Court Opinion

ID: 9576909
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:29:58.062989+00
Date Added: 2024-06-11T13:19:42.841041
License: Public Domain

*172Judge Greene
dissenting.
The majority holds that the insurance “regulatory charge” levied pursuant to N.C. Gen. Stat. § 58-6-25 is “not a tax.” The principle bases for this holding are that the monies were placed in the “Insurance Fund” and were used only to defray the cost of regulating insurance companies.
I do not agree for two distinct reasons. First, our Supreme Court has specifically held that the segregation of funds collected by the State into a special account to be used only for a “special purpose” does not disqualify the classification of the levy as a tax. Insurance Co. v. Unemployment Compensation Com., 217 N.C. 495, 499, 8 S.E.2d 619, 621 (1940). Second, even if the majority correctly states the rule for determining the proper classification of a levy, in this case the revenue from the “regulatory charge” is not used exclusively for the regulation of the insurance industry. Indeed, the statute permits the revenue to be used by the Commissioner of Insurance (Commissioner) to “pay the expenses . . . incurred in regulating the insurance industry and other industries in this State ....” N.C.G.S. § 58-6-25(d) (1994) (emphasis added). Some examples of “other industries” regulated by the Commissioner include: continuing care facilities, N.C.G.S. § 58-64-1 (1994); dental service corporations, N.C.G.S. § 58-65-1 (1994); health maintenance organizations, N.C.G.S. § 58-67-1 (1994); motor clubs, N.C.G.S. § 58-69-1 (1994); collection agencies, N.C.G.S. § 58-70-1 (1994); and bail bondsmen, N.C.G.S. § 58-71-1 (1994).
The “regulatory charge” in this case constitutes a tax because it is assessed by the General Assembly and used, in the discretion of that body, to defray the cost of operating the North Carolina Department of Insurance, which has broad powers beyond the regulation of the insurance industry. See Black’s Law Dictionary 1457 (6th ed. 1990) (a tax is generally defined as “[a]n enforced contribution of money . . . assessed in accordance with some reasonable rule or apportionment by authority of a sovereign state on persons or property within its jurisdiction for the purpose of defraying the public expenses”); N.C.G.S. § 58-6-25(d) (proceeds placed in Insurance Fund “may be spent only pursuant to appropriation by the General Assembly” and used to pay the expenses . . . incurred in regulating the insurance industry and other industries in this State and the general administrative expenses of the State incident thereto”).
*173Because I read the “regulatory charge” as a tax, the statutory provision (N.C. Gen. Stat. § 105-228.8(e)) excluding its consideration in the computation of the retaliatory premium tax (N.C. Gen. Stat. § 105-228.8(a)) is unconstitutional in that it violates the Equal Protection Clause. This is so because it allows North Carolina to impose a more onerous tax on the foreign insurance company doing business in North Carolina than would be imposed on a North Carolina insurance company doing business in the foreign insurer’s state. See Western and Southern Life Ins. Co. v. Bd. of Equalization, 451 U.S. 648, 68 L. Ed. 2d 514 (1981); United Services Auto. Ass’n v. Curiale, 668 N.E.2d 384, 388 (N.Y. 1996) (retaliatory taxes are permitted only to the “point of equalization”).
In this case, the plaintiffs were charged a 0.1 per cent retaliatory tax, which sought to equalize the tax assessments between North Carolina and Illinois (the home state of the defendants). Additionally, however, the plaintiffs were required to pay 7.25 per cent of the premium tax, as a “regulatory charge.” There is no evidence that Illinois has any assessment beyond the premium tax. The plaintiffs were thus required to pay a larger retaliatory tax than needed to equalize the taxes charged in North Carolina and Illinois. I would therefore reverse the entry of summary judgment for the defendants and remand for entry of summary judgment for the plaintiffs.