Summary
In General American Life Insurance Co. v. Bates, 363 Mo. 143, 249 S.W.2d 458 (banc 1952), we held that the premium tax on insurance companies imposed "in lieu of" all other taxes on their intangible personal property, § 148.370, RSMo 1949, was an unconstitutional exemption from property taxation.
Summary of this case from Mercantile Bank Nat. Ass'n v. BerraOpinion
No. 42286.
June 9, 1952.
Action under the Declaratory Judgment Act by plaintiff insurance companies against the Director of Revenue and the Collector of Revenue to construe the intangible property tax as applying to insurance companies. Sec. 148.370 RSMo 1949 providing a tax on premiums in lieu of the intangible property tax is unconstitutional. Sec. 146.010-4 RSMo 1949 permitting a deduction of interest credited to reserve liabilities is constitutional. The judgment of the trial court holding both sections constitutional is modified.
1. TAXATION: Constitutional Law: Insurance: Premium Tax in Lieu of Intangible Tax Unconstitutional. Sec. 148.370 RSMo 1949, providing a tax on premiums received by insurance companies in lieu of the intangible property tax, is unconstitutional as it grants an exemption from the intangible personal property tax through substituting an excise tax, which is in violation of Sec. 6, Art. X of the Constitution. Secs. 4(b) and 4(c), Art. X have no application.
2. TAXATION: Constitutional Law: Insurance: Actions: Declaratory Judgment Act: Intangible Personal Property Tax: Computation of Yield Valid: Declaratory Judgment Modified. Sec. 146.010-4 RSMo 1949 is not unconstitutional because it permits the deduction of interest credited to reserve liabilities of insurance companies. A declaratory judgment should be entered in accord with this opinion.
Appeal from Cole Circuit Court; Hon. Sam C. Blair, Judge.
REVERSED AND REMANDED ( with directions).
J.E. Taylor, Attorney General, and Will F. Berry, Jr., Assistant Attorney General, for appellants.
(1) The court erred in holding the "in lieu of" provision of Section 6098a, Mo. R.S.A. to be a valid exercise of the power of the General Assembly, and not violative of Section 6, Article X, Constitution of Missouri. Sub-par. (A), Sec. 11456.1, Mo. R.S.A.; Sec. 6098a, Mo. R.S.A.; Sec. 6, Art. X, Constitution of Missouri; Sec. 4, Art. X, Constitution of Missouri; Massachusetts Bonding Ins. Co. v. Chorn, 274 Mo. 15, 201 S.W. 1122; Life Assn. of America v. St. Louis County Board of Assessors, 49 Mo. 512; Sub-par. (28), Sec. 40, Art. III, Constitution of Missouri; Title 12, Sec. 548, U.S.C.A.; In re: Skelton L. Z. Co's. Gross Production Tax, 197 P. 495. (2) The court erred in holding Section 11211.1 Mo. R.S.A. to be a valid exercise of the power of the General Assembly, and not violative of Sections 3, 4 and 6, of Article X, Constitution of Missouri. Sec. 11211.1 Mo. R.S.A.; Secs 3, 4, 6, Art. X, Constitution of Missouri; Sec. 6098a, Mo. R.S.A.
Frank P. Aschemeyer, E.R. Morrison, John A. Morrison, Martin J. Purcell and Franklin E. Reagan for respondent General American Life Insurance Company; Morrison, Hecker, Buck, Cozad Rogers of counsel. W.F. Drescher, Jr., for The Reliable Life Insurance Company; Geo. L. Gordon, John Gilmore, for Business Men's Assurance Company of America; E.R. Morrison, John A. Morrison, Martin J. Purcell, for National Fidelity Life Insurance Company; John B. Gage, for Postal Life Casualty Insurance Company; Ray B. Lucas, Jos. R. Stewart, for Kansas City Life Insurance Company; McKay A. Cox, for Old American Insurance Company; Kenneth Teasdale, Wm. H. Armstrong, for Mutual Savings Life Insurance Company; Louis A. Robertson, for State National Life Insurance Company, intervenors-respondents.
(1) The "In Lieu" statute provides a just and reasonable substitute for the intangible tax and does not constitute an exemption within the meaning of Section 6 of Article X of the 1945 Constitution as charged by appellants. Pacific Express Co. v. Seibert, 142 U.S. 339, 35 L.Ed. 1035; State ex rel. Wolfe v. Parmenter, 50 Wn. 164, 96 P. 1047; 51 Am. Jur., p. 523. (2) Missouri decisions uphold the validity of similar statutes. Stouffer v. Crawford, 248 S.W. 581; Pacific Express Co. v. Seibert, 142 U.S. 339, 35 L.Ed. 1035; Crow v. State of Missouri, 14 Mo. 237; Kansas City v. Building Loan Assn., 145 Mo. 50, 46 S.W. 624; City of Springfield v. Hubbel, 89 Mo. App. 379; City of Lamar v. Adams, 90 Mo. App. 35; State ex rel. Bank v. Gehner, 319 Mo. 1048, 5 S.W.2d 40; State ex rel. Hyde v. Buder, 315 Mo. 791, 287 S.W. 307. (3) Authorities from other jurisdictions support the validity of the statute. Lutz v. Arnold, 208 Ind. 480, 193 N.E. 840; Jasnowski v. Board of Assessors, 191 Mich. 287, 157 N.W. 891; Vicksburg Bank v. Worrell, 67 Miss. 47, 7 So. 219; 2 Cooley, Taxation, (4th Ed.) Ch. 13; 61 C.J. 390, Sec. 392; In re Gross Production Tax of Wolverine Oil Co., 53 Okla. 24, 154 P. 362; People ex rel. Commonwealth Ins. Co. v. Coleman et al., Commissioners of Taxes, 121 N.Y. 542, 25 N.E. 51; McHenry v. Alford, 168 U.S. 651, 42 L.Ed. 614; City of Minneapolis v. Armson, 188 Minn. 167, 246 N.W. 660; Postal Telegraph Cable Co. v. Adams, 155 U.S. 688, 39 L.Ed. 311; State ex rel. City of Fargo v. Wetz, 40 N.D. 299, 168 N.W. 835; City and County of San Francisco v. Pacific Tel. Tel. Co., 22 Cal.App. 244, 135 P. 971; Merrill Ry. Lighting Co. v. City of Merrill, 119 Wis. 249, 96 N.W. 686; Pacific Gas Electric Co. v. Roberts, State Treasurer, 168 Cal. 420, 143 P. 700; United States Express Co. v. Minnesota, 223 U.S. 335, 56 L.Ed. 459; Ex Parte Shaw, 53 Okla. 654, 157 P. 900. (4) Section 6 of Article X was taken from the Constitution of 1875 and should be construed in accordance with its prior settled judicial and legislative interpretation. 