r o the r o bli g a tio ns imp os e d b y thi s State pursuant to this Article on an insura nce company of another s tate or te rritory shall not exceed th e a g g r e g a te o f s u c h c h ar g e s im p o s e d b y s u c h o th e r s tate o r te r r it ory on a simil ar insura

nce c ompany

of this State that may

be license d and doing business.

Tex. I ns. Code Ann. ar

t. 21.46 § 1(a). Un d e r th e te r

ms o f th e r e ta li a to r

y tax s tatute , f

o r e ig n in s u r e r s ar e r e qu ir e d to file a repor t for the pur

pose of d et er m i n i n g whether a re taliatory

tax needs to be assesse d ag ainst the insurers. Id. § (1)( d). I nstructions for the Texas T itle Ag ent Statisti cal Repor t, which is issued by the De pa rtme nt a nd is f ile d w iththe Com mis sio ne r o f I ns ur anc e , r e qu ir e ins ur e rs to l ist pr e miums collecte d and var ious ex penses imposed upon them. Althoug h insurers had previously been a llowed to include 100% of t he premium tax in the reta liatory tax calculation, the Comptroller cha ng ed the previous interpr etation of the r etaliatory tax s ch em e, which she may do as long as the ne w interpre tation does not contradic t either statutory lang uag e or a

formally promulg ated r

ule. See Mo or e , 845 S.W .2d at 823 (ag ency ’s construction of st atute entitl ed to defe renc e as long a s does not

c on tr a dic t st a tut or

y langua g e ); Gr oc e rs S

up ply Co. , I nc . v . S ha rp , 9 7 8 S. W. 2 d

6 3 8 , 6 4 2 ( T e x. Ap p. —A us tin

19 98 , p e t. d e nie d) (C omp tr oll e r’ s in fo rm a l c ha ng e in p oli c y

of ho w r ule e nf or c e d d id not “i n formally

contravene the express terms of a f ormally promulg ated r

ule.”) . Under

the new interpre tation, insurers ar e allowe d to include only 1 5 % of the pr emium tax for the pur pose of deter mining the a

mount of retaliator

y taxes, if any , to be paid.11 Whe n d e ve lop ingthe ne w inte rp re ta tio n o f t he re ta liator

y ta x sch e me in w hic h a g e nts share responsibility for pay ing premium taxes, the Comptroller relied upon the fac t that ag ents are

e xemp t fr om pa

y ing fr anc his e ta xes o r “ a dd iti on a l” pr e mium ta xes. See Gables Realty Ltd. P’ship, 81 S.W .3d at 873 (statutes should be c o n s t ru ed t o g ive meaningto ever y word). F urther, the Comptroller rea soned that bec ause se ction 8(b) of the pre mium tax s tatute spec ifies that insurer s

rec eive the ag ents’ portion of t he premium tax due whe n the pre mium is divided among the ag ent and the insurer and beca

use the De partment ha s specifie d that title ag ents are to transfe r 15% of the premi u m c o ll e c te d to th e in s u r e r s , th e n o n ly 1 5 % o f th e p r e mi u m tax is d ir e c tl y im p o s e d on the insurer. The ref

ore, the insurer sho u l d only be allowe d to include 15% of the premium tax for the purposes of c alculatinga re taliatory tax. See Tex. I ns. Code Ann. ar t. 9.59 § 8(b). After adopting this new interpre tation, the Comptroller, in 1996, insti tuted a policy that makes title ag ents responsible to the Comptroller for any p o rt ion of premium tax that is not remitted to insurers. See Te x. I ns . Co de Ann. art
. 9. 59 § 3 (c ) ( a llo wi ngCom ptr oll e r t o c re a te ru le s, lim itatio ns , mi nim

um s tand ard s, and

re g ulatio ns that are fa ir , r e a so na ble , a nd a pp ro pr ia te ). Th is policy limit ed the insure rs’ oblig ation to remit premium tax ac tually collecte d if an insurer c an prove that the title ag ent did not remit the portion of the pre mium the ag ent is require d t o g ive to the insurer. In 2000, the policy was published on the I n t er n et base d State Tax Automated Resear ch Sy stem. See T e x a s C o mp t r o l l e r o f P u b l i c A c c o u n t s , S t ar

S y s t e m N o . 2 0 0 0 0 9 7 5 1 L available at http:// aixt cp.cpa .state.tx .us/star.

