      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                        NO. 03-04-00342-CV



            First American Title Insurance Company and Old Republic National
                           Title Insurance Company, Appellants

                                                   v.

    Carole Keeton Strayhorn, Comptroller of Public Accounts of the State of Texas and
             Gregg Abbott, Attorney General of the State of Texas, Appellees




     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT
       NO. GN301692, HONORABLE MARGARET A. COOPER, JUDGE PRESIDING



                                            OPINION


                First American Title Insurance Company and Old Republic National Title Insurance

Company sell title insurance in Texas but are incorporated in other states. They are seeking to

recover taxes they argue were unlawfully imposed upon them. Texas imposes a tax on the amount

of premium collected from title insurance policies. In addition, foreign title insurance companies,

like First American and Old Republic, are required to pay an additional tax if their states of origin

impose financial burdens on Texas insurance companies selling title insurance in the foreign states

that are higher than the financial burdens Texas imposes upon foreign insurance companies selling

title insurance here. This additional tax is called a retaliatory tax.

                Previously title insurance companies have been allowed to include 100% of the total

premium tax paid as part of their imposed financial burden for the purpose of determining whether
a retaliatory tax needs to be paid. However, the Comptroller changed this previous interpretation

and concluded that, because insurance companies pay only 15% of the premium tax, insurance

companies should include only 15% of the premium tax as part of their total imposed financial

burden. Under this new interpretation, foreign title insurance companies will be required to pay

significantly more in retaliatory taxes.

               First American and Old Republic contend that the Comptroller’s new interpretation

is wrong and seek to recover taxes they claim were unlawfully assessed under the Comptroller’s new

interpretation.1 The district court granted summary judgment in favor of the Comptroller, and we

will affirm the judgment.


                      FACTUAL AND PROCEDURAL BACKGROUND

               First American is a California-based title insurance company, and Old Republic is a

Minnesota-based title insurance company. Title insurance companies (“insurers”) are responsible

for issuing title insurance policies, for insuring title risks, and for paying claims and providing

defenses to claims if necessary. Both First American and Old Republic engage in title insurance

business within the State of Texas.

               First American issues title policies through title agents and through direct operations.

Old Republic issues title policies through title agents alone. Title agents are legal entities, such as

corporations, that are separate from insurers and that are licensed to close real estate title insurance

transactions on behalf of one or more insurers. Title agents may be affiliated with an insurer or may


       1
         Both First American and Old Republic filed suits seeking to recover taxes they had paid.
After the district court granted summary judgment in favor of the Comptroller, both cases were
consolidated into this appeal.

                                                   2
be completely independent. If an insurer becomes licensed as a direct operator, then it may close

insurance transactions on its own without an agent.

               Article 9.59 of the insurance code (“the premium tax statute”) requires title insurers

to remit to the state a tax on insurance premiums collected while engaged in business in Texas. See

Tex. Ins. Code Ann. art. 9.59 (West Supp. 2004-05), repealed by Act of April 30, 2003, 78th Leg.,

R.S., ch. 1274, § 26(b)(4), 2003 Tex. Gen. Laws 3611, 4139 (effective April 1, 2005). In addition,

article 21.46 of the insurance code (“the retaliatory tax statute”) requires the imposition of an

additional tax on foreign insurers doing business within Texas if the foreign state imposes financial

burdens on Texas-based insurers doing business in the foreign state that are higher than the financial

burdens Texas places on the foreign state’s insurers doing business here. See Tex. Ins. Code Ann.

art. 21.46 (West Supp. 2004-05), repealed by Act of April 30, 2003, 78th Leg., R.S., ch. 1274,

§ 26(b)(4), 2003 Tex. Gen. Laws 3611, 4139 (effective April 1, 2005). The principal purpose of a

retaliatory tax law is to facilitate the ability of insurers to conduct business across state lines by

deterring states from enacting discriminatory or excessive taxes against foreign insurers. See

Western & S. Life Ins. Co. v. State Bd. of Equalization of Cal., 451 U.S. 648, 668 (1981).

               In the late 1990s, the Comptroller took the position that the premium tax statute

required title insurance agents to pay a portion of the premium taxes due and that the payment of title

insurance premium taxes is not solely the obligation of insurers. Previously, insurers had been

allowed to include 100% of the premium tax paid as the insurers’ tax burden for the purposes of

determining whether a retaliatory tax would be imposed on an insurer. Under the new calculation

method, an insurer may only count 15% of the premium tax as its financial burden when determining

the amount of retaliatory taxes due, if any.

                                                  3
                After auditing First American’s 1998-2001 insurance tax reports, the Comptroller

assessed a fee of $175,383.77 in retaliatory taxes and interest against First American for the 2001

tax year,2 which First American paid in March 2003 under protest. In addition, First American paid,

under protest, $1,257,196.99 in retaliatory taxes for 2002. Similarly, after an audit, the Comptroller

assessed retaliatory taxes against Old Republic. Old Republic paid, under protest, $219,626.40 as

retaliatory taxes for 2002.


