Douglas County Assessor v. Crawford , 21 Or. Tax 6 ( 2012 )

6 August 7, 2012 No. 2
IN THE OREGON TAX COURT
REGULAR DIVISION
DOUGLAS COUNTY ASSESSOR,
Plaintiff,
v.
Ralph L. CRAWFORD,
Defendant.
(TC 5076)
Plaintiff (the county) appealed from a Magistrate Division decision that
removed exception value as assessed on Defendant (taxpayer)’s real property on
the ground that the county had not properly complied with statutory require-
ments regarding omitted property. Taxpayer filed a motion to dismiss the county’s
complaint, and a brief trial was held on the initial question of whether or how the
omitted property or other provisions of Oregon law applied to the actions of the
assessor. In ordering the case to continue, the court ruled that the stipulation
and facts established at the hearing were not conclusive on the question of when
the improvements were done, therefore the court could not reach a decision as to
whether the action of the county was correct, in whole or in part.
Trial was held July 10, 2012, in the courtroom of the
Oregon Tax Court, Salem.
Paul E. Meyer, Douglas County Counsel filed the response
and argued the cause for Plaintiff (the county).
Ralph L. Crawford, Defendant (taxpayer) filed the motion
and argued the cause pro se.
Decision rendered August 7, 2012.
HENRY C. BREITHAUPT, Judge.
I. INTRODUCTION
This matter is before the court on motions for an ini-
tial decision as to whether or how the omitted property or other
provisions of Oregon law apply to the actions of the assessor in
this matter. The facts have been stipulated or established at
the hearing on this matter held on July 10, 2012.
II. FACTS
Plaintiff (the county) added certain values to the
assessment roll for the 2010-11 tax year attributable to
Cite as 21 OTR 6 (2012) 7
improvements made by Defendant (taxpayer) to structures
that had been on the property at the time of the last physical
appraisal of the property in 2000. The county assessment
official involved in the case could not determine when the
improvements had been made. The additions were treated
as additional property in the tax account.
III. ISSUE
The issue is whether the actions of the assessor with
respect to the improvements were valid under Oregon law.
IV. ANALYSIS
The actions of the county gave rise to additional
real market value (RMV) being reflected in the property tax
account. More importantly, it gave rise to “exception value,”
that is an addition of maximum assessed value (MAV) to
the property tax account. Addition of an element of RMV to
the account would not result in additional tax obligations
unless the MAV of the account were also increased. This is
because of the most basic rule of Article XI, section 11, of
the Oregon Constitution (Measure 50) and its implementing
statutes—that the assessed value (AV) of an account cannot
exceed the MAV of the property in the account. The calcula-
tions are made on the basis of aggregate figures for all prop-
erty in the account. See, ORS 308.142;1 Flavorland Foods v.
Washington County Assessor, 15 OTR 182 (2000).
The term “exception value” is a creature of Measure
50. It is not found in either the Constitution or statutes, but
is a shorthand expression for the occasions triggering a cal-
culation of the MAV for an account under an exception to the
calculation rule of ORS 308.146(1). The county asserts that
in determining the MAV for the account in question it is not
limited to the calculation contained in ORS 308.146(1). The
“exceptions” are found in ORS 308.146(3) and include, inso-
far as relevant to this opinion, occasions when property is
new property or improvements, occasions when property is
first taken into account as omitted property, and occasions
when the property becomes disqualified from exemption.
See ORS 308.146(3)(a), (d), and (e), respectively.
1
Unless otherwise noted, all references to the Oregon Revised Statutes
(ORS) are to 2009.
8 Douglas County Assessor v. Crawford
Taxpayer asserts that the county, in taking the
action it did, should have followed the procedures applica-
ble to omitted property. See ORS 311.216 to 311.232. The
magistrate who heard this matter concluded that the county
should have followed the omitted property procedures, rely-
ing on the facts she found and the analysis of the Magistrate
Division decision in Metzger v. Multnomah County Assessor,
TC-MD No 050231C, WL 1083378 (Apr 20, 2006). In Metzger,
the court concluded that additions to the roll being prepared
could be made only as to property or improvements that
came into existence after January 1 of the prior assessment
year.2 Earlier additions would have to be made in accordance
with the omitted property statutes.
The position of taxpayer and the magistrate is that,
given the facts as proven in the Magistrate Division—that
all improvements were made before January 1, 2009, the
only exception value provision of ORS 308.146 available to
the county is that applicable to omitted property. The county
concedes that it did not follow the omitted property proce-
dures. This proceeding is de novo and there has not so far
been a stipulation or proof, in this division, of when the
improvements in question were made.
