Johnson v. Department of Revenue

• Decision Date: 19 January 1982
• Docket Number: No. 1334,1334
• Parties: , 2 Ed. Law Rep. 282 Arthur JOHNSON, Clatsop County Assessor, Plaintiff-Respondent, v. DEPARTMENT OF REVENUE, Defendant, John M. Foster, Intervenor-Appellant. ; SC 27708. Supreme Court of Oregon
• Court: Oregon Supreme Court

Page 128

639 P.2d 128

292 Or. 373, 2 Ed. Law Rep. 282

Arthur JOHNSON, Clatsop County Assessor, Plaintiff-Respondent, v. DEPARTMENT OF REVENUE, Defendant, John M. Foster, Intervenor-Appellant.

Tax Court No. 1334; SC 27708.

Supreme Court of Oregon.

Argued and Submitted Nov. 2, 1981.

Decided Jan. 19, 1982.

Jeanyse R. Snow, Astoria, argued the cause and filed the briefs for intervenor-appellant. With her on the briefs was Robert C. McDonald, Astoria.

William T. Park, Warrenton, argued the cause and filed the brief for plaintiff-respondent.

Mary J. Deits, Asst. Atty. Gen., Salem, filed an amicus curiae brief for the Division of State Lands. With her on the brief were Dave Frohnmayer, Atty. Gen. and Ted E. Barbera, Asst. Atty. Gen., Salem.

Before DENECKE, C. J., and TONGUE, LENT, LINDE, TANZER and CAMPBELL, JJ. CAMPBELL, Judge.

This is an appeal from a Tax Court decision finding certain submerged ¹ and submersible ² lands owned by the State of Oregon and leased to intervenor-appellant John M. Foster subject to ad valorem property taxation by Clatsop County. Intervenor-appellant John M. Foster attacks plaintiff Clatsop County assessor's assessment on the ground that it is contrary to the legislative intent in enacting ORS 307.110, providing for taxation of state-owned lands leased to taxable individuals, and on the ground that it violates the Oregon Constitution Article VIII, section 5. The Clatsop County Board of Equalization affirmed the assessor's action. ³ The Department of Revenue allowed intervenor's petition for review and issued an order requiring removal of the subject lands from the tax rolls. The Tax Court set aside the Department of Revenue's order. ⁴ Our review of the Tax Court's decision is pursuant to ORS 305.445.

The subject property is part of a parcel totalling approximately 78,408 square feet located in Astoria, Clatsop County, Oregon. The parcel is made up of approximately 5,490 square feet of dry land and 72,918 square feet of submerged or submersible land. Intervenor is the owner in fee simple of the dry land. The submerged or submersible land is owned by the State of Oregon. The Division of State Lands, as agent for the State Land Board, leased 36,155 square feet of the state's submerged or submersible land to intervenor for a 20 year term beginning August 1, 1976. Intervenor is obligated under the lease to pay any taxes due on the land. The county assessor assessed and taxed the entire parcel in intervenor's name for the year 1977-78.

The statute at issue in this case is ORS 307.110, which provides:

"(1) Except as provided in ORS 307.120, all real and personal property of this state or any institution or department thereof or of any county or city, town or other municipal corporation or political subdivision of this state, held under a lease or other interest or estate less than a fee simple, by any person whose real property, if any, is taxable, except employes of the state, municipality or political subdivision as an incident to such employment, shall be subject to assessment and taxation for the true cash value thereof uniformly with real property of nonexempt ownerships.

(2) Each leased or rented premises not exempt under ORS 307.120 and subject to assessment and taxation under this section which is located on property used as an airport and owned by and serving a municipality or port shall be separately assessed and taxed.

(3) Nothing contained in this section shall be construed as subjecting to assessment and taxation any publicly owned property described in subsection (1) of this section which is:

(a) Leased for student housing by a school or college to students attending such a school or college.

(b) Leased to or rented by persons, other than sublessees or subrenters, for agricultural or grazing purposes and for other than a cash rental or a percentage of the crop.

(4) The provisions of law for liens and the payment and collection of taxes levied against real property of nonexempt ownerships shall apply to all real property subject to the provisions of this section.

Intervenor challenges the application of ORS 307.110 to his lease of state-owned submerged or submersible lands on two grounds. First, intervenor argues that principles of statutory construction must be applied to ORS 307.110 to effectuate the policy underlying the statutory scheme, namely, maximization of the common school fund. Second, intervenor challenges the validity of ORS 307.110 under the Oregon Constitution Article VIII, section 5, requiring that common school funds be managed with "the object of obtaining the greatest benefit for the people of Oregon."

