Kamps v. Dept. of Revenue

• Decision Date: 24 April 2003
• Docket Number: No. 02-2355.,02-2355.
• Citation: Kamps v. Dept. of Revenue, 264 Wis.2d 794, 2003 WI App 106, 663 N.W.2d 306 (Wis. App. 2003)
• Parties: John Q. KAMPS and Ruth R. Kamps, Petitioners, v. WISCONSIN DEPARTMENT OF REVENUE, Respondent. Edward C. WILKINSON and Jean F. Wilkinson, Petitioners-Appellants, v. WISCONSIN DEPARTMENT OF REVENUE, Respondent-Respondent.
• Court: Wisconsin Court of Appeals

264 Wis.2d 794

2003 WI App 106

663 N.W.2d 306

John Q. KAMPS and Ruth R. Kamps, Petitioners, v. WISCONSIN DEPARTMENT OF REVENUE, Respondent.

Edward C. WILKINSON and Jean F. Wilkinson, Petitioners-Appellants, v. WISCONSIN DEPARTMENT OF REVENUE, Respondent-Respondent.

No. 02-2355.

Court of Appeals of Wisconsin.

Submitted on briefs February 7, 2003.

Decided April 24, 2003.

On behalf of the petitioners-appellants, the cause was submitted on the briefs of Geri A. Wilkinson, Glendale.

On behalf of the respondent-respondent, the cause was submitted on the brief of Mary E. Burke, asst. attorney general, and James E. Doyle, attorney general.

Before Vergeront, P.J., Roggensack and Lundsten, JJ.

¶ 1. VERGERONT, P.J.

The primary issue on this appeal is whether certain of Edward Wilkinson's retirement payments are exempt from taxation under WIS. STAT. § 71.05(1)(a) (2001-02).¹ The Tax Appeals Commission decided they were not. Wilkinson² appeals the trial court's decision affirming the commission's ruling and order, contending that: (1) the commission erred in its construction of the statute, (2) the Department of Revenue (DOR) is equitably estopped from taxing the benefits, (3) taxation of these benefits denies his right to equal protection, and (4) the commission's decision is contrary to DOR's policy and practice.

¶ 2. We affirm the circuit court. We conclude that the commission's construction of WIS. STAT. § 71.05(1)(a) is entitled to great weight deference and, because the construction is not contrary to the clear language of the statute, the circuit court correctly upheld it. We also conclude that DOR is not equitably estopped from taxing the retirement payments and doing so does not violate Wilkinson's right to equal protection. Accordingly, the circuit court correctly affirmed the commission's decision on these points as well. Finally, Wilkinson is not entitled to reversal of the commission's decision on the ground that it is contrary to DOR's prior policy and practice.

BACKGROUND³

¶ 3. Wilkinson was a teacher in the Milwaukee public schools from 1955 to 1967, becoming a member of the Milwaukee School Teachers' Annuity and Retirement Fund (the Milwaukee Fund) in September 1959. In 1967, Wilkinson took a position with the University of Wisconsin-Milwaukee and the University of Wisconsin Extension. In April of that year, he applied for a refund of his contributions to the Milwaukee Fund, and in June he received a complete refund. The application, which he signed, stated: "As a member of the FUND, I further agree that payments of said accumulation(s) made shall constitute a full and complete discharge and release of all right, interest or claim on my part to state deposit accumulations which accrued while a member of said FUND." Wilkinson's Milwaukee Fund ledger shows that in 1967 all deposited accumulations had been withdrawn, leaving a zero balance.

¶ 4. As a result of his new employment, Wilkinson became a member of the Wisconsin State Teachers Retirement System (the State System) on or about August 18, 1967. His State System ledger shows that when he began this service, he started out with a zero balance, there being no deposits from either him or the state attributable to his teaching service with the Milwaukee public schools.

¶ 5. In 1974, Wilkinson returned to employment with the Milwaukee public schools until his retirement in 1990. In 1990, he applied to the Wisconsin Retirement System to purchase under WIS. STAT. § 40.25(6) previously forfeited years of service under the Milwaukee Fund. Originally he purchased ten years of forfeited service, leaving 5.07 years of forfeited service uncredited. However, based on the results of litigation by other retirees, he was subsequently granted 7.7 years of his Milwaukee Fund forfeited service at no charge, and his years of forfeited service purchased were accordingly adjusted to 7.37 years, with payment for 2.63 years refunded. For the years at issue in this case, Wilkinson's retirement benefits were based on his non-forfeited years of service, two years of military service, and 7.37 years previously forfeited.

