Klamath Irrigation Dist. v. Employment Division

Citation534 P.2d 190,21 Or.App. 61,75 Adv.Sh. 1389
PartiesKLAMATH IRRIGATION DISTRICT, Petitioner, v. EMPLOYMENT DIVISION, Ross Morgan, Administrator, Respondent.
Decision Date24 June 1975
CourtOregon Court of Appeals

William Ganong, Jr., Klamath Falls, argued the cause for petitioner. With him on the brief were Ganong & Sisemore, Klamath Falls.

John W. Burgess, Asst. Atty. Gen., Salem, argued the cause for respondent. With him on the brief were Lee Johnson, Atty. Gen., and W. Michael Gillette, Sol. Gen., Salem.

Henigson, Stunz & Fonda and Stephen B. Fonda, Nyssa, filed a brief amicus curiae.

Panner, Johnson, Marceau & Karnopp, C. Montee Kennedy, Lyman C. Johnson and Owen M. Panner, Bend, filed a brief amicus curiae on behalf of North Unit Irrigation District and Tumalo Irrigation District.

Before LANGTRY, P.J., and FOLEY and LEE, JJ.

LANGTRY, Presiding Judge.

This appeal, pursuant to ORS 657.684, of a referee's findings, conclusions and order presents the question whether an irrigation district existing under Oregon law and delivering over 96 percent of the water it handles for farming purposes is exempt from paying unemployment compensation taxes for the benefit of its employes. ORS 657.020(1) of the unemployment compensation Act was amended in 1973 to provide that political subdivisions are subject to paying the tax. Irrigation districts are admittedly political subdivisions. However, the same legislative session re-enacted without change ORS 657.045(1) and (2) (c) which provide:

'(1) 'Employment' does not include agricultural labor.

'(2) 'Agricultural labor' includes all services performed:

'* * *

'(c) * * * (I)n connection with the operation or maintenance of ditches, canals, reservoirs or waterways not owned or operated for profit used exclusively for supplying and storing water for farming purposes.'

This definition, with the exception of the clause 'not owned or operated for profit,' came to the Oregon unemployment compensation Act in 1941 amendments via the Federal Social Security Act's (See infra p. 193) definition of agricultural labor. Oregon Laws 1941, chs. 258 and 443.

Summarizing, the record before the referee demonstrated that the district served was originally in farms. It contains 39,930.57 acres with rights running with the land to water it handles. On account of urbanization and land subdivision some 1,361 acres of this land is now divided between about 1,100 owners who use slightly less than 4 percent of its water-right water, generally for esthetic and gardening purposes. The district also delivers water to some 15,000 acres under arrangements with the United States Government, apparently all of which is for farming purposes. There appears to be no dispute as to these summarized facts.

The referee held, inter alia:

'* * * (I)n subsection (c) (of ORS 657.045(2)) 'used exclusively' means then no matter how infinitesimal or de minimis the amount of water diverted to gardens or lawns may be, (district's) delivery of such to the turnout points negates the intent of the statutory exclusion, as well as removing the services of (district's) employes as exempt 'agricultural labor.' Admittedly this is a strict interpretation of the words 'used exclusively for . . . farming purposes', but as prefaced herein all exclusions from the Employment Division Law are to be strictly construed against the employer and in favor of coverage for the employe * * *.'

(1). It is initially contended by the Employment Division that the enactment of the provision in ORS 657.020(1) that 'political subdivisions' shall pay the tax takes precedence over the exemption for agricultural labor re-enacted in ORS 657.045(1) and (2)(c). If this contention is adopted, we would entirely ignore the agricultural labor exemption provision. This we cannot do. The two provisions should be harmonized and given effect if possible, particularly in view of the fact they were both enacted at the same legislative session. State v. Pearson, 250 Or. 54, 58, 440 P.2d 229 (1968); Daly v. Horsefly Irrigation District, 143 Or. 441, 446, 21 P.2d 787 (1933).

(2). The central question, then, is whether the words 'used exclusively for supplying and storing water for farming purposes' are to be applied strictly, exactly and literally in determining whether the exemption applies. That is what was done in the quotation from the referee's decision, supra. The referee relied on Standard Oil Co. of Louisiana v. Fontenot, 198 La. 644, 4 So.2d 634 (1941), and Just-A-Mere Farm v. Peet, 247 Or. 413, 430 P.2d 987 (1967). For reasons that are explained infra, we think the rules of these cases were misapplied.

The first case involved a license tax and in it the Louisiana court said exemption provisions in statutes imposing taxes would be strictly construed. As a general rule, that may be correct, but the rule has its own exceptions. For example, People's Educational Camp Society, Inc. v. C.I.R., 331 F.2d 923 (2d Cir.), cert. denied 379 U.S. 839, 85 S.Ct. 75, 13 L.Ed.2d 45 (1964), was a case involving a statutory exemption from income taxes imposed under the Internal Revenue Code. It gave the exemption to organizations 'operated exclusively for the promotion of social welfare * * *.' Construing this provision, the court said:

'* * * The word 'exclusively' as used * * * has not been given a strict interpretation * * * but rather has been interpreted to mean 'primarily.' * * *' 331 F.2d at 931.

