River Vale LP v. Dep't of Revenue

• Decision Date: 10 March 2021
• Docket Number: TC 5390
• Parties: RIVER VALE LIMITED PARTNERSHIP, Plaintiff, v. DEPARTMENT OF REVENUE, State of Oregon, Defendant.
• Court: Oregon Tax Court

RIVER VALE LIMITED PARTNERSHIP, Plaintiff,
v.
DEPARTMENT OF REVENUE, State of Oregon, Defendant.

TC 5390

OREGON TAX COURT REGULAR DIVISION Property Tax

March 10, 2021

ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

I. INTRODUCTION

In this property tax case, Defendant Department of Revenue (the "Department") has moved for summary judgment, asking the court to uphold the assessment by the Deschutes County Assessor (the "Assessor") of additional tax and interest (the "Additional Assessment") imposed upon the withdrawal of Plaintiff's ("Taxpayer's") land from assessment under ORS 308A.300 to 308A.330 (the "Open Space Lands Statutes"). Taxpayer does not contest the withdrawal but resists the Department's motion, seeking to prove at trial that the Assessor incorrectly determined the amount of the Additional Assessment. Specifically, Taxpayer seeks to prove two values, the difference of which constitutes a cap (the "Cap") on the Additional

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Assessment under ORS 308A.318(2).¹ Taxpayer intends to prove that the Cap, correctly determined, reduces the amount of the Additional Assessment.

II. FACTS

The parties stipulate to the following facts. Taxpayer purchased a 36.06-acre parcel consisting of land² in Deschutes County (the "Property") on January 27, 2017, for $4,500,000. (Stip Facts at 2, ¶¶ 1, 3, 6, 7.) The Assessor had classified the Property as "open space land" ("Open Space Land") in 1984, under what is now ORS 308A.300(1), and the property was still so classified when Taxpayer bought it. (Stip Facts at 2, ¶ 5.) On October 31, 2017, Taxpayer's Land Development Manager sent an email to the Assessor's office stating in part: "We acquired taxlot 181113C001300 earlier this year and plan to improve the land to finished home lots beginning in a few weeks. We are trying to understand the tax breakdown as we believe there will be farmland deferral owed. Is there a way for us to get that exact amount and when that will be due?" The Assessor's office responded that day, stating that, as of that date, the potential additional tax liability amount plus interest was $442,097.70. (Stip Facts at 3, ¶¶ 10-13; Stip Ex 6.)

On February 27, 2018, the Assessor's office sent Taxpayer a letter stating in part: "In compliance with ORS 308A.718 and 308A.724, this is official notification that the special assessment of 36.06 acres of Open Space Specially Assessed land on the above real property account(s) have been disqualified by the Assessor for the following reason. -The land is no longer qualified because the use of the land has been applied to some use other than as open space land." The amount of "open space additional tax" stated in the February 27 letter was

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$495,887. (Stip Facts at 4, ¶¶ 18-19; Stip Ex 9.) Taxpayer inquired about the computation of the amount due, and the Assessor responded. (See Stip Facts at 4, ¶¶ 20-25; Stip Ex 10.) Taxpayer appealed to the Magistrate Division on May 18, 2018. (Stip Facts at 4, ¶ 26.) Taxpayer's appeal in this division of the court is limited to its claim that "the amount of additional taxes and interest quoted by the Assessor exceeds the limitations provided within ORS 308A.318(2)." (Ptf's Response at 2.) The court understands this to mean that Taxpayer challenges only the dollar amount of the Cap, not the amount of additional tax or interest that would be determined under ORS 308A.312(3) before application of the Cap pursuant to ORS 308A.315(5).

The parties stipulate that the Assessor recorded the following values for the Property on the roll during the annual assessment process. Taxpayer does not stipulate that these values are accurate or that they control for purposes of determining the Cap:

• Real market value determined under ORS 308.205 ("RMV") (tax year 2017-18): $1,803,000 (Stip Facts at 5, ¶ 30.)

• RMV (tax year 2018-19): $4,500,000 (Supp Stip Facts at 2, ¶ 34.)

• Maximum assessed value determined under ORS 308A.315(3) ("MAV")³ (tax year 2017-18): $55,215 (Stip Facts at 5, ¶ 31.)

