Karamanos Holdings Inc. II v. Dept. of Rev. , 21 Or. Tax 204 ( 2013 )

204 June 20, 2013 No. 28
IN THE OREGON TAX COURT
REGULAR DIVISION
KARAMANOS HOLDINGS, INC.
and Sunshine Dairy Foods Management, LLC,
Plaintiffs,
v.
DEPARTMENT OF REVENUE
and Multnomah County Assessor,
Defendants.
(TC 5135)
Plaintiffs (taxpayer) appealed from a Magistrate Division decision of dis-
missal regarding property tax assessment in Multnomah County. Taxpayer
asserted its petition to the county board of property tax appeals and its com-
plaint to the Magistrate Division were timely, and argued that its property was
not principal or secondary industrial property such that the appeal provisions of
ORS 305.403 applied. Defendant Department of Revenue (the department) moved
to dismiss on the ground that the Magistrate Division complaint was not timely.
Following cross-motions for summary judgment, the court ruled that because
taxpayer’s property was principal or secondary industrial property, the appeal
provisions of ORS 305.403 as recently amended applied, and that because of that
statutory context, taxpayer’s appeal to the Magistrate Division was untimely and
not a failure for good and sufficient cause such that the court could consider the
matter under ORS 305.288.
Oral argument on cross-motions for summary judgment
was held April 8, 2013, in the courtroom of the Oregon Tax
Court, Salem.
Michael J. Mangan, Cosgrave Vergeer Kester LLP,
Portland, filed the cross-motion and argued the cause for
Plaintiffs (taxpayer).
Douglas M. Adair, Senior Assistant Attorney General,
Department of Justice, Salem, filed the motion and argued
the cause for Defendant Department of Revenue (the
department).
Lindsay R. Kandra, Multnomah County Counsel,
Portland, filed the motion for Defendant Multnomah County
Assessor (the county).
Decision for Defendants rendered June 20, 2013.
HENRY C. BREITHAUPT, Judge.
Cite as 21 OTR 204 (2013) 205
I. INTRODUCTION
This matter is before the court on cross-motions for
summary judgment. The question is whether Plaintiffs (tax-
payer) timely appealed assessment of its property.
II. FACTS
This property tax case involves buildings, struc-
tures and equipment contained in several tax accounts, used
in a dairy operation and located at one physical address. For
a number of years prior to the year in question, 2011-12,
the property was classified as industrial property in respect
of which Defendant Department of Revenue (the depart-
ment) had assessment responsibility under ORS 306.126.1
Taxpayer has known that the property was subject to state
assessment and has, for many years, filed the reporting
forms appropriate to that status.
Prior to the 2011 legislative session of the Oregon
Legislature, ORS 305.403 provided that a taxpayer owning
principal or secondary industrial property subject to assess-
ment by the department could, if the taxpayer so elected,
bypass any appeal to a county Board of Property Tax Appeal
(BOPTA) and proceed directly to this court to contest the
assessment. Alternatively appeals could be to the appro-
priate BOPTA. In either case the appeal had to be filed by
December 31 of the tax year.
In 2011 the Oregon Legislature amended ORS
305.403 and ORS 309.100 so that any contest of department
assessments of primary or secondary industrial properties
had to be initiated, if at all, in this court. Or Laws 2011,
ch 111, sections 1 and 2. Those amendments were effective
September 29, 2011, prior to the time the tax statements for
the property were sent to taxpayer. The appeal to this court,
for the 2011-12 year, had to be filed by December 31, 2011.
Taxpayer’s attorney prepared and, on December 23,
2011, filed with the Multnomah County BOPTA, appeals of
the assessments for the 2011-12 year. Based on the changes
made to ORS 305.403, those filings were rejected by the
Multnomah County BOPTA . Thereafter, taxpayer filed an
1
All references to the Oregon Revised Statutes (ORS) are to 2011.
206 Karamanos Holdings Inc. II v. Dept. of Rev.
appeal in this court on January 4, 2012. That filing was
beyond the statutory filing deadline.
III. ISSUES
Two issues are presented for decision. The first
issue is whether the property in question was principal or
secondary industrial property such that the appeal provi-
sions of ORS 305.403 apply. The second issue is whether,
if ORS 305.403 did apply, failure of taxpayer to file in this
court within the statutory time allowed was a failure for
good and sufficient cause such that the court can consider
the matter under ORS 305.288 notwithstanding the failure
to timely appeal.
IV. ANALYSIS
A. Issue of Primary or Secondary Industrial Property
Taxpayer’s first argument is that the property unit
in question was not a principal or secondary industrial prop-
erty. That position is untenable. For purposes of determin-
ing the proper route of appeal, ORS 305.403 specifies that
the direct route to this court must be taken for principal
and secondary industrial property. The statute then goes
on to say that those terms have the meaning assigned in
ORS 306.126 “and include those properties appraised by
the department for ad valorem property tax purposes.” ORS
305.403(5).
The property in question here is a principal or sec-
ondary industrial property as defined in ORS 306.126. That
statute must be read together with the rules that the depart-
ment has adopted to carry out its responsibilities. Taxpayer
argues that ORS 306.126 must be read by treating a “unit”
of property as each individual building, structure or piece
of equipment found in an industrial location. That position
is not well taken. ORS 306.126 itself speaks of a “unit” as
potentially being comprised of “improvements.” It states, for
example:
“ ‘Secondary industrial property’ means any unit of
industrial property having a real market value of the
improvements on the assessment roll for the preceding year
of more than $1 million but of $5 million or less.”
Cite as 21 OTR 204 (2013) 207
ORS 306.126(1)(a)(B) (emphasis supplied). That statutory
language cannot be given effect if a “unit” was, in all cases,
only one improvement or piece of machinery.
