Opinion ID: 894999
Heading Depth: 2
Heading Rank: 4

Heading: A Response to the Dissent

Text: The insurers' arguments center on one underlying theme: the Comptroller's interpretation improperly credits foreign title insurers with a lower premium tax payment (15%) than what they actually pay (100%), which results in an improperly high retaliatory tax burden. The dissent frames the issue differently: the Comptroller's interpretation compare[s] other states' taxes on total premiums with Texas' tax on only the insurer's 15% share, resulting in an unfair comparison as equal as 15 is to 100. [53] The dissent's argument is premised on an understanding that the retaliatory tax scheme was originally based on a comparison of the taxes on total premiums imposed by Texas and other states, and that the retaliatory tax is only fair if it takes into consideration the burdens placed on the insurance industry  both the insurer and associated agents. [54] Comparing the tax burden imposed on the entire title insurance industry in Texas and a hypothetical other state, the dissent concludes that the Comptroller has artificially lowered the effective premium tax rate in a way that ensures that all foreign insurers will pay retaliatory taxes, thus generating additional revenue for the State. [55] We cannot agree with the dissent's portrayal of the retaliatory tax scheme because it fails to comport with the express language of the retaliatory tax statute. The dissent accuses us of employing a myopic view of the statute that gives credence to an artificial allocation of the premium tax burden based on payor, [56] but Article 21.46 is clear: the payor matters. The dissent's assertion that [t]his tax was based on the burden imposed ... on the insurance industry ignores the statute's plain language. [57] The relatively unchanged [58] language of the retaliatory tax statute instructs the Comptroller to compare the tax burdens imposed upon any insurance company  from Texas operating elsewhere with the tax burdens directly imposed upon a similar insurance company  from elsewhere operating in Texas. [59] If a Texas insurer operating outside the state bears a heavier tax burden under this comparison, then the Comptroller shall impose a retaliatory tax upon... any similar company  so long as the taxes imposed by Texas on an insurance company  from out-of-state do not exceed the taxes imposed by another state on a similar insurance company  from Texas. [60] Thus, the retaliatory tax is imposed only on insurers based only on the other tax burdens borne by insurers. The Comptroller does not, and cannot, compare the taxes on total premiums, take into consideration the taxes paid by agents, or look to the burden borne by the industry as a whole because the Legislature set the focus of the retaliatory tax scheme on a single entity  the insurance company. Once we employ the same focus dictated by the Legislature  comparing the burdens borne only by title insurance companies  the dissent's numbers balance out. Under the dissent's hypothetical, a Texas insurer operating out-of-state pays $20 in premium taxes; the out-of-state insurer also pays $20-$2.03 of premium tax and $17.97 of retaliatory tax. Thus, the retaliatory tax fulfills its role as an equalizer between similarly situated title insurers. Furthermore, when we focus on the proper tax base  the foreign insurer's $150 premium  the effective premium tax rate remains 1.35%  the statutorily designated rate. [61] As for the $11.47 tax burden borne by the foreign agent, a Texas agent operating in Texas would pay the same amount of premium tax, and the foreign operations of either Texas or foreign agents are not at issue because Article 21.46 neither aggregates an agent's tax burdens nor imposes the retaliatory tax on agents. The dissent expresses concern that the Comptroller's interpretation of the tax scheme would impose retaliatory tax on an insurer from a state with a lower premium tax rate than Texas, but this concern is misplaced. Article 21.46 does not impose a tax based on comparative tax rates; it does so based on comparative tax burdens. If, as in the dissent's example, another state applies a lower tax rate to a larger tax base in a way that requires a Texas insurer to pay more total taxes, then the retaliatory tax would properly apply to equalize the total taxes paid. The dissent also argues that the Comptroller's interpretation fails to comply with the directive of Article 21.46 to impose the retaliatory tax in the same manner and for the same purpose as the taxes imposed on Texas insurers by foreign states. Specifically, the dissent asserts that the Comptroller's scheme compares the insurer's 15% premium tax burden in Texas with the full premium tax burden imposed in other states. The record flatly contradicts this assertion: the retaliatory tax worksheet filled out by First American provides for gross premiums earned, and then  recognizing that California, First American's home state, splits the premiums between insurers and agents  allows a reduction for [p]remiums retained by underwritten title companies, what Texas would call title agents. Thus, the [t]otal premiums subject to tax are only those premiums retained by the title insurance company  precisely the apples-to-apples comparison the dissent calls for. Not all states split the tax burden between insurers and agents like Texas and California, but as we have already noted, Article 21.46 charges the Comptroller with assessing the retaliatory tax based on the burdens imposed on the insurer alone. If other states choose to impose the full premium tax on the insurer, then the Comptroller is not out-of-bounds  indeed she is only following the statutory mandate  by comparing that tax to the tax imposed on the insurer's 15% premium in Texas. The Comptroller's current interpretation may represent a change from past practice, but it is squarely in line with the 1987 legislative amendments that first established the agent  insurer pass-through premium tax collection system, which is all we require. [62] In sum, First American and Old Republic have failed to show that the full amount of the title insurance premium tax is directly imposed upon them for purposes of Article 21.46. The Comptroller's interpretation of the retaliatory tax scheme comports with the plain language of the premium and retaliatory tax provisions of the Insurance Code; therefore, we reject the insurers' statutory claim.