United Streetcar, LLC v. Dept. of Rev. , 23 Or. Tax 418 ( 2019 )

418 July 11, 2019 No. 20
IN THE OREGON TAX COURT
REGULAR DIVISION
UNITED STREETCAR, LLC,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
State of Oregon,
Defendant,
and
CLACKAMAS COUNTY ASSESSOR,
Defendant-Intervenor.
(TC 5318)
At issue in the motions for summary judgment of Plaintiff, United Streetcar,
LLC (taxpayer) and the Defendant-Intervenor, Clackamas County Assessor (the
county) were the tax years to which an enterprise zone exemption applied and
whether taxpayer met its minimum employment requirements. The court deter-
mined the start and end dates of the enterprise zone exemption period, based
on interpretation of taxpayer’s contract with the zone sponsor and the timeline
of actions of taxpayer and the sponsor, including taxpayer’s application for and
claiming of a construction-in-progress exemption. Further, the court concluded
that a material issue of fact remained as to whether taxpayer maintained the
required number of employees performing eligible activities within the enter-
prise zone during the relevant period. The court held that a firm applying for an
enterprise zone exemption is not restricted to those eligible activities specifically
marked on its exemption application. The court denied both motions for summary
judgment.
Oral argument on Cross-Motions for Summary Judgment
was held October 17, 2018, in the courtroom of the Oregon
Tax Court, Salem.
Michael J. Mangan, Tonkon Torp, LLP, Portland, filed
the motion and argued the cause for Plaintiff (taxpayer).
Marilyn J. Harbur, Senior Assistant Attorney General,
Department of Justice, Salem, filed a response for Defendant
Department of Revenue.
Kathleen J. Rastetter, Assistant Clackamas County
Counsel, Oregon City, filed the motion and argued the cause
for Defendant-Intervenor Clackamas County Assessor (the
county).
Decision rendered July 11, 2019.
Cite as 23 OTR 418 (2019) 419
ROBERT T. MANICKE, Judge.
I. INTRODUCTION
Defendant-Intervenor Clackamas County Assessor
(the county) notified Plaintiff United Streetcar, LLC (tax-
payer) on July 12, 2016, that taxpayer’s property in the
Milwaukie/North Clackamas enterprise zone was disqual-
ified from enterprise zone exemption for property tax year
2016-17, and that additional tax attributable to taxpayer’s
entire five-year extended enterprise zone exemption period
would be assessed. This case is before the court on appeal
from a Magistrate Division decision upholding disqualifica-
tion. Taxpayer moves for summary judgment, arguing that
the term of its enterprise zone exemption ended with the
prior year, such that there was no exemption in place for tax
year 2016-17, and therefore no basis for the county to dis-
qualify the property. The county opposes taxpayer’s motion,
asserting that the enterprise zone exemption term included
tax year 2016-17 as the last year of the five-year period. The
county also moves for summary judgment on the merits of
the disqualification, arguing that documentary evidence
makes it clear that taxpayer failed to meet the applicable
employment requirements for exemption for tax year 2016-17.
Defendant Department of Revenue (the department) joins in
the county’s filings.
II. ISSUES
Was the final year of taxpayer’s five-year enterprise
zone exemption period tax year 2015-16 or 2016-17?
If the final year was 2016-17, did taxpayer meet its
minimum employment requirements for that year?
III. STATUTORY BACKGROUND
The Oregon Enterprise Zone Act provides tem-
porary exemption from property taxation for “quali-
fied” business firms that invest in “qualified” property
and increase their employment within any of numerous
enterprise zones located throughout the state.1 Under the
1
ORS 285C.050 to 285C.250. Unless otherwise indicated, all references
to the Oregon Revised Statutes (ORS) are to the 2015 edition. The Oregon
Enterprise Zone Act has been amended and recodified several times since it
420 United Streetcar, LLC v. Dept. of Rev.
“standard”2 enterprise zone program, a firm seeking to
become qualified must (1) be “eligible” based on its proposed
activities or operations; and (2) become “authoriz[ed].” See
ORS 285C.140(1)(a) (eligibility a prerequisite to authoriza-
tion), ORS 285C.200 (authorization a prerequisite to qual-
ification). To be “eligible,” the firm generally must, within
the zone, provide goods, products or services to businesses
or other organizations through “activities including, but not
limited to, manufacturing, assembling, fabrication, process-
ing, shipping or storage.” ORS 285C.135(1); see also ORS
285C.050(13)(a) (defining “new employees hired by the firm”
to include “only those employees * * * engaged for a major-
ity of their time in eligible operations”), ORS 285C.200(1)(a)
(qualified firm must be “engaged in eligible business oper-
ations under ORS 285C.135”). An eligible firm must apply
for authorization with the zone sponsor before commencing
construction or hiring employees. See ORS 285C.140(1). The
application must describe the proposed operations within
the zone and include an estimate of the number of new
employees and the estimated value of the proposed quali-
fied property, among other data, as well as commitments to
meet all requirements imposed pursuant to any agreement
with the sponsor. See id. As relevant to this order, “qual-
ified property” generally must (1) be newly constructed or
installed; (2) meet a minimum cost requirement; (3) be con-
structed or installed for approved income-producing pur-
poses of the firm; (4) be owned or leased by an authorized
firm; and (5) be of the same “general type,” and in the same
location inside the geographic boundaries of the enterprise
zone, as described in the firm’s application for authorization.
See ORS 285C.180.
was first enacted in 1985, but as relevant to this order has been unchanged
for the property tax years 2010-11 through 2016-17. See Or Laws 2010, ch 39
(allowing waiver of certain requirements and extensions of certain deadlines
during periods of economic downturn as measured by statewide nonfarm payroll
employment).
2
The Enterprise Zone Act includes several variations with different statu-
tory requirements; this order discusses only the standard three-year exemption
with optional extension of up to two years. Cf., e.g., ORS 285C.400 to 285C.420
(long-term rural enterprise zone program); ORS 285C.300 to 285C.320 (reserva-
tion enterprise zones); ORS 285C.540 to 285C.559 (renewable energy resource
equipment manufacturing).
