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8/9/2019 Metropolitan Life Ins Co. vs. Ward Comm of Ins of Alab 470 U.S. 869 105 S.ct. 1676
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8/9/2019 Metropolitan Life Ins Co. vs. Ward Comm of Ins of Alab 470 U.S. 869 105 S.ct. 1676
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8/9/2019 Metropolitan Life Ins Co. vs. Ward Comm of Ins of Alab 470 U.S. 869 105 S.ct. 1676
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[3] Constitutional Law 92 3560
92 Constitutional Law
92XXVI Equal Protection
92XXVI(E) Particular Issues and Applica-
tions
92XXVI(E)6 Taxation
92k3560 k. In General. Most Cited
Cases
(Formerly 92k228.5)
State's goal of bringing in new business is legitim-
ate under equal protection clause. U.S.C.A.
Const.Amend. 14.
[4] Constitutional Law 92 3371
92 Constitutional Law
92XXVI Equal Protection
92XXVI(B) Particular Classes
92XXVI(B)10 Residency or Duration
Thereof
92k3369 Trade or Business
92k3371 k. Licenses and Regula-
tion in General. Most Cited Cases
(Formerly 92k230.3(4))
Insurance 217 1165
217 Insurance217IV Insurance Companies and Related Entit-
ies
217IV(B) Foreign Companies
217k1165 k. Authority to Do Business.
Most Cited Cases
(Formerly 92k230.3(4))
Taxation 371 2137
371 Taxation
371III Property Taxes
371III(B) Laws and Regulation371III(B)4 Constitutional Regulation and
Restrictions Concerning Equality and Uniformity
371k2134 Classification of Subjects,
and Uniformity as to Subjects of Same Class
371k2137 k. Foreign Corporations.
Most Cited Cases
(Formerly 371k42(3))
Promotion of domestic business within state, by
discriminating against foreign corporations that
wished to compete by doing business there, was not
legitimate state purpose under equal protection
clause, supporting Alabama statute imposing sub-
stantially lower gross premiums tax rate on domest-
ic insurance companies than out-of-state insurance
companies. Ala.Code 1975, 27-4-4, 27-4-5;
U.S.C.A. Const.Amend. 14.
[5] Constitutional Law 92 3694
92 Constitutional Law
92XXVI Equal Protection
92XXVI(E) Particular Issues and Applica-
tions
92XXVI(E)12 Trade or Business
92k3681 Licenses and Regulation
92k3694 k. Insurance. Most Cited
Cases
(Formerly 92k240(2))
Insurance 217 1100
217 Insurance
217III What Law Governs
217III(B) Preemption; Application of State
or Federal Law
217k1100 k. In General. Most Cited Cases
(Formerly 92k240(2))
States 360 18.41
360 States
360I Political Status and Relations
360I(B) Federal Supremacy; Preemption
360k18.41 k. Insurance. Most Cited Cases
(Formerly 92k240(2))
Although McCarran-Ferguson Act exempts insur-
ance industry from commerce clause restrictions, it
does not purport to limit in any way the applicabil-
ity of equal protection clause. U.S.C.A. Const. Art.
1, 8, cl. 3; McCarran-Ferguson Act, 1-5, 15
U.S.C.A. 1011-1015; U.S.C.A. Const.Amend.
14.
