Opinion ID: 1288234
Heading Depth: 2
Heading Rank: 2

Heading: Deference to Commission's Interpretation of the Regulation

Text: ¶ 53 An administrative agency's interpretation of its own rules or regulations is controlling unless `plainly erroneous or inconsistent with the regulations.' DaimlerChrysler, 299 Wis.2d 1, ¶ 11, 727 N.W.2d 311. However, in this case, as in DaimlerChrysler, the adjudicative body did not promulgate the rule, i.e., in this case the Commission did not promulgate the rule. See, e.g., id. Rather, the rule was promulgated by the DOR. However, if the Commission reasonably interpreted the rule, the interpretation was not inconsistent with the language of the rule or clearly erroneous, and the Commission was charged with being the final authority on the rule at issue, we must afford the Commission controlling weight deference. See id., ¶ 13, 727 N.W.2d 311 (affording the Labor and Industry Review Commission (LIRC) controlling weight deference when interpreting the Department of Workforce Development's (DWD) rule). ¶ 54 When applying controlling weight deference, we ask whether the agency's interpretation is reasonable and consistent with the meaning or purpose of the regulation. Id., ¶ 19, 727 N.W.2d 311. Despite the different terminology, controlling weight deference is similar to great weight deference, the latter associated with deference given to an agency when interpreting a statute as opposed to a rule interpretation. Id. Thus, we may consider that standard's language; as such, under controlling weight deference, a court should refrain from substituting its view of the law for that of an agency charged with administration of the law, and will sustain the agency's conclusions of the law if they are reasonable. Id., ¶ 16. We will sustain an agency's conclusions of law even if an alternative view of the law is just as reasonable or even more reasonable. Id. Accordingly, if the Commission's interpretation is reasonable and consistent with the meaning or purpose of the rule, then we uphold the Commission's decision rather than substitute our judgment for that of the Commission's. ¶ 55 Because the legislature has subjected the Commission's decision to judicial review, it is the Commission's decision, rather than the DOR's decision, to which we must give deference. Kamps v. DOR, 2003 WI App 106, ¶ 26, 264 Wis.2d 794, 663 N.W.2d 306; see also Wis. Stat. § 73.015(2); Wis. Stat. § 227.57. Even if disagreement between the Commission and the DOR arises over the rule's meaning, courts give deference to the Commission rather than the DOR. See, e.g., Caterpillar, 241 Wis.2d 282, ¶ 6 n. 3, 625 N.W.2d 338 (stating that when there is a conflict between the DOR and the Commission, any deference that might be due is given to the Commission because it is the final administrative authority that reviews the DOR's decisions); River City Refuse Removal, 299 Wis.2d 561, ¶ 59, 729 N.W.2d 396 (concluding that deference should be given to the Commission; the DOR's interpretation was not more reasonable than the Commission's). [15] ¶ 56 While the DOR concedes that courts must review the Commission's decision and not the DOR's decision, it argues that the Commission should at least give deference to or address the DOR's construction of its rule. Because the Commission did not defer or specifically refer to the DOR's construction, the DOR argues that this court should conduct a de novo review of the Commission's rule interpretation. We decline that request. ¶ 57 The DOR asserts several arguments in favor of its conclusion that the Commission must give deference to the DOR. While we address those specific arguments below, in short, the DOR fails to articulate any reason that persuades us to conclude that the Commission must defer to the DOR's interpretation of its rule. ¶ 58 The legislature designated the Commission as the final authority on all tax questions. Requiring the Commission to grant deference to the DOR would undermine the Commission's authority to review tax questions. By virtue of creating the Commission and identifying it as the agency charged with interpreting questions that arise under our tax code, the legislature has divided the agencies' duties with regard to the tax code. The DOR may promulgate rules and even issue private letter rulings or interpretations that give guidance to taxpayers, but the Commission is the final authority. Thus, it is for the Commission to interpret those rules. The legislature has designated the Commission, not the DOR, as the final authority on all tax questions. It is within the province of the legislature to enact the law. ¶ 59 Requiring the Commission to give deference to the DOR not only undermines the Commission's authority, it is troubling for the taxpayer who appeals the DOR's decision. The Commission hears and decides disputes between the DOR and individual taxpayers or entities. If the Commission, which serves a quasi-judicial function, must defer to one party  namely, the DORhow does the taxpayer receive a fair hearing? The taxpayer brings his or her appeal to the Commission at a significant disadvantage if the Commission must defer to the taxpayer's opponent, the DOR. ¶ 60 While the Commission may find it useful to consider the DOR's construction of its rule by reviewing such things as published tax releases, technical information memorandums, and private letter rulings, it need not ultimately defer to the DOR's interpretation, nor must it specifically refer to the DOR's construction in its decision. In this case, while the Commission did not specifically refer by name to the DOR's published tax releases, technical information memorandums, and private letter rulings, these materials were submitted to the