16 C.J.S., p. 76; Ludlow-Saylor Wire Co. v. Wollbrinck, 275 Mo. 339, 205 S.W. 196; State ex rel. Board of Control of St. Louis School and Museum of Fine Arts v. St. Louis, 216 Mo. 47, 115 S.W. 534; Moore v. Brown, 350 Mo. 256, 165 S.W.2d 657; State ex rel. City of Carthage v. Hackmann, 287 Mo. 184, 229 S.W. 1078; City of Roanoke v. James W. Michael's Bakery Corp., 180 Va. 132, 21 S.E.2d 788; People ex rel. Douglas v. Barrett, 370 Ill. 464, 19 N.E.2d 340; Mumme v. Marrs, 120 Tex. 383, 40 S.W.2d 31; State ex inf. Gentry v. Meeker, 317 Mo. 719, 296 S.W. 411; Messick v. Grainger, 356 Mo. 1227, 205 S.W.2d 739; State v. Nolte, 345 Mo. 1103, 138 S.W.2d 1016. (5) "In lieu" statutes enacted under the Constitution of 1875. Secs. 5542, 6049, 6091, 10959, 10963, 11294, R.S. 1939. (6) Legislative and executive construction of provisions of new constitution is entitled to great weight. Gantt v. Brown, 244 Mo. 271, 149 S.W. 644; State ex rel. O'Connor v. Riedel, 329 Mo. 616, 46 S.W.2d 131; State ex rel. Donnell v. Osburn, 347 Mo. 469, 147 S.W.2d 1065. (7) Consideration should be given to the universal trend of legislation in other states relating to taxation of life insurance companies. Secs. 490.070-110, R.S. 1949; Rigby v. Great Atlantic Pacific Tea Co., 344 Pa. 674, 25 A.2d 401; 31 C.J.S., sec. 19, p. 534; Hartliep Transit Co., for use of Snow v. Central Mut. Ins. Co. of Chicago, 5 N.E.2d 879, 288 Ill. App. 140; Wisconsin Malting Co. v. City of Maitowoc, 274 N.W. 288, 225 Wis. 393; Town of Holyoke v. Smith, 226 P. 158, 75 Colo. 286; Opinion of Attorney General of South Dakota dated Sept. 15, 1949 (See Appendix p. 1). (8) The 1945 Constitution specifically recognizes the principle that the legislature has the power to enact laws providing substitutes for the intangible tax. Sec. 4, Art. X, 1945 Constitution; Title 12, Sec. 548, U.S.C.A; State ex rel. Miller v. Shryack, 179 Mo. 424, 78 S.W. 808. (9) The power of the legislature is plenary and every presumption is in favor of the validity of its enactments. Ward v. Pub. Serv. Comm., 341 Mo. 227, 108 S.W.2d 136; Household Finance Corp. v. Shaffner, 356 Mo. 808, 203 S.W.2d 734; State v. American Colony Ins. Co., 336 Mo. 406, 80 S.W.2d 876; State v. Shelby, 333 Mo. 1036, 64 S.W.2d 269; Taylor v. Gehner, 329 Mo. 511, 45 S.W.2d 59; State ex rel. Fire Dist. of Lemay v. Smith, 353 Mo. 807, 184 S.W.2d 593; State v. Loesch, 350 Mo. 989, 169 S.W.2d 675; State ex rel. McDowell, Inc. v. Smith, 334 Mo. 653, 67 S.W.2d 50. (10) The premium tax provides a fair and adequate substitute and no issue is raised by appellants as to the amount thereof. Pacific Express Co. v. Seibert, 142 U.S. 339, 35 L.Ed. 1035; Concordia Fire Ins. Co. v. Illinois, 292 U.S. 535, 78 L.Ed. 1411; Lutz v. Arnold, 208 Ind. 480, 193 N.E. 840; Constitutional Debates, p. 4983. (11) Double taxation is not favored whether or not in a form prohibited by the Constitution. Colgate v. Harvey, 296 U.S. 404, 80 L.Ed. 299; Automobile Gasoline Co. v. St. Louis, 326 Mo. 435; State v. St. Louis, Kansas City Northern Ry. Co., 77 Mo. 202; State ex rel. Pearson v. Louisiana Missouri River R. Co., 196 Mo. 523, 94 S.W. 279; Tennessee v. Whitworth, 117 U.S. 129, 29 L.Ed. 830; Gray on Limitations of Taxing Power and Public Indebtedness, sec. 1366, p. 678. (12) The "in lieu" statute applies to all insurance companies organized under the general insurance laws and is not a special law within the provisions of subparagraph (28), Section 40, Article III of the 1945 Constitution forbidding special legislation. Claudy v. Royal League, 259 Mo. 92, 168 S.W. 593; Smith v. Travelers Protective Assn., 319 Mo. 1120, 6 S.W.2d 780; Jenkins v. Covenant Mut. Life Ins. Co., 171 Mo. 375, 71 S.W. 688. (13) Decisions holding "in lieu" statutes to be invalid are clearly distinguishable. Hawkeye Ins. Co. v. French, 109 Iowa 585, 80 N.W. 660; State ex rel. Cornell v. Poynter, 59 Neb. 417, 81 N.W. 431; Northwestern Mut. Life Ins. Co. v. Lewis and Clarke Co., 28 Mont. 484, 72 P. 982; Millers' Mut. Fire Ins. Co. v. City of Austin, 210 S.W. 825; Georgia Fire Insurance Co. v. City of Cedartown, 134 Ga. 87, 67 S.E. 410; Levi v. City of Louisville, 97 Ky. 394, 30 S.W. 973; Raydure v. Board of Suprs. of Estill County, 183 Ky. 84, 209 S.W. 19; Miners Merchants Bank v. Board of Suprs., 55 Ariz. 357, 101 P.2d 461; In re Gross Production Tax of Wolverine Oil Co., 53 Okla. 24, 154 P. 362; Redfield v. Fisher, 135 Or. 180, 292 P. 813, 73 A.L.R. 721. (14) The statute defining "yield" and permitting deduction of interest required to be credited to reserve liabilities does not violate the provisions of Sections 3, 4 or 6 of Article X of the 1945 Constitution. Statute defining "yield" Laws 1945, p. 1760. Secs. 3, 4, 6, Art. X Constitution of Missouri, 1945. (15) This is a valuation statute which is uniformly applicable to all taxpayers without regard to the nature of their business. Sec. 3, Art. X, 1945 Constitution; 2 Cooley's Constitutional Limitations, 8th Ed., p. 1050; Laws 1945, p. 1914, Sec. 1 (B); Gray on Limitations of Taxing Power, sec. 1396. (16) Missouri decisions. State ex rel. Missouri State Life Ins. Co. v. Frederick Gehner, 320 Mo. 691, 8 S.W.2d 1068; State ex rel. American Automobile Ins. Co. v. Schramm, 271 Mo. 223, 196 S.W. 21; State ex rel. Am. Cent. Ins. Co. v. Gehner, 315 Mo. 1126, 280 S.W. 416; State ex rel. Hyde v. Buder, 315 Mo. 791, 287 S.W. 307. (17) Cases from other jurisdictions. George Washington Life Ins. Co. v. Board of Review, etc. W. Va., 113 W. Va. 664, 169 S.E. 532; Florer v. Sheridan, 137 Ind. 28, 36 N.E. 365; Alabama Gold Life Ins. Co. v. Lott, Tax Collector, 54 Ala. 499; Hess v. Columbia Life Ins. Co., 116 Ohio St. 416, 156 N.E. 504; City of Waco v. Amicable Life Ins. Co., 248 S.W. 332; Michigan Mut. Life Ins. Co. v. Common Council of City of Detroit, 133 Mich. 408, 95 N.W. 1131; Michigan Mutual Life Ins. Co. v. Hartz, 129 Mich. 104, 88 N.W. 405; Equitable Life Ins. Co. of Iowa v. Board of Equalization, 74 Iowa 178, 37 N.W. 141; Nye-Schneider-Fowler Co. v. Boone County, 102 Neb. 742, 169 N.W. 436; Hubbard v. Brush, 61 Ohio St. 252, 55 N.E. 829; Stumpf v. Storz, 