Court Opinion

ID: 6887135
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:31:35.011298+00
Date Added: 2024-06-11T16:05:44.622114
License: Public Domain

HOLMES, Circuit Judge
(dissenting).
The taxpayer is not a life insurance company within the meaning of Section 201 of the Revenue Act of 1936. In order to qualify as a life insurance company under the statute, it is not enough that life insurance contracts are issued; it is essential that the company maintain reserve funds against such contracts. The Tax Court found that the taxpayer’s mortuary fund was not actuarially computed according to recognized tables of mortality, and held that it was not taxable as a life insurance company. See: First Nat. Benefit Soc. v. Stuart, 9 Cir., 134 F.2d 438; National Protective Ins. Co. v. Commissioner, 8 Cir., 128 F.2d 948; Massachusetts Mut. Life Ins. Co. v. United States, 56 F.2d 897, 74 Ct.Cl. 162; Lamana-Panno-Fallo Industrial Ins. Co. v. Commissioner, 5 Cir., 127 F.2d 56.
The meaning of the words reserve funds, as used in the taxing statutes from 1909 to 1921, is given by the Supreme Court in Maryland Casualty Co. v. United States, 251 U.S. 342, at page 350, 40 S.Ct. 155 at page 158, 64 L.Ed. 297, as follows: “The term ‘reserve’ or ‘reserves’ has a special meaning in the law of insurance. While its scope varies under different laws, in general it means a sum of money, variously computed or estimated, which, with accretions from interest, is set aside — ’‘reserved’ — as a fund with which to mature or liquidate, either by payment or reinsurance with other companies, future unaccrued and contingent claims, and claims accrued, but contingent and indefinite as to amount or time of payment.”
Other decisions indicating that the term as used in the statutes had a special and technical meaning are McCoach v. Insurance Co. of N. America, 244 U.S. 585, 37 S.Ct. 709, 61 L.Ed. 1333, and New York Life Ins. Co. v. Edwards, 271 U.S. 109, 46 S.Ct. 436, 70 L.Ed. 859. In addition, there is affirmative evidence that Congress intended the term, as it appears in Section 201(a) of the Revenue Act of 1936, to be given the technical meaning indicated by insurance technicians.1
*191I agree with the majority that the mortuary fund was required by law, but I think it was not a true reserve fund within the meaning of Section 201(a) of the Revenue Act of 1936, and it does not meet the test under Section 202(b) because it was not held exclusively for the payment of claims. Therefore, I think the judgment appealed from should be affirmed.

 Mertens, Law of Federal Income Taxation (1942), Section 44.15, fn. 40:
Senate Finance Committee Hearings on H.R. 8245 (Sept. 1-Oct. 1, 1921), pp. 87 *191and 92, where it appears that members of the Committee objecting to phraseology of some of the proposed provisions were informed by Dr. T. S. Adams, Tax Adviser to the Treasury Department that:
“Only experts are interested * * * that .language merely repeats the language of the present law, language which the companies themselves proposed and which they understand * * *. Every word of the phraseology of that section has been gone over by insurance experts of the very highest caliber. Only a few people are involved. The public is not interested in this, they do not have to read it, and the people who deal with it are experts. Every word of that phraseology was presented to the insurance officials, and only those companies who are involved must understand it.”
That this may properly be considered in evaluating Section 201(a) is supported by the decision in National Protective Ins. Co. v. Commissioner, 8 Cir., 128 F.2d 948, where the testimony of Adams before the Committee was relied on in part in resolving another problem of statutory construction.