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USAA Studies Options Following Court Ruling

    SAN ANTONIO--May 13, 2002--The following was released today by USAA.

    USAA Statement

    "We believe that we are right on the law and we are studying the options we have as the result of today's ruling.
    "USAA is owned by millions of members of America's fighting forces. We cannot understand why anyone would insist that those who defend our freedom pay more taxes to the state of Texas than the law requires.
    "If we decide to appeal and prevail, any refund we ultimately receive in this case will be used to help hold the line on the cost of insurance and other financial services for the military families who depend on us."

Cyndi Taylor Krier, Vice president, Texas Governmental Relations USAA

    USAA's TAX REFUND CLAIM

    -- USAA, founded and based in San Antonio for the past 80 years,
    provides insurance and financial services products to
    America's Military fighting forces and their families around
    the world.

    -- In January of 2000, USAA filed a refund claim with the Texas
    State Comptroller's office for taxes it discovered that it had
    overpaid.

    -- Article 4 of the Texas Insurance Code states that insurance
    companies are required to pay premium taxes on gross revenue.
    All other businesses pay taxes on net revenue, after
    deductions. If such premium taxes are paid by insurance
    companies, the law says that:

    -- "No other tax shall be levied or collected from any
    insurance carrier by the state, county, or city or any
    town, but this law shall not be construed to prohibit
    the levy and collection of state, county, and
    municipal taxes upon the real and personal property of
    such carrier."

    -- "The taxes in this article shall constitute all
    collectible under the laws of Texas against any such
    insurance carrier, except maintenance taxes
    specifically levied under the laws of Texas and
    assessed by the commissioner and administered by the
    comptroller."

    -- Because of the language of Article 4 above, USAA was not
    required to pay sales and use taxes. In other words, the
    premium tax is in lieu of sales and use taxes.

    -- During the 2001 legislative session, the Comptroller requested
    and received a change in the law so that from now on,
    insurance companies have to pay both premium taxes and sales
    and use taxes. However, the legislature declined to support
    the Comptroller's request to block refund claims by USAA to
    recover the overpayment of taxes from the prior years.

    -- Every year many Texans and Texas businesses file for and
    receive refunds for overpayments of taxes. USAA discovered
    that it had overpaid its taxes and is now seeking a refund, as
    well.