Meadows v. State, Department of Revenue, 122011 AKTAX, 1JU-10-840 CI

Docket Nº:1JU-10-840 CI, 1JU-10-873 CI
Opinion Judge:Philip M. Pallenberg Superior Court Judge
Party Name:MARK MEADOWS, Appellant, v. STATE OF ALASKA, DEPARTMENT OF REVENUE, Appellee. STATE OF ALASKA, DEPARTMENT OF REVENUE, Cross-Appellant, v. MARK MEADOWS, Cross- Appellee.
Case Date:December 20, 2011
Court:Superior Court of Alaska
 
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MARK MEADOWS, Appellant,

v.

STATE OF ALASKA, DEPARTMENT OF REVENUE, Appellee.

STATE OF ALASKA, DEPARTMENT OF REVENUE, Cross-Appellant,

v.

MARK MEADOWS, Cross- Appellee.

Nos. 1JU-10-840 CI, 1JU-10-873 CI

Superior Court of Alaska, First Judicial District, Juneau

December 20, 2011

DECISION ON APPEAL

Philip M. Pallenberg Superior Court Judge

I. INTRODUCTION

In 2003, Prince William Sound experienced a uniquely high return of pink salmon which overwhelmed the local fishermen and processors. By the end of the normal fishing season, huge numbers of "dark" pink salmon remained in the water. Because of the poor quality of these late stage fish, they were difficult if not impossible to market.

In order to prevent waste of these fish, the Alaska Department of Fish & Game ("ADF&G") issued emergency regulations allowing "roe-stripping" of these fish. Roe-stripping is a practice by which the salmon eggs are taken and the rest of the fish discarded. This process is normally banned, but may be allowed by ADF&G in unusual situations.

Mark Meadows was a long-time seine fisherman in Prince William Sound. In 2003, he and other fishermen found themselves unable to sell fish to their usual buyer, Sea Hawk Seafoods, Inc. in Valdez, because Sea Hawk had lost its processing license.

After cooperation between fishermen, Sea Hawk, and ADF&G, a plan was devised by which Meadows and other fishermen would obtain their own licenses to process their catches.1They would deliver their catches to the Sea Hawk plant, where the fish would be roe-stripped under the fishermen's licenses.

Under this arrangement, Meadows caught whole pink salmon in the terminal harvest area and delivered those fish to Sea Hawk. Sea Hawk employees removed the roe and turned it into ikura which was sold by broker Seafoods Sales. The fish carcasses were ground and dumped. Seafoods Sales sold the ikura and took 3% of the proceeds, Sea Hawk then deducted its operating costs and then took half of the remaining proceeds, and Meadows split the remainder equally between himself and two other fishermen involved in a joint venture. In total, Meadows processed 321, 698 pounds of roe, for which 4, 282, 945 pounds of pink salmon carcasses were discarded.

At the end of the year, Meadows submitted tax returns to ADF&G for those fish that he harvested for their roe, as well as fish he had caught throughout the rest of the season. Only the taxes relevant to those fish harvested for their roe are relevant for purposes of this appeal. Meadows calculated the relevant taxes based on the value of the whole round pink salmon. The Department of Revenue (Department) contended he should have calculated his taxes based on the value of the roe alone, which had a greater value than that of the whole fish. It is this dispute that forms the basis for this appeal.

Meadows paid the additional taxes, but also appealed the Department's decision. His case was heard by an informal conference panel within the Department. The panel upheld the Department's assessment based on the value of the roe for all relevant taxes. Meadows appealed that decision and his appeal was heard by an Administrative Law Judge (ALJ) from the Office Of Administrative Hearings. The ALJ granted Meadows' appeal in part, and found that two of the four relevant taxes should be based on the value of the whole salmon rather than the roe; and he upheld the Department's determination on the remaining two taxes.

Meadows now appeals the ALJ's decision that the remaining two taxes should be based on the value of the roe. The Department filed a cross appeal based on the ALJ's determination that two taxes should be based on the whole round salmon.

For the reasons set forth below, I affirm the decision of the Office of Tax Appeals in part and reverse in part. I find that all four taxes should be based on the value of the whole round salmon.

II. DISCUSSION

A. Standard of Review

When the superior court acts as an appellate court to review questions of law there are two possible standards of review to apply: the reasonable basis test or the substitution of judgment test.2 The reasonable basis test is applied to questions of law involving agency expertise, and the court substitutes its own judgment for questions of law that do not involve agency expertise.3

Meadows argues that the questions of law presented in this case do not involve agency expertise, and that therefore this Court should substitute its own judgment. When the issues on appeal "revolve around questions of statutory interpretation requiring the application and analysis of various canons of statutory construction" the issues are appropriately decided using the court's independent judgment because such questions are "regular grist for judicial mills."4 This is because it is within the court's expertise to determine the legislature's intent when passing laws.5 However, when the legislature adopts statutes that give an agency broad authority to adopt its own rules, then "[t]he scope of review for an agency's application of its own regulations to the facts [should be]...

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