Opinion ID: 2637340
Heading Depth: 3
Heading Rank: 3

Heading: Blue Cross Is Subject to Retaliatory Taxes Under AS 21.09.270.

Text: Blue Cross argues that because it is a hospital and medical services corporation, it should not even be subject to retaliatory taxes. Under AS 21.87.260, [e]very hospital and medical service corporation doing business under this chapter shall be taxed as provided in AS 21.09.210, which addresses premium taxes and not retaliatory taxes. Blue Cross argues that because no reference is made in AS 21.87.260 to retaliatory taxes under AS 21.09.270, AS 21.87.260 should be understood to state the clear legislative intention that Blue Cross, as an HMSC [hospital and medical service corporation], is subject only to premium taxes under AS 21.09.210 and not also to retaliatory taxes under AS 21.09.270. Blue Cross also relies on AS 21.87.030, which provides that this title [Title 21-Insurance] does not apply to a health care service corporation unless contained or referred to in this chapter. It also cites, among other similar opinions, a 1979 opinion of the Attorney General which states that AS 21.87 is the exclusive frame of reference for addressing any problems relating to the regulation of health care service corporations in the state. [23] In response, the Division contends that AS 21.87.260 was only intended to clarify that HMSCs are not exempt from taxation despite being non-profits, as in some other states they are exempt. Therefore, the Division argues, AS 21.87.260 was not intended as a limit on the Division's authority. The Division further argues that failure to reference a retaliatory statute, different in nature than a tax statute, is unexceptional and no inference can be drawn that the legislature intended to exclude it. The Division also counters that AS 21.87.340 renders the HMSCs subject to retaliatory taxes. Alaska Statute 21.87.340 provides in relevant part: In addition to the provisions contained or referred to previously in this chapter, the following chapters and provisions of this title also apply with respect to service corporations to the extent applicable and not in conflict with the express provisions of this chapter and the reasonable implications of the express provisions, and, for the purposes of the application, the corporations shall be considered to be mutual insurers: . . . (4) AS 21.09, except AS 21.09.090. The Division then notes that had the legislature intended HMSCs to be exempted from retaliatory taxes, it could have expressly excluded them under AS 21.87.270, as it did with AS 21.09.090. We are persuaded by the Division's argument. Had the legislature intended to exclude HMSCs from paying retaliatory taxes, it could have simply included AS 21.09.270 along with AS 21.09.090 as an exception. We are also persuaded by the superior court's conclusion: The retaliatory tax statute, AS 21.87.270, and the provision governing the taxation of HMSCs, AS 21.87.260, are not in conflict because they serve different purposes. The purpose of AS 21.87.260 is to impose a standard tax that raises revenue for the State. To the contrary, the purpose of section .270 is not to raise revenues, but to create a fair playing field among insurers from different domiciles. Therefore, under AS 21.87.340, which provides that chapter 21, including the retaliatory tax statute AS 21.09.270, applies to the extent applicable and not in conflict with the express provisions of this chapter and the reasonable implications of the express provisions, retaliatory taxes should apply to Blue Cross. The 1979 opinion of the Attorney General cited by Blue Cross for the proposition that AS 21.87 is the exclusive frame of reference for addressing any problems relating to the regulation of health care service corporations in the state [24] lends further support to a finding that AS 21.87.260 was not intended to exclude retaliatory taxes. The Attorney General addressed an inquiry from Blue Cross about whether, as a foreign HMSC, Blue Cross was required to comply with certain deposit and investment provisions of AS 21.87. The Attorney General noted: [O]n its face AS 21.87 allows for the creation and recognition of only domestic health care service corporations. There is no provision in AS 21.87 which would be analogous to AS 10.05.597 et seq pertaining to foreign business corporations which would provide for the issuance of certificates of authority to foreign health care service corporations. Thus, it is clear that the legislature intended to prohibit the operation of foreign health service corporations in the state with one exception. AS 21.87.350 states: A health care service contractor registered to do business in this state on July 1, 1966 is entitled to be registered under this chapter, whether or not it meets the requirements of this chapter. This provision was specifically added to grandfather in foreign service corporations operating in the state at the time. [Blue Cross] was the only such corporation and thus the grandfather clause was designed for the exclusive benefit of that corporation.[ [25] ] The Attorney General also noted that [i]t is our view that, although the question is not without some ambiguity, AS 21.87 does apply to foreign hospital and medical service corporations to the extent that its requirements do not conflict with the inherent characteristics of Blue Cross as a foreign corporation. [26] Since AS 21.87 was intended to apply only to domestic HMSCs with the sole exception of Blue Cross, and retaliatory taxes would only be applicable because of the inherent characteristics of Blue Cross as a foreign corporation, the inference can be drawn that retaliatory taxes were not even contemplated by the legislature when it enacted AS 21.87. Therefore, Blue Cross's argument that AS 21.87.260 should be understood to state the clear legislative intention that Blue Cross, as an HMSC, is subject only to premium taxes under AS 21.09.210 and not also to retaliatory taxes under AS 21.09.270 is unpersuasive.