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(148 N.E.)

tum, as is argued, that the tax levied on the net receipts of such foreign insurance companies was not a property tax, but was assessed on the business of insurance done; that the regulations relating to personal property tax had no application to the tax there provided. It was also held that there existed in the Legislature power and authority to adopt the methods prescribed by which the amount of the tax is to be determined. In People v. Barrett, supra, it was again held that the tax on net receipts of foreign insurance companies is not a personal property tax, and not entitled to be scaled or reduced. It was also there held that section 30 is not unconstitutional, as violating section 10 of article 9 of the Illinois Constitution, requiring uniformity of taxation, and that since the tax was not a property tax, but a tax on the business of insurance done, it does not violate section 1 of article 9 of the Constitution.

ders of this state. Alpena Cement Co. v. Jenkins & Reynolds Co., 244 Ill. 354, 91 N. E. 480; Raymond v. Hartford Fire Ins. Co., 196 Ill. 329, 63 N. E. 745; Hartford Fire Ins. Co. v. City of Peoria, 156 Ill. 420, 40 N. E. 967; Walker v. City of Springfield, 94 Ill. 364; Western Union Telegraph Co. v. Lieb, 76 III. 172; Ducat v. City of Chicago, 48 Ill. 172, 95 Am. Dec. 529; People v. Thurber, 13 Ill. 554; Western Union Telegraph Co. v. Kansas ex rel. Coleman, 216 U. S. 1, 30 S. Ct. 190, 54 L. Ed. 355; Paul v. Virginia, 8 Wall. 168, 19 L. Ed. 357.

[3] It is not contended that the Legislature of this state may not levy such privilege tax as it chooses without regard to the constitutional provisions compelling uniformity and equal protection of the laws, but it is said that the tax here involved, having been held to be a tax on business, cannot be considered a privilege tax. This is a misconception of the term "tax on business." HavAppellant contends that, if the Barrett ing a right to prohibit a foreign corporation Case is right in holding that the tax in ques- from entering the state to do business, it foltion in that case is a tax on insurance busi- lows that the Legislature may exact such ness done in the state, then such tax is a compensation for that privilege as it sees property tax, and not an excise tax, and that, fit, and levy the same in any manner or by since this is so, the act, which requires for- any method it chooses. The tax provided eign fire insurance companies to pay this tax, by section 30 does not purport to be a propwhile foreign casualty companies and domes-erty tax. Net receipts, of course, are pertic fire insurance companies are not required to pay the same, is void, as against the uniformity clause of section 1 of article 9 of the state Constitution, and in violation of the equal protection clause of the Fourteenth Amendment to the Constitution of the United States. It is said that, this court having held that this is a tax on business, either a logical or legal possibility of its being considered a privilege tax is precluded; that a privilege tax was by the act of 1919, hereinbefore referred to, levied as the consideration for the privilege of coming into the state to do business, while a tax on business is that levied after the insurance company has been allowed to do business in the state, and is therefore levied on the property of a person within the state, and, whether it be considered a property tax or a business tax, it is under either view subject to the constitutional requirement of uniformity, and is not in any view a privilege tax, such as is authorized by the latter clause of section 1 of article 9 of our Constitution, empowering the Legislature to tax "insurance, telegraph and express interests or business."

sonal property. The right given to the Legislature to provide for the levying of taxes on property requires that the property be valued by an assessor or some person provided by the law to fix the valuation thereof. The Revenue Act (Smith-Hurd Rev. St. c. 120), in compliance with this mandate, provides that the assessor fix the value of such personal property as of the 1st day of April. It will be noted that, under section 30 complained of, the net receipts of foreign insurance companies, such as appellant, are not to be valued by an assessor or other authority, nor is the assessment to be based on property having a situs in this state on April 1. In fact, it is not required that the net receipts acquire or retain a situs in this state at any time. It is a tax on the amount of business done, and for the privilege of continuing in such business and the net receipts of such business are used as the basis of determining that tax. Such net receipts and the method prescribed constitute the thing and the means by which is to be determined the amount which foreign fire, marine, and inland navigation insurance companies shall [2] The General Assembly has power to pay to the state, and to the various municiprescribe the terms and conditions upon palities included in the act, as compensation which foreign corporations, other than cor- for the right to do business in the state and porations engaged in interstate commerce in such municipalities. Section 30 provides and those constituting instrumentalities of that this tax shall be "in lieu of all town the United States government, shall be al- and municipal licenses," except for the suplowed to do business in this state. The Leg- port of organized fire departments. No conislature has, if it desires to use it, power to stitutional prohibition exists against such prevent foreign corporations from entering a tax as a condition to the right to do busior transacting any business within the bor-ness. A tax on business, as provided in this

certificate cannot be lawfully issued without such showing. This act provides no other means of collecting such tax, and no reference is made for its collection.

