Wolter v. DOR

• Decision Date: 24 November 1999
• Docket Number: No. 99-0671.,99-0671.
• Citation: 231 Wis.2d 651,605 N.W.2d 283
• Parties: Otto WOLTER, John Wolter, Janet Plenke, Michelle Cichacki, Kim Wiedmann and Wolter Investment Company — A Limited Partnership, a Wisconsin Limited Partnership, Petitioners-Appellants, v. WISCONSIN DEPARTMENT OF REVENUE, Respondent-Respondent.
• Court: Wisconsin Court of Appeals

231 Wis.2d 651

605 N.W.2d 283

Otto WOLTER, John Wolter, Janet Plenke, Michelle Cichacki, Kim Wiedmann and Wolter Investment Company — A Limited Partnership, a Wisconsin Limited Partnership, Petitioners-Appellants, v. WISCONSIN DEPARTMENT OF REVENUE, Respondent-Respondent.

No. 99-0671.

Court of Appeals of Wisconsin.

Submitted on briefs October 7, 1999.

Decided November 24, 1999.

On behalf of the petitioners-appellants, the cause was submitted on the briefs of John T. Clark and John P. Miller of Miller, Simon, McGinn & Clark, S.C. of Milwaukee.

On behalf of the respondent-respondent, the cause was submitted on the brief of James E. Doyle, attorney general and Stephen J. Nicks, assistant attorney general.

Before Brown, P.J., Anderson and Snyder, JJ.

¶ 1. ANDERSON, J.

Otto Wolter, his children and the family limited partnership seek to avoid paying a real estate transfer fee on a conveyance of commercial property from the family partnership to a newly formed family limited liability company. This appeal challenges the decision of the Wisconsin Tax Appeals Commission that a direct transfer of real property from the partnership to the limited liability company was a conveyance of title for value and no exemptions applied to this transaction. Because we agree with the Commission's decision, we affirm.

¶ 2. The facts are not in dispute. We take them from the Wisconsin Tax Appeals Commission's (WTAC) findings and the parties' stipulation of facts. Otto Wolter is the father of John Wolter, Janet Plenke, Michelle Cichacki and Kim Wiedmann (collectively Wolter) and all were partners in Wolter Investment Company — Limited Partnership (the partnership). Otto was the general partner and his children were limited partners. The partnership held title to three parcels of land which it leased to various tenants. In 1994 the partnership was reorganized as Wolter Investment Company, LLC (the LLC), a Wisconsin limited liability company under ch. 183, STATS. In order to give notice of the reorganization, the individuals had prepared and recorded in the Waukesha County Register of Deeds office a "Memorandum of Organizational and Operating Agreement." The reorganization of the partnership into the LLC did not involve payment of any cash consideration to any person or entity.

¶ 3. The Memorandum recited that the partnership was reorganizing under ch. 183, STATS., as an LLC and that it owned three parcels of land, whose legal descriptions were attached as Exhibit A. The document also recited that the LLC is the "owner of all of the above described real estate . . . ." The Memorandum was signed by all five Wolters in their individual capacity and the signatures were authenticated by a member of the State Bar of Wisconsin.

¶ 4. The Wisconsin Department of Revenue (DOR) served a "Notice of Additional Assessment of Real Estate Transfer Fee" on the LLC's attorney of record. DOR based the assessment on its determination that any conveyance between a partnership and an LLC is subject to the transfer fee. The transfer fee due was calculated to be $6420.30, based upon the 1994 fair market value of the three parcels. DOR also assessed interest and penalty payments totaling $2561.26. DOR rejected the LLC's petition for redetermination.

¶ 5. Wolter filed an appeal with the Wisconsin Tax Appeals Commission (WTAC). In the appeal, Wolter maintained that the additional assessment was improper for three reasons. First, there was no conveyance within the meaning of § 77.21(1), STATS. Second, any deemed transfer was without value. Third, if there was a conveyance it was exempt under § 77.25(15m) and (15s), STATS. The WTAC rejected Wolter's appeal finding that the recorded Memorandum was a conveyance within the meaning of § 77.21(1). It found that the transfer was with value because the individuals received capital accounts in the LLC. The WTAC also held that there is no statutory exemption for a transfer from a family partnership to a family LLC. The WTAC upheld the assessment of the transfer fee but reversed DOR's assessment of interest and penalty payments.

¶ 6. The Wolters, individually and as partners in the partnership, filed a petition for judicial review. The circuit court affirmed all of the findings and the conclusion of the WTAC. This appeal followed.

STANDARD OF REVIEW

¶ 7. Not surprisingly, the parties differ as to the appropriate standard of review. Wolter contends that of the three levels of deference a court owes to an administrative agency's legal conclusion, we should use the lowest standard, de novo, because this is a case of first impression. DOR counters that we should use the highest standard, "great weight," because the assessment of a real estate transfer fee is within the WTAC's expertise.