156 Mich. 228, 120 N.W. 618; Lancaster County v. McDonald, 103 N.W. 78, 73 Neb. 453; 3 Cooley on Taxation (4th Ed.), sec. 1159; 26 R.C.L., sec. 225, p. 254. (18) The "yield" statute does not create any classification of personal property. Norberg v. Montgomery, 351 Mo. 180, 173 S.W.2d 387; St. Louis Rose Co. v. Unemployment Comp. Commission, 348 Mo. 1153, 159 S.W.2d 249; Cummins v. K.C. Pub. Serv. Co., 334 Mo. 672, 66 S.W.2d 920; State v. Wilden, 357 Mo. 167, 206 S.W.2d 979. (19) The statute is not limited to insurance reserves nor is it limited to reserves existing under statutes now in force. Hull v. Baumann, 345 Mo. 159, 131 S.W.2d 721; Hawthorne v. People, 109 Ill. 302, 50 Am. Rep. 610; 50 Am. Jur., sec. 9, p. 27; 50 Am. Jur., sec. 13, pp. 29, 30. (20) Section 4 of Article X of the Constitution of 1945 does not add any additional restrictions to the comprehensive effect of Section 4 of Article X of the 1875 Constitution. Sec. 4, Art. X, 1875 Constitution; State ex rel. Tompkins v. Shipman, 290 Mo. 65, 234 S.W. 60; State ex rel. Missouri State Life Ins. Co. v. Gehner, 320 Mo. 691. (21) The General Assembly has inherent power to legislate on any subject unless restrained by the State or Federal Constitution. Household Finance Corp. v. Shaffner, 356 Mo. 808, 203 S.W.2d 734; State v. Day-Brite Lighting, Inc., 240 S.W.2d 886, 362 Mo. 299; Ludlow-Saylor Wire Co. v. Wollbrinck, 275 Mo. 339, 205 S.W. 196; Bacon v. Ranson, 331 Mo. 985, 56 S.W.2d 786; Kansas City v. Fishman, 241 S.W.2d 377; State ex rel. Randolph County v. Walden, 357 Mo. 167, 206 S.W.2d 979; 61 C.J. 390, sec. 392; 2 Cooley, Taxation, Fourth Ed., Ch. 13, sec. 668. (22) Every presumption is in favor of the constitutionality of a legislative enactment. Bowman v. Kansas City, 361 Mo. 14, 233 S.W.2d 26; Ward v. Public Service Comm., 341 Mo. 227, 108 S.W.2d 136; State ex rel. Barker v. Merchants' Exch. of St. Louis, 269 Mo. 346, 190 S.W. 903; Ludlow-Saylor Wire Co. v. Wollbrinck, 275 Mo. 339, 205 S.W. 196. (23) The debates in the constitutional convention show that there was no purpose to prohibit substitute taxation or affect existing legislation providing for substitute taxation. Household Finance Corp. v. Shaffner, 356 Mo. 808, 203 S.W.2d 734; State ex rel. Randolph County v. Walden, 357 Mo. 167, 206 S.W.2d 979; State ex rel. Donnell v. Osburn, 347 Mo. 469, 147 S.W.2d 1065; State ex rel. Russell v. State Highway Comm., 328 Mo. 1942, 42 S.W.2d 196; State ex rel. Heimberger v. Board of Curators of University of Missouri, 268 Mo. 598, 188 S.W. 128; 16 C.J.S. Constitutional Law, sec. 31, p. 69; 1 Cooley's Constitutional Limitations, pp. 142, 143; State ex rel. Randolph County v. Walden, 357 Mo. 167, 206 S.W.2d 979; Graves v. Purcell, 337 Mo. 574, 85 S.W.2d 543; State ex rel. Norman v. Hall, 325 Mo. 154, 28 S.W.2d 363; State ex rel. Lashly v. Becker, 290 Mo. 560, 235 S.W. 1017. (24) The validity of the "in lieu" statute is shown by legislative enactments in force during a period of more than fifty years. Discussion of 1931 Premium Tax Act. Laws 1931, p. 238; Sec. 6091, R.S. 1939; State ex rel. City of Carthage v. Hackmann, 287 Mo. l.c. 192. (25) Discussion of the 1895 Premium Tax Act. Laws 1895, p. 198; Sec. 6094, R.S. 1939; Laws 1945, p. 1024; Sec. 6092, now Sec. 148.310, R.S. 1949. (26) Substitute tax on express companies. Laws 1889, p. 42; Sec. 11294, R.S. 1939; Pacific Express Co. v. Seibert, 142 U.S. 339, 35 L.Ed. 1035; State ex rel. Missouri Life Ins. Co. v. Gehner, 320 Mo. 691, 8 S.W.2d 1068; State ex rel. American Central Ins. Co. v. Gehner, 315 Mo. 1126, 280 S.W. 416; Ackerman v. Green, 201 Mo. l.c. 244, 100 S.W. 34; Kansas City v. Building Loan Assn., 145 Mo. 50, 46 S.W. 624; Stouffer v. Crawford, 248 S.W. 581. (27) Other statutes enacted under 1875 Constitution. Laws 1872, p. 80, Sec. 10959, R.S. 1939; Laws 1885, p. 234, Sec. 10963, R.S. 1939; Laws 1933, p. 467, Sec. 5542, R.S. 1939. (28) The court erroneously failed to consider the interpretation given to the new constitution by contemporaneous legislative enactments. Laws 1945, p. 993; Sec. 148.320, R.S. 1949; Sec. 6092, R.S. 1939 (now Sec. 148.310 of R.S. 1949); Sec. 6094, R.S. 1939 (now Sec. 148.340 of R.S. 1949); Secs. 148.110, 148.230, 148.250, 148.290, 148.520, 152.030 and 153.020, R.S. 1949; Gantt v. Brown, 244 Mo. 271, 149 S.W. 644; State ex rel. O'Connor v. Riedel, 329 Mo. 616, 46 S.W.2d 131. (29) Section 4 (c) specifically recognizes the power of the General Assembly to enact substitute taxation. Sec. 4(c) of Art. X; Ludlow-Saylor Wire Co. v. Wollbrink, 275 Mo. 339, 205 S.W. 196; Bacon v. Ranson, 331 Mo. 985, 56 S.W.2d 786; State ex rel. Gass v. Gordon, 266 Mo. 394, 181 S.W. 1016; State ex rel. Missouri State Life Ins. Co. v. Gehner, 320 Mo. 691, 8 S.W.2d 1068. (30) The restrictions of Section 4 are applicable only to property taxes and do not apply to an excise tax so as to prevent its being imposed as a substitute for the intangible tax. Secs. 3, 4, Art. X; Glasgow v. Rowse, 43 Mo. 479; Ludlow-Saylor Wire Co. v. Wollbrinck, 275 Mo. 339, 205 S.W. 196; Bacon v. Ranson, 331 Mo. 985, 56 S.W.2d 786; State ex rel. Mo. Pac. R. Co. v. Danuser, 319 Mo. 799, 6 S.W.2d 907; Massachusetts Bonding Ins. Co. v. Chorn, 274 Mo. 15, 201 S.W. 1122; Pacific Express Co. v. Seibert, 142 U.S. 339, 35 L.Ed. 1035; State ex rel. Crutcher v. Koeln, 332 Mo. 1229, 61 S.W.2d 750; 1 Cooley's Constitutional Limitations, Eighth Ed., 128; 16 C.J.S., sec. 14, p. 50, Constitutional Law. (31) The court has erroneously construed the exemption provision of section 6 as an invalidating substitute taxation however just or adequate. Pacific Express Co. v. Seibert, 142 U.S. 339, 35 L.Ed. 1035; State ex rel. City of Fargo v. Wetz, 40 N.D. 299, 168 N.W. 835; McHenry v. Alford, 168 U.S. 651, 42 L.Ed. 614; In re Gross Production Tax of Wolverine Oil Co., 53 Okla. 24, 154 P. 362; People ex rel. Commonwealth Ins. Co., v. Coleman, 121 N.Y. 542, 25 N.E. 51.