act, is not, as argued, to be distinguished | plied with the requirements of section 30 with from a privilege tax. Considered as either, reference to the payment of this tax. Such it is a tax on the right to do business in this state, and is subject to no constitutional limitations, except that it be "uniform as to the class on which it operates." Walker v. City of Springfield, supra; People v. Thurber, su- That it was the intention of the Legislapra; Pembina Mining Co. v. Pennsylvania, ture that the payment of this tax be made a 125 U. S. 181, 8 S. Ct. 737, 31 L. Ed. 650; condition upon which the business of fire Scottish U. & M. Ins. Co. v. Herriott, 109 insurance may be continued in this state by Iowa, 606, 80 N. W. 665, 77 Am. St. Rep. 578. a foreign insurance company is further The fact that a tax is a privilege tax does shown by an act entitled “An act providing a not necessarily require that it be paid as a penalty for a violation of section 30 of an act condition precedent to entering the state. entitled 'An act to incorporate and govern Such a condition, being precedent, could, of fire, marine and inland navigation insurance course, be met but once. However, the great- companies doing business in the state of Illest financial benefit to such a company flows inois,' approved and in force March 11, 1869," from the continuation of the privilege to do approved June 22, 1893. Smith's Stat. 1923, business. Compensation for that privilege p. 1157. The first section of that act deshould be based on the benefits actually de- clares that any foreign insurance company rived from the business done under such coming under the provisions of the act of privilege, and such compensation must nec- 1869, authorized to do insurance business essarily be assessed in some manner after in this state, which places risks or policies the business is done and the benefits thereof received. Section 30 provides the method by which the amount of this compensation shall be determined and assessed.

of indemnity upon property located in this state in any other manner except through its regularly authorized agents, shall be deemed to have violated section 30 of the Fire, Marine, etc., Act herein referred to. By section 2 of that act any company so violating section 30 shall have its authority to transact business in the state revoked by the auditor of public accounts for a period of not less

Counsel for appellant argue that the fact that the act requires that these net receipts shall be entered on the same tax lists and be subject to the same rate of taxation, for all purposes, as other personal property is entered and is subject, shows that it is a per-than 90 days, and when so revoked it shall sonal property tax; that its payment is not made a condition to the right to do business in the state; and that it therefore cannot be considered a privilege tax. This is a misconception of the provisions of the statute pertaining to this tax.

[4] Section 22 of the act relating to fire, marine, and inland navigation insurance, aside from specifying certain requirements imposed upon foreign insurance companies seeking to do business in this state, and specifying what shall be necessary to secure the right of entry, further provides:

"Nor shall it be lawful for any agent or agents to act for any company or companies referred to in this section, directly or indirectly, in taking risks or transacting the business of fire and inland navigation insurance in this state, without procuring annually from the insurance superintendent a certificate of authority, stating that such company has complied with all the requisitions of this act which apply to such companies and the name of the attorney appointed to act for the company."

The provisions of section 30 requiring the return of net receipts of this tax are a part of the "requisitions of this act." It is evident, therefore, from the language of section 22 quoted, that before appellant may continue in business in this state its agent shall procure annually from the insurance superintendent of the state or his successor in law, a certificate showing that it has com

not be reissued until such insurance company has shown "complete compliance with the laws of this state governing fire, marine and inland navigation insurance companies," and has shown that all taxes and penalties and expenses due thereunder have been paid. It seems clear, therefore, that this tax is levied as compensation for the privilege of continuing their business in the state.