                                    PROCEDURAL HISTORY

                Appellants filed separate lawsuits against the Comptroller and the Attorney General

of Texas (cumulatively the “Comptroller”) to recover what they claim were unlawfully assessed

retaliatory taxes that were paid under protest. The appellants and the Comptroller both filed cross-

motions for summary judgment in the separate cases, which the trial court heard simultaneously.

The trial court granted summary judgment in favor of the Comptroller in both cases. Both appellants

appealed the decision of the trial court, and the two cases were consolidated into this appeal.


                                    STANDARD OF REVIEW

                The standards for review of a traditional summary judgment are well established: the

movant must show that there is no genuine issue of material fact and that it is entitled to judgment

as a matter of law; in deciding whether there is a disputed material fact issue precluding summary

judgment, the court must take evidence favorable to the nonmovant as true, and the court must

indulge every reasonable inference in favor of the nonmovant and resolve any doubts in the


       2
           The tax years of 1998-2000 are not at issue in this case.

                                                  4
nonmovant’s favor. Sergeant Enters., Inc. v. Strayhorn, 112 S.W.3d 241, 245 (Tex. App.—Austin

2003, no pet.) (citing Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995); Nixon v. Mr. Prop. Mgmt.

Co., 690 S.W.2d 546, 548-49 (Tex. 1985)). We review the trial court’s decision to grant summary

judgment de novo. Id. (citing Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex. 1994)).

               Generally, a party cannot appeal the denial of a motion for summary judgment

because it is an interlocutory order and, thus, not appealable. Id. (citing Cincinnati Life Ins. Co. v.

Cates, 927 S.W.2d 623, 625 (Tex. 1996)). However, when both parties move for summary judgment

and the district court grants one motion and denies the other, the unsuccessful party may appeal both

the grant of the prevailing party’s motion and the denial of its own. Id. (citing Holmes v. Morales,

924 S.W.2d 920, 922 (Tex. 1996)). In such a case, we will review the summary judgment evidence

offered by both sides, determine all questions presented, and render the judgment the trial court

should have rendered. Id. (citing FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872

(Tex. 2000); Commissioners Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997)). Because the district

court did not state the basis for granting summary judgment, the appellants must negate all grounds

that support the judgment. Id. (citing State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 381 (Tex.

1993)). However, if the appellants fail to negate each ground on which the judgment may have been

rendered, we must uphold the summary judgment. Id. (citing Carr, 776 S.W.2d at 569).

               This case involves interpreting the title insurance premium tax statute and the

retaliatory tax statute, and, therefore, we apply a de novo standard. Lopez v. Texas Workers’ Comp.

Ins. Fund, 11 S.W.3d 490, 494 (Tex. App.—Austin 2000, pet. denied) (citing Johnson v. City of Fort

Worth, 774 S.W.2d 653, 656 (Tex. 1989)). When construing a statute, the court must construe the



                                                  5
statute as written and must, if possible, determine the legislature’s intention from the language that

was used in the statute. Del Indus., Inc. v. Texas Workers’ Comp. Ins. Fund, 973 S.W.2d 743, 745

(Tex. App.—Austin 1998), aff’d, 35 S.W.3d 591 (Tex. 2000). When determining legislative intent,

the entire act, not isolated portions of the act, must be considered. Jones v. Fowler, 969 S.W.2d 429,

432 (Tex. 1998). Courts should first look to the plain meaning of the words in the statute and, if the

meaning is unambiguous, interpret the statute so that it comports with the plain meaning expressed.

City of San Antonio v. City of Boerne, 111 S.W.3d 22, 25 (Tex. 2003). Every word, phrase, and

expression used in a statute should be read as if it were deliberately used. See Gables Realty Ltd.

P’ship v. Travis Cent. Appraisal Dist., 81 S.W.3d 869, 873 (Tex. App.—Austin 2002, pet. denied).

If two statutes are in pari materia or address the same subject, then an effort should be made to

harmonize and give effect to both statutes. Breeding v. State, 762 S.W.2d 737, 739 (Tex.

App.—Amarillo 1988, pet. ref’d) (citing Cheney v. State, 755 S.W.2d 123 (Tex. Crim. App. 1988)).

               When enacting a statute, the legislature is presumed to have intended to comply with

both the state and the federal constitutions. Brady v. Fourteenth Court of Appeals, 795 S.W.2d 712,

715 (Tex. 1990). Therefore, when construing a statute, courts should interpret a statute so that the

statute’s meaning is consistent with all constitutional requirements if possible. Id. In addition, when

an administrative agency is charged with a statute’s enforcement and also construes the statute, the

agency’s construction of the statute is entitled to serious consideration as long as the construction

is reasonable and does not contradict the plain meaning of the statute. Tarrant Appraisal Dist. v.

Moore, 845 S.W.2d 820, 823 (Tex. 1993).