See also Sugarman & Pomeroy, Business Income of Exempt Organizations, 46 Va.L.Rev. 424, 425 (1960), in which the authors said:

'The term 'exclusively' is not applied literally as meaning 100 per cent, but rather has been applied as meaning 'primarily.' * * *' (Footnote omitted.)

In real property taxation a similar construction is often applied as was done in Plattsburgh Col. B. & E. Ass'n v. Assessors, 43 Misc.2d 741, 252 N.Y.S.2d 229 (Sup.Ct. Clinton County 1964). The clause there exempted real property "* * * used exclusively for carrying out * * *" "charitable * * * educational * * * purposes * * *." The court held the word 'exclusively' thus used means 'the primary use of the realty must be in furtherance of the permitted purposes and an occasional minor deviation does not result in taxability (citing authorities) * * *.' 252 N.Y.S.2d at 237. See, for the same rule applied to real property taxation in Oregon, Mult. School of Bible v. Mult. Co., 218 Or. 19, 343 P.2d 893 (1959).

However, the more pertinent inquiry at bar is the construction to be placed upon the word 'exclusively' in exemption clauses set in the context of unemployment compensation tax statutes. Social security and unemployment compensation taxes are imposed to accomplish a socially beneficial purpose, and will be construed to accomplish that legislative purpose when exemption provisions are ambiguous. Puget Sound B. & D. Co. v. S.U.C.C., 168 Or. 614, 621, 126 P.2d 37 (1942); Holmes v. Morgan, 10 Or.App. 242, 498 P.2d 830, Sup.Ct. review denied (1972). Both were developed in the states in substantial part from the wording of the Federal Social Security Act. The taxes imposed in both are used for the specific purpose, whereas real property and income taxes universally are imposed to raise general government revenue. Thus, different rules of construction may be applied to them, depending upon the purpose to be served in each statute. 1

In a part of Just-A-Mere Farm v. Peet, supra, to which the referee did not refer in his decision, the Oregon Supreme Court said:

'We begin our inquiry into the meaning of the term 'agricultural labor' and 'farm' as used in ORS 657.045 fully cognizant of the fact that The meaning of words must be derived from the purpose for which they are used. The legislative history of the Oregon Department of Employment Law and the related federal unemployment legislation throws little light upon the purpose for excluding agricultural labor from the coverage of the respective acts * * *.

'* * *

'* * * (T)he meaning of the term 'agricultural labor' is by no means clear * * *.' (Emphasis supplied.) 247 Or. at 416--18, 430 P.2d at 988.

The court then went on to hold that forest or tree farming does not involve agricultural labor within the purpose of the Act. The court did not specifically consider the meaning of the clause in question at bar, but it did say:

'* * * The specific activities listed in the statute to help further define 'agricultural labor' or 'farm' with the possible exception of the activities specified in subsection (2)(d) (which have to do with food processing and packing) all fit within the concept of farming as it is understood in common parlance * * *.' 247 Or. at 419, 430 P.2d at 990.

This language appears to say that the exception for irrigation employes describes them as agricultural laborers. 2

Our research and the briefs that have been presented do not reveal any case where the specific clause under consideration has been construed by any court. However, in Big Wood C. Co. v. Unemployment C. Div., 61 Idaho 247, 100 P.2d 49 (1940), the Idaho Supreme Court held that employes of an irrigation district were exempt 'agricultural labor.' At that time the federal act and state acts patterned thereon, including Idaho's, (which was almost universally the practice) simply exempted 'agricultural labor' without defining the term. But the Idaho court pointed out that the Federal Social Security Act, from which the exemption term 'agricultural labor' had been taken, was, in 1939, amended by the United States Congress to define 'agricultural labor' as

'* * * labor 'in connection with the operation or maintenance of ditches, canals, reservoirs, or waterways used exclusively for supplying and storing water for farming purposes.' (Sec. 209(15)(l)(3), p. 1467.) * * *' 61 Idaho at 253, 100 P.2d at 51.

See also Roberts v. Unemployment Comp. Com., 215 Or. 100, 103, 332 P.2d 1067 (1958)....

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2 cases
  • Naumes of Oregon, Inc. v. Employment Division
    • United States
    • Oregon Court of Appeals
    • October 13, 1975
    ...decide it is desirable to extend coverage to such employes, it can easily accomplish that objective. See Klamath Irr. Dist. v. Employ. Div., Or.App., 75 Adv.Sh. 1389, 534 P.2d 190, Sup.Ct. Review denied Reversed. ...
  • Talent Irrigation Dist. v. Employment Division
    • United States
    • Oregon Court of Appeals
    • June 24, 1975
    ...District. Before LANGTRY, P.J., and FOLEY and LEE, JJ. LANGTRY, Presiding Judge. This is a companion appeal to Klamath Irr. Dist. v. Employ. Div., Or.App., 534 P.2d 190 (1975), decided pursuant to the same law. With the exception of the exact percentage of its total water that the respectiv......

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