Toyota Motor Sales, U.S.A., Inc. v. Multnomah County Assessor
| Decision Date | 02 May 2008 |
| Docket Number | TC-MD 060583C |
| Parties | TOYOTA MOTOR SALES, U.S.A., INC., Plaintiff v. MULTNOMAH COUNTY ASSESSOR, Defendant. v. |
| Court | Oregon Tax Court |
DECISION
DAN ROBINSON MAGISTRATE
This matter is before the court on cross-motions for summary judgment. Plaintiff appeals Defendant's partial denial of its application for exemption, for the 2006-07 tax year, on certain real property affected by a lease between Plaintiff and the Port of Portland (Port), and used by Plaintiff for the operation of its import vehicle receiving and processing center. Defendant's determination, dated April 18, 2006 was made in response to Plaintiff's request for computation of payment in lieu of tax pursuant to ORS 307.120(3).
Oral argument was heard in the Oregon Tax Court in Salem on January 9, 2008. Plaintiff was represented by David L Canary, Attorney at Law, Garvey Schubert Barer. Defendant was represented by Jed R. Tompkins, Assistant County Attorney. For ease of reference, the parties will be referred to as Toyota, the County, and the Port.
The Port is organized under the laws of the State of Oregon and, pursuant to ORS 307.090(1), the land owned by the Port is exempt from taxation. Toyota is a California corporation, and a taxable entity registered to conduct business in Oregon.
On the applicable assessment date - January 1, 2006 - the Port owned approximately 82.96 acres of land located at Terminal 4 in Multnomah County, Portland, Oregon, and identified in the records of the Multnomah County Division of Assessment and Taxation as Account Nos. R537406, R537417, R537423, and R580045.
On October 9, 2002, the Port and Toyota entered into a lease, hereinafter referred to as the “2002 lease, ” whereby the Port leased approximately 82 acres of land at Terminal 4 to Toyota, for Toyota's use as an import vehicle receiving and processing facility. Under the terms of the 2002 lease, Toyota agreed to finance and construct certain improvements “consisting generally of the perimeter fence, site and building improvements, and rail spur track, [associated with its import vehicle center and] identified as ‘Lessee Improvements-Phase 2.' ” (Stip Ex 1 at 12, 75, 82.) The Port agreed to demolish certain warehouses and an existing rail spur to make way for Toyota's new facility and to construct certain Phase 1 and Phase 2 improvements, most if not all of which were “outside the fence” improvements including dock modifications, fill material, electrical utility work, lighting and pavement improvements, plus perimeter landscaping and storm water collection and treatment systems. (Id. at 75, 82-86.) Toyota agreed to reimburse the Port for the Phase 1 improvements in an amount not to exceed $2, 186, 000, plus oversight costs not to exceed $165, 000. (Id. at 82.) The term of the 2002 lease was 15 years, commencing April 1, 2005, with two 5-year renewal options. The parties agreed to a basic rent of $1, 406, 000 per year, with annual adjustments based on an agreed upon formula. (Id. at 18.)
As part of the Lessee Improvements-Phase 2, Toyota financed and constructed a Body Shop building and a Post-Production Options (PPO) building. Those two buildings are located on 4.03 acres of the approximately 82 acres of land Toyota leases from the Port. It is the ownership and use of those buildings that forms the basis for the present dispute. The use of those buildings is described below.
There is no deed or bill of sale in the records of Multnomah County regarding ownership of the improvements described in the 2002 lease.
Pursuant to ORS 307.120(3), Toyota properly and timely filed with the County a request for exemption and computation of the payment in lieu of tax for the 82.96 acres of leased land and the improvements thereon described in the 2002 lease, and provided all of the information necessary to enable the County to complete the in lieu computation.
