Respondent voluntarily paid the capital stock tax imposed on domestic corporations by section 1000, Revenue Act of 1921, 42 Stat. 294, for the fiscal years ending June 30 in 1922 and 1923. Thereafter it applied for refund on the ground that it was an insurance company taxable only under section 246, 42 Stat. 262. The claim was denied. It brought this action in the federal court for the Southern district of New York to recover the amount so paid. The parties by written stipulation waived a jury and submitted the case on an agreed statement of facts. The District Court gave judgment for respondent. 34 F.(2d) 504. The Circuit Court of Appeals affirmed. 50 F.(2d) 104.

The question is whether on the admitted facts respondent was an insurance company subject to the tax imposed by section 246 and therefore not taxable under sections 230 and 1000.

Respondent was incorporated in 1893 under § 170(1) of Article 5 of the Insurance Law of New York1 as the 'Lawyers Mortgage Insurance Company' to examine titles, procure and furnish information in relation thereto, and guarantee or insure bonds and mortgages and the owners of real estate against loss by reason of defective titles. In 1903, 'insurance' was dropped from its name. In 1905, its certificate of incorporation was amended to include the making, and guaranty of the correctness, of searches for instruments, liens, and charges affecting real estate and the guaranty of payment of bonds and mortgages.2 In 1913,3 the certificate of incorporation was further amended to include authority to insure payment of notes of individuals and partnerships and bonds and other evidences of indebtedness of corporations, when secured by real estate mortgages, and to 'invest in, purchase and sell, with such guarantee (of payment) or with guarantee only against loss by reason of defective title or incumbrances, bonds and mortgages, and notes of individuals or partnerships secured by mortgages * * * and bonds, notes, debentures and other evidences of indebtedness of solvent corporations secured by deed of trust or mortgages * * *.' It was subject to supervision by the state superintendent of insurance and to the laws applicable to title and credit guaranty corporations and was required to file with such superintendent statements of its condition at the end of each year.

Respondent never has insured titles. In the tax years, it carried on business as follows: Upon receiving an application for a loan it caused an appraisal of the proposed real estate security to be made and procured a title insurance company to survey the property, make a report as to title and insure the same. The borrower, having executed and delivered a bond and mortgage to respondent, received from it the amount specified therein less charges for title insurance, survey, disbursements, and recording tax, and less a lending fee which included the charge for appraisal. Respondent sold the mortgage loans. On the sale of a bond and mortgage as a whole, it delivered an assignable contract called 'policy of mortgage guarantee' to the purchaser. On the sale of part of a loan, it issued a participation certificate assignable by indorsement and registration on respondent's books and containing substantially the same provisions as the policy. By every such policy or certificate the purchaser appointed respondent his agent to collect the principal and interest, and the latter agreed to keep the title guaranteed and the premises insured against fire and to require the owner to pay taxes, assessments, water rates, and fire insurance premiums. Respondent guaranteed payment of principal, as and when collected but in any event within 18 months following written demand made after maturity, and payment of interest regularly at an agreed rate usually one-half of one per cent. less than that specified in the bond. Respondent kept the difference and called it 'premium.' Respondent also retained the interest accruing between the making of the loans and the sale of the securities. For renewals of loans it charged extension fees.

It issued some policies of guaranty as to mortgage loans which were not made or sold by it. While substantial in amount, that part of its business constituted but a small percentage of the total. It made no assignment or apportionment of assets to the different parts of its business but used them indiscriminately in its different activities. It kept on hand sufficient bonds and mortgages to maintain the guaranty fund required by the Insurance Law. Corporations organized under the New York banking laws and subject to its banking department are authorized to make loans and sell bonds, mortgages and participations therein with their guaranties under the same general method of doing business as that of respondent. And at least two companies so organized and supervised are carrying on that business.

Pertinent provisions of the act are printed in the margin.4 The general rule declared by section 1000(a) is broad enough to include respondent. But, if it was an insurance company taxable under section 246, it was excepted from the general rule by subsection (b). As such corporations constitute a special class, respondent must be held liable for the capital stock tax unless clearly shown to have been an insurance company within the meaning of the act. Bank of Commerce v. Tennessee, 161 U. S. 134, 146, 16 S. Ct. 456, 40 L. Ed. 645; Heiner v. Colonial Trust Co., 275 U. S. 232, 235, 48 S. Ct. 65, 72 L. Ed. 256; Choteau v. Burnet, 283 U. S. 691, 696, 51 S. Ct. 598, 75 L. Ed. 1353. The act does not define 'insurance company' or definitely indicate criteria by which corporations meant to be so specially dealt with may with certainty by identified. General definition is not necessary in order to determine whether, having regard to the purpose of the classification and the considerations on which it probably was made, respondent's business brought it within the special class.

