Gale v. Department of Revenue, State of Or.

• Jurisdiction: Oregon
• Parties: Wilna GALE, Appellant, v. DEPARTMENT OF REVENUE, STATE OF OREGON, Respondent. TC 1559; SC 28078.
• Citation: 293 Or. 221,646 P.2d 27
• Court: Oregon Supreme Court
• Decision Date: 09 June 1982

Page 27

646 P.2d 27

293 Or. 221

Wilna GALE, Appellant, v.DEPARTMENT OF REVENUE, STATE OF OREGON, Respondent.

TC 1559; SC 28078.

Supreme Court of Oregon, In Banc.

Argued and Submitted April 6, 1982.

Decided June 9, 1982.

Thomas D. Kershaw, Jr., Klamath Falls, argued the cause and filed briefs for appellant.

Ira W. Jones, Asst. Atty. Gen., Salem, argued the cause for respondent.With him on the brief was Dave Frohnmayer, Atty. Gen., Salem.

PETERSON, Justice.

Under ORS 310.630 et seq., medium and low income homeowners and renters are entitled to a refund of a portion of the real property taxes paid upon the dwelling they occupy.ORS 310.640(3) provides that the claimant's status as an owner or renter "shall be determined as of December 31 of the calendar year for which the claim is filed."The plaintiff in this case sold her home in October, 1977, and she claims entitlement to a pro rata portion of the owner refund to which she would have been entitled had she been an owner on December 31, 1977.She claims that the legislation impermissibly discriminates between homeowners who owned their homestead on December 31 of the tax year and homeowners who did not, in violation of the Equal Protection Clause of the Constitution of the United States.¹She makes no claim under any provision of the Oregon Constitution.

The plaintiff herein owned and resided in a house in Philomath, Oregon.She sold the house in October of 1977, and moved out.Even though she did not own the house on December 31, 1977, she filed for and received an owner's refund under ORS 310.640.The Department of Revenue subsequently issued an order and ruling disallowing the refund on the grounds that she did not own the house on December 31 of the year for which the claim was filed.

Following an administrative appeal, the Department seized the plaintiff's 1981 tax refund and threatened further collection action.Plaintiff filed a complaint in the Tax Court seeking declaratory and injunctive relief.

The Department of Revenue moved to dismiss the complaint for failure to state facts sufficient to constitute a claim, ORCP 21 A(8).The Tax Court granted the motion.Taxpayer appealed to this court.ORS 305.445.We affirm.

The refund program creates two categories of eligible taxpayers, renters and homeowners.In order to qualify, taxpayer had to be either a homeowner ² or a renter "as of December 31 of the calendar year for which the claim is filed."ORS 310.640(3)(1977 Replacement Part).Taxpayer makes no claim that she was a renter as of December 31, 1977, and her complaint shows that she was not a homeowner as of December 31, 1977.Her claim is that the statutes violate the Equal Protection Clause of the Fourteenth Amendment.She argues:

" * * * (I)t seems apparent that the purpose of the tax relief statutes is to refund to people who pay taxes a certain amount of those taxes, the amount depending on need.There is nothing improper about that.Is ORS 310.640(3), then, reasonably calculated to help achieve that end?It is not.In the case of people like this plaintiff, it does the opposite.Such people may pay most or all of the taxes and still not be entitled to any relief.Others may qualify for the full amount of the refund while paying little or none of the tax.Legislative acts having no tendency to achieve the legislative purpose have been invalidated when they act to discriminate against one group of people.* * * Here the group disadvantaged consists of persons who pay property taxes but do not qualify for tax relief solely because of the requirement of ORS 310.640(3).It is a well established principle that when government gives a benefit, equal protection requires it to be given without unreasonable discrimination."

The plaintiff is not critical of the differentiation of homeowners and renters.She criticizes the distinction between (1) homeowners who paid taxes upon their homestead and were an owner of the homestead as of December 31 of the calendar year for which the claim is filed, and (2) homeowners who paid taxes upon their homestead but were no longer an owner of the homestead as of December 31 of the calendar year for which the claim is filed.She asserts that an impermissible discrimination exists because taxpayers who own their homestead on December 31 are eligible for tax relief while a taxpayer who sold the home on December 29 or 30 is not.We find no impermissible classification.