Kenneth Teasdale, for Life Insurance Association of America, amicus curiae; Cobbs, Blake, Armstrong, Teasdale Roos and Charles E. Dapron, Jr., of counsel.
(1) Prior judicial construction of Sec. 7, Art X of Missouri Constitution of 1875. The Opinion recognizes that Section 6 of Article X of the Constitution of 1945 is "of identical legal effect" as Section 7 of Article X of the Constitution of 1875. Ludlow-Saylor Wire Co. v. Wollbrinck, 275 Mo. 339, 205 S.W. 196; Sanders v. St. Louis M.O. Anchor Line, 97 Mo. 26, 10 S.W. 595. (2) It is presumed that the members of the Constitutional Convention knew of the construction which had been placed upon the provisions of the Constitution in 1875. State ex rel. Board of Control of St. Louis School and Museum of Fine Arts v. St. Louis, 216 Mo. 47, 115 S.W. 534. (3) Constitution of 1945 recognizes that a general power of substitution is reposed in the legislature. (4) It is evident that over a long period of years the legislature of Missouri considered that it had the power to enact substitute tax measures and that such power was not prohibited by Section 7 of Article X of the Constitution of 1875. 16 C.J.S., p. 76; State ex rel. City of Carthage v. Hackmann, 287 Mo. 184, 229 S.W. 1078; State ex rel. City of Columbia v. Wilder, 197 Mo. 1, 94 S.W. 495; State v. Lorenzo, 79 A. 839; Mumme v. Marrs, 40 S.W.2d 31; Morrow v. Corbin, 62 S.W.2d 641; City of Roanoke v. James W. Michael's Bakery Corp., 180 Va. 132, 21 S.E.2d 788; People ex rel. Douglas v. Barrett, 370 Ill. 464, 19 N.E.2d 340. (5) Since the Constitution of 1945 became effective, the legislature of Missouri has passed the following acts in which it has recognized and asserted its constitutional power to substitute other forms of taxation for the tax on intangible personal property. Sec. 148.320, R.S. 1949; Laws 1947, Vol. II, p. 271; Sec. 153.020; Laws 1945, p. 1852; Sec. 152.030, Laws 1947, Vol. I, p. 544; Secs. 148.030, 148.140, 148.250, 148.370, 148.480, 148.520, R.S. 1949. (6) These legislative constructions of the Constitution of 1945 following, as they do, so soon after the adoption of the new constitution, are strongly persuasive as to the meaning and purpose of the constitution and, in particular, constitute persuasive authority that the substitution of other forms of taxation for the tax on intangible personal property are not in violation of section 6 of Article 10 of the Constitution of 1945. This fundamental principle has often been recognized by the Missouri courts. Gantt v. Brown, 244 Mo. 271, 149 S.W. 644; State ex rel. O'Connor v. Riedel, 329 Mo. 616, 46 S.W.2d 131; State ex rel. Donnell v. Osburn, 347 Mo. 469, 147 S.W.2d 1065. (7) It seems quite clear from the provisions of Ch. 148 of the Revised Statutes of 1949 that the State of Missouri, through legislative enactments, is pursuing a definite policy of taxation with respect to financial institutions which has for its purpose the substitution of other forms of taxation for taxes on intangible personal property owned by such institutions. It must be presumed that in adopting and following such a consistent policy of taxation with respect to financial institutions, the legislature did so in the belief that such policy was within the framework of the Missouri Constitution and within the plenary powers of the legislature. Household Finance Corp. v. Shaffuer, 356 Mo. 808, 203 S.W.2d 734.
Dupuy Warrick and Boyd Ewing for Missouri Savings and Loan League, Farm and Home Savings and Loan Association and First Federal Savings and Loan Association, amici curiae; Warrick, Brewer Lamkin and Ewing, Ewing Ewing of counsel.
(1) First, we desire to direct the attention of the court to decisions of other jurisdictions wherein it has been judicially determined that statutes very similar to the statute herein being considered, did not operate to exempt property from taxation — and to statements of a recognized authority upon the subject of taxation. Jersey Cent. Power Light Co. v. City of Asbury Park, 128 N.J.L. 141, 24 A.2d 526; Public Service Co.-Ordinated Transport v. State Board of Tax Appeals, 115 N.J.L. 97, 178 A. 550; San Bernardino County v. State Board of Equalization of California, 172 Cal. 76, 155 P. 458; 2 Cooley, Taxation, Fourth Edition, secs. 652, 668, 939. (2) The people of Missouri by the adoption of Article X of the Constitution of 1945, providing for the assessment of real and tangible personal property for taxation upon an ad valorem basis, not only removed the requirement of the previous constitution, as construed by the Supreme Court in the case of State ex rel. Tompkins v. Shipman, 290 Mo. 65, 234 S.W. 60, that intangible property be assessed for taxation ad valorem, without distinction as between real or tangible personal property. Under the Constitution of 1945, intangible personal property is to be taxed "only to the extent authorized and at the rate fixed by law * * *." (Art. X, Sec. 4b, last sentence.) This phraseology can only mean that the legislature is not required to impose any tax whatsoever upon intangible personal property. (3) When Sections 6 and 4 of Article X are so read and considered, it is clear that it was the intention of the people of Missouri in 1945 in adopting Article X, that the Legislature, by enacting an insurance premium tax statute as a substitute for an intangible property tax which under Section 4 of such Article it was not required to levy at all, would not be granting an exemption in violation of Section 6 of such Article. Kansas City v. Building Loan Assn., 145 Mo. 50, 46 S.W. 624; State ex rel. Wagner v. Farm and Home Savings Loan Assn., 90 S.W.2d 93.
