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2 Tennessee Attorney General Reports and Opinions 1 (1972-1973)

handle is hein.sag/sagtn0164 and id is 1 raw text is: OFFICE OF THE ATTORNEY GENERAL SUPREME COURT BUILDING NASHVILLE, TENNESSEE 37219 DAVID M. PACK ATTORNEY GENERAL & REPORTER OPINION NO. 1 TO: Department of Insurance DATE: June 6, 1972 QUESTION This office has been requested to render an opinion on whether a company claiming a premium tax reduction under T.C.A. § 56-414 should report its investments in stocks on the basis of cost or at admitted or market value. OPINION It is our opinion that stocks should be reported at their cost to the company. ANALYSIS T.C.A. § 56-414, which provides for the premium tax reduction of certain percentages by casualty insurance companies, states, in pertinent part, as follows: .. . Any such company desiring to qualify for such . . . reduction shall report to the commissioner of insurance and banking . .. the amount the company had invested . . . in Tennessee securities as defined herein and the amount that it had invested . . . in similar securities in the other state in which it had its highest percentage of ad- mitted assets invested. . . . (Emphasis supplied) We have read with interest the opinion of the Texas Court of Civil Appeals in the case of Centennial Insurance Company v. Nutt, 450 S.W. (2d) 395 (1966) wherein that court had under consideration this issue, in a different factual situation, under the applicable Texas statute which is identical to T.C.A. § 56-414. That court cited an opinion by the Attorney General of Texas, No. S-200, given on May 31, 1956 which held that in computing the annual tax under the Texas statute the cost or book value of stocks rather than their market value should be used by com- panies claiming this tax reduction. The reasoning of said opinion is very persuasive. One of the grounds for said opinion was that the purpose of such a statute is to encourage those insurance carriers subject to the statute to make investments in Texas securities. In the case of Williams v. Thomas Jefferson Insurance Company, 215 Tenn. 356, 385 S.W. (2d) 908 (1965), the Tennessee Supreme Court in dealing with T.C.A. § 56-414 stated that: It seems to us when the General Assembly enacted Sec. 56-414, T.C.A. Supp, that it had in mind that this incentive statute would induce these insurance companies to invest in securities in this State, and from these securities other taxes would accrue to the State and therefore more than make up for what is allowed by reason of their investing in Tennessee securities. .. . (215 Tenn. at 361) The court went further in the Williams case and stated with reference to this Code section that: This statute does not specify a lower tax rate; does not provide a tax exemption of any kind; it merely offers to the insurance companies a credit against their tax liability for their performance of an act found by the Legislature to be economically beneficial to Tennessee, to-wit, the investment of their assets in Tennessee securities. (215 Tenn. at 363)

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