Serenity Lane, Inc. v. Lane County Assessor , 21 Or. Tax 229 ( 2013 )

No. 31 August 30, 2013 229
IN THE OREGON TAX COURT
REGULAR DIVISION
SERENITY LANE, INC.
and Serenity Lane Health Services,
Plaintiffs,
v.
LANE COUNTY ASSESSOR
and Department of Revenue,
Defendants.
(TC 5082)
Plaintiffs (taxpayer) appealed disqualification by Defendant Lane County
Assessor (the county) of taxpayer’s status as a charitable institution exempt from
ad valorem property tax for the 2010-11 tax year. The county and Department of
Revenue (the department) argued that taxpayer’s addiction treatment programs
and activities lacked the statutory “gift or giving” component required to qual-
ify for exemption. Following trial, the court found that taxpayer had provided
extensive testimony and evidence showing that it had intent to make its services
widely available to poor and indigent individuals, as well as to those more readily
able to pay for treatment, that taxpayer provided treatment to patients at a cost
well below the market rate, and that this factor as well as other factors involved
with taxpayer’s activities, met taxpayer’s burden of proof as to the gift or giving
element, and that as a whole, taxpayer was a charitable institution for purposes
of the statute, and the subject property was exempt from taxation pursuant to
ORS 307.130.
Trial was held January 28, 2013, in the courtroom of the
Oregon Tax Court, Salem.
Dennis W. Percell, Arnold Gallagher Percell, et al.,
Eugene, argued the cause for Plaintiffs (taxpayer).
Steven E. Dingle, Lane County Counsel, Eugene, argued
the cause for Defendant Lane County Assessor (the county).
Darren Weirnick, Assistant Attorney General, Depart-
ment of Justice, Salem, appeared for Defendant Department
of Revenue (the department).
Decision for Plaintiffs rendered August 30, 2013.
HENRY C. BREITHAUPT, Judge.
I. INTRODUCTION
This case comes before the court for decision follow-
ing a trial in the Regular Division. Plaintiffs Serenity Lane,
230 Serenity Lane, Inc. v. Lane County Assessor
Inc. and Serenity Lane Health Services (Serenity) appealed
from the disqualification, by Defendant Lane County
Assessor (the county), of taxpayer’s status as charitable
institutions exempt from ad valorem property tax for the
2010-11 tax year.1 Serenity argues that they are charitable
institutions, as that term is used in ORS 307.130 and that
they actually and exclusively use the property at issue in
this case to conduct their charitable work—treating the dis-
ease of substance addiction. The county agrees that Serenity
has many of the salient features of a charitable institution
and does not challenge Serenity’s allegations regarding
exclusive use or possession. The county does argue, however,
that Serenity’s operations do not involve the “gift or giving”
required for exemption as charitable institutions.
This Opinion should be read in context with this
court’s Opinion in Hazelden Foundation v. Yamhill County
Assessor, 21 OTR 245 (2013).
II. FACTS
Serenity operates addiction treatment programs
throughout this state. Serenity’s operational hub is located
in central Eugene, between the downtown commercial dis-
trict and the campus of the University of Oregon. The physi-
cal plant of Serenity’s central Eugene location has expanded
over time, and by the tax year at issue had come to occupy
substantially all of one full city block and parts of an adja-
cent block. At the time of trial Serenity had plans in the
future to sell this facility and to construct a new, larger
facility in the nearby town of Coburg.
Serenity is composed of two separate legal enti-
ties, SLI and SLHS. Both entities are organized as IRC
section 501(c)(3) nonprofit corporations.2 In the late 1980s
1
In opinions and orders of the Oregon Tax Court, the plaintiff is normally
referred to as “taxpayer” in the body of the opinion or order. In this case the
activities of the two plaintiffs are so extensively intertwined that despite the
existence of two separate legal entities, Plaintiffs may best be considered as one
singular operation. That being the case, in this opinion Plaintiffs are collectively
referred to as “Serenity.” When the individual plaintiffs are discussed separately,
Serenity Lane, Inc. is referred to as “SLI” and Serenity Lane Health Services is
referred to as “SLHS.”
2
All references to the Internal Revenue Code (IRC) are to the 2008 edition.