The county asserts that it was not required to fol-
low the omitted property procedures in adding an element of
MAV, associated with the improvements, to the property tax
account. Although the county does not appear to have said
so explicitly, it appears that the county takes this position
without regard to when the improvements in question were
made. While the county is clear as to what it thinks it was
not required to do procedurally, it is not clear as to what
substantively in the statutes gave it the authority to add any
increment of MAV to the property tax account in question
here above and beyond the amount calculated under ORS
308.146(1).
In this proceeding, the county relies upon the decision
in Multnomah County Assessor v. Portland Devel. Comm. I,
20 OTR 395 (2011) in concluding that it did not need to
2
See ORS 308.007 for definitions of what is an assessment year as opposed
to a tax year.
Cite as 21 OTR 6 (2012) 9
follow the omitted property procedures in adding value to
the 2010-11 roll in the process of preparing that roll and
before certification of that roll. In Portland Devel. Comm. I
this court held that the county involved there did not need
to follow omitted property procedural requirements when it
concluded that property of the taxpayer was not exempt and
proceeded to levy taxes on such property on the assessment
and tax rolls being prepared for the tax year in question.
Portland Devel. Comm. I does not help the county.
It is true that the county in that case, as the county here,
was adding an element of MAV to the account for the year
for which the roll was being prepared. However in Portland
Devel. Comm. I, the county involved was doing so because of
a change of its view as to whether the property was exempt.
The county was relying on ORS 308.146(3)(e)—the stat-
ute addressing loss of exemption. The addition of MAV to
the account did not depend upon any change in the physi-
cal nature of the property in the account. The change was
rather one of the view of the county as to whether the owner-
ship and use of a given amount of property was, or was not,
exempt under Oregon law.
Here, the county does not purport to act under the
provisions of ORS 308.146(3)(e) regarding disqualification
from exemption. Nor does the county purport to act under
the omitted property exception of ORS 308.146(3)(d). That
leaves the county with a potential substantive source of
authority only in ORS 308.146(3)(a), the provision permit-
ting additions of elements of MAV in cases where there is
“new property or new improvements to property” involved.
See ORS 308.146(3)(a). As this authority only applies to
property or improvements that are “new,” the court must
address what “new” means.3
There is no explicit statutory definition of what
makes property or an improvement “new.” There can be no
3
There is no doubt that “new” in the context of ORS 308.146(3)(a) does not
mean “newly discovered” or “newly added.” “New” is an adjective and “newly” is
an adverb. “New” qualifies the property or improvement whereas “newly discov-
ered” or “newly added” qualify an action of the assessor. An action of the assessor
cannot supply the authority for the action of the assessor.
10 Douglas County Assessor v. Crawford
doubt, however, that there is a temporal element in the con-
cept of “new.” The definition of “new” is:
“[H]aving existed or having been made but a short time;
having originated or occurred lately * * *.”
Webster’s Third New Int’l Dictionary 1522 (unabridged ed
2002). This definition suggests not only that something has
existed for only a short time, but also implicitly suggests
that if that something existed earlier than a measuring
point in time, the item is not new.
The context of the statutes implementing Measure
50 support a conclusion that there is a temporal element
involved in “new.” They also supply a basis for concluding
that a “new” improvement or “new” property is one that has
come into being between January 1 of the preceding assess-
ment year (in this case January 1, 2009) and January 1 of
the current assessment year (in this case January 1, 2010).
To the statutory provisions providing this context the court
now turns.
The term “new property or new improvements” is
defined in ORS 308.149(5)(a), which, in relevant part pro-
vides that the term means “changes in the value of prop-
erty as the result of * * * [n]ew construction, reconstruction;
major additions, remodeling, renovation or rehabilitation of
property.”
Excluded from the term, however is “minor con-
struction.” Minor construction is defined as “additions of
real property improvements, the real market value of which
does not exceed $10,000 in any assessment year or $25,000
for cumulative additions made over five assessment years.”
ORS 308.149(6) (emphasis supplied). Obviously, an annual
period is important in this element of the statutory provi-
sion about new property. Further the annual period is the
assessment year rather than the tax year.
Also relevant to this analysis is ORS 308.149(5)(c),
which provides that the term “new property or new improve-
ments” includes “taxable property that on January 1 of the
assessment year is located in a different tax code area than
on January 1 of the preceding assessment year.” (Emphasis
Cite as 21 OTR 6 (2012) 11
added.) There is no indication in the statutes that what
is true of property in a different code area, and therefore
“new,” would not also be true of improvements to property.
That being true, it follows that the period during which
something must come into existence in order to be “new” is
the assessment year preceding the current assessment year.
The temporal element contained in ORS 308.149(5)(c)
and ORS 308.149(6) is confirmed by ORS 308.153, which,
in relevant part, provides, “If new property is added to the
assessment roll or improvements are made to property as
of January 1 of the assessment year, the maximum assessed
value of the property shall be * * *.” (Emphasis added.) This
language provides the end point of the period within which
something can qualify as “new,” at least for the annual cal-
culation that must be made for the preparation of a roll. That
end point is January 1 of the assessment year in respect of
which the roll for the tax year is being prepared.