I n addition, in 2001, the Compt roller amended r ule 3.831, desc ribing ag ents’ and insurers’ responsibilities for paying premium taxes. Under the amende d rule, insure rs ar e instructed12

to collect the pr emium tax due on the a g ents’ portion of the premium and remit to the Comptroller both the agents’ and the insurer s’ portions of the pre mium tax

. See 34 Tex. Admin. C ode § 3.831(4)( B) , (D) (2004) (Insuranc e Ta x : Gross Premiums Definitions

. . . and Clarific ation of the Taxation on the Distributi on of Title Premiums). Fur ther, sec t i o n 3 .831(4)( C) holds ag ents and insurers se parately

liable for the ir share of the premium tax. Id. § 3.831(4)( C). Specifica lly , section 3. 83 1( 4) (C ) r e a ds a s f

oll ow s:
Title insurers a

nd title ag ents are both subject to the premium and maintena nce ta x on their propor

tional share of

the pre m i u m s and are sepa rate ly liable if the insure r fails to remit the tax due on the ag ent’s portion.

Id.

DI SCU SSIO N

On appea l, the appellants make the following three claims: (1) for eig n-base d insurers

are entitled to include 100% of the premium taxes pa id to the state of Texas in its calc ulation of the amount of re taliatory

taxes owed; (2) ag ents do not, in fact, be ar le g al re sponsibili ty to pay 85% of the pr e mium ta x; an d ( 3) the Com ptr oll e r’ s n e w i nte rp re ta tio n o f t he re ta liator

y ta x sch e me is unconstitutional. For ea se of r eading , we will combine a ppellants’ first two points.

The Co m pt r oll e r ’s Int e r pr e ta ti on i s R e as ona ble

Ap pe lla nts c on te n d

t h a t th e Com

ptr oll e r’ s in te rp re ta tio n o f t he re ta liator

y ta x sch e me is incorre ct. Fir st, appellants asser t that insurers ar e solely

responsible for

paying 1 0 0 % of the pr e mium ta x an d, sim ila

rl y , a sse rt that the ob lig a tio n to pa y pr e mium ta xes i s n ot i mpo se d o n a g e nts
.13

I n support of their a ssertions, appellants point to section 111.016(a) and (b) of the tax code for the proposition that insurers will stil l ha ve to pa y 100% of the premium tax if ag ents do not transfe r 15% of the pre mium to i nsurer s. See Tex. Tax Code Ann. § 111.01 6 (a ), (b ) (W est 2001). Section 111.016(a) states, in rele vant par t, that “any

person who r ece ives or collec ts a t ax o r any money repr esente d to be a tax from another person holds the amount s o collecte d in trust for the bene fit of the state a

nd is liable for the f

ull amount collected plus any acc rued pe nalties and intere st on the amount collecte d.” See Tex. Tax Code Ann. § 111.016(a). Section 111.016(b) states, in rele vant part, that “ an individual who controls or supe rvises the c ollection of tax or money from anothe r pe rs on . . . a nd wh o w ill fu lly

fa ils to p ay

or c a us e to b e pa id the tax or mo ne y is l ia ble a s a responsible indi vidual for an amount equal to the t ax or m oney not paid or cause d to be paid.” See Tex. Tax Code Ann. § 111.016(b)

.

Ho we ve r, n eit her of the se se c tio ns sta te that an in sure r w ou ld b e lia ble fo r t he fu ll amount of pre mium tax if ag ents do not turn over the ir share of the pre mium tax . Fur ther, subsec tion (a) states that the per son has to rec eive the ta x in question in order to be held liable for the amount in question, and subsection (b) states that the responsible party must have willfully ref used to pay the ta x c oll e c t e d

o nb e h a l f

o f an o t h e r . N e i t h e r

o f t h e s e s c e n ar i o s a d dr e s s t h e s i tu a t i o no f a g e nts ref using to turn ove r their por tion of the premium tax to i nsurer s. As fu rt he r s up po rt

fo r t he a sse rt ion

that th e re is n o p re mium ta x impo se d o n a g e nts , appellants point to the first sentenc e of se ction 8(b) o f t h e p re m i u m tax statute, which states that

