Intermountain Title Guaranty Co. v. State Tax Commission

This proceeding is here to review a decision of the Utah State Tax Commission finding there is a deficiency of $408.17 due from plaintiff for taxes on total premiums received from title insurance policies issued by it.

No transcript of the proceedings in the hearing held before the commission has been filed, instead the plaintiff and the commission have entered into a stipulation of the facts adduced at the hearing and this has been filed as part of the record. From this stipulation it appears that plaintiff is a Utah corporation which has for more than ten years engaged in the title insurance business in Utah and other western states and has issued policies of title insurance on property located in Utah. During all this time it has regularly paid to the State of Utah a premium tax based on 20% of its total receipts paid by customers for the services rendered by the company in and for the issuance of title insurance policies. The company books show a division of 80% of such receipts allocated to "Searching and Abstracting" and 20% to "Title Insurance." The company has agents in Utah other than in Salt Lake County and the standard agreement of the company is that 80% of the total premiums received from the customer will be paid these agents or agencies for services rendered in searching and abstracting the title, the remaining 20% being retained by the company to cover the insurance feature of the business. The company has its own abstracting and title research departments in Salt Lake, Ogden and Provo and retains for these departments 80% of the total premium received from the customer and remits only 20% to the general office for the title insurance feature of the business. The company's president testified that the cost of searching and examining titles amounted to 80% of the total premiums paid by customers and this was generally true in other states. This company has for more than ten years paid its premium tax on a basis of 20% of the total customers receipts. The tax commission has not assessed a deficiency for a period prior to 1939, but only from 1939 to 1941, inclusive.

It is plaintiff's contentions that prior to 1939 when the state legislature again amended Sec. 43-3-7, R.S.U. 1933, which is the section which deals with taxation of insurance companies, the tax commission had interpreted "gross premiums," as used in that section, to mean total customer receipts less the cost of searching and examining the titles, and that this interpretation was given this phrase to conform with the definition of that phrase in Sec. 9, Chap. 48, Laws of Utah 1937, now 43-14-9, U.C.A. 1943, wherein this phrase is so defined with reference to the title insurance companies. That the amendment of 1939 in changing the body of the act to read "total premiums" instead of "gross premiums" caused the tax commission to find a deficiency due and that this finding is error because the 1939 amendment is unconstitutional in that it violates Sec. 23, Art. VI of the Constitution of the State of Utah because it contains more than one subject.

Sec. 43-3-7, R.S.U. 1933, as amended in Chap. 40, Laws of Utah 1935, reads:

"All insurance companies engaged in the transaction of business in this state shall annually, on or before the thirty-first day of March in each year, pay to the state tax commission two and one-fourth per centum of the gross amount ofpremiums received on business in this state * * *." (Italics ours.)

In 1939, the state legislature again amended this section to read:

"All insurance companies engaged in the transaction of business in this state shall annually, on or before the thirty-first day of March in each year, pay to the state tax commission two and one fourth per centum of the total premiums received from insurance covering property or risks located in this state * * *." (Italics ours.)

The titles of the amendments of 1935 and 1939 of Sec. 43-3-7, R.S.U. 1933, are identical except that the amendment of 1935 refers to amending Sec. 43-3-7, R.S.U. 1933, and the amendment of 1939, which is Chap. 55, Laws of Utah 1939, contains in addition a reference to the 1935 amendment. These titles read:

"Taxation of Insurance Companies.

"An Act to Amend Section 43-3-7, Revised Statutes of Utah, 1933, Relating to the Annual Statement and Tax of Insurance Companies; Providing That All Insurance Companies Licensed to Transact Business in This State Shall Be Required to File an Annual Statement of Gross Premiums and Be Required to Pay a Tax Thereon." (Italics ours.)

Plaintiff contends that inasmuch as the 1939 amendment provides for taxation based on total premiums whereas the title of that amendment refers to a requirement of a statement by insurance companies on "gross premiums," that portion of Sec. 23, Art. VI, of the Constitution of the State 1, 2 of Utah which provides that "* * * no bill shall be passed containing more than one subject, which shall be clearly expressed in its title," is violated, especially since "gross premiums" as applied to title insurance companies has been defined by the legislature in Sec. 9, Chap. 48, Laws of Utah 1937, to be the total amount collected for a policy less the cost of making the search and examination of the title. Plaintiff argues that in view of the above the change in the body of the 1939 amendment to read "total premiums" when the title refers to "gross premiums" is a fatal variance in the subject matter, unless "total premiums" is construed to mean "gross premiums" as defined in Sec. 9, Chap. 48, Laws of Utah 1937, now 43-14-19, U.C.A. 1943. We find no merit to this contention. This court had decided numerous times that if the amendatory act refers by the number to the section of the law to be amended and declares that it is being amended, the constitutional provision is satisfied, as long as the amended act contains subject matter which could have been included in the original act under its title. See Edler v. Edwards, 34 Utah 13,95 P. 367; Salt Lake City v. Wilson, 46 Utah 60,148 P. 1104; State v. McCornish, 59 Utah 58, 201 P. 637; Salt LakeUnion Stock Yards v. State Tax Commission, 93 Utah 166,71 P.2d 538. The subject matter of Sec. 43-3-7, is taxation of insurance companies. It is self-evident and needs no argument that the change made by the legislature in 1939 whereby the tax is based on total premiums received from insurance rather than on gross premiums on business done by the insurance companies is germane to the subject of the title and does not violate the prohibition of Sec. 23, Art. VI, of the Constitution against dual subjects being contained in one bill.

Plaintiff further contends that because of the peculiar nature of title insurance business which makes it necessary for 80% of the total customer receipts to be expended on title search and examination, Sec. 43-3-7, Laws of Utah, 1939, requiring the tax to be on total premiums, should be interpreted 3, 4 to mean the same as "gross premiums" as defined in Sec. 9, Chap. 48, Laws of Utah 1937, now 43-14-9, U.C.A. 1943, because any other interpretation would be confiscatory. This section reads:

"Every title insurer shall annually set aside ten per cent of its gross premiums as a reserve fund. Such sums shall be allowed to accumulate until a fund is created equal in amount to twenty-five per cent of the aggregate of the subscribed capital stock of the insurer. Such fund shall be known as the ``title insurance surplus fund' and shall take the place of the reserve fund referred to in section 43-3-14, Revised Statutes of Utah, 1933. Gross premiums as herein referred to shall consist of the total amount collected for the policy less the cost of making the search and examination of the title." (Italics ours.)

It is apparent that the definition of "gross premiums" as used in the foregoing section refers to the fund which is the subject matter of this section and is not meant to be a general definition of the term "gross premiums" as applied to title insurance companies. The wording of Sec. 43-3-7, as amended in 1939, is plain and unambiguous. It requires a tax on total premiums. Total is defined in Webster's New International Dictionary as: "Comprising or constituting a whole; whole; undivided; lacking no part; entire; * * *."

The fixing of tax rates is a legislative function and not that of this court. We cannot subscribe to plaintiff's contention that the rate as fixed is confiscatory, especially in view of the provision in Sec. 43-3-7, that: "The taxes and 5, 6 fees as provided herein shall be in lieu of all other state, county and municipal licenses and fees of every kind and character."

The decision of the tax commission is affirmed. Cost to defendant.

WOLFE, C.J., and McDONOUGH and TURNER, JJ., concur.