¶ 8. The issue presented concerns the applicability of the real estate transfer fee under § 77.22, STATS., to the Memorandum. A real estate transfer fee is only assessed if there is a conveyance or transfer of ownership interests in real property for value and there are no statutory exemptions or exclusions. See §§ 77.21(1), (3), 77.22(1), STATS. This presents an issue of statutory interpretation. See William Wrigley, Jr., Co. v. DOR, 176 Wis. 2d 795, 800, 500 N.W.2d 667, 669-70 (1993). We apply three levels of deference — great weight, due weight or de novo — to an agency's conclusions of law and statutory interpretation. See id. at 801, 500 N.W.2d at 670.

[1]

¶ 9. Four requirements must be met before we afford "great weight" deference to an agency's interpretation of a statute:

(1) the agency was charged by the legislature with the duty of administering the statute; (2) the agency's interpretation of the statute is one of longstanding; (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.

Margoles v. LIRC, 221 Wis. 2d 260, 265, 585 N.W.2d 596, 598 (Ct. App.), review denied, 221 Wis. 2d 654, 588 N.W.2d 631 (1998). When the "great weight" standard is applied, we sustain an agency's reasonable interpretation even if there is a more reasonable interpretation available. See id.

¶ 10. We apply the "due weight" standard where an agency has some experience in making the statutory interpretations being challenged, but has not developed the expertise necessary to place it in a better position than this court to interpret a statute. See id. at 265, 585 N.W.2d at 598-99. When this standard is used, we will not reverse an agency's reasonable interpretation that is in keeping with the purpose of the statute unless we determine that a more reasonable interpretation is available. See Zignego Co. v. DOR, 211 Wis. 2d 819, 825-26, 565 N.W.2d 590, 593 (Ct. App. 1997).

¶ 11. The lowest standard of deference is de novo. This standard is applied when the issue is one of first impression for the agency or the agency's position on the issue has been contradictory. See id. at 824, 565 N.W.2d at 592. Regardless of the level of deference, we review the decision of the agency, not the decision of the circuit court. See Stafford Trucking, Inc. v. DILHR, 102 Wis. 2d 256, 260, 306 N.W.2d 79, 82 (Ct. App. 1981).

¶ 12. Wolter does not dispute that the WTAC has a great deal of expertise and experience in determining whether a transaction is a conveyance subject to the assessment of a transfer fee or is exempt by statute. Wolter's position is that whether a transfer between family entities is a conveyance subject to the real estate transfer fee presents a case of first impression.

The test is not, however, whether the commission has ruled on the precise — or even substantially similar — facts in prior cases. If it were, given the myriad factual situations to which the provisions of [the statutes] may apply, deference would indeed be a rarity. Rather, the cases tell us that the key in determining what, if any, deference courts are to pay to an administrative agency's interpretation of a statute is the agency's experience in administering the particular statutory scheme — and that experience must necessarily derive from consideration of a variety of factual situations and circumstances.

Barron Elec. Coop. v. PSC, 212 Wis. 2d 752, 764, 569 N.W.2d 726, 732 (Ct. App. 1997).¹

¶ 13. This is not a case of first impression. The WTAC has regularly decided cases with similar facts. In three recent cases, the WTAC held that a transfer from a revocable living trust by the trustee or trustees to a limited partnership or a limited liability corporation in which the trustee or trustees were the only member(s) was exempt from the transfer fee. See Huntington v. DOR, No. 98-T-179, 1999 WL 199300 (Wis. Tax App. Comm'n Apr. 8, 1999); Blado v. DOR, No. 98-T-166, 1999 WL 202883 (Wis. Tax App. Comm'n Mar. 19, 1999); Selle v. DOR, No. 98-T-175, 1999 WL 160244 (Wis. Tax App. Comm'n Mar. 15, 1999). Of interest in these three opinions is the same comment:

Claimed exemptions from the fee for entity-to-entity transfers — between partnerships, corporations, and LLCs, all of which are comprised solely of family members — have not succeeded, in the absence of specific exemption language.

Huntington, 1999 WL 199300 at *2; see Blado, 1999 WL 202883, at *2; Selle, 1999 WL 160244, at *2.

¶ 14. The WTAC has decided other entity-to-entity transfer cases. See Sunset Meadows v. DOR, No. 98-T-129, 1999 WL 149768 (Wis. Tax App. Comm'n Mar. 5, 1999) (transfer from a family partnership to an LLC consisting of the same family members); Nicolet Invs. v. DOR, No. 96-T-943, 1998 WL 557177 (Wis. Tax App. Comm'n Sept. 1, 1998) (transfer from one family partnership to a second family partnership consisting of the same family members); J. & R. Hotel Partnership v. DOR, No. 96-T-663, 1997 WL 117188 (Wis. Tax App. Comm'n Mar. 14, 1997) (transfer from family partnership to LLC consisting of the same family members); Heritage Place Ltd Partnership v....