Case Name: New York Life Ins. Co. v. Robertson, State Revenue Agent
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1925-01-19
Citations: 140 Miss. 108
Docket Number: No. 23918
Parties: New York Life Ins. Co. v. Robertson, State Revenue Agent.
Judges: 
Reporter: Mississippi Reports
Volume: 140
Pages: 108–120

Head Matter:
New York Life Ins. Co. v. Robertson, State Revenue Agent.
(In Banc.
Jan. 19, 1925.
Suggestion of Error Overruled March 23, 1925.)
[103 So. 222.
No. 23918.]
Wells, Stevens <& Jones, for appellants as amici curiae.
A. H. Longino, B. B. Bicketts, and Green, Green é Potter, for appellants.
Headnotes 1. Taxation, 37 Cye., p. 841; 2. Taxation, 37 Cyc., p. 1191.

Opinion:
Per Curiam:
This is a suit in which the appellee, the state revenue agent, alleges that the appellant for several years has failed to pay the full amount of the tax due by it on the gross amount of its premium receipts and in which he seeks to collect the amount of the tax thereon which he alleges the appellant failed to pay. The tax sought to be collected is that imposed by section 1, chapter 203, Laws of 1916, which now appears, as paragraph 3 of section 31, chapter 104, Laws of 1920, as follows :
"All life insurance companies or associations shall pay annually a tax of two per centum on the gross amount of premium receipts in this state, less premiums paid to reinsuring companies authorized to do business in Mississippi and less matured endowments and cash dividends paid under policy contracts in this state during the year; provided, however, tliat the tax assessed on any such life insurance company shall not be less than an amount equal to one and three-fourths per centum of the gross premiums received by it upon the business done within the state during the said year. ' '
The case was tried by the court below without a jury on an agreed statement of facts, and from a judgment in the revenue agent's favor the appellant has brought the case to this court.
It appears from the agreed statement of facts that the appellant is a nonresident mutual life insurance company without capital stock, and "whatever profits or accretions arise from its business, from any cause, are for the common use and benefit of the policyholders who, in fact, constitute the company."
Its policies are written under "the level premium system" plan by which the maximum annual payment which any policy holder can be called on to pay during the life of the policy is stipulated therein. The calculation of the company's premium rates for life insurance involves:
(a) The adoption of a table of mortality, showing' the proportionate death rate of each ag'e of life.
(b) The adoption of an assumed rate of interest, such as the company may reasonably expect to realize upon its invested assets during the lifetime of the policy.
These two factors determine what is technically known as the net or mathematical premiums which are the sums sufficient and necessary to pay all outstanding policies, as they become claims against the company, provided the deaths should occur exactly in accordance with the table of mortality and the rate of interest earned on the investments of such premiums should be equal to the assumed interest rate..
To the said "mathematical premiums" there is added a sum which is technically called a "loading," which may be needed for the purpose of meeting the expense incident to carrying on the business, as well as to cover any unforeseen contingencies that might arise, such for instance as an abnormal death rate which might be brought about by war, epidemic, pestilence, or any other unforeseen fatality.
The net or mathematical premiums, so increased by "loading" as aforesaid, constitute the premium rates stipulated in the policies of insurance.
The premium rates, when so computed, are in the experience of life insurance companies generally found to be in excess of what is actually required to carry the policy.
Such excess constitutes, in mutual companies, their estimated margins of safety and must, therefore, be liberally provided for in the "loading," since a company having no capital stock must rely solely upon premiums collected for funds with which to meet the ordinary and incidental expenses of the business, as well as the unusual contingencies which may, and probably will, have to be incurred. In addition to providing an adequate expense fund, premiums must be sufficiently large to in - sure also the company's ability to pay death claims, beyond doubt or peradventure, when they accrue. Though the insurance policies may run for any stipulated number of years, the premiums, as fixed, cannot be increased, but remain level after the issuance of the policy.
In computing premium rates the insurance companies allow for a greater death rate than that which probably will be' experienced. The assumed rate of interest also, on the companies' investments, is calculated at a rate below that which they expect to realize. In their calculations for expenses and unforeseen contingencies they provided for a greater amount than is ordinarily and usually needed.
Mutual companies have the above three named mar- gins of safety, and each assumption of the amount needed is usually in excess of what is actually required, and when such collections result in excess or redundant premiums the same is apportioned to its policies and paid back to the owners thereof.
According to the rule and practice of the New York Life Insurance Company, at the end of each year whatever remains of excess premium receipts which it has collected—over and above the expenses and disburse' ments—is ascertained, and there is then set aside out of said excess such amount as is required for the increase in policy reserves and other liabilities; then whatever balance of excess remains is apportioned and paid back by the company to the policyholders, under the usual designation of' " dividends. ' '
Such provision is contained in all of the policies of the defendant company and is as follows: sured he either: (a) Paid in cash; or (b) applied toward payment of premiums por (e) applied to purchase a participating paid-up addition to the sum insured; or (d) left to accumulate at such rate of interest as the company may declare on funds so held, but at a rate never less than three per cent, compounded and credited annually, and withdrawn in cash on any anniversary or payable at the maturity of the policy to the person entitled to its proceeds."
"Participation in Surplus—Dividends.—The propor tion of divisible surplus accruing upon this policy shall be ascertained annually. Beginning at the end of the second insurance year, and on each anniversary thereafter, such surplus as shall have been apportioned by the company to this policy shall at the option of the in-
For the first year of each policy the appellant company collects the full maximum premium stipulated for in the policy, and such collections form a part of its taxable in come for that year and are included in its reports, respectively, as part of its income on which taxes are due the state, and that taxes were paid on such premiums for each of the years embraced in this suit.
