Hong v. Douglas County Assessor ( 2012 )

IN THE OREGON TAX COURT
MAGISTRATE DIVISION
Property Tax
FANG YEN HONG )
and CHUN-MEI L. HONG, )
)
Plaintiffs, ) TC-MD 120055N
)
v. )
)
DOUGLAS COUNTY ASSESSOR, )
)
Defendant, )
)
and )
)
DEPARTMENT OF REVENUE, )
State of Oregon, )
)
Defendant-Intervenor. ) DECISION
Plaintiffs filed their Complaint on February 14, 2012, challenging Defendant Department
of Revenue’s (Department) Conference Decision No. 11-0021, dated December 28, 2011.
Plaintiffs allege Department abused its discretion by dismissing Plaintiffs’ petition for lack of
supervisory jurisdiction. The court review is limited to the record before the Department.
Resolution Trust Corp. v. Dept. of Rev. (Resolution Trust), 13 OTR 276, 279 (1995). The
Department provided the complete “conference record,”1 including all evidence provided to the
Department and an audio recording of the conferences held by the Department. The parties
agree that the conference record includes all evidence and testimony submitted to the
Department as part of Plaintiffs’ petition. The parties submitted cross-motions for summary
judgment and this matter is now ready for the court’s determination.
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1
The Department’s “conference record” is 49 pages and includes the conference decision, Plaintiffs’
petition, letters submitted by Plaintiffs and the county, and all correspondence from the Department.
DECISION TC-MD 120055N 1
I. STATEMENT OF FACTS
Plaintiffs appealed the 2008-09, 2009-10, and 2010-11 real market values (RMV) and
maximum assessed values (MAV) of property identified as R34324 to the Department.
(Department’s Conference R at 1.) Plaintiffs also appealed the accrued interest on back taxes for
tax years 2008-09, 2009-10, and 2010-11 for properties identified as R34324 (Lot 300) and
R34340 (Lot 400) to the Department. (Id.) Plaintiffs did not own Lots 300 and 400 for the tax
years at issue, but the Department found that Plaintiffs had standing for the appeal because
Plaintiffs are obligated to pay “back taxes” for each of those years. (Id. at 4.) Timely appeals
were not filed with the county board of property tax appeals for the tax years at issue, although
Paul Meyer, Douglas County Counsel, reported that “the then property owner (taxpayer’s
predecessor in interest) asked the assessor to review the value of the properties [and t]hat
resulted in a significant drop in the RMV of the land. The RMV of [Lot 400] became $467,500.”
(Id. at 35.)
Plaintiffs sought supervisory review by the Department under ORS 306.115.2 The
Department held telephone conferences on August 16, 2011, and September 8, 2011, to
determine whether Plaintiffs’ petition satisfied the requirements for the Department’s
supervisory jurisdiction. (Id. at 1, 9.) Fang Yen Hong appeared and testified on behalf of
Plaintiffs. Paul Meyer and Bryan Lif appeared and testified on behalf of Douglas County. (Id.
at 7, 8.)
On December 28, 2011, Department issued its Conference Decision No. 11-0021. The
Department concluded that it lacked jurisdiction to review the substantive issues of Plaintiffs’
petition because:
2
All references to the Oregon Revised Statutes (ORS) and to the Oregon Administrative Rules (OAR) are
to 2009.
DECISION TC-MD 120055N 2
“[T]he department does not find agreement to any facts that indicate an
assessment error is likely. In fact there was no challenge to the valuation or
appraisal process. Further, there is no evidence that any of the other supervisory
standards indentified in OAR 150-306.115 have been satisfied.”
(Id. at 4.)
The Conference Record indicates that Plaintiffs acquired two adjacent and similar lots,
Lot 300 and Lot 400, on January 28, 2011, from Rogue River Mortgage “as a matter of record.”
(Department’s Conference R at 4.) Property taxes and accrued interest for the 2008-09 and
2009-10 tax years were not paid at the time of Plaintiffs’ acquisition. (Id.) During the
August 16, 2011, telephone conference with the Department, Plaintiffs asserted that the back
taxes and interest on Lot 300 are unreasonable because the MAV and the corresponding property
taxes for Lot 300 are 740 percent greater than the MAV and corresponding property taxes for
Lot 400. (Department’s Conference R at 42.) Plaintiffs alleged that the parties agreed to facts
indicating a likely error on the tax roll, and that they were being taxed on nonexistent property
for the tax years at issue.
The 2008-09, 2009-10, and 2010-11 RMVs, MAVs, and assessed values (AV) for
Lot 300 and Lot 400 are as follows:
Lot 300 Lot 400
2008-09 RMV $975,193 $918,131
MAV $1,309,681 $119,432
AV $975,193 $119,432
2009-10 RMV $975,193 $918,131
MAV $1,309,681 $123,014
AV $975,193 $123,014
2010-11 RMV $496,500 $467,500
MAV $1,309,681 $126,704
AV $496,500 $126,704
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DECISION TC-MD 120055N 3
(Id. at 30.) Back taxes and accrued interest of Lot 300 total $39,622.27. (Id. at 43.) Back taxes
and accrued interest of Lot 400 total $6,362.64. (Id. at 44.)