Cite as 23 OTR 418 (2019) 421
The basic exemption period for the standard enter-
prise zone program is three years (ORS 285C.175(2)(a)); how-
ever, before authorization, a firm desiring a longer period
of exemption may enter into a written agreement with the
zone sponsor to extend the exemption period for up to two
additional years, resulting in a total exemption period of
no more than five consecutive years. ORS 285C.160(3). The
sponsor may set additional reasonable requirements (such as
requirements to hire and maintain more employees than the
statutory minimum) as a condition of the extended exemp-
tion period. Id. For the first year of the exemption period, the
statutory minimum generally is a 10 percent increase (com-
pared to the firm’s average employment in the zone over the
12 months before the firm applied for authorization) no later
than April 1 following the year the investment is made; or,
for a firm without any previous employees in the zone, one
new employee. See ORS 285C.200(1)(c), (8)(a). Thereafter, the
firm must not “substantially curtail operations” within the
zone, based on a multiprong test set forth in ORS 285C.210.
To be counted toward the minimum, an employee generally
must work 32 hours per week in a nontemporary and non-
construction job and spend a majority of his or her time in
eligible operations within the zone. ORS 285C.050(7); ORS
285C.200(8)(b).
A firm anticipating enterprise zone exemption may
apply for a construction-in-process (CIP) exemption for its
owned or leased property under ORS 285C.170.3 The CIP
exemption, which the assessor can approve annually up to a
maximum of two years, applies if the firm has been autho-
rized and the property is expected to satisfy all requirements
for enterprise zone exemption after construction or instal-
lation is complete and after the property has been “placed
in service.” Id. at (1)(h). Property is “in service” when it is
“being used * * * for commercial purposes consistent with
the intended operations of the business firm as described
in the application for authorization.” ORS 285C.050(11). The
assessor determines whether to approve the CIP exemption.
ORS 285C.170(3).
3
The terms of the CIP exemption available pursuant to ORS 285C.170 are
generally similar to the widely applicable cancelation of assessment for construc-
tion in process pursuant to ORS 307.330.
422 United Streetcar, LLC v. Dept. of Rev.
From January 1 through April 1 immediately after
the “assessment year”4 in which the property is placed in
service, the firm may file its first claim for enterprise zone
exemption with the assessor. ORS 285C.220(1)(a). Among
other data, the claim must include the number of employees
within the zone on April 1 (or on the date the claim is filed,
whichever is earlier); as well as the annual average number
of employees in the zone during the preceding assessment
year; and the annual average number of employees in the
zone during the 12 months preceding the application for
authorization. ORS 285C.220(1)(c). The assessor reviews the
claim for compliance with minimum employment and other
requirements and decides whether to grant the exemption.
ORS 285C.220(4). Like other property tax exemption stat-
utes,5 the Enterprise Zone Act refers to the exemption period
sometimes as a period of assessment years and sometimes
as a period of tax years. For example, ORS 285C.175 pro-
vides that, when the assessor approves a claim, the enter-
prise zone exemption period begins with the first tax year
after the assessment year in which the qualified property
is in service6 and continues for the prescribed number of
4
“Assessment year” means the calendar year starting on January 1 and end-
ing on December 31, and “tax year” means a period of 12 months beginning on
July 1 and ending on June 30. See ORS 285C.050(20) and (22) (incorporating
ORS 308.007(1)(b), (c)). For example, assessment year 2011 begins on January 1,
2011, and ends on December 31, 2011, while the corresponding tax year begins on
July 1, 2011, and ends on June 30, 2012.
5
Compare, e.g., ORS 307.166(3)(a)(A) (governing application process for prop-
erty leased from one organization to another; referring to “exemption[ ] claimed for
the assessment year”), ORS 307.260(1)(a) (veteran housing exemption; referring
to “assessment year for which the exemption is claimed”), ORS 307.330 (general
CIP exemption; declaring property “exempt from taxation for each assessment
year”), with ORS 307.112(4) (lease to public body; claim must be filed on or before
April 1 preceding “tax year for which the exemption is claimed,” “exemption first
applies for the tax year beginning July 1”), ORS 307.162(1)(a) (governing applica-
tion process for property leased from nonexempt owner; requiring application on
or before April 1 “preceding the tax year for which the exemption is claimed”).
6
The court notes that the 2015 Legislative Assembly amended the statute
governing the commencement of the exemption period to clarify that the qual-
ified property must be in use or occupancy before July 1 of the year immedi-
ately following the year during which the property “was first placed in service.”
Or Laws 2015, ch 648, § 21 (amending ORS 285C.175(4)(d)) (emphasis added).
The quoted language replaced a requirement that construction of the property be
completed and thus harmonized the statute with the general requirement that
the property be placed in service on or before the January 1 preceding the first
tax year of exemption.
Cite as 23 OTR 418 (2019) 423
successive tax years. ORS 285C.175(2)(a).7 On the other
hand, the period for compliance with the minimum employ-
ment requirements generally is measured by assessment
years, as in the definition of “substantial curtailment,” which
requires the assessor to determine whether the “annual
average number of employees within the enterprise zone
during the first assessment year for which the exemption
under ORS 285C.175 is granted, or any subsequent year in
which an exemption is claimed,” is reduced below the greater
of one of two measurements. ORS 285C.210(1)(c) (emphasis
added). After filing the first claim, the firm must file a claim
on or before April 1 for each subsequent year for which it
seeks enterprise zone exemption. ORS 285C.220(1)(a).
The exemption applies to 100 percent of the assessed value
of the qualified property in each of the tax years for which
the exemption is available. ORS 285C.175(3)(a).
Among other possible triggering events, a firm’s
property may be disqualified from enterprise zone exemption
if at any time during the exemption period the firm substan-
tially curtails its business operations, or if the firm fails to
meet additional terms imposed by any extension agreement.
