Tesoro Logistics Nw. Pipeline LLC v. Dep't of Revenue, TC 5252 (Control)
| Decision Date | 19 February 2021 |
| Docket Number | TC 5395,TC 5252 (Control),TC 5313,TC 5271,TC 5350,TC 5292 |
| Parties | TESORO LOGISTICS NORTHWEST PIPELINE LLC, Plaintiff, v. DEPARTMENT OF REVENUE, State of Oregon, Defendant. |
| Court | Oregon Tax Court |
The parties ask the court to determine the maximum assessed value ("MAV") of the taxable property in Oregon assessed to Plaintiff ("Taxpayer"), a centrally assessed taxpayer, for tax year 2014-15 (the "Property"). The real market value ("RMV") is not at issue; on November 20, 2015, the court entered a Partial Stipulated Judgment determining the RMV. After abeyance pending final resolution of cases including DISH Network Corp. v. Dept. of Rev., 364 Or 254, 434 P3d 379 (2019), the parties now present cross-motions for summary judgment in case TC 5252 and consolidated cases involving later tax years.1
The Supreme Court's opinion in DISH Network explains important legal background relevant to this case, providing (1) an overview of the "central assessment" of property used in certain businesses, including the longstanding concept of valuing the company's worldwide property as a "unit" and allocating a portion of that value to the property in Oregon; (2) an overview of the more recent MAV limitation on the growth of the assessed value of a "unit of property" under Article XI, section 11, of the Oregon Constitution ("Measure 50") and implementing statutes; (3) a detailed analysis of the "exception" that allows MAV to be redetermined when "new property" is added to the assessable "unit of property"; and (4) a discussion of ORS 308.162(1),2 which has the practical effect of preserving the MAV, notwithstanding the "new property" exception, if property attributable to one account is changed to another account. See DISH Network, 364 Or at 257-62. The relevant constitutional provisions and statutes have not changed materially between the law in effect for the tax year 2009-10 at issue in DISH Network and the law in effect for tax year 2014-15 and the Later Years.3 As in DISH Network, this case requires the court to consider the "new property" exception and the possible effect of ORS 308.162(1).
The record establishes the following facts. Taxpayer, through other affiliates, is owned indirectly but entirely by Tesoro Logistics LP, a publicly traded limited partnership in thebusiness of "gathering" crude oil, as well as "terminalling," transporting and storing crude oil and refined oil products, including through pipelines. (See Def's Ex A at 5 (); Def's Ex B at 1 () On June 19, 2013, Taxpayer and another affiliate wholly owned by Tesoro Logistics LP4 bought the "Northwest Products System" from Chevron Pipe Line Company and Northwest Terminalling Company (collectively, "Chevron") for a total purchase price of $354.8 million before certain adjustments. (Ptf's Ex 5 at 2.) The Northwest Products System consists of (1) a federally regulated petroleum products pipeline extending from Salt Lake City, Utah through southern Idaho and eastern Oregon to Spokane, Washington, as well as (2) other assets including a five-mile jet fuel pipeline connecting to the Salt Lake City airport and certain products terminal rights, properties, facilities and equipment located in Idaho and Washington. (Ptf's Ex 5 at 2; Def's Ex A at 6; Def's Ex A at 10 (map).) Before acquiring the Northwest Products System, Taxpayer had no property in Oregon subject to local or central assessment.
For tax year 2013-14 and prior years, the Department maintained a centrally assessed property tax account for Chevron that included the Oregon portion of the Northwest Products System. (See Ptf's Mot Summ J at 3; Def's Cross-Mot Summ J at 2, 5-6.) The parties differ in their description of what, exactly, was centrally assessed to Chevron and what is now centrally assessed to Taxpayer. Their differences stem, in part, from fundamentally different understandings and uses of terms involving the word "unit," as will be discussed below.5 The uncontradicted evidence, however, indicates that property constituting the Oregon portion of the Northwest Products System was assessed to Chevron for tax year 2013-14, and Taxpayer acquired and continued to hold that property as of the January 1, 2014, assessment date for tax year 2014-15. (See, e.g., Def's Ex B at 7 ().) The dispute arises because the MAV that the Department has assigned to Taxpayer's account on the central assessment roll and that the Department asks the court to uphold ($38,723,000) is substantially higher than the MAV that the Department previously assigned to Chevron's account on the central assessment roll ($10,786,200). (Compare Def's Ex D (Department's revised Measure 50 template for Taxpayer for tax year 2014-15) and Ptf's Ex 1 at 6 () with Ptf's Ex 6 (Measure 50 template for Chevron for tax year 2012-13, filed under seal) and Ptf's Ex 2 at 3 ().) After initially using the MAV set for tax year 2013-14, an act that the Department now asserts was a mistake, the Department determined the MAV for tax year 2014-15 by following the normal procedures for new centrally assessed property, without regard to the 2013-14 MAV.6 () Subject to any adjustments as noted below, Taxpayer asks the court to determine that the MAV for tax year 2014-15 is the same as that assigned to Chevron's account for tax year 2013-14.
(1) Did Taxpayer's acquisition of the Northwest Products System cause the exception under Or Const Art XI, § 11(1)(c)(A) and ORS 308.149(6)(a) for "new property or new improvements" to apply for purposes of determining the MAV for tax year 2014-15?
(2) If so, does ORS 308.162(1) nevertheless require the Department to apply the MAV as determined for Chevron's centrally assessed account for tax year 2013-14, to the property attributable to Taxpayer's account for tax year 2014-15, subject to any new property or new improvements that might have been made on or after January 1, 2013, and before January 1, 2014?
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In DISH Network, the court analyzed the taxpayer's and the Department's competing arguments regarding the meaning of "new property or new improvements," which means "changes in the value of property as the result of * * * [t]he addition of machinery, fixtures, furnishings, equipment or other taxable real or personal property to the property tax account." See 364 Or 254; ORS 308.149(6)(a)(C). DISH Network involved items that the taxpayer had owned in prior tax years (set-top boxes and other items that enabled the taxpayer's customers to receive its transmissions of television programming), and that had been locally assessed for those years. See 364 Or at 262-63. When the Department, in light of the Supreme Court's decision in another case,7 determined that the taxpayer in DISH Network was subject to central assessment, the taxpayer argued that the MAV previously assigned to each item by a county assessor continued to apply for the year for which the taxpayer was first centrally assessed. Id. at 263-64. The taxpayer argued, based on this court's decision in Comcast Corp. III v. Dept. of Rev., 22 OTR 233 (2016), that "new property" is limited to property newly created or acquired by the taxpayer within a certain time before the assessment date, and does not include property that an assessor adds to the roll by the "unilateral" action of subjecting the taxpayer to central assessment for the first time. DISH Network, 364 Or at 268. The Supreme Court rejected this argument, concluding:
In reaching this conclusion, the court clarified that a property tax "account," for purposes of the definition of "new property or new improvements" in ORS 308.149(6), refers not only to the administrative division used for listing property in the local assessment rolls. Rather, for centrally assessed property, "account" refers to the single account that the Department generally establishes for each company maintaining a business listed in ORS 308.515(1). Id. at 270. Therefore, "new property" "includes additions to the accounts of companies on the central assessment roll." Id. at 271; see also, e.g., id. at 277 ().
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