Cite as 21 OTR 229 (2013) 231
Serenity’s management decided to separately incorporate
the two entities as a way of shielding Serenity’s assets from
potential civil liability. SLHS owns Serenity’s physical plant
and provides administrative support for SLI. SLI, in turn,
leases the physical plant from SLHS and operates Serenity’s
addiction treatment programs.
Serenity’s primary use for its real property in cen-
tral Eugene during the tax year at issue was to operate an
inpatient residential addiction treatment facility. Serenity’s
facility was licensed as a specialty hospital and employed a
medical staff of physicians and nurses in addition to coun-
selors trained in treating substance addiction.
Serenity offers inpatient residential treatment
and detoxification (detox) at its central Eugene location.
Serenity’s staff are equipped for “uncomplicated detox.” The
court understands that term to mean medically managed
detox of an individual, without the need to simultaneously
treat other acute medical conditions that are independent of
the patient’s addiction. Most of Serenity’s patients undergo
detox as a preliminary step in either inpatient residential
treatment or intensive outpatient treatment, but the testi-
mony at trial indicated that detox is a separate service that
is billed at a different rate by service providers and reim-
bursed at different rates by the Centers for Medicare and
Medicaid Services (CMS) and other insurance providers.
Serenity also offers outpatient treatment. Outpatient
treatment takes two forms: intensive outpatient treatment
and nonintensive outpatient treatment. Intensive outpatient
treatment requires a relatively substantial time commit-
ment from patients over a span of several weeks and seeks
to produce many of the salutary effects of inpatient residen-
tial treatment, while still allowing patients to accommodate
work schedules and avoiding some of the costs associated
with housing and feeding inpatient residential patients.
Serenity offers intensive outpatient treatment as a lower
cost alternative to inpatient residential treatment and uses
intensive outpatient treatment as the principal treatment
option for the indigent and low-income patients served
through Serenity’s “New Hope” program. Serenity offers
nonintensive outpatient treatment primarily in the form of
232 Serenity Lane, Inc. v. Lane County Assessor
“recovery support” for patients who have already completed
either inpatient residential treatment or intensive out-
patient treatment. Patients who undertook treatment with
Serenity receive an allotment of free recovery support hours
at no additional charge. Serenity also offers recovery support
treatment, for a fee, to patients that undertook either resi-
dential or outpatient treatment with other service providers.
Serenity’s “New Hope” program exists to offer treat-
ment options for indigent and low-income individuals. It is
housed out of a facility separate from Serenity’s downtown
residential treatment facility. The testimony at trial was to
the effect that Serenity typically serves patients who have
insurance through the Oregon Health Plan through the
New Hope program, but also looks for other signs of acute
financial distress, such as reliance on food stamps. While
neither party has given precise figures for the number of
patients treated through the New Hope program during
the 2009-10 and 2010-11 tax years, the record indicates
that during Serenity’s 2009 and 2010 fiscal years, Serenity
treated 137 patients with insurance coverage through the
Oregon Health Plan.3 Serenity also offered detox treatment
to patients on the Oregon Health Plan, though this service
falls outside of the New Hope program.
In addition to its treatment of individuals suffering
from substance addiction, Serenity also sponsors an intern-
ship program to train aspiring addiction counselors. Serenity
hosts ten interns per year in a program aimed at achieving
the training necessary for certification as a Certified Alcohol
and Drug Counselor (CADC). The interns do not pay for this
training, and are given a stipend to help defray living expenses
while involved with the program. Interns obtain hands-on
experience counseling Serenity’s patients under the supervi-
sion of Serenity’s CADCs in the internship program and in
many instances Serenity has hired former interns to work
as CADCs after completing the program. The testimony at
3
At trial, Serenity’s CEO also mentioned so-called “free slots” associated
with the New Hope program. Neither party developed on this testimony, but in
context the mention of “free slots” appeared to suggest the presence of patients in
the New Hope program in addition to those with insurance coverage through the
Oregon Health Plan. The record does not contain figures showing how many such
patients might exist, if any.
Cite as 21 OTR 229 (2013) 233
trial was to the effect that Serenity’s interns receive, free of
charge, an education that is equivalent to what is offered by
counseling programs at several institutions of higher learn-
ing in this state, and that upon completion of the program
Serenity’s interns have the requisite knowledge to take the
CADC licensing examination. Over the years, Serenity has
hired several of its former interns to work as CADCs. Interns
are not, however, in any way bound to work for Serenity after
completing the program.