THE HOMEOWNER REFUND STATUTES DO NOT VIOLATE THE FOURTEENTH AMENDMENT

Our analysis is directed to the plaintiff's claim that the failure to allow the plaintiff a pro rata refund impermissibly discriminates against her in violation of the Equal Protection Clause of the Fourteenth Amendment.³There can be no question that the legislation distinguishes between owners who own their homes on December 31 of the calendar year and those who do not.But the fact that the law provides for different treatment for different people does not compel the conclusion that equal protection does not exist.The equal protection guarantee is that persons who are similarly situated obtain equal treatment.Here, the law classifies persons for different benefits, as determined by their status on December 31 of the calendar year.The inquiry is: Does the classification between persons who owned their homestead on December 31 and those who did not bear a rational relationship to whatever end or ends the statute may seek to achieve?Vance v. Bradley, 440 U.S. 93, 97, 99 S.Ct. 939, 942, 59 L.Ed.2d 171(1979);Dandridge v. Williams, 397 U.S. 471, 485-486, 90 S.Ct. 1153, 1162-63, 25 L.Ed.2d 491(1970).

The Supreme Court's "rational basis" test requires us, first, to examine the objectives of the statutes and, second, to analyze whether the classification rationally furthers achievement of those objectives.Although it is possible to infer the basis for the statutory requirement that the status of the claimant"be determined as of December 31 of the calendar year for which the claim is filed,"we need not speculate.The legislative history makes it clear why the last sentence of ORS 310.640(3) was added to the statute in 1977.

The homeowner's relief law was first enacted in 1971.Its goal was to reduce the homeowner's real property tax burden.The plan was simple: All homeowners were eligible for some tax relief, but the relief was graduated.The less income, the more potential tax relief.The maximum refund was $400; the minimum, to persons with household income exceeding $8,000, was $100.ORS 310.640(4) then provided (Or.Laws 1971, ch. 747, § 3):

"The property tax relief granted under this section applies to property taxes levied in the calendar year immediately preceding the year in which the claim is filed."

In 1973, the statute was amended.Or.Laws 1973, ch. 752.Provision was made for refunds to renters as well as homeowners, dependent upon the income of the renter.Maximum benefits to homeowners and renters, respectively, were $490 and $245.Persons with incomes of $20,000 or over were not eligible.ORS 310.640(4) was renumbered ORS 310.640(3) and modified to read as follows (Or.Laws 1973, ch. 752, § 2):

"The property tax refund granted under this section applies to property taxes levied or rent constituting property taxes paid in the calendar year for which the claim is filed."

In November, 1973, the Department of Revenue promulgated detailed rules implementing the tax refund program.OAR 150-310.640 provided, in part:

"A taxpayer's status on the last day of the calendar year for which the claim is filed shall determine his status as a homeowner or renter.A taxpayer may file only one claim.If the claim is for a home owned on December 31, the refund is computed on the tax levied on that home for the current tax year.If the claim is for a homestead rented on December 31, the refund is computed on the total net rent paid during the calendar year. * * * "

The 1975legislature made minor revisions to the program.Or.Laws 1975, chs. 616 and 734.In 1977, substantial changes were made.Or.Laws 1977, chapters 90 and 841.Provisions were made for rental assistance, in addition to the existing provisions for rental refund.The amount of maximum and minimum owner and renter refunds was raised, and the income eligibility requirements were lowered.ORS 310.640(3) was amended to include, in its last sentence, the gist of what had previously been the first sentence of OAR 150-310.640.As amended in 1977, ORS 310.640(3) read (Or.Laws 1977, ch. 841, § 3):

"The property tax refund granted under this section applies to property taxes levied or rent constituting property taxes paid in the calendar year for which the claim is filed.Status as an owner or renter shall be determined as of December 31 of the calendar year for which the claim is filed."

From 1973 on, provision was also made for auditing and adjusting claims.ORS 310.657(2)(1973 Replacement Part) provided:

"The department shall audit or examine the claim and shall adjust the claim upward or shall allow or deny the claim in whole or in part. * * * "

ORS 310.657 was amended in 1977 to make provision for consideration of the new rental assistance program.As amended, ORS 310.657(2) provided:

"The department shall audit or examine the claim and:

"(a) If it appears that the taxpayer is eligible for rental assistance, shall consider the claim as a claim for rental assistance and if the renter refund for which the taxpayer is eligible is not greater in amount than the rental assistance, shall adjust the claim for rental assistance upward or shall allow or deny the claim in whole or in part; and

"(b) If the taxpayer is eligible for owner refund, or is not eligible for rental assistance, or if the amount of rental assistance is less than the renter refund for which the taxpayer is eligible, shall consider the claim a claim for owner or renter tax refund and shall adjust the claim upward or shall allow...