Transamerica Financial Corp. v. Wisconsin Dept. of Revenue, s. 126

• Court: United States State Supreme Court of Wisconsin
• Citation: 201 N.W.2d 552,56 Wis.2d 57
• Docket Number: Nos. 126,127,s. 126
• Parties: TRANSAMERICA FINANCIAL CORPORATION, a foreign corporation, Respondent, v. WISCONSIN DEPARTMENT OF REVENUE, Appellant. TRANSAMERICA FINANCIAL CORPORATION, a foreign corporation, Respondent, v. James R. MORGAN, Secretary of the Wisconsin Department of Revenue, Appellant.
• Decision Date: 31 October 1972

Page 552

201 N.W.2d 552 56 Wis.2d 57 TRANSAMERICA FINANCIAL CORPORATION, a foreign corporation, Respondent,
v.
WISCONSIN DEPARTMENT OF REVENUE, Appellant.
TRANSAMERICA FINANCIAL CORPORATION, a foreign corporation, Respondent,
v.
James R. MORGAN, Secretary of the Wisconsin Department of
Revenue, Appellant. Nos. 126, 127. Supreme Court of Wisconsin. Oct. 31, 1972.

Robert W. Warren, Atty. Gen., E. Weston Wood, Asst. Atty. Gen., Madison, for appellant.

John M. Koeppl, Stafford, Rosenbaum, Rieser & Hansen, Madison, for respondent; Robert Horowitz, Madison, of counsel.

HANLEY, Justice.

Three issues are presented on this appeal:

(1) Is the phrase 'total interest and dividends received' as set forth in sec. 71.07(2), Stats., to be read literally as meaning all interest and dividends received, whether or not apportionable, or is the phrase to be read as including only interest and dividends received which are nonapportionable;

(2) Did the circuit court exceed its jurisdiction by directing the department to promulgate an apportionment rule applicable to finance companies; and

(3) Does the intepretation of sec. 71.07(2), Stats., averred for by the department, violate the due process clause of the Fourteenth Amendment to the United States Constitution?

In a case where the department and a taxpayer cannot agree on the proper interpretation to be accorded a particular statutory section, there are certain fundamental rules of construction which the court may apply.

First, unless a statute is unclear or ambiguous, legislative intent must be found "by giving the language its ordinary and accepted meaning." ¹ Similarly, when the legislature does impose a tax, it must do so in clear and express language, with all ambiguity and doubt in the [56 Wis.2d 65] particular legislation being resolved against the one who seeks to impose the tax. ²

Although the benefit of the doubt shall be given to the taxpayer in cases where the language imposing the tax is ambiguous, there is no duty upon the court ". . . to search for doubt in an endeavor to defeat an obvious legislative intention." ³

The effect of sec. 71.07, Stats., ⁴ is to divide the income of a taxpayer operating

Page 556

both within and without this [56 Wis.2d 66] state into 'apportionable income' and 'nonapportionable income.' 'Apportionable income' is that income which for income tax purposes must be allocated to two or more states in which the taxpayer's business is carried on. Correspondingly, 'nonapportionable income' is that income which follows the situs of the property or the residence of the taxpayer and, as a result, is not allocated among two or more states.

Sec. 71.07(1), Stats., provides that interest from intangibles follows the residence of the recipient and therefore such income is nonapportionable. However, sub. (2), Stats., further provides that if the business is conducted within and without Wisconsin, and if the business is unitary, then the business income is apportionable. Here the taxpayer concedes that its interest income is apportionable.

For the court's purposes, the starting point in sec. 71.07(2), Stats., is the provision which states:

'. . . There shall first be deducted from the total net income of the taxpayer such part thereof (less related expenses, if any) as follows the situs of the property or the residence of the recipient; . . .' (Emphasis supplied.)

Since income which follows the 'situs of the property or the residence of the recipient' is nonapportionable income, the statute is in effect saying, 'Deduct nonapportionable income from total net income.'

However, sub. (2) goes on to limit the amount of nonapportionable income that can be deducted when it states:

'. . . provided, that in the case of income which follows the residence of the recipient, the amount of interest and dividends deductible under this provision shall be limited to the total interest and dividends received which are in excess of the total interest (or related expenses, if any) [56 Wis.2d 67] paid and allowable as a deduction under section 71.04 during the income year. . . .' (Emphasis supplied.)

The reference in the immediately preceding portion of the statute to 'the amount of interest and dividends deductible under this provision' refers...