Finally, the parties have stipulated that the Assessor determined and placed on the roll for tax year 2017-18 the amount of $36,060 "pursuant to ORS 308A.315(5)." (Stip Facts at 5, ¶ 32.) The parties refer to this value as the "taxable specially assessed value," a term that does not exist in Oregon property tax law. (Id.) Based on the reference to ORS 308A.315(5) and the parties' usage in these proceedings, the court understands the parties to agree that the Assessor

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determined for annual assessment purposes that the "open space value" of the Property, i.e., its RMV determined under ORS 308.205 but subject to the assumption that its highest and best use was its "current open space use" as required by ORS 308A.315(5)(a), was $36,060. The court understands the parties to agree further that the Assessor treated this same $36,060 value as the Property's "assessed value" for tax year 2017-18 under ORS 308A.315(2) because it was less than the MAV of $55,215. See ORS 308A.315(2) ("assessed value" is lesser of "maximum assessed value" or "open space value determined under subsection (5)"). (See Def's Mot Summ J at 6 (referring to $36,060 as "the value of the land as open space, determined pursuant to ORS 308A.315(5)" and as "the value on which plaintiff's property taxes were assessed for that year"); Oral Argument, July 16, 2020, 10:40-10:41 (Statement of Alex Robinson) ("[T]he taxable specially assessed value [under ORS 308A.315(2)] is the lesser of either the maximum assessed value or the open space value under [ORS 308A.315(5)]") (emphasis added); see also Stip Ex 2 (property tax statement for tax year 2017-18; showing $36,060 as "TOTAL ASSESSED VALUE").) As with the other values recited above, Taxpayer does not agree that $36,060 is accurate or that it controls for purposes of the Cap.

In this order, the court uses the term "Open Space Value" to mean a value determined pursuant to ORS 308A.315(5). The court finds that the parties agree that the Assessor determined that the Open Space Value of the Property for tax year 2017-18 was $36,060. (See Stip Facts at 5, ¶ 31.) The court uses the term "Assessed Value" or "AV" to mean a value determined as the lesser of (1) the property's MAV or (2) its RMV or Open Space Value, whichever is applicable in context, pursuant to ORS 308A.315(2). The court finds that the parties agree that the Assessor determined that the AV of the Property for tax year 2017-18 was $36,060. Again, Taxpayer does not agree that $36,060 is the accurate value for either purpose.

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III. LEGAL BACKGROUND

The legislature adopted the Open Space Lands Statutes in 1971 as one of the early "special assessment" property tax programs that now encompass all of ORS chapter 308A. See Or Laws 1971, ch 493; see generally Boardman Acquisition, LLC v. Dept. of Rev., 361 Or 440, 442-44, 393 P3d 1147 (2017) (overview of farmland special assessment).⁴ In lieu of the familiar RMV based on a hypothetical arm's-length transaction,⁵ these programs assign a value to qualifying property that is intended to be low, reflecting restrictions that limit the property's use to purposes that the legislature considers socially beneficial.⁶ On the other hand, if the

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property's use changes to one that is not thus favored, the law governing the special assessment program typically requires the assessor to recover some or all of the accumulated difference in tax. Most programs also require the assessor to determine this difference annually, and to note on the assessment and tax rolls that additional amounts will become due if the special assessment program ceases to apply. See, e.g., ORS 308A.083 (for specially assessed farm use zone farmland, requiring county assessor to enter on the annual roll the "potential additional tax liability."); ORS 308A.362(6) (same for tax-exempt and partially tax-exempt riparian land).

In a comprehensive law in 1999, the legislature standardized procedures (and associated terminology) by which property enters and exits many of the most commonly used special assessment programs, and the legislature recodified most of the governing statutes together in new ORS chapter 308A. See Or Laws 1999, ch 314; ORS 308A.700 to 308A.733 (providing procedures for determining and assessing additional taxes for certain farmland, forestland, wildlife habitat and conservation easement properties). The Open Space Lands Statutes largely escaped this procedural standardization, however, and they continue to include very distinct features: not only the method for computing the Additional Assessment (and accordingly, its potential size) and the application of percentage-based penalties in addition to the Additional Assessment, but also the procedure for exiting the program and the use of the term "withdrawal" rather than "disqualification" as used in most other programs.

/ / /

The substitute for RMV prescribed in the Open Space Lands Statutes is the Open Space

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Value, computed pursuant to ORS 308A.315(5), which requires the assessor to assume that "the highest and best use of the land" is limited to "the current open space use." The assessor is specifically prohibited from "consider[ing] alternative uses to which the land might be put." ORS 308A.315(5)(a).⁷ As with other special assessment programs, the assessor is required to determine two parallel sets of values for Open Space Land when compiling the annual assessment and taxation rolls: the values actually used to determine the tax due each year the property is classified as Open Space Land, and a second set of values "as if" the property were not so classified, the latter set used only to determine the potential monetary consequences if the property is withdrawn from Open Space Land classification:

Values Actually Used; Each Year	How Determined	"As if" Values	How Determined
Open Space Value; ORS 308A.315(5)	RMV, but assumes the; land will be used solely; for its current open; space use	"As if" Real Market; Value; ORS

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