ORS 285C.240(1)(a) - (f). If the disqualifying event occurs at
any time during the exemption period, the assessor “shall
disqualify the property for the assessment year following
the disqualifying event and 100 percent of the additional
taxes calculated under ORS 285C.175 shall be assessed
against the property for each year for which the property
had been granted exemption under ORS 285C.175.” ORS
285C.240(3)(a) (emphasis added); see also ORS 285C.175(7)
(requiring the assessor to enter on the roll the assessed
value and the “amount of additional taxes that would be
due if the property were not exempt”). That means even if
the disqualifying event occurs in the last year of a five-year
exemption period, the statute mandates that the assessor
assess the previous four years’ worth of tax on the property
in addition to the amount of tax assessed for the fifth year.
ORS 285C.240(3)(a). See Keeter Manufacturing, Inc. v. Dept.
of Rev., 13 OTR 124, 125-30 (1994) (explaining that “dis-
qualification occurs at the time of the disqualifying event,”
7
Therefore, in the example above, qualified property placed in service on or
before December 31, 2011, would be exempt for tax year 2012-13.
424 United Streetcar, LLC v. Dept. of Rev.
and, “upon disqualification, 100 percent of the taxes previ-
ously exempted [are] to be recaptured”); see also Columbia
Sun, Inc. v. Dept. of Rev., 321 Or 514, 516, 900 P2d 1039(1995) (discussing assessor’s assessment of an additional
four years’ worth of taxes in addition to the amount of prop-
erty tax assessed for the year of disqualification).
IV. FACTS
The following facts are not in dispute. For tax
years 2010-11, 2011-12, 2012-13, 2013-14, 2015-16, and
2016-17, taxpayer leased land and an existing building
within the Milwaukie/North Clackamas enterprise zone,
which is jointly sponsored by Clackamas County and the City
of Milwaukie. In August 2010, taxpayer applied for authori-
zation, stating that it planned to construct improvements
costing approximately $4 million.8 Taxpayer’s application
stated that it intended to “maintain at least [five employ-
ees] as an annual average employment during the exemp-
tion period.” Before its authorization, taxpayer and the zone
manager, on behalf of the sponsors, signed an agreement
(the Extension Agreement) extending the statutory three-
year exemption period by an additional two tax years. The
Extension Agreement provided, in relevant part:
“The Zone Sponsor extends The Firm’s property tax
exemption an additional two years on all property that
initially qualifies in the Milwaukie / North Clackamas
Enterprise Zone in or before the assessment year begin-
ning on January 1, 2011 and, thus, sets a total period of
exemption of five consecutive years during which statutory
requirements for the standard three-year enterprise zone
exemption must also be satisfied and maintained.
“United Streetcar, LLC will hire and maintain at least
5 full time positions by December 31, 2011 as submitted in
the Oregon Enterprise Zone Authorization Application and
any other positions added that result from their investment
at the compensation levels described below[.]
“* * * * *
8
Both parties rely on the same documents submitted in separate declara-
tions. As a matter of convenience unrelated to the merits of either party’s decla-
ration, the court will cite to the Declaration of Rastetter when citing a document
contained in both parties’ declarations.
Cite as 23 OTR 418 (2019) 425
“3. Only employees working at jobs filled for the first
time after the application for precertification but prior to
July 1 following the first full year of the exemption and per-
formed within the current boundaries of the Milwaukie /
North Clackamas Enterprise Zone are counted; and
“4. Only full-time, year-around and non-temporary
employees engaged a majority of their time in The Firm’s
eligible operations under ORS 285B.707[9] are counted,
regardless if such employees are leased, contracted for
or otherwise obtained through an external agency or are
employed directly by The Firm.”
(Emphasis added.) On March 22, 2011, taxpayer applied for CIP
exemption to build a “[s]treetcar test track and maintenance/
testing building,” in the enterprise zone. Taxpayer’s applica-
tion listed the “[s]tarting date of construction” as “05/01/2010”
and the “[e]stimated completion date of construction” as
“Mar. 31, 2011.” The county approved taxpayer’s CIP exemption
on April 14, 2011, by countersigning taxpayer’s application.
On March 30, 2012, taxpayer filed an “Oregon
Enterprise Zone Exemption Claim” on Department of Rev-
enue Form No. 150-310-075. Taxpayer attached Depart-
ment of Revenue Form No. 150-310-076, entitled “OREGON
ENTERPRISE ZONE PROPERTY SCHEDULE For Quali-
fied Property of a Qualified Business Firm Placed in Service
at a Location in the Enterprise Zone” (uppercase in orig-
inal), on which taxpayer listed a “Streetcar Test Track &
Maintenance Bldg (OIW)” at a cost of $4,098,344, improve-
ments to existing structures at a cost of $377,809, and real
property machinery and equipment at a cost of $1,100,923.
For each item of property, taxpayer indicated a “date placed
in service” as on or before December 31, 2011. On Line 5b
of the claim form, taxpayer responded affirmatively to the
question: “[I]s this the first property schedule filed with an
exemption claim subject to this authorization?” On June 25,
2012, the county sent a letter to taxpayer approving its
application for enterprise zone exemption. The letter stated:
9
Former ORS 285B.707 contained the criteria for eligibility. The legislature
recodified the provision as ORS 285C.135 in 2003. See also Or Laws 2015, ch 648,
§ 20 (amending ORS 285C.135(5)(d) to include certain types of business firms
within zones designated for electronic commerce).
426 United Streetcar, LLC v. Dept. of Rev.
“The application filed on April 2, 2012 claiming the
Enterprise Zone exemption for the ensuing 2012-13 tax
year has been approved. This is the first year of exemption
under this program.”