¶ 6. When he retired, Wilkinson received a copy of DOR Publication 108 entitled "How Your Retirement Benefits Are Taxed" dated June 1989, which provided in part:

Some payments received from the Wisconsin Retirement System are exempt for Wisconsin tax purposes (they are not exempt for federal tax purposes):

Payments received from the Wisconsin Retirement System if the payments were paid on the account of a person who was a member of the State Teacher's Retirement System or the Milwaukee Teacher's Retirement System as of December 31, 1963, or was retired from one of those retirement systems as of that date . . . .

Wilkinson relied upon this publication in preparing his Wisconsin income tax returns for 1991, 1992, and 1993. He did not report on those returns the payments he received from the Wisconsin Retirement System for those years, which were: 1991—$20,330; 1992— $21,343; 1993—$22,481.

¶ 7. In 1995, DOR issued an income tax assessment against Wilkinson for the years 1991-93 in the amount of $4,834, plus $1,306.41 in interest, asserting, among other grounds, that the Wisconsin Retirement System payments he received in those years were subject to Wisconsin's income tax. Wilkinson petitioned for a redetermination, challenging only that portion of the assessment relating to the Wisconsin Retirement System payments. He contended the payments were exempt from taxation under WIS. STAT. § 71.05(1)(a), which provides:

Income computation. (1) EXEMPT AND EXCLUDABLE INCOME. There shall be exempt from taxation under this subchapter the following:

(a) Retirement systems. All payments received from . . . the public employee trust fund as successor to the Milwaukee public school teachers' annuity and retirement fund and to the Wisconsin state teachers retirement system, which are paid on the account of any person who was a member of the paying or predecessor system or fund as of December 31, 1963 . . . .

DOR denied the petition for redetermination, stating that Wilkinson's withdrawal of his contributions from the Milwaukee Fund had terminated his membership and the purchase of previously forfeited years of service did not reinstate his account as of December 31, 1963.

¶ 8. Wilkinson petitioned for review by the commission and the commission affirmed DOR's decision. The commission concluded that prior commission decisions governed, and under those, because Wilkinson withdrew all his contributions and left nothing in his account, the payments he received in 1991-93 were not "paid on the account of" a person who was a member on December 31, 1963, within the meaning of WIS. STAT. § 71.05(1)(a). The commission rejected Wilkinson's argument that DOR was equitably estopped from assessing the tax because of Publication 108. It also rejected his argument that his right to equal protection was violated because DOR had allowed former members of the State System, who had withdrawn their deposit accumulations prior to December 31, 1963, to be considered members of the State System as of December 31, 1963.

¶ 9. Wilkinson petitioned for judicial review in the circuit court. The circuit court concluded that the commission's construction of WIS. STAT. § 71.05(1)(a) was entitled to great weight deference and, applying that standard of review, it affirmed the commission's construction. The court agreed with the commission that neither equitable estoppel nor the equal protection clause precluded taxation of the retirement payments.

DISCUSSION

¶ 10. We first address Wilkinson's contention that the commission erroneously interpreted WIS. STAT. § 71.05(1)(a).⁴ According to Wilkinson, under the plain language of that statute, if one is a member of the Milwaukee Fund on December 31, 1963, then retirement benefits paid on that person's behalf are exempt, and it is irrelevant whether the person subsequently withdrew his contributions after that date.

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¶ 11. Construction of a statute and its application to a given set of facts present a question of law, which we review de novo. Harnischfeger Corp. v. LIRC, 196 Wis. 2d. 650, 659, 539 N.W.2d 98 (1995). If the language of a statute is plain, we apply that language to the facts at hand. UFE Inc. v. LIRC, 201 Wis. 2d 274, 281, 548 N.W.2d 57 (1996). However, if a statute is ambiguous, although we are not bound by an agency's construction, we may in certain situations defer to an agency's construction of a statute. Id. at 281-84. We give great weight deference when:

(1) the agency was charged by the legislature with the duty of administering the statute; (2) . . . the interpretation of the agency is one of long-standing; (3) . . . the agency employed its expertise or specialized knowledge in forming the interpretation; and (4) . . . the agency's interpretation will provide uniformity and consistency in the application of the statute.

Id. at 284. We give a lesser amount of deference—due weight—when the agency has some experience in the area but has not developed the expertise that necessarily places it in a better position than the court to make judgments regarding the interpretation of the statute. Id. at 286.

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¶ 12. Under the great weight standard, we uphold an agency's reasonable interpretation of the statute if it is not contrary to the clear meaning of the statute, even if we conclude another interpretation is more reasonable. Id. at 287. Under the due weight standard, we uphold the agency's reasonable interpretation if it comports with the purpose of the statute and we conclude there is not a more reasonable interpretation. Id. We give no deference to the agency, and review the issue de novo, when the issue before the agency is one of first impression or the agency's position has been so inconsistent as to provide no real guidance. Id. at 285.

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¶ 13. We do not agree with Wilkinson's contention that the...