The General American Life Insurance Company instituted this declaratory judgment action against G.H. Bates and R.E. Copher, Director and Collector of Revenue, respectively, of the State of Missouri and [460] charged with the collection and disbursement of State taxes on intangible personal property. The General American Life Insurance Company is a corporation organized under the provisions of Art. 2, Ch. 37, R.S. 1939. (See Ch. 376, R.S. 1949.) The following corporations, organized under Art. 2 aforesaid, filed intervening petitions, to-wit: Kansas City Life Insurance Company; National Fidelity Life Insurance Company; Old American Insurance Company; Postal Life Casualty Insurance Company; State National Life Insurance Company; Mutual Savings Life Insurance Company; Business Men's Assurance Company of America, and The Reliable Life Insurance Company. The purpose of the litigation is to enjoin the collection of intangible property taxes levied or threatened to be levied against plaintiff and interveners and to test the constitutionality and applicability of two statutes hereinafter set out and designated in the record as the "in lieu" statute and the "yield" statute. The parties stipulated that the only issues submitted were those relating to the constitutionality of the "in lieu" and the "yield" statutes. Other matters mentioned in the stipulation are not determinative here and need not be set forth.
The court held the two statutes constitutional and entered judgment accordingly.
The defendants appealed, and contend said statutes are unconstitutional on the grounds stated in the discussion of the particular statute.
Respondents contend the "in lieu" statute, under which they tender their tax, is constitutional and applicable, but, if not, then the "yield" statute is constitutional and applies.
I. The "in lieu" statute. The respondents rely primarily upon the "in lieu" statute. The "in lieu" provision relates to the intangible personal property tax act and we first briefly mention that act.
The intangible personal property tax act was approved April 19, 1946. Laws 1945, p. 1914; Mo. R.S.A., §§ 11456.1 — 11456.15; Ch. 146, §§ 146.010 — 146.130, R.S. 1949. It was enacted under § 4, Art. 10, Mo. Const. 1945, quoted hereinafter. It applied to "any individual, firm, * * * association, corporation, company * * *." Laws 1945, p. 1914, § 1 (A). It defined intangible property as, so far as material, "* * * moneys on deposit; bonds * * *; certificates of indebtedness * * *; notes, debentures, annuities, accounts receivable, conditional sales contracts * * *, and real estate and chattel mortgages." Id., § 1 (B). It stated: "Yield means the aggregate proceeds received as a result of ownership or beneficial interest in intangible property whether received in money, credits or property, exclusive of any return of capital." Id., § 1 (C). Sections 2 and 4 of said act open with the statement: "Except as otherwise provided by law, intangible personal property having a taxable situs in the State of Missouri * * * shall be subject to a property tax * * *"; and imposed a tax of 4% upon "such yield."
The "in lieu" statute was also approved on said April 19, 1946. See Laws 1945, p. 1023, § 6098a; Mo. R.S.A., § 6098a; § 148.370, R.S. 1949. It repealed and reenacted § 6098a as theretofore enacted and approved on April 28, 1945 (Laws 1945, p. 993), by adding the "in lieu" provision to said act of April 28, 1945. We set it out, emphasizing the "in lieu" provision:
The Legislature stated in the emergency clause (Laws 1945, p. 995) to the act of April 28, 1945, that it was enacted to forestall possible "discrimination against foreign companies" under the decision of the United States Supreme Court in United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 88 L.Ed. 1440, 64 S.Ct. 1162, decided June 5, 1944. See, however, Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 90 L.Ed. 1342, 66 S.Ct. 1142, 164 A.L.R. 476.
"Every insurance company or association organized under the laws of the State of Missouri and doing business under the provisions of Articles 2, 7 and 17, of Chapter 37, Revised Statutes of Missouri, 1939, and every mutual fire insurance company organized [461] under the provisions of Article 6, Chapter 37, Revised Statutes of Missouri, 1939, shall, as hereinafter provided, annually pay, beginning with the year 1945, a tax upon the direct premiums received by it from policyholders in this state, whether in cash or in notes, or on account of business done in this state, for insurance of life, property or interest in this state, at the rate of two per cent (2%) per annum, which amount of taxes shall be assessed and collected as hereinafter provided, and shall be in lieu of all taxes upon intangible personal property owned by such insurance companies or associations: Provided, that fire and casualty insurance companies or associations shall be credited with cancelled or returned premiums actually paid during the year in this state, and that life insurance companies shall be credited with dividends actually declared to policyholders in this state but held by the company and applied to the reduction of premiums payable by the policyholders."
Appellants contend the "in lieu" statute violates the exemption provision of § 6, Art. 10, Mo. Const. 1945 (1 Mo. R.S. 1949, p. 80), which, after enumerating certain property as proper subject matter for exemption from taxation but not embracing the property here involved, provides:
"All laws exempting from taxation property other than the property enumerated in this article shall be void."
Said § 6 is of identical legal effect, so far as here involved, with §§ 6 and 7, Art. 10, Mo. Const. 1875 (1 Mo. R.S. 1939, p. 142c).
Sections 3 and 4 of Art. 10, Mo. Const. 1945 (1 Mo. R.S. 1949, p. 80), bear upon the issues and are quoted here.
"Section 3. * * * Uniformity. * * * Taxes * * * shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax. * * *
"Section 4(a). Classification of Taxable Property — Taxes on Franchises, Incomes, Excises and Licenses. — All taxable property shall be classified for tax purposes as follows: Class 1, real property; Class 2, tangible personal property; Class 3, intangible personal property. The general assembly, by general law, may provide for further classification within Classes 2 and 3, based solely on the nature and characteristics of the property, and not on the nature, residence or business of the owner, or the amount owned. Nothing in this section shall prevent the taxing of franchises, privileges or incomes, or the levying of excise or motor vehicle license taxes, or any other taxes of the same or different types.
"Section 4(b). Basis of Assessment of Tangible Property — Taxation of Intangibles — Limitation. — Property in Classes 1 and 2 and subclasses of Class 2, shall be assessed for tax purposes at its value or such percentage of its value as may be fixed by law for each class and for each subclass of Class 2. Property in Class 3 and its subclasses shall be taxed only to the extent authorized and at the rate fixed by law for each class and subclass, and the tax shall be based on the annual yield and shall not exceed eight per cent thereof.
"Section 4(c). Assessment, Levy, Collection and Distribution of Tax on Intangibles. — All taxes on property in Class 3 and its subclasses, and the tax under any other form of taxation substituted by the general assembly for the tax on bank shares, shall be assessed, levied and collected by the state and returned as provided by law, less two per cent for collection, to the counties and other political subdivisions of their origin, in proportion to the respective local rates of levy."
Respondents cite many authorities in support of their position and the subdivisions thereof: "That the statute imposing a premium tax in lieu of an intangible tax does not create an exemption but constitutes the substitution of a tax which is a just and equitable equivalent for the intangible property [462] tax and bears more equitably on the taxpayers involved."
Respondents mention that prior to the enactments of the 1945 General Assembly, respondents and other domestic insurance companies were entitled to deduct "the legally required reserve necessary to reinsure its outstanding risks" and any unpaid policy claims from the value of their personal property in making their tax returns under § 6090, R.S. 1939, Mo. R.S.A. Consult State ex rel. Missouri State Life Ins. Co. v. Gehner, 320 Mo. 691, 8 S.W.2d 1068, 1071[4].
