Azar v. Dept. of Rev. , 21 Or. Tax 302 ( 2013 )

302 December 3, 2013 No. 38
IN THE OREGON TAX COURT
REGULAR DIVISION
Myrna AZAR,
Plaintiff,
v.
DEPARTMENT OF REVENUE
and Lincoln County,
Defendants.
(TC 5090)
Plaintiff (taxpayer) appealed her disqualification from and denial of appli-
cation for the Senior Property Tax Deferral Program. Taxpayer argued that the
subject property was her homestead for the purposes of the statutes applying to
senior property tax deferral. Following trial, the court found that Defendants
properly disqualified taxpayer from Senior Property Tax Deferral in January of
2009 and properly denied taxpayer’s application for Senior Property Tax Deferral
for the 2009-10 tax year, and that the subject property was not taxpayer’s home-
stead during the timeframe under consideration in this case, and that taxpayer
was not absent from the subject property “by reason of health,” as that term is
used in ORS 311.670(1) and ORS 311.684(3).
Trial was held February 27, 2013, in the courtroom of the
Oregon Tax Court, Salem.
Carl R. Neil, Attorney at Law, Portland, argued the cause
for Plaintiff (taxpayer).
James C. Wallace, Senior Assistant Attorney General,
Department of Justice, Salem, argued the cause for Defen-
dant Department of Revenue (the department).
Decision for Defendant rendered December 3, 2013.
HENRY C. BREITHAUPT, Judge.
I. INTRODUCTION
This case comes before the court for decision fol-
lowing a trial in the Regular Division. Plaintiff (taxpayer)
appeals from a decision of the Magistrate Division holding
that Defendant Department of Revenue (the department)
properly disqualified real property owned by taxpayer from
Senior Property Tax Deferral in January of 2009 and prop-
erly denied, in May of 2009, taxpayer’s application for Senior
Property Tax Deferral for the 2009-10 tax year.
Cite as 21 OTR 302 (2013) 303
II. FACTS
Taxpayer owns real property (the subject property)
located in the city of Newport in Lincoln County. The sub-
ject property consists of a residential lot, a house, and an
out-building formerly used as a store front. Taxpayer’s par-
ents had owned the subject property and had used it both as
a private residence and a place of business. Taxpayer inher-
ited the subject property in 1976, when her last surviving
parent passed away.
The parties do not dispute that the subject prop-
erty was taxpayer’s primary residence as a child. Taxpayer
began college in 1956, and between 1956 and roughly 1961
taxpayer split her time between living with her parents on
the subject property and living on campus. In 1961 tax-
payer married. Taxpayer and her husband first rented, and
then purchased a house in Portland, though taxpayer still
frequently spent weekends with her parents in Newport.
Taxpayer had a son in 1967 and for a time in the early
1970s lived on campus with her son while pursuing a grad-
uate degree at the University of Oregon in Eugene. After
receiving her degree, both taxpayer and her son returned to
Portland.
Taxpayer claims that her son suffers from ago-
raphobia and for much of his life has required her con-
stant care. However, there is no evidence in the record
that taxpayer’s son has ever actually been diagnosed with
agoraphobia.
Taxpayer and her husband divorced in 1986 and
taxpayer’s husband has since remarried. However, taxpayer
and her son continued after the divorce to share a house
with taxpayer’s ex-husband. At the time of trial taxpayer
and her son occupied a portion of this house that is sepa-
rate from the portion used by taxpayer’s ex-husband and
his present wife. The testimony at trial was to the effect
that taxpayer stayed at the subject property intermittently,
primarily staying in a Mercedes-Benz camping van parked
next to the house. Taxpayer’s declarations suggest that she
may have lived roughly half-time on the subject property
starting in July of 2010 and running through at least early
304 Azar v. Dept. of Rev.
September of 2010. However, taxpayer’s testimony also indi-
cated that at the time of the trial in this case she was not
living on the subject property and would have to expend a
significant amount of money to repair the structures on the
property before resuming living on the subject property.
In 2007 taxpayer applied for and received defer-
ral of property taxes under Oregon’s Deferred Collection of
Homestead Property Taxes program (also known as Senior
Property Tax Deferral), as described in ORS 311.666 to
311.701.1 Taxpayer withdrew from the program, but then
re-applied in 2008 and received deferral for the 2008-09 tax
year. In January 2009 the department received informa-
tion to the effect that taxpayer was not living on the subject
property. The department disqualified the subject property
from Senior Property Tax Deferral and issued a disquali-
fication notice on January 13, 2009. Consistent with ORS
311.684, the notice informed taxpayer that she now had to
pay her previously deferred property taxes along with those
owed for the 2009-10 tax year. Taxpayer then re-applied for
Senior Property Tax Deferral for the 2009-10 tax year. The
department denied this application in a notice dated May 20,
2009, on the ground that taxpayer was not living on the sub-
ject property.