                                                  6
                                  STATUTORY FRAMEWORK

                 Before addressing the merits of the appellants’ claims, it will be helpful to describe

the statutory scheme in question in this case and the Comptroller’s current interpretation of it. In

1907, the legislature first imposed a title insurance premium tax upon insurers. See Act of May 16,

1907, 30th Leg., 1st C.S., ch. 18, § 8, 1907 Tex. Gen. Laws 479, 482. In 1987, the insurance

premium tax statutes were amended. Act of June 17, 1987, 70th Leg., R.S., 1987 Tex. Gen. Laws

3610, 3638-40 (codified as Tex. Ins. Code Ann. art. 9.59). As part of the amendment, a provision

calling for the division of premium between insurers and title agents and a provision requiring

insurers to obtain an agent’s portion of the premium tax and to remit it to the state were added. Id.

The relevant portions of the premium tax statute read as follows:


       Sec. 1.     Each title insurance company receiving premiums . . . shall pay to the
                   Comptroller a tax on those premiums . . . .

       Sec. 2.     In this article premium means the total amount of premiums received for
                   the taxable year on title insurance written on property located in this state
                   ....

       ...

       Sec. 4.     There is imposed on all premium on title insurance an annual tax equal to
                   1.35 percent.

       Sec. 5.     Each title insurance company that is liable under this article to remit tax
                   on premium shall file a tax return annually . . . .

       ...

       Sec. 8(a) Title insurance companies and title insurance agents subject to the tax
                 levied by this article may not be required to pay any additional tax in
                 proportion to their gross premium receipts levied by this state or any



                                                   7
                  county or municipality except as otherwise provided by this code and the
                  Labor Code. . . .

              (b) The premium tax is levied on all amounts defined to be premium in this
                  Chapter, whether paid to the title insurance company or retained by the
                  title insurance agent, such tax being in lieu of the tax on the premium
                  retained by the agent. The State of Texas facilitates the collection of the
                  premium tax on the premium retained by the agent by setting the division
                  of the premium between insurer and agent so that the insurer receives the
                  premium tax due on the agent’s portion of the premium and remits it to the
                  State.


Tex. Ins. Code Ann. art. 9.59 (West Supp. 2004-05) (emphasis added).

               The premium tax statute exempts title agents, which are subject to taxation under the

statute, from paying an additional tax based on gross premium receipts. Id. § 8(a). In addition to

the section 8(a) exemption, section 171.052 of the Texas Tax Code exempts agents and insurers from

franchise taxes because both are required to pay a tax based on gross premium receipts. Tex. Tax

Code Ann. § 171.052 (West Supp. 2004-05). Specifically, section 171.052 provides as follows:


       An insurance organization, title insurance company, or title insurance agent
       authorized to engage in insurance business in this state now required to pay an annual
       tax under Chapter 4 or 9, Insurance Code, measured by its gross premium receipts is
       exempted from the franchise tax. . . .


Id.

               The premium tax statute also states that premiums collected are divided between

insurers and agents in such a way that insurers receive the agents’ shares of the premium tax in the

amount collected from the agents. Tex. Ins. Code Ann. art. 9.59 § 8(b). How the premium is

divided between insurers and agents and what premium rates are charged are both questions decided



                                                 8
by the Texas Department of Insurance (the “Department”). See Tex. Ins. Code Ann. arts. 9.07(b),

(c) and 9.30(B)(1) (West Supp. 2004-05). In determining reasonable premium rates, the Department

is required to consider all relevant income and expenses of title agents and insurers. Id. art. 9.07(b),

(c). Between 2001 and 2002, the time period in issue in this case, the Department allowed title

agents to keep 85% of the premiums collected from policyholders and required title agents to remit

15% of the premiums to title insurers.3 28 Tex. Admin. Code § 9.1 (2004) (adopting Basic Manual

of Rules, Rates, and Forms for the Writing of Title Insurance in Texas) (available at

www.tdi.state.tx.us/company/titlem4d.html#P-23).

                In addition to paying premium taxes, insurers from a foreign state doing business in

Texas may be required to pay a retaliatory tax. The retaliatory tax statute imposes an additional tax

upon a foreign insurer doing business in the state of Texas if the foreign state imposes financial

burdens on Texas-based insurers doing business in the foreign state that are higher than the financial

burdens Texas places on the foreign state’s insurers doing business in Texas. The relevant portion

of the retaliatory tax statute reads as follows:


        Whether by the laws of any state or territory of the United States any taxes, including
        maintenance or similar regulatory fees, income and corporate franchise, licenses,
        fees, fines, penalties, deposit requirements or other obligations, prohibitions or
        restrictions are imposed upon any insurance company that is organized in this State
        and licensed and is doing business or that may do business in such other state or
        territory which, in the aggregate are in excess of the aggregate of the taxes, including
        maintenance or similar regulatory fees, income and corporate franchise, licenses,
        fees, fines, penalties, deposit requirements or other obligations, prohibitions or
        restrictions directly imposed upon a similar insurance company of such other state


        3
        In this appeal, we are not faced with and do not address whether the specific division of
premium between agents (85%) and insurers (15%) is reasonable.

