Vill. at Main St. Phase II, LLC v. Dep't of Revenue

• Jurisdiction: Oregon
• Court: Oregon Supreme Court
• Writing for the Court: LANDAU, J.
• Citation: Vill. at Main St. Phase II, LLC v. Dep't of Revenue, 356 Or 164, 339 P.3d 428 (Or. 2014)
• Decision Date: 18 September 2014
• Docket Number: SC S061138,SC S061139.,TC 5057,TC 5054,TC 5055,SC S061137,TC 5056,SC S061133 Control
• Parties: VILLAGE AT MAIN STREET PHASE II, LLC, Respondent, v. DEPARTMENT OF REVENUE, State of Oregon; and Clackamas County Assessor, Appellants. Village at Main Street Phase III, LLC, Respondent, v. Department of Revenue, State of Oregon; and Clackamas County Assessor, Appellants. Village Residential, LLC, Respondent, v. Department of Revenue, State of Oregon; and Clackamas County Assessor, Appellants. Village Residential, LLC, Respondent, v. Department of Revenue, State of Oregon; and Clackamas County Assessor, Appellants.

356 Or. 164

339 P.3d 428

VILLAGE AT MAIN STREET PHASE II, LLC, Respondent

v.DEPARTMENT OF REVENUE, State of Oregon; and Clackamas County Assessor, Appellants.

Village at Main Street Phase III, LLC, Respondent

v.Department of Revenue, State of Oregon; and Clackamas County Assessor, Appellants.

Village Residential, LLC, Respondent

v.Department of Revenue, State of Oregon; and Clackamas County Assessor, Appellants.

Village Residential, LLC, Respondent

v.Department of Revenue, State of Oregon; and Clackamas County Assessor, Appellants.

TC 5054

SC S061133 Control

TC 5055

SC S061137

TC 5056

SC S061138

TC 5057

SC S061139.

Supreme Court of Oregon, En Banc.

Argued and Submitted Jan. 16, 2014.

Decided Sept. 18, 2014.

Carolyn Alexander, Senior Assistant Attorney General, argued the cause and filed the brief for appellant Department of Revenue. With her on the brief were Ellen F. Rosenblum, Attorney General, and Anna Joyce, Solicitor General.

Kathleen J. Rastetter, Senior Assistant County Counsel, filed the briefs for appellant Clackamas County Assessor. With her on the briefs was Stephen L. Madkour, Clackamas County Counsel.

Donald H. Grim, Greene & Markley, PC, Portland, argued the cause and filed the brief for respondents on review.

Opinion

LANDAU, J.

In these consolidated property tax appeals, taxpayers challenged the valuation of their real property by the Clackamas County Assessor. In their appeals to the Magistrate Division of the Tax Court, they challenged only the valuation of the improvements on their land, not the valuation of the land itself. The Magistrate Division affirmed. Taxpayers then appealed to the Regular Division of the Tax Court, again challenging only the valuation of their improvements. In the meantime, however, the legislature had enacted ORS 305.287. Under that new statute, even if a taxpayer challenges only one aspect of a property tax assessment, any other party to an “appeal” may challenge other aspects of the assessment as well. Relying on that statute, the county asserted for the first time before the Regular Division of the Tax Court that it had erroneously undervalued taxpayers' land. The Tax Court concluded, however, that challenges before the Regular Division are not “appeals” for the purposes of that statute. Village at Main Street Phase II v. Dept. of Rev., 20 OTR 524, 2012 WL 3024117 (2012). As a result, the court ruled that the county could not challenge the valuation of taxpayers' land. The issue before us now is whether the Tax Court correctly concluded that ORS 305.287 does not apply to appeals to the Regular Division of the Tax Court. For the reasons that follow, we conclude that the Tax Court erred in ruling that the statute does not apply and that the county may not challenge its own land valuations.

I. BACKGROUND

To provide context for the parties' dispute about the meaning of ORS 305.287, we begin with an overview of the property tax appeal process, followed by a brief description of the relevant facts and a summary of the Tax Court's decision.

A. The Property Tax Appeal Process

In Oregon, property taxes are assessed for, among other things, real property, including any improvements on that real property. The taxes—referred to as “ad valorem” taxes—are based on the value of the property and improvements. The state's property tax system largely relies on county tax assessors to value property subject to taxation, calculate the tax, collect the tax, and distribute the revenue to taxing districts. By law, the county assessor is required to value the land and any improvements separately. ORS 308.215(1)(a)(E), (F) (as renumbered by the legislature in 2012; Or. Laws 2012, ch. 30, § 1).

A taxpayer who is dissatisfied with the county assessor's valuation may appeal the assessor's decision through four successive levels of review, each of which the statutes refer to as an “appeal.”

The first level of review is (in most cases) before a county board of property tax appeals (BOPTA). See ORS 309.100 (authorizing taxpayers to appeal to BOPTA); ORS 305.275(3) (party cannot appeal to Tax Court if party can appeal to a BOPTA).¹ The relevant statutes refer to review by the county BOPTA as an “appeal.” See ORS 305.275(3) (appeal to Magistrate Division is not allowed “[i]f a taxpayer may appeal to the board of property tax appeals”). Indeed, the name of the reviewing tribunal is the “board of property tax appeals. ” ORS 309.020(1)(a) (emphasis added).

