G. L. c. 63, § 23]

would be imposed by the laws of the state or country under which such company is organized upon a like insurance company incorporated in this commonwealth, or upon its agents, if doing business to the same extent in such state or country. In case any company discontinues business in this commonwealth and reinsures the whole or part of its risks without making payment of this excise, the company accepting such reinsurance shall pay the same, and if several companies shall make such reinsurance, the tax shall be apportioned among such companies in proportion to the original premiums on the business in this commonwealth so reinsured by each company.

These statutes are applicable to all corporations, associations, partnerships or individuals engaged as principals in the business of making contracts of insurance, other than life insurance.1 A contract of insurance is an agreement by which one party for a consideration promises to pay money or its equivalent, or to do an act valuable to the insured, upon the destruction, loss or injury of something in which the other party has an interest."

It has been held that the excise provided for by this statute may be constitutionally imposed upon any association given by legislative sanction the privilege of acting independently of the rules that govern a simple partnership, and as no foreign company or association is allowed to carry on an insurance business in this commonwealth unless it is fully and legally organized under the laws of its own state or country, the constitutionality of the statute with respect to all associations to which it is applicable appears to be unquestionable.

These statutes are applicable to mutual as well as to stock companies. Before the enactment of any statutes specifically requiring the taxation of insurance companies or other corporations it was held that a mutual fire insurance company was not taxable for personal property held by it for the purposes of its incorporation and invested in its corporate name. An insurance company might have offices in many cities and was not a resident of any of them. It was said however that the insured stood in the same position as stockholders and they should be taxed for their respective interests. After the imposition of the corporate 'G. L. c. 175, §1.

"G. L. c. 175, §2.

'Oliver v. Liverpool, etc., Insurance Co., 100 Mass. 531 (1868).

'G. L. c. 175, §151.

"Worcester Mutual Fire Insurance Co. v. Worcester, 7 Cush. 600 (1851).

[G. L. c. 63, §§ 23, 24 franchise tax in 1864 it was held that a mutual life insurance. company was not taxable thereunder upon its unredeemed guarantee stock. Subsequently it was provided that mutual fire and marine insurance companies should under certain circumstances be taxable for the corporate franchise tax, and companies so taxed were exempted from the special provisions relating to fire and marine insurance companies; but there was no special provision for the taxation of mutual life insurance companies and they were not excepted from the effect of the statutes relating to the taxation of life insurance companies. In 1918 the special provisions for the taxation of mutual fire and marine insurance companies were repealed,' and all mutual companies are now taxable in the same manner as stock companies.

Determination of Amount of Premiums Tax

SECTION 24. In determining the amount of the tax payable under sections twenty-one, twenty-two and twenty-three, there shall be deducted all premiums on policies written but not taken, or cancelled through default of payment, and all premiums returned or credited to policy holders during the year for which the tax is determined, provided that all such premiums have been included as premium receipts in a return made under the following section and a tax assessed thereon, and all premiums paid to authorized companies for reinsurance, provided that it is shown to the satisfaction of the commissioner that the tax on such premiums has been or will be paid in full by such reinsuring company.

Under the original statute imposing a tax on the premium receipts of insurance companies, no deduction whatever was allowed from the full amount of all gross premiums received.1 When subsequently provision was made for certain deductionssuch as sums paid for return premiums on cancelled policies and sums actually paid to other companies for reinsurance-it was expressly provided that dividends should not be considered return premiums. Under these circumstances it was held that the tax was on gross premiums, subject to the statutory deductions, and not upon the net premiums after deducting dividends

Commonwealth v. Berkshire Life Insurance Co., 98 Mass. 25 (1867). 'St. 1918, c. 184, §8.

'St. 1862, c. 224, §§1, 6, 9.

G. L. c. 63, §§ 24-27 inc.]

paid to policy holders. Subsequent legislation however authorized the deduction of premiums returned or credited to policy holders.3

Returns and Inspection of Books

SECTION 25. Every insurance company liable to taxation under section twenty-one, twenty-two or twenty-three shall annually in January make a return to the commissioner in such form as he shall prescribe, on oath of its secretary or other officer having knowledge of the facts, setting forth: if a domestic company, the total amount of gross premiums for all policies written or renewed, of all additional premiums charged and of all assessments made, during the preceding calendar year, and the amount of each class of deductions claimed under any provision of this chapter; if a foreign company, the total amount of gross premiums for all policies written or renewed, of all additional premiums charged and of all assessments made, during the preceding calendar year for insurance of property or interests in this commonwealth, or which are subjects of insurance by contracts issued through companies or agents therein, and the amount of each class of deductions claimed under any provision of this chapter, and in addition to the above any information which the commissioner may require in assessing an excise under any provision of law.

