Dish Network Corp. v. Dep't of Revenue

Citation364 Or. 254,434 P.3d 379
Decision Date25 January 2019
Docket NumberTC 5007 (Control, 5050, 5140, 5201, 5239, 5267, 5293),(SC S065019)
Parties DISH NETWORK CORPORATION, Plaintiff-Respondent, v. DEPARTMENT OF REVENUE, Defendant-Appellant.
CourtSupreme Court of Oregon

Benjamin Gutman, Solicitor General, Salem, argued the cause and filed the briefs for appellant. Also on the briefs were Ellen F. Rosenblum, Attorney General, and Marilyn J. Harbur, James C. Strong, and Daniel Paul, Assistant Attorneys General.

Nicholas G. Green, Orrick, Herrington & Sutcliffe LLP, New York, New York, argued the cause for respondent. Scott G. Seidman, Tonkin Torp LLP, Portland, filed the brief. Also on the brief was Nicholas G. Green.

Before Walters, Chief Justice, and Balmer, Nakamoto, Flynn, Duncan, and Nelson, Justices, and Kistler, Senior Justice pro tempore.**

WALTERS, C. J.

In 2009, taxpayer DISH Network Corporation (DISH) received an assessment order from the Department of Revenue showing that the department had valued its property in Oregon for tax purposes at an amount that exceeded the previous year's valuation by nearly 100 percent. The increase came about because the department had subjected DISH's property to central assessment and thus, also, to "unit valuation," a method of valuing property that purports to capture the added value associated with a large, nationwide business network that, by statute, is available for central, but not local, assessments. ORS 308.555 (2007).1 Although DISH objected to the change from local to central assessment and continued to do so in successive tax years in appeals to the Oregon Tax Court, the department insisted that central assessment was required because DISH was using its property in a "communication" business. See ORS 308.515(1)(h) (stating that property used in certain businesses, including "communication" businesses, shall be assessed by the Department of Revenue). When DISH was forced to concede defeat on that issue, based on this court's decision in DIRECTV, Inc. v. Dept. of Rev. , 360 Or. 21, 377 P.3d 568 (2016), another issue came to the fore in DISH's tax appeals: Did the drastic increase in the assessed value of DISH's property starting in the 2009-10 tax year violate Article XI, section 11, of the Oregon Constitution, which provides that the assessed value of a unit of property in any given year cannot exceed the previous year's assessed value by more than three percent? The department argued that, because DISH's property had been newly added to the central assessment rolls in 2009, the property fell into an exception to the three-percent cap on increases in assessed value—for "new property or new improvements to property." Or. Const., Art. XI, § 11 (1)(c)(A). The statutes implementing the constitutional provision define "new property or new improvements" to include "the addition of *** property to the property tax account." ORS 308.149(5)(a)(C). The Tax Court rejected the department's "new property" theory and held that the department's assessments of DISH's property in the tax years after 2008-09 was unconstitutional.

The department has appealed that decision, reprising its argument that the "new property" exception applies. We agree with the department that the exception applies and therefore reverse the Tax Court's decision to the contrary.

I. BACKGROUND

This case arises at the intersection of two legal constructs—the statutory requirement that certain types of businesses be centrally assessed under ORS 308.505 to 308.665, and the limitations on the assessed value of property set out in Article XI, section 11, of the Oregon Constitution and its implementing statutes. Before we proceed to the specific facts of this case, we provide the following brief introduction.

A. Local Versus Central Assessment

Most property in Oregon is assessed locally, by county assessors. ORS 308.210. However, the Department of Revenue is charged with centrally assessing property in Oregon that is "used or held for future use by" certain kinds of businesses—generally, those that provide services through networks or systems that operate over a large geographic area. ORS 308.515. Whether performed locally or centrally, assessment of property for purposes of taxation involves the preparation of an assessment roll. County assessment rolls are organized by "property tax account," an administrative division of property for assessment purposes that generally consists of a parcel of land and the buildings, structures, improvements, machinery, equipment, and fixtures thereon which are assessable to the owner. See ORS 308.215(1) ("real property shall be listed in sequence by account number"); ORS 307.010(1)(b) (defining "real property" for purposes of property assessment as including the land itself and all buildings, structures, improvements, equipment or fixtures thereon). In contrast, the central assessment roll is organized by company and lists all the properties for which the company is liable to assessment under the central assessment statutes—specifically, all property that the company uses or holds for use in its business. ORS 308.515(1) ; ORS 308.540.

