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### THE ATIVKNEY GENERAL OF -XAS
AUSTIN. TEXAS 78711 February 19, 

### 1968
Honorable Clay Cotten Opinion No. M-202 Commissioner of Insurance State Board of Insurance 1110 SanJacinto Street Austin, Texas 

### 78701 Re: Interpretation of the word “State” as used In Articles 

### 4769and 

### 7064,Vernon’s civil Statutes, as applied to Investment of the highest percentage of admitted assets of foreign companies licensed In Texas, when computing the gross premiums tax on lnDear Mr. Cotten: surance companies. You have requested this office to Interpret the word

“State”as used In Articles 4769 and 

### 7064,Vernon’s Civil Statutes, as applied to investment of the highest percentages of admitted assets of foreign companies licensed in Texas, when computing the gross premiums tax on insurance companies. The above statutes allow tax reductions to insurance companies meeting specified conditions pertaining to the ratio that their investment in Texas securities bears to their investment in similar securities in the State in which they have the highest percentage of their admitted assets invested. The pertinent language, which is used repeatedly in both of the above statutes,is:

II

. . . the amount that It had invested In similar securities in the State in which it then had the highest percentage of its admitted assets Invested

. . .” Attorney General’s Opinion No. V-422 (1947) mentions the possibility of.atax reduction under Article 

### 4769,V.C.S.,~ for aMexican Insurance company, but the opinion does not



### -970-Honorable Clay Cotten, page 2 M-202

decide the question nowIn issue, In one Texas case the court held that the word “state,” as used In a federal statute relating to prohibition of commoncarriers’ exemption from liability, did not include foreign nations. Houston E. &W.T. Ry. v. Inman Akers and Inman, 134 S.W. 275 (Tex. Clv. App.

‘1911, nowri!?). At page 2’(‘(, the court stated:

“The word ‘state, Ias used in the Constitution of the United States, has been uniformly construed to meanaconstituent memberor part of the federal Union having an independent local governmental organization D0*” In-Eidman v. Martinez, 184 U.S. 578, 22S. Ct. 515, 46 L. Ed. 697 (1902),- the United States Supreme Court stated at page 591:

“It need, only be added that while the words

‘State or Territory’ are used in treaties, and perhaps also in someacts of Congress regulating our International relations as including foreign States, they are used in the Constitution and in ordinary acts of Congress as applying only to States or Territories of the United States.” In construing astate statute governing service of process, the Supreme Court of NewYork County held that the word

“state” did not include a foreign nation. Fair v. Kenny, 171 N.Y.S. 694, 695, 103 Misc. 412 (1918). At page byb the court stated:

I, D * 0 the Legislature, in providing for service by ‘attorneys and counselors at law in any other state, Ievidently must have had In mind the United States and its territories, where such anomenclature commonly prevails.” The following pertinent quotation is taken from 81 C.J.S. 856-857, States @ 1:

“While the word ‘state’ has various meanings, as used In the federal Constitution, it has a definite, fixed, certain legal or technical meaning, which excludes the signification attached to it bywrlt,ers on the law of nations. The term

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Honorable Clay Cotten, page 

### 3 M-202

‘state, 1in American Governmental parlance, Is used as designating amemberof the Union, in contradistinction to the United States as a nation, and It ordinarily has such meaning where used In the Constitution, in the acts of Congress, and in the statutes of the several states.” In creating Articles 4769 and 7064, V.C,S., the Texas Legislature could have easily Included foreign nations In the tax reduction provisions If It had so intended. There is no persuasive Indication in either statute that the Legislature contemplated giving a tax reduction to an Insurance company having the highest percentage of its admitted assets Invested in any foreign nation or subdivision thereof. It is our opinion that the Legislature did not Intend to give a reduction in gross premiums tax to any Insurance company which does not have the highest percentage of its admitted assets invested wlthin one of the states of the United States. Weconclude that the word “State” in Articles 4769 and 

### 7064,V.C.S., as used in the provisions governing reduction in gross premiums tax, refers only to astate which is a part of the United States. Therefore, an insurance company having the highest percentage of its admitted assets Invested in a foreign nation does not meet the conditions necessary to qualify for any reduction In gross premiums’tax under the above statutes. SUMMARY ------- Theword “State” as used In Articles 4769 and 7064, V.C.S., as applied to investments of the highest percentages of admitted assets of foreign companies, licensed In Texas, when computing the gross premiums tax on Insurance companies, refers only to astate which Is a part of the United States, Ve& truly yours,

orney General of Texas Prepared by C. Fielding Early 1 Assistant Attorney General

-972-Honorable Clay Cotten, page 4

APPROVED: OPINIONCOMMITTEE Hawthorne Phillips, Chairman Kerns Taylor, Co-Chairman W.V. Geppert Ralph Rash Pat Cain John Grace A. J. Carubbi, Jr. Executive Assistant M-202

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