STATE BOARD OF INSURANCE et al., Petitioners, v. PETROLEUM CASUALTY COMPANY, Respondent, 447 S.W.2d 666

STEAKLEY, Justice. The problem here is whether the investment by Petroleum Casualty Company, Respondent, of $454,268.37 in United States Treasury bills constitutes an investment in Texas securities as contemplated by

Article 7064, entitling Respondent to claim, as to such investment, the tax reducing provisions of the statute in the payment of taxes on gross premiums collected during the year 1965. Respondent sued to recover taxes paid under protest to the extent of an alleged overpayment resulting from the refusal of the State Board of Insurance to recognize the Treasury bills as Texas securities. The trial court was of the opinion that the bills were not Texas securities and entered a take-nothing judgment against Respondent. The Court of Civil Appeals held otherwise and rendered judgment that Respondent recover the overpayments paid under protest. 439 S.W.2d 435. We agree with the trial court.

Article 7064 imposes an annual tax on the gross premiums collected by certain classes of insurance companies, of which Respondent is one. The tax rate is determined by a formula which compares the investments of the company in Texas securities with investments in the similar securities of another state in which it does business.

The tax is reduced by investments in Texas securities, which are defined by the statute as follows: “For the purposes of this Act, Texas securities are defined as “(1) real estate in this State; “(2) bonds of the State of Texas', “(3) bonds or interest bearing warrants of any county, city, town, school district or any municipality or subdivision thereof which is now or may hereafter be constituted or organized and authorized to issue bonds or warrants under the Constitution and laws of this State; “(4) notes or bonds secured by mortgage or trust deed on property in this State insured by the Federal Housing Administrator; “(5) the cash deposits in regularly established national or state banks or trust companies in this State on the basis of average monthly balances throughout the calendar year; “(6) that percentage of such insurance company’s investments in the bonds of the United States of America, that its Texas reserves for the unearned premiums and loss reserves as may be required by the Board of Insurance Commissioners, are of its total reserves; but this provision shall apply only to United States Government bonds purchased between December 8, 1941, and the termination of the war in which the United States is now engaged; “(7) in any other property in this State in which by law such insurance carriers may invest their funds." (Subdivision numbering and italics have been added.) It is stipulated that the legal and commercial domicile of Respondent is in Texas; that the United States Treasury bills in question were purchased in Texas from a Federal Reserve Bank and are payable to the bearer upon presentation to any Federal Reserve Bank; that the bills were held by Respondent in Texas; and that some of the bills were at times forwarded to the Treasurer of the State for deposit with the Commissioner of Insurance in compliance with statutory requirements not relevant here.

U. S. Treasury bills are not specifically included in the definition of Texas securities in

Article 7064. The problem is whether this type of investment is nevertheless a tax reducing Texas security under the omnibus clause of the definition which qualifies investments “in any other property in this State in which by law such insurance carriers may invest their funds.” The question may be stated even more narrowly; i. e., whether the bills constitute “property in this State” since it is agreed that insurance companies subject to the payment of a gross premiums tax are permitted by other statutes to invest their funds in this character of security.

Respondent forcefully urges that the controlling question is whether the Treasury bills in question were located “in this State”; it argues that the bills are a species of intangible property, the situs of which is in Texas under the undisputed facts, and that this should end the matter. This was the view of the Court of Civil Appeals and there is much merit in this approach; however, the omnibus clause is not clear of ambiguity and there are additional, and, we think, controlling considerations to be weighed in construing its meaning and effect.

Article 7064 has the twofold statutory purpose of raising revenue and promoting investments in Texas properties.

To these ends the statute imposes an annual tax upon gross premium receipts of specified insurance companies at a maximum rate of 3.85%, which rate is subject to reduction by application of a formula comparing the total investments of the company in Texas securities with its investments in similar securities in the State “in which it then had the highest percentage of its admitted assets invested.” Since securities which are included in the definition of Texas securities determine the investments which are favorable to tax reduction, a proper construction of the definition must heed the established rule that exemptions from taxation are not favored and will have doubts resolved against them.

State Board of Insurance v. Southwest General Ins. Co., 401 S.W.2d 369 (Tex.Civ.App.1966, error ref., n. r. e.) ; Morris v. Lone Star

Chapter No. 6, R. A. Masons, 68 Tex. 698, 5 S.W. 519 (1887); and cf. Hilltop Village, Inc., v. Kerrville Independent School District, 426 S.W.2d 943 (Tex.Sup.1968); and River Oaks Garden Club v. City of Houston, 370 S.W.2d 851 (Tex.Sup.1963). It is quite clear, as has been heretofore recognized, that the tax reducing provisions of

Article 7064 were designed to encourage investments by insurance companies in properties of this State. Kansas City Title Ins. Co. v. Butler, 253 S.W.2d 318 (Tex.Civ.App. 1952, writ ref., n. r. e.); Board of Insurance Commissioners v. Prudential Fire Ins. Co., 167 S.W.2d 578 (Tex.Civ.App.1942, writ ref) ; and cf. Kansas City Life Ins. Co. v. Love, 101 Tex. 531, 109 S.W. 863 (1908).

This statutory purpose is furthered only if the property in which the funds of insurance companies are invested is Texas property in the sense of having originated in the State and having a direct and beneficial relationship to the domestic economy of the State. This is the common characteristic of the properties enumerated in the first five subdivisions of the definition of Texas securities.

In our view, this is the intended meaning of the phrase “other property in this State.” The statute premises tax reduction on a comparison between investments in Texas securities and investments in “similar securities” in the State in which it had invested its highest percentage of admitted assets. It is not believed that this contemplates a comparison between investments in federal securities, the paper evidences of which are located in the two states.

It can be said that the provisions of the definition respecting United States government bonds purchased during World War II indicate the noninclusion of any other types of federal securities within the omnibus clause; but it can also be said that this specific provision indicates that the Legislature considered an investment in federal securities to be of sufficient importance to Texas to qualify as a tax reducing investment. In our view, however, no particular significance in either respect should be given this obviously patriotic and temporary measure.

The omnibus clause is to be strictly construed, and for the reasons stated we hold that it does not convert Treasury bills of the United States government into Texas securities for tax reducing purposes. The judgment of the Court of Civil Appeals is reversed and that of the trial court is affirmed. Dissenting opinion by CALVERT, C. J., in which SMITH and WALKER, JJ., join. REAVLEY, J., not sitting. . The reference is to Vernon’s Annotated Texas Civil Statutes.