Mississippi Supreme Court doubles down denying deference to DOR regulation

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Eversheds Sutherland (US) LLPThe Mississippi Supreme Court1 held that a state chancery court erred in deferring to the Mississippi Department of Revenue (Department) and Mississippi Gaming Commission’s (Commission) regulatory interpretation of a Mississippi tax statute governing the computation of the state gaming license fee.2 However, the court agreed with the chancery court that costs of prizes from casino rewards program drawings were not deductible from gross revenue, based on the plain language of the statute.

Mississippi Code section 27-77-7(5), which governs judicial review of findings and orders of the Mississippi Board of Tax Appeals to the chancery court, provides that the court “shall give no deference to the decision of the Board of Tax Appeals, the Board of Review or the Department of Revenue, but shall give deference to the department's interpretation and application of the statutes as reflected in duly enacted regulations and other officially adopted publications.”3

The court found that section 27-77-7(5) was unconstitutional because it violated the separation of powers doctrine of the state constitution.4 In so holding, the court relied on its 2018 decision in King v. Miss. Military Dep’t,5 where the court abandoned the “old standard of review giving deference to agency interpretations of statutes” and established a de novo review standard.6 The court explained that although the King decision did not directly address deference to duly-promulgated regulations interpreting statutory language, the decision’s ultimate finding, that “[i]nterpreting statutes is exclusively reserved for the courts,” “is applicable to any case in which an agency interprets a statute.” The court further noted that although section 27-77-7(5) instructs that “appeals are to be tried de novo,” a “de novo but deferential” standard of review “creates a confusing and vague standard.” Accordingly, the court held that the chancery court erred in giving deference to the administrative agencies’ regulatory interpretations of section 75-76-193 rather than conducting its own de novo review.

After confirming that deference did not apply to the Department and Commission’s duly-promulgated regulations, the court performed a de novo analysis of Mississippi Code Section 75-76-193. Reviewing the plain language of the statute, the court agreed with the chancery court that the taxpayers failed to meet their burden of showing that costs of prizes qualified for a deduction for purposes of computing the license fee.

Eversheds Sutherland Observation: Mississippi is one of several states that has abandoned agency deference in recent years. In Wisconsin, like Mississippi, the state Supreme Court held that deference violated the state constitution. In Arizona, a bill was passed in 2018 abandoning deference to agency interpretations of constitutional or statutory provisions or rules adopted by the agency and providing for a de novo standard of review. In Florida, a 2018 ballot initiative amended the state constitution to provide that state courts and administrative hearing officers may not defer to an agency’s interpretation of a statute or rule and must instead interpret such statute or rule de novo. Pending legislation in Georgia would similarly remove deference to regulatory and subregulatory interpretations by the Department of Revenue.7 For more information on agency deference, see our prior publication here.

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1HWCC-Tunica, Inc. / HWCC-Tunica, LLC v. Miss. Dep’t of Revenue and Miss. Gaming Comm’n, Dkt. No. 2019-CA-00336-SCT (Miss. May 28, 2020).
2Miss. Code Ann. 75-76-193. The license fee for gaming licensees is imposed by Miss. Code Ann. § 75-76-177.
3Prior to 2014, Miss. Code Ann. § 27-77-7(5) provided for deference to an agency’s prior decisions in addition to its interpretations of statutes.
4Miss. Const. art. 1, §§ 1, 2.
5245 So.3d 404 (Miss. 2018).
6245 So.3d at 408.
7Georgia H.B. 538 (2019-2020).

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