                                                   9
       or territory doing business in this State, the comptroller shall impose upon and collect
       from any similar company of such state or territory in the same manner and for the
       same purpose, the same taxes, licenses, fees, fines, penalties, deposit requirements
       or other obligations, prohibitions or restrictions; provided, however, the aggregate of
       taxes, licenses, fees, fines, penalties or other obligations imposed by this State
       pursuant to this Article on an insurance company of another state or territory shall not
       exceed the aggregate of such charges imposed by such other state or territory on a
       similar insurance company of this State that may be licensed and doing business.


Tex. Ins. Code Ann. art. 21.46 § 1(a).

               Under the terms of the retaliatory tax statute, foreign insurers are required to file a

report for the purpose of determining whether a retaliatory tax needs to be assessed against the

insurers. Id. § (1)(d). Instructions for the Texas Title Agent Statistical Report, which is issued by

the Department and is filed with the Commissioner of Insurance, require insurers to list premiums

collected and various expenses imposed upon them. Although insurers had previously been allowed

to include 100% of the premium tax in the retaliatory tax calculation, the Comptroller changed the

previous interpretation of the retaliatory tax scheme, which she may do as long as the new

interpretation does not contradict either statutory language or a formally promulgated rule. See

Moore, 845 S.W.2d at 823 (agency’s construction of statute entitled to deference as long as does not

contradict statutory language); Grocers Supply Co., Inc. v. Sharp, 978 S.W.2d 638, 642 (Tex.

App.—Austin 1998, pet. denied) (Comptroller’s informal change in policy of how rule enforced did

not “informally contravene the express terms of a formally promulgated rule.”). Under the new

interpretation, insurers are allowed to include only 15% of the premium tax for the purpose of

determining the amount of retaliatory taxes, if any, to be paid.




                                                 10
                When developing the new interpretation of the retaliatory tax scheme in which agents

share responsibility for paying premium taxes, the Comptroller relied upon the fact that agents are

exempt from paying franchise taxes or “additional” premium taxes. See Gables Realty Ltd. P’ship,

81 S.W.3d at 873 (statutes should be construed to give meaning to every word). Further, the

Comptroller reasoned that because section 8(b) of the premium tax statute specifies that insurers

receive the agents’ portion of the premium tax due when the premium is divided among the agent

and the insurer and because the Department has specified that title agents are to transfer 15% of the

premium collected to the insurers, then only 15% of the premium tax is directly imposed on the

insurer. Therefore, the insurer should only be allowed to include 15% of the premium tax for the

purposes of calculating a retaliatory tax. See Tex. Ins. Code Ann. art. 9.59 § 8(b).

                After adopting this new interpretation, the Comptroller, in 1996, instituted a policy

that makes title agents responsible to the Comptroller for any portion of premium tax that is not

remitted to insurers. See Tex. Ins. Code Ann. art. 9.59 § 3(c) (allowing Comptroller to create rules,

limitations, minimum standards, and regulations that are fair, reasonable, and appropriate). This

policy limited the insurers’ obligation to remit premium tax actually collected if an insurer can prove

that the title agent did not remit the portion of the premium the agent is required to give to the

insurer. In 2000, the policy was published on the Internet based State Tax Automated Research

System. See Texas Comptroller of Public Accounts, Star System No. 200009751L available at

http://aixtcp.cpa.state.tx.us/star.

                In addition, in 2001, the Comptroller amended rule 3.831, describing agents’ and

insurers’ responsibilities for paying premium taxes. Under the amended rule, insurers are instructed



                                                  11
to collect the premium tax due on the agents’ portion of the premium and remit to the Comptroller

both the agents’ and the insurers’ portions of the premium tax. See 34 Tex. Admin. Code

§ 3.831(4)(B), (D) (2004) (Insurance Tax: Gross Premiums Definitions . . . and Clarification of the

Taxation on the Distribution of Title Premiums). Further, section 3.831(4)(C) holds agents and

insurers separately liable for their share of the premium tax. Id. § 3.831(4)(C). Specifically, section

3.831(4)(C) reads as follows:


       Title insurers and title agents are both subject to the premium and maintenance tax
       on their proportional share of the premiums and are separately liable if the insurer
       fails to remit the tax due on the agent’s portion.


Id.


                                           DISCUSSION

               On appeal, the appellants make the following three claims: (1) foreign-based insurers

are entitled to include 100% of the premium taxes paid to the state of Texas in its calculation of the

amount of retaliatory taxes owed; (2) agents do not, in fact, bear legal responsibility to pay 85% of

the premium tax; and (3) the Comptroller’s new interpretation of the retaliatory tax scheme is

unconstitutional. For ease of reading, we will combine appellants’ first two points.


The Comptroller’s Interpretation is Reasonable

               Appellants contend that the Comptroller’s interpretation of the retaliatory tax scheme

is incorrect. First, appellants assert that insurers are solely responsible for paying 100% of the

premium tax and, similarly, assert that the obligation to pay premium taxes is not imposed on agents.