Taxpayer filed her initial complaint in the Magistrate
Division in April of 2009. Taxpayer filed an amended com-
plaint in October of 2009, some time after the denial of her
application for the 2009-10 tax year by the department. In
the Magistrate Division taxpayer initially moved for sum-
mary judgment on the legal question of whether she was
absent from the subject property “by reason of health.” In an
order dated July 6, 2011, the magistrate denied taxpayer’s
motion but also declined to rule as a matter of law that tax-
payer was not absent “by reason of health.” Following a trial
on that issue the magistrate issued a decision finding that
taxpayer had not satisfied the burden of showing that she
was absent from the subject property “by reason of health.”
See Azar v. Dept. of Rev., TC-MD 090639C (Mar 27, 2012)
(slip op). Taxpayer appealed this decision to the Regular
Division.
1
All references to the Oregon Revised Statutes (ORS) are to the 2009 edition.
Cite as 21 OTR 302 (2013) 305
III. ISSUES
(1) Was the subject property taxpayer’s “homestead,” for
purposes of ORS 311.666(2)?
(2) Was taxpayer absent from the subject property “by rea-
son of health,” as that term is used in ORS 311.670(1)
and ORS 311.684(3)?
IV. ANALYSIS
The procedural history of this case before the
Regular Division requires explanation because, from the
pleadings and briefs submitted by the parties in this case,
the parties do not appear to be fully in agreement as to what
issues are properly before the court.
The department, in its pleadings, argues that the
disqualification of the subject property is the only issue prop-
erly before the court and claims that taxpayer never timely
appealed the denial of her application for the 2009-10 tax year.
Taxpayer has, on the other hand, drafted her plead-
ings and briefing before this division in most respects as if
the only issue before the court is the denial of taxpayer’s
application for deferral for the 2009-10 tax year. However,
taxpayer alleges that her position with regard to the sub-
ject property did not change over the course of the tax years
2007-08 through 2009-10 and makes this allegation the
basis for her argument that her application for the 2009-10
tax year, filed in April of 2009, should not have been denied.
If taxpayer’s allegation is true, then the court cannot pass
judgment on the department’s denial of taxpayer’s applica-
tion for the 2009-10 tax year without at the same time pass-
ing judgment on the properness of the department’s disqual-
ification of the subject property in January of 2009.
The court has reviewed the complaint and the
amended complaint filed by taxpayer in the Magistrate
Division. In the opinion of the court, taxpayer’s request for
relief in her amended Magistrate Division complaint fairly
embraces both the disqualification and the denial. The court
also observes that the Magistrate Division ruled on both
issues, first in the magistrate’s order denying taxpayer’s
motion for summary judgment and again in the final deci-
sion of the magistrate.
306 Azar v. Dept. of Rev.
The court draws from this that the magistrate
deemed the denial of taxpayer’s application properly before
the Magistrate Division. If the department considered this
not to be the case, then the time to object was during proceed-
ings before the Magistrate Division. Because the magistrate
ruled on both issues and taxpayer’s Regular Division com-
plaint at least implicitly embraces both the disqualification
of the subject property and the denial of taxpayer’s appli-
cation for deferral for the 2009-10 tax year, the court rules
that both the disqualification of taxpayer’s property from
Senior Property Tax Deferral in January of 2009 and the
denial of taxpayer’s application for deferral for the 2009-10
tax year are properly before the Regular Division of the
court.
A. Introduction to Senior Property Tax Deferral
New applicants for Senior Property Tax Deferral and
existing enrollees must each satisfy the same criteria, so the
legal analysis is the same for both issues. Senior Property
Tax Deferral is limited to individuals who are either older
than 62 years of age or suffering from certain severe phys-
ical disabilities, and allows enrollees to defer collection of
property taxes only for property used as a “homestead,” as
that term is defined in ORS 311.666(2). ORS 311.668; ORS
311.670. In addition to the age or disability requirement and
“homestead” requirement, the applicant’s household income
and net worth and the Real Market Value (RMV) of the prop-
erty subject to deferral must also fall below threshold levels
specified in the statute. See ORS 311.668(1). Property taxes
are deferred, not forgiven; the deferred taxes come due, with
accrued interest, when the property ceases to be eligible for
deferral or when certain disqualifying events occur. ORS
311.684.
The parties appear to agree that: taxpayer meets
the age requirement; that her income and net worth are
within the thresholds permitted by the statutes; and that
the RMV of the subject property does not exceed the thresh-
old for deferral. The only questions in this case appear to
be whether the subject property was taxpayer’s “homestead”
for purposes of ORS 311.666(2), and if not, whether tax-
payer satisfies an exception to the homestead requirement
Cite as 21 OTR 302 (2013) 307
that allows qualified individuals to enroll or remain in the
program if their absence from the property at issue arises
“by reason of health.”
