Wis. Prop. Tax Consultants, Inc. v. Wis. Dep't of Revenue

• Citation: 402 Wis.2d 653,976 N.W.2d 482,2022 WI 51
• Decision Date: 30 June 2022
• Docket Number: 2020AP485
• Parties: WISCONSIN PROPERTY TAX CONSULTANTS, INC. and Wisconsin Manufacturers and Commerce, Inc., Plaintiffs-Appellants-Petitioners, v. WISCONSIN DEPARTMENT OF REVENUE, Defendant-Respondent.
• Court: United States State Supreme Court of Wisconsin

402 Wis.2d 653

976 N.W.2d 482

2022 WI 51

WISCONSIN PROPERTY TAX CONSULTANTS, INC. and Wisconsin Manufacturers and Commerce, Inc., Plaintiffs-Appellants-Petitioners,

v.WISCONSIN DEPARTMENT OF REVENUE, Defendant-Respondent.

No. 2020AP485

Supreme Court of Wisconsin.

Oral Argument: April 5, 2022

Opinion Filed: June 30, 2022

For the plaintiffs-appellants-petitioners, there were briefs filed by Don M. Millis, Karla M. Nettleson and Reinhart Boerner Van Deuren S.C., Madison. There was an oral argument by Don M. Millis.

For the defendant-respondent, there was a brief filed by Brian P. Keenan, assistant attorney general, with whom on the brief was Joshua L. Kaul, attorney general. There was an oral argument by Brian P. Keenan.

An amicus curiae brief was filed by Lucas T. Vebber, Anthony F. LoCoco and Wisconsin Institute for Law & Liberty, Milwaukee, for the Wisconsin Property Taxpayers, Inc.

HAGEDORN, J., delivered the majority opinion of the Court, in which ANN WALSH BRADLEY, DALLET, and KAROFSKY, JJ., joined. ZIEGLER, C.J., filed a concurring opinion. ROGGENSACK, J., filed a concurring opinion, in which REBECCA GRASSL BRADLEY, J., joined.

BRIAN HAGEDORN, J.

¶1 When both a court and an agency may address an issue, who should decide first? That is the question this case presents, and the question the primary jurisdiction doctrine answers. We have held that a circuit court may stay its hand pending an agency's determination if the issue before it turns primarily on factual or technical questions within the agency's expertise. But if the question is primarily one of law outside the agency's specialized competence, the circuit court should decide the question. In this case, the circuit court declined to decide whether a letter from the Wisconsin Department of Revenue (DOR) constituted an unpromulgated rule, deferring instead to the Tax Appeals Commission to decide that question first. We conclude that the circuit court erroneously exercised its discretion. Even if the Tax Appeals Commission has jurisdiction to address the unpromulgated rule question, it is a pure question of law outside the Tax Appeals Commission's expertise. The circuit court should have assumed jurisdiction and decided it.

I. BACKGROUND

¶2 In 2017, the Wisconsin Legislature enacted a new tax exemption for "machinery, tools, and patterns, not including such items used in manufacturing." 2017 Wis. Act 59, § 997j (codified at Wis. Stat. § 70.111(27)(b) (2017-18)). Seeking guidance on how the new exemption would be applied, Wisconsin Manufactures and Commerce, Inc. (WMC) sent a letter to DOR. In the letter, WMC articulated its view that "machinery, patterns and tools that are not used in manufacturing" are exempt even if that property is "located on manufacturing property." DOR disagreed. It explained by letter its view that "the new exemption does not apply to manufacturers."

¶3 WMC responded by filing a declaratory judgment action in circuit court under Wis. Stat. § 227.40 (2019-20)¹ raising three claims: (1) DOR's letter is an unpromulgated rule and is therefore invalid; (2) DOR's letter is invalid because it is inconsistent with the text of the new exemption; and (3) DOR's proffered interpretation violates various provisions of the Wisconsin and United States constitutions.² Following cross-motions for summary judgment, the circuit court dismissed all three claims under the primary jurisdiction doctrine.³ It observed that the Tax Appeals Commission was then "considering how to interpret and apply Wis. Stat. § 70.111(27) to property owned and used by the manufacturers" and was "well suited to use its expertise in determining this issue." It therefore declined to assume jurisdiction over any of the three claims.

¶4 WMC appealed the circuit court's dismissal of the unpromulgated rule and constitutional claims only, and the court of appeals affirmed. Wis. Prop. Tax Consultants, Inc. v. DOR, 2021 WI App 47, 398 Wis. 2d 654, 963 N.W.2d 103. WMC then sought this court's review, but only regarding the unpromulgated rule claim. We granted the petition for review.