“ [t]he pr e mium ta x is le vie d o n a ll amou nts de fi ne d to be pr e mium . . . whe ther pa id t o th e tit le insurance company

or re tained by

the . . . ag ent, s u ch t ax b eing in lieu of the tax on the premium14

re ta ine d b y

the a g e nt.
. . .” Te x. I ns . Co de Ann. art . 9 .5 9 § 8( b) . How e ve r, thi s sen te nc e mus t a lso be re ad alongwith the last sentence of sec tion 8(b), which states that the insurer rec eives the a g ent’s portion of the pre mium tax due whe n the premium is divided betwee n the ag ent and the insure r. See id. When r ead toge ther, the “in lieu of” provision me ans that one compre hensive tax i s formulated b as ed o n the total amount of pre mium with i nsurer s collecting that portion of the pre mium that includes the a g ent’s po rtion of the pre mium tax

. See J ones , 969 S.W .2d at 432 (e ntire ac t, not isolated parts, must be conside red) . Although the statute requir es t i t l e i n s u re rs to remit all of the premium tax t o the Comptroller, the statute does not plac e all of the financ ial burden on the insurer.

Appellants also ar g ue that the Comptrol le r ’ s e r r o n e o u s in

te r p r e ta ti o n o f th e r e ta li atory tax s cheme in w hich ag ents are responsible for paying 85% of the pre mium tax is based, in par t, on an incor rec t and isolated re ading of sec tion 8 o f t h e p remium tax st atute, which c ontains the fo llo wi ng langua g e : “ Ti tle ins ur anc e c omp anie s and tit le ins ur anc e a g e nts subject to the tax levied by this article . . . .” T ex. I ns. Code Ann. art. 9.59 § 8(a) (empha sis added) . Appellants cla im that age n t s ca nb e “ s u

b j ec tt o ” p ay i n g a t ax wi t h o u t ac tu al l y h av i n g t o p ay a t ax . Fu rt h er , ap p el l an t s u rge that, rathe r than mea

ning a tax m ust be paid, the phra se “subjec t to” in se ction 8(a) means to bring under dominion, control, or authority

. See Rylander v. Fisher Controls Int’l, Inc

. , 45 S.W .3d 291, 298-99 (Te x . Ap p . — Au s t i n 2001, no pet.) (c ourt construe d statute to mean taxpay er “ subject to” taxation if there was possibili ty that state mig ht impose tax ation, not if individual actually require d to pay tax). Fr om this asser

tion, appellants contend that ag ents are subject to taxation because a tax could be leg ally

imposed on ag ents but is not, and appellants i n s i s t t h at s ec tion 8 is onl y an exclusionary

provision exempti ng insurers a nd agents fr om other taxes but does not impose tax es15

on any one. Howe ver, the premium tax statute contr adicts appe llants’ asser tion that ag ents are not responsible for

paying a ny portion of the pre mium tax by stating that taxes on a g ents’ portions of the premium collec ted ar e included w ithin the portions tran s fer red f rom ag ents to insurers a fter the pr e mium has be e n divi de d. Te x. I ns . Co de Ann. art . 9 .5 9 § 8( b) ; se e als o City of S an An ton io , 111 S.W .3d at 25 (if meaning unambig uous, statute should be int erpr eted to comport wit h that meaning ).

I n addition, appellants insist that the Compt roller’ s interpre tat i o n of the re taliatory tax s ch em e, under w hich both ag ents and insure rs ar e liable f or pre mium tax es, lea ds to absurd conclusions and unjust d iscrimination ag ainst fore ign insure rs, and, ther efor e, the pr evious interpre tation should be reimplemented. Se e Cra me r v . S he pp ar d , 140 Tex. 271, 167 S .W.2d 147, 155 (Tex. 1942) (statu t o ry p ro v i sions will not be interpr eted in wa y that leads to “a

bsurd conclusions, g reat publ i c i n co nvenienc e, or unjust discrimination” if a nother interpr etation ca

n

rea sonably

be made ). Appe llants assert that, bec ause insure rs bea r the re sponsibili ty

to remit 100% of the pre mium tax to the state, the pre mium tax is a t ax “directly imposed upon” insurer s as descr ibed in the re taliatory tax s tatute. See Tex. I ns. Code Ann. art. 21.46 (re quiring , for pur poses of ca lculating reta liatory taxes, comparison of oblig ations i m p o s ed on fore ign insure rs doing business in Texas with obl igations im posed on Texas insurers doing business in fore ign state). Appellants conte nd that there is no statut e o r fo rm al ru le that would excuse a title insurer from having to pa

