Wis. Prop. Tax Consultants, Inc. v. Wis. Dep't of Revenue, Appeal No. 2020AP485

• Court: Court of Appeals of Wisconsin
• Writing for the Court: REILLY, P.J.
• Citation: 2021 WI App 47,398 Wis.2d 654,963 N.W.2d 103
• Docket Number: Appeal No. 2020AP485
• Decision Date: 02 June 2021
• Parties: WISCONSIN PROPERTY TAX CONSULTANTS, INC. and Wisconsin Manufacturers and Commerce, Inc., Plaintiffs-Appellants, v. WISCONSIN DEPARTMENT OF REVENUE, Defendant-Respondent.

398 Wis.2d 654
963 N.W.2d 103
2021 WI App 47

WISCONSIN PROPERTY TAX CONSULTANTS, INC. and Wisconsin Manufacturers and Commerce, Inc., Plaintiffs-Appellants,^†
v.
WISCONSIN DEPARTMENT OF REVENUE, Defendant-Respondent.

Appeal No. 2020AP485

Court of Appeals of Wisconsin.

Submitted on Briefs: November 23, 2020
Opinion Filed: June 2, 2021

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Shawn E. Lovell, Don M. Millis and Karla M. Nettleton of Reinhart Boerner Van Deuren S.C., Madison.

On behalf of the defendant-respondent, the cause was submitted on the brief of Colin T. Roth, assistant attorney general, and Joshua L. Kaul, attorney general.

Before Neubauer, C.J., Reilly, P.J., and Davis, J.

REILLY, P.J.

398 Wis.2d 657

¶1 In 2017, the legislature enacted a new personal property tax exemption for "[m]achinery, tools, and patterns." WIS. STAT. § 70.111(27) (2017-18)¹ ; 2017 Wis. Act 59, § 997J. Wisconsin Manufacturers and Commerce, Inc. (WMC), a business trade association, asked the Wisconsin Department of Revenue (DOR) to offer its interpretation of § 70.111(27) based upon hypothetical facts, arguing that DOR's application of § 70.111(27) violated statutory rulemaking

398 Wis.2d 658

procedures. WMC, unhappy with DOR's interpretation, filed a declaratory judgment action seeking a declaration that DOR's interpretation of § 70.111(27) is invalid.² The circuit court, pursuant to the primary jurisdiction doctrine, dismissed WMC's action deferring to the principle of administrative review and the expertise of the Wisconsin Tax Appeals Commission (TAC). We affirm as the circuit court's dismissal adheres to the legislature's statutory process of administrative review.

Factual Background

¶2 In January 2018, WMC sent a letter to DOR expressing its interpretation of WIS. STAT. § 70.111(27),³ providing DOR

963 N.W.2d 106

with a hypothetical fact situation,⁴ and

398 Wis.2d 659

asking DOR to provide its interpretation of § 70.111(27) in light of the hypothetical facts. DOR's answer did not align with WMC's interpretation, prompting WMC to seek a declaration from the courts that (1) DOR's interpretation and application of § 70.111(27) is an unpromulgated administrative rule in violation of statutory rulemaking procedures; (2) DOR's administration of § 70.111(27) conflicts with state law; and (3) DOR's interpretation violates "uniformity, due process, equal protection, and the prohibition against government taking of private property for public use without just compensation" under both the United States and Wisconsin Constitutions. Cross-motions for summary judgment were filed. The circuit court chose, under the primary jurisdiction doctrine, to not assume jurisdiction, concluding that initial review should be with the TAC.

Standard of Review

¶3 A circuit court's dismissal on primary jurisdiction grounds is reviewed for an erroneous exercise of discretion. City of Brookfield v. Milwaukee Metro. Sewerage Dist. , 171 Wis. 2d 400, 420, 491 N.W.2d 484 (1992) ; see also Butcher v. Ameritech Corp. , 2007 WI App 5, ¶¶38, 41, 298 Wis. 2d 468, 727 N.W.2d 546 (2006). Where resolution of disputed issues rests on "hypothetical or future facts" we generally decline to rule so as to avoid rendering advisory opinions. Tammi v. Porsche Cars N. Am., Inc. , 2009 WI 83, ¶3, 320 Wis. 2d 45, 768 N.W.2d 783 (citation omitted).