The general rule of ORS chapter 307 is that all real and tangible personal property in Oregon is subject to assessment and taxation in equal and ratable proportions. ORS 307.030. This rule is subject to exceptions where otherwise provided by law. Other provisions exempt property of the United States, mining claims, property of the state, counties and other municipal corporations, property of nonprofit corporations held for certain public purposes, property owned by municipalities, dock commissions or ports, property of forest protection agencies, and certain other property when used for specified purposes. See ORS 307.040-.090; 307.115-.705. If property is leased by an exempt institution, organization or public body to another exempt institution, organization or public body, the latter is also exempt. ORS 307.166.

Several exceptions are provided to these exemptions, among them ORS 307.110, providing that public property leased to a taxable private owner is subject to tax. Other exceptions are provided in ORS 307.095, regarding state-owned property leased to private individuals for parking, and ORS 307.100, regarding public property sold to private individuals under contract.

The policy underlying exemptions from taxation is made clear by a close reading of these sections. When property is used for a public purpose, it is exempt from taxation. Where, however, public property is put to some private use, whether by lease or sale, the policy underlying exemption from taxation no longer applies. Because the legislative intent is clear regarding taxation of state-owned, leased property, we do not see the need for invoking any rules of construction to shed light on the legislative intent. School District No. 1, Multnomah County v. Bingham, 204 Or. 601, 283 P.2d 670, 284 P.2d 779 (1955). The only rule of construction applicable to this case is the one which requires exemptions from taxation to be express. Allen v. Multnomah County, 179 Or. 548, 173 P.2d 475 (1946); State Land Board v. Campbell, 140 Or. 196, 13 P.2d 346 (1932).

There is no exemption provided in the Oregon statutes for intervenor's leased land. On the contrary, ORS 307.110 expressly subjects his leased land to taxation. Intervenor's land is therefore subject to taxation in accordance with the plenary power of the legislature in the area of taxation, except insofar as that power is limited by the Oregon Constitution or the United States Constitution. State ex rel. Overhulse v. Appling, 226 Or. 575, 585, 361 P.2d 86 (1961). The federal constitutional issue is not before us in this case.

Intervenor alleges that ORS 307.110 violates the Oregon Constitution Article VIII, section 5, which provides:

"Section 5. State Land Board; land management. (1) The Governor, Secretary of State and State Treasurer shall constitute a State Land Board for the disposition and management of lands described in section 2 of this Article, and other lands owned by this state that are placed under their jurisdiction by law. Their powers and duties shall be prescribed by law.

"(2) The board shall manage lands under its jurisdiction with the object of obtaining the greatest benefit for the people of this state, consistent with the conservation of this resource under sound techniques of land management.

We review the history of this section to aid in our interpretation of it.

Prior to the 1968 constitutional amendments, the sections of Article VIII pertinent to this discussion provided as follows:

"Section 2. Common School Fund. The proceeds of all the lands which have been, or hereafter may be, granted to this state, for education purposes (excepting the lands heretofore granted to and (aid) in the establishment of a university), all the moneys and clear proceeds of all property which may accrue to the state by escheat or forfeiture; all moneys which may be paid as exemption from military duty; the proceeds of all gifts, devises and bequests, made by any person to the state for common school purposes; the proceeds of all property granted to the state, when the purposes of such grant shall not be stated; all the proceeds of the five hundred thousand acres of land to which this state is entitled by the provisions of an act of congress, entitled "An act to appropriate the proceeds of the sales of the public lands and to grant pre-emption rights, approved September 4, 1841," and also the five per centum of the net proceeds of the sales of the public lands, to which this state shall become entitled on her admission into the Union (if congress shall consent to such appropriation of the two grants last mentioned) shall be set apart as a separate and irreducible fund, to be called the common school fund, the interest of which, together with all other revenues derived from the school land mentioned in this section, shall be exclusively applied to the support and maintenance of common schools in each school district, and the purchase of suitable libraries and apparatus therefor."

"Section 5. The Governor, Secretary of State, and State Treasurer shall constitute a Board of Commissioners for the sale of school, and university lands, and for the investment of the funds arising therefrom, and their powers, and duties, shall be such as may be prescribed by law. Provided that no part of the University funds, or of the interest...