Commission. Moreover, the DOR submitted briefs, proposed findings of fact, affidavits, and exhibits. The Commission states in its written decision that [b]ased upon the submissions of the parties and the entire record in this matter, the Commission hereby rules and orders as follows[]. Therefore, the Commission did consider the DOR's submissions since the DOR was a party. ¶ 61 No authority exists for requiring the Commission to defer to the DOR's construction of its rule. The legislature does not mandate such a requirement, and we decline the opportunity to create one. The DOR's deference argument is intriguing because the DOR promulgated this rule, and thus, it is, at least arguably, reasonable to argue that the Commission should give the DOR deference. However, this would ignore the boundaries that the legislature created when it gave the Commission final authority over all tax questions. ¶ 62 The DOR, citing to Hillhaven, [16] argues that an agency's interpretation of its own rule is controlling unless plainly erroneous or inconsistent with the rule's language. Thus, according to the DOR, the Commission should afford the DOR deference because the DOR promulgated the rule at issue. As a general rule, that is correct. However, the DOR fails to acknowledge a critical difference between this case and Hillhaven. In Hillhaven, no adjudicative agency body was charged with reviewing the Department of Health and Family Services' decision. The department's decision was appealed directly to the circuit court. In the case at issue, the Commission reviews the DOR's decisions, and it is the Commission's decision, not the DOR's, that is appealed to the circuit court. It is significant that the legislature, in this case, designated an intermediarythe Commissionto review the DOR's decision and to be the final authority on tax questions. Again, it is the Commission's decision that is subject to judicial review and to which we must give deference, if deference is to be given. ¶ 63 The DOR, citing to State ex rel. Griffin, [17] argues that the goal when interpreting a rule is to discern the intent of the rule maker. Presumably, the DOR is arguing that the Commission must defer to the DOR's construction in an effort to discern the intent of the rule maker. However, the meaning of the rule may also be discerned from the rule's language. See State ex rel. Kalal v. Circuit Court for Dane County, 2004 WI 58, ¶45, 271 Wis.2d 633, 681 N.W.2d 110. The Commission's decision relies heavily on the rule's language. The DOR had an opportunity to express the rule's meaning when it drafted the rule. We say this not to discourage the production of private letter rulings or other guiding documents, which greatly assist the public in interpreting tax rules, but to simply state that the meaning of the rule can be expressed in the rule's language. Here, the Commission reasonably relied on the rule's language to discern its meaning. ¶ 64 The DOR also relies on Griffin to further argue that by declining to require the Commission to give deference to the DOR, the Commission is given more power than Wisconsin courts because courts must defer to an agency's interpretation of its rule unless the agency's interpretation is plainly erroneous or inconsistent with the regulations. Courts give deference to an agency, either a line agency or an adjudicative agency, because the agency is in a better position to interpret the rule than the court; the agency has significant and continual experience with the area of law in question. [18] ¶ 65 However, when, as in this case, the Commission reviews the DOR's decision, the Commission need not rely on the DOR's expertise because the Commission itself is experienced with interpreting and applying the tax code, and is, in fact, the final authority on all tax questions. See DOR v. Heritage Mut. Ins. Co., 208 Wis.2d 582, 589, 561 N.W.2d 344 (Ct.App.1997) (stating that the Commission possesses expertise and experience in construing the tax laws generally). The Commission has extensive experience with interpreting and applying this state's tax laws. As a result, it need not rely on the DOR for assistance, although it certainly may consider the DOR's publications, which articulate the DOR's interpretation of a rule. Therefore, it is not that the Commission has more power than a court, but rather, it is that, unlike the courts, the Commission is better suited and less likely to need assistance with interpreting and applying the tax rules that it is charged with interpreting and applying. ¶ 66 The DOR, citing to Pfeiffer, [19] argues that because it performed all of the[] legislative functions, it necessarily `knows the specific purposes of the regulations it has promulgated' and `is in the best position to interpret its own regulations in accordance with their underlying purposes.' However, Pfeiffer and other cases cited by the DOR do not consider how the quasi-judicial function of the Commission alters this analysis. While it remains true that the agency that promulgates the rule should be given controlling weight deference, this is altered here because the legislature designated an agency, the Commission, with the task of reviewing decisions and being the final authority. In DaimlerChrysler, we stated that [a]n administrative agency that regularly works with the rules and regulations of another agency, whose actions it is authorized by the legislature to review, is in the best position to interpret such rules and regulations because the agency knows the specific purposes of the rules and regulations that have been promulgated, and has expertise in the area the agency is called upon to review. DaimlerChrysler, 299 Wis.2d 1, ¶ 22, 727 N.W.2d 311. ¶ 67 The DOR argues that [n]owhere does