105 S.Ct. 1676 Page 2
470 U.S. 869, 105 S.Ct. 1676, 84 L.Ed.2d 751, 53 USLW 4399
(Cite as: 470 U.S. 869, 105 S.Ct. 1676)
2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92XXVIhttp://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92XXVI%28E%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92XXVI%28E%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92XXVI%28E%296http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92k3560http://www.westlaw.com/Digest/Default.wl?rs=dfa1.0&vr=2.0&CMD=MCC&DocName=92k3560http://www.westlaw.com/Digest/Default.wl?rs=dfa1.0&vr=2.0&CMD=MCC&DocName=92k3560http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1000546&DocName=USCOAMENDXIV&FindType=Lhttp://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1000546&DocName=USCOAMENDXIV&FindType=Lhttp://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92XXVIhttp://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92XXVI%28B%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92XXVI%28B%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92XXVI%28B%2910http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92k3369http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92k3371http://www.westlaw.com/Digest/Default.wl?rs=dfa1.0&vr=2.0&CMD=MCC&DocName=92k3371http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=217http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=217IVhttp://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=217IV%28B%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=217IV%28B%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=217k1165http://www.westlaw.com/Digest/Default.wl?rs=dfa1.0&vr=2.0&CMD=MCC&DocName=217k1165http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=371http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=371IIIhttp://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=371III%28B%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=371III%28B%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=371III%28B%294http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=371k2134http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=371k2137http://www.westlaw.com/Digest/Default.wl?rs=dfa1.0&vr=2.0&CMD=MCC&DocName=371k2137http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1000002&DocName=ALSTS27-4-4&FindType=Lhttp://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1000002&DocName=ALSTS27-4-5&FindType=Lhttp://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1000546&DocName=USCOAMENDXIV&FindType=Lhttp://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92XXVIhttp://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92XXVI%28E%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92XXVI%28E%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92XXVI%28E%2912http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92k3681http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=92k3694http://www.westlaw.com/Digest/Default.wl?rs=dfa1.0&vr=2.0&CMD=MCC&DocName=92k3694http://www.westlaw.com/Digest/Default.wl?rs=dfa1.0&vr=2.0&CMD=MCC&DocName=92k3694http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=217http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=217IIIhttp://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=217III%28B%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=217III%28B%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=217k1100http://www.westlaw.com/Digest/Default.wl?rs=dfa1.0&vr=2.0&CMD=MCC&DocName=217k1100http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=360http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=360Ihttp://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=360I%28B%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=360I%28B%29http://www.westlaw.com/KeyNumber/Default.wl?rs=dfa1.0&vr=2.0&CMD=KEY&DocName=360k18.41http://www.westlaw.com/Digest/Default.wl?rs=dfa1.0&vr=2.0&CMD=MCC&DocName=360k18.41http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1000546&DocName=USCOARTIS8CL3&FindType=Lhttp://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1000546&DocName=USC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8/9/2019 Metropolitan Life Ins Co. vs. Ward Comm of Ins of Alab 470 U.S. 869 105 S.ct. 1676
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[6] Commerce 83 12
83 Commerce
83I Power to Regulate in General
83k11 Powers Remaining in States, and Lim-
itations Thereon
83k12 k. In General. Most Cited Cases
Under commerce clause analysis, state's interest, if
legitimate, is weighed against burden state law
would impose on interstate commerce. U.S.C.A.
Const. Art. 1, 8, cl. 3.
[7] Constitutional Law 92 3053
92 Constitutional Law
92XXVI Equal Protection
92XXVI(A) In General
92XXVI(A)6 Levels of Scrutiny
92k3052 Rational Basis Standard;
Reasonableness
92k3053 k. In General. Most Cited
Cases
(Formerly 92k213.1(2))
In equal protection context, if state's purpose is
found to be legitimate, state law stands as long as
burden it imposes is found to be rationally related
to that purpose, a relationship that is not difficult to
establish. U.S.C.A. Const.Amend. 14.
[8] Constitutional Law 92 3012
92 Constitutional Law
92XXVI Equal Protection
92XXVI(A) In General
92XXVI(A)3 Persons or Entities Protec-
ted
92k3012 k. Corporations and Other
Business Entities. Most Cited Cases
(Formerly 92k210(2))
Constitutional Law 92 3927
92 Constitutional Law
92XXVII Due Process
92XXVII(C) Persons and Entities Protected
92k3927 k. Business Organizations; Cor-
porations. Most Cited Cases
(Formerly 92k252)
Corporation is a person within meaning of the
Fourteenth Amendment. U.S.C.A. Const.Amend.
14.
[9] Constitutional Law 92 3694
92 Constitutional Law
92XXVI Equal Protection
92XXVI(E) Particular Issues and Applica-
tions
92XXVI(E)12 Trade or Business
92k3681 Licenses and Regulation
92k3694 k. Insurance. Most Cited
Cases
(Formerly 92k230.3(3))
Taxation 371 2137
371 Taxation
371III Property Taxes
371III(B) Laws and Regulation
371III(B)4 Constitutional Regulation and
Restrictions Concerning Equality and Uniformity
371k2134 Classification of Subjects,
and Uniformity as to Subjects of Same Class
371k2137 k. Foreign Corporations.
Most Cited Cases
(Formerly 371k42(3))
Encouragement of investment in Alabama assets
and governmental securities, when furthered by dis-
crimination against out-of-state insurance compan-
ies, was not legitimate state purpose under equal
protection clause supporting Alabama statute im-
posing substantially lower gross premiums rate on
domestic insurance companies than out-of-state in-
surance companies. Ala.Code 1975, 27-4-4,
27-4-5; U.S.C.A. Const.Amend. 14.
**1677 *869 SyllabusFN*
FN* The syllabus constitutes no part of the
opinion of the Court but has been prepared
by the Reporter of Decisions for the con-
venience of the reader. See United States v.