While the act of 1919, entitled "An act in relation to the taxation of nonresident corporations, companies and associations for the privilege of doing an insurance business in this state," approved June 28, 1919 (Laws

1919, p. 628), imposes an annual state tax equal to 2 per cent. on the gross amount of premiums received by any foreign insurance company during the preceding year, less certain specified deductions, for the privilege of doing business in this state, that fact does not show that the tax imposed on the business of fire insurance by section 30 is not likewise a tax for the privilege of doing business. The act of 1919 requires that the tax there levied be paid to the state. Section 30 requires that the tax be apportioned among the state and the different municipalities of the situs of the agency. A valid reason is seen for this distribution of the tax. The foreign fire insurance company takes its net proceeds largely from the vicinity of its agencies, and it is but just that it return to the municipality in which its

(148 N.E.)

agency is located something in lieu of the panies, when admitted to this state, should taxes that would otherwise be realized from not be required to pay any tax which domessuch net receipts as are taken away. tic insurance companies do not pay, by the same token domestic insurance companies, who pay on all of their property, could justly complain that the Revenue Law as applied to them is invalid, for the reason that it, in effect, does not apply to foreign insurance companies doing a like business in the, state, because such companies, by reason of the withdrawal of their net receipts, are able to escape all, or practically all, property taxation.

The contention of appellant that this tax is void for want of uniformity cannot be sustained.

[5] The power to tax insurance interests or business is expressly conferred by the second clause of section 1 of article 9 of the Constitution. That section also requires that the act of the General Assembly creating such tax shall operate uniformly as to the class to which it applies, and appellant argues that, since domestic fire insurance companies make the same sort of contract, transact the same sort of business, and are likewise doing business within the state, they belong to the same class as foreign fire insurance companies which have been permitted to come into the state, and that therefore a tax [6, 7] Nor is section 30 open to the objeclevied against the latter which the domestiction that it violates the equal protection fire insurance companies do not have to pay is not uniform, as required by the section of the Constitution referred to. Counsel are in error in supposing that for purposes of taxation under this section of the Constitution foreign and domestic insurance companies belong to the same class, because they are doing the same kind of business within this state. There is no reason why insurance companies may not be divided into classes, the very point of distinction in which shall be the domicile of such companies; i. e., whether foreign or domestic. The levying of taxes upon foreign fire insurance companies and not upon domestic companies of the same character, as compensation for the right to do business, is not, therefore, an infraction of this provision of the Constitution. Hughes

v. City of Cairo, 92 Ill. 339; Ducat v. City

of Chicago, supra; Walker v. City of Springfield, supra; People v. Thurber, supra; Insurance Co. v. Bradley, 83 S. C. 418, 65 S. E. 433.

clause of the Fourteenth Amendment to the Constitution of the United States. The portion of the Fourteenth Amendment referred to provides:

"No state shall make or enforce any law which shall abridge the privileges or immunities of the citizens of the United States, nor shall any state deprive any person of life, liberty or property, without due process of law, nor deny to any person within its jurisdiction, the equal protection of the laws."

While a foreign insurance company may be a citizen, it is not a citizen of the state entitled to the equal protection of the laws of that state, as contemplated by the Fourteenth Amendment to the Constitution of the United States, until it has complied with the

conditions which entitle it to come and re

main within the state. The only limitation upon the power of the state to prevent a foreign corporation from doing business within its limits, or to exact condition for

allowing a corporation to do business in the state, arises where the corporation is an instrumentality of the federal government or where its business is strictly commerce, interstate or foreign. Pembina Mining Co. v. Pennsylvania, 125 U. S. 181, 8 S. Ct. 737,

In Home Ins. Co. v. Swigert, 104 Ill. 653, it was held that not only can the Legislature classify insurance companies into domestic and foreign, but may likewise divide foreign insurance companies into classes for purposes of taxation; that such companies 31 L. Ed. 650; Paul v. Virginia, supra; Pen

sacola Telegraph Co. v. Western Union Telegraph Co., 96 U. S. 1, 24 L. Ed. 708; Missouri v. Lewis, 101 U. S. 22, 25 L. Ed. 989; Horn

Silver Mining Co. v. New York, 143 U. S. 305, 12 S. Ct. 403, 36 L. Ed. 164; Home Ins. Co. v. New York, 134 U. S. 594, 10 S. Ct.

