Madison Gas & Electric v. State
| Decision Date | 12 August 1999 |
| Docket Number | 98-2377 |
| Parties | This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See 808.10 and Rule 809.62, Stats. Madison Gas and Electric Company, Petitioner-Respondent, v. Department of Revenue, Respondent-Appellant.STATE OF WISCONSIN IN COURT OF APPEALS DISTRICT IV |
| Court | Wisconsin Court of Appeals |
APPEAL from a judgment of the circuit court for Dane County: PAUL B. HIGGINBOTHAM, Judge. Affirmed.
Before Eich, Roggensack and Deininger, JJ.
Madison Gas and Electric deducted losses in 1975, 1976 and 1977 due to a 1975 transmission line collapse. The Department of Revenue permitted only fifteen percent of the losses to be taken in those years and allowed the major portion of the loss in 1978 when MG&E received a settlement for the loss in a lawsuit it instituted. DOR charged twelve percent interest on the amount of taxes that resulted because MG&E deducted the loss in 1975, 1976 and 1977, and DOR applied interest at nine percent on the refund it owed to MG&E for the large loss that DOR maintained should have been taken in 1978. The Tax Appeals Commission agreed with DOR and the circuit court reversed. Because we conclude that under 71.04(7), Stats., 1975-76, MG&E properly deducted losses in 1975, 1976 and 1977 that occurred from the 1975 collapse of its transmission line, we affirm the decision of the circuit court in regard to the timing of the loss deduction. Therefore, we do not reach the question of netting overpayments of taxes against underpayments of taxes and interest accrued to the date of the overpayment, which would have resulted if MG&E's timing of the deduction had been incorrect.
On January11, 1975, MG&E's sixty-three mile transmission line between Madison and the south Fond du Lac substation collapsed and was totally destroyed. MG&E had no insurance for the loss. MG&E sued the consulting engineers who designed the line and supporting structures, the manufacturer of the supporting tower structures, the builder, and a railroad whose employee had cut a conductor after part of the line had fallen, causing the rest of the line to collapse.
Because of the collapse of the line, MG&E deducted $2,665,247 on its income tax returns in 1975, $20,982 in 1976 and $222,646 in 1977. In 1978, the defendants in MG&E's lawsuit agreed to a $3,500,000 payment as settlement. Also in 1978, MG&E declared the settlement amount as income on its income tax return.
Subsequent to receiving notice of MG&E's recovery, the Wisconsin Department of Revenue issued an assessment of additional taxes due because it permitted MG&E to deduct only fifteen percent of the transmission line losses for 1975 through 1977.1 DOR did permit a deduction of $2,537,648 for losses relating to the line collapse in 1978, the year in which MG&E received the settlement proceeds. Because DOR permitted transmission line losses in 1978, which MG&E had already taken in 1975, 1976 and 1977, according to DOR's calculations, MG&E significantly overpaid its taxes for 1978 and significantly underpaid its taxes for 1976 and 1977.2
Because DOR made its determination that additional taxes were due for the years 1976 and 1977, and that a refund was due for 1978 in 1983, it calculated interest at twelve percent on the 1976 and 1977 taxes from the date the returns were due until the 1978 overpayment was received. MG&E does not object to this calculation. However, DOR continued to calculate interest on the 1976 and 1977 taxes at twelve percent, without first applying the 1978 overpayment to the taxes and interest accrued prior to the overpayment. Instead DOR applied a nine percent interest rate to the refund it owed MG&E and continued to accrue twelve percent interest on the additional taxes it assessed against MG&E. MG&E contends that DOR should have credited the 1978 overpayment, as of the date paid, against the 1976 and 1977 underpayments and interest accrued to the date of that overpayment, and then calculated twelve percent interest on only the net amount of taxes remaining.
Standard of Review.
We review the decision of the TAC, not that of the circuit court. See Advance Pipe & Supply Co., Inc. v. DOR, 128 Wis.2d 431, 434, 383 N.W.2d 502, 503 (Ct. App. 1986). Statutory construction and the application of a statute to undisputed facts are questions of law. See Truttschel v. Martin, 208 Wis.2d 361, 364-65, 560 N.W.2d 315, 317 (Ct. App. 1997). On review of an administrative agency's decision, we are not bound by the agency's conclusions of law. See Currie v. DILHR, 210 Wis.2d 380, 387, 565 N.W.2d 253, 257 (Ct. App. 1997). However, we may defer to the TAC's legal conclusions. See id.