B. Whether the subject property was taxpayer’s “homestead”
Enrollment in Senior Property Tax Deferral is gov-
erned by ORS 311.670. That statute states, in pertinent
part:
“In order to qualify for tax deferral under ORS 311.666 to
311.701, the property must meet all of the following require-
ments when the claim is filed and thereafter so long as the
payment of taxes by the taxpayer is deferred:
“(1) The property must be the homestead of the individ-
ual or individuals who file the claim for deferral, except for
an individual required to be absent from the homestead by
reason of health.”
Disqualification from Senior Property Tax Deferral is gov-
erned by ORS 311.684. That statute similarly states, in per-
tinent part:
“Subject to ORS 311.688, all deferred property taxes,
including accrued interest, become payable as provided in
ORS 311.686 when:
“* * * * *
“(3) The tax-deferred property is no longer the homestead
of the taxpayer who claimed the deferral, except in the case
of a taxpayer required to be absent from such tax-deferred
property by reason of health.”
As the court understands taxpayer’s pleadings and
briefing, taxpayer argues that the subject property was her
“homestead” in January of 2009 and during the 2009-10 tax
year. ORS 311.666(2) defines “homestead” in this context as:
“[T]he owner occupied principal dwelling, either real or
personal property, owned by the taxpayer and the tax lot
upon which it is located.”
While the subject property was taxpayer’s childhood home,
the evidence in the record clearly supports the department’s
contention that the subject property was not taxpayer’s
homestead during the timeframe under consideration in
308 Azar v. Dept. of Rev.
this case. Most notably, taxpayer’s own declarations indi-
cate that she did not move onto the subject property until
roughly two months before the date of her declaration dated
September 3, 2010. This was more than a year after the
department denied taxpayer’s application for deferral for the
2009-10 tax year.
The subject property was not taxpayer’s primary
residence in January of 2009, when the department disqual-
ified the subject property from Senior Property Tax Deferral,
or in May of 2009, when the department denied taxpayer’s
application for deferral for the 2009-10 tax year. The record
before the court indicates that taxpayer was absent from the
property, albeit with periodic visits, for many years before
either event. The subject property was therefore not tax-
payer’s homestead at the time of either the disqualification
or the denial of taxpayer’s application for deferral for the
2009-10 tax year.
C. Whether taxpayer was absent from the subject property
“by reason of health” for purposes of ORS 311.670(1) and
ORS 311.684(3)
Because the subject property was not taxpayer’s
homestead at any time under consideration in this case, the
department’s disqualification of the subject property from
Senior Property Tax Deferral in January of 2009 and its
subsequent denial of taxpayer’s application for deferral for
the 2009-10 tax year must be upheld unless taxpayer was
absent from the subject property “by reason of health,” as
that term is used in ORS 311.684(3) and ORS 311.670(1).
Taxpayer and the department each offer different
legal interpretations of the “by reason of health” exception.
Taxpayer offers an interpretation that might support a con-
clusion that taxpayer was absent from the subject property
“by reason of health,” and the department offers an inter-
pretation that clearly would not allow such a conclusion.
Taxpayer argues that she was absent from the subject prop-
erty “by reason of health” during the years leading up to and
including the 2009-10 tax year because she was staying in
Portland to care for her adult son. As mentioned above, tax-
payer alleges that her son suffers from severe agoraphobia.
Cite as 21 OTR 302 (2013) 309
The department argues that as a legal matter the absence
“by reason of health” exception to the homestead require-
ments of ORS 311.670(1) and ORS 311.684(3) refers exclu-
sively to an absence by the person applying for, or seeking to
maintain, deferral for reasons of that person’s own health.
In support of this argument the department points to leg-
islative history detailing the circumstances resulting in
the addition of the “by reason of health” exception to ORS
311.670(1). Taxpayer, in turn, argues that the text of the
statute encompasses situations such as her own, where the
person seeking to maintain or enroll in Senior Property Tax
Deferral is absent for reasons relating to the health of a
third person.
When interpreting statutory text, the court seeks
to implement the intention of the legislature. ORS 174.020.
To determine that intent, the court looks to the text of the
relevant provision and its context in the overall statutory
scheme. PGE v. Bureau of Labor and Industries, 317 Or 606,
610, 859 P2d 1143 (1993). The court may also consider legis-
lative history to the extent the court considers it probative.
State v. Gaines, 346 Or 160, 206 P3d 1042 (2009).