Prior to the 2010-11 tax year, the county consid-
ered SLI and SLHS charitable institutions exempt from
ad valorem property tax under ORS 307.130. In March of 2010,
the county began a review of the exempt status of both entities
and requested documents from Serenity substantiating their
charitable nature. Serenity complied with this request, but
the response failed to satisfy the county. Following a further
exchange of letters, the county removed the exemptions of both
SLI and SLHS. Serenity then appealed that decision of the
county to the Magistrate Division. The magistrate found for
the county, and Serenity appealed to this division of the court.
III. ISSUE
Whether Serenity’s operations involve the “gift or
giving” required for exemption from property tax as chari-
table institutions.
IV. ANALYSIS
A. Statutory Framework
As an initial matter, the court will address the stat-
utes that the court must consider in analyzing this case.
ORS 307.130(2) provides:
“[T]he following property owned or being purchased by
art museums, volunteer fire departments, or incorporated
literary, benevolent, charitable and scientific institutions
shall be exempt from taxation:
“(a) * * * only such real or personal property, or proportion
thereof, as is actually and exclusively occupied or used in
the literary, benevolent, charitable or scientific work car-
ried on by such institutions.” 4
4
All references to the Oregon Revised Statutes (ORS) are to the 2009 edition.
234 Serenity Lane, Inc. v. Lane County Assessor
Observant readers will note that the way that Serenity has
structured its operations poses a problem in directly apply-
ing ORS 307.130 to Serenity’s particular situation. While
SLI and SLHS might be said to form an overall whole—
Serenity—that whole is comprised of two distinct legal enti-
ties, one of which, SLI, leases the real property at issue in
this case from the other, SLHS. As a result of this arrange-
ment, ORS 307.130 cannot apply directly to SLI because by
its own terms the statute applies only to “property owned or
being purchased” by a qualifying institution.
ORS 307.166(1) provides the way forward. The rele-
vant text of ORS 307.166(1) provides:
“If property is owned or being purchased by an institution,
* * * that is granted exemption or the right to claim exemp-
tion for any of its property under a provision of law con-
tained in this chapter, and the institution, organization or
public body leases or otherwise grants the use and posses-
sion of the property to another institution * * * that is like-
wise granted exemption or the right to claim exemption for
property under a provision of law contained in this chapter,
the property is exempt from taxation if used by the lessee
or possessor in the manner, if any, required by law for the
exemption of property owned or being purchased by the les-
see or possessor * * *.”
Phrased differently, if an institution that is entitled to claim
exemption from property tax under a provision of ORS chap-
ter 307 leases its property to another institution that is also
entitled to claim exemption from property tax for property
that it owns, then the property remains exempt from prop-
erty tax as long as the lessee institution uses the property
in the manner required under the statute that would entitle
that lessee institution to claim exemption for the property if
it owned the property.
The result is that, because of Serenity’s internal
organization, each of the two components of Serenity must
individually qualify as charitable institutions to satisfy the
terms of ORS 307.166. The saving grace is that in the past
this court has concluded, when presented with analogous
separations of administrative functions from the substan-
tive work of a charitable institution, that property devoted
to the administrative functions of an otherwise charitable
Cite as 21 OTR 229 (2013) 235
institution is exempt when it is not used in a profit-making
business and is used for the advancement of the charitable
work of the institution. Archdiocese of Portland v. Dept. of
Rev., 5 OTR 111, 124 (1972). Because the county has not
raised the separate existence of SLI and SLHS as a bar to
exemption, the court will take a similar approach on the
grounds that, while SLI and SLHS are separate legal enti-
ties, they operate under unified management and can most
reasonably be described as component parts of an overall
whole. In other words, the court will look at Serenity’s over-
all operation as if it were one allegedly charitable institu-
tion. If the court concludes that these overall operations are
charitable for purposes of ORS 307.130, it will then conclude
that SLHS and SLI are each individually charitable institu-
tions for purposes of applying ORS 307.166.
