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Tig Insurance Co. v. Department of Treasury8/17/1999
In these consolidated cases involving the 1988 amendments to the retaliatory tax provision of the Michigan Insurance Code, MCL 500.1314(5) and (6); MSA 24.1134(5) and (6), defendant Department of Treasury (the Department) cross-appeals the Court of Claims determination that the amendments are unconstitutional on equal protection grounds. Plaintiffs TIG Insurance Company, Inc. and TIG Premier Insurance Company, Inc. (TIG) appeal the Court of Claims determination that TIG's claims for tax years 1990 and 1991 were barred by the ninety-day statute of limitations contained in MCL 205.27a(6); MSA 7.6577(27a)(6). We affirm.
I.
Like nearly every other state, Michigan has a retaliatory tax which imposes a tax on foreign insurance companies "equal to that imposed on Michigan companies doing business in those states where the aggregate tax burden on Michigan companies doing business in those states exceeds the burden on companies of those states doing business in Michigan." Coates v Attorney General, 120 Mich App 816, 826-827; 328 NW2d 113 (1982). In other words, whenever a Michigan insurer is required to pay taxes, fines, penalties, or other burdens as a requirement of selling insurance in another state, those burdens are compared to the burdens that Michigan law imposes on foreign insurers. If the foreign state's burdens on Michigan insurers are greater than the burdens Michigan generally imposes on foreign insurers, then insurers from that state writing insurance in Michigan are subject to a retaliatory tax, equal to the difference in the burdens.
Prior to 1987, foreign insurers were subject to either a premiums tax, MCL 500.440; MSA 24.1440 (repealed) or a retaliatory tax, MCL 500.476; MSA 24.1476 (repealed). The premiums tax was computed as two to three percent of gross premiums collected, depending on the type of insurance sold, and was not imposed on domestic insurers. In contrast, domestic insurers were required to pay a single business tax (SBT), MCL 208.1 et seq.; MSA 7.558(1) et seq., which is a value-added tax assessed for the privilege of doing business in Michigan. Cowen v Dep't of Treasury, 204 Mich App 428, 432; 516 NW2d 511 (1994). This bifurcated tax structure led to vastly different taxation between foreign and domestic insurers.
In 1987, this Court held that the premiums tax imposed on foreign insurers violated the equal protection clause because it was not rationally related to the state interest advanced; that is, making insurance coverage more available to Michigan residents. Penn Mutual Life Ins Co v Dep't of Licensing and Regulation, 162 Mich App 123, 129 130; 412 NW2d 668 (1987). In response, the Legislature enacted 1987 PA 261 and 1987 PA 262, repealing the premiums tax, revising the existing retaliatory tax, and amending the SBT to apply to foreign as well as domestic insurers.
In early 1988, the Department determined that the actual insurance company tax revenue for that year was far behind its earlier projections. It appears that one of the reasons for the shortfall was the method used to calculate projected revenues from retaliatory tax assessments; the Department, along with the Department of Management and Budget, had erroneously excluded from its projected retaliatory tax computations payments to certain facilities formed as nonprofit organizations of insurers. Such third party assessments were, until that time, generally included as a "burden" of conducting business in Michigan. See OAG, 1975, No. 4874 (May 22, 1975). Excluding these payments from the computation of projected revenue resulted in an overstatement of the amount of expected revenue from the new retaliatory tax scheme. When actual revenues were lower than projecte
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