Further, ORS 306.126 authorizes the department
to adopt rules as may be necessary to carry out the purposes
of the statute. The department has done so and the court
finds no fault with what the department has done in order
to define its areas of responsibility and provide guidance to
taxpayers and county assessment officials. The court con-
cludes that the property in question here is a secondary
industrial property within the definitions of ORS 306.126.
Even if that were not the case, ORS 305.403 appears
to apply to this property because it was, in the language of
ORS 305.403(5), a property “appraised by the department.”
That appears to be an independent basis for concluding that
the appeal requirements of ORS 305.403 must be satisfied.
The court observes that doubt about the status of
the property in question does not appear to have existed in
years prior to 2011-12. In those years the taxpayer reporting
and department processing functions applicable to indus-
trial facilities had been regularly followed. Taxpayer argues
that the fact that such processes were followed cannot sup-
port the conclusion that this property was in fact industrial.
Taxpayer states that the reason for this was that, prior to
2011, there was no reason to care whether property was or
was not industrial. That, however, was not so. Prior to the
amendments to ORS 305.403 made in 2011, owners of prin-
cipal and secondary industrial properties had the option
to forego appeal to the Board of Tax Appeals and proceed
directly to this court. In any case, the resolution of this point
rests on the provisions of the statute and rules and not on
inferences from false premises.
B. Applicability of ORS 305.288
Taxpayer also argues that notwithstanding
the requirement of ORS 305.403, as amended effective
September 29, 2011, the provisions of ORS 305.288 apply
to give this court jurisdiction for the reason that taxpayer
had good and sufficient cause for failing to comply with the
208 Karamanos Holdings Inc. II v. Dept. of Rev.
requirements of ORS 305.288. ORS 305.288 provides, in
respect of the good cause element:
“(b) ‘Good and sufficient cause’:
“(A) Means an extraordinary circumstance that is
beyond the control of the taxpayer, or the taxpayer’s agent
or representative, and that causes the taxpayer, agent
or representative to fail to pursue the statutory right of
appeal; and
“(B) Does not include inadvertence, oversight, lack of
knowledge, hardship or reliance on misleading information
provided by any person except an authorized tax official
providing the relevant misleading information.”
ORS 305.288(5)(b).
It is obvious that but for the change in the provisions
of ORS 305.403 made by the 2011 legislature, the actions
taken by taxpayer and its attorney would have been suffi-
cient to begin a contest as to the assessment of taxpayer’s
property. The record contains no evidence that any physi-
cal changes or, indeed, any other changes occurred in 2011
that led to any act or omission on the part of taxpayer to its
detriment.
What the statute requires, in the first instance, is a
“circumstance” that “causes” a taxpayer or an agent or rep-
resentative to fail to pursue a statutory right of appeal. In
order to qualify for the benefits of ORS 305.288, a taxpayer
needs to show not only that some “circumstance” occurred,
but also that its occurrence “caused” a failure.2 In the record
made by taxpayer in this matter, there is no evidence that
any “occurrence,” including the amendment of ORS 305.403,
caused taxpayer or its agent or representative to fail to pur-
sue an appeal. There is no declaration or affidavit of an offi-
cer of taxpayer to that effect. There is a declaration of David
J. Sweeney, an attorney for taxpayer. However, that decla-
ration does not go beyond a statement of certain historical
facts. It contains no identification of a circumstance that
2
In a typical situation, a taxpayer would establish, for example, the fact of a
debilitating illness and show how the timing of that illness and statutory dead-
lines coincided.
Cite as 21 OTR 204 (2013) 209
caused or is described as causing any failure to pursue the
appeal properly. In particular, there is no statement from
David J. Sweeney that he had, in good faith, formulated a
view of ORS 306.126 and ORS 305.403 consistent with what
counsel for taxpayer now argues, and that on that basis he
chose to take the action he did.
The failure of taxpayer to make a record as to a
circumstance and a causal connection between that and
a failure would be enough to deny the motion of taxpayer
and grant the motion of the department. However, in the
absence of any such showing, the court also observes that,
logically, the only circumstance that occurred and was rel-
evant to the failure to pursue the statutory right of appeal
was the amendment to ORS 305.403. Following that amend-
ment taxpayer and its attorney were either unaware of the
change in the law or they were aware of the change but did
not take the change into account.
In the case of taxpayer or its attorney being
unaware of the change in the law, the explicit language of
ORS 305.288(5)(b) states that such lack of knowledge does
not constitute good and sufficient cause. In the event that
taxpayer or its attorney knew of the change in law but did
not react appropriately, that would constitute inadvertence
or oversight, again specifically declared in the statute not to
constitute good and sufficient cause.
V. CONCLUSION
The complaint filed in the Magistrate Division in
this matter identified one real property tax account and two
personal property tax accounts as being at issue. On this
record, accounts R278439 and P623373 were properly before
the court given action of the Multnomah County BOPTA
in denying jurisdiction over those accounts. Nothing in the
record indicates that the Multnomah County BOPTA took
any action in respect of Account P613420 prior to the time
taxpayer’s complaint was filed in the Magistrate Division.
There is therefore no action for this court to review as to
Account P613420 and the complaint, insofar as it addresses
that account is, for that reason, dismissed. As to its sub-
stantive discussions and decision, this order should be read
210 Karamanos Holdings Inc. II v. Dept. of Rev.
as referring only to accounts R278439 and P623373. Now,
therefore,
IT IS ORDERED that the motion for summary
judgment of Defendants is granted; and
IT IS FURTHER ORDERED that Plaintiffs’ cross-
motion for partial summary judgment is denied. Counsel for
Defendant Department of Revenue is directed to prepare
and appropriate form of judgment. Costs shall be paid by
Plaintiffs.