(Emphasis added.) Taxpayer filed additional claims for
enterprise zone exemption in March of 2013, 2014, 2015,
and 2016. The county approved the exemption for tax years
2013-14, 2014-15, and 2015-16. The county denied the
claim for tax year 2016-17. In addition, on July 12, 2016,
the county sent a letter notifying taxpayer that its property
was disqualified from enterprise zone exemption effective
with the 2016-17 tax year because taxpayer had not met the
minimum employment requirements as of April 1, 2016. As
a result, the county assessed tax equal to 100 percent of
the tax for the five-year exemption period, totaling approxi-
mately $322,000.
V. ANALYSIS
A. Summary Judgment Standard
The court grants a motion for summary judgment
only if “the pleadings * * * declarations, and admissions on
file show that there is no genuine issue as to any material
fact and that the moving party is entitled to prevail as a
matter of law.” Tax Court Rule (TCR) 47 C. See Christensen
v. Dept. of Rev., 23 OTR 155, 162-63 (2018) (citing Two Two v.
Fujitech America, Inc., 355 Or 319, 331, 325 P3d 707 (2014)).
“No genuine issue as to a material fact exists if, based upon
the record before the court viewed in a manner most favor-
able to the adverse party, no objectively reasonable [fact-
finder] could [find] for the adverse party on the matter that
is the subject of the motion for summary judgment.” TCR
47 C. The adverse party has the burden of producing evidence
on any issue raised in the motions as to which the adverse
party would have the burden of persuasion at trial. Id. See,
e.g., Hagler v. Coastal Farm Holdings, Inc., 354 Or 132, 142,
144-45, 309 P3d 1073 (2013) (nonmoving party—an injured
customer—had the burden on summary judgment to pro-
duce evidence sufficient to create a genuine issue of material
fact that the moving party—a business owner—“knew or
should have known” that the manner in which it shelved
Cite as 23 OTR 418 (2019) 427
certain merchandise posed a danger to customers) (citation
omitted).
B. Parties’ Arguments
1. Taxpayer’s motion
Taxpayer moves for summary judgment on the
ground that the five-year enterprise zone exemption period
for its property commenced with tax year 2011-12 and
ended with tax year 2015-16; therefore, as a matter of law,
taxpayer was not required to meet minimum employment
requirements specified in the Enterprise Zone Act or in the
Extension Agreement for tax year 2016-17. Taxpayer asserts
that it claimed exemption for tax year 2016-17 only by its
own mistake, and that the county improperly disqualified
the property based on a misinterpretation of the enterprise
zone statutes and the Extension Agreement.
Taxpayer argues that by “extend[ing] the Firm’s
property tax exemption” on or for property that “ini-
tially qualifies” in or before the assessment year 2011, the
Extension Agreement “sets forth the period for which the
qualified property may continue to receive the exemption as
starting with ‘the assessment year beginning on January 1,
2011.’ ” (Emphasis added.)
The county counters that taxpayer’s property could
not have been entitled to enterprise zone exemption for
tax year 2011-12 because the record shows taxpayer was
approved for CIP exemption for that year. According to the
county, that CIP exemption, and the fact that taxpayer never
filed a claim for enterprise zone exemption for 2011, pre-
clude enterprise zone exemption for taxpayer’s property for
tax year 2011-12, irrespective of the terms of the Extension
Agreement.10
In interpreting the Extension Agreement, the court
applies standard principles of contract interpretation. See
10
As will be discussed when the court turns to the county’s motion, the
county argues that, but for taxpayer’s disqualification, taxpayer’s property would
have been entitled to five consecutive years of enterprise zone exemption in tax
years 2012-13, 2013-14, 2014-15, 2015-16, and 2016-17.
428 United Streetcar, LLC v. Dept. of Rev.
Yogman v. Parrott, 325 Or 358, 361, 937 P2d 1019 (1997)
(examining text of disputed provision in context of document
as a whole; extrinsic evidence of parties’ intent if provision
is ambiguous; and appropriate maxims of construction if
first two steps have not resolved the ambiguity). However,
the “context” of any term or provision of the Extension
Agreement necessarily includes the Enterprise Zone Act.
The act prescribes the parties’ authority to contract with
each other for property tax exemption, as Article IX, sec-
tion 1, of the Oregon Constitution requires a county or other
local property taxing jurisdiction to levy property taxes
(including the conferring of any exemptions) “under general
laws operating uniformly throughout the State.” Or Const,
Art IX, § 1; see also Or Const, Art I, § 32; Corporation of
Sisters of Mercy v. Lane Co., 123 Or 144, 152, 261 P 694(1927) (“There is never an exemption from taxation unless
it is provided for by law.”). Accordingly, any interpretation of
the Extension Agreement that conflicts with the Enterprise
Zone Act or other statutes is suspect.
The court concludes that taxpayer misreads the
Extension Agreement and ignores the significance of tax-
payer’s CIP exemption for the 2011-12 tax year. The premise
of taxpayer’s argument is that the language of the Extension
Agreement quoted above declares the starting year of
the enterprise zone exemption period. Yet the Extension
Agreement nowhere expressly states the starting year. The
court concludes that the language quoted above simply pre-
scribes a deadline of December 31, 2011,11 for taxpayer’s
property to become “qualified.”12 As summarized above,
property generally is “qualified” if it is new, meets minimum
cost requirements, was constructed to further the produc-
tion of income, is owned or leased by an authorized firm, is
11
Because an “assessment year” means the calendar year (ORS 308.007
(1)(b)), the phrase “in or before the assessment year beginning on January 1,
2011” means anytime through December 31, 2011.
12
Taxpayer may be reading the term “extends” in the passage quoted above
to mean that the sponsor “confers” or “grants” exemption on property that qual-
ifies on or before December 31, 2011. Consistent with ORS 285C.160(1)(a), how-
ever, the court reads the term to refer to the parties’ authority to lengthen the
duration of the exemption period beyond the default period of three years. See
Webster’s Third Int’l Dictionary 804 (unabridged ed 2002) (defining “extend” to
mean “to cause to be longer”).
