Comcast Corp. IV v. Dept. of Rev. (TC 4909) ( 2017 )

442 November 30, 2017 No. 42
42
22 OTR Corp. IV v. Dept. of Rev. (TC 4909)
Comcast
2017 November 30, 2017
IN THE OREGON TAX COURT
REGULAR DIVISION
COMCAST CORPORATION,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
Defendant.
(TC 4909)
On remand from the Oregon Supreme Court, the parties sought resolution of
the issue of the Maximum Assessed Value of Plaintiff’s (taxpayer’s) real property
under central assessment. Also at issue were taxpayer’s second through fourth
claims for relief, collectively referred to by the parties as “taxpayer’s discrimina-
tion claims.” On remand, the parties initially disagreed on the scope of remand.
Taxpayer argued that although the Supreme Court ruled conclusively against
taxpayer on its first claim for relief, neither the Tax Court nor the Supreme Court
had ruled on taxpayer’s remaining claims for relief and they were therefore still
before this court. The department argued that the only issue remaining before
this court was the Measure 50 issue. The court later determined by order that
all of taxpayer’s remaining claims for relief, claims two through five, remained
pending.
Oral argument on cross-motions for summary judgment
was held March 16, 2016, in the courtroom of the Oregon Tax
Court, Salem. An evidentiary hearing was held March 21,
2017, in the courtroom of the Oregon Tax Court, Salem.
Joseph M. DePew, Sutherland, Asbill & Brennan LLP,
Atlanta argued the cause pro hac vice. Cynthia M. Fraser,
Garvey Schubert Barer, PC, Portland, filed the motion and
argued the cause for Plaintiff (taxpayer).
Marilyn J. Harbur, Senior Assistant Attorney General,
Department of Justice, Salem, filed the cross-motion and
argued the cause for Defendant Department of Revenue (the
department).
Decision rendered November 30, 2017.
HENRY C. BREITHAUPT, Judge.
I. INTRODUCTION
This case is on remand from the Oregon Supreme
Court, and concerns the central assessment of the property
Cite as 22 OTR 442 (2017) 443
of Plaintiff Comcast Corporation (taxpayer) by Defendant
Department of Revenue (the department) for tax year
2009-10.
II. FACTS AND PROCEDURAL HISTORY
This case has a long history regarding various chal-
lenges to the department’s central assessment of taxpayer’s
property for tax year 2009-10. Only a portion of that history
will be recited here for purposes of describing what issues
remain pending for decision. The decisions and opinions ref-
erenced in this opinion provide a more complete picture of
the litigation in this case.
A. Procedural History
For tax year 2009-10, the department for the first
time subjected certain property of taxpayer to central
assessment. This had the effect of greatly increasing the
Real Market Value (RMV) of taxpayer’s property because in
central assessment, unlike in local assessment, taxpayer’s
intangible property is subject to assessment and taxation.
See ORS 307.030(2).1
In August 2009, taxpayer filed a complaint in the
Tax Court, alleging various facts constituting five separate
claims for relief from the effects of central assessment.2
Taxpayer made the following claims:
(1) Taxpayer is not subject to central assessment as a
communication company;
(2) The department violated the federal Internet Tax
Freedom Act (ITFA), codified at 47 USC § 151 note
(1998);3
1
Unless otherwise noted, the court’s references to the Oregon Revised
Statutes (ORS) are to the 2009 edition.
2
Taxpayer subsequently amended its complaint, and added two claims for
relief—collateral estoppel and res judicata. However, taxpayer abandoned those
claims on remand.