Detroit Lumber Co., 200 U.S. 321, 337, 26
105 S.Ct. 1676 Page 3
470 U.S. 869, 105 S.Ct. 1676, 84 L.Ed.2d 751, 53 USLW 4399
(Cite as: 470 U.S. 869, 105 S.Ct. 1676)
2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
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-
8/9/2019 Metropolitan Life Ins Co. vs. Ward Comm of Ins of Alab 470 U.S. 869 105 S.ct. 1676
5/23
S.Ct. 282, 287, 50 L.Ed. 499.
An Alabama statute imposes a substantially lower
gross premiums tax rate on domestic insurance
companies than on out-of-state (foreign) insurance
companies. The statute permits foreign companies
to reduce but not to eliminate the differential by in-
vesting in Alabama assets and securities. Appellant
foreign insurance companies filed claims for re-
funds of taxes paid, contending that the statute, as
applied to them, violated the Equal Protection
Clause. The State Commissioner of Insurance
denied the claims. On consolidated appeals to a
county Circuit Court, in which several domestic
companies intervened, the statute was upheld on
summary judgment. The court ruled that the statutedid not violate the Equal Protection Clause because,
in addition to raising revenue, it served the legitim-
ate state purposes of encouraging the formation of
new insurance companies in Alabama and capital
investment by foreign insurance companies in
Alabama assets and securities, and that the distinc-
tion between foreign and domestic companies was
rationally related to those purposes. The Alabama
Court of Civil Appeals affirmed the finding as to
legitimate state purposes, but remanded for an evid-
entiary hearing on the issue of rational relationship.
On certiorari to the Alabama Supreme Court, appel-lants waived their rights to such an evidentiary
hearing, and the court entered judgment for the
State and the intervenors on appellants' equal pro-
tection challenge to the statute.
Held: The Alabama domestic preference tax statute
violates the Equal Protection Clause as applied to
appellants. Pp. 1679-1684.
(a) Under the circumstances of this case, promotion
of domestic business by discriminating against non-
residents is not a legitimate state purpose. Western& Southern Life Ins. Co. v. State Board of Equaliz -
ation of California, 451 U.S. 648, 101 S.Ct. 2070,
68 L.Ed.2d 514 distinguished. Alabama's aim to
promote domestic industry is purely and completely
discriminatory, designed only to favor domestic in-
dustry within the State, no matter what the cost to
foreign corporations also seeking to do business
there. Alabama's purpose constitutes the very sort
of parochial discrimination that the Equal Protec-
tion Clause was intended to prevent. A State may
not constitutionally favor its own residents by tax-
ing foreign corporations at a higher rate solely be-
cause of their residence. Although the McCarran-
Ferguson Act exempts the insurance industry from
Commerce Clause *870 restrictions, it does not
purport to limit the applicability of the Equal Pro-
tection Clause. Equal protection restraints are ap-
plicable even though the effectof the discrimination
is similar to the type of burden with which the
Commerce Clause also would be concerned. Pp.
1680-1684.
**1678 (b) Nor is the encouragement of the invest-
ment in Alabama assets and securities a legitimate
state purpose. Domestic insurers remain entitled to
the more favorable tax rate regardless of whether
they invest in Alabama assets. Moreover, since the
investment incentive provision does not enable for-
eign insurers to eliminate the statute's discriminat-
ory effect, it does not cure but reaffirms the imper-
missible classification based solely on residence. P.
1684.
447 So.2d 142 (Ala.), reversed and remanded. Matthew J. Zinn argued the cause for appellants.
With him on the briefs was Steven Reed.
Warren B. Lightfoot argued the cause for appellees.
With him on the brief for appellee Ward were E.
Mabry Rogers and Phillip E. Stano. Robert W.
Bradford, Jr., and Harry Cole filed a brief for ap-
pellees American Educators Life Insurance Co. et
al.*
* Briefs of amici curiae urging reversal were filed
for the State of Connecticut et al. by Dennis J. Roberts II, Attorney General of Rhode Island,
Frances X. Bellotti, Attorney General of Massachu-
setts, Gregory H. Smith, Attorney General of New
Hampshire, Joseph I. Lieberman, Attorney General
of Connecticut, Elliot F. Gerson, Deputy Attorney
General, and John G. Haines, Assistant Attorney
105 S.Ct. 1676 Page 4
470 U.S. 869, 105 S.Ct. 1676, 84 L.Ed.2d 751, 53 USLW 4399
(Cite as: 470 U.S. 869, 105 S.Ct. 1676)
2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
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8/9/2019 Metropolitan Life Ins Co. vs. Ward Comm of Ins of Alab 470 U.S. 869 105 S.ct. 1676
6/23
General; and for the Life Insurance Council of New
York by Peter J. Flanagan.