Although the central assessment process is similar to the local assessment process, there are some notable differences. First, under central assessment, a company is assessed for the property it uses (or holds for future use) in its business, whereas under local assessment, a company (or person) is assessed for property that it owns. Compare ORS 308.515(1)with ORS 308.215. Second, only centrally assessed property may be subjected to "unit valuation," whereby the value of a business's property "both within and without the state" is determined "as a unit" and, based on the proportion of certain of the business's physical assets that are situated in Oregon, part of the unit is deemed to be assessable and taxable in Oregon. ORS 308.555.2 In fact, as this court explained in Comcast Corp. v. Dept. of Rev. , 356 Or. 282, 289-93, 337 P.3d 768 (2014), the central assessment process was adopted in Oregon for the specific purpose of allowing statewide unit assessment of businesses that use property over a large area to operate a single network or system.3 Finally, and relatedly, while real property and "tangible personal property" are subject to both local and central assessment,4 only central assessment may also take "intangible personal property" into account.5 ORS 307.030(2) ; ORS 308.510(1).

B. Article XI, Section 11, of the Oregon Constitution (Ballot Measure 50)

The other legal construct that is the focus of this appeal is the limitation on increases in property taxes, and the exceptions thereto, provided in Article XI, section 11, of the Oregon Constitution and its implementing statutes. Article XI, section 11, was added to the Oregon Constitution in 1997, when the legislature proposed it and the voters adopted it as Measure 50 (1997). The legislature referred Measure 50 to the voters, at least in part, to fix problems in an earlier voter-approved property tax limitation measure that it replaced, Measure 47 (1996).

In a nutshell, Measure 50 provides that, for the 1997 tax year, each "unit of property" in the state shall have a maximum assessed value (MAV) that does not exceed its real market value for 1995, less 10 percent. It further provides that, for each year after 1997, the property's MAV "shall not increase by more than three percent from the previous tax year." The provision expressly allows for certain exceptions to that rule, but still limits the assessed value of property that falls into those exceptions. It does so by applying a ratio that seeks to produce the same reductions from real market value for exceptional properties that the application of Measure 50 has produced for neighboring properties of the same type. Thus, it provides, in paragraph 1 ( Article XI, section 11(1)(c) of the Oregon Constitution ):

"Notwithstanding [the described cap on maximum assessed value], property shall be valued at the ratio of average maximum assessed value to average real market value of property located in the area in which the property is located that is within the same property class, if on or after July 1, 1995:
"(A) The property is new property or new improvements to property;
"(B) The property is partitioned or subdivided;
"(C) The property is rezoned and used consistently with the rezoning;
"(D) The property is first taken into account as omitted property;
"(E) The property becomes disqualified from exemption, partial exemption or special assessment; or"(F) A lot line adjustment is made with respect to the property ***."

Measure 50 does not set out a specific mechanism for effecting its limitations on the assessed value of property; nor does it define many of its own terms—including the term "new property or new improvements to property."6 However, after the measure passed, the legislature enacted implementing legislation that purports to fill some of those gaps.7 The resulting statutes include one, ORS 308.146, which provides formulas for calculating the maximum three percent increase in MAV and for determining when the assessed value (AV) must equal that MAV. ORS 308.146(1) and (2).8 The same statute refers the reader to a different set of statutes, with different formulas or "special determinations of value" for properties that fall within six exceptions—the same six exceptions, described in the same terms, that are identified in Measure 50. ORS 308.146(3).9 One of the referenced statutes, ORS 308.156, sets out the formula that applies to four of the six exceptions (partition, rezoning, omitted property and disqualification from exemption), while another, ORS 308.153, sets out the formula that applies to the "new property or new improvements" exception. That latter statute provides:

"(1) If new property is added to the assessment roll or improvements are made to property as of January 1 of the assessment year, the maximum assessed value of the property shall be
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