On review of the text and context of the “by reason of
health” exceptions, and of the legislative history provided by
the department, the court concludes that the department’s
interpretation of the statute is correct. In the opinion of the
court, the choice between the position of the department and
that of taxpayer hinges on the word “required.” The “by rea-
son of health” exception in ORS 311.684(3) applies only to “a
taxpayer required to be absent from such tax-deferred prop-
erty by reason of health.” (Emphasis added.) Likewise, the
“by reason of health exception in ORS 311.670(1) applies only
to “an individual required to be absent from the homestead
by reason of health.” (Emphasis added.) The word “required”
is susceptible to varying definitions, but in the case of the “by
reason of health” exceptions the court finds that “required”
means “[T]o demand as necessary or essential.” Webster’s
Third New International Dictionary 1929 (unabridged ed
2002). That is to say that the absence cannot arise simply
from preference or from convenience; it must be dictated by
circumstances in such a way that to do otherwise would be
310 Azar v. Dept. of Rev.
to risk serious consequences for the person subject to the
requirement. In the context of an absence from property that
is “required * * * by reason of health,” the court finds that
such a “requirement” most naturally arises when that per-
son’s own health is at stake.
The legislative history provided by the department
is illustrative here. The legislators and witnesses discussing
the addition of the “by reason of health” exception to ORS
311.670(1) discussed numerous real and hypothetical cases
where the exception may or may not be implicated. All of
those cases involved individuals required to be absent from
what would otherwise be their homestead because of the
state of their own health. (See Def’s Ex F-6.) The court con-
siders the examples given in these discussions to mean that
the legislature intended to limit the exception to persons
absent from property that would otherwise be their home-
stead for reasons of their own health.
Taxpayer does not allege that she herself had any
medical condition that required her to be absent from the
subject property. Rather, she argues that she was “required”
to live with her adult son in Portland because of his alleged
mental disorder. The court appreciates that taxpayer likely
performed many valuable services for her son, and that tax-
payer’s son may have derived substantial benefits from tax-
payer’s presence with him in Portland during the time frame
under consideration in this case. However, for the purposes
of the “by reason of health” exceptions in ORS 311.670(1)
and ORS 311.684(3), taxpayer was not “required” to live in
Portland “by reason of health.” The department’s disqual-
ification of the subject property from Senior Property Tax
Deferral and subsequent denial of taxpayer’s application for
deferral for the 2009-10 tax year were therefore proper.
D. Burden of Proof
As a further matter, even if the court had adopted
the interpretation of the “by reason of health” exceptions put
forward by taxpayer, taxpayer has failed on the record before
the court to satisfy the burden of proving that her absence
from the subject property during the time frame under con-
sideration in this case was as a result of her son’s medical or
Cite as 21 OTR 302 (2013) 311
mental health needs. As the party seeking affirmative relief
in this matter, taxpayer must prove the material facts of her
case by a preponderance of the evidence. ORS 305.427. On
the record before the court, even if the court had concluded
that taxpayer correctly interpreted the “by reason of health”
exceptions found in ORS 311.670(1) and ORS 311.684(3),
taxpayer has failed to show that her absence from the sub-
ject property was more likely than not as a result of her son’s
medical or mental health.
Most importantly, while the court does not doubt
the sincerity of taxpayer’s belief in her son’s mental illness,
there is no competent evidence in the record showing that
her son has ever been diagnosed with agoraphobia, or with
any other medical or mental condition that would explain
taxpayer’s absence from the subject property. Taxpayer her-
self testified to the effect that her son suffered from ago-
raphobia, but taxpayer’s testimony as a layperson cannot
satisfy the burden of proof on this question. Taxpayer also
attached to her pre-trial brief a letter from her own physi-
cian to the effect that taxpayer’s son displayed symptoms
consistent with agoraphobia, but taxpayer never offered the
letter in evidence and taxpayer never sought to call her phy-
sician to testify as to the basis for her conclusion.
Therefore, even if the court had adopted taxpayer’s
interpretation of the “by reason of health” exception, tax-
payer’s case would have failed for a lack of evidence showing
that her son more likely than not suffered from a condition
that “required” taxpayer to be absent from the subject prop-
erty to care for her son.
V. CONCLUSION
The court concludes that the subject property was
not at any time taxpayer’s “homestead,” as that term is
defined by ORS 311.666(2). The court further concludes that
taxpayer was not “required” to be absent from the subject
property “by reason of health” when the department disqual-
ified the subject property from Senior Property Tax Deferral
in January of 2009 and when the department denied tax-
payer’s application for deferral for the 2009-10 tax year.
Finally, even if the court had adopted the interpretation of
312 Azar v. Dept. of Rev.
the “by reason of health” exception advanced by taxpayer,
taxpayer failed to carry the burden of showing that her
absence from the subject property was “required * * * by rea-
son of” the health of her son. Now, therefore,
IT IS THE DECISION OF THIS COURT that
Defendant properly disqualified Plaintiff from Senior
Property Tax Deferral in January of 2009 and properly
denied Plaintiff’s application for Senior Property Tax
Deferral for the 2009-10 tax year.