Briefs of amici curiae urging affirmance were filed
for the State of Alaska et al. by Anthony
Celebrezze, Jr., Attorney General of Ohio, and
Connie J. Harris, Assistant Attorney General, Dave
Frohnmayer, Attorney General of Oregon, William
F. Gary, Deputy Attorney General, and James E.
Mountain, Jr., Solicitor General, Jim Mattox, Attor-
ney General of Texas, and Henry H. Robinson, As-
sistant Attorney General; for the State of Illinois by
Neil F. Hartigan, Attorney General, and Patricia
Rosen and Kathryn A. Spalding, Assistant Attor-
neys General; for Allstate Insurance Co. et al. by
Duane C. Quaini; for the Florida Association ofDomestic Insurance Companies, Inc., et al. by
Robert W. Perkins and Samuel R. Neel III.
*871 Justice POWELL delivered the opinion of the
Court.
This case presents the question whether Alabama's
domestic preference tax statute, Ala.Code
27-4-4 and 27-4-5 (1975), that taxes out-of-state in-
surance companies at a higher rate than domestic
insurance companies, violates the Equal Protection
Clause.
I
Since 1955,FN1
the State of Alabama has granted a
preference to its domestic insurance companies by
imposing a substantially lower gross premiums tax
rate on them than on out-of-state (foreign) compan-
ies.FN2
Under the current statutory provisions, for-
eign life insurance companies pay a tax on their
gross premiums received from business conducted
in Alabama at a rate of three percent, and foreigncompanies selling other types of insurance pay at a
rate of four percent. Ala.Code 27-4-4(a) (1975).
All domestic insurance companies, in contrast, pay
at a rate of only one percent on all types of insur-
ance premiums. 27-4-5(a).FN3
As a result, a for-
eign *872 insurance company doing the same type
and volume of business in Alabama as a domestic
company generally will pay three to four times as
much in gross premiums taxes as its domestic com-
petitor.
FN1. The origins of Alabama's domestic
preference tax statute date back to 1849,
when the first tax on premiums earned by
insurance companies doing business in the
State was l imited to companies not
chartered by the State. Act No. 1, 1849
Ala.Acts 5. A domestic preference tax was
imposed on and off throughout the years
until 1945, when the State restored equal-
ity in taxation of insurance companies in
response to this Court's decision in UnitedStates v. South-Eastern Underwriters
Assn., 322 U.S. 533, 64 S.Ct. 1162, 88
L.Ed. 1440 (1944). Act No. 156, 1945
Ala.Acts 196-197. In 1955, the tax was re-
instated, Act No. 77, 1955 Ala.Acts 193
(2d Spec.Sess.), and with minor amend-
ments, has remained in effect until the
present.
FN2. For domestic preference tax pur-
poses, Alabama defines a domestic insurer
as a company that both is incorporated inAlabama and has its principal office and
chief place of business within the State.
Ala.Code 27-4-1(3) (1975). A corpora-
tion that does not meet both of these criter-
ia is characterized as a foreign insurer.
27-4-1(2).
FN3. There are two exceptions to these
general rules concerning the rates of taxa-
tion of insurance companies. For annuities,
the tax rate is one percent for both foreign
and domestic insurers, Ala.Code 27-4-4(a) (1975), and for wet marine and trans-
portation insurance, the rate is three-
quarters of one percent for both foreign
and domestic insurance companies,
27-4-6(a).
105 S.Ct. 1676 Page 5
470 U.S. 869, 105 S.Ct. 1676, 84 L.Ed.2d 751, 53 USLW 4399
(Cite as: 470 U.S. 869, 105 S.Ct. 1676)
2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
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Alabama's domestic preference tax statute does
provide that foreign companies may reduce the dif-
ferential in gross premiums taxes by investing pre-
scribed percentages of their worldwide assets in
specified Alabama assets and securities. 27-4-4
(b). By investing 10 percent or more of its total as-
sets in Alabama investments, for example, a foreign
life insurer may reduce its gross premiums tax rate
from 3 to 2 percent. Similarly, a foreign property
and casualty insurer may reduce its tax rate from
four to three percent. Smaller tax reductions are
available based on investment of smaller percent-
ages of a company's assets. Ibid. Regardless of how
much of its total assets a foreign company places in
Alabama investments, it can never reduce its gross
premiums tax rate to the same level paid by com-parable domestic companies. These are entitled to
the one-**1679 percent tax rate even if they have
no investments in the State. Thus, the investment
provision permits foreign insurance companies to
reduce, but never to eliminate, the discrimination
inherent in the domestic preference tax statute.