The County subsequently notified Toyota by letter dated April 18, 2006, that Toyota's request for exemption and in lieu tax payments had been granted in part, for parcels R537406, R537417, and R537423, totaling 78.93 acres of land and certain improvements with a real market value of $2, 613, 600. The County denied Toyota's request for exemption and in lieu tax computation on the remaining 4.03 acres of land, and on $20, 305, 500 worth of improvements, including the Body Shop and PPO buildings, on the grounds and for the reason that the County believed that the property did not meet the statutory criteria set forth in ORS 307.120. The County moved the property it believed to be non-qualifying to a new account identified as Account No. R580045. This appeal involves the property denied exemption by the County and identified under that newly created account (i.e., the 4.03 acres of land and the buildings thereon).
The parties agree that, aside from the 4.03 acres, the land leased by Toyota under the 2002 lease qualifies for exemption and in lieu computation under ORS 307.120. The real market value of the 4.03 acres of land denied exemption is $701, 440. As stated above, the real market value of the improvements for which exemption was denied is $20, 305, 500.
The parties entered into two previous lease agreements on property other than that subject to the 2002 lease. The first lease was entered into on July 1, 1976, and the second on January 31, 1986. In each case, portions of the property were subject to full ad valorem taxation because the property did not qualify for exemption and in lieu computation under ORS 307.120. In the case of the 1986 lease, the Oregon Department of Revenue issued a decision finding that portions of the property did not comply with the statute. Toyota v. Multnomah County Assessor, Or Dept. of Rev. No 89-2420 (1992).
The parties agree to the following description of Toyota's import vehicle receiving and processing facility operations on the property subject to the 2002 lease. (See Stip Facts at 12-13.) Toyota automobiles are transported by ship from Japan and are received at the Port's Terminal 4, next to the subject property. The automobiles are off-loaded from the ship transporting the automobiles to a receiving area on the subject property. If the automobiles have been damaged during shipment to the Port, they are taken to the Body Shop building on the subject property where dings, creases, dents and the like are repaired, including repainting bumpers and body panels, to return the automobiles to the condition they were in at the time they were loaded onto the ship in Japan for shipment to the Port. The Body Shop building is 21, 173 square feet. Part of the Body Shop building, a maintenance shop and a mechanical shop that comprise a total of 8, 576 square feet, is used for servicing vehicles and equipment used by Toyota on the subject property.
Some of the automobiles Toyota ships from Japan to the Port's Terminal 4 are taken to the PPO building. There, the automobiles are outfitted with roof racks, rear wind deflectors, drop hitches, audio/alarm/DVD devices, running boards, and other post-production options according to dealer specifications. The PPO building is 65, 186 square feet. The PPO building includes a 43, 661 square foot warehouse where parts are stored. The PPO building also includes Toyota's office that is 21, 525 square feet, where Toyota's operations at the Port are administered.
1) For purposes of ORS 307.120(1), [1] did the Port own the improvements on the 4.03 acres within the 82 acres of land leased by Toyota from the Port, and lease those improvements to Toyota as of January 1, 2006?
2) If the Port owned the improvements and leased them to Toyota, was Toyota using the Body Shop and PPO buildings, and the underlying 4.03 acres, “for the purpose of the berthing of ships, barges or other watercraft * * * the discharging, loading or handling of cargo therefrom or for the storage of such cargo directly incidental to transshipment, * * *” as required by ORS 307.120(1)(a) for exemption and payment in lieu of taxes?
As a general rule, all real property in Oregon is subject to assessment and taxation. ORS 307.030(1). ORS 307.090(1) specifically exempts from taxation “all public or corporate property used or intended for corporate purposes of the several counties, cities, towns, school districts, irrigation districts, drainage districts, [and] ports * * *.” Moreover, while ORS 307.110(1) provides that such publicly-owned property is nonetheless subject to assessment and taxation when held under lease by a taxable owner, an exception exists as provided in ORS 307.120.[2]
ORS 307.120 provides in relevant part as follows:
The Port of Portland is a “port organized under the laws of this state, ” and the subject property, specifically the Body Shop and PPO buildings, and the 4.03 acres upon which those buildings are situated, is exempt from taxation provided that property satisfies the ownership and use requirements under ORS 307.120(1).[3] Specifically, the disputed property is exempt if, on January 1, 2006: (1) the Port owned the property and leased it to Toyota, and (2) Toyota used the property in a qualified manner.
The parties dispute whether the Port or Toyota...
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