dissenting.
I do not disagree with the majority’s tax policy as expressed in this case. But I disagree with their right to choose that policy in the face of the Commissioner’s reasonable interpretation of the act.
The language of the statute obviously is far from definitive; it lends itself to either interpretation — the one advanced by the taxpayer or the one by the State. That being so, the policy choice should be left to the agency so long as it is not unreasonable.
This conclusion flows from what has been described as “the prevailing judicial orthodoxy” with respect to the interpretation of statutes that delegate enforcement and rulemaking power to administrative agencies. Diver, Statutory Interpretation in the Administrative State, 133 U.Pa.L.Rev. 549, 562 (1985). The principle holds that once it is determined that the plain *223meaning of the statute fails to solve the inquiry — and if the attributes of the agency’s legal authority and function are appropriate — a court should grant deference to the agency. The court’s task is converted from determining whether the contested interpretation is correct to determining whether it is reasonable. Id. at 562.
The United States Supreme Court has adopted just such an approach in interpreting federal law:
the task for the Court * * * was not to interpret the statute as it thought best but rather the narrower inquiry into whether the [agency’s] construction was “sufficiently reasonable” to be accepted by a reviewing court.
[Federal Election Comm’n v. Democratic Senatorial Campaign Comm., 454 U.S. 27, 39, 102 S.Ct. 38, 46, 70 L.Ed. 2d 23, 34 (1981) (citations omitted).]
See also United States v. Riverside Bayview Homes, Inc., 474 U.S. —, —, 106 S.Ct. 455, 461, 88 L.Ed.2d 419, 429 (1985) (an agency's construction of a statute it is charged with enforcing is entitled to deference if it is reasonable and not in conflict with the express intent of Congress).
Since I believe that the statute’s plain meaning not only does not suggest the majority’s holding, but the contrary, and since the Division of Taxation has not only the greatest expertise in this area but also the primary and substantial responsibility for administering and enforcing the act — and has as well extensive rulemaking and administrative powers — its attributes and functions warrant the application of the principle of deference. Justice O’Connor recently reiterated this principle with respect to federal tax law: “the ‘choice among reasonable interpretations is for the Commissioner, not the courts.’ ” Commissioner v. Engle, 464 U.S. 206, 224, 104 S.Ct. 597, 608, 78 L.Ed.2d 420, 434 (1984) (holding that IRS Commissioner’s interpretation in the matter was unreasonable and not entitled to deference) (quoting National Muffler Dealers Ass’n, Inc. v. United States, 440 U.S. 472, 488, 99 S.Ct. 1304, 1312, 59 L.Ed.2d 519, 531 (1979)). Similar principles have long been followed in New Jersey. Atlantic City Transp. Co. v. Director, Div. of Taxa*224tion, 12 N.J. 130, 146 (1953); Ridolfi v. Director, Div. of Taxation, 1 N.J.Tax 198, 203 (Tax Ct.1980).
I.
Applying these principles of law to this case, I cannot agree that the construction imposed upon the statute by the Director of the Division of Taxation is unreasonable. On the contrary, if we follow the most fundamental principles of statutory construction, we should find the Director’s construction not only reasonable, but the one that should best be made in accordance with law.
A.
The statute’s plain language supports the position taken by the Division of Taxation. See Service Armament Co. v. Hyland, 70 N.J. 550, 556 (1976) (statutes should be construed in accord with their plain meaning). At issue in this case is the appropriate criterion for determining the investment-ownership requirement for purposes of the subsidiary-dividend exclusion in N.J.S.A. 54:10A-4(k)(1). The critical statutory language is not, as the majority would have us focus, the phrase “80% or more ownership of investment”; rather, the critical language is the definition of that phrase as set forth in subsection (d) of section 54:10A-4. That subsection specifically defines the qualifying investment as
ownership (1) of at least 80% of the total combined voting power of all classes of stock of the subsidiary entitled to vote and (2) of at least 80% of the total number of shares of all other classes of stock except nonvoting stock which is limited and preferred as to dividends. (Emphasis added).
Thus, in accordance with the plain language of the statute, in order to meet the test for exclusion the parent must “own” at least 80% of the subsidiary’s voting stock. Nothing on the face of the statute supports the majority’s contention that indirect control of at least 80% of the subsidiary’s stock is enough. IFF simply does not own the requisite percentage of second-tier subsidiary stock.
*225It might be tempting to ignore the subsidiary structuring of IFF’s operations in order to focus on the reality of corporate control and thereby equate indirect with direct ownership. But generally speaking, taxpayers have not been allowed to disavow the corporate structures they have fashioned for their own business convenience on the mere assertion that one form of organization is functionally equivalent to another. General Trading Co. v. Director, Div. of Taxation, 83 N.J. 122, 136-37 (1980). We have consistently held business organizations to the consequences of the structure they have chosen, if for no other reason than “the administrative burden may well be too much if a state must explore the ramifications of corporate structures to determine the justice of recognizing or ignoring corporate entities in each factual complex.” Household Fin.Corp. v. Director, Div. of Taxation, 36 N.J. 353, 363, appeal dismissed, cert. denied, 371 U.S. 13, 83 S.Ct. 41, 9 L.Ed.2d 49 (1962). Accordingly, IFF should be held to the consequences of its chosen form.