                                                  12
In support of their assertions, appellants point to section 111.016(a) and (b) of the tax code for the

proposition that insurers will still have to pay 100% of the premium tax if agents do not transfer 15%

of the premium to insurers. See Tex. Tax Code Ann. § 111.016(a), (b) (West 2001). Section

111.016(a) states, in relevant part, that “any person who receives or collects a tax or any money

represented to be a tax from another person holds the amount so collected in trust for the benefit of

the state and is liable for the full amount collected plus any accrued penalties and interest on the

amount collected.” See Tex. Tax Code Ann. § 111.016(a). Section 111.016(b) states, in relevant

part, that “an individual who controls or supervises the collection of tax or money from another

person . . . and who willfully fails to pay or cause to be paid the tax or money is liable as a

responsible individual for an amount equal to the tax or money not paid or caused to be paid.” See

Tex. Tax Code Ann. § 111.016(b).

               However, neither of these sections state that an insurer would be liable for the full

amount of premium tax if agents do not turn over their share of the premium tax. Further, subsection

(a) states that the person has to receive the tax in question in order to be held liable for the amount

in question, and subsection (b) states that the responsible party must have willfully refused to pay

the tax collected on behalf of another. Neither of these scenarios address the situation of agents

refusing to turn over their portion of the premium tax to insurers.

               As further support for the assertion that there is no premium tax imposed on agents,

appellants point to the first sentence of section 8(b) of the premium tax statute, which states that

“[t]he premium tax is levied on all amounts defined to be premium . . . whether paid to the title

insurance company or retained by the . . . agent, such tax being in lieu of the tax on the premium



                                                  13
retained by the agent. . . .” Tex. Ins. Code Ann. art. 9.59 § 8(b). However, this sentence must also

be read along with the last sentence of section 8(b), which states that the insurer receives the agent’s

portion of the premium tax due when the premium is divided between the agent and the insurer. See

id. When read together, the “in lieu of” provision means that one comprehensive tax is formulated

based on the total amount of premium with insurers collecting that portion of the premium that

includes the agent’s portion of the premium tax. See Jones, 969 S.W.2d at 432 (entire act, not

isolated parts, must be considered). Although the statute requires title insurers to remit all of the

premium tax to the Comptroller, the statute does not place all of the financial burden on the insurer.

               Appellants also argue that the Comptroller’s erroneous interpretation of the retaliatory

tax scheme in which agents are responsible for paying 85% of the premium tax is based, in part, on

an incorrect and isolated reading of section 8 of the premium tax statute, which contains the

following language: “Title insurance companies and title insurance agents subject to the tax levied

by this article . . . .” Tex. Ins. Code Ann. art. 9.59 § 8(a) (emphasis added). Appellants claim that

agents can be “subject to” paying a tax without actually having to pay a tax. Further, appellants urge

that, rather than meaning a tax must be paid, the phrase “subject to” in section 8(a) means to bring

under dominion, control, or authority. See Rylander v. Fisher Controls Int’l, Inc., 45 S.W.3d 291,

298-99 (Tex. App.—Austin 2001, no pet.) (court construed statute to mean taxpayer “subject to”

taxation if there was possibility that state might impose taxation, not if individual actually required

to pay tax). From this assertion, appellants contend that agents are subject to taxation because a tax

could be legally imposed on agents but is not, and appellants insist that section 8 is only an

exclusionary provision exempting insurers and agents from other taxes but does not impose taxes



                                                  14
on anyone. However, the premium tax statute contradicts appellants’ assertion that agents are not

responsible for paying any portion of the premium tax by stating that taxes on agents’ portions of the

premium collected are included within the portions transferred from agents to insurers after the

premium has been divided. Tex. Ins. Code Ann. art. 9.59 § 8(b); see also City of San Antonio, 111

S.W.3d at 25 (if meaning unambiguous, statute should be interpreted to comport with that meaning).

               In addition, appellants insist that the Comptroller’s interpretation of the retaliatory

tax scheme, under which both agents and insurers are liable for premium taxes, leads to absurd

conclusions and unjust discrimination against foreign insurers, and, therefore, the previous

interpretation should be reimplemented. See Cramer v. Sheppard, 140 Tex. 271, 167 S.W.2d 147,

155 (Tex. 1942) (statutory provisions will not be interpreted in way that leads to “absurd

conclusions, great public inconvenience, or unjust discrimination” if another interpretation can

reasonably be made). Appellants assert that, because insurers bear the responsibility to remit 100%

of the premium tax to the state, the premium tax is a tax “directly imposed upon” insurers as

described in the retaliatory tax statute. See Tex. Ins. Code Ann. art. 21.46 (requiring, for purposes

of calculating retaliatory taxes, comparison of obligations imposed on foreign insurers doing

business in Texas with obligations imposed on Texas insurers doing business in foreign state).

