Hon. William A. Harrison                         Opinion   No. WW-525
Commissioner   of Insurance
State Board of Insurance                         Re:   Proper interpretation    of
Austin, Texas                                          Article 21.46, Texas
                                                       Insurance Code--retalia-
Dear   Sir:                                            tory statute.

        You have requested    an opinion of this office concerning the
proper construction  of Article 21.46 of the Insurance Code, Acts
55th Leg., R.S. 1957, p. 1184, ch. 396, Sec. 1. This article provides:

                   “Whenever by the laws of any other state or
         territory   of the United States any taxes, licenses,            fees,
         fines, penalties,   deposit requirements           or other obliga-
         tions, prohibitions     or restrictions      are imposed upon
         any insurance company organized             in this State and li-
         censed and actually doing business            in such other state
         or territory which, in the aggregate            are in excess of
         :fzsagdgregate of taxes, licenses,        fees, fines, penal-
                 eposlt requirements       or other obllgatlons,       pro-
         hibiiions or restrictions      directly    imposed upon a simi-
          lar insurance company of such other state or territory
         doing business in this State, the Board of Insurance
          Commissioners      of this State shall impose jupon any
          similar company of such state or territory              in the same
          manner and for the same purpose,             the same taxes, li-
          censes, fees, fines, penalties,       deposit requirements         or
          other obligations,   prohibitions      or restrictions;     pro-
          vided, however, the a gre ate of taxes, licenses,              fees,
          fines, penalties or oaations                   imposed by this
          State pursuant to this Article 21.46 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 actually licensed and doing business therein;
          . . .”

          In your opinion    request    you state:

                   “We find it quite difficult to find the ‘aggregate’
          of such diverse items as taxes, licenses,        fees, fines,
          penalties, deposit requirements,      obligations,    prohibi-
          tions or restrictions.    It is much like trying to find the
          aggregate of apples, oranges,      bananas, potatoes and
          tomatoes.
Hon. William   A. Harrison,    page 2 (WW-525)



                 “We are of the opinion that the only practical
        construction    and interpretation    of the statute is that
        each enumerated      item contained in the statute must
        be viewed and computed separately,          determine the
        aggregate of such separate item, and apply the re-
        taliatory law to each separate item.         In other words,
        it is our opinion that proper construction         of the stat-
        ute would be to consider and total all taxes as such,
        determine the aggregate       of the taxes, and then apply
        the retaliatory   law to these taxes.      We would then
        consider all licenses     to determine    the aggregate of
        such licenses,    and apply the retaliatory      law to li-
        censes.    A similar procedure      would then be used
        with respect to each of the other items enumerated
        and mentioned in Article 2 1.46.”

         Your first question is whether this interpretation   is correct.
It is the opinion of this office that the construction as stated is in-
correct,

         The legislative     history of this article is pertinent:      In 1909
the Legislature      enacted a statute which was designated as Article
4758, V.C.S. (Acts 1909, p, 192, $ 29 as amended in Acts 44th Leg.,
 1935, p. 713. ch. 307, $ 1) which was also a retaliatory           act. Article
4758 did not expressly       require an “aggregate”       method of computa-
tion; however, the Attorney General in Opinion No. 0-1997-A               ap-
proved July 11, 1940, held that a construction           of the statute compar-
ing fees against fees, taxes against taxes, penalties against penalties,
was erroneous       and the total or aggregate     of all taxes, fines, penal-
ties, fees and other charges imposed by the foreign state should be
compared    with the aggregate       imposed by the Texas law on a foreign
corporation    for the purpose of applying the act. Although Article
4758 was repealed in 1951 (Acts 1951, 52nd Leg., p, 868, ch. 491,
 5 4) substantially    identical language to that of Article 4758 was in-
corporated    in House Bill 278, Section 1 (later enacted as Article
 21.46) when it was introduced.         The word “aggregate” was later
 added by committee        amendments     and by House floor amendments
 (Daily House Journal, pp. 2407. 2409. April 29, 1957) which incorpo-
 rated substantially     the language now set out in the text of Article
 21.46.   Therefore,     the construction   placed by our former opinion
would apply to the bill as it was originally         introduced and the addi-
 tion of the amendments would further militate for the construction
 set out in Attorney General’s        Opinion 0-1997-A.