DaimlerChrysler state that LIRC would have reasonably interpreted DWD's rule if LIRC had either failed to accord controlling weight to DWD's construction of DWD's own rule or had failed to address DWD's prior official constructions of its rule.... However, nowhere in DaimlerChrysler does the court suggest that giving deference to or addressing the DWD's construction was critical to its conclusion that the LIRC reasonably interpreted the regulation in question. In fact, the LIRC's interpretation was afforded controlling weight deference because the LIRC reasonably interpreted a rule adopted by the DWD, the LIRC's interpretation was not inconsistent with the language of the rule or clearly erroneous, and the LIRC was charged by the legislature with the duty of reviewing decisions... of the DWD, and does so frequently. Id., ¶ 13, 727 N.W.2d 311. ¶ 68 The DOR, citing to River City Refuse Removal, [20] argues that the Commission should not have been afforded any deference because it had not issued prior decisions construing the substantive provisions of the DOR's rule. However, in so arguing, the DOR utilizes the standards of review for statutory interpretation instead of rule interpretation. While this argument may apply to statutes, as articulated in River City Refuse Removal, it does not necessarily follow that it applies to interpretation of rules. No deference is due when an agency's statutory interpretation is one of first impression. River City Refuse Removal, 299 Wis.2d 561, ¶ 35, 729 N.W.2d 396 (emphasis added). However, the case at hand is based upon a rule interpretation rather than a statutory interpretation. ¶ 69 In any event, the Commission does have some experience with the factors articulated in Wis. Admin. Code § Tax 11.71(1)(e). See, e.g., IBM Corp. v. DOR, Wis. Tax Reptr. (CCH) ¶ 202-854 (WTAC 1987); Health Micro Data Sys., Inc. v. DOR, Wis. Tax Reptr. (CCH) ¶ 203-062 (WTAC 1989). While, in these cases, the Commission did not apply the Wis. Admin. Code § Tax 11.71(1)(e) and (k) factors as it did in this present case, the decisions do reference the factors and do consider, at the very least, the ideals contained within the formalized factors. Thus, the DOR seems to overstate the Commission's inexperience and does not acknowledge the Commission's general experience with interpreting and applying the tax statutes and rules. See Heritage, 208 Wis.2d at 589, 561 N.W.2d 344; see also Telemark Dev., Inc. v. DOR, 218 Wis.2d 809, 820, 581 N.W.2d 585 (Ct.App. 1998) (stating that deference is not dependent on whether a specific factual scenario has been heard but rather on the Commission's experience with the statutory scheme). In this case, it is not as though the Commission never saw these particular factors until it was called upon to decide this case. After all, these factors have been in existence since 1985. ¶ 70 Finally, the DOR argues that the acquiescence and nonacquiescence provisions of Wis. Stat. §§ 73.01(4)(e) [21] and 73.015(2) [22] apply to the case at hand. [23] In short, the DOR argues that when the DOR does not petition for judicial review and does not file a notice of nonacquiescence after the Commission's decision, the DOR has determined that the Commission has correctly construed the statutes or rules at issue. On the other hand, the DOR argues that when it petitions for judicial review or files a notice of nonacquiescence, the DOR has determined that the Commission has incorrectly construed the statutes or rules at issue. As a result, the DOR argues that in such cases, the Commission's decision should be subject to de novo review. ¶ 71 We, however, are persuaded by Menasha's argument that the acquiescence and nonacquiescence provisions of Wis. Stat. §§ 73.01(4)(e) and 73.015(2) do not apply to the case at bar. The acquiescence rules, in general, expand the binding effect of the Commission's decision. While the Commission's decision is always binding on the parties of a particular dispute, the Commission's decision binds the DOR on other potential disputes only if the DOR does not appeal or file a notice of nonacquiescence. The acquiescence rules ensure stability in tax matters because they allow taxpayers to rely on the Commission's decisions and interpretations unless notice to the contrary is givenby appeal or nonacquiescencethat the DOR does not intend to follow the Commission's interpretations in subsequent taxpayer disputes. See DOR v. U.S. Shoe Corp., 158 Wis.2d 123, 136-37, 462 N.W.2d 233 (Ct.App.1990). If no appeal or notice of nonacquiescence is filed, then the DOR is estopped from re-litigating the Commission's interpretation when the same issue arises with another taxpayer. In the case at hand, the acquiescence rules do not apply because here we are reviewing the Commission's decision. We are procedurally beyond the point where acquiescence or nonacquiescence has any relevance. The acquiescence and nonacquiescence provisions simply cannot be read to require a de novo review of the Commission's decision. They have no relationship to the standard of review. ¶ 72 Accordingly, we give the Commission's statutory interpretation due weight deference, and we give the Commission's rule interpretation controlling weight deference. While the statute uses the word custom, that word is defined only by the rule. Therefore, it is the rule interpretation that controls in this case. Under controlling weight deference, we ask whether the agency's interpretation is reasonable and consistent with the meaning or purpose of the regulation. If the Commission's interpretation is reasonable and consistent with the meaning or purpose of the rule, then we uphold the Commission's decision rather than substitute our judgment for that of the Commission's.