II
Appellants, a group of insurance companies incor-
porated outside of the State of Alabama, filedclaims with the Alabama Department of Insurance
in 1981, contending that the domestic preference
tax statute, as applied to them, violated the Equal
Protection Clause. They sought refunds of taxes
paid for the tax years 1977 through 1980. The Com-
missioner of Insurance denied all of their claims on
July 8, 1981.
*873 Appellants appealed to the Circuit Court for
Montgomery County, seeking a judgment declaring
the statute to be unconstitutional and requiring the
Commissioner to make the appropriate refunds.Several domestic companies intervened, and the
court consolidated all of the appeals, selecting two
claims as lead casesFN4
to be tried and binding on
all claimants. On cross-motions for summary judg-
ment, the court ruled on May 17, 1982, that the
statute was constitutional. Relying on this Court's
opinion in Western & Southern Life Ins. Co. v.
State Board of Equalization of California, 451 U.S.
648, 101 S.Ct. 2070, 68 L.Ed.2d 514 (1981), the
court ruled that the Alabama statute did not violate
the Equal Protection Clause because it served at
least two purposes, in addition to raising revenue:
(1) encouraging the formation of new insurance
companies in Alabama, and (2) encouraging capital
investment by foreign insurance companies in the
Alabama assets and governmental securities set
forth in the statute. App. to Juris. Statement
20a-21a. The court also found that the distinction
the statute created between foreign and domestic
companies was rationally related to those two pur-
poses and that the Alabama Legislature reasonably
could have believed that the classification wouldhave promoted those purposes. Id., at 21a.
FN4. Metropolitan Life Insurance Co., a
New York corporation, was chosen to rep-
resent the life insurance claimants, and
Prudential Property and Casualty Co., a
New Jersey corporation, was chosen as
representative of the nonlife claimants. See
App. 314-315.
After their motion for a new trial was denied, ap-
pellants appealed to the Court of Civil Appeals. Itaffirmed the Circuit Court's rulings as to the exist-
ence of the two legitimate state purposes, but re-
manded for an evidentiary hearing on the issue of
rational relationship, concluding that summary
judgment was inappropriate on that question be-
cause the evidence was in conflict. 437 So.2d 535
(1983). Appellants petitioned the Supreme Court of
Alabama for certiorari on the affirmance of the le-
gitimate state purpose issue, and the State and the
intervenors petitioned for review of *874 the re-
mand order. Appellants then waived their right to
an evidentiary hearing on the issue whether the stat-
ute's classification bore a rational relationship to
the two purposes found by the Circuit Court to be
legitimate, and they requested a final determination
of the legal issues with respect to their equal pro-
tection challenge to the statute. The Supreme Court
105 S.Ct. 1676 Page 6
470 U.S. 869, 105 S.Ct. 1676, 84 L.Ed.2d 751, 53 USLW 4399
(Cite as: 470 U.S. 869, 105 S.Ct. 1676)
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denied certiorari on all claims. Appellants again
waived their rights to an evidentiary hearing on the
rational relationship issue and filed a joint motion
with the other parties seeking rehearing and entry
of a final judgment. The motion was granted, and
judgment was entered for the State and the inter-
venors. 447 So.2d 142 (1983). This appeal fol-
lowed, and we noted probable jurisdiction. 466 U.S.
935, 104 S.Ct. 1905, 80 L.Ed.2d 455 (1984). We
now reverse.
III
Prior to our decision in Western & Southern Life
Ins. Co. v. State Board of Equalization of Califor-
nia, supra, the jurisprudence of the applicability of
the Equal Protection Clause to discriminatory tax
statutes had a somewhat checkered history. Lincoln
National Life Ins. Co. v. Read, 325 U.S. 673, 65
S.Ct. 1220, 89 L.Ed. 1861 (1945), held that so-
called privilege **1680 taxes, required to be paid
by a foreign corporation before it would be permit-
ted to do business within a State, were immune
from equal protection challenge. That case stood in
stark contrast, however, to the Court's prior de-
cisions in Southern R. Co. v. Greene, 216 U.S. 400,
30 S.Ct. 287, 54 L.Ed. 536 (1910), and HanoverFire Ins. Co. v. Harding, 272 U.S. 494, 47 S.Ct.
179, 71 L.Ed. 372 (1926), as well as to later de-
cisions, in which the Court had recognized that the
Equal Protection Clause placed limits on other
forms of discriminatory taxation imposed on out-
of-state corporations solely because of their resid-
ence. See, e.g., WHYY, Inc. v. Glassboro, 393 U.S.