y the full premium tax if an ag ent does not re mit 15% of the total premiums collecte d to the insurer a

nd contend that the Comptroller ha s no statutory authority to collect premium from

a g e nts in t

he e ve nt t hat an a g e nt f

a ils to t ra ns fe r t he pr e mium to an in sure r; the re fo re , appellan ts ins ist ins ur e rs wi ll b e he ld l ia

ble fo r t he fu ll amou

nt o f pr e mium taxe s re g ard le ss of wh e the r a g e nts16

transfe r the pre mium or not. Further , appellants a ssert that i f i n s u re rs d o not pay 100% of the premium tax due beca

use an a g ent has not transf err ed the pr emium, they

will be subject to a collection proc eedingfor the amount not pa id, a nd the Depa

rtment may

revoke its li cense to transac t business in Texas. See Tex. Ins. Code Ann. arts. 9.59 § 9 (“ A title insurance company failing to pay all taxes imposed by this article is subject to Article 4.05 of this code.” ); 4.05 (West Supp. 2004-05) (authorizing c ollection proce eding to collect tax es due on unre ported g ross premium re ceipts), repeale d by Act of A

pril 30, 2003, 78th L eg ., R.S., ch. 1274, § 26(b)( 4), 2003 Tex . Gen. L aws 3611, 41 39 (e ff e c tiv e Ap ri l 1, 20 05 ); 9. 28 (We st 19 81 ) (a uth or izin g re vo c a tio n o f c e rt if ic a te of a uth or ity to transac t business if insurer doe s not comply with provisions of insurance code) , repeale d by Act of April 30, 2003, 78th L eg ., R.S., ch. 1274, § 26(b)(4) , 2003 Tex. Ge n. L aws 3611, 4139 (ef fec tive Ap ri l 1, 20 05 ). Ap pe lla

nts a sse rt tha t a llo wi ngins ur e rs to inc lud e on ly 15 % of the pr e mium ta x in the re taliatory

tax calculation even though the insurers will be responsible for the full amount and may be subjec ted to the sanc tions li sted above is discriminatory and absur d. Howeve r, as mentioned, the Comptroller amende d rul e 3 .831 to codify the new interpre tation that age n t s are proportionally liable for pr emium tax es. 34 Tex. Admin. Code § 3.831(4)( C). I n addition, the Comptroller published a poli cy providing insurers a defe nse to being held re sponsible for all pre mium tax es if an a g ent does not re mit it s share of t he premium tax due. The Comptroller’s inter

pretation, the amended r

ule 3.831, and the Comptroller’s published policy protec t insurers fr om being responsible for the full amount of pre mium tax es if the a g ent does not remit its portion of the premium tax. The Comptroller’ s interpre tation, policy , and rule do not leadBe cause the Depa rtment is require d to consider insure rs’ re levant expe n s es for the purposes 4 of setting p remium rate s, we will presume that the Depa rtment ac counted f

or the oblig ation of r e mi tt in g a g e n ts ’ p o rti o n s o f th e p r e mi u m t a x. 17 to absurd conc lusions or unjust di scrimination; o n t h e contra ry , they protec t insurers fr om being unfairly held liable for

taxes they

do not pay

or owe . A lt e r n a ti v e ly , a

p p e ll an ts ar g u e th a t, e v e nif a g e n ts ar e r e s p o n s ib le f

o r 8 5 % o f th e tax, then the duty

to remit 100% of the pr em i u m tax t o the state qua lifies as an “ other oblig ation . . . dir e c tly imp os e d” on

ins ur e rs un de r ar

tic le 21 .4 6, and , the re fo re , 100 % of the pr e mium ta x sho uld be included in the r etaliatory tax calculation. See Tex. I ns. Code Ann. ar t. 21.46. Appellants asser t that th e ph ra se “ oth e r ob lig a tio ns ” a s lis te d in art ic le 21 .4 6 fo c us e s on ob lig a tio ns that are dir e c tly imp os e d o n a

n ins ur e r, no t on wh o be ars the mon e tary burd e n, and e xten ds be y on d the le g a l li a bil ity for th e t ax and includes the obligation to remit the tax to the state. See Tex. Tax Code Ann. § 101.003(11) ( West 2001) (oblig ation is “ the duty of a person to pay a tax, fee, a ssessment, or other amount”). Howeve r, administrative duties to re mit tax es collec ted from a nother e ntity

