American Fire & Casualty Co. v. New Jersey Division of Taxation

Justice RIVERA-SOTO,

dissenting.

This appeal requires an examination of the methodology used by the Director of the Division of Taxation (Director) in applying this State’s taxing scheme on foreign insurers doing business in New Jersey. Specifically, as the majority properly observes, our task in this appeal is to “determine the proper relationship between the State’s retaliatory tax statute, N.J.S.A. 17:32-15, 17B:23-5, and its premium tax cap statute, N.J.S.A. 54:18A-6(a).” Ante, 189 N.J. at 69, 912 A.2d at 128 (2006). Harmonizing these two statutes, the Director computed the retaliatory tax to which these foreign insurers were subject while also giving effect to New Jersey’s 12.5% premium tax cap. The net effect of the Director’s actions was to create a level playing field and place New Jersey insurers on an equal footing with foreign insurers: foreign insurers are to be taxed in the same manner as New Jersey insurers would be taxed by the foreign insurers’ home state if the New Jersey insurer earned premiums in the foreign state.

In those circumstances, our duty is long-standing and clear: “the Director’s expertise, particularly when exercised in the specialized and complex area covered by [taxing statutes] is entitled to great respect by the courts. Moreover, the agency’s interpretation of the operative law is entitled to prevail, as long as it is not plainly unreasonable.” Metromedia, Inc. v. Dir., Div. of Taxa *86 tion, 97 N.J. 313, 327 , 478 A.2d 742 (1984) (citations omitted). See also In re Freshwater Wetlands Prot. Act Rules, 180 N.J. 415, 441 , 852 A.2d 167 (2004) (same); Kasper v. Bd. of Trs. of the Teachers’ Pension & Annuity Fund, 164 N.J. 564, 581 , 754 A.2d 525 (2000) (“ ‘To uphold an agency’s construction of a statute that is silent or ambiguous with respect to the question at issue, a reviewing court need not conclude that the agency construction was the only one it permissibly could have adopted, or even the reading the court would have reached if the question initially had arisen in a judicial proceeding.’ ” (quoting 2 Am.Jur.2d Admin. Law § 525 (1994) (footnotes omitted))). Applying those well-settled principles, the majority’s logic cannot sustain the requisite conclusion that the Director’s means of harmonizing the premium tax cap and retaliatory tax statutes is “plainly unreasonable.”

Consistent with our obligations, the majority acknowledges that “the Director has interpreted the two statutes based on a plain reading of their language[,]” ante, 189 N.J. at 72-73, 912 A.2d at 131 (2006), a conclusion in which the Tax Court concurred. Am. Fire & Cas. Co. v. N.J. Div. of Taxation, 21 N.J. Tax 155, 162-74 (2003). Nevertheless, eschewing that reasoned and reasonable conclusion, the majority rejects the Director’s position, preferring instead to “adopt plaintiffs’ methodology[,]” ante, 189 N.J. at 73, 912 A.2d at 131 (2006), a methodology based on the majority’s independent judgment — one contrary to the judgment reached by the Director and consistent with the arguments advanced by plaintiffs — that “the benefits of the premium tax cap should be preserved when calculating [the] retaliatory tax.” Ante, 189 N.J. at 75, 912 A.2d at 132 (2006).

I respectfully disagree. In my view, the better and more balanced approach is the one so ably adopted by Tax Court Judge Kuskin, who granted summary judgment in favor of the State, and held that “[t]he history of the [premium tax] cap and retaliatory tax statutes suggests that neither statute should affect the interpretation of the other.” Am. Fire & Cas. Co. v. N.J. Div. of Taxation, supra, 21 N.J. Tax at 166 . Instead, as Judge Kuskin *87 correctly noted, a complete review of the legislative history of these two statutes “suggest[s] a legislative intent to have the [premium tax] cap statute and retaliatory tax statute function in the manner adopted by the Director.” Id. at 167 . Judge Kuskin captured the issue clearly and succinctly:

Plaintiffs’ policy arguments and the analyses by their experts are logical, sensible, and appealing. However, my responsibility is not to interpret the [premium tax] cap and retaliatojy tax statutes based on my notions of appropriate policy, but to interpret the statutes based on my analysis of legislative intent. The judiciary has no power to devise tax programs or to qualify the existing legislative mandate with a judge’s private view of what is just or sensible. If the Legislature has made a bad policy judgment in requiring that the [premium tax] cap be applied in calculating retaliatory tax, that is the Legislature’s prerogative, as it is the Legislature’s prerogative to amend the [premium tax] cap and retaliatory tax statutes if it wishes.

[Id. at 172 (citations and internal quotation marks omitted).]

That clear reasoning is compelled by the fact that the matter before us is closely poised. Thus, we should refrain from interposing our judgment in respect of the wisdom of the Director’s methodology for assessing both the premium tax cap and the retaliatory tax on foreign insurance carriers. In its stead, we should reverse the determination of the Appellate Division and reinstate the judgment of the Tax Court.

I, therefore, respectfully dissent.

Justices ALBIN and WALLACE join in this opinion.

For affirmance — Chief Justice PORITZ and Justices LONG, LaVECCHIA and ZAZZALI — 4.

For reversal — Justices ALBIN, WALLACE and RIVERA-SOTO — 3.