3
The ITFA was originally enacted in 1998 on a temporary basis and set to
expire after three years. Internet Tax Freedom Act § 1101(a), Pub L 105-277, div
C, tit XI, 112 Stat 2681-719 (1998). In 2001, the ITFA was extended to November 1,
2003. Internet Tax Nondiscrimination Act, Pub L 107-75, § 2, 115 Stat 703
(2001). The ITFA was then amended and extended as amended in 2004, with
an operative period from November 1, 2003 to November 1, 2007. Internet Tax
Nondiscrimination Act, Pub L 108-435, 118 Stat 2615 (2004). In 2007, the ITFA
444 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
(3) The department violated the uniformity and equal-
ization clauses of the Oregon Constitution contained
in Article I, section 32, and Article IX, section 1, of the
Oregon Constitution;
(4) The department violated the Equal Protection
Clause of the United States Constitution, US Const,
Amend XIV, § 1; and
(5) The department violated Measure 50—codified in
Article XI, section 11, of the Oregon Constitution—and
the statutes implementing Measure 50.
In August 2011, after trial, the court determined
that taxpayer’s property was not subject to central assess-
ment because the primary use of taxpayer’s property,
cable television, was not a communication service offering
data transmission services within the meaning of ORS
308.505(3). Comcast Corp. v. Dept. of Rev., 20 OTR 319 (2011).
Because the court determined that taxpayer’s property was
not subject to central assessment, the court determined
that it was “unnecessary to * * * address the other chal-
lenges made by [taxpayer] to the actions of the department.”
Id. at 337.
The department appealed, and the Supreme Court
reversed.4 The Supreme Court held that property owned by
taxpayer and used to provide cable television, voice-over-
internet protocol (VOIP), and internet services was subject
to central assessment in tax year 2009-10. Comcast Corp.
v. Dept. of Rev., 356 Or 282, 337 P3d 768 (2014). It then
remanded the case to this court for further proceedings. Id.
at 335.
On remand, the parties disagreed on the scope of
remand. Taxpayer argued that although the Supreme Court
ruled conclusively against taxpayer on its first claim for
was again amended and extended as amended to 2014. Internet Tax Freedom
Act Amendments Act of 2007, Pub L 110-108, 121 Stat 1024. It was then extended
to 2015, then 2016, and ultimately made permanent in 2016. Consolidated and
Further Continuing Appropriations Act, 2015, Pub L 113-235, div E, tit VI, § 624,
128 Stat 2377 (2014); Consolidated Appropriations Act, 2016, Pub L 114-113, div
E, tit VI, § 633, 129 Stat 2471 (2015); Trade Facilitation and Trade Enforcement
Act of 2015, Pub L 114-0125, tit IX, § 922 (2016).
4
Taxpayer also appealed portions of the court’s judgment.
Cite as 22 OTR 442 (2017) 445
relief, neither this court nor the Supreme Court had ruled on
taxpayer’s remaining claims for relief and they were there-
fore still before this court. The department argued that the
only issue remaining before this court was the Measure 50
issue.
The court resolved the dispute by order. Comcast
Corp. II v. Dept. of Rev. (TC 4909), 22 OTR 64 (2015) (Order
on Scope of Remand). In that order, the court determined
that all of taxpayer’s remaining claims for relief, claims two
through five, remained pending.
At the hearing on the scope of remand, the court
invited taxpayer to file a motion for attorney’s fees. Shortly
thereafter, taxpayer submitted its motion, to which the
department filed its objections. That request remains pend-
ing, and will be addressed in further proceedings for a sup-
plemental judgment following entry of a general judgment
in this case.
The first claim for relief that the court considered
on remand was taxpayer’s Measure 50 claim. After briefing
and argument, the court issued an order detailing the prin-
ciples applicable to determining the Maximum Assessed
Value (MAV) and Assessed Value (AV) of property previ-
ously subject to, but not subjected to, central assessment
for purposes of Measure 50 and the statutes implementing
Measure 50. Comcast Corp. III v. Dept. of Rev. (TC 4909),
22 OTR 233 (2016) (Order on New Property Exception to
Measure 50).
Subsequently, the parties were unable to agree on
the final calculation of MAV and AV and submitted letter
briefing to the court on the matter. Accordingly, final resolu-
tion of taxpayer’s Measure 50 claim remains pending before
the court, and is decided in this opinion.