B. Whether Serenity is a Charitable Institution
When determining whether an allegedly chari-
table institution meets the requirements of ORS 307.130,
Oregon courts look to whether the institution meets three
requirements:
(1) Charity as the organization’s “primary, if not sole,
object”;
(2) The organization’s operations must serve the charita-
ble mission of the organization; and
(3) The presence of an element of “gift or giving” in the
activities of the organization.
SW Oregon Pub. Def. Services v. Dept. of Rev., 312 Or 82,
89, 812 P2d 1292 (1991). The parties are in agreement that
Serenity meets the first two of these requirements. More
specifically, the county agrees that Serenity’s sole purpose is
to operate addiction treatment programs on a not-for-profit
basis and does not dispute that Serenity does, indeed, oper-
ate such programs without an eye to personal gain or profit
for the individuals that own or control Serenity. As often
happens in cases such as this one, however, the parties are
in disagreement as to whether Serenity has shown that its
operations involve the element of “gift or giving” required of
a charitable institution under ORS 307.130.
236 Serenity Lane, Inc. v. Lane County Assessor
When determining whether the operations of a
given institution involve “gift or giving,” Oregon courts turn
to another multi-factor test. Unlike the test for determining
whether an institution is a charitable institution for pur-
poses of ORS 307.130, not all of the factors looked at in this
test need to be present for a court to determine that the “gift
or giving” requirement has been met. Methodist Homes, Inc.
v. Tax Com., 226 Or 298, 310, 360 P2d 293 (1961). In addi-
tion, the list of factors is not exhaustive; a court can find
that sufficient “gift or giving” exists for reasons other than
those specifically listed in this test. Id. However, the factors
listed have been found to be especially probative of the issue
of “gift or giving” and so have been relied upon by this court
and by the Supreme Court in numerous past cases. These
factors are:
“(1) Whether the receipts are applied to the upkeep, main-
tenance and equipment of the institution or are other-
wise employed;
“(2) Whether patients or patrons receive the same treat-
ment irrespective of their ability to pay;
“(3) Whether the doors are open to rich and poor alike and
without discrimination as to race, color or creed; and
“(4) Whether charges are made to all and, if made, are
lesser charges made to the poor or are any charges
made to the indigent.”
SW Oregon Pub. Def. Services, 312 Or at 87 (quoting
Oregon Administrative Rule (OAR) 150-307.130-A(4)(d)(C)).
Serenity argues that its operations involve several different
types of “gift or giving.” Serenity’s alleged “gift or giving”
takes the following forms:
(1) Need-based scholarships to reduce the cost of treat-
ment for some patients;
(2) Charging rates below those that the market for the
type of treatment that taxpayers provide would rea-
sonably bear;
(3) Providing free education to individuals training to
work as drug and alcohol addiction counselors;
(4) Providing treatment for the indigent and for
those enrolled in the Oregon Health Plan at rates
Cite as 21 OTR 229 (2013) 237
substantially below Serenity’s already below-market
rates; and
(5) Community outreach education for employers.
In the following analysis, the court will discuss whether
the forms of gift or giving that Serenity alleges satisfy the
“gift or giving” requirement. In so doing the court will first
analyze Serenity’s alleged giving in light of the four “gift or
giving” factors laid out above. To the extent that any form
of giving alleged by Serenity does not neatly interact with
the four “gift or giving” factors, the court will consider it on
its own terms. Serenity must prove the presence of “gift or
giving” in its operations by a preponderance of the evidence.
ORS 305.427.
1. Consideration of the four traditional “gift or giving”
factors
With regard to the first “gift or giving factor,” SLHS
and SLI are both organized as not-for-profit corporations
under IRC section 501(c)(3). Serenity and the county appear
to be in agreement that with the exception of a cash reserve
necessary for operations, Serenity reinvested the excess
of its revenues over its expenses into expanding its opera-
tions. Serenity’s past expansions of its original facility in
central Eugene and current plans to expand its operations
by constructing a new facility in Coburg is probative of this
issue. The county does not allege that Serenity’s revenues
inured to the benefit of any private individual, other than to
the extent that Serenity’s employees are, of course, paid for
their services.