117, 89 S.Ct. 286, 21 L.Ed.2d 242 (19 68); Allied
Stores of Ohio, Inc. v. Bowers, 358 U.S. 522, 79
S.Ct. 437, 3 L.Ed.2d 480 (1959); Wheeling Steel
Corp. v. Glander, 337 U.S. 562, 69 S.Ct. 1291, 93
L.Ed. 1544 (1949).
In Western & Southern, supra, we reviewed all of
these cases for the purpose of deciding whether to
permit an equal *875 protection challenge to a Cali-
fornia statute imposing a retaliatory tax on foreign
insurance companies doing business within the
State, when the home States of those companies im-
posed a similar tax on California insurers entering
their borders. We concluded that Lincoln was no
more than a surprising throwback to the days be-
fore enactment of the Fourteenth Amendment and
in which incorporation of a domestic corporation or
entry of a foreign one had been granted only as a
matter of privilege by the State in its unfettered dis-
cretion. 451 U.S., at 665, 101 S.Ct., at 2081. We
therefore rejected the longstanding but
anachronis[tic] rule of Lincoln and explicitly held
that the Equal Protection Clause imposes limits
upon a State's power to condition the right of a for-
eign corporation to do business within its borders.
451 U.S., at 667, 101 S.Ct., at 2082. We held that
[w]e consider it now established that, whatever theextent of a State's authority to exclude foreign cor-
porations from doing business within its boundar-
ies, that authority does not justify imposition of
more onerous taxes or other burdens on foreign cor-
porations than those imposed on domestic corpora-
tions, unless the discrimination between foreign and
domestic corporations bears a rational relation to a
legitimate state purpose. Id., at 667-668, 101 S.Ct.,
at 2082-2083.
Because appellants waived their right to an eviden-
tiary hearing on the issue whether the classificationin the Alabama domestic preference tax statute
bears a rational relation to the two purposes upheld
by the Circuit Court, the only question before us is
whether those purposes are legitimate.FN5
FN5. The State and the intervenors ad-
vanced some 15 additional purposes in
support of the Alabama statute. As neither
the Circuit Court nor the Court of Civil
Appeals ruled on the legitimacy of those
purposes, that question is not before us,
and we express no view as to it. On re-
mand, the State will be free to advance
again its arguments relating to the legitim-
acy of those purposes.
As the dissent finds our failure to resolve
whether Alabama may continue to col-
105 S.Ct. 1676 Page 7
470 U.S. 869, 105 S.Ct. 1676, 84 L.Ed.2d 751, 53 USLW 4399
(Cite as: 470 U.S. 869, 105 S.Ct. 1676)
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lect its tax baffling, post, at 1686, we
reemphasize the procedural posture of
the case: it arose on a motion for sum-
mary judgment. The Court of Civil Ap-
peals upheld the Circuit Court's ruling
that the two purposes identified by it
were legitimate, but the appellate court
remanded on the issue of rational rela-
tionship as to those purposes because it
found the evidence in conflict. In order
to obtain an expedited ruling, appellants
waived their right to an evidentiary hear-
ing only as to the purposes which the
lower courts have determined to be legit-
imate. 447 So.2d 142, 143 (Ala.1983).
Thus, for this Court to resolve whetherAlabama may continue to collect the tax,
it would have to decide de novo whether
any of the other purposes was legitimate,
and also whether the statute's classifica-
tion bore a rational relationship to any of
these purposes-all this, on a record that
the Court of Civil Appeals deemed inad-
equate.
*876 A
(1)
The first of the purposes found by the trial court to
be a legitimate reason for the statute's classification
between foreign and domestic corporations is that it
encourages the formation of new domestic insur-
ance companies in Alabama. The State, agreeing
**1681 with the Court of Civil Appeals, contends
that this Court has long held that the promotion of
domestic industry, in and of itself, is a legitimate
state purpose that will survive equal protection
scrutiny. In so contending, it relies on a series of
cases, including Western & Southern, that are said
to have upheld discriminatory taxes. See Bacchus
Imports, Ltd. v. Dias, 468 U.S. 263, 104 S.Ct. 3049,
82 L.Ed.2d 200 (1984); Pike v. Bruce Church, Inc.,
397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970);
Allied Stores of Ohio, Inc. v. Bowers, supra; Parker
v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315
(1943); Carmichael v. Southern Coal & Coke Co.,
301 U.S. 495, 57 S.Ct. 868, 81 L.Ed. 1245 (1937);
Board of Education v. Illinois, 203 U.S. 553, 27
S.Ct. 171, 51 L.Ed. 314 (1906).