Given that the statute does not plainly extend the dividend exclusion to a parent corporation with indirect control of a second-tier subsidiary, we should defer to the Director’s plausible interpretation that the exclusion applies only to the parent with direct ownership of the subsidiary.
B.
The Director’s position is buttressed by a second rule of statutory construction that “tax preference provisions are to be strictly construed, and ambiguities resolved against those claiming exemption.” Body-Rite Repair Co. v. Director, Div. of Taxation, 89 N.J. 540, 544 (1982) (citing MacMillan v. Director, Div. of Taxation, 180 N.J. Super. 175 (App.Div.1981), aff'd o.b., 89 N.J. 216 (1982)). If there is doubt about the plain meaning of the statute, then strict construction of the preference leads to the conclusion that since the taxpayer simply does not “own” *22680% of the stock of the second-tier subsidiary, it is not entitled to the dividend exclusion.
The Legislature knows quite well how to deal with the definition of subsidiaries, whether directly or indirectly owned. In defining a subsidiary under the New Jersey Business Corporation Act, N.J.S.A. 14A:1-1 to :18—12, the Legislature expressly included an indirect ownership standard: “ ‘Subsidiary’ means a domestic or foreign corporation whose outstanding shares are owned directly or indirectly by another domestic or foreign corporation in such number as to entitle the holder at the time to elect a majority of its directors without regard to voting power which may thereafter exist upon a default, failure or other contingency.” N.J.S.A. 14A:1-2(r).
The absence of the term “indirect” in the definition of subsidiary under N.J.S.A. 54:10A-4(d) evidences that only actual, direct ownership by a taxpayer of 80% of the stock of another corporation satisfies the subsidiary test for the 100%-dividend exclusion. Strictly construed, that is the statutory language.
C.
The majority has had to skirt its own recent decisions in Fedders Fin. Corp. v. Director, Div. of Taxation, 96 N.J. 376 (1984), and Mobay Chem. Corp. v. Director, Div. of Taxation, 96 N.J. 407 (1984), to reach this result. In those cases, the Court admonished the Director to reject concepts of economic reality and focus instead on the literal language of the pertinent statutory sections. It was crucial, the Court said in Fedders and Mobay, that the debt be owed directly to the parent or controlling stockholders for it to be included in the taxpayer’s tax base. Fedders, supra, 96 N.J. at 388-89. Having been told in Mobay and Fedders that he should not expand the concept of subsidiary ownership to incorporate the economic reality of corporate control in evaluating corporate-debt structure, the Director could hardly be expected to anticipate being faulted, in this tax-preference context, for failing to expand the *227relationship between the corporations to include the indirect-ownership aspects in evaluating equity structure.
As noted, the majority suggests the use of the concept of “ownership of investment” evidences a consideration by the Legislature of the economic realities of the investment by parents and subsidiaries rather than concern with the specific manner in which the investment is held. But the origin of the generic phrase “ownership of investment” is due to the fact that corporations have a variety of security interests that represent varying degrees or qualitative aspects of ownership. The Legislature, in subsection (d), has made it clear that it was concerned primarily with the voting stock of the corporation. What it is concerned about is power. Yet power cannot clearly be discerned unless we understand the requirements of the foreign law under which IFF’s subsidiaries are incorporated.
Excursions into the variety of subsidiary structures that a domestic corporation may use will invariably propel us into the murky waters of foreign corporation laws and international high-finance, all in order to answer the question whether the New Jersey directors of the parent can dictate the moves of the foreign subsidiary even though removed by one or more levels of corporate structure. Foreign corporation laws may, for example, require a subsidiary to maintain an independent board of directors composed of nationals of that country with interests that differ markedly from those of their parental counterparts. Since the issue was never raised, we do not have a clear showing that IFF-Holland is for all purposes a robot of IFF in the voting of the shares of IFF-Brazil and IFF-France. In future cases, the relationships will have to be analyzed carefully. Under such circumstances, we should not rewrite the language of sections 54:10A-4(d) and 4(k)(l) in order to equate indirect and direct ownership.