Appellants contend that there is no statute or formal rule that would excuse a title insurer from

having to pay the full premium tax if an agent does not remit 15% of the total premiums collected

to the insurer and contend that the Comptroller has no statutory authority to collect premium from

agents in the event that an agent fails to transfer the premium to an insurer; therefore, appellants

insist insurers will be held liable for the full amount of premium taxes regardless of whether agents



                                                 15
transfer the premium or not. Further, appellants assert that if insurers do not pay 100% of the

premium tax due because an agent has not transferred the premium, they will be subject to a

collection proceeding for the amount not paid, and the Department may revoke its license to transact

business in Texas. See Tex. Ins. Code Ann. arts. 9.59 § 9 (“A title insurance company failing to pay

all taxes imposed by this article is subject to Article 4.05 of this code.”); 4.05 (West Supp. 2004-05)

(authorizing collection proceeding to collect taxes due on unreported gross premium receipts),

repealed by Act of April 30, 2003, 78th Leg., R.S., ch. 1274, § 26(b)(4), 2003 Tex. Gen. Laws 3611,

4139 (effective April 1, 2005); 9.28 (West 1981) (authorizing revocation of certificate of authority

to transact business if insurer does not comply with provisions of insurance code), repealed by Act

of April 30, 2003, 78th Leg., R.S., ch. 1274, § 26(b)(4), 2003 Tex. Gen. Laws 3611, 4139 (effective

April 1, 2005). Appellants assert that allowing insurers to include only 15% of the premium tax in

the retaliatory tax calculation even though the insurers will be responsible for the full amount and

may be subjected to the sanctions listed above is discriminatory and absurd.

               However, as mentioned, the Comptroller amended rule 3.831 to codify the new

interpretation that agents are proportionally liable for premium taxes. 34 Tex. Admin. Code

§ 3.831(4)(C). In addition, the Comptroller published a policy providing insurers a defense to being

held responsible for all premium taxes if an agent does not remit its share of the premium tax due.

The Comptroller’s interpretation, the amended rule 3.831, and the Comptroller’s published policy

protect insurers from being responsible for the full amount of premium taxes if the agent does not

remit its portion of the premium tax. The Comptroller’s interpretation, policy, and rule do not lead




                                                  16
to absurd conclusions or unjust discrimination; on the contrary, they protect insurers from being

unfairly held liable for taxes they do not pay or owe.

               Alternatively, appellants argue that, even if agents are responsible for 85% of the tax,

then the duty to remit 100% of the premium tax to the state qualifies as an “other obligation . . .

directly imposed” on insurers under article 21.46, and, therefore, 100% of the premium tax should

be included in the retaliatory tax calculation. See Tex. Ins. Code Ann. art. 21.46. Appellants assert

that the phrase “other obligations” as listed in article 21.46 focuses on obligations that are directly

imposed on an insurer, not on who bears the monetary burden, and extends beyond the legal liability

for the tax and includes the obligation to remit the tax to the state. See Tex. Tax Code Ann.

§ 101.003(11) (West 2001) (obligation is “the duty of a person to pay a tax, fee, assessment, or other

amount”).

               However, administrative duties to remit taxes collected from another entity without

financial implications that can be quantified are not the type of “other obligations” that need to be

included when performing the retaliatory calculation to determine what retaliatory taxes, if any,

should be assessed. On the contrary, because all the other obligations listed before the phrase “other

obligations” refer to financial obligations, the rule of ejusdem generis implies that the phrase “other

obligations” also refers to obligations that have financial, not ministerial, implications.4 See Hillco

Elec. Coop. v. Midlothian Butane Gas Co., Inc., 111 S.W.3d 75, 81 (Tex. 2003) (rule of ejusdem

generis “provides that when words of a general nature are used in connection with the designation



       4
         Because the Department is required to consider insurers’ relevant expenses for the purposes
of setting premium rates, we will presume that the Department accounted for the obligation of
remitting agents’ portions of the premium tax.

                                                  17
of particular objects or classes of persons or things, the meaning of the general words will be

restricted to the particular designation.”).

                Contrary to the appellants’ assertions, the Comptroller’s new interpretation and rule

3.831 do not impose additional restrictions, conditions, or burdens that are inconsistent with either

the retaliatory tax statute or the premium tax statute. See Hollywood Calling v. Public Util. Comm’n

of Tex., 805 S.W.2d 618, 620 (Tex. App.—Austin 1991, no writ) (rule “may not impose additional

burdens, conditions, or restrictions beyond or inconsistent with the statutory provisions.”). Rule

3.831(4)(C) does not directly contradict any statutory language because the premium tax statute

states that an agent’s portion of the premium tax is included within the division of premium

transferred to the insurer, here 15%. In addition, the retaliatory tax statute only requires inclusion

of financial obligations “directly imposed” on an insurer. Further, the new interpretation and the rule

do not run counter to the general objectives of the retaliatory tax statute or impose any burdens that

are in excess of or inconsistent with the statute. The retaliatory tax statute is designed to equalize

burdens imposed on Texas-based insurers by foreign states and the burdens imposed by Texas on

foreign-based insurers. The rule and the Comptroller’s new interpretation make insurers responsible

for the portion of premium taxes they actually pay. Including what the insurers are actually

responsible for in the retaliatory tax equation does not contravene the objectives of the statute; on

the contrary, it actually enforces the objectives. The fact that insurers may have to pay more as

retaliatory taxes than was required before as a result of including only the amount insurers actually

pay in premium taxes does not impose an additional tax in excess of statutory objectives. Rather,

the new interpretation and rule impose the burden contemplated by the retaliatory tax statutory



                                                  18
scheme. Enacting this rule and adopting the Comptroller’s new reasonable interpretation of the

retaliatory tax scheme, which facilitate the purpose of the retaliatory tax scheme, were not, as

suggested by the appellants, abuses of discretion. See Buddy Gregg Motor Homes, Inc. v. Motor

Vehicle Bd. of the Tex. Dep’t of Transp., 156 S.W.3d 91, 102 (Tex. App.—Austin 2004, pet. filed)

(when determining whether agency abuses its discretion, court must ascertain whether agency “based

its decision on legally irrelevant factors or failed to consider legally relevant factors.”).

