The Wisconsin Supreme Court recently accepted Applegate-Bader Farm, LLC v. Wisconsin Department of Revenue, a case about the administrative rulemaking process in Wisconsin. The Wisconsin Department of Revenue (DOR) promulgated a rule that adjusted how different lands were taxed. After an initial approval of the scope statement and public hearings, DOR made new changes to the rule that significantly increased the tax on certain farmers from the earlier scope statement. The changed draft rule was eventually promulgated fully. The farmers contest the legitimacy of the rule because of the earlier change.
The Court of Appeals District IV in Madison handed down its decision on January 30, 2020 and the case now awaits briefing at the Supreme Court, with the first brief due tentatively on July 9, 2020.
Multiple issues arise from this case: the first, was a new scope statement needed after DOR changed the proposed rule?
The Court of Appeals said no:
We reject the LLC’s argument that an agency must create a revised scope statement whenever a draft version of a rule is changed in a meaningful or measurable way, even if the changed rule fits within the ambit of the previously authorized scope statement. Rather, the comparison mandated by § 227.135(4) is not between a changed draft rule and the initial draft rule, but between a changed draft rule and the previously authorized scope statement¶39.
The statute at issue, Wis. Stat. § 227.135(4), says:
If at any time after a statement of the scope of a proposed rule is approved under sub. (2) the agency changes the scope of the proposed rule in any meaningful or measurable way, including changing the scope of the proposed rule so as to include in the scope any activity, business, material, or product that is not specifically included in the original scope of the proposed rule, the agency shall prepare and obtain approval of a revised statement of the scope of the proposed rule in the same manner as the original statement was prepared and approved ….
The Court of Appeals, interpreted the statute to mean that:
The language of § 227.135(4) and closely related statutes, together with the evident intent of the legislature in enacting these statutes, demonstrate that a rule-making agency must revise a scope statement only when the draft rule under consideration meaningfully or measurably varies from the topics described by the scope statement.¶43.
In this case, the original rule was modified primarily by adding a requirement for certain land to be qualified as “agricultural use.” Did this addition meaningfully or measurably vary from the topics described by the original scope statement? The court said no.
The court also addressed the most obvious concern with this interpretation of § 227.135(4) :
The LLC contends that the Department’s interpretation of WIS. STAT. § 227.135(4) would lead to an absurd result: an agency could easily avoid public resistance to a proposed rule by preparing a broadly framed, seemingly uncontroversial scope statement and offering an initial draft rule designed to have broad appeal but then, after the close of public comment, switch to a controversial changed draft rule that still falls within the topics in the broadly framed scope statement¶51.
The court acknowledged that this is a real flaw in the process:
We assume without deciding that the LLC has identified a potential weakness in rule-making procedure that could be exploited in some circumstances. The problem for the LLC is that it does not point to, and we do not discern, a suggestion in the text of WIS. STAT. § 227.135(4) that the legislature intended to use subsection (4), or § 227.135 more generally, to address that potential weakness¶52.
Despite this apparent flaw, the court concerned itself primarily with whether the rulemaking violated a statute. It noted that there were several checks on deceptive scope statements, including the Governor and the Legislature. Additionally, the court said:
If scope statements are overly broad or otherwise inappropriate, they may fall short of one or more requirements outlined in WIS. STAT. § 227.135(1)(a)-(f), and we see no reason why a rule challenger could not seek to rebut the presumption that a scope statement complied with the requirements.¶54.
When an agency files a rule with the legislature, it creates a statutory presumption that the proper rulemaking procedure was followed. This presumption could be a concern; however, this case affirms that the presumption is rebuttable.
This case currently awaits briefing at the Supreme Court. GLLF will continue to monitor because of its potential import on the role of scope statements and proper rulemaking procedure.
Written by GLLF’s Legal Intern, Mike Pflughoeft