With regard to the second “gift or giving” factor,
the record is harder to conclusively assess. Serenity orients
its inpatient residential treatment program toward work-
ing and middle class individuals. Serenity offers treatment
options for the indigent and for individuals on the Oregon
Health Plan, but does not typically admit such individu-
als to inpatient residential treatment. At first glance, this
would appear to weigh against Serenity. However, in his
testimony, Serenity’s CEO offered what the court considers
valid therapeutic reasons for keeping its indigent patients
separate from its inpatient residential patients. Serenity’s
CEO testified to the effect that Serenity treats its indigent
238 Serenity Lane, Inc. v. Lane County Assessor
patients separately from its inpatient residential patients
because indigents suffering from substance addiction tend
to suffer from additional co-morbid conditions that compli-
cate addiction treatment. Serenity has attempted in the
past to comingle its indigent and non-indigent patient pop-
ulations and has found that it resulted in inadequate treat-
ment for both groups. The court accepts this explanation.
However, the second “gift or giving” factor specifically calls
for the “same treatment,” irrespective of ability to pay. The
court concludes that this factor weighs somewhat against
taxpayer, but not so much so as to be determinative of the
issue of the presence of “gift or giving.”
With regard to the third factor, the county does
not allege discrimination on the basis of race, skin color, or
religious convictions, and the record contains no evidence of
such discrimination. The court also concludes that Serenity’s
doors were open to rich and poor alike. While Serenity’s evi-
dent disinclination to take on indigent patients on the same
basis as it took on other patients weighs against it on the
second of the “gift or giving” factors, Serenity’s undertaking
to provide outpatient treatment for indigent patients through
its “New Hope” program clearly evidences a desire to provide
treatment options for the indigent and poor, albeit in a setting
separate from its main treatment facility. Serenity’s accep-
tance of patients on Medicaid and providing detox services to
patients on the Oregon Health Plan further evidences a pos-
itive desire to make its services widely available to the poor,
as well as to the relatively affluent patients that made up the
bulk of Serenity’s inpatient residential patient population.
The record on the fourth factor is mixed but likewise
weighs overall in favor of a finding of the presence of “gift or
giving.” Serenity’s CEO testified to the effect that Serenity
does have a system of “scholarship” giving—in other words,
Serenity gave need-based discounts on the cost of care for
patients with limited financial assets. However, Serenity’s
CEO also testified that Serenity only rarely gave care at
no charge whatsoever. Serenity’s CEO claimed that there
was a legitimate therapeutic reason for this insistence on its
patients paying Serenity something for treatment, in that it
gave its patients a feeling that they had an investment in
their recovery from addiction. This claimed motivation has
Cite as 21 OTR 229 (2013) 239
the potential to be self-serving, but in this case the court
believes that it is genuine. It is consistent with other prac-
tices of Serenity, and Serenity’s CEO made clear in his tes-
timony that Serenity accepted de minimis or token payment
from truly needy patients for whom even a small amount of
money could represent a significant investment.
Two factors limit the amount of weight the court can
give to the existence of Serenity’s scholarship program and
willingness to take token payments from indigent patients.
First, in the case of indigent patients making token payments
it was not clear from the record whether such patients would
have the same treatment options as patients that were better
able to pay for treatment. The record contains an account of
at least one patient admitted to Serenity’s inpatient residen-
tial facility, and subsequently to the EXSL program, but the
testimony at trial suggests that this was a rare case.
Second, the record does not contain any informa-
tion regarding the criteria Serenity uses to qualify patients
for scholarships or to calibrate the amount of the discount
appropriate for any given patient. This court discussed in
Hazelden Foundation v. Yamhill County Assessor, 21 OTR
245 (2013), how the third and fourth “gift or giving” factors
are very closely interrelated. While the existence of a need-
based sliding scale of fees for treatment weighs, at the mar-
gins, in favor of a finding of the presence of “gift or giving,”
the contours of the sliding scale are extremely probative of
whether the doors of an institution are truly open to “rich
and poor alike.” If, as a practical matter, the poor and the
indigent are still generally unable to access the services of
an institution despite the existence of a need-based sliding
scale of fees, then the institution may well be admirable, but
it is not charitable.
The actual dollar amounts of charitable giving
during the 2010 and 2011 tax years are in the record, and
they are not insubstantial; they amount to roughly 2.3 per-
cent of Serenity’s overall revenues during each of those cal-
endar years. Nonetheless, in the absence of evidence tending
to show Serenity’s guidelines for distributing their scholar-
ship money, the court cannot say any more than that the
evidence in the record relating to the fourth gift or giving
240 Serenity Lane, Inc. v. Lane County Assessor
factor weighs marginally in favor of finding the presence of
gift or giving.
