Delta Air Lines, Inc. v. Dep't of Revenue

CourtOregon Tax Court
PartiesDELTA AIR LINES, INC., Plaintiff, v. DEPARTMENT OF REVENUE, State of Oregon, Defendant. 1909 Central Assessment List Central Assessment List in ORS 308.515(1) Date Taxation Of Intangibles Central Assessment Uniformity Clauses
Decision Date23 August 2023
Docket NumberTC 5409 (Control),TC 5418,TC 5433,TC 5452



DEPARTMENT OF REVENUE, State of Oregon, Defendant.

Nos. TC 5409 (Control), TC 5418, TC 5433, TC 5452

Tax Court of Oregon, Regular Division, Property Tax

August 23, 2023


Robert T. Manicke, Judge


Plaintiff, Delta Air Lines, Inc. (Delta), is an interstate and international air carrier doing business in Oregon. (Stip Facts at 1.) As an "[a]ir transportation" company, its property is subject to central assessment, with consequences discussed below. See ORS 308.515(1)(e).[1]Delta appeals from the Opinion and Order (O&O) issued by Defendant (the Department) for property tax year 2019-20,[2] which determined a real market value of (1) $50 billion for Delta's worldwide property valued as a unit, or "system,"[3] and (2) an allocated real market value of $212,560,000 for Delta's property sitused in Oregon. (Stip Facts at 2; 10/31/2019, Delta Compl


at 4 (O&O).) Each of these values includes some amount attributable to intangible property, such that the value would be less if intangible property were excluded. (See Stip Facts at 2.)

Delta's complaint asserts two claims:

1. That assessment for taxation of Delta's intangible property violates the Uniformity Clauses of the Oregon Constitution (Or Const, Art I, § 32; Art IX, § 1) and the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution (US Const, Am XIV)
2. That the Department's allocation of Delta's unit value to Oregon
a. Does not fairly reflect the real market value of Delta's property that has a situs in Oregon and
b. Results in the taxation of Delta's property located outside Oregon

(See 10/31/2019, Delta's Compl at 2.) Delta's first claim is now before the court on Delta's and the Department's cross-motions for partial summary judgment.


After an initial set of briefs on the parties' cross-motions in this case, the court held a first hearing on April 28, 2021, at which it heard oral argument and directed the parties to address certain issues in supplemental briefing. (See 5/5/2021, Ct Ltr.) While the cross-motions were under advisement, another centrally assessed taxpayer pursuing its own valuation appeal, PacifiCorp, moved for leave to amend its complaint to add a claim similar to Delta's regarding the validity of taxation of its intangible property for tax year 2020-21. [4] (See 10/1/2021, PacifiCorp Motion to Amend Complaint, PacifiCorp v. Dept. of Rev., No. 5411.) On November 8, 2021, the court issued an order in PacifiCorp allowing the amendment but staying proceedings on PacifiCorp's new, constitutional claim until after the trial set for later that month. (See 11/8/2021, Order Granting Plaintiff's Motion for Leave to Amend Complaint, PacifiCorp, No.


5411.) Also on November 8, 2021, the court issued a letter in Delta, with copies to the parties in PacifiCorp, that requested additional briefing on certain tentative conclusions of the court, as well as four further questions related to Delta's claims. The letter invited the parties in both cases to consider a joint hearing for oral argument on the tentative conclusions and questions, and the parties in both cases agreed. (See 11/8/2021, Ct Ltr.) Shortly after the PacifiCorp trial, on January 18, 2022, the court held a single hearing at which the court heard oral argument from the parties in both cases. The court directed the parties to file a final set of briefs, which the parties completed on May 18, 2022. (See 1/19/2022, 1/25/2022, 1/27/2022, Emails with Counsel in Delta and PacifiCorp). Delta and PacifiCorp responded separately from each other, but neither Delta nor PacifiCorp has expressed substantive disagreement with the other's arguments.[5]

PacifiCorp's March 2, 2022 brief concludes as follows: "PacifiCorp joins Delta in its request that the court grant summary judgment finding that ORS 307.030(2) is unconstitutional * * *." (3/2/2022, PacifiCorp Br at 32.) Accordingly, the court treats PacifiCorp as having moved for partial summary judgment as to the second, constitutional claim in its October 25, 2021, First Amended Complaint, and the court treats the Department as having cross-moved for partial summary judgment as to that same claim of PacifiCorp. The court today issues a separate order, incorporating this order, on the cross-motions regarding PacifiCorp's constitutional claim.[6]

For convenience, the remainder of this order uses the term "Taxpayer" to mean both Delta and PacifiCorp.