Cite as 23 OTR 418 (2019) 429
located within the zone and is the same “general type” of
property described in the firm’s application for authoriza-
tion. See ORS 285C.180(1). The enterprise zone exemption
period, however, does not start until the tax year that starts
after an additional condition is satisfied: the qualified prop-
erty must have been placed in service. ORS 285C.175 pre-
scribes when the exemption period begins:
“(1) Property of an authorized business firm is exempt
from ad valorem property taxation if:
“(a) The property is qualified property under ORS
285C.180;
“* * * * *
“(A) The exemption allowed under this section applies
to the first tax year for which, as of January 1 preceding the
tax year, the qualified property is in service. * * *”
ORS 285C.175(1) - (2)(a)(A) (emphases added).13 Regardless
of taxpayer’s intentions when it applied for authorization,14
the record is clear that taxpayer ultimately placed its prop-
erty in service during 2011, not 2010. (Taxpayer’s March 30,
2012, enterprise zone exemption claim listing the subject
property as placed in service on December 15, 2011.)
The record also shows that taxpayer applied for, and
was granted, CIP exemption for tax year 2011-12. Although
the CIP exemption and the enterprise zone exemption are
part of the same statutory scheme, each is separately avail-
able depending on different criteria, and their respective
terms cumulate to a maximum of seven possible years of
13
Taxpayer also misreads ORS 285C.160(2), which states (emphasis added):
“The period for which the qualified property is to continue to be exempt must
be set forth in the [extension] agreement and may not exceed two additional
tax years.” Taxpayer seems to assume that the word “period” refers to a specific
year; from that premise, taxpayer argues that the reference in the Extension
Agreement to 2011 marks that year as the commencement of the enterprise zone
exemption period. However, correctly read, “period” refers not to one specific year
or another (2011 vs. 2012), but to the duration of the extension (one year vs. two).
14
Taxpayer cites its application for enterprise zone authorization as evi-
dence that it “expected to apply for property tax exemption in 2011, 2012, 2013,
2014, and 2015.” (Emphasis added.) Indeed, the application for authorization, as
amended, does state: “The anticipated first year(s) for the exemption period(s) is
(are): 2011.” The application indicates further that, when taxpayer signed it on
August 17, 2010, taxpayer expected to finish construction of two new buildings
and a new addition by October 2010.
430 United Streetcar, LLC v. Dept. of Rev.
exemption overall. See ORS 285C.170(4) (CIP exemption
“does not depend on the property or the authorized business
firm receiving the [enterprise zone] exemption under ORS
285C.175.”); ORS 285C.175(5) (“Property is not required to
have been exempt under ORS 285C.170 [CIP exemption]
in order to be exempt under this section [enterprise zone
exemption].”); ORS 285C.170(1)(h) (requiring, as a condition
of CIP exemption, that there be “no known reason” to con-
clude that the property “will not” satisfy the requirements of
the enterprise zone exemption upon being placed in service).
The fact that the subject property was exempt pursuant
to a CIP exemption for tax year 2011-12 proves that it was
not entitled to, and could not have received, enterprise zone
exemption for tax year 2011-12.
The court finds the following ultimate facts: (1) tax-
payer became authorized for enterprise zone exemption
in 2010; (2) taxpayer applied for and received CIP exemp-
tion for tax year 2011-12; (3) taxpayer placed the subject
property in service during 2011; (4) taxpayer filed its first
enterprise zone exemption claim in March 2012; and (5) the
county approved taxpayer’s claim in April 2012. On these
facts only one conclusion is possible: the property could not
have enjoyed enterprise zone exemption for tax year 2011-12,
and the first year of enterprise zone exemption was tax year
2012-13. There is no dispute that the Extension Agreement
granted taxpayer’s property an additional two years of prop-
erty tax abatement in addition to the standard three-year
exemption. Because the statutes allow a total of five consec-
utive years of exemption, the court concludes that taxpay-
er’s property was entitled to enterprise zone exemption in
tax years 2012-13, 2013-14, 2014-15, 2015-16, and 2016-17
unless disqualified at any point during those tax years.
Taxpayer’s motion is denied.
2. County’s motion
Because the court concludes that the enterprise
zone exemption period for taxpayer’s property continued
through tax year 2016-17, the court now must rule on the
county’s motion. The county asserts that taxpayer failed to
meet its employment requirements under the statutes and
the Extension Agreement for the period relevant to tax year
Cite as 23 OTR 418 (2019) 431
2016-17. The court views the county as making four spe-
cific points: that taxpayer (1) failed to maintain at least five
full-time employees who were (2) “engaged in the approved
work” and (3) performing the approved work a majority of
their time (4) inside the enterprise zone. By “approved work,”
(which the county sometimes refers to as “authorized work”
or “approved activities”) the county apparently means “man-
ufacturing, assembly or fabrication,” in contrast to, for exam-
ple, “act[ing] as a middle-man for parts,” without fabricat-
ing or assembling the parts within the zone. (“The company
must do the work approved by the Enterprise Zone sponsor
* * *.”) Among other evidence, the county relies on taxpay-
er’s enterprise zone exemption claim for tax year 2016-1715
and, in significant part, on emails between a staff member
in the assessor’s office and Don Hutchison, an employee of
taxpayer.
Taxpayer defends on the ground that genuine
issues of material fact preclude summary judgment. As
the nonmoving party, taxpayer has the burden of “produc-
ing evidence” now on any issue raised in the motion as to
which it would have the burden of persuasion at trial. TCR
47 C. Because taxpayer would bear the burden of proof at
trial as to its entitlement to exemption from tax, taxpayer
must now produce evidence countering each of the county’s
four allegations, to the extent those allegations are based on
valid requirements under the law. See, e.g., Hagler, 354 Or
at 144-45.
Much of taxpayer’s evidentiary showing in response
to the county’s motion misses the mark.16 However, taxpayer
15
Taxpayer now asserts that it filed this claim by mistake. For purposes of
its motion, the county cites the claim because taxpayer’s response to question 7
on the claim form states that taxpayer had “0” employees within the zone as of
March 29, 2016.
