Gray v. Department of Revenue

• Decision Date: 20 December 2018
• Docket Number: TC 5324
• Citation: Gray v. Department of Revenue, TC 5324 (Or. Tax Dec 20, 2018)
• Parties: DIANE RENEE GRAY, Plaintiff, v. DEPARTMENT OF REVENUE, State of Oregon, Defendant. Taxpayer's Position (Improvements Only) Department's Position (Land + Improvements)
• Court: Oregon Tax Court

DIANE RENEE GRAY, Plaintiff, v. DEPARTMENT OF REVENUE, State of Oregon, Defendant.

No. TC 5324

Tax Court of Oregon, Regular Division, Property Tax

December 20, 2018

ORDER GRANTING DISMISSAL AS TO 2014-15 AND 2015-16 TAX YEARS

ROBERT T. MANICKE, JUDGE

I. INTRODUCTION

This matter is before the court on the remainder of Defendant Department of Revenue's (the "Department's") motion to dismiss Plaintiff Diane Gray's ("Taxpayer's") complaint as to tax years 2014-15 and 2015-16 for lack of subject matter jurisdiction and failure to state ultimate facts sufficient to constitute a claim.^[1] The court previously denied the Department's motion to strike the complaint for failure to properly sign it. Gray v. Dept. of Rev., TC 5324 (May 30, 2018).

II. FACTS

The record that the court considers on a motion to dismiss depends on the basis asserted for dismissal. See Tax Court Rule (TCR) 21 A. On a motion to dismiss for failure to state ultimate facts sufficient to constitute a claim, the court's review is limited to the allegations, accepted as true, made in the complaint. Work v. Dept. of Rev., 22 OTR 396, 397-98, aff'd 363 Or 745 (2018) (quoting Douglas County v. Smith, 18 OTR 450, 453 (2006)). On a motion to dismiss for lack of subject matter jurisdiction, the court also may consider "matters outside the pleading, including affidavits, declarations and other evidence." Work, 22 OTR at 398. Taxpayer's complaint alleges the following:

"[Taxpayer] is owner of certain property in Linn County, Oregon, identified by the assessor's office as Account number 219358." (Ptf's Compl at 1.) "[Taxpayer] appealed an act, omission, order, or determination of a county board of property tax appeals, a county assessor, other county official, or the Department of Revenue for such property to the Magistrate Division of the Oregon Tax Court." (Id.) "The Magistrate's decision is in error for the reasons stated below." (Id.)

The amounts discussed in the remaining recitation of facts are illustrated in tables in the Analysis section below. For tax year 2014-15, Taxpayer challenges the real market value ("RMV")^[2] of "all structures" on her property. (Ptf's Compl at 2.) Those structures include a "residential two-story home" and a "pole barn." (Id. at 1-2.) Taxpayer alleges the RMV for all structures is $78, 860. (Id. at 2.) The RMV for all structures as listed on the tax roll is $147, 630, a difference of $68, 770 or approximately 47 percent.^[3] (Id.) Taxpayer claims relief for tax year 2014-15 under ORS 305.288(1)^[4] "based on the evidence the tax roll RMV was overstated by 20%." (Id.) Taxpayer also alleges that the land RMV for her property is $104, 270, but her complaint does not inform the court of the land RMV on the tax roll, or whether she requests a value for the land that is different from the roll value. (Id.) Accordingly, without looking beyond the complaint, the court cannot determine the percentage difference between the RMV on the tax roll for the entire property and the RMV Taxpayer requests for the entire property.^[5]

For tax year 2015-16, Taxpayer challenges the RMV of both the land and improvements on her property. (Ptf's Compl at 3.) As to improvements, Taxpayer alleges the tax roll RMV of $163, 340 should be reduced to $103, 935, a difference of $59, 405 or approximately 36 percent. (Id.) As to land, Taxpayer alleges the RMV should be $105, 626. Because Taxpayer alleges that the RMV of the entire property on the tax roll is $226, 720, the court can deduce that Taxpayer alleges that the land RMV on the tax roll is $63, 380.^[6] (Id.) Accordingly, Taxpayer seeks an increase in the RMV of the land. Just as with tax year 2014-15, Taxpayer claims relief for tax year 2015-16 under ORS 305.288(1) "based on the evidence the tax roll RMV was overstated by 20%." (Id.) Although the complaint requests a change in both land and improvement values, the court interprets Taxpayer's complaint as seeking relief based on the requested change in value of the improvements alone. (See id.)^[7]

III. ISSUE

Under ORS 305.288(1)(b), must the court apply the "20-Percent Correction Test" (defined below) using the total real market value of all associated real property (in this case, land plus improvements), or using the separate value of each component that the party seeks to appeal (in this case, improvements alone)?

