STEVENS, J., concurring in judgment

470 U. S.

of at least one of those crimes. Moreover, where the prosecution's evidence is weak, its ability to bring multiple charges may substantially enhance the possibility that, even though innocent, the defendant may be found guilty on one or more charges as a result of a compromise verdict. The submission of two charges rather than one gives the prosecution 'the advantage of offering the jury a choice a situation which is apt to induce a doubtful jury to find the defendant guilty of the less serious offense rather than to continue the debate as to his innocence.' Cichos v. Indiana, 385 U. S. 76, 81 (1966) (Fortas, J., dissenting from dismissal of certiorari).”* Accordingly, I concur in the judgment.

*The following footnote is appended to the quoted passage:

"It is true that compromise is possible even under the familiar procedure whereby a lesser included offense is submitted along with a greater offense and the jury is told that it can convict on only one charge. Under the usual procedure, however, the risk of an irrational compromise is reduced by the rule that a lesser included offense will not be submitted to the jury if the element that distinguishes the two offenses is not in dispute. See, e. g., Sansone v. United States, 380 U. S. 343 (1965); United States v. Tsanas, 572 F. 2d 340, 345–346 (CA2), cert. denied, 435 U. S. 995 (1978).” 459 U. S., at 372, n. 4 (MARSHALL, J., dissenting).

Syllabus

METROPOLITAN LIFE INSURANCE CO. ET AL. v. WARD ET AL.

APPEAL FROM THE SUPREME COURT OF ALABAMA

No. 83-1274. Argued October 31, 1984-Decided March 26, 1985 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 investing in Alabama assets and securities. Appellant foreign insurance companies filed claims for refunds 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 statute did not violate the Equal Protection Clause because, in addition to raising revenue, it served the legitimate 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 distinction 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 evidentiary hearing on the issue of rational relationship. On certiorari to the Alabama Supreme Court, appellants waived their rights to such an evidentiary hearing, and the court entered judgment for the State and the intervenors on appellants' equal protection challenge to the statute.

Held: The Alabama domestic preference tax statute violates the Equal Protection Clause as applied to appellants. Pp. 874-883.

(a) Under the circumstances of this case, promotion of domestic business by discriminating against nonresidents is not a legitimate state purpose. Western & Southern Life Ins. Co. v. State Board of Equalization of California, 451 U. S. 648, distinguished. Alabama's aim to promote domestic industry is purely and completely discriminatory, designed only to favor domestic industry 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 Protection Clause was intended to prevent. A State may not constitutionally favor its own residents by taxing foreign corporations at a higher rate solely because of their residence. Although the McCarranFerguson Act exempts the insurance industry from Commerce Clause

restrictions, it does not purport to limit the applicability of the Equal Protection Clause. Equal protection restraints are applicable even though the effect of the discrimination is similar to the type of burden with which the Commerce Clause also would be concerned. Pp. 876–882. (b) Nor is the encouragement of the investment 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 foreign insurers to eliminate the statute's discriminatory effect, it does not cure but reaffirms the impermissible classification based solely on residence. Pp. 882-883.

447 So. 2d 142, reversed and remanded.

POWELL, J., delivered the opinion of the Court, in which BURGER, C. J., and WHITE, BLACKMUN, and STEVENS, JJ., joined. O'CONNOR, J., filed a dissenting opinion, in which BRENNAN, MARSHALL, and REHNQUIST, JJ., joined, post, p. 883.

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 appellees 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 Massachusetts, 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 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, Attorney General of Texas, and Henry H. Robinson, Assistant Attorney General; for the State of Illinois by Neil F. Hartigan, Attorney General, and Patricia Rosen and Kathryn A. Spalding, Assistant Attorneys General; for Allstate Insurance Co. et al. by Duane C. Quaini; for the Florida Association of

869

Opinion of the Court

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 insurance companies at a higher rate than domestic insurance companies, violates the Equal Protection Clause.

I

Since 1955,' 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 outof-state (foreign) companies. Under the current statutory provisions, foreign life insurance companies pay a tax on their gross premiums received from business conducted in Alabama at a rate of three percent, and foreign companies 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 insurance premiums. §27-4-5(a).3 As a result, a foreign

Domestic Insurance Companies, Inc., et al. by Robert W. Perkins and Samuel R. Neel III.

'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 limited 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 equality in taxation of insurance companies in response to this Court's decision in United States v. South-Eastern Underwriters Assn., 322 U. S. 533 (1944). Act No. 156, 1945 Ala. Acts 196–197. In 1955, the tax was reinstated, Act No. 77, 1955 Ala. Acts 193 (2d Spec. Sess.), and with minor amendments, has remained in effect until the present.

'For domestic preference tax purposes, Alabama defines a domestic insurer as a company that both is incorporated in Alabama and has its principal office and chief place of business within the State. Ala. Code § 27-4-1(3) (1975). A corporation that does not meet both of these criteria is characterized as a foreign insurer. §27-4-1(2).

3

There are two exceptions to these general rules concerning the rates of taxation of insurance companies. For annuities, the tax rate is one percent for both foreign and domestic insurers, Ala. Code § 27-4-4(a)

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 competitor.

Alabama's domestic preference tax statute does provide that foreign companies may reduce the differential in gross premiums taxes by investing prescribed percentages of their worldwide assets in specified Alabama assets and securities. § 27-4-4(b). By investing 10 percent or more of its total assets 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 percentages 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 comparable domestic companies. These are entitled to the one-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 incorporated outside of the State of Alabama, filed claims 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 Commissioner of Insurance denied all of their claims on July 8, 1981.

(1975), and for wet marine and transportation insurance, the rate is threequarters of one percent for both foreign and domestic insurance companies, § 27-4-6(a).