         Many other states have retaliatory      statutes which are similar
in language as well as in nature.      The cases hold that the purpose of
the retaliatory   statutes is to provide that an insurance corporation
incorporated    under the laws of the retaliating    states can enter into
and operate in other states on parity with their domestic insurance
Hon. William     A. Harrison,    page 3 (WW-525)



corporations.      They are calculated       to equalize the burden a foreign
corporation     must carry with that imposed by the state of its domi-
cile upon a domestic       corporation     of the retaliating    state doing busi-
ness in that foreign state.        The statutes are based on the principle
of comity between the states.          State v. Reinmund, 45 Ohio State 214,
 13 N.E. 30 (1887). Lie and Casualty Insurance Company of Tennessee
v. Coleman,      233 Ky. 350, 25 S W 2d 748 (1930) timployers              Casualty
Company v. Hobbs, 149 Kansa; ;74, 89 P.2d 9i3 (1939) Occidental
Life Insurance Company v. Holmes,              80 P.2d 383 (Mont&a Sup.Ct.
 1938) Pacific Mutual Life Insurance Company v. State, 161 Wash.
 135. i96 P. 813 (1931).        Thus, the statute is designed to place on the
foreign corporation       coming into Texas a burden equal to the burden
imposed by the state of such foreign corporation’s               domicile upon any
similar    Texas insurance company licensed to do business and actually
doing business in the foreign, state.          It is the total and ultimate effect
 of the “taxes, licenses,      fees, fines, penalties,     deposit requirements      or
other obligations,      prohibitions    or restrictions”     directly imposed by
the foreign state upon a similar Texas corporation                which must be com-
pared with the total and :iltimate effect of the “taxes, licenses,             fees,
 etc.,” which would be directly imposed            by the Texas statutes other
than Article 21.46 .Ipon the foreign insurance             company.     An item by
 item comparison       of the aggregate taxes with aggregate taxes, aggre-
 gate fees with aggregate fees, etc. does not total burdens.               While the
 aggregate    taxes imposed by the foreign state might exceed the aggre-
 gate taxes imposed by Texas in the absence of Article 21.46, the ag-
 gregate fees imposed by the foreign state might be so much less than
 the aggregate fees imp,osed by Texas so that the excess of the aggre-
 gate Texas fees over the aggrega.te foreign fees vyozid exceed the ex-
 cess of the aggregate foreign        tax over the aggregate         Texas tax. The
 construction     suggested by your department          wcl;ld not allow for this
  offset and would not be a comparison           of the total burdens with an aim
 towards equalizing them, and thus would not be in harmony with the
 purposes     of the stakte.

          In the case’ of Employers    Casualty Company v. Hobbs, 149
Kansas 774. 89 P.2d 923, 926 (1939). the Court exoresslv         reiected a
construction    of the Kansas statute in the manner your opinion request
suggests    is the proper construction    for the Texas statute.   The Court
stated:

                  “There can be no equalization    of the burden
          unless the taxes levied or the obligations   imposed are
          the same in the aggregate.”

           The Court in that case held that the total of fees, taxes, li-
 censes,    etc., shoald be aggregated    or totaled. The Kansas statute
 significantly    does not expressly   require aggregation.

          Occidental   Life Insurance Company v. Holmes, 80 P.Zd 383
 (Sup.Ct.Mont.    1938). concerned   the construction of the Montana statute.
.‘.




Hon. William         A. Harrison,   page 4 (WW-525)



The issue was whether the statute should be applied at all. The
company contended the proper construction was one involving a
totaling of all exactions imposed. The Court in upholding the com-
pany’s position said:

                       “To arrive at a fair and equitable adjust-
              ment and to give the statute such an effect, the
              total exactions must be taken into account irre-
              spective of how such exactions   may be character-
              ized or named.‘

           The Maryland statute, apparently,         has also been construed
 to require computation       of the total or aggregate of ‘taxes, fees,
 fines, penalties,   licenses,     deposit requirements     or other obligations,
 prohibitions    or restrictions’.      See 38 Opin. A.C. 202, Dec. 21, 1953,
 wherein examination       fees of a Texas corporation       doing business in
 Maryland paid to the Maryland Department of Insurance were allowed
 as an offset against the retaliatory        tax calculated   on the base of the
 excess    of Texas tax over Maryland tax; and see also 39 Opin. A.G.
  191, Sept. 7, 1954, which allows an offset the cost of publication of an
  annual statement against the retaliatory         tax.

               In Arizona the Attorney General (Opin. 56-l 19, dated July 3,
      1956) has held that their retaliatory    statute and the use of the phrase
      “aggregate    . ~. requirements  or  other  obligations   , . . directly im-
      posed upon similar insurers . D . ”, is conclusive      that the intent of the
      Legislature    was to allow for all burdens directly imposed upon com-
      panies to be deducted.

               We recognize  the administrative  difficulties involved in mak-
      ing such a comparison.    We also recognize    that a comparison   of the
      total of all burdens was intended by the Legislature    instead of the
      method presently used.

                 Your second question is predicated   upon a negative answer to
      the first.    You ask us as to the proper interpretation  and construction
      of the statute.    Because there is no specific fact situation submitted
      with the request, we will not be able to answer the question.