Respondents also say, absent the "in lieu" statute, that said General Assembly subjected them to two new taxes; i.e., the 2% premium tax and the intangible tax; that they and foreign life insurance companies are now taxed on their real estate and tangible personal property (§ 148.310, R.S. 1949), and a premium tax of 2% in lieu of the intangible property tax (§ 148.370, R.S. 1949; Laws 1945, p. 1023, and § 148.340, R.S. 1949); and they say that under the following sections of R.S. 1949 substitutions of tax methods exist: § 148.370, here involved; § 148.320; § 148.340 when viewed under the change effected in § 6092, R.S. 1939, by Laws 1945, p. 1024, now § 148.310; § 148.290; § 148.230; § 153.020; § 152.030; § 148.110; and § 148.520.
We consider the nature of the tax before taking up respondents' cases most directly in point. Taxes fall into three natural classifications: capitation or poll taxes, taxes on property, and excises. State ex rel. Missouri Portland Cement Co. v. Smith, 338 Mo. 409, 413 [1, 2], 90 S.W.2d 405, 406[2]; State ex rel. Tompkins v. Shipman, 290 Mo. 65, 75 (III), 234 S.W. 60, 62(III). The instant case involves a property tax, expressly so designated in the constitution (Art. 10, § 4, quoted supra) and made subject to specific constitutional inhibitions. Excises include "'* * * every form of taxation which is not a burden laid directly upon persons or property; in other words, excises include every form of charge imposed by public authority for the purpose of raising revenue upon the performance of an act, the enjoyment of a privilege, or the engaging in an occupation.'" State ex rel. Missouri Portland Cement Co. v. Smith, supra; State ex rel. Tompkins v. Shipman, supra; Viquesney v. Kansas City, 305 Mo. 488, 495 (I-V), 266 S.W. 700, 702[1-10]; 51 Am. Jur. 61, § 33; 33 C.J.S. p. 110. Excises are not subject to all the constitutional inhibitions applicable to taxes on property. They are valid as revenue measures if they operate alike upon all within the same class of subjects. See, among others, cases supra, and Bacon v. Ranson, 331 Mo. 985, 56 S.W.2d 786, 787[1-3]; Ex parte Asotsky, 319 Mo. 810, 5 S.W.2d 22, 25[3-5], 62 A.L.R. 95; State ex rel. People's Motorbus Co. v. Blaine, 332 Mo. 582, 58 S.W.2d 975, 978[3]. A number of respondents' cases involve excise taxes.
Respondents' case of Stouffer v. Crawford (Mo. 1923), 248 S.W. 581, 585[10], involved Laws 1919, p. 718, which repealed and reenacted certain sections of the income tax law of 1917 (Laws 1917, p. 524) and under § 7, Laws 1919, p. 719, imposed an income tax of 1-½% on corporations, except, so far as involved, "insurance companies which pay an annual tax on their gross premium receipts in this state." Foreign insurance corporations were required to pay an annual tax of 2% on premiums received on business done in this state "in lieu of all other taxes, except as in this article otherwise provided." § 6387, R.S. 1919, from Laws 1895, p. 198, § 2 (§ 5958). The statement in Stouffer v. Crawford to the effect that the tax on the gross premium income of insurance companies in lieu of other taxes had been upheld, read in the light of the supporting citations, is not a holding that said tax was in lieu of "property" taxes. Further, income taxes are not property taxes, and have been considered to be in the nature of an excise tax. 27 Am. Jur. 309, n. 8; 42 C.J.S. 536; Bacon v. Ranson, 331 Mo. 985, 56 S.W.2d 786, 787.
In Crow et al. v. State (1851), 14 Mo. 237, defendants had been convicted of operating as merchants without a license, respondents say, under an act imposing taxes in the nature of a license tax in lieu of other taxes assessed upon merchants. Laws 1848-1849, p. 68; R.S. 1845, p. 737, Ch. 118. The [463] constitutional inhibitions controlling in the instant case were not in the Constitution of 1820. As we read the Crow case (the Court being divided and three lengthy opinions having been written), the defendants were discharged (see l.c. 288 and 319); and the statement in one of the opinions (l.c. 288) that the "in lieu" provision was not such a departure from the Missouri constitutional provision of 1820 (Art. 13, § 19) that property be taxed in proportion to its value as to require judicial interposition is not controlling here.
Pacific Express Co. v. Seibert, 142 U.S. 339, 35 L.Ed. 1035, involved Missouri legislation imposing, briefly stated, a tax on express companies, carrying on their business under contracts for hire with railroad or steamboat companies, of $2 on each $100 of gross receipts on business within the state, less amounts actually paid for transportation. Laws 1889, p. 52, §§ 7767, 7768, R.S. 1889. The case does not aid respondents as said act explicitly provided "that nothing herein contained shall release such express companies from the assessment and taxation of their tangible property in the manner that other tangible property is assessed and taxed." The tax there involved was an excise tax and the holding sustaining it is in harmony with our views hereinbefore expressed. (142 U.S. l.c. 354, 35 L.Ed. l.c. 1040.)
No constitutional issue was presented in City of Springfield v. Hubbel, 89 Mo. App. 379, and City of Lamar v. Adams, 90 Mo. App. 35, cases involving annual city licenses. (Note, however, what was said in the City of Lamar case regarding the "other taxes" referred to in Laws 1895, p. 198, §§ 2 and 8.)
Kansas City v. Mercantile Mut. Bldg. Loan Ass'n, 145 Mo. 50, 52, 53, 46 S.W. 624, involved an attempt by the city of Kansas City to tax the property of a building and loan association in its corporate name. Section 1 of Laws 1885, p. 234, provided: "Building and loan associations shall be taxed in the following manner only: All parties holding stock or shares * * * [in such associations], on which no loan has been obtained from such association" were required to list the same, with their actual cash value, with the assessor, "and the tax shall be levied upon said shares, and collected from such holder * * *, as taxes on other personal property * * *." § 7539, R.S. 1889. The Court held the statute provided for the assessment and taxation of the property of building and loan associations "by assessing the shareholders on their shares, and from them collecting the tax," and that such property could not be assessed and taxed in the corporate name. The Court further considered that the constitutional provision restricting the exemption of property from taxation (Mo. Const. 1875, Art. 10, § 7) referred to affirmative exemptions and not to mere casual omissions; that said constitutional provision was not "self enforcive," but it was the duty of the Legislature to see that no class of property escaped taxation, and that it did not matter that the legislation did not reach the borrowing members of the association, because the omissions could not be supplied by the courts. To authorize the taxation of property it must by law be subject to taxation. State ex rel. Globe-Democrat Pub. Co. v. Gehner, 316 Mo. 694, 696(I), 294 S.W. 1017, 1018[1], and cases there cited.
State ex rel. United States Bank et al. v. Gehner, 319 Mo. 1048, 5 S.W.2d 40, 43[2], involved taxes against the shares of a state and the shares of a national bank under § 12775, R.S. 1919 (§ 10959, R.S. 1939), which statute provided for the assessment of the property, other than the real estate, of banks against the shares of the stockholders as stated in that opinion and cases cited. The question was whether in arriving at the value of the shares ("their true value in money, less the value of the real estate" as provided in said § 12775) the actual liabilities of the bank (sums reserved for accrued taxes and accrued interest but not yet paid or payable) were deductible from the gross value of the personal property in assessing the shares of stock. The court held such liabilities deductible in ascertaining and determining the actual, real and true value of the shares, reasoning that such corporate liabilities affected the value of [464] the capital stock, and unless the deduction be made, its value would be, to that extent, inflated and fictitious; that § 4, Art. 10, Mo. Const. 1875, contemplated the taxation of property in proportion to its actual or real value, neither inflated nor deflated; and that the relators' insistence upon the assessment and taxation of the shares at their actual value in money instead of an inflated and fictitious value was not asking and presented no question of the exemption of property from taxation under §§ 6, 7, Art. 10, Mo. Const. 1875, but was an insistence upon their assessment and taxation at their true value. (5 S.W.2d l.c. 46).
