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FILED: FEBRUARY 23, 2001

IN THE SUPREME COURT OF THE STATE OF OREGON

WALLACE L. and ELIZABETH PREBLE,

Appellants,

v.

DEPARTMENT OF REVENUE,

Respondent.

(OTC 4130; SC S45863)

On petition for attorney fees and statement of costs and disbursements filed December 1, 2000.

Submitted on the record January 23, 2001.

Kevin O'Connell, Kevin O'Connell, P.C., Portland, filed the petition, statement, and reply to objection for appellants.

Jerry Bronner, Assistant Attorney General, Salem, filed the objection for respondent. With him on the objection was Hardy Myers, Attorney General.

Before Carson, Chief Justice, and Gillette, Durham, Leeson, Riggs, and De Muniz, Justices.*

DURHAM, J.

Appellants' statement of costs and disbursements is allowed in the sum of $1,054.43. Appellants' petition for attorney fees is denied.

*Kulongoski, J., did not participate in the consideration of the petition or statement.

DURHAM, J.

Taxpayers prevailed in this court in their appeal from a judgment of the Oregon Tax Court. Preble v. Dept. of Rev., 331 Or 320, ____ P3d ____ (2000). Taxpayers have filed a petition for attorney fees and a statement of costs and disbursements. The Department of Revenue (department) has filed objections to each. The court overrules the department's objection to the statement of costs and disbursements and awards taxpayers the sum of $1,054.43. For the reasons that follow, the court denies the petition for attorney fees.

ORS 305.447(1) grants this court discretion to award attorney fees to taxpayers. In Swarens v. Dept. of Rev., 320 Or 669, 674, 890 P2d 1374 (1995), this court stated that it would apply the following standard in exercising discretion under ORS 305.447(1):

"We agree with the parties that an explanation of how we choose to exercise our discretion will be of benefit to those involved in future tax appeals. In general, we also agree with the rationale of the court in Van Gordon [v. Ore. State Bd. of Dental Examiners, 63 Or App 561, 666 P2d 276 (1983)] when it addressed its exercise of discretion to award fees in the face of an agency's erroneous but reasonable interpretation of a statute. That is, generally, when an agency erroneously but reasonably interprets a statute, the purposes ascribed to the attorney fee statute are not served by a fee award:

"'A fee award will not deter similar actions in the future, because reasonable misinterpretations are mistakes made in good faith rather than reckless or intentional decisions to adopt erroneous constructions. There is also less of a "fairness" justification for attorney fees in such cases.' 63 Or App at 568.

"The Romani [v. Dept. of Rev., 10 OTR 64 (1985),] formulation makes sense with respect to ambiguous regulations or tax forms, because those are within the department's control to make clear, but the same cannot be said of the statutes that the department is required to apply. Under ORS 305.447(1), we will be guided, inter alia, by the following principle in exercising our discretion when a taxpayer prevails on appeal: We usually will exercise our discretion to award attorney fees to the taxpayer when the department's interpretation contradicts the clear meaning of a controlling statute, as disclosed by that statute's text and context or legislative history."

After this court issued Swarens, the legislature enacted ORS 20.075. Or Laws 1995, ch 618,