[1] The cases cited lend little or no support to the
State's contention. In Western & Southern, the case
principally relied upon, we did not hold as a general
rule that promotion of domestic industry is a legit-
imate state purpose under equal protection analysis.FN6
Rather, we held that California's purpose*877
in enacting the retaliatory tax-to promote the inter-
state business of domestic insurers by deterring
other States from enacting discriminatory or ex-cessive taxes-was a legitimate one. 451 U.S., at
668, 101 S.Ct., at 2083. In contrast, Alabama asks
us to approve its purpose of promoting the business
of its domestic insurers in Alabama by penalizing
foreign insurers who also want to do business in the
State. Alabama has made no attempt, as California
did, to influence the policies of *878 other States in
order to enhance its domestic companies' ability to
operate interstate; rather, it has erected barriers to
foreign companies who wish to do interstate busi-
ness in order to improve its domestic insurers' abil-
ity to compete at home.
FN6. We find the other cases on which the
State relies also to be inapposite to this in-
quiry. Bacchus Imports, Pike, and Parker
discussed whether promotion of local in-
dustry is a valid state purpose under the
Commerce Clause. The Commerce Clause,
unlike the Equal Protection Clause, is in-
tegrally concerned with whether a state
purpose implicates local or national in-
terests. The Equal Protection Clause, in
contrast, is concerned with whether a state
purpose is impermissibly discriminatory;
whether the discrimination involves local
or other interests is not central to the in-
quiry to be made. Thus, the fact that pro-
motion of local industry is a legitimate
105 S.Ct. 1676 Page 8
470 U.S. 869, 105 S.Ct. 1676, 84 L.Ed.2d 751, 53 USLW 4399
(Cite as: 470 U.S. 869, 105 S.Ct. 1676)
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8/9/2019 Metropolitan Life Ins Co. vs. Ward Comm of Ins of Alab 470 U.S. 869 105 S.ct. 1676
10/23
state interest in the Commerce Clause con-
text says nothing about its validity under
equal protection analysis. See infra, at
1683.
Moreover, neither Bacchus nor Pike
ruled that a State's ability to promote do-
mestic industry was unlimited, even un-
der the Commerce Clause. Thus, in Bac-
chus, although we observed as a general
matter that a State may enact laws pur-
suant to its police powers that have the
purpose and effect of encouraging do-
mestic industry, 468 U.S., at 271, 104
S.Ct., at 3055, we held that in so doing,
a State may not constitutionally impose adiscriminatory burden upon the business
of other States, merely to protect and
promote local business, id., at 272-273,
104 S.Ct., at 3055-3056. Accord, Armco
Inc. v. Hardesty, 467 U.S. 638, 642, 104
S.Ct. 2620, 2622, 81 L.Ed.2d 540 (1984)
. Likewise, in Pike, the Court held that
the state statute promoting a legitimate
local interest must regulat [e] evenhan-
dedly. 397 U.S., at 142, 90 S.Ct., at 847
.
Other cases cited by the State are simply
irrelevant to the legitimacy of promoting
local business at all. Carmichael relates
primarily to the validity of a state unem-
ployment compensation scheme, and
Board of Education deals with the State's
ability to regulate matters relating to
probate. Bowers is the only one of the
State's cases that involves the validity
under the Equal Protection Clause of a
tax that discriminates on the basis of res-
idence of domestic versus foreign cor-
porations. That case does little, however,
to support the State's contention that pro-
motion of domestic business is a legitim-
ate state purpose. It was concerned with
encouraging nonresidents-who are not
competitors of residents-to build ware-
houses within the State. See infra, at
1682 - 1683.
The crucial distinction between the two cases lies in
the fact that Alabama's aim to promote domestic in-
dustry is purely and completely discriminatory, de-
signed only to favor domestic industry within the
State, no matter what the cost to foreign corpora-
tions also seeking to do business there. Alabama's
purpose, contrary to California's, constitutes the
very sort of parochial discrimination that the Equal
Protection Clause was intended to prevent. As
Justice BRENNAN, joined by Justice Harlan,
**1682 observed in his concurrence in Allied Stores
of Ohio, Inc. v. Bowers, 358 U.S. 522, 79 S.Ct. 437,3 L.Ed.2d 480 (1959), this Court always has held
that the Equal Protection Clause forbids a State to
discriminate in favor of its own residents solely by
burdening the residents of other state members of
our federation. Id., at 533, 79 S.Ct., at 444. Unlike
the retaliatory tax involved in Western & Southern,
which only burdens residents of a State that im-
poses its own discriminatory tax on outsiders, the
domestic preference tax gives the home team an
advantage by burdening all foreign corporations
seeking to do business within the State, no matter
what they or their States do.