Basing the levy and collection of a tax on corporations against the shareholders on their shares at the actual value of the property as in the Mercantile Mut. Bldg. Loan Ass'n and the United States Bank cases, supra, is not the substitution of one tax for another, and clearly is not the substitution of an excise, or occupation, tax, as attempted by the "in lieu" statute, for a property tax in contravention of constitutional provisions fettering the lawmaking power with respect to intangible property taxes.
We conclude on this, the first and principally contested, issue that the "in lieu" statute contravenes constitutional inhibitions, including that prohibiting the exemption of property from taxation, because:
Under the "in lieu" statute no "tax upon intangible personal property" is exacted of respondents. "Intangible personal property" constitutes "Class 3" of the classes of property subject to tax under § 4, quoted supra, of the constitution. The intangible personal property tax act imposes a tax on property. The other two classes of property under said § 4 are "real property" and "tangible personal property"; and the General Assembly is authorized to further classify "tangible" and "intangible" personal property "solely on the nature and characteristics of the property" by general law. While "real property" and "tangible personal property" are to be assessed on the basis of value, the tax on "intangible personal property" "shall be based on the annual yield," not exceeding 8% thereof. The 2% premium tax of the "in lieu" statute is not a tax on intangible personal property. Said statute does not classify intangible personal property "solely on the nature and characteristics of the property." The tax is not "based on the annual yield." It is not a property." tax. It is an excise, or occupation, tax imposed upon the privilege of conducting the business authorized under Arts. 2, 7, 17 and 6, of Ch. 37, R.S. 1939, in this state. Bankers' Life Co. v. Chorn, 186 S.W. 681, 683[2]; Massachusetts Bonding Ins. Co. v. Chorn, 274 Mo. 15, 201 S.W. 1122, 1125[3,4]; Viquesney v. Kansas City, 305 Mo. 488, 266 S.W. 700, 702[1]; State ex rel. Missouri Portland Cement Co. v. Smith, 338 Mo. 409, 90 S.W.2d 405, 406[2]; State ex rel. People's Motorbus Co. v. Blaine, 332 Mo. 582, 58 S.W.2d 975, 977[2-4]. This distinction between property and excise taxes is recognized in the provision of said § 4(a) reading: "Nothing in this section shall prevent the taxing of franchises, privileges or incomes, or the levying of excise or motor vehicle license taxes, or any other taxes of the same or different types."
Section 6, Art. 10, Mo. Const. 1945, effects two constitutional classes of property: (1) taxable, and (2) exempt. The "in lieu" statute (Laws 1945, p. 1023) exempts from the intangible personal property tax act (Laws 1945, p. 1914) the intangible personal property of respondents; and in so doing is an unauthorized attempt to reclassify as exempt property not enumerated in said § 6 as exempt but which is there constitutionally classified as taxable property. This, it has been held, the lawmaking power may not do. State ex rel. Tompkins v. Shipman, 290 Mo. 65, 234 S.W. 60, 62(II-IV). See Life Association of America v. St. Louis Board of Assessors, 49 Mo. 512, 519, 521, which is construed in State ex rel. Missouri State Life Ins. Co. v. Gehner, 320 Mo. 691, 8 S.W.2d 1068, 1069(I), as holding a statute providing for the annual payment by certain life insurance companies of $150 to $200 for the support of the insurance department "in lieu" of all taxes whatsoever contravened the 1865 constitutional [465] provision (Art. 11, § 16) against the exemption of property from taxation.
We have examined respondents' cases from foreign jurisdictions and think they are to be distinguished in view of the Missouri constitutional inhibitions upon the taxing power of the General Assembly and the construction placed upon our constitution by the courts.
The foregoing disposes of practically all of the subdivisions of respondents' position in support of the "in lieu" statute. There are, however, two additional contentions that should be developed.
Respondents argue that while § 4(c), Art. 10, Mo. Const. 1945, relating to the collection and distribution of the tax on intangibles, does not create a right of substitution it assumes that the lawmaking power has the right to enact laws providing substitutes for the intangible personal property tax. We quote the material portion of said § 4(c), emphasizing the clause stressed by respondents: "All taxes on property in class 3 and its subclasses, and the tax under any other form of taxation substituted by the general assembly for the tax on bank shares" are to be collected, et cetera, by the state and returned to the political subdivision of their origin as provided by law.
We think the clause in italics was the result of the authority conferred by Congress (see U.S.C.A. Tit. 12, § 548 (R.S.U.S. § 5219; 42 Stat. 1499; 44 Stat. 223)) upon the states to tax national banking associations, and the policy of the state of taxing Missouri banks on the same basis as National banks. National banks are instrumentalities of the federal government, and the states do not possess the sovereign power with respect to their taxation that exists with respect to citizens of the state generally. State ex rel. Bay v. Citizens State Bank, 274 Mo. 60, 202 S.W. 382, 384(I); Maricopa County v. Valley Nat. Bk., 130 F.2d 356, 359. Only the taxes against national banks contemplated in § 548, supra, are within the authority of the states. They embrace the power to tax the real estate; and either to tax (1) the shares of a national bank, or (2) to include dividends derived therefrom in the taxable income of the owner, or (3) to tax their net income or (4) according to or measured by their net income as provided and subject to the conditions in said § 548. The section has undergone several amendments. This act of Congress is of superior force to state constitutions and laws. Under the constitution of 1875 and the laws thereunder, Missouri assessed and collected taxes on the real estate of national banks and on their shares at their true value in money for the tax on the personal property of such banks; and state banks were put on the same plane. § 10959, R.S. 1939; Laws 1872, p. 90, § 35. See, among others, State ex rel. Miller v. Shryack, 179 Mo. 424, 430(I), 78 S.W. 808, 809; State ex rel. Koeln v. Lesser, 237 Mo. 310, 326, 141 S.W. 888, 892; State ex rel. Bay v. Citizens State Bk., supra. Observations supra respecting the State ex rel. United States Bank case are applicable. The clause in italics recognizes the above situation and is not an assumption of the existence of general authority in the lawmakers to enact substitute tax legislation in contravention of specific constitutional inhibitions.
Next: Under § 4(b), Art. 10, Mo. Const. 1945, intangible personal property and its subclasses "shall be taxed only to the extent authorized and at the rate fixed by law for each class and subclass * * *." Respondents say this means the Legislature is not required to impose any tax whatsoever upon intangible personal property. The contention is not controlling here because the Legislature did impose a tax upon intangible personal property; and in such event, under other provisions of said § 4, the tax "shall be based on the annual yield," and any classification of the intangible personal property is to be "based solely on the nature and characteristics of the property" et cetera, which the said "in lieu" statute does not do.
