Opinion ID: 2516158
Heading Depth: 4
Heading Rank: 1

Heading: Standard of review for Office of Tax Appeals' review of department's decision

Text: As a preliminary matter, the department asks this court to determine what level of deference the Office of Tax Appeals must give to the department's decisions. The department contends that the Office of Tax Appeals must uphold the Department's decision on imposition of a penalty unless the decision is not supported by a reasonable basis. According to the department, the administrative law judge should have deferred to the decision the department reached in its informal conference with DynCorp. Instead, the judge [made] findings of fact based on a preponderance of the evidence and exercise[d] her own independent judgment in reaching a conclusion as to whether the circumstances surrounding the late filing or payment constitute reasonable cause. Before the legislature created the Office of Tax Appeals in 1996, disputes between taxpayers and the department were adjudicated at the administrative level by the Commissioner of Revenue. [3] In creating the Office of Tax Appeals, the legislature removed the department's adjudicatory role, creating a new quasi-judicial agency charged with the duty of resolving tax disputes. [4] In AS 43.05.435, the statute creating the Office of Tax Appeals, the legislature wrote: The administrative law judge shall hear all questions de novo under AS 43.05.400-43.05.499. The administrative law judge shall (1) resolve a question of fact by a preponderance of the evidence or, if a different standard of proof has been set by law for a particular question, by that standard of proof; (2) resolve a question of law in the exercise of the independent judgment of the administrative law judge; (3) defer to the Department of Revenue as to a matter for which discretion is legally vested in the Department of Revenue, unless not supported by a reasonable basis. [5] By describing the Office of Tax Appeals as a quasi-judicial agency, and adopting the standards of review provided in AS 43.05.435, the legislature created the functional equivalent of a full trial court charged with the task of impartially resolving tax disputes. Accordingly, the Office of Tax Appeals, like any trial court, must review and determine facts de novo, [6] and exercise its independent judgment in interpreting and applying the law to the facts. [7] And, like the superior court, the Office of Tax Appeals shall defer to agency decisions only where a question of law involves particularized agency expertise or where the agency's specialized knowledge and experience would be especially probative as to the meaning of a statute or regulation. [8] This case involves the application of the department's regulation defining reasonable cause for missing a tax deadline. [9] That regulation incorporates by reference the body of federal law interpreting the Internal Revenue Code's reasonable-cause exception. [10] Because the outcome of this case rests solely on the application of established federal law to undisputed facts, it cannot be said that the answer depends on the particularized experience or knowledge of the administrative personnel. [11] Therefore, acting as the functional equivalent of a court of original jurisdiction, the Office of Tax Appeals correctly concluded that it owed no special deference to the decision reached by the department.