[author: James L. Fritz]
An equal division (3-3) of the Pennsylvania Supreme Court has resulted in the affirmance of a 2010 Commonwealth Court decision allowing credit against premiums tax liability for Pennsylvania Life and Health Insurance Guaranty Association assessments paid by companies selling fixed premium annuities. Allstate life Insurance Co. v. Commonwealth, No. 68 MAP 2010, August 2, 2012, affirming 992 A.2d 910 (Pa. Cmwlth. 2010). Suspended Justice Orie Melvin did not participate in the case.
The statute indicates that all assessments were intended to be recoverable, either by increasing premiums or (where premiums are fixed) by taking credit against the issuer’s Pennsylvania premiums tax. The statute provided for the creditable portion of an assessment to be determined by applying a fraction whose denominator included all premiums and the numerator included fixed premiums. However, only the statutory language addressing the denominator included annuity premiums. The numerator language referenced only premiums from “life or health and accident” policies. Finding the omission of annuity premiums to be inconsistent with other sections of the statute and with legislative intent, the justices supporting the result below considered the statute ambiguous and ruled that annuities must be considered in order to effectuate the express purpose of the assessment and credit statute.
The three justices supporting the Commonwealth Court’s decision did not specifically discuss the lower court’s determination that a separate fraction must be applied to the annuity portion of the Guaranty Assn. assessments. However, this aspect of the decision below was implicitly sustained.
Three other justices would have reversed the Commonwealth Court, on the basis that the plain language of the numerator provision was not ambiguous and must be enforced to exclude annuities from the numerator (thereby assuring zero credit for assessments made against annuities).