Taken together, all of the statutory provisions lead
to the conclusion that the beginning point of the measuring
period for a determination of what is “new” is one year prior
to the assessment date for the year in question. Anything
added before that, in this case before January 1, 2009,
would, or should, have been taken into account as “new” on
that earlier year roll and should not be treated as “new” in
a later year.4 The ending point of the period of measurement
is January 1 of the current assessment year, in this case
January 1, 2010. Property or improvements added after that
time should be added as “new” property in the following
assessment year.
Applying the foregoing to this case, in order for the
improvements made by taxpayer to be added as new prop-
erty or new improvements to the roll for the 2010 assess-
ment year, they would have had to have come into existence
between January 1, 2009, and January 1, 2010. They would
4
If property or improvements added to the account prior to the preceding
year were to later be included as new, a taxpayer could lose the benefit of properly
computed MAV addition. That addition depends on the ratio of MAV to RMV of
property of a similar class in the year in which the property is added to the roll.
Getting the year wrong could result in using the wrong ratio. That would result
in getting the MAV calculation wrong.
12 Douglas County Assessor v. Crawford
then have been “new” for purposes of the roll for the 2010-11
tax year. Any improvements made prior to January 1, 2009,
can, subject to any other applicable provision of law, only
be added to the roll or rolls in accordance with the omitted
property statutes.
The county has argued that its actions in add-
ing exception value on the 2010-11 roll are authorized by
Measure 50, even though some or possibly all of the improve-
ments were added before January 1, 2009. The county points
to the provisions of Article XI, section 11(1)(d), of the Oregon
Constitution, which provides that property is to be valued
under the exception value provisions “only for the first tax
year in which the changes described in paragraph (c) of this
subsection are taken into account following the effective
date of this section.” The “changes described in (c)” are those
including new property or improvements, omitted property,
and loss of exemption of a property. However, the constitu-
tional provision is a timing or transition rule designed to
state when Measure 50 actions are to be taken. It does not
alter or affect the requirement that, to be added to a roll
being prepared after the effective date of Measure 50, new
property or improvements must, in fact, be “new.”
The stipulation and facts established at the hearing
on this matter in this division of the court are not conclu-
sive on the question of when the improvements were done.
Therefore the court cannot reach a decision as to whether
the action of the county was correct, in whole or in part.
If the county believes it can prove that some or
all of the improvements were done during the period from
January 1, 2009 to January 1, 2010, the county should
inform the court that it desires to have trial on that issue.
If the county accepts that the improvements were completed
prior to January 1, 2009, the court is of the opinion that the
actions of the county taken thus far were not valid.
In its presentations to the court, the county has
stressed that the assessor was not aware of the improve-
ments in question until during the calendar year 2010. It
has also stated that the assessor did not know when the
improvements were completed. The county argues that
Cite as 21 OTR 6 (2012) 13
these facts about, as it says, “what the assessor knew and
when he knew it” somehow provide a basis for allowing the
county to add exception value to the 2010-11 roll for all the
improvements. Nothing in the statutes related to exception
value makes the existence or timing of assessor knowledge
a factor in determining in what situations the assessor may
take exception value into account. It is only in the omitted
property statutes that the state of the assessor’s knowledge
is relevant—and then only to determine when the duty of
the assessor to make omitted property assessments arises.
However, the assessor in this case does not rely on the omit-
ted property statutes as a basis for adding exception value.
The county has indicated that if its addition to the
2010-11 roll was not proper, it may proceed with omitted
property assessments. The court considers it appropriate to
observe that the date of particular improvements may be
important in determining on which tax roll an improvement
may be added as omitted property. Under the omitted prop-
erty statutes, an improvement could not be added to a roll
before it was made. However, the omitted property statutes
recognize that it may be added thereafter, subject to the
time limitations of the omitted property regime.
The county has suggested in its presentations as to
this preliminary ruling that doubt about the date of comple-
tion somehow made its addition of the property to the 2010-11
rolls proper or at least acceptable, even if the improvements
were done in years prior to January 1, 2009. That is not the
law. However, in the context of an omitted property assess-
ment, if one is undertaken, all parties should understand
that the burden of proof on any facts would be assigned
according to ORS 305.427.
The hearing on this stage of the case also touched
on the question of the proper application of the minor con-
struction provisions, including the consideration of retire-
ments and valuation issues. The court expresses no opin-
ion on those matters as they were not briefed or argued at
this stage of the case. Nor does the court express an opinion
on how the exception value provisions relating to omitted
property are to apply in any case in which the omission first
occurred more than five years prior to the last certified roll.
14 Douglas County Assessor v. Crawford
V. CONCLUSION
Now, therefore,
IT IS ORDERED that this case will be continued
taking into account this order.