[2] The validity of the view that a State may not
constitutionally favor its own residents by taxing
foreign corporations at a higher rate solely because
of their residence is confirmed by a long line of this
Court's cases so holding. WHYY, Inc. v. Glassboro,
393 U.S., at 119-120, 89 S.Ct., at 2 87; Wheeling
Steel Corp. v. Glander, 337 U.S., at 571, 69 S.Ct.,
at 1296; Hanover Fire Ins. Co. v. Harding, 272
U.S., at 511, 47 S.Ct., at 183; Southern R. Co. v.
Greene, 216 U.S., at 417, 30 S.Ct., at 291. See Re-
serve Life Ins. Co. v. Bowers, 380 U.S. 258, 85
S.Ct. 951 (1965) ( per curiam ). As the Court stated
in Hanover Fire Ins. Co., with respect to general
tax burdens on business, the foreign corporation
stands equal, and is to be classified with domestic
corporations of the same kind. *879 272 U.S., at
105 S.Ct. 1676 Page 9
470 U.S. 869, 105 S.Ct. 1676, 84 L.Ed.2d 751, 53 USLW 4399
(Cite as: 470 U.S. 869, 105 S.Ct. 1676)
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8/9/2019 Metropolitan Life Ins Co. vs. Ward Comm of Ins of Alab 470 U.S. 869 105 S.ct. 1676
11/23
511, 47 S.Ct., at 183. In all of these cases, the dis-
criminatory tax was imposed by the State on for-
eign corporations doing business within the State
solely because of their residence, presumably to
promote domestic industry within the State.FN7 In
relying on these cases and rejecting Lincoln in
Western & Southern, we reaffirmed the continuing
viability of the Equal Protection Clause as a means
of challenging a statute that seeks to benefit do-
mestic industry within the State only by grossly dis-
criminating against foreign competitors.
FN7. Although the promotion of domestic
business was not a purpose advanced by
the States in support of their taxes in these
cases, such promotion is logically theprimary reason for enacting discriminatory
taxes such as those at issue here.
The State contends that Allied Stores of Ohio, Inc.
v. Bowers, supra, shows that this principle has not
always held true. In that case, a domestic mer-
chandiser challenged on equal protection grounds
an Ohio statute that exempted foreign corporations
from a tax on the value of merchandise held for
storage within the State. The Court upheld the tax,
finding that the purpose of encouraging foreign
companies to build warehouses within Ohio was alegitimate state purpose. The State contends that
this case shows that promotion of domestic busi-
ness is a legitimate state purpose under equal pro-
tection analysis.
[3][4] We disagree with the State's interpretation of
Allied Stores and find that the case is not inconsist-
ent with the other cases on which we rely. We agree
with the holding of Allied Stores that a State's goal
of bringing in new business is legitimate and often
admirable. Allied Stores does not, however, hold
that promotion of domestic business by discrimin-ating against foreign corporations is legitimate. The
case involves instead a statute that encourages non-
residents-who are not competitors of residents-to
build warehouses within the State. The discriminat-
ory tax involved did not favor residents by burden-
ing outsiders; rather, it granted the *880 nonresid-
ent business an exemption that residents did not
share. Since the foreign and domestic companies
involved were not competing to provide warehous-
ing services, granting the former an exemption did
not even directly affect adversely the domestic
companies subject to the tax. On its facts, then, Al-
lied Stores is not inconsistent with our holding here
that promotion of domestic business within a State,
by discriminating against foreign corporations that
wish to compete by doing business there, is not a
legitimate state purpose. See **1683358 U.S., at
532-533, 79 S.Ct., at 443-444 (BRENNAN, J., con-
curring).
(2)
[5] The State argues nonetheless that it is imper-
missible to view a discriminatory tax such as the
one at issue here as violative of the Equal Protec-
tion Clause. This approach, it contends, amounts to
no more than Commerce Clause rhetoric in equal
protection clothing. Brief for Appellee Ward 22.
The State maintains that because Congress, in en-
acting the McCarran-Ferguson Act, 15 U.S.C.
1011-1015, intended to authorize States to impose
taxes that burden interstate commerce in the insur-
ance field, the tax at issue here must stand. Ourconcerns are much more fundamental than as char-
acterized by the State. Although the McCarran-Fer-
guson Act exempts the insurance industry from
Commerce Clause restrictions, it does not purport
to limit in any way the applicability of the Equal
Protection Clause. As noted above, our opinion in
Western & Southern expressly reaffirmed the viab-
ility of equal protection restra