The supreme court has established when deference to an agency's legal conclusion is warranted and how much deference reviewing courts should give. See UFE, Inc. v. LIRC, 201 Wis.2d 274, 284, 548 N.W.2d 57, 61 (1996) (citation omitted). An agency's interpretation or application of a statute may be accorded great weight deference, due weight deference or de novo review. See id. We will accord great weight deference only when all four of the following requirements are met: (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. See id. (citing Harnischfeger Corp. v. LIRC, 196 Wis.2d 650, 660, 539 N.W.2d 98, 102 (1995)). Under the great weight standard, "a court will uphold an agency's reasonable interpretation that is not contrary to the clear meaning of the statute, even if the court feels that an alternative interpretation is more reasonable." UFE, 201 Wis.2d at 287, 548 N.W.2d at 62.
We will accord due weight deference when "the agency has some experience in an area, but has not developed the expertise which necessarily places it in a better position to make judgments regarding the interpretation of the statute than a court." Id. at 286, 548 N.W.2d at 62. The deference allowed an administrative agency under due weight review is accorded largely because the legislature has charged the agency with the enforcement of the statute in question. See id. Under this standard, we will not overturn a reasonable agency decision that furthers the purpose of the statute, unless we determine that there is a more reasonable interpretation under the applicable facts than that made by the agency. See id. at 286-87, 548 N.W.2d at 62.
And finally, we will employ de novo review to the legal conclusion made by an agency if any one of the following is true: (1) the legal issue presented to the agency is one of first impression; (2) there is no evidence of any special agency experience or expertise in deciding the legal issue; or (3) when the agency's position on the legal issue has been so inconsistent as to provide no real guidance. See Coutts v. Wisconsin Retirement Bd., 209 Wis.2d 655, 664, 562 N.W.2d 917, 921 (1997) (citations omitted).
Our review persuades us that the TAC's determination of the timing of the deduction allowed under 71.04(7), Stats., 1975-76, must be reviewed denovo. While it is true that the agency has been charged by the legislature with the duty of administering the tax code, its interpretation of this section is not one of long standing which was determined through its specialized knowledge or expertise. This is evidenced by the TAC's reasoning that the plain meaning of the statute precluded the deduction and DOR's position that the deduction should be disallowed because MG&E had a reasonable prospect of recovery, citing 26 C.F.R. 1.165-1 (1975-76).
Loss Deduction Timing.
The timing of the deduction for the transmission line loss claimed by MG&E is controlled by the meaning of 71.04(7), Stats., 1975-76, which provided in relevant part: Deductions from gross income of corporations. Every corporation ... shall be allowed to make from its gross income the following deductions: ...
(7) Losses actually sustained within the year and not compensated by insurance or otherwise ....
As we address the concerns of the parties, we note that the purpose of statutory construction is to ascertain and to give effect to the intent of the legislature. See County of Columbia v. Bylewski, 94 Wis.2d 153, 164, 288 N.W.2d 129, 135 (1980). In determining legislative intent, our first resort must be to the plain meaning of the statutory language the legislature chose to use. See Truttschel, 208 Wis.2d at 365, 560 N.W.2d at 317 (citation omitted). If the language of the statute clearly and unambiguously sets forth legislative intent, our inquiry ends, and this court must apply that language to the facts of this case. See id. However, if the statute can be understood to have more than one meaning by persons who are reasonably well informed, it is ambiguous. See Coutts, 209 Wis.2d at 666-67, 562 N.W.2d at 922 (citation omitted).3 When a statute is ambiguous, we determine legislative intent from the words of the statute in relation to its context, subject matter, scope, history and the object which the legislature intended to accomplish. See Truttschel, 208 Wis.2d at 365-66, 560 N.W.2d at 317 (citation omitted).
We conclude that 71.04(7), Stats., 1975-76, is ambiguous4 because "actually sustained" could reasonably be understood to refer to losses for which there was never any prospect of recovery, losses for which there is no reasonable prospect of recovery, losses that result from an identifiable event within the period for which the loss is claimed and there was no recovery during that period, or a determination unrelated to the timing of the loss.5
The parties agree that the line collapsed in...
To continue reading
Request your trial