Western & Southern Life Insurance Co. v. State Board of Equalization of California case brief

Western & Southern Life Insurance Co. v. State Board of Equalization of California case brief summary

451 U.S. 648 (1981)

CASE SYNOPSIS

Appellant insurer sought review of the denial of appellant's petition for rehearing by the California Supreme Court of a judgment that held that appellee State Board of Equalization of California did not have to refund retaliatory insurance taxes paid by appellant under Cal Ins. Code § 685 (1972) because the retaliatory tax was constitutional.

CASE FACTS
Cal. Ins. Code § 685 mandated that appellee State Board of Equalization of California impose taxes on foreign insurance corporations that were from states that had similar retaliatory taxes on California insurers doing business in that state. Appellant insurer sought a refund from appellee. Appellee refused, but the state trial court found § 685 unconstitutional and ordered a refund. The state appellate court reversed and upheld the retaliatory tax. The state supreme court denied appellant's petition for hearing, and the Court affirmed.

DISCUSSION

• The Court held that the McCarran-Ferguson Act, 15 U.S.C.S. § 1011 et seq., removed entirely any Commerce Clause restriction upon California's power to tax the insurance business. 
• The Court reaffirmed that the Privileges and Immunities Clause was inapplicable to corporations. 
• The Court rejected appellant's argument under the Equal Protection clause of the Fourteenth Amendment because the legislation had the legitimate purpose of influencing other states to drop their retaliatory taxes, and it was reasonable that the classification would promote that purpose.

CONCLUSION

The Court affirmed the denial of a petition for hearing and upheld a retaliatory tax imposed upon appellant insurer. The Court held that federal law removed any Commerce Clause restriction upon appellee State Board of Equalizations of California's power to tax the insurance business. The Court found that the legislation had a legitimate purpose and it was reasonable that the classification would promote that purpose.