16
Taxpayer referred at times to facts stated in the magistrate’s decision but
not contained in evidence introduced in this division by stipulation, declaration
or otherwise. It should be obvious to counsel that facts recited in a magistrate’s
decision are not automatically evidence in this division because of the require-
ment that the judge hear an appeal from the Magistrate Division de novo. See
ORS 305.425(1); ORS 305.501(6). It is also fundamental that, because a magis-
trate is not bound by the evidentiary requirements that apply in this division,
no part of a magistrate’s findings constitutes a “record” on which this division
can rely. See ORS 305.501(4)(a) (magistrate not bound by evidentiary rules). The
court also notes that taxpayer has placed into the record in this division a list of
432 United Streetcar, LLC v. Dept. of Rev.
has introduced a declaration of taxpayer’s human resources
manager, Rochelle Burbank, identifying taxpayer as a
wholly owned subsidiary of “Vigor Iron Works LLC and its
predecessor Oregon Iron Works,” and otherwise stating in
relevant part:
“3. As of March 29, 2016, the date of USC’s fifth and
final Oregon Enterprise Zone Exemption Claim, at least
seven full-time (i.e., more than 32 hours/week) employees
worked at the facility at and adjacent to 9200 SW Mather
Road, Clackamas, Oregon (the ‘Facility’) on USC projects.
Prior to 2016, they were paid by USC through ADP® pay-
roll service, but after a computer conversion, they were all
converted to Vigor employees even though they continued
to work on USC projects.
“4. In addition, at least 400 full-time employees worked
at the Facility on Vigor projects in 2016, including on the
design of specialized rail cars for use by the United States
Department of Defense.”
Burbank addresses points (1) and (4) of the county’s argu-
ments by stating under penalty of perjury that more than
five employees were engaged full time within the zone at the
date of taxpayer’s claim, as of March 29, 2016.17 The court
finds that taxpayer has carried its burden of “producing
evidence” on those two points, and that the Burbank decla-
ration contradicts the county’s factual position, creating a
genuine issue of material fact as to those points.
There remain points (2) and (3)—respectively, the
county’s assertions that the employees were not engaged in
documents that taxpayer claims to have produced to the Department of Revenue
in discovery. Taxpayer then appears to rely on the list itself as evidence support-
ing exemption. The court sees no probative value in such a list of documents.
Merely describing documents that a party could introduce into evidence comes
nowhere close to satisfying a party’s burden to “produce evidence” on an issue as
to which the party would have the burden of persuasion at trial.
17
The Burbank declaration is not entirely clear regarding whether taxpayer
or either of its parent entities during the tax years at issue (Vigor Works LLC or
its predecessor Oregon Iron Works) was the contractual or common-law employer
of the employees. The declaration does, however, specify that taxpayer was a
“wholly owned” subsidiary of Vigor Works LLC (and previously, of Oregon Iron
Works). The county does not cite the possible involvement of either parent com-
pany as a ground for disqualification, possibly because the Enterprise Zone Act
allows two firms to elect to be treated as one if one owns 100 percent of the equity
interest of the other. See ORS 285C.135(4).
Cite as 23 OTR 418 (2019) 433
the “approved” or “authorized” “work” or “activities,” and that
that work or those activities did not amount to a majority of
the workers’ time. As to the precise nature of the activities,
the county asserts that only three activities are permissi-
ble: “manufacturing, fabrication or assembly for [taxpayer].”
Although the county does not fully explain this restrictive
interpretation—and taxpayer inexplicably does not attempt
to refute it—the court infers that the county takes the posi-
tion that taxpayer’s exemption required it to perform only
those three activities that taxpayer selected from a list
of 12 checkboxes on the Department of Revenue form on
which taxpayer applied for authorization. Other activities
on the application form included “Shipping,” “Storage,” and
“Other,” none of which taxpayer marked.18 The briefing does
not allow the court to determine whether the county’s posi-
tion is that every firm seeking even the minimum three-year
exemption is restricted to only those activities as to which
the firm checks a box on the authorization application form,
or whether only those firms that enter into an extension
agreement that incorporates the authorization application
by reference are bound by the boxes they check. The court
finds neither position convincing in this case.
The statutory origin of the form’s list of activi-
ties is the requirement in ORS 285C.135 that an eligible
firm “provid[e] goods, products or services to businesses or
other organizations through activities including, but not
limited to, manufacturing, assembly, fabrication, process-
ing, shipping or storage.” ORS 285C.135(1).19 The court is
not aware of any statutory authority that would limit every
applicant for authorization to only those eligible activities
that the applicant specifically identifies on the application
form. Applying the Oregon Supreme Court’s methodology
of statutory analysis, the court considers the text, context
18
The remaining checkboxes on the form are for “Bulk Printing,” “Agricultural
Production,” “Energy Generation,” “Processing,” “Software Publishing,” and
“Back-office Systems.”
19
The same section of the application form also includes a list of “ineligible”
activities (such as retail sales, health care, professional services, or construction),
as well as four “Special Cases”: operating a hotel, motel or destination resort; a
call center; a “headquarters” facility or an “electronic commerce investment.” The
entire section of the form is entitled “Business Eligibility,” and the topics it covers
closely track the content of ORS 285C.135.
434 United Streetcar, LLC v. Dept. of Rev.
and—where useful—relevant legislative history. State v.
Gaines, 346 Or 160, 171-72, 206 P3d 1042 (2009). The defi-
nitional statute broadly states that a firm seeking to be
“eligible” must engage in the “business of providing goods,
products or services to businesses or other organizations.”