The MAV of $1,309,681 of Lot 300 resulted from the existence of a lumber mill on
the property prior to 2003. (Id. at 28, 34.) In 2003, the lumber mill went bankrupt and was
dismantled. (Id. at 28.) At the time, no law existed allowing a reduction of a property’s MAV
reflecting removal of property. (Id. at 4.) However, the RMV of Lot 300 was reduced for the
2003-04 tax year reflecting the removal of the lumber mill. (Id. at 34.) In 2006, the City of
Roseburg rezoned Lots 300 and 400 from “heavy industrial” to “mixed use” commercial,
resulting in RMV increases reflected in the 2008-09 RMVs. (Id. at 35.)
II. ANALYSIS
The court’s standard of review of the Department’s Conference Decision is abuse of
discretion. When evaluating abuse of discretion, the court reviews the Department’s decision
in the context of whether the Department acted in an “arbitrary, capricious or wrongful manner”
or whether Defendant’s decision is “clearly wrong.” Perkins and Wiley v. Dept. of Rev.,
13 OTR 426, 428 (1995) (citing Corvallis Country Club v. Dept. of Rev., 10 OTR 302, 307
(1986)); Martin Bros. v. Tax Commission, 252 Or 331, 338, 449 P2d 430 (1969) (citing
Richardson v. Neuner, 183 Or 558, 564, 194 P2d 989 (1948)). The court cannot “substitute its
own view for the administrator’s judgment” when review is statutorily given to another entity.
Rogue River Pack v. Dept. of Rev., 6 OTR 293, 301 (1976). In making its determination, the
court is limited to the record before the Department. Resolution Trust, 13 OTR at 279.
The parties filed cross-motions for summary judgment. Summary judgment is
appropriate when “the pleadings, depositions, affidavits, 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
DECISION TC-MD 120055N 4
prevail as a matter of law.” Tax Court Rule 47 C. The court reviews the record to determine
whether the moving party is “entitled to prevail as a matter of law.” (Id.)
The Department has supervisory power over the Oregon property tax system under
ORS 306.115. ORS 306.115(3) grants the Department the authority to:
“[O]rder a change or correction applicable to a separate assessment of
property to the assessment or tax roll for the current tax year and for either of the
two tax years immediately preceding the current tax year if for the year to which
the change or correction is applicable the department discovers reason to correct
the roll which, in its discretion, it deems necessary to conform the roll to
applicable law without regard to any failure to exercise a right of appeal.”
(Emphasis added.) The Department may adopt rules “to regulate its own procedure.”
ORS 305.100. The Department promulgated OAR 150-306.115 to govern the process by which
Department will review a petition for a change or correction to a separate assessment of property.
OAR 150-306.115(4) provides in part:
“The department will consider the substantive issue in the petition only when:
“(a) The assessor or taxpayer has no remaining statutory right of appeal;
and
“(b) The department determines that an error on the roll is likely as
indicated by at least one of the following standards:
“(A) The parties to the petition agree to facts indicating likely
error; or
“(B) There is an extraordinary circumstance indicating a likely
error. Extraordinary circumstances under this provision are:
“(i) The taxation of nonexistent property, property that is
exempt as a matter of law without an application, or
property outside the taxing jurisdiction[.]”
Plaintiffs allege that the Department abused its discretion when it dismissed Plaintiffs’
petition for lack of jurisdiction. Plaintiffs argue that the Department had jurisdiction to hear the
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DECISION TC-MD 120055N 5
substantive issues of their petition because the parties agreed to facts indicating a likely error
and the existence of an extraordinary circumstance of taxation of nonexistent property. The
Department responds that it did not abuse its discretion when it dismissed Plaintiffs’ petition
because, for the tax years at issue, the case is void of facts indicating likely error and Plaintiffs
were not taxed for nonexistent property.
Plaintiffs’ request a reduction in the MAV of Lot 300 for the tax years at issue based on
the substantial difference between the MAV of Lot 300 and the MAV of Lot 400. Plaintiffs
allege that the neighboring properties are similar, and thus the fact that the MAV of Lot 300 is
740 percent higher than the MAV of Lot 400 indicates an error. Plaintiffs believe that, because
the Department acknowledges that the MAV of Lot 300 is substantially higher than the MAV of
Lot 400, the parties agree to facts indicating a likely error. However, the Department concluded
that the MAV of Lot 300 was consistently and correctly calculated as 100 percent of the MAV of
the prior year for each of the tax years at issue.3 (Def’s Cross-Mot Summ J at 4; Conference R
at 4, 36.)
The parties agree that Lot 300 has a higher MAV than Lot 400 because, before 2003,
Lot 300 included a lumber mill. The lumber mill was removed during the 2003-04 tax year.