A party dissatisfied with a decision of a county BOPTA may seek review by the Tax Court. ORS 305.275(3). The Tax Court, however, consists of two separate divisions: the Magistrate Division and the Regular Division. See ORS 305.404 (reference to “Tax Court” in statutes “may include either the regular division or the magistrate division of the Oregon Tax Court, or both, or the judge or judges of the [T]ax [C]ourt or its magistrates or a combination”); ORS 305.498(1) (“The magistrate division is established in the Oregon Tax Court.”); Dept. of Rev. v. Froman, 14 OTR 543, 546, 1999 WL 240350 (1999) ( “The Oregon Tax Court is one court with two divisions.”).

The Magistrate Division is not a court of record; proceedings before it are informal and are not subject to the rules of evidence. See ORS 305.430(1) ( “Proceedings before the magistrate division shall not be reported.”); ORS 305.501(4)(a) (subject to Tax Court rules, magistrate “is not bound by common law or statutory rules of evidence or by technical or formal rules of procedure,” but “may conduct the hearing in any manner that will achieve substantial justice”); see also Froman, 14 OTR at 546–47 (“The Magistrate Division is intended by the legislature to be informal and user friendly.”).

The Regular Division, in contrast, is a court of record with general jurisdiction. ORS 305.405(1). It has the same powers as a circuit court. ORS 305.405(2), (3). Proceedings before the Regular Division are “original, independent proceedings” that are “tried * * * de novo.” ORS 305.425(1). The Regular Division is to “consider all properly admitted evidence and reach its own independent conclusions” in any given case. Reed v. Dept. of Rev., 310 Or. 260, 265, 798 P.2d 235 (1990).

Ordinarily, a party seeking review of a county BOPTA decision must first appeal to the Magistrate Division. ORS 305.501(1).² The relevant statutes refer to review of a BOPTA decision by the Magistrate Division as an “appeal.” ORS 305.275(1), (3) (authorizing “appeal * * * to the magistrate division of the Oregon Tax Court”). When a taxpayer appeals a property tax assessment to the Magistrate Division, the Department of Revenue is substituted for the county assessor as a party. ORS 305.501(1).

A party dissatisfied with the decision of the Magistrate Division may then seek review, de novo, by filing a complaint in the Regular Division. ORS 305.501(5)(a) (party who is “dissatisfied with a written decision of a magistrate may appeal the decision to the judge of the [T]ax [C]ourt”). The relevant statutes refer to that review, too, as an “appeal.” Id.

The fourth and final level of review is before the Supreme Court. ORS 305.445. On review before this court, the court can review only for errors of law and for the absence of substantial evidence in the record to support the Tax Court's decision. Id. The relevant statutes also describe that final review as an “appeal.” Id. (“exclusive remedy for review” of decision of Tax Court “shall be by appeal to the Supreme Court”).

B. The Nepom Rule, Ballot Measure 50, and ORS 305.287

Because an assessment entails separate valuation of both the land and the improvements, a taxpayer seeking review of an assessment is entitled to challenge the valuation of either of those components, or both of them. In Nepom v. Dept. of Rev., 272 Or. 249, 256, 536 P.2d 496 (1975), this court held that, if a taxpayer challenged the valuation of only one component—either the land or the improvements—the sole issue before the reviewing body was the valuation of that component. Thus, for example, if a taxpayer challenged the value of the improvements, arguing that they were too high, the county assessor could not seek to offset any drop in that valuation by showing that the land had been valued too low. See id. (“We conclude that plaintiff was entitled to challenge only the value of the improvements * * *; however, as the value of the land was not an issue in the case, the Tax Court acted improperly in adding the reduction in the improvement values to the land.”).

Under the law in effect at the time, Nepom had limited practical effect. If a taxpayer challenged only one component of a real property assessment, and if the county assessor believed that the other component had been assessed in error, the assessor could adjust the value of that other component the following year. In 1997, however, the voters approved Ballot Measure 50, which amended the Oregon Constitution, creating a new provision, Article XI, section 11.

Among many other things, Measure 50 and its implementing statutes reduced the assessed value of property to 10 percent below 1995 values. Or. Const., Art. XI, § 11 (1)(a). For future years, the value of property for tax purposes cannot exceed three percent more than what it was in the preceding year. Or. Const., Art. XI, § 11 (1)(b); ORS 308.146(2). The combined effect of Nepom and Measure 50 was to curb the assessor's ability to adjust any error in valuation of any assessment components that a taxpayer elected not to challenge. See generally Flavorland Foods v. Washington County Assessor, 334 Or. 562, 565, 54 P.3d 582 (2002) (summarizing effects of Measure 50).

In 2011, the legislature enacted ORS 305.287 to address that combined effect of Nepom and Measure 50. That statute provides:

“Whenever a party appeals the real market value of one or more components of a property tax account, any other party to the appeal may seek a determination from the body or tribunal of the total real market value of the property tax account, the real market value of any

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