593, 33 L. Ed. 1025.

cannot complain of a classification which is made the basis for admitting them into this state, even though such insurance companies are put in different classes, for the reason that the state may exclude them entirely, and therefore, in permitting them to enter, may impose whatever conditions it chooses. Nor is there in this any injustice. Foreign We are of the opinion that there is no eqinsurance companies have or may have inuity in this portion of the bill of appellant, this state on April 1, when assessments on personal property are made, practically nothing of value, while domestic fire insurance companies are assessed for all of their holdings, both real and personal, including their choses in action, little, if any, of which tax THOMPSON and DUNN, JJ. (dissenting). is paid by foreign insurance companies. If The constitutional objections to section 30 it were to be said that section 30 violates the of the act to incorporate and govern fire, uniformity clause of the Constitution, for marine, and inland navigation insurance the reason that foreign fire insurance com- companies doing business in this state, pre

and the superior court did not err in dismiss-
ing the same. The decree of that court will
therefore be affirmed.
Decree affirmed.

involved in the proceeding, manifestly no ruling was made with respect to it. No case is cited in support of the opinion filed where the objection here presented for decision was considered or decided, and we are of the opinion none can be found. It will appear from the discussion which follows that we do not agree with the construction given to section 30 of the act of 1869, nor with the construction given to other acts relating to the business of insurance which bear indirectly on the question before the court.

Our Constitution recognizes a distinction between a tax on the insurance business, which is an occupation tax, and a tax on the corporation using the privilege of doing an insurance business, generally called a franchise tax. In 1919 the Legislature passed an act in relation to the taxation of nonresident insurance companies. This act pro

vides:

sented for decision in this case, have not been presented or decided in any of the cases involving the construction of said section heretofore considered by us. People v. Barrett, supra, was a mandamus proceeding brought by the city of Chicago, an agency of the state which spends public funds raised by taxation, against the board of review of Cook county, a tax-assessing agency of the state. No insurance company or other taxpaying person was a party to that litigation, and therefore the question here presented could not have been presented in the proceeding. The validity of an act can only be questioned by a party to a suit whose interests will be adversely affected by a judgment or decree. Nowhere in the opinion is the question of uniformity discussed, and it is clear from reading the opinion that the question was not there considered by the court. In People v. Kent, supra, the action was a mandamus proceeding brought by the "That each nonresident corporation, compacity of Chicago against the agent of nine- ny and association licensed and admitted to teen foreign insurance companies, which do an insurance business in this state shall, exwere named. The constitutional questions cept as herein otherwise provided, pay an anpresented in this case could have been pre- nual state tax for the privilege of doing an insented in that case, but it is clear that the surance business in this state, equal to two only questions presented by the parties and per centum on the gross amount of premiums decided by the court were whether the tax received during the preceding calendar year on contracts covering risks within this state. involved was a property tax or excise tax✰✰ The tax herein provided for shall be and whether the agent could be compelled in lieu of all license fees or privilege or occupaby mandamus to make the return required tion taxes levied or assessed by any municipalby section 30. The court held specifically ity in this state, and no municipality shall imthat the tax involved was a tax on the busi- pose any license fee or privilege or occupation ness of insurance, which is authorized by tax upon any such corporation, company or asthe second division of section 1 of article 9 sociation, or any of its agents, for the privilege of doing an insurance business therein; of our state Constitution. It was said in but this act shall not be construed * the discussion of the question that this secto prevent the levy and collection of the tax tion of the Constitution requires such tax to authorized by section 30 of an act entitled, 'An be fixed by general law uniform as to the act to incorporate and to govern fire, marine class on which it operates, but whether the and inland navigation insurance companies dotax authorized by section 30 s a uniform ing business in the state of Illinois.'" Smith's tax was not considered, discussed, or de- Stat. 1923, p. 1157. cided.

Other sections of the act provide the method of computing the amount of the annual tax and of collecting it, and section 12 makes the penalty for failing to comply with the provisions of the act a revocation of the li

cense to do an insurance business in this

In Walker v. City of Springfield, supra, the sole question before the court was the validity of a city ordinance imposing a tax based on premiums received by foreign insurance companies. The court expressly held that the tax was one referred to in the state. The title and the body of the act inproviso to section 30, and that the tax men- dicate clearly that this is a franchise tax coltioned in the first part of the section, which lected from foreign insurance companies as is the tax involved in the case at bar, was a compensation to the state for the privilege different tax authorized for a dissimilar pur-granted by it to the company to do an inpose. The only constitutional questions raised by the parties and considered by the court in the Walker Case were that the tax imposed by the ordinance was double taxation, and that it was not uniform. The court held that the tax there under consideration was a privilege tax or license fee, and that it was not double taxation, and that it was uniform on the class on which it operated. No reference was made to the business tax mentioned in the part of section 30 here under consideration, and, such a tax not being

surance business in this state. The provisions of section 1 of the act clearly indicate that it is to be the only franchise tax collected by the state or any of its agencies; but the right of local taxing authorities, granted by other statutes, to collect from such companies an occupation tax and a tax on the real and personal property located within the several taxing districts is specifically preserved.

