Section 3.19 - Statutory Construction

• Jurisdiction: New York

[3.19] c. Statutory Construction

While "the construction given statutes and regulations by the agency responsible for their administration, if not irrational or unreasonable, should be upheld,"⁹³ the Court of Appeals has cautioned against blind application of this often-quoted "reasonable construction" standard. In Kurcsics v. Merchants Mutual Insurance Co.,⁹⁴ in litigation involving the Insurance Law, the Court of Appeals distinguished two types of cases: (1) where interpretation of a statute or its application involves knowledge of operational practices or an evaluation of factual data and inferences, and (2) where the question is one of pure statutory reading and analysis dependent only on apprehension of legislative intent. In the first type of case, the Court of Appeals said, the courts regularly defer to the administrative agency, and the agency's interpretation is upheld if not irrational or unreasonable. In the second type of case, however, the high Court stated that there is little reason to rely on any special expertise of the agency, and the agency's interpretative regulations are to be accorded much less weight. If the regulations run counter to the clear wording of a statute, the Court would accord them no weight at all. The Kurcsics theme also has been sounded in tax cases.⁹⁵

When an agency's interpretation of a statute is long-standing, a taxpayer is entitled to rely on it, and an administrative interpretation to the contrary may be held arbitrary and capricious.⁹⁶ For example, the Third Department recently held that "[r]etroactively applying a changed interpretation upon which a taxpayer was relying is 'arbitrary and capricious.'"⁹⁷

There are several maxims and canons of construction which appear with regularity in court opinions regarding state taxes, in addition to those already treated. While it can be doubted that these have much effect on the decisional process, they are routinely marshaled by opposing counsel. Two of the more important rules are these: (1) an ambiguity in a tax statute is to be construed most strongly in favor of the taxpayer and against the government,⁹⁸ and (2) a tax law should be interpreted as the ordinary person reading it would interpret it.⁹⁹ Additionally, rising almost to the level of a maxim is the statement that it is not the terminology used by a taxpayer which controls, but rather the substance of the transaction.¹⁰⁰Other principles of construction are summarized in Brooklyn Union Gas Co. v....