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Insurance Law No. 03-02-00722, 5/22/2003. Click here for the full text of this decision FACTS: Texas law imposes a premium tax on all insurance companies. Texas Insurance Code article 4.11 �1. If a foreign insurance company maintains certain investments in Texas, it may be entitled to a lower tax rate. To determine this tax benefit, a foreign insurer must demonstrate that it owns a certain ratio of Texas investments to investments in a comparison state. The Texas investments germane to this appeal are corporate stocks and bonds and “real property, or any interest therein.” This dispute requires the court to determine whether certain assets qualify as Texas assets for the purpose of calculating tax rates under article 4.11. United American is a Colorado-based insurance company headquartered in Houston. United American owns participations in limited partnerships formed to own and exploit Texas mineral resources. Although it is not clear from the record, it appears that these partnerships primarily hold fractional interests in various oil and gas properties. On its premium tax returns beginning in 1987, United American consistently listed these partnership interests as corporate stocks, bonds, or other obligations, qualifying as Texas investments under article 4.11. In 1999, the comptroller completed an audit of United American’s premium tax returns for prior years beginning in 1990. The comptroller determined that the limited partnership interests did not qualify as Texas investments under article 4.11. Accordingly, the comptroller assessed an additional $1,270,365 in premium taxes, interest and penalty for underpayments occurring between 1990 and 1995. United American appealed to the comptroller and paid the full amount under protest. After the comptroller denied the appeal, United American sought a declaration that its limited partnership interests should have been considered Texas assets for the purposes of article 4.11. The comptroller responded that, because partnership interests do not constitute real property under Texas law generally, article 4.11 cannot, based on its plain language, be extended to include partnership interests in real property. The trial court found that article 4.11 did not include limited partnership interests in mineral producing properties and granted the comptroller’s traditional summary judgment motion. HOLDING: Affirmed. The court construes article 4.11 without regard to article 3.33, and, because article 4.11 is a tax exemption statute, the court strictly construes its terms. The 1951 insurance code allowed a premium tax rate benefit for all real estate in Texas acquired according to the provisions of chapter three of the code. In 1984, the Legislature moved the definitional provision to article 4.11 and removed any reference to chapter three. There is no statutory indication in article 4.11 that the two articles are to be read together. Because article 4.11 is a tax exemption statute and must be strictly construed, the court declines to link its interpretation with the provisions of article 3.33. The assets listed in article 4.11 are all items that must be held in direct ownership by the foreign insurance company applying for beneficial tax treatment. Several of those items constitute intangible personal property that can only be owned directly by an insurance company. The provision at issue, by contrast, provides tax benefits for ownership of real property. The limited partnership participations involved in this case are personal property, not real property. Furthermore, the real property at issue is owned by the limited partnerships, not by the insurance company. As the comptroller argues, if the Legislature had intended for article 4.11 to apply to limited partnership interests, it could have indicated that real property and personal property related to oil and gas production would be accounted Texas assets for premium tax rate purposes. The court concludes that article 4.11 does not extend to interests in limited partnerships. OPINION: Kidd, J.; Kidd, Yeakel and Puryear, JJ.

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