No reference is made in the title of the act of 1869, of which section 30 is a part,

(148 N.E.)

That the tax on net receipts, to which the provisions of section 30 relate, is not a tax levied as compensation for the privilege of doing an insurance business in this state is no longer on open question. In City of Chicago v. James, 114 Ill. 479, 2 N. E. 475, and in Walker v. City of Springfield, supra, it was held that the portion of section 30 preceding the proviso relates to a tax on the business

to taxation, nor is there any provision in the | particular insurance business shall be subact levying a tax or providing a penalty for jected in the particular taxing district. The the nonpayment of a tax. The act is one "to method of collecting the tax is not fixed by incorporate and govern fire, marine and in- section 30 or any other section of the act of land navigation insurance companies doing 1869. business in the state of Illinois." The first 21 sections of the act relate to the incorporation and government of domestic companies. Section 22 relates to the method by which foreign companies may be admitted to do business in the state and to the government of companies so admitted. Before there is granted to a foreign insurance company the right to do business in this state, section 22❘ requires (1) proof that a certain specified of insurance as distinguished from a fee for capital has been subscribed and paid; (2) the appointment of a resident attorney in fact and the filing of a certificate of such appointment; (3) the filing of a certified copy of its charter and a verified statement showing details of its organization, assets and liabilities; (4) the deposit with the insurance department of securities; and (5) the securing of a certificate of authority for its agents; and its right to continue to do business here depends upon the filing of an annual statement of its financial condition. Compliance with the provisions of section 30 is not made a prerequisite for admission to do an insurance business in this state nor to continue such a business. The action | does not require any act on the part of the company at any time. It requires the agent of a foreign insurance company to return to the proper taxing authorities the amount of the net receipts of his agency.

In order to prevent a circumventon of the legislative intent there was passed in 1893 an act providing a penalty for violation of section 30. This act makes it unlawful for any insurance company to do an insurance business in this state, except through legally authorized resident agents and penalizes any company writing insurance otherwise than through resident agents possessing proper certificates of authority by revoking its license to do business in this state. Smith's Stat. 1923, p. 1157. This statute acts directly upon the foreign insurance companies, and a compliance with the act of 1893 is an additional prerequisite to the right of such companies to do an insurance business in this state. Section 30 acts directly upon the agent of foreign insurance companies, and if such agent fails or refuses to make the return required by the section he may be compelled by mandamus to make the return. People v. Kent, supra. Section 30 does not levy a tax on net receipts or on any other property of foreign insurance companies. It simply requires the agent to return to the proper taxing authorities the amount of the net receipts of his agency for the preceding year, so that the taxing authorities may enter this amount on the tax list for the purpose of determining the amount of tax to which the

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a license to exercise the privilege of conducting an insurance business. In People v. Kent, supra, it was held that this tax is a charge made upon the business of insurance for the purpose of compelling that business to bear its just proportion of the burdens of government. The amount of the net receipts of the business is used as a measure for determining the amount of the annual tax, and the tax is levied without regard to the value of the assets or physical property of the insurance company within the state and without regard to the number of policies issued or the value of the property insured. In People v. Cosmopolitan Fire Ins. Co., 246 Ill. 442, 92 N. E. 922, we held that the tax on net receipts collectible under section 30 is not a fee for a license to do an insurance business in this state. Section 30 does not assume to exact a fee as a prerequisite to the granting of authority to do an insurance business in this state, but it assumes that the authority to do such a business exists independently of its provisions.

There is a clear distinction between the privilege to transact a business within the. limits of a state and the actual operation of the business itself. The one looks to preparation for engaging in the business, and the other is the actual engagement in it. Greene v. Kentenia Corp., 175 Ky. 661, 194 S. W. 820. It is just as clear that there is a distinction between a tax on a particular business and a tax on the person exercising the privilege of engaging in that business. The payment of the latter is a condition precedent to the right to engage in the business, while the former is merely a charge on the business for the purpose of raising revenue for the maintenance of government. The right of a foreign corporation to do business in this state is a privilege, and the tax levied against the corporation as compensation for the right to enter or remain in the state is what is commonly called a privilege or franchise tax. It may be imposed for the grant of a privilege which is never exercised by the licensee. On the other hand, a tax on the business of the corporation is a charge upon the result of exercising the privilege when exercised. This distinction between a busi

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