West Case Update

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States May Not Tax "Independently Procured Insurance" from Across State Lines

Description Texas appeals court held that the state could not impose a tax on insurance purchased by firms doing business in Texas that obtain insurance on their property in the state from out-of-state insurance companies not licensed to do business in Texas.

Topic Insurance

Key Words McCarran-Ferguson; Taxation; Due Process

C A S E S U M M A R Y

Facts Dow Chemical, a Delaware company headquartered in Michigan, owns property in Texas. It insures the property through out-of-state insurance companies. Those companies are not authorized to sell insurance in Texas. Texas law calls such insurance "independently procured insurance" and imposes a tax on it. The Comptroller of Texas billed Dow over $400,000 for taxes owed on the insurance. Dow protested the tax. The district court dismissed the suit; Dow appealed.

Decision Reversed. The state's "independently procured insurance" statute violates the federal McCarran-Ferguson Act. Insurance is interstate commerce. The Act allows insurance to be regulated by the states, but the states may not discriminate against out-of-state insurers or it violates the Due Process Clause of the Fourteenth Amendment by imposing taxes on companies that have no business presence in the state.

Citation Dow Chemical Co. v. Rylander, - S.W.3d - (2001 WL 58001, Ct. App., Tex., 2001)

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States May Not Tax "Independently Procured Insurance" from Across State Lines
Description	Texas appeals court held that the state could not impose a tax on insurance purchased by firms doing business in Texas that obtain insurance on their property in the state from out-of-state insurance companies not licensed to do business in Texas.
Topic	Insurance
Key Words	McCarran-Ferguson; Taxation; Due Process
C A S E S U M M A R Y
Facts	Dow Chemical, a Delaware company headquartered in Michigan, owns property in Texas. It insures the property through out-of-state insurance companies. Those companies are not authorized to sell insurance in Texas. Texas law calls such insurance "independently procured insurance" and imposes a tax on it. The Comptroller of Texas billed Dow over $400,000 for taxes owed on the insurance. Dow protested the tax. The district court dismissed the suit; Dow appealed.
Decision	Reversed. The state's "independently procured insurance" statute violates the federal McCarran-Ferguson Act. Insurance is interstate commerce. The Act allows insurance to be regulated by the states, but the states may not discriminate against out-of-state insurers or it violates the Due Process Clause of the Fourteenth Amendment by imposing taxes on companies that have no business presence in the state.
Citation	Dow Chemical Co. v. Rylander, - S.W.3d - (2001 WL 58001, Ct. App., Tex., 2001)