The court’s analysis of the four traditional “gift or
giving” factors leans somewhat in the direction of concluding
that “gift or giving” is present in Serenity’s operations. The
court finds particularly probative the substantial evidence
in the record before the court of Serenity’s intent to make its
services widely available to poor and indigent individuals,
as well as to those more readily able to pay for treatment.
This conclusion is tempered, however, by Serenity’s general
policy of not admitting indigent patients to its inpatient res-
idential treatment facility and the lack of evidence in the
record before the court detailing the contours of Serenity’s
scholarship program. However, on the whole the analysis
supports a finding of the presence of “gift or giving.”
2. Serenity’s other forms of alleged “gift or giving”
In addition to the forms of giving discussed above,
Serenity alleges three forms of giving that do not mesh
neatly with the four “gift or giving” factors discussed above.
These supposed forms of giving are Serenity’s alleged pro-
vision of treatment at below-market rates, Serenity’s intern-
ship program for aspiring CADCs, and Serenity’s educa-
tional outreach to employers.
The administrative rules of the Department of
Revenue implementing ORS 307.130 recognize that the “gift
or giving” requirement may be met by providing products or
services to those in need at below-market rates. OAR 150-
307.130-(A)(1)(d). At trial, Serenity provided extensive testi-
mony and a report by a professional economist purporting to
show that Serenity provides treatment to patients at a cost
well below the market rate.
The gist of Serenity’s expert report and testimony
was that Serenity most likely charges at or modestly below
the market rate for residential and intensive outpatient
treatment. At the same time, however, the expert’s report
tends to show that Serenity charges substantially below
the market rate for two specific types of treatment: detox
and recovery support counseling for patients who have com-
pleted a course of residential or outpatient treatment. The
Cite as 21 OTR 229 (2013) 241
overall result being that Serenity’s patients are charged sig-
nificantly less than the market rate for overall treatment.
Serenity’s expert sought to establish that Serenity
offers detox at below-market rates by comparing the cost of
detox for patients of Serenity to the rates other hospitals in
this state charge for “uncomplicated detox.” The results of
this comparison approach support a conclusion that Serenity
did provide uncomplicated detox at rates far below what the
market would bear for such treatment. In addition, while
Serenity’s expert discussed this subject in a different section
of his report, the record further indicates that Serenity pro-
vides detox treatment to individuals on the Oregon Health
Plan at a cost significantly reduced from Serenity’s normal
charges for detox—charges that, as noted above, already
appear to be below the market rate.
The county did not place in the record any evidence
tending to contradict the conclusions of Serenity’s expert.
Rather, the county relies entirely on objections to Serenity’s
expert report. The county objects to Serenity’s expert
analysis regarding detox for two reasons: first, the county
argues that the uncomplicated detox services provided by
Serenity and those provided by full-service hospitals are not
comparable because full-service hospitals have the capac-
ity to provide extensive medical treatment in addition to
detox. Second, the county argues that these services are
not comparable because Serenity primarily provides detox
treatment to patients as a preliminary step in residential
treatment—a service that full-service hospitals do not typi-
cally provide.
The county’s sole reliance on such objections reflects
the county’s failure to develop a record on this issue. The
county provided two witnesses to rebut Serenity’s expert
witness report and testimony. However, the first of these
witnesses confined his testimony to criticizing the approach
taken by Serenity’s expert. The county failed to qualify its
second witness as an expert in the market for addiction
treatment services and, as a consequence of this failure, the
court had no choice but to treat this witness’ testimony as
hearsay not subject to any exception to the bar on hearsay
evidence. In short, the county was unable to present any
242 Serenity Lane, Inc. v. Lane County Assessor
admissible evidence tending to rebut Serenity’s expert con-
clusion that Serenity offers detox at below-market rates.
The record before the court with regard to whether
Serenity offers detox to its patients at below-market rates
consists, in its entirety, of a expert report tending to show
that Serenity does, indeed, offer detox at below-market rates.
Serenity has carried the burden of proof on this issue.
