Opinion
May 27, 1988
Appeal from the Supreme Court, Monroe County, Provenzano, J.
Present — Doerr, J.P., Denman, Green, Lawton and Davis, JJ.
Judgment unanimously reversed on the law with costs, and defendants' cross motion to dismiss granted, in accordance with the following memorandum: Xerox was granted summary judgment in its action for declaratory and injunctive relief seeking a favorable interpretation of Tax Law § 208 (3). The State Department of Taxation and Finance and State Tax Commission appeal, contending that the court erred in granting plaintiff's motion and denying defendants' cross motion to dismiss the complaint for plaintiff's failure to exhaust its administrative remedies. We agree.
A party aggrieved by an administrative determination generally must "`exhaust all possibilities of obtaining relief through administrative channels before appealing to the courts'" (Young Men's Christian Assn. v Rochester Pure Waters Dist., 37 N.Y.2d 371, 375). That rule applies to a taxpayer challenge to determinations of the State Tax Commission (Allstate Ins. Co. v Tax Commn., 67 N.Y.2d 999, 1001; Slater v Gallman, 38 N.Y.2d 1, rearg denied 39 N.Y.2d 832; Hahn v State Tax Commn., 134 A.D.2d 904). Plaintiff has been unable to establish any exception to the exhaustion doctrine which would allow it to bypass the available administrative remedies and maintain a declaratory judgment action to challenge the adverse tax determination. First, Xerox does not challenge the statute as "`wholly inapplicable'" to it (Watergate II Apts. v Buffalo Sewer Auth., 46 N.Y.2d 52, 58). The parties agree that the statute is applicable to Xerox and merely differ as to its proper interpretation. Second, this case does not involve a pure question of statutory interpretation. Xerox contends that defendants' determination is inconsistent with their own regulations ( 20 NYCRR 3-6.2) and the court based its decision in part on its reading of such regulations. The administrative agency should be afforded the opportunity to construe and apply its own regulations (cf., Matter of Howard v Wyman, 28 N.Y.2d 434, 437-438, rearg denied 29 N.Y.2d 749). Third, this case involves a question concerning the "`specific application of a broad statutory term'", viz., "owned", and therefore is one in which the agency which administers the statute "must determine it initially" (Matter of American Tel. Tel. Co. v State Tax Commn., 61 N.Y.2d 393, 400, rearg denied 62 N.Y.2d 943; see, Matter of Mobil Intl. Fin. Corp. v New York State Tax Commn., 117 A.D.2d 103, 106). Fourth, there are factual issues which preclude plaintiff from bypassing administrative channels. Those issues involve the precise nature and extent of Xerox' ownership of Rank Xerox stock as well as the proper allocation of Xerox' expenses to subsidiary capital. Where the issue concerns the proper application of "statutory language to as yet unresolved issues of fact * * * [t]he remedy of a declaratory judgment is [not] applicable" (Allstate Ins. Co. v Tax Commn., 115 A.D.2d 831, 834, affd 67 N.Y.2d 999, supra). Finally, Xerox started to pursue its administrative remedies by filing petitions for redetermination with the State Tax Commission. A party must exhaust its administrative remedies "particularly when the administrative process has already been commenced" (Allstate Ins. Co. v Tax Commn., supra, at 832; see, W.T. Wang, Inc. v New York State Dept. of Taxation Fin., 88 A.D.2d 825, affd 58 N.Y.2d 1021).