without financ ial implications that can be qua ntified are not the ty

pe of “ other oblig ations” that nee d to be i n c l u d e d w h e n p e r f

o r m i n g t h e r e t a l i a t o r

y c a l c u l a t i o nt o d e t e r

m i n e w h a tr e t a l i a t o r

y t a x e s , i f

a n y, should be assesse d. On t he contrary , beca use all the other

obligations li sted befor e the phr ase “ other obligations” ref

er to fina ncial oblig ations, the rule of ejusdem g ener is implies that the phra se “othe r ob lig a tio ns ” a lso re fe rs to o bli g a tio ns that ha ve fi na nc ia l, n ot min ist e ri a l, i mpl ic a tio ns . See H illco 4 Elec. Coop. v. M

idlothian But ane Gas Co., Inc ., 111 S.W .3d 75 , 8 1 (T ex . 2003) (r ule of e jusdem g ener is “provides that whe n words of a g ener al nature are used i n connec tion with the desig nation18

of par ticular objec ts or classes of persons or thing s, the meaningof the g ene ra l words will be restric ted to the par

ticular de signation.”). Con tr ary to t he a pp e lla nts ’ as se rt ion s, the Com

ptr oll e r’ s new int e rp re ta tio n a nd ru le 3.831 do not impose additional restric tions, conditions, or burdens that are inconsistent with either the reta liatory tax statute or the premium tax s tatute. See Hollywood Calli ng v. Publi c Util. Comm’n of Tex. , 805 S.W .2d 618, 620 (Tex. A pp.—Austin 1991, no writ) (rule “may not impose a dditional burd e ns , c on dit ion s, or

re str ic tio ns be y on d o r i nc on si st ent wi th t he statut or

y pr ov isi on s. ” ). Rul e 3. 83 1( 4) (C ) d oe s n ot dir e c tly c on tr a dic t any

statut or y langua g e be c a

us e the pr e mium ta x sta tut e states that an ag ent’s portion of the premium tax is included within the di v i s i o n o f p remium transfe rre d to the insurer, he re 15%

. I n addition, the reta liatory tax s tatute only

require s inclusion of fi na nc ia l ob lig a tio ns “ dir e c tly imp os e d” on an ins ur e r. F ur the r, the ne w i nte rp re ta tio n a nd the ru le do not run counter

to the g ener al objectives of the reta liatory tax statute or impose any burdens that

ar e in e xc e s s o f o r in c o n s is te n t w it

h th e s tatute
. T h e r e ta li a to r y tax s tatute is d e s ig n e d

to e qu a li ze burdens impo s ed on Te x as-ba sed insurer s by fore ign states and the bur dens imposed by Texas on fo re ig n- ba se d in su

re rs . The ru le and the Com ptr oll e r’ s n e w i nte rp re ta tio n ma ke ins ur e rs re sp on sib le fo r t he po rt ion

of p rem iu m tax es th e y

a c tua lly pa y . Inc lud ingwh a t th e ins ur e rs are a c tua lly responsible for

in the reta liatory tax equation doe s not contrave ne the objec tives of the statute; on the contra

ry , it actually

enfo rc es t he objec tives. The fa ct that insurer s may have to pa

y more a s

re ta liator y ta xes t ha n w a s r e qu ir e d b e fo re a s a re su lt of inc lud ing on ly the a mou nt ins ur e rs a c tua lly pay in premium taxes does not impose an additional tax i n excess of statutory objectives. Rather , the new inter

pretation and rule impose the bur d en co n t em p lated by the re taliatory

tax s tatutory19

scheme . Enac ting this rule a nd adopting the Comptroller’s newrea sonable int erp re t ati on of the reta liatory t ax s ch eme, whic h fac ilitate the purpose of the re taliatory

tax s cheme , wer e not, as sug g ested by

the appe llants, abuses of discr etion. See Buddy Gre gg Motor Homes, I

nc. v. M otor Vehicle Bd. of the Tex. Dep’ t of Tr ansp. , 156 S.W .3d 91, 102 (Tex. App.—Austin 2004, pet. filed) (whe n deter

mini n g wh et h er

age n cy ab u s es i t s d i s cr et i o n , co u rt m u s tas ce rt ai nwh et h er age n cy “b as ed its decision on leg ally

irrele vant fa ctors or f

ailed to consider

leg ally rele vant fa ctors.”)

