Section 3.15 - Basic Principles

• Jurisdiction: New York

[3.15] 1. Basic Principles

The basic standard applicable when the Appellate Division reviews a decision of the Tax Appeals Tribunal is the "substantial evidence" standard found at CPLR 7803(4), which states that "whether a determination made as a result of a hearing held, and at which evidence was taken, pursuant to direction by law is, on the entire record, supported by substantial evidence." In addition, two of the questions enumerated in CPLR 7803(3), i.e., whether a determination was affected by an error of law or was arbitrary and capricious, have been repeatedly coupled with the substantial evidence test in the case law. Thus, the courts have effectively expanded the formulation of the basic standard to provide that the Tribunal's decision is to be confirmed if it is found to be supported by substantial evidence in the record and not erroneous, arbitrary or capricious.

The cases repeatedly cited as authority in litigants' briefs and in court decisions generally do not, however, invoke even the expanded standard of review in such a relatively straightforward way. Instead they discuss, inter alia, the standard to be applied when an administrative agency's construction of a statute is under review, the burden borne by the taxpayer and the taxing authority, the evidentiary test, and the question of "against" whom the applicable taxing statute should be construed. From this admixture have come incomplete and possibly misleading formulations of the standard review, arguably weighted too strongly in favor of upholding the administrative body.

The first of the often-cited formulations is found in Howard v. Wyman .⁶⁷ Here the focus of the Court of Appeals was on statutory construction:

It is well settled that the construction given statutes and regulations by the agency responsible for their administration, if not irrational or unreasonable, should be upheld. As this court wrote in the Mounting & Finishing Co. case, "statutory construction is the function of the courts 'but where the question is one of specific application of a broad statutory term in a proceeding in which the agency administering the statute must determine it initially, the reviewing court's function is limited.' The administrative determination is to be accepted by the courts 'if it has "warrant in the record" and a reasonable basis in law.' 'The judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body.' ⁶⁸

Grace v. New York State Tax Commission,⁶⁹ a second important Court of Appeals decision, mentions the "erroneous, arbitrary or capricious" standard, as well...