For cause, the commissioner may extend the time within which any such statement may be filed, but not to a date later than March first.

SECTION 26. The books, papers and accounts of every insurance company and of its agents shall be open at all times to inspection and examination by the commissioner and the commissioner of insurance, or their duly authorized representatives, for the purpose of verifying the accuracy of the returns made under sections twenty and twentyfive.

SECTION 27. Every insurance company neglecting to make the return required by section twenty or twenty-five shall forfeit twentyfive dollars for every day during which such neglect continues. If any company neglects to make such return for ten days after notice thereof addressed to it has been deposited in the post office, postage prepaid, it shall further forfeit five hundred dollars, and upon an in'American Mutual Liability Insurance Co. v. Commonwealth, 224 Mass. 299 (1916).

'St. 1916, c. 227; St. 1917, c. 97; St. 1918, c. 184, §1; St. 1919, c. 349, §12.

[G. L. c. 63, §§ 27-29 formation by the attorney general at the relation of the commissioner it may be restrained from the further transaction of its business in this commonwealth until it has made such return; but such penalties shall not be incurred if it is proved that the return was duly made and deposited in the post office, postage prepaid, properly directed to the commissioner, and that there was no neglect. If any return required by said section twenty or twenty-five contains a false statement which is known, or by the exercise of reasonable care might have been known, to the officers making it, to be false, such company shall be liable for the amount of tax thereby lost to the commonwealth, and each offending officer shall forfeit not less than five hundred nor more than five thousand dollars.

Assessment and Collection of Tax

SECTION 28. The commissioner, from such returns, and from such other evidence as he may obtain, shall assess upon all insurance companies subject to this chapter the taxes imposed by sections twenty to twenty-three, inclusive, and shall forthwith upon making such assessment give to every such company notice of the amount thereof. Such taxes shall become due and payable to the state treasurer thirty days after the date of such notice but not later than July first. All such taxes, whether assessed before or after July first, shall bear interest at the rate of twelve per cent per annum from that date until they are paid. Within ten days after the date of such notice the company may apply to the commissioner for a correction of said excise, and in default of settlement may be heard thereon by the board of appeal. The commissioner shall annually, on or before July first, deliver to the state treasurer a certificate stating the name of every such company upon which such excise has been assessed and the amount assessed upon each, and a like certificate of such further assessments as may be made after that date.

SECTION 29. Every domestic or foreign insurance company shall be liable for the full amount of all taxes assessed under this chapter upon it or its agents, which, with interest at the rate of twelve per cent per annum, may be recovered in contract by the state treasurer in the name of the commonwealth. It shall further be liable, upon an information, to an injunction restraining it and its agents from the further prosecution of its business until all taxes due with costs and interest are fully paid.

G. L. c. 63, § 30]

DOMESTIC BUSINESS CORPORATIONS

Early Methods of Taxing Corporations

It was not until the latter part of the eighteenth century that the taxation of private corporations became a subject of any importance in Massachusetts. There were no private business corporations in the colony or the province until near the time of the revolution and perhaps only one private corporation of any kind in Massachusetts before the year 1772, namely, that of Harvard College. Soon after the revolution however the corporate form of organization came into frequent use by the proprietors of banks, turnpikes and bridges, and to some extent of mills and factories, and before the nineteenth century was far advanced incorporated mills and banks and manufacturing and railroad corporations became the owners of large amounts of property. In 1793 for the first time special mention was made in the statutes of the taxation of corporate stock or property, when it was provided that bank shares should be assessed at their just value to the individual shareholders in the places where they respectively resided. In 1801 the provision was extended to shares in turnpike and bridge corporations3 and in 1805 to "any other incorporated company possessing taxable property." In 1812 banking corporations were subjected to an excise of one per cent per annum on their capital stock. There were no special provisions relating to the taxation of corporations themselves (other than the tax on the franchise of banking corporations) but corporations were commonly assessed under the general provisions of the statutes as the "owners" of both real and personal property where it was situated, the only corporations owning personal property being usually definitely established in a single town, so that frequent controversies as to the place of taxation were not likely to arise.

Objection to this method of taxation being taken in 1813 for the first time, it was pointed out by the court that, inasmuch as the stockholders were assessed for their shares in the towns

1

Attorney-General v. Sullivan, 163 Mass. 446 (1895).

* St. 1793, c. 9, A.

'St. 1800, c. 77, §2.

'St. 1804, c. 144, §2.

St. 1812, c. 32; Portland Bank v. Apthorp, 12 Mass. 252 (1815).