. The Comptroller’s interp re t at i o n, policy , and rule stating that insurers ar e not responsible for

the full 100% of the tax because a g ents g ive insurer s their share of t he tax when they g ive an in su rer 15% o f t he pr e mium c oll e c te d a

re re a so na

ble and do no t c on fl ic t w iththe pla in meaningof either

the re taliatory or premium tax statutes. On the contr ary , they specify exactly what section 8(b) of the pre mium tax statute requir es: the insurer rec eiving “the premium tax due on the ag ent’s portion” throug h the division of premium between age n t s and insurer s. Acc ording ly , we

ov e rr ule a pp e lla nts ’ f ir st two iss ue s o n a

pp e a l.

Com ptroller’ s Appl ication of Retaliatory Tax Statute is Constitutional

I na d d i t i o nt o ar g u i n g t h a tt h e C o mp t r o l l e r ’ s n e w i n t e r p r e t a t i o ni s i n c orre c t, appellants a lso assert that the Comptroller’s a pplication of the r et al i at o ry tax i s unconstitutional beca use i t v io la

te s the equa l protection cla use. Specific ally , appellants insist that the retaliator y taxes imposed under the Comptroller’ s new interpr etation unlawf ully rais e re v en ue for

the state at the expense of for eig n insurers, e x cee d the “relatively modest” amount of r evenue raised unde r the California re taliatory

tax s cheme found constitutional in W estern and Southern Life Insurance , and do not serve the purpose of promoting the interstate business of domestic insurers by deter ring otherAdditionally , appellants insist that the Co mp tr o ll e r ’ s in te r p r e ta tion would c ause othe r states 5 to r e ta liate a g a ins t T e xas- ba se d in sure rs , w hic h w ou ld b e de tr ime nta l to bo th fo re ig n a nd do me sti c insurers. How ever , it is not within the purview of this cour t to consider what othe r s t ates may or may not do as a re sult of the Comptroller adopting this new interpre tation. I t is for the leg islature, not the courts, to consider the possibilit y

of other states’ re actions whe n enac ting leg islation. 20 states from enac ting discriminatory taxes. See W estern &S. Life Ins. Co. , 4 51 U. S. at 66 8- 72 ; see als o M e tro po litan LifeIn s. Co. v . W ar d , 4 70 U. S. 8 69 , 8 82 n. 10 (1 98 5) (s ta te may no t im po se “discriminatorily

highe r taxes on nonresident cor porations solely beca

use t hey are nonresidents.” ). Appellants urg e the c ourt to interpre t Article 21.46 a s requiringinsurers to i n cl u d e 100% of the premium tax paid in t he re taliatory tax calculat ion in order to avoid the a lleg ed constitutional infirmities. See B rady , 7 95 S.W. 2d a t 71 5; T e x. Go v’ t Co de Ann. § 3 11 .0 21 (1 ) ( Wes t 20 05 ); Ex parte Elliot , 973 S.W .2d 737, 742 (Tex. App.—Austin 1998, pet. ref ’d). Al te rn a tiv e ly , if the c ourt de te rm ine s that the Com ptr oll e r’ s int e rp re ta tio n is the on ly permissible interpre tation, appellants conte nd the cour t shou l d d ec l ar e the e ntire re taliatory tax statute unconstitutional beca use it imposes retaliatory

taxes on foreig n-title insurers that e x cee d the ag g reg at e tax burden that would be imposed on a compar able Te x as insurer doing busine ss in the fore ign state. 5 The e qual protec tion clause of the United States Constit ution forbids states from denying to a

ny person located within the jurisdiction of the states equal protec tion of the law. See id. a t 6 5 6 -57. Simi larly , th e T e xa s Co n s ti tuti o na ls o g u ar a n te e s e qu a l r ig h ts to a ll p e r s o n s . T e x. Const. art. I , § 3. When determining whether a tax i s u nconstitutional, courts must look t o the substance of the tax and not the form of the ta x . Se e Ha no v e r F ireIn s. Co. v . H

ar din g Co un ty , 272 U.S. 494, 509-10 (1926) ( court must reg ard substanc e not form f or dete rmining whether ta xContrary to appellants’ a ssertions, the test of the c onstitut ionality of a reta liatory tax i s not 6 whether a reta liatory tax has incre ased or decr ease d over time, nor is the te st whether the tax raises reve nue. All taxes raise re venue, inc luding the pr evious reta liatory tax s tatute. 21 constitutional, and test is “in the operation and eff ect of the law a s applied and e nforc ed by the state” (q u o t i n g St