Under section 230, Revenue Act of 1918, 40 Stat. 1075, insurance companies were taxed as were other business corporations. The applicable Definition of gross income was comprehensive and included gains, profits and income derived from any source whatever. Section 213, p. 1065. It was substantially the same in the 1921 Act. Section 213, 42 Stat. 237. But section 246 of the latter act dealt with certain classes of insurance companies separately and defined gross income to be 'investment income,' i. e., interest, dividends and rents, and 'underwriting income,' i. e., premiums earned less losses and expenses. Capital gains and income from other sources were omitted.

A statement showing respondent's lending fees, extension fees, interest and premiums follows:

                   Lending     Extension 
      Year          Fees         Fees         Interest       Premiums 
 
      1922.... $655,283.70   $214,303.56    $372,795.12     $619,986.38
      1923..... 990,855.37     73,745.71     426,842.31      750,803.21

While name, charter powers, and subjection to state insurance laws have significance as to the business which a corporation is authorized and intends to carry on, the character of the business actually done in the tax years determines whether it was taxable as an insurance company. United States v. Phellis, 257 U. S. 156, 168, 42 S. C.t. 63, 66 L. Ed. 180; Weiss v. Stearn, 265 U. S. 242, 254, 44 S. Ct. 490, 68 L. Ed. 1001, 33 A.L.R. 520. Evidently that was the basis of the classification. Congress did not intend to exempt from the capital stock tax under section 1000(a) and the income tax under section 230 corporations not doing insurance business even though organized under and subject to state insurance laws.

The dropping of 'insurance' from respondent's name and the extension of charter powers to the purchase and sale of mortgage loans suggest purpose to carry on an investment rather than an insurance business. Respondent did not consider itself an insurance company taxable under section 246 until after it had twice made and paid capital stock taxes under section 100(a) and income taxes under section 230. The lending of money on real estate security, the sale of bonds and mortgages given by borrowers and use of the money received from purchasers to make additional loans similarly secured constituted its principal business. Undoubtedly the guaranties contained in the policies and participation certificates were in legal effect contracts of insurance. Tebbets v. Mercantile Credit Guarantee Co. (C. C. A.) 73 F. 95, 97; Guarantee Co. v. Mechanics' Sav. Bank & Trust Co. (C. C. A.) 80 F. 766, 772; State ex rel. Peach Co. v. Bonding & Surety Co., 279 Mo. 535, 553, 556, 215 S. W. 20; People v. Potts, 264 Ill. 522, 527, 106 N. E. 524; People v. Rose, 174 Ill. 310, 51 N. E. 246, 44 L. R. A. 124; Commonwealth v. Wetherbee, 105 Mass. 149, 160; Shakman v. United States Credit System Co., 92 Wis. 366, 374, 66 N. W. 528, 32 L. R. A. 383, 53 Am. St. Rep. 920; Young v. American Bonding Co., 228 Pa. 373, 380, 77 A. 623. These guaranties furnished purchasers additional security and were calculated to make the loans desirable as investments and readily saleable at a profit.

The lending fees, extension fees, and accrued interest appertain to the business of lending money rather than to insurance and may not reasonably be attributed to the subordinate element of guaranty in respondent's mortgage loan business. The so-called premiums amount to about one-third of total income, but they cover agency and other services which generally are not performed under contracts of insurance. There is no showing that these amounts do not include profits arising from such sales or that they are justly chargeable or were intended to apply only to the risks covered. Respondent has not established any basis upon which the interest so retained may reasonably be charged or apportioned to the element of insurance involved in such transactions. And the stipulation in respect of policies issued on loans not made by respondent is too vague to be given weight.

'Premiums' are characteristic of the business of insurance, and the creation of 'investment income' is generally, if not necessarily, essential to it. Section 246 does not cover any other class of income. It is not shown that respondent had any investment income within that section. Evidently its guaranties produced less than one-third of its income.

Respondent's business is one which may be and is in fact carried on by corporations organized under the New York banking laws. The element of insurance may not properly be regarded as more than an incident thereof; it certainly is not sufficient to make respondent an 'insurance company' within the meaning of that phrase as it is commonly used and understood. There is no warrant for holding that Congress intended to use the expression in any other sense. Miller v. Robertson, 266 U. S. 243, 250, 45 S. Ct. 73, 69 L. Ed. 265; Sacramento Navigation Co. v. Salz, 273 U. S. 326, 329, 330, 47 S. Ct. 368, 71 L. Ed. 663.

This case is not, as respondent contends, ruled against the government by United States v. Loan & Bldg. Co., 278 U. S. 55, 49 S. Ct. 39, 73 L. Ed. 180. The opinion in that case shows that loan and building associations exempt from taxes under Revenue Acts of 1918 and 1921 are not strictly confined to the raising of funds by subscription of members for the making of advances to members to enable them to build or buy houses of their own, that the outside operations of the association there considered were not so related to mere money making as to constitute a gross abuse of the name and that the receiving of deposits on interest and making of loans to nonmembers did not disqualify it for the exemption.

In the case before us respondent's charter authority extended not only to the business of insurance but also to other lines including that of investment with or without guaranties as it might choose. As above shown, the element of guaranty involved in its transactions in the tax years was not sufficient to make it an insurance company.

Judgment reversed.