II. The "yield" statute. Respondents rely upon the "yield" statute in the event the "in lieu" statute be unconstitutional. It was approved July 17, 1946. Laws 1945, p. 1760, § 1; Mo. R.S.A., § 11211.1; and see § 146.010(4). R.S. 1949. It provided (emphasis ours):
"The terms 'yield' or 'annual yield' as used in any law heretofore enacted imposing [466] a tax upon intangible personal property pursuant to Article 10, Section 4, of the Constitution of Missouri, shall mean the aggregate proceeds received as a result of ownership or beneficial interest in intangible property whether received in money, credits or property, exclusive of any return of capital, and less the amount of interest required to be credited by the owner thereof, during the preceding calendar year, to reserve liabilities of the owner maintained under the statutes of this state."
No cases are cited by appellants to sustain their position that the italicized portion of the "yield" statute contravenes §§ 3, 4 and 6 (all quoted hereinbefore) of Article 10 of the constitution. Appellants say that the "uniformity" clause (§ 3, supra) requires all taxpayers similarly situated to be taxed uniformly; that the "yield" statute creates a subclass of owners of intangible personal property based solely on the business of the owners, and not on the nature and characteristics of the property as required by § 4, supra; and to the extent respondents are permitted to deduct the interest required to be credited to reserve liabilities from the gross returns received on intangible personal property, respondents are exempted from the payment of the intangible personal property tax in contravention of § 6, supra.
While property was not a subject for classification under the 1875 constitution, § 4 of the 1945 constitution expressly authorizes the classification and subclassification of intangible personal property. The taxation of property is contemplated on a basis of actual or real value (State ex rel. United States Bank v. Gehner, 319 Mo. 1048, 5 S.W.2d 40, 45), and double taxation is not favored (Automobile Gasoline Co. v. St. Louis, 326 Mo. 435, 32 S.W.2d 281, 283[3]).
The reasoning and holding in State ex rel. Missouri State Life Ins. Co. v. Gehner, 320 Mo. 691, 8 S.W.2d 1068 (the l.c. references infra are to 8 S.W.2d), answer appellant's contentions. It involved a construction of § 6386, R.S. 1919. Section 6386 provided that the property of domestic insurance companies was subject to taxation for state, county, municipal and school purposes; and required such companies to make returns: "First, of all the real estate held or controlled by it; second, of the net value of all its other assets or values in excess of the legally required reserve necessary to reinsure its outstanding risks and of any unpaid policy claims, which net values shall be assessed and taxed as the property of individuals * * *."
The insurance company's return of June 1, 1925, disclosed that its gross assets less "the legally required reserve necessary to reinsure its outstanding risks" left no personal property of relator subject to taxation under said § 6386. The St. Louis board of equalization, however, arbitrarily assessed relator's personal property at $1,000,000, and relator sought to quash said assessment. Respondent contended that if "only the net assets" of relator were subject to taxation, the statutes violated constitutional requirements that taxation shall be uniform (Mo. Const. 1875, Art. 10, § 3) and in proportion to value (Id., § 4), and constituted an unconstitutional exemption of property from taxation (Id., § 7). (l.c. 1069.)
The court held it had been the policy of the state since 1872 "to subject to taxation the personal property of insurance companies in the form of net assets, and not otherwise" (l.c. 1071[4]); and that a statute, in ascertaining the amount of credits of a taxpayer to be taxed to him, which "allows a deduction of the debts owed by him, does not violate constitutional provisions that taxation shall be uniform and in proportion to value, and that no property shall be exempt from taxation." After reviewing the authorities the Court held that, while credits are property, the difference found upon deducting the bona fide indebtedness from the gross credits of the owner was the precise amount and just value of the credits. (l.c. 1071[6, 7].)
The court further held "the legally required reserve necessary to reinsure its outstanding risks" was deductible from the credits of an insurance company in valuing them for taxation; and in so holding considered: [467] "'The reserve fund of a life insurance company is properly regarded as an indebtedness, because the death of every person it has insured is inevitable, and its disbursement in payment of policies is an absolute certainty. The only uncertainty in the matter is the order in which the policies kept in force will have to be paid.' * * *
"In considering the nature of the legal reserve of an insurance company other than life, it must be kept in mind that the construction of a statute permitting the deduction of debts from credits is not involved in this case. It may be conceded that the requirement for the maintenance of such a reserve is not a debt in a technical sense. Yet it is a liability * * *; such liability, considered with reference to a particular policy, may be regarded as contingent, but with reference to the outstanding insurance of the company as a whole it is definite and fixed, made so by statute. * * * The assets of such a company as a whole are impressed with this liability, and only assets in excess of it can be distributed in the form of dividends, earnings or profits." (l.c. 1072[8, 9].)
See also State ex rel. American Automobile Ins. Co. v. Schramm, 271 Mo. 223, 196 S.W. 21[2]; State ex rel. American Central Ins. Co. v. Gehner, 315 Mo. 1126, 280 S.W. 416, 420[10]; State ex rel. Hyde v. Buder, 315 Mo. 791, 287 S.W. 307, 309[9]; George Washington Life Ins. Co. v. Board of Review etc., 113 W. Va. 664, 169 S.E. 532, 535; Hess v. Columbia Life Ins. Co., 116 Ohio St. 416, 156 N.E. 504, 505; City of Waco v. Amicable Life Ins. Co., (Tex.), 248 S.W. 332, 334[2]; Michigan Mut. Life Ins. Co. v. Common Council etc. Detroit, 133 Mich. 408, 95 N.W. 1131, 1132; Nye-Schneider-F. Co. v. Boone County, 102 Neb. 742, 169 N.W. 436, 437; Annotations, 13 A.L.R. 186, and 78 A.L.R. 562; Gray, Limitations of Taxing Power, 692, §§ 1395 et seq.; 3 Cooley on Taxation, 4th Ed., 2325, §§ 1159 et seq.; 51 Am. Jur., Taxation, 525, § 523; 61 C.J., Taxation, 650, § 805 et seq.; and the authorities cited in State ex rel. Missouri State Life Ins. Co. v. Gehner, supra, at p. 1072 of 8 S.W.2d.
The holdings that the legal reserve involved represents an indebtedness or liability upon the policies in force finds recognition in the provision of the "yield" statute reading: "less the amount of interest required to be credited * * * to reserve liabilities of the owner maintained under the statutes of this state." The statute applies to all such "reserve liabilities," whether presently required to be maintained or to be maintained under any future statute and whether maintained by life insurance companies or some other owner. The fund is a statutory trust fund to be held and treated as such. The courts recognize it as a deduction, when made so by statute, from gross assets in arriving at the actual and true value of personal property for taxation and not as an exemption from taxation.
We conclude that error in the ruling of the trial court on the "yield" statute has not been established; that the intangible personal property tax act applies to all intangible personal property defined in § 146.010, RSMo 1949; that under the Missouri State Life Ins. Co. case, quoted supra, and other cases the "yield" statute provides for a deduction to reach the true and actual yield and not a fictitious yield, and is not an exemption of property from taxation, and that, so far as any classification may be concerned, it is based on the nature and characteristics of the intangible personal property involved.
Accordingly, the judgment is reversed and the cause is remanded with directions to enter judgment holding the "in lieu" portion of the statute unconstitutional and the "yield" statute applicable.
The foregoing opinion by BOHLING, C., is adopted as the opinion of the Court en Banc. All concur.