September 10, 1979

Ms. Helen Wegner, Secretary 
Department of Commerce 
State Capitol 
Pierre, South Dakota 57501

Official Opinion No. 79-34

Premium tax paid by domestic insurers

Dear Ms. Wegner:

You have requested an official opinion from this office based upon the following factual situation:

FACTS: 

The 1979 Legislature enacted House Bill 1045 (copy attached) which, primarily, raised the premium tax paid by domestic insurers from 1/2 to 1% of premiums to 3/4 to 1% of premiums. 

The definition of premium in SDCL 10-44-1(4) states in part . . .  “received by such company during the preceding calendar year, . . .”

Based upon the above factual situation, you have asked the following question:

QUESTION: 

Since House Bill 1045 will not become effective until July 1, 1979, does this increased tax percentage apply to all premiums during calendar year 1979 or only to those collected, assessed, or attributed to the premiums after July 1, 1979?

It is my opinion that SDCL 10-44-2, as amended by the 1979 legislative session, is effective as of July, 1979, and that this would mean that the tax paid in 1980 would be at the rate of three quarters of 1 percent of premiums for all premiums collected in 1979.

In the case of Welch v. Henry, 305 U.S. 134, 59 S.Ct. 121, 118 A.L.R. 1142, 83 L.Ed. 87, 93 (1938), the United States Supreme Court stated: 

A tax is not necessarily unconstitutional because retroactive. Milliken v. U.S., 283 U.S. 15, 21, 75 L.Ed. 809, 814, 51 S.Ct. 324, and cases cited. Taxation is neither a penalty imposed on the taxpayer nor a liability which he assumes by contract. . . . For more than seventy-five years in has been the familiar legislative practice of Congress in the enactment of revenue laws to tax retroactively income or profits received during the year of the session in which the taxing statute is enacted, and in some instances during the year preceding session.  (Citation omitted.) These statutes not only increased the tax burden by laying new taxes and increasing the rates of old ones or both, but they redistributed retroactively the tax burdens imposed by pre-existing laws. . . .

Likewise, the South Dakota Supreme Court has indicated in the case of  Matter of Heuermann, 90 S.D. 312, 240 N.W.2d 603 that “ex post facto prohibitions” and retroactive regulation restrictions do not apply to a non- penal statute (footnotes 6 and 7) Clearly 10-44-1 is not a penal statute.

Based on all of the above reasons and authorities it is my view that the increased tax percentage applies to all premiums collected in calendar year 1979 and that this portion is what the Legislature clearly intended and is a lawful exercise of legislative powers.

Respectfully submitted,

Mark V. Meierhenry
Attorney General

MVM:DOC:esp