ORS 285C.135(1).20 There follows an expressly nonexclusive
(“including, but not limited to”) list of six named activities
that fit this broad description. Id. Far from limiting a firm
to specific activities on the list, the statutory text allows a
firm to engage in any business-to-business transaction that
is not prohibited elsewhere in statute.21
The question then becomes whether the legisla-
ture intended to “lock in” a firm at the moment of autho-
rization by requiring the firm to commit to a specifically
identified subset of eligible activities. The authorization
statute does require an applicant to include “[a] description
of the nature of the firm’s current and proposed business
operations inside the boundary of the enterprise zone.” ORS
285C.140(2)(a). But the statutory requirements for exemp-
tion do not expressly limit the firm to this description. See
ORS 285C.200 (“qualified” firm must be “authorized”; no
requirement to adhere to specific eligible activities).22 A firm
20
By contrast, the same statute counts as “ineligible” a firm that provides
goods or services to the general public, including retail sales or services, child
care, housing, health care, tourism, entertainment, financial or professional ser-
vices, or property management. See ORS 285C.135(2). This restriction on purely
local business activity recognizes that an enterprise zone is, by definition, gener-
ally located in an area of low income and high unemployment unlikely to sustain
a market for local goods and services. See ORS 285C.090. The restriction is also
consistent with the legislature’s express desire to use the enterprise zone pro-
gram and other economic development programs to “strengthen[ ] traded sector
industries,” i.e., to attract businesses that can choose where to locate their opera-
tions because they sell their goods or services into markets for which national or
international competition exists. See ORS 285A.020(1)(i); ORS 285A.010(17).
21
In fact, the application form itself lists nearly twice as many eligible activ-
ities as those stated in the statute (not counting the catch-all “Other” category
on the form). See Decl of Rastetter B, Ex 1 at 2. This suggests that the form’s
authors, Defendant and the Oregon Business Development Department, inter-
pret the statutory list as nonexclusive. See ORS 285C.140(2)(g) (Defendant and
Oregon Business Development Department to determine additional information
for form).
22
A statutory exception shows that the legislature knows how to require
scrutiny and approval of the precise nature of the activities: a “headquarters”
facility that merely supports the operation of the same firm, as opposed to other
firms, can nevertheless be eligible if the facility provides administrative, design,
financial, management, or marketing support to the firm’s statewide, regional,
Cite as 23 OTR 418 (2019) 435
“may” amend its authorization application until the enter-
prise zone exemption period begins, but nothing requires it
to do so. See ORS 285C.140(3). The disqualification statute
provides a safeguard by requiring the assessor to disqualify
the firm if its activities are not “eligible” activities; however,
the statute does not purport to allow disqualification if the
firm switches from one kind of eligible activity to another.
See ORS 285C.240(1)(e). Thus, neither the statutory text nor
the immediate context appears to confine an applicant firm
to only those eligible activities that the firm marks on its
application.
Taking a more expansive view of statutory context,
the court finds it significant that the step of applying for
authorization occurs relatively early, before a firm has started
construction or hired any employees. ORS 285C.140(1)(a).
The authorization statute expressly requires the firm to
disclose only the “estimated” value of new improvements
and an “estimate” of the number of new employees. ORS
285C.140(2)(b), (c). Rather than forcing a firm to commit to
a rigidly fixed state of future facts, the statute requires the
firm to disclose presently known facts (such as the number
of employees within the zone in the previous 12 months) and
a set of future projections.
Likewise, the legislative history of the bill that
introduced the term “authorization” into the Enterprise
Zone Act also provides clues indicating that the term should
not be read to restrict a firm from pursuing different eligi-
ble activities beyond those marked on the application form.
Before 2003, the predecessor to ORS 285C.140 required a
firm to apply to the zone sponsor for “precertification” before
commencing construction or hiring employees. Former ORS
285B.719(1)(a) (2001). In a bill overhauling and reorganizing
the act, however, the 2003 Legislative Assembly replaced
national, or international operations. See ORS 285C.135(5)(b). But authorization
of a headquarters facility requires an additional step—the zone sponsor must
make a “formal finding” that the size of the proposed investment, the employ-
ment at the facility, “or the nature of the activities undertaken by the firm within
the enterprise zone will significantly enhance the local economy, promote the
purposes for which the zone was created and increase employment within the
zone.” ORS 285C.140(7). The authorization statute requires no such scrutiny
if the firm’s activities fit within the general description of eligible business-to-
business activities in ORS 285C.135(1).
436 United Streetcar, LLC v. Dept. of Rev.
the term “precertification” with “authorization.” Or Laws
2003, ch 662, § 30. The assistant director of the economic
development agency now known as the Oregon Business
Development Department testified that the purpose of the
change was to eliminate confusion:
“In the current law there’s a term called ‘precertifica-
tion.’ ‘Precertification’ has been confusing because there’s
no subsequent ‘certification.’ People do the precertification
to essentially put the assessors on notice that they’re pur-
suing an enterprise zone exemption. The term ‘precertifica-
tion’ means it takes place before construction begins. We’re
changing that—or we’re proposing to change that—to
‘authorization’ instead of ‘precertification’ [because] there’s
no subsequent ‘certification.’ ”
Testimony, House Committee on Trade and Economic
Development, HB 2299, Feb 23, 2003, Ex B at 3 (statement
of Mike Burton). This testimony suggests that the bill’s pro-
ponents had no intention that the change in terminology
would require the zone sponsor or the assessor to “autho-
rize” which eligible activities the firm could pursue; rather,
the authorization process served a general notice function.
The minutes summarizing the 12 days of testimony before
four legislative committees give no indication that legisla-
tors questioned or disagreed with this view. Minutes, House
Committee on Trade and Economic Development, Feb 24,
2003, 1-4, Feb 26, 2003, 3-5, Apr 7, 2003, 1-3, Apr 9, 2003,
2-3; Minutes, House Committee on Revenue, Apr 21, 2003,
4-7, Apr 28, 2003, 1-3, Apr 30, 2003, 1-3; Minutes, Senate
Committee on Revenue, May 29, 2003, 1-7, June 10, 2003,
5-9, June 12, 2003, 1-3; Minutes, Conference Committee,
July 15, 2003, 1-3, July 17, 2003, 1-2.23 By providing notice,
the authorization process weeds out projects that would be
ineligible before either the firm or the zone sponsors invest
substantial resources in them. Authorization at an early
23
Documents accompanying the agency’s oral testimony indicate that the
agency intended the 2003 change to “confirm that [a firm’s] descriptions only
matter in the most general terms of the proposed location and broad property
types, except for [‘headquarters’ facilities]. * * * Estimates and descriptions with
authorization can be critical information, but were never supposed to confound
exemption to the business firm’s disfavor.” House Committee on Trade and
Economic Development, HB 2299, Feb 23, 2003, Ex B at 4; see also id. Ex B at 9;
id. Ex A at 2; House Trade and Economic Development Committee, HB 2299-3,
Apr 7, 2003, Ex B.