ORS 308.146(8) allows a reduction in MAV for the removal or demolition of a building in the
year of removal or demolition and upon application to the county assessor. Subsection (8) of
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3
ORS 308.146(1) provides:
“The maximum assessed value of property shall equal 103 percent of the property’s assessed value
from the prior year or 100 percent of the property's maximum assessed value from the prior year,
whichever is greater.”
DECISION TC-MD 120055N 6
ORS 308.146 was added during the 2007 legislative session. Or Laws 2007, ch 516, § 1. At
the time the lumber mill was removed during the 2003-04 tax year, there was no provision in
the law allowing a corresponding reduction in the MAV of Lot 300. See Benson v. Columbia
County Assessor, TC-MD No 020660B at 3 - 4, WL 32104967 at *2 (Dec 23, 2003). Because
there was no provision under the law to reduce the MAV of Lot 300 in tax year 2003-04 to
reflect the removal of the lumber mill, the difference between the MAV of Lot 300 and the
MAV of Lot 400 does not indicate a likely error on the roll. It has been recognized that the
concept of MAV may result in various degrees of nonuniformity over time. Ellis v. Lorati,
14 OTR 525, 535 (1999). Article 11, section 11, of the Oregon Constitution is not subject
to uniformity requirements. Id. Therefore, under Article 11, section 11, of the Oregon
Constitution, similar properties may have different MAVs.
Even if the 2003-04 tax roll included an error, it is not likely that there was an error on
the tax rolls in any of the years at issue before the Department. According to ORS 306.115(3),
the Department may correct valuation errors for the current tax year and the two prior tax
years. (Def’s Cross-Mot Summ J at 5.) The Department lacks authority to correct an error on
the 2003-04 tax roll, because that year is beyond the time allowed under ORS 306.115. (Id.) For
the years at issue, the MAV of Lot 300 was correctly calculated as 100 percent of the MAV of
the prior year. (Def’s Cross-Mot Summ J at 4; Conference R at 4, 36.)
If the Department does not find that an error on the roll is likely in the years at issue, it
must deny a plaintiff’s petition for supervisory review. Ghazi-Moghaddam v. Dept. of Rev.,
TC No 4968, WL 2750894 at *3 (June 21, 2011). Because the agreed upon facts do not indicate a
likely error, Department did not abuse its discretion in dismissing Plaintiffs’ petition.
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DECISION TC-MD 120055N 7
Plaintiffs put forth an alternative argument that the MAV of Lot 300 should be reduced
because Plaintiffs believe they are being taxed on “phantom property,” which is an extraordinary
circumstance. (Ptf’s Cross-Mot Summ J at 7.) The Department concluded that Plaintiffs
were not being taxed for nonexistent property under OAR 150-306.115(4)(b)(B)(i).
(Department’s Conference R at 4.) Property is taxed on the lesser of its MAV or the RMV.
Or Const Art XI § 11(1)(f); ORS 308.146(2); Flavorland Foods v. Washington County Assessor,
334 Or 562, 565 (2002). Because the RMV of Lot 300 was less than the MAV of Lot 300 for the
years at issue, the property was taxed on its RMV in the 2008-09, 2009-10, and 2010-11 tax
years. The RMV of Lot 300 decreased as a result of the removal of the lumber mill and did not
include any value for nonexistent property. (Department’s Conference R at 4, 34.) For the tax
years at issue, Plaintiffs were not taxed for non-existent property; thus, no extraordinary
circumstance exists for those years and the Department did not abuse its discretion in dismissing
Plaintiffs’ petition.
Finally, Plaintiffs question the Department’s property tax conference procedures, stating
that their “phone was cut off from the conference many times,” and that their Conference
Decision was unnecessarily delayed. (Ptf’s Cross-Mot Summ J at 1, 2.) OAR 150-306.115-(C)
outlines the Department’s property tax conference procedures. The court has reviewed
OAR 150-306.115-(C), and it appears that the Department complied with the procedures set
forth in the rule. The Department did not abuse its discretion for failure to comply with its own
property tax conference procedures.
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DECISION TC-MD 120055N 8
III. CONCLUSION
After careful consideration of the Conference Record, the court concludes that the
Department did not abuse its discretion in dismissing Plaintiffs’ petition for tax years 2008-09,
2009-10, and 2010-11, based on lack of supervisory jurisdiction. Now, therefore,
IT IS DECIDED that Plaintiffs’ Motion for Summary Judgment is denied; and
IT IS FURTHER DECIDED that Defendant’s Cross-Motion for Summary Judgment is
granted.
Dated this day of July 2012.
ALLISON R. BOOMER
MAGISTRATE
If you want to appeal this Decision, file a Complaint in the Regular Division of
the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563;
or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.
Your Complaint must be submitted within 60 days after the date of the Decision
or this Decision becomes final and cannot be changed.
This document was signed by Magistrate Allison R. Boomer on July 10, 2012.
The Court filed and entered this document on July 10, 2012.
DECISION TC-MD 120055N 9