. Louis S.W

. Ry. Co. v. Ark

ansas , 235 U.S. 350, 362 (1914))) . Ba sed on this premise, appellants insist that, reg ardle ss of whethe r t he insurer or the a g ent is technica lly liable for the 85% of the pre mium tax, the Comptroller’s interpre tation imposes financ ial burdens on f oreig n insurers doing busine ss in Tex as that gre atly exceed the financ ial burdens impos ed on Te x as insurer s in the fo re ig n s ta te . Sp e c if

ic a lly , a pp e lla nts c on te nd

that, b e c a us e ins ur e rs wi ll b e a llo we d to inc lud e on ly 15% of the pr emium tax in the reta liato ry tax calculation, fore ign insure rs will have to pay the differ ence betwee n 15% of the pr emium tax imposed by Texas and the tot

al p re m i u m t ax t h e f

o re i gn state imposes, which would lea d to foreig n insurers pa y ing sig nificantly

lar ger t ax es than a compar able Te x as insurer eng ag ed in business in the fore ign state. Howeve r, we do not ag ree with the appellants’ c hara cter ization of the Compt roller’ s interpre tation. Be cause the Texas reta liatory statute applies only

to foreig n insu re rs , the equa l taxation t est applica

ble to reta liatory

taxes requires a

deter mination of whether

the distinction betwee n for ei gn and domesti c insurer s is rationally related to a leg itimate gove rnment purpose
. W estern &S. Life Ins. Co. , 451 U.S. at 657. Gene rally speaking , reta liatory

taxes are c onstitut ional 6 and ra i s e m inimum amounts of re venue. Id. at 6 6 9 -7 0

. R et al i at o ry t ax es ar e ap p l i edt o fo re i gn ins ur e rs fo r t

he purp os e of

de te rr ingoth er st ate s from im po sin g e xce ssi ve ta xes a g a ins t do me sti c insurers, or

alternatively , t o co m p ensate for hig her out-of -state tax obligations imposed on Texas insurers, whic h serve s a leg itimate gove rnmental purpose

. Id. at 668-72.22 Un de r t he Com ptr ol ler ’s i nt erpr eta ti on of t he re tal iat ory tax sch eme , t it le a gents rem it 85 % o f t he pr e mium ta x to ti tle ins ur e rs . App e lla nts a sse rt that by a llo wi ngfo re ig n in surers to include only

15% of the premium tax in the reta liatory tax calculation, the Comptroller is imposi ng reta liatory

taxes on foreig n-title insurers that e x cee d the ag g reg ate f inancial burden imposed on compar able Te x as insurer s doing business in the fo reign state. T he Comptroller’s interpr etation allows fore ign insurers selling title insurance in Te x as to include only the portion of the pr emium ta x the y a c tua lly pa y in t he re ta liator

y ta x c a lc ulatio n. I t c omp are s a fo re ig n ti tle ins ur e r’ s a g g re g a te financ ial obligations in Tex as t o a Tex as insurer ’s ag g reg ate f inancial oblig ations in a fore ign state; it then require s a re taliatory tax from a fore ign- based insure r only if its Texas counter

part pa y s more in the foreig n state, and require s, as pay ment in reta liatory taxes, the amount that would equalize the fi na nc ia l burd e ns on

fo re ig n in sure rs do ingbu sin e ss i n T e xas a nd Te xas i ns ur e rs do ingbu sin e ss i n the fo re ig n s ta te . A c c or din g ly , th e Com ptr oll e r’ s int e rp re ta tio n se rv e s the le g iti ma te state purp os e of dete rringother states f

rom imposing excessive taxes ag ainst Texas insurers. The ref ore, both the reta liatory

tax s t at u t e an d the Comptroller’s application of the reta liatory tax s cheme are

c on sti tutio na l. Compare W estern &S. Life Ins. Co., 451 U.S. at 674 (California r etaliatory tax statute constitutional), with W ar d , 470 U. S. at 878 , 882 (s ta tut e un c on sti tut ion a l th a t g a ve do me sti c

co mp an i es p re fe re n t i al t re at m en t an d b u rd en ed al l fo re i gnco rp o ra t i o n s re gar d l es s o f w h at fo re i gn states did). Appellants fur ther insist that beca