               We recognize   that a foreign state may impose on a Texas com-
      pany a burden such as a recommendation        that the company be licensed
      in doing business in Texas for five years prior to its admission to the
      foreign state.   Since we have declined to answer your second question,
      this opinion should not be construed as prescribing      how burdens such
      as this, which by their nature may not be capable of being reduced to
      a common denominator       with other burdens for the purpose of compari-
      son. should be treated when applying Article 21.46 except to say that
      the present interpretation    of the Department of Insurance is incorrect.
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          Hon. William               A. Harrison,       page   5 (WW-525)




                  In your third question you inquire as to the data and time when
          such items are to be aggregated.    The statute is silent insofar as this
          matter is concerned.   Article 21.46 and Senate Bill 222, Acts 55th Leg.,
          R.S. 1957. p. 1454. ch. 499, when construed           together vest enforcement
          of Article  21.46 in the State Board of Insurance and direct that the du-
          ties therein set out be executed and carried           out by the Commissioner
          of Insurance who acts under the supervision            and rules and regulations
          of the State Board of Insurance.          (Art. 1.04(b) and Art. 1.09(a))   Senate
          Bill 222 empowers        the State Board of Insurance to make rules and
          regulations    for the purpose of carrying       out its duties and functions.
          (Art. 1.04(c))    It is our opinion that this is a matter lying within the
          sound discretion      of the State Board of Insurance and the Commissioner
          and may properly       be resolved by adoption’of       appropriate rules and regu-
          lations; provided,     however, that the rules and regulations       conform to
          the language and purposes         of Article 21.46 and other applicable     statutes.

                    In your opinion              request       you state:

                              “As mentioned above, Article 21.46 became ef-
                    fective on January 1, 1958. As we understand Attorney
                    General’s    Gpinion dated August 16, 1949, written by
                    Assistant    Attorney General Ned McDaniel to the Honor-
                    able George B. Butler, Chairman of the Board of Insur-
                    ance Commissioners,        and Attorney General’s   Opinion
                    dated December       3, 1936, appearing in book 374, page
                    496, written by the Honorable W. W. Heath,to the Hon-
                    orable R. L. Daniel, Chairman of the Board of Insurance
                    Commissioners,       the taxes which are now due from for-
                    eign casualty and fire companies       under Article 7064,
                    Revised Civil Statutes, would be subject to the retalia-
                    tory law. These same opinions lead us to the concl-sion
                    that taxes now due from foreign life insurance companies
                    under Article 4769, Revised Civil Statutes, would not be
                     subject to the retaliatory    law.”

                    Your final question is whether the present              interpretation   and
          construction   of these opinions and the construction               of Article 21.46 is
          correct.

                    We have carefully examined the opinions referred        to, together
          with the present text of Article 4769 and Article 7064, Vernon’s          Civil
          Statutes.   It is the opinion of this office that basic features of both of
          these tax statutes have not been changed since the issuance of these
          two opinions.     The principles  stated in those opinions are still appli-
          cable.    Therefore,  since the gross premium tax levied under Article
          7064 is an occupation tax for the privilege      of doing business in this
          State, payable in advance, the tax presently      due under this article
          would be a tax for doing business during 1958, subsequent to the ef-
          fective date of the retaliatory   act. Accordingly,     these taxes should
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Hon. William   A. Harrison,   page 6 (WW-525)



be taken into consideration  in applying the retaliatory   act. In con-
trast, the taxes now due under Article 4769 are imposed for doing
business  in 1957 prior to the effective data of the retaliatory  act
and should not be taken into consideration   in applying the retaliatory
act.

                                    SUMMARY

                 The Retaliatory     Act, Article 21.46, requires
                 a comparison     of total burdens imposed by
                 Texas laws on a foreign insurance company
                 with the total burdens imposed by the State
                 of its domicile upon similar Texas corpora-
                 tions licensed to do business and actually
                 doing business in the foreign state; accord-
                 ingly, the method of “‘aggregating” the items
                 enumerated     in Article 21.46 that are set out
                 in the opinion request are incorrect.       The
                 date and time on which these vari.ous items
                 are to be aggregated rest within the discre-
                 tion of the State Board of Insurance and may
                 be determined     by rules and regulations.     The
                 Retaliatory   Act should be applied to the taxes
                 now due p,ursuant to Article 7064, Vernon’s
                  Civil Statutes, but should not be applied to
                 the taxes now due under Article 4769, Vernon’s
                  Civil Statutes.

                                            Very txly        yozs,

                                            w ILL w ILSON
                                            Attorney Gene


 WPF:lm                                     BY

 APPROVED:                                       Assistant

 OPINION    COMMITTEE:

 Geo.   P. Blackburn,   Chairman

 J. C. Davis, Jr.
 Tom I. McFarling
 L. P. Lollar

 REVIEWED FOR THE ATTORNEY              GENERAL
 BY:
      W. V. Geppert