Finally, it is apparent that the decision in this case imports into our State tax law concepts relevant to the treatment *228afforded parent-subsidiary corporations under the federal Internal Revenue Code. Under the I.R.C., corporations that are members of an “affiliated group,” as defined in I.R.C. § 1504(a), are entitled to file consolidated returns, id. § 1501, and, under certain circumstances, may deduct from adjusted gross income dividends received from other members of the affiliated group. See, e.g., I.R.C. §§ 243 and 245(b). Such concepts should not bear on the decision in this case. Consolidated returns have never been permitted in New Jersey, United States Steel Corp. v. Director, Div. of Taxation, 38 N.J. 533, 546 (1962); and to the extent section 54:10A-4(k)(1) allows certain tax-free distributions between related corporations, nothing suggests that our Legislature contemplated the expansive concept of the “affiliated group” embodied in federal law. The wisdom of affording corporations similar treatment under state law — either by exclusion from entire net income, deduction, credit, or the use of consolidated returns — is another question entirely. But if aspects of our tax laws are to be remade in the federal image, the decision to do so should be made in the Legislature, not here.
II.
Above and beyond all the canons of statutory construction, for me, the compelling reason why a court should not choose among reasonable interpretations of tax policy is that when courts make tax policy they make it only halfway. Courts can decide only who gets the tax preference. We do not make the hard choices about who will make up the difference in taxes, what programs will be cut, or what other taxpayers will have to pay additional taxes to make up for the preferences we have granted.
The majority makes much of Governor Hughes’ letter to his State Tax Policy Commission in which he requested that it evaluate proposals for eliminating “taxation of dividends re*229ceived by a parent company from a subsidiary company * * Ante at 215. Noticeably missing from the majority’s discussion are the considerations of revenue-balancing that underlie the Commission’s recommendations. Tax-policy commissions are scrupulous in their presentations to make clear the revenue effects of their recommendations. The 1968 report was in precisely this form. The carefully-worded report of the Commission balanced the revenue gains and losses of its recommendations in these words:
Alternative J: A fourth alternative would meet the problem on a narrower base but with more substantial relief directed to the problem of corporate headquarters location. The Commission recommends:
Million
dollars
A. Include only 50% of subsidiary capital in the net worth base — (after allowing for proportionate debt adjustment) — which would, in effect, reduce the effective tax rate on this form of capital to 1 mill, resulting in an estimated revenue reduction of $1.5
B. Eliminate total assets allocation factor from the net worth tax, with estimated revenue reduction of.................... 1.5
C. Eliminate from the income tax base intercorporate dividends received from 80% owned subsidiaries, with estimated revenue loss of............................................ 4.5
Net revenue loss................................. $7.5
D. Increase corporate income tax rate to 3%%, increasing the revenue yield by........................................... $7.0
E. Balance revenue loss from General Fund.............. 0.5
Total revenue replacement........................ $7.5
[Comm’n On State Tax Policy, Twelfth Report 47 (1968).] 1
*230There is nothing to evidence that the recommendations made by the 1968 Committee contemplated the interpretation of section 54:10A-4(k)(1) today adopted by this Court.
Those who have the primary responsibility for determining the tax policy of the State, the Legislature and the Executive, have apparently consistently viewed the statute in question as not excluding from taxation dividends from indirectly-owned subsidiaries. Yet the effect of the majority decision is to impose a revenue loss through an increase in the dividend exclusion without consideration of what that does to the other side of a delicately-balanced tax equation. Unless the language of the statute clearly dictates otherwise, such decisions are better left to the tax and budgeting experts, not the courts.
The consistent judicial philosophy of this State has been that as judges we should not substitute our judgment in matters of tax policy for the judgments of those delegated the task by legislative design.
Restraint is particularly essential in tax matters. As the Supreme Court observed in Ridgefield Park v. Bergen Cty. Bd. of Taxation, 31 N.J. 420, 431 (1960), “[t]he judiciary has no power to devise tax programs or to qualify the existing legislative mandate with a judge's private view of what is just or sensible.” This is because of the essentiality of the taxing role in government.
[MacMillan v. Director, supra, 180 N.J.Super. at 178, aff'd o.b., 89 N.J. 216.]
In applying these principles of the structure of government to this case, it is at least reasonable to conclude that if the Legislature had intended to exclude from taxation all dividends received from subsidiaries either directly or indirectly owned to the extent of 80%, it would have said so expressly. It did not. The Legislature has acquiesced in the Director’s longstanding and reasonable construction of the statute to the contrary, and under traditional jurisprudential considerations, we should defer to that construction. Body-Rite Repair Co., supra, 89 N.J. at 545; Malone v. Fender, 80 N.J. 129, 137 (1979).
I believe that adherence to the time-tested role of courts in relation to the taxing authority of government will, in the long *231run, serve the State better. I would reverse the judgment of the Appellate Division.
For affirmance — Justices GARIBALDI, POLLOCK, STEIN and CLIFFORD — 4.
For reversal — Justices O’HERN and HANDLER — 2.
The 1972 report of the New Jersey Tax Policy Committee (the Cahill Commission), which recommended sweeping changes in State tax laws, contained a similar item-by-item summary of the precise revenue effects of its combined recommendations. See Tax Policy Comm., Summary: Report of the New Jersey Tax Policy Comm. 53 (1972).