Northwestern Mutual Life Insurance v. State Board of Equalization

This is an appeal by plaintiff from a judgment in favor of the State Board of Equalization in a suit to recover taxes paid under protest. The case was tried under an agreed statement of facts and involves solely a question of law—the construction of the provisions of sections 14 and 14% of article XIII of the California Constitution. In respect to the point in controversy both sections read the same. However, the sections apply to different years, section 14 to taxes assessed in 1938, and section 14% to taxes assessed in 1939 and 1940.

The statement of facts sets forth in part: “In the years 1936 and 1937 plaintiff, hereafter sometimes called the Insurance Company, was the owner of certain real property in the County of Los Angeles. On or about July 1, 1936, certain levies — hereinafter more particularly described — were imposed on said properties which were paid by the Insurance Company as follows: one-half (%) in December, 1936 and one-half (%) in April, 1937. On or about July 1, 1937, certain levies were imposed on said properties one-half (%) of which was paid by the Insurance Company in December, 1937.” Only one item is in dispute: “Said item represents the portion of the rate of said levy imposed pursuant to the provisions of the Act of the Legislature of the State of California, approved June 12, 1915 (Statutes of 1915, eh. 755, page 1502; [Deering’s Gen. Laws, Act 4463]) known as the ‘Los Angeles Flood Control Act,’ and amendments thereto.

In 1938 the insurance company filed a statement of taxes paid on real estate owned in the state of California with the state Insurance Commissioner. This statement included the entire amount paid during 1937, including “flood control levies.” The same situation prevailed with respect to the deduction of taxes on real property for the years 1938 and 1939, including “flood control levies,” from the gross premiums tax in 1939 and 1940. Some time in 1941 the Insurance Commissioner investigated the component parts of the amounts of real property and found that the items constituting “flood control levies” had been included in the real property taxes for the years 1937, 1938 and 1939 and reported such findings to the State Board of Equalization.

The commissioner reported that these flood control items which were deducted in the three years should be added to the tax levied in 1941. The board added to the tax levied in the year 1941 the aggregate amount of the previously deducted items constituting “flood control levies.” This additional amount was paid under protest. If the items were properly deductible, judgment should go in favor of plaintiff. The trial court rendered judgment for defendants.

Appellant stresses the fact that for twenty-five years the Flood Control Act had been in force and the items in dispute had always been allowed as a deduction. Respondents replied that the commissioner had for the first time discovered the improper deduction in 1941. Moreover, on the 1938 return appears the following: “(b) Positively no irrigation or reclamation district taxes, nor special taxes and assessments, penalties, interest, nor other charges on account of delinquency of tax can be allowed.” On the 1939 and 1940

It is appellant’s theory that in providing for deduction of “taxes” the Constitution uses the word “taxes” in a broad and all inclusive sense. Appellant claims that its position is strengthened by the use of the word “any” in conjunction with “taxes.” The word “any,” as used, might well be defined as “all or every.” It is true that-in this and other jurisdictions the word “taxes” often includes some form of assessments. To that extent the words have often been used synonymously. “The terms ‘tax’ and ‘assessment, ’ except in the case of specific taxation, both include the idea of some ratio or rule of apportionment.” (24 Cal.Jur., p. 38, § 22 ; see, also, Holley v. County of Orange, 106 Cal. 420 [ 39 P. 790 ] ; Neary v. Peterson, 1 Cal.2d 703 [ 37 P.2d 82 ].)

A tax is an assessment levied on the person or the property involved and hence the terms have often been confused, but there is a difference that may be determined from the language, and legal effect of the particular statute involved. In Ingels v. Riley, 5 Cal.2d 154 , 159 [ 53 P.2d 939 , 103 A.L.R. 1 ], the court said: “It is impossible to lay down any positive rule by means of which the character of any given tax may be ascertained. In each case the character of the given tax must be ascertained by its incidents, and from the natural and legal effect of the language employed in the statute.” (See, also, Flynn v. San Francisco, 18 Cal.2d 210 [ 115 P.2d 3 ] ; Edward Brown & Sons v. McColgan, 53 Cal. App.2d 504 [ 128 P.2d 186 ].)

“There is a broad and well-recognized distinction between a tax levied for general governmental or public purposes and a special assessment levied for improvements made under special laws of a local character.” (Inglewood v. County of Los Angeles, 207 Cal. 697 , 702 [ 280 P. 360 ] ; see, also, San Diego v. Linda Vista I. Dist., 108 Cal. 189 [ 41 P. 291 , 35 L.R.A. 33 ] ; City Street Imp. Co. v. Regents etc., 153 Cal. 776 [ 96 P. 801 , 18 L.R.A.N.S. 451 ] ; Holley v. County of Orange, supra.) “Moreover, the law recognizes a distinction between property impressed with a public purpose and property of an agency not so impressed, for in the latter instance the

The Supreme Court of this state has declared in reference to this particular flood control district: “The interveners point to the fact that the legislature has used the word ‘tax’ throughout the act, and does not anywhere refer to the charge as an assessment. Furthermore, such ‘tax’ is to be levied and collected in the same manner, by the same machinery, and at the same time as general taxes. These facts are not, however, conclusive. The word ‘tax’ is used, with equal propriety, in two distinct senses. In its broad meaning the word includes both general taxes and special assessments. (Chicago G. W. Ry. Co. v. Kansas City N. W. Ry., 75 Kan. 167 [12 Ann. Cas. 588, 88 P. 1085 ] ; 1 Page and Jones on Taxation by Assessment, sec. 40; see, also, In re Madera Irr. Dist., 92 Cal. 296 [ 27 Am.St.Rep. 106 , 14 L.RA. 755 , 28 P. 272 , 675].)” (Los Angeles County F. C. District v. Hamilton, 177 Cal. 119 , 128-129 [ 169 P. 1028 ].) Courts have always assumed, upon stipulation or otherwise, since the decision in the Hamilton ease, that under the provision of the Los Angeles County Flood Control District Act (Stats. 1915, p. 1502; Deering’s Gen. Laws, Act 4463), it is an assessment for benefits and not a tax that may be imposed. To the same effect, see Los Angeles Railway Cory. v. Los Angeles County Flood Control Dist., 78 Cal.App. 173 [ 248 P. 532 ] ; Los Angeles County Flood Control Dist. v. Superior Court, 207 Cal. 709 [ 280 P. 366 ] ; Inglewood v. County of Los Angeles, supra; Los Angeles County Flood Control Dist. v. Wright, 213 Cal. 335 [ 2 P.2d 168 ] ; Los Angeles v. Los Angeles C. F. C. Dist., 11 Cal.2d 395 [ 80 P.2d 479 ] ; Chesebro v. Los Angeles County Flood Control Dist., 306 U. S. 459 [ 59 S.Ct. 622 , 83 L.Ed. 921 ].) The above citations must be accepted as authority that, notwithstanding the use of the word “tax,” the Los Angeles flood control statute does not provide for a tax but rather a special assessment with benefits conferred on the specific property for which the levy compensates.

A deduction in the amount of taxation does not include a deduction of special assessments unless expressly stated in a statute. Article Kill, sections 14 and 14% of the Constitution permits deduction to insurance companies upon payment of a stated percentage upon gross- premiums of any taxes paid by them on real estate in this state. To be available and advantageous to appellant, the Constitution would

The judgment is affirmed.

Peters, P. J., and Schottky, J. pro tern., concurred.

A petition for a rehearing was denied April 17, 1946, and appellant’s petition for a hearing by the Supreme Court was denied May 16, 1946. Shenk, J., and Schauer, J., did not participate.