use the Comptroller’s c urre nt interpretation of article 9.59 has not been c onsistently and uniformly

applied by

the Comptroller, then the Com ptr oll e r’ s c ur

re nt int e rp re ta tio n is not en tit le d to judi c ia l def e re nc e , an d the Com

ptr oll e r s ho uld23

be re quired to re turn to the previou s i nterpre tation. See Tex as Citr us Exch. v . Sharp, 955 S.W .2d 164, 170 (Tex. App.—Austin 1997, no pet.) (cour ts do not defe r to administrative construc tion that de viate s f ro m c le ar and e xpre ss pr ov isi on s of statut or y sc he me , and

c ourt s g ive g re a te r d e fe re nc e to ag ency interpre tation that is long-standingand ap p l i ed uniformly ). Howe ver, just bec ause the Com ptr oll e r u nif or mly e nf or c e d a statut e un til a

c e rt a in d a te and

the n unif or mly e nf or c e d th e statut e in a diffe rent manne r does not mea n there is a constitutional vio l at i o n , espec ially wher e, as the Comptrolle r asserts, all the tax pay ers have bee n treated equa lly since the ne w interpre tation was adopted. See ge nerally Groce rs Supply Co., Inc. , 9 78 S.W. 2d 63 8 ( Te x. Ap p. —A us tin 19 98 , p e t. denied) . I n the Comptroller’s summary judgme nt evidence , she demonstrated t h at the new instructions have be en consistently appl i ed to audits conducte d since 2000, whic h includes re port y ear s since 1996.

Fur ther, taxpay ers do not ac quire a rig ht to pay less in taxes beca use they have be en char g ed lower

taxes in t he past or be cause a tax policy was incor

rec tly implemented. See id. (Comptroller cha

ng ed pre vious inter

pretation of tax statute, and g roce ry store applied f

or re fund of

sa le s taxes p re vio us ly

pa id; ho we ve r, Com

ptr oll e r c ha

ng ed inte rp re ta tio n o f t a x sta tut e ba c k to previous interpr etation, and c ourt held groc ery store not entitled to ref und). P ast omissions by

the Comptroller will not serve as a bar to the C omptroller enforcing the s tatute and from imposing the

corr ect f inancial oblig ation on title insurers. See Sharp v. House of Lloyd, Inc. , 815 S.W .2d 245, 249 (T e x. 19 91 ) ( Com

ptr oll e r d id n ot e nf

or c e pa rt of fr anc his e ta x sta tut e fo r t

hir te e n y e ars , but s up re me court held prior non-enforc ement could not preve nt Comptroller from properly collectingtaxes due

as re quired by

statute).24 Ti tle ins ur e rs are fi na

nc ia lly ob lig a te d to pa

y 15 % o f t he ta x du e on

pr e miums. Th is require ment is ma

ndated by the premium and reta liatory tax statutes and by the C o m ptroller’s interpre tation of these statutes. Requiring insurers to include only the 15% of the premium tax t hey actua lly pay does not r ender the re taliatory tax s cheme unconstitutional. Bec ause w e conc lude that the re taliatory

tax s tatutory

scheme and the Comptroller’s a pplication of i t ar e constitutional, we

ov e rr ule a pp e lla nts ’ t hir d is su e on

a pp e a l.

CO NC LU SION Th e Com ptr oll e r’ s i nt erpr eta tio n o f t he pr e mium ta x an d r e ta liator y ta x sch e me is

rea sonable a

nd does not contra dict the plain meaningof either the re taliatory

tax or the premium tax

s t a tu t e s . F u rt h e r , t h e C o mp t r o l l e r ’ s a p p l i c a t i o n o f t h e t w o s t a tu t e s i s c o n s t i tu t i o n a l

. A c c o r d i n g l y, the dis tr ic t c ourt

did no t e rr in g ra nti ngthe Com

ptr oll e r’ s mo tio n f

or su mma ry jud g men t and

in de nyinga pp e lla nts ’ m oti on

fo r s umm ary jud g me nt. Th e re fo re , we ov e rr ule a pp e lla nts ’ t hr e e c la ims

and a ff ir m th e jud g me nt o f t

he dis tr ic t c ourt
.

David Pury ear , J ustice Be fore J ustices B . A. Smith, P ury ear and Pember

ton Affir med Filed: June 3, 2005