                The Comptroller’s interpretation, policy, and rule stating that insurers are not

responsible for the full 100% of the tax because agents give insurers their share of the tax when they

give an insurer 15% of the premium collected are reasonable and do not conflict with the plain

meaning of either the retaliatory or premium tax statutes. On the contrary, they specify exactly what

section 8(b) of the premium tax statute requires: the insurer receiving “the premium tax due on the

agent’s portion” through the division of premium between agents and insurers. Accordingly, we

overrule appellants’ first two issues on appeal.


Comptroller’s Application of Retaliatory Tax Statute is Constitutional

                In addition to arguing that the Comptroller’s new interpretation is incorrect,

appellants also assert that the Comptroller’s application of the retaliatory tax is unconstitutional

because it violates the equal protection clause. Specifically, appellants insist that the retaliatory taxes

imposed under the Comptroller’s new interpretation unlawfully raise revenue for the state at the

expense of foreign insurers, exceed the “relatively modest” amount of revenue raised under the

California retaliatory tax scheme found constitutional in Western and Southern Life Insurance, and

do not serve the purpose of promoting the interstate business of domestic insurers by deterring other


                                                    19
states from enacting discriminatory taxes. See Western & S. Life Ins. Co., 451 U.S. at 668-72; see

also Metropolitan Life Ins. Co. v. Ward, 470 U.S. 869, 882 n.10 (1985) (state may not impose

“discriminatorily higher taxes on nonresident corporations solely because they are nonresidents.”).

Appellants urge the court to interpret Article 21.46 as requiring insurers to include 100% of the

premium tax paid in the retaliatory tax calculation in order to avoid the alleged constitutional

infirmities. See Brady, 795 S.W.2d at 715; Tex. Gov’t Code Ann. § 311.021(1) (West 2005); Ex

parte Elliot, 973 S.W.2d 737, 742 (Tex. App.—Austin 1998, pet. ref’d).

                  Alternatively, if the court determines that the Comptroller’s interpretation is the only

permissible interpretation, appellants contend the court should declare the entire retaliatory tax

statute unconstitutional because it imposes retaliatory taxes on foreign-title insurers that exceed the

aggregate tax burden that would be imposed on a comparable Texas insurer doing business in the

foreign state.5

                  The equal protection clause of the United States Constitution forbids states from

denying to any person located within the jurisdiction of the states equal protection of the law. See

id. at 656-57. Similarly, the Texas Constitution also guarantees equal rights to all persons. Tex.

Const. art. I, § 3. When determining whether a tax is unconstitutional, courts must look to the

substance of the tax and not the form of the tax. See Hanover Fire Ins. Co. v. Harding County, 272

U.S. 494, 509-10 (1926) (court must regard substance not form for determining whether tax



        5
          Additionally, appellants insist that the Comptroller’s interpretation would cause other states
to retaliate against Texas-based insurers, which would be detrimental to both foreign and domestic
insurers. However, it is not within the purview of this court to consider what other states may or
may not do as a result of the Comptroller adopting this new interpretation. It is for the legislature,
not the courts, to consider the possibility of other states’ reactions when enacting legislation.

                                                    20
constitutional, and test is “in the operation and effect of the law as applied and enforced by the state”

(quoting St. Louis S.W. Ry. Co. v. Arkansas, 235 U.S. 350, 362 (1914))). Based on this premise,

appellants insist that, regardless of whether the insurer or the agent is technically liable for the 85%

of the premium tax, the Comptroller’s interpretation imposes financial burdens on foreign insurers

doing business in Texas that greatly exceed the financial burdens imposed on Texas insurers in the

foreign state. Specifically, appellants contend that, because insurers will be allowed to include only

15% of the premium tax in the retaliatory tax calculation, foreign insurers will have to pay the

difference between 15% of the premium tax imposed by Texas and the total premium tax the foreign

state imposes, which would lead to foreign insurers paying significantly larger taxes than a

comparable Texas insurer engaged in business in the foreign state.

                However, we do not agree with the appellants’ characterization of the Comptroller’s

interpretation. Because the Texas retaliatory statute applies only to foreign insurers, the equal

taxation test applicable to retaliatory taxes requires a determination of whether the distinction

between foreign and domestic insurers is rationally related to a legitimate government purpose.