For the same reason, the court must conclude that
a preponderance of the evidence supports the conclusion
of Serenity’s expert with regard to Serenity’s charges for
recovery support treatment. Here, again, the county failed
to provide competent, admissible evidence tending to show
a different market rate than the one provided by Serenity’s
expert and instead relied upon criticisms of the expert’s
approach. The preponderance of the evidence on this ques-
tion again supports Serenity’s position.
These conclusions, coupled with the evidence tend-
ing to show that Serenity’s charges for inpatient residential
and intensive outpatient treatment were at or near the mar-
ket price for such services, lead to the further conclusion
that Serenity did charge substantially less than the market
rate for its addiction treatment programs. This conclusion,
coupled in turn with the court’s analysis above under the
four traditional “gift or giving” factors, takes the court a
long way toward a finding that “gift or giving” is present
in the activities of Serenity. However, for the sake of thor-
oughness, the court will address the two remaining forms of
giving alleged by Serenity.
The county argues that Serenity’s internship pro-
gram should not be considered as indicating the presence
of “gift or giving” because the program requires an out-
lay of only a very small portion of Serenity’s revenues and
because Serenity obtains certain benefits from the program
by way of recruiting new CADCs. The court disagrees with
both of the county’s arguments. First, when it comes to dis-
cerning the presence of “gift or giving,” the size of a par-
ticular component of a purported package of gifts does not
dictate whether it is worthy of consideration. The question
is whether individuals other than those who own or operate
Cite as 21 OTR 229 (2013) 243
the institution receive a benefit without any expectation of
reciprocity from the recipient. SW Oregon Pub. Def. Services,
312 Or at 91. The size of the purported gift is important in
determining whether, on the whole, an institution’s opera-
tions evince “gift or giving,” but at the margins, any gift
weighs in favor of the purportedly charitable institution.
Taxpayer’s internship program on its own might not be suf-
ficient to show the presence of “gift or giving” in Serenity’s
overall operation, but as part of a larger package of giving it
weighs in Serenity’s favor.
Second, the court does not consider the presence of
an incidental recruiting benefit to Serenity from sponsor-
ing the internship program disqualifying as evidence of the
presence of “gift or giving.” Testimony at trial made clear
that Serenity’s interns did not ease (and in fact, most likely
worsened) the workload for Serenity’s CADCs. Moreover, the
interns had no obligation to work for Serenity after complet-
ing their training. They could, and did, accept employment
with other employers. Whatever recruiting benefit Serenity
derived seems insubstantial and, frankly, unavoidable given
that Serenity both trains and employs CADCs. The overall
character of the internship program adds to the impression
that Serenity’s operations contained the element of “gift or
giving” required of a charitable institution by the courts of
this state.
Finally, the county argues that the court should not
consider Serenity’s community outreach activities as signs
of “gift or giving” because they are de minimis, because
Serenity’s expert counted unpaid time by Serenity’s staff
as giving on Serenity’s behalf, and because these activities
amount to marketing by Serenity. The discussion above con-
cerning Serenity’s internship program dispenses with the
county’s argument that Serenity’s outreach activities are too
small to be considered. However, the court agrees, for rea-
sons stated by the Supreme Court in YMCA v. Dept of Rev.,
that Serenity’s expert erred in counting uncompensated
time spent by Serenity’s employees and board members to
promote the mission of Serenity as “giving” by Serenity. See
YMCA, 308 Or 644, 654, 784 P2d 1086 (1989). The court
gives Serenity’s community outreach activities little weight
244 Serenity Lane, Inc. v. Lane County Assessor
in determining whether it shows the presence of “gift or
giving.”
V. CONCLUSION
Based on the foregoing analysis, the court concludes
that the required element of “gift or giving” is present in the
activities of Serenity. As a consequence, the court concludes
that Serenity, taken on the whole, was a charitable insti-
tution during the 2010-11 tax year. The court further con-
cludes that SLI and SLHS, the separately incorporated legal
entities comprising Serenity, were both charitable institu-
tions for purposes of ORS 307.130 and for purposes of apply-
ing ORS 307.166 during that same tax year. Now, therefore,
IT IS THE DECISION OF THIS COURT that the
property leased to SLI by SLHS is exempt from ad valorem
property tax by reason of ORS 307.166.