The dividends are not part of the premium receipts of the year in which they are distributed, but are applications of previously accumulated surplus premium collections; that is to say, by way of illustration, the dividends applied to payment of premiums for policy years beginning in the year 1923 are made up of surplus funds ac • cumulated in policy years beginning in 1922 or prior years.
The appellant for each of the years embraced in this suit reported to the insurance commissioner and paid to him the tax due on the actual amount of money collected by it from its policyholders in settlement of premiums due by them on policies issued by it, but did not include therein as a part of its "premium receipts" the dividends apportioned by it to its policyholders under the provision of its policies therefor hereinbefore set out and which were applied by direction of its policyholders "toward the payment of premiums" due by them.
The contention of the revenue agent is that the ' ' dividends" apportioned by the appellant to and applied by its policyholders "toward the payment of premiums" should be regarded as a part of and included in the gross amount of its premium receipts. If this contention is correct, then the appellant admits it has paid for each of the years here in question,'after giving it the benefit of all of the deductions allowed by the statute, less than one and three-fourths per cent, of its gross premium receipts, the minimum tax thereon allowed by the statute, and the judgment of the court below should be affirmed.
Judges Anderson, Cook, and Ethridge are of the opinion that these dividends should be regarded as a part ofvthe company's gross premium receipts; Judges Mc(xowen, Holden, and Smith, are of the opinion that they should not be so regarded, but that the tax to be collected from the company should be computed only on the money actually received by it in payment of premiums.
Affirmed.
On Suggestion oe Error.
Cook, J.,
delivered the opinion of the court.
The tax which the state revenue agent is seeking to collect by this suit is that imposed upon the gross amount of the premium receipts of insurance companies by section 1, chapter 203, Laws of 1916, which now appears as paragraph 3, of section 31, chapter 104, Laws of 1920. On suggestion of error, for the first time, appellant presents the contention that "all prior existing laws imposing upon insurance companies excise taxes measured by the premium receipts of such companies on their Mississippi business, wTere repealed, and without saving clause, by the enactment of chapter 132 of the Laws of 1924'. Chapter 132 of the Laws of 1924 is "an act levying an income tax on individuals, partnerships, corporations, associations, trusts, and estates, for the benefit of the general fund of the state of Mississippi," etc. Section 4 of this act levies a tax to be paid annually, "at the rate specified in this section, upon and with respect to the entire net income as herein defined except as hereinafter provided, from all property owned, and from every business, trade, or occupation carried on in this state by individuals, corporations, partnerships, trusts, or estates, not residents of the state of Mississippi," while subdivision 10, section 11, of the act, provides that "in the case of life insurance companies there shall not be included in gross income such portion of any actual premium received from any individual policy holder as is paid back or credited to or treated as an abatement of premium of such policy holder within the taxable year. ' '
The taxes which the revenue agent is seeking to collect by this suit all accrued prior to the enactment of chapter 132, Laws of 1924, but the appellant now contends that the taxes imposed by both the Act of 1924 and the laws under which the revenue agent is proceeding are excise taxes, that the tax of 1924, called an income tax, is simply the same tax with the same deductions (with one exception), that was imposed by the former statutes; that the subsequent statute covers the same subject-matter as the former statutes, and prescribes the only rules as to that subject-matter; and that, consequently, all prior laws imposing upon insurance companies, excise taxes measured by the premium receipts are, by implication, repealed by said chapter 132 of the Laws of 1924.
Without expressing or indicating any views whatever as to whether the Act of 1924 has repealed the prior laws imposing these premium taxes, but conceding for the purpose of this opinion that such is the case, still we think that the saving clause found in subsection 2, section 29, chapter 132, Laws of 1924, fully preserves the right of the revenue agent to enforce collection of these taxes which accrued prior to the enactment of the act of 1924 Among other things, this section provides that: "Nothing in this act shall affect or defeat any claim, assessment, suit, appeal, right, or cause of action for taxes due prior to the passage of this act, whether assessment, suit, appeal, or claim therefor shall have been begun before the passage of this act, or shall thereafter be begun; and the laws amended or repealed are expressly con tinued in full force, effect, and operation for the purpose of the assessment and collection of any back taxes, and for the imposition of any penalties, forfeitures, or claims for the failure to comply therewith."
We do not think there is any merit in the contention of appellant that this saving clause applies only to taxes due or claimed under chapter 101 of the Laws of 1912, as amended by chapter 116 of the Laws of 1914, which-latter acts imposed a tax of five mills on the dollar on all annual incomes in excess of two thousand five hundred dollars. There is nothing in subsection 2 of section 29 of this Act of 1924 which would warrant us in so limiting the very broad language of this saving clause. It covers any claim, assessment, suit, appeal, right, or cause of action for taxes due prior to the passage of the act, whether such assessment, suit, appeal, or claim therefor shall have been begun before the passage of the act or shall thereafter be begun, and it seems clear that it was the intention of the legislature to fully preserve, by this saving clause, the right to enforce collection of any taxes that accrued under or by virtue of any law repealed or in any wise affected by the passage of the act.
Upon all questions decided in the former opinion, rendered January 19, 1925, each of' the judges adheres to the opinion therein expressed. The suggestion of error will therefore be overruled.
Overruled.