II. PRIMARY JURISDICTION DOCTRINE

¶5 The primary jurisdiction doctrine comes into play when "both a court and an administrative agency have jurisdiction over resolution of issues in a dispute." City of Brookfield v. Milwaukee Metro. Sewerage Dist., 171 Wis. 2d 400, 420, 491 N.W.2d 484 (1992). It is "a doctrine of comity" and judicial efficiency, with the purpose of promoting "the proper relationship between administrative agencies and courts." Id. Thus, primary jurisdiction deals not with the court's ability to decide the matter, but with "which portion of the dispute-settling apparatus—the courts or the agency—should, in the interests of judicial administration, first take the jurisdiction that both the agency and the courts share." Gen. Tel. Co. of Wis. v. Auto-Owners Ins. Co., 140 Wis. 2d 10, 23, 409 N.W.2d 133 (Ct. App. 1987). Where both the court and the agency have authority to answer the question presented, the circuit court has discretion to allow the agency to address the matter in the first instance or decide the question itself. Sawejka v. Morgan, 56 Wis. 2d 70, 78-79, 201 N.W.2d 528 (1972).

¶6 One of the primary considerations for a court determining whether to let an agency address a question first is the nature of the issue raised. City of Brookfield, 171 Wis. 2d at 420-21, 491 N.W.2d 484 ; Wis. Collectors Ass'n, Inc. v. Thorp Fin. Corp., 32 Wis. 2d 36, 44-45, 145 N.W.2d 33 (1966). Where factual or technical issues predominate, our cases have counseled that "the better course may be" deferring to the agency.⁴ City of Brookfield, 171 Wis. 2d at 421, 491 N.W.2d 484. This recognizes that the legislature creates agencies "to afford a systematic method of factfinding and policymaking," typically in areas that involve technical expertise. McEwen v. Pierce County, 90 Wis. 2d 256, 271, 279 N.W.2d 469 (1979). Agencies are designed to "provide uniformity and consistency in the fields of their specialized knowledge." Thorp, 32 Wis. 2d at 44, 145 N.W.2d 33. So when the issue involves factual or specialized questions that fit "squarely within the very area for which the agency was created," it is appropriate to allow the agency to address the matter first. Id. On the other hand, "when statutory interpretation or issues of law are significant," the circuit court will have less reason to let the agency decide the question first. City of Brookfield, 171 Wis. 2d at 421, 491 N.W.2d 484. This is particularly so where the controlling issue is primarily a question of law that "rests within the special expertise of the circuit court," rather than the agency. State v. Dairyland Power Coop., 52 Wis. 2d 45, 56, 187 N.W.2d 878 (1971).

¶7 Our cases have consistently drawn the line between fact-bound and agency-specialized questions (which may warrant deference) and predominately legal or nonspecialized questions (which do not).⁵

Recent developments in our approach to reviewing the work of administrative agencies reinforce this distinction.

¶8 When we review an agency decision, we defer to the agency's factual findings unless they are insufficiently supported. Wis. Stat. § 227.57(6). Furthermore, as the law instructs, we give "due weight" to "the experience, technical competence, and specialized knowledge of the agency involved, as well as discretionary authority conferred upon it." § 227.57(10). Until recently, we also deferred to administrative agencies’ conclusions of law in many circumstances. See, e.g., Milwaukee Symphony Orchestra, Inc. v. DOR, 2010 WI 33, ¶¶34-37, 324 Wis. 2d 68, 781 N.W.2d 674 (describing "three levels of deference to be granted to agency interpretations" of statutes). In 2018, however, we ended that practice. Tetra Tech EC, Inc. v. DOR, 2018 WI 75, 382 Wis. 2d 496, 914 N.W.2d 21. Since our decision in Tetra Tech, the legislature has codified our approach, directing that when reviewing "an agency action or decision, the court shall accord no deference to the agency's interpretation of law." § 227.57(11).

¶9 This shift in our approach to reviewing the legal interpretations of administrative agencies further strengthens— and deepens—the historical distinction in our cases between issues raising factual and technical questions uniquely within the purview of an agency's expertise, and those raising predominantly legal and nonspecialized issues that are properly questions for the judicial branch. Although the analysis will depend on the specifics of each case, courts generally should decide pure questions of law when they are presented, particularly when those questions lie outside an agency's area of expertise. With this in mind, we examine the single claim WMC raises before us.

III. APPLICATION

¶10 WMC contends that the circuit court improperly dismissed its claim that the letter response from DOR constitutes an unpromulgated rule in violation of Wis. Stat. ch. 227. We review the circuit court's decision to dismiss this claim under the primary jurisdiction doctrine for an erroneous exercise of discretion. City of Brookfield, 171 Wis. 2d at 423, 491 N.W.2d 484. "We will sustain a discretionary act if we find the trial court examined the relevant facts, applied a proper standard of law, and using a demonstrative rational process, reached a conclusion that a reasonable judge could reach." Lane v. Sharp Packaging Sys., Inc., 2002 WI 28, ¶19, 251 Wis. 2d 68, 640 N.W.2d 788.

¶11 In briefing and oral argument, WMC contended the primary jurisdiction doctrine is inapplicable here "because the tax appeals commission lacks jurisdiction over Wis. Stat. § 227.40(1) declaratory judgment actions." Because other independently sufficient grounds are available to resolve this case, we do not address the Tax Appeals Commission's jurisdiction over the unpromulgated rule claim in this opinion. In particular, we received amicus briefing from Wisconsin Property Taxpayers, Inc. suggesting the primary jurisdiction doctrine...