Are Oregon's Uniformity Clauses or the federal Equal Protection Clause violated by Oregon's taxation of intangible personal property only when used or held for future use in a business listed in ORS 308.515(1)? [7]


A. Oregon Uniformity Clauses and Federal Equal Protection Clause

As is true for nearly every state, the Constitution of Oregon imposes requirements of uniformity of taxation. See Jerome R. Hellerstein &Walter Hellerstein, 1 State Taxation ¶ INTRO PT II (3d ed 2023) ("[A]lmost every state constitution contains an explicit constitutional requirement of uniformity and equality in taxation * * *."). Oregon has two Uniformity Clauses. Article I, section 32, provides in relevant part: "[A]ll taxation shall be uniform on the same class of subjects within the territorial limits of the authority levying the tax." Article IX, section 1, provides in relevant part: "The Legislative Assembly shall * * * provide by law uniform rules of assessment and taxation. All taxes shall be levied and collected under general laws operating uniformly throughout the State." The Oregon Supreme Court has declared that "[t]he two sections are to be read together." State ex rel. v. Malheur County Court, 185 Or. 392, 410-11, 203 P.2d 305 (1949).

The current text of both Uniformity Clauses reflects amendments in 1917, which the Oregon Supreme Court has discussed. See Mathias v. Dept. of Rev., 312 Or. 50, 57-60, 817 P.2d 272 (1991),


aff'g 11 OTR 347 (1990); Jarvill v. City of Eugene, 289 Or. 157, 170-84, 613 P.2d 1 (1980). By requiring that taxation be "uniform on the same class of subjects," rather than "equal and uniform," the framers of the amendments "confirmed that property could be broken up into rational classes and treated differently class by class." Mathias, 312 Or at 58.

The requirement of a "rational class" under the Uniformity Clauses overlaps substantially with the requirement under the federal Equal Protection Clause that a legislative classification have a "'rational relation to some legitimate end.'" See U.S. Const, Am XIV, § 1 ("[N]or [shall any State] deny to any person within its jurisdiction the equal protection of the laws."); Crocker and Crocker, 332 Or. 42, 55, 22 P.3d 759 (2001) (quoting Romer v. Evans, 517 U.S. 620, 631, 116 S.Ct. 1620, 134 L.Ed.2d 855 (1996)); Jarvill, 289 Or at 184 (denying claim under Article I, section 32 and Equal Protection Clause "[f]or the same reasons"). As the Oregon Supreme Court most recently summarized, a claim that a tax

"violated the provisions of Article I, sections 20 and 32, of the Oregon Constitution and the Equal Protection Clause of the United States Constitution, require[s the taxpayer] to establish that the [legislative body] had no rational basis for creating the class of persons subject to the charges. See Crocker and Crocker, 332 Or. 42, 55, 22 P.3d 759 (2001) (stating standard with respect to equal privileges and immunities and equal protection analysis); Jarvill v.City of Eugene, 289 Or. 157, 613 P.2d 1 (1980) (stating standard). A classification is rationally based 'if it rests upon genuine differences' and those differences bear a 'reasonable relationship to the legislative purpose.' Jarvill, 289 Or at 180, 613 P.2d 1; Huckaba v. Johnson, 281 Or. 23, 26, 573 P.2d 305 (1978)."

Knapp, 342 Or at 276 (upholding city water and sewer bill surcharges solely on developed property, because city "'could have correctly concluded that safety needs increase when property is developed'") (quoting 18 OTR 22, 38 (2004) (Knapp I)). The task of this court, therefore, is to determine whether the legislature based the classification in this case on genuine differences that bear a reasonable relationship to a legislative purpose. Under this standard, the legislature need not have articulated its legislative purpose; it suffices if the court can conceive of "'some


legitimate end.'" Crocker, 332 Or at 55 (quoting Romer, 517 U.S. at 631). The court will discuss this standard in greater detail below, before evaluating the parties' arguments regarding classification.

Although the Oregon Uniformity Clauses and the federal Equal Protection Clause have been held to share the same standard, Oregon's "first-things-first" doctrine requires the court to analyze Taxpayer's Uniformity Clause claims first. See Hughes v. State of Oregon, 314 Or. 1, 12, 838 P.2d 1018 (1992). Doing so also safeguards against the possibility that developments in the federal standard, or its application, might confuse the court's interpretation of the Oregon Clauses. See Tharalson v. State Dept. of Rev., 281 Or. 9, 15 n 10, 573 P.2d 298 (1978) ("Even when the verbal 'tests' are similar, however, a state's application of its own constitution is independent of federal review and of changing applications of the fourteenth amendment, as have occurred since Standard Lumber Co. v. Pierce, [112 Or. 314, 228 P 812 (1924)].").

Accordingly, this court will first apply precedent under Oregon's Uniformity Clauses, before turning to the larger body of Equal Protection case law for any different or supplemental points.

B. Central Assessment and Treatment of Intangible Property

The Oregon Supreme Court has charted the origins and nature of the "central assessment" of property used in certain...

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