Western & S. Life Ins. Co., 451 U.S. at 657.6 Generally speaking, retaliatory taxes are constitutional

and raise minimum amounts of revenue. Id. at 669-70. Retaliatory taxes are applied to foreign

insurers for the purpose of deterring other states from imposing excessive taxes against domestic

insurers, or alternatively, to compensate for higher out-of-state tax obligations imposed on Texas

insurers, which serves a legitimate governmental purpose. Id. at 668-72.



        6
         Contrary to appellants’ assertions, the test of the constitutionality of a retaliatory tax is not
whether a retaliatory tax has increased or decreased over time, nor is the test whether the tax raises
revenue. All taxes raise revenue, including the previous retaliatory tax statute.

                                                   21
                Under the Comptroller’s interpretation of the retaliatory tax scheme, title agents remit

85% of the premium tax to title insurers. Appellants assert that by allowing foreign insurers to

include only 15% of the premium tax in the retaliatory tax calculation, the Comptroller is imposing

retaliatory taxes on foreign-title insurers that exceed the aggregate financial burden imposed on

comparable Texas insurers doing business in the foreign state. The Comptroller’s interpretation

allows foreign insurers selling title insurance in Texas to include only the portion of the premium

tax they actually pay in the retaliatory tax calculation. It compares a foreign title insurer’s aggregate

financial obligations in Texas to a Texas insurer’s aggregate financial obligations in a foreign state;

it then requires a retaliatory tax from a foreign-based insurer only if its Texas counterpart pays more

in the foreign state, and requires, as payment in retaliatory taxes, the amount that would equalize the

financial burdens on foreign insurers doing business in Texas and Texas insurers doing business in

the foreign state. Accordingly, the Comptroller’s interpretation serves the legitimate state purpose

of deterring other states from imposing excessive taxes against Texas insurers. Therefore, both the

retaliatory tax statute and the Comptroller’s application of the retaliatory tax scheme are

constitutional. Compare Western & S. Life Ins. Co., 451 U.S. at 674 (California retaliatory tax

statute constitutional), with Ward, 470 U.S. at 878, 882 (statute unconstitutional that gave domestic

companies preferential treatment and burdened all foreign corporations regardless of what foreign

states did).

                Appellants further insist that because the Comptroller’s current interpretation of

article 9.59 has not been consistently and uniformly applied by the Comptroller, then the

Comptroller’s current interpretation is not entitled to judicial deference, and the Comptroller should



                                                   22
be required to return to the previous interpretation. See Texas Citrus Exch. v. Sharp, 955 S.W.2d

164, 170 (Tex. App.—Austin 1997, no pet.) (courts do not defer to administrative construction that

deviates from clear and express provisions of statutory scheme, and courts give greater deference to

agency interpretation that is long-standing and applied uniformly). However, just because the

Comptroller uniformly enforced a statute until a certain date and then uniformly enforced the statute

in a different manner does not mean there is a constitutional violation, especially where, as the

Comptroller asserts, all the taxpayers have been treated equally since the new interpretation was

adopted. See generally Grocers Supply Co., Inc., 978 S.W.2d 638 (Tex. App.—Austin 1998, pet.

denied). In the Comptroller’s summary judgment evidence, she demonstrated that the new

instructions have been consistently applied to audits conducted since 2000, which includes report

years since 1996.

               Further, taxpayers do not acquire a right to pay less in taxes because they have been

charged lower taxes in the past or because a tax policy was incorrectly implemented. See id.

(Comptroller changed previous interpretation of tax statute, and grocery store applied for refund of

sales taxes previously paid; however, Comptroller changed interpretation of tax statute back to

previous interpretation, and court held grocery store not entitled to refund). Past omissions by the

Comptroller will not serve as a bar to the Comptroller enforcing the statute and from imposing the

correct financial obligation on title insurers. See Sharp v. House of Lloyd, Inc., 815 S.W.2d 245, 249

(Tex. 1991) (Comptroller did not enforce part of franchise tax statute for thirteen years, but supreme

court held prior non-enforcement could not prevent Comptroller from properly collecting taxes due

as required by statute).



                                                 23
               Title insurers are financially obligated to pay 15% of the tax due on premiums. This

requirement is mandated by the premium and retaliatory tax statutes and by the Comptroller’s

interpretation of these statutes. Requiring insurers to include only the 15% of the premium tax they

actually pay does not render the retaliatory tax scheme unconstitutional. Because we conclude that

the retaliatory tax statutory scheme and the Comptroller’s application of it are constitutional, we

overrule appellants’ third issue on appeal.


                                         CONCLUSION

               The Comptroller’s interpretation of the premium tax and retaliatory tax scheme is

reasonable and does not contradict the plain meaning of either the retaliatory tax or the premium tax

statutes. Further, the Comptroller’s application of the two statutes is constitutional. Accordingly,

the district court did not err in granting the Comptroller’s motion for summary judgment and in

denying appellants’ motion for summary judgment. Therefore, we overrule appellants’ three claims

and affirm the judgment of the district court.




                                                 David Puryear, Justice

Before Justices B. A. Smith, Puryear and Pemberton

Affirmed

Filed: June 3, 2005




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