IV. ANALYSIS

Relief under ORS 305.288(1) is a remedy for overvaluation of property used primarily as a dwelling. The relief is "in addition" to other remedies (ORS 305.288(6)), but Taxpayer's complaint requests relief only under ORS 305.288(1), and there is no basis to conclude that Taxpayer has pursued any other route to relief as to tax years 2014-15 and 2015-16. See Work, 22 OTR at 404-05 (summarizing the four potential sources of relief). The statute provides in relevant part:

"(1) The tax court shall order a change or correction applicable to a separate assessment of property to the assessment and tax roll for the current tax year or for either of the two tax years immediately preceding the current tax year, or for any or all of those tax years, if all of the following conditions exist:

"(a) For the tax year to which the change or correction is applicable, the property was or is used primarily as a dwelling (or is vacant) and was and is a single-family dwelling, a multifamily dwelling of not more than four units, a condominium unit, a manufactured structure or a floating home.

"(b) The change or correction requested is a change in value for the property for the tax year and it is asserted in the request and determined by the tax court that the difference between the real market value of the property for the tax year and the real market value on the assessment and tax roll for the tax year is equal to or greater than 20 percent."

ORS 305.288(1) (emphasis added). The court must correct "a separate assessment of property" for the current year, either of the prior two years, or any or all of those years, if two conditions are met. First, "the property" must meet the dwelling requirements. ORS 305.288(1)(a). Second, the change in value must be equal to or greater than 20 percent of "the property's" RMV as shown on the assessment roll (the "20-Percent Correction Test"). ORS 305.288(1)(b).

This case requires the court to interpret the phrase "the property" as used in the 20-Percent Correction Test. Taxpayer argues that "the property" can mean any one of three things whose value is listed on the assessment roll, (1) land only: the "land, excluding all buildings, structures, improvement and timber thereon," (2) improvements only: the aggregate of all "buildings, structures and improvements thereon," or (3) land + improvements: the "parcel of real property assessed." See ORS 308.215(1)(a)(E), (F), (I). Taxpayer cites a 2001 decision from the Magistrate Division that reasoned that, because the legislature has required the assessor to determine these three values and record them on the roll, and because case law allows a party to appeal the value of land or improvements separately, the 20-Percent Correction Test applies to land or improvements separately. See Ferschweiler v. Clackamas County Assessor, 16 OTR-MD 429, 434 (2001).

The Department argues that Taxpayer is focusing on the wrong statute. Instead of considering the statute that tells the assessor what values to list on the tax roll, the court should base its decision on the statute that allows Taxpayer's appeal only if the 20-Percent Correction Test is satisfied: ORS 305.288(1). That statute requires "the property" to be primarily used as a "dwelling." According to the Department, the only way to compare the value of "the property" as a dwelling with the value of "the property" on the assessment roll is to limit the meaning of "the property" to the land and improvements together.^[8]

The parties' calculations for each tax year are expressed in the tables below as a ratio or percentage, with the numerator representing the requested change in RMV of the property, and the denominator representing the RMV of the property as shown on the assessment roll. To resolve the Department's motion, the court must decide whether Taxpayer has correctly limited her calculation of the value of "the property" to the value of the improvements, which for each of tax years 2014-15 and 2015-16 would result in a percentage change exceeding the threshold prescribed by the 20-Percent Correction Test.

Tax Year 2014-15

Taxpayer's Position (Improvements
                              Only)
                Department's Position (Land +
                              Improvements)
                              RMV Change Requested
                            
                              $68, 770[9]
                              $23, 900[10]
                              RMV on Tax Roll
                            
                              $147, 630[11]
                              $207, 030[12]
                              Percentage Change (Must exceed 20% under 20-Percent
                              Correction Test)
                            
                              46.58%
                            
                              11.54%
                            
                

Tax Year 2015-16

              Taxpayer's Position (ImprovementsOnly)
                            
                              Department's Position (Land + Improvements)
                            
                              RMV Change Requested
                            
                              $59, 405[13]
                              $17, 159[14]
                              RMV on Tax Roll
                            
                              $163, 340[15]
                              $226, 720[16]
                              Percentage Change (Must exceed 20% under 20-Percent
                              Correction Test)
                            
                              36.37%
                            
                              7.57%
                            
                

The Department asks the court to dismiss Taxpayer's claims as to tax years 2014-15 and 2015-16, claiming that the requirements of ORS 305.288(1)(b) were not met for those years. The Department gives two independent legal theories citing this court's recent decision in Work, which has recently been...