Cite as 23 OTR 418 (2019) 437
stage, before commencing construction or hiring employees,
also helps ensure that the enterprise zone program func-
tions as a true “incentive” and does not merely afford exemp-
tion to a firm that has already committed to the new invest-
ment within the zone. See ORS 285C.055 (“[I]t is declared
to be the purpose of ORS 285C.050 to 285C.250 to stimulate
and protect economic success in such areas of the state by
providing tax incentives for employment, business, industry
and commerce * * *.” (Emphasis added.)). In short, the court
has not discovered any evidence of legislative intent to con-
fine a firm to specific activities that fit the definition of “eli-
gible” activities.
The court now considers whether the Extension
Agreement narrows the types of permitted activities. The
Enterprise Zone Act clearly authorizes the firm and the
zone sponsor to agree to “any additional requirement the
sponsor may reasonably require” as a condition of the addi-
tional one or two years of exemption. ORS 285C.160(3)(b)
(allowing reasonable additional conditions in an urban
zone); see also ORS 285C.160(3)(a)(B) (similar in nonurban
zones). In this case, however, the text of the Extension
Agreement places no express restrictions on taxpayer’s
activities beyond those imposed by the statute. Instead, sec-
tion 3 of the agreement states: “Only full-time, year-around
and non-temporary employees engaged a majority of their
time in The Firm’s eligible operations under [former] ORS
285B.707 [now ORS 285C.135] are counted.” (Emphasis
added.) The Extension Agreement does refer at one point
to taxpayer’s authorization application: “United Streetcar,
LLC will hire and maintain at least 5 full time positions
by December 31, 2011 as submitted in the Oregon Enterprise
Zone Authorization Application and any other positions
added that result from their investment at the compensa-
tion levels described below[.]” (Emphasis added.) The county
does not argue expressly that this provision incorporates
by reference all responses set forth in taxpayer’s applica-
tion, and the court declines any implied invitation to inter-
pret the emphasized phrase in the Extension Agreement as
converting all responses on the authorization application
form into hard and fast metrics by which to later test for
disqualification.
438 United Streetcar, LLC v. Dept. of Rev.
The court concludes, therefore, that the Extension
Agreement allowed taxpayer to count any activities or oper-
ations considered “eligible” under the Enterprise Zone Act
when determining whether disqualification was required.
On this summary judgment record, the court cannot deter-
mine that the county is entitled to prevail as a matter of
law regarding whether taxpayer’s activities were “eligible.”
Activities such as “serving as a middle-man for parts” and
“warehousing” appear to be business-to-business activities
as required in ORS 285C.135(1); they are not on the list of
expressly ineligible activities in ORS 285C.135(2); and they
may even constitute “shipping” or “storage” as expressly
permitted by ORS 285C.135(1). Despite taxpayer’s inatten-
tion to this issue, the court concludes that an objectively rea-
sonable finder of fact could well find in favor of taxpayer on
point (2) of the county’s argument. See TCR 47 C.
As to point (3) of the county’s argument, the same
conclusion as to the type of activities that were permissi-
ble prevents the court from determining, based on the
record to date, whether the employees spent the majority of
their time engaged in eligible operations as the Enterprise
Zone Act requires. See ORS 285C.050(13)(a) (definition of
“new employees hired by the firm” includes only employees
“engaged for a majority of their time in eligible operations”);
ORS 285C.200(4)(b) (qualification of firm requires that
employees “work a majority of their time in eligible opera-
tions” in the zone); ORS 285C.200(8)(b)(A) (same). The court
interprets these provisions as establishing a per-employee
test, i.e., the statutes require that each employee whom the
firm wishes to count toward the minimum requirement must
work a majority of the employee’s time in eligible operations
within the zone. The Burbank declaration is ambiguous, if
not silent, regarding whether the seven employees spent the
majority of their time on eligible operations, stating only
that seven “full-time * * * employees worked at the facility
* * * on USC projects.” The court thus has difficulty conclud-
ing that taxpayer has satisfied its burden of producing evi-
dence on how the employees spent the majority of their time.
However, because the parties apparently have proceeded on
an incorrect understanding of the type of activities permit-
ted, the overall record is even less informative about how
Cite as 23 OTR 418 (2019) 439
each employee spent the majority of time than about the
related, but higher-level, question of which activities tax-
payer pursued. As with point (2), the court cannot conclude
that the county is entitled to judgment as a matter of law.
The county’s motion is denied. At trial, taxpayer
may seek to prove its entitlement to exemption, and the
county may defend the assessment based on any applica-
ble arguments, including any or all of the four arguments
raised in its motion.
VI. CONCLUSION
Taxpayer’s motion for summary judgment is denied
because the record before the court proves that the final tax
year of taxpayer’s five consecutive tax years of enterprise
zone exemption was tax year 2016-17. The county’s motion
for summary judgment is also denied because, applying
a correct interpretation of the law governing the employ-
ment requirements, a genuine issue of material fact exists
regarding whether taxpayer maintained five employees per-
forming eligible activities a majority of their time within the
enterprise zone during the period relevant to the tax year
2016-17. Now, therefore,
IT IS ORDERED that Plaintif’s Motion for Sum-
mary Judgment is denied; and
IT IS FURTHER ORDERED that Defendant-
Intervenor’s Motion for Summary Judgment is denied.