398 Wis.2d 660

Primary Jurisdiction Doctrine

¶4 The primary jurisdiction doctrine, also known as the prior resort rule, applies "when an administrative agency and the circuit court both have jurisdiction over an issue, the circuit court has the discretion to defer to the agency to resolve the issue." Butcher , 298 Wis. 2d 468, ¶38, 727 N.W.2d 546 ; Nodell Inv. Corp. v. Glendale , 78 Wis. 2d 416, 427 n.13, 254 N.W.2d 310 (1977). It applies where there has been an absence of a formal proceeding before the agency. Nodell , 78 Wis. 2d at 427 n.13, 254 N.W.2d 310.

The doctrine is based on the principle that "[a]dministrative agencies are designed to provide uniformity and consistency in the fields of their specialized knowledge [and] [w]hen an issue falls squarely in the very area for which the agency was created, it is sensible to require prior administrative recourse before a court decides the issue."

Butcher , 298 Wis. 2d 468, ¶38, 727 N.W.2d 546 (alterations in original; citation omitted). We are to exercise our jurisdiction "with the understanding that the legislature created the agency in order to afford a systematic method of fact finding and policymaking and that the agency's jurisdiction should be given priority in the absence of a valid reason for judicial intervention." Id. (citation omitted); see also City of Brookfield , 171 Wis. 2d at 421, 491 N.W.2d 484 ; Wisconsin Bell, Inc. v. DOR , 164 Wis. 2d 138, 144, 473 N.W.2d 587 (Ct. App. 1991).

¶5 Here, the TAC is the administrative body with concurrent jurisdiction. Our legislature has declared that the TAC is "the final authority for the

398 Wis.2d 661

hearing and determination of all questions of law and fact arising under" the tax code, subject to judicial review, WIS. STAT. § 73.01(4)(a) ; DOR v. Menasha Corp. , 2008 WI 88, ¶40, 311 Wis. 2d 579, 754 N.W.2d 95 ;

963 N.W.2d 107

Sawejka v. Morgan , 56 Wis. 2d 70, 75, 201 N.W.2d 528 (1972), and is "an independent tribunal exercising quasi-judicial functions,"⁵ Sawejka , 56 Wis. 2d at 76, 201 N.W.2d 528 ; see also State ex rel. Thompson v. Nash , 27 Wis. 2d 183, 195, 133 N.W.2d 769 (1965). Taxpayers—as specific to this case, manufacturers—who dispute a tax assessment must bring their complaints to the TAC. See WIS. STAT. § 70.995(8). Any aggrieved party may seek judicial review of a determination by the TAC in circuit court. See WIS. STAT. §§ 70.995(9) ; 73.015.

¶6 Our case law fully supports application of the primary jurisdiction doctrine in cases involving the interpretation of the state tax code. In Sawejka , the circuit court declined to assume jurisdiction where the taxpayers claimed that DOR improperly applied a retail sales tax law to the taxpayers’ business. Sawejka , 56 Wis. 2d at 79-80, 201 N.W.2d 528. The court noted that there was "no administrative proceeding under way to establish the validity or constitutionality of such a determination," and the question "is whether the court or the [TAC] should make the initial decision as to the validity or constitutionality of applying [the retail sales tax law] to plaintiffs’ business." Id. Concluding that the taxpayers had not shown "any valid reason for the intervention of the courts" and recognizing the existence of "many factual issues as to the application

398 Wis.2d 662

of" the retail sales tax law, our supreme court concluded that the circuit court did not erroneously exercise its discretion. Id. at 80-81, 201 N.W.2d 528. According to the court, "[u]niform application of our tax laws is an admirable and necessary legislative and administrative goal. The courts should not unnecessarily interject themselves into this process." Id.

¶7 In Butcher , plaintiffs brought claims on behalf of themselves and all others alleging that Ameritech Corporation collected sales tax on services that did not fall under telecommunication services. Butcher , 298 Wis. 2d 468, ¶1, 727 N.W.2d 546. We affirmed the circuit court's dismissal under the primary jurisdiction doctrine as "DOR is charged with administering the tax laws of the state, WIS. STAT. § 73.03(1), and the [TAC] has ‘the final authority for the hearing and determination of all questions of law and fact’ arising under the tax laws ...." Id. , ¶41 (citing WIS. STAT. §§ 73.01(4)(a) ; 73.015(1) (2003-04)). We found that deferral to the administrative agency under the primary jurisdiction doctrine is appropriate when an issue of statutory construction is inextricably interwoven with issues that may require an understanding of subjects within the expertise of the agency. Id. , ¶¶41-43.

¶8 Similarly, in Wisconsin Bell , Bell sought a declaratory judgment that billing services provided by Bell to AT&T were not subject to sales tax. Wisconsin Bell , 164...