Also subsequent to the court’s Order on New
Property Exception to Measure 50, the court received brief-
ing, additional evidence, and argument on taxpayer’s sec-
ond through fourth claims for relief, collectively referred
to by the parties as “taxpayer’s discrimination claims.”
Those claims remain pending, and are decided in this
opinion.
446 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
B. Facts
The record in this case includes the testimony and
exhibits introduced at trial,5 and supplemental declarations,
stipulation, and testimony on remand.6 There are two cat-
egories of facts that are relevant to this decision. The first
category relates to the ultimate determination of MAV and
AV for purposes of taxpayer’s Measure 50 claim. The second
category relates to taxpayer’s discrimination claims.
1. Measure 50 claim
A brief introduction of the law concerning calcula-
tion of MAV is necessary to give context to the relevant facts
in this case.
In this case, MAV is determined pursuant to the
statutory calculation in ORS 308.146, plus an adjustment
for new property pursuant to ORS 308.153 and OAR 150-
308-149(5).7 ORS 308.146(1) provides that the MAV in the
current year (here tax year 2009-10) is equal to the greater
of either 100 percent of the prior year’s MAV (here tax
year 2008-09) or 103 percent of the prior year’s AV. ORS
308.153(1) provides that the MAV in the current year is
adjusted for new property by adding the product of the value
of new property multiplied by the Changed Property Ratio
(CPR). The calculation pursuant to OAR 150-308-149(5) will
be discussed in the analysis section of this opinion.
The final calculation for the AV is straightforward.
It is the lesser of either the RMV or MAV for the current
year. ORS 308.146(2).
Many of the facts concerning the calculation of MAV
and AV for tax year 2009-10 are not disputed.
• The RMV for tax year 2009-10 is $1,013,000,000.
• The AV for tax year 2008-09 was $244,044,900.
• The MAV for tax year 2008-09 was $434,084,202.
Trial was held December 10 through 16, 2010.
5
An evidentiary hearing was held March 21, 2017.
6
7
The new property exception to Measure 50 was the only exception to
Measure 50 asserted by the department.
Cite as 22 OTR 442 (2017) 447
• The CPR for tax year 2009-10 is 1.00.8
• The calculation principles necessary to determine
the MAV in 2009-10 are contained in the court’s
Order on New Property Exception to Measure 50.9
What is disputed by the parties is the amount of
new property for purposes of Measure 50. On December 20,
2016, the parties entered into the following stipulation:
“For purposes of the 2009-2010 tax year, Comcast’s net
additions under OAR 150-308.149(5) [(now OAR 150-308-
0150)] are $86,000,000.”10
The department prepared a calculation of the
MAV for tax year 2009-10 that equaled $520,084,202. This
amount was derived as follows: To the tax year 2008-09
MAV of $434,084,202, the department added the product of
new property valued at $86,000,000 multiplied by the CPR
of 1.0.
Taxpayer prepared a calculation of the MAV for
tax year 2009-10 that equaled $486,747,025. This amount
was derived as follows: To the tax year 2008-09 MAV of
$434,084,202, taxpayer added the product of new property
80
The CPR is calculated pursuant to ORS 308.153(1)(b). That subsection
provides that the CPR is “the ratio, not greater than 1.00, of the average [MAV]
over the average [RMV] for the assessment year.” Taxpayer does not dispute that
the CPR is 1.00 if new property added to the assessment roll is not part of the
CPR calculation. Taxpayer relies upon ORS 308.149(3)(c) and (4)(c) to argue that
new property should be included in the CPR calculation for purposes of central
assessment. If new property is included in the CPR calculation, taxpayer states
“the CPR may still be 1.0 but the Department has not provided Comcast with
information to determine with absolute certainty whether that is the case.”
Neither party seriously engaged with this issue. Further, even if taxpayer’s
argument was correct, taxpayer’s own brief indicates that this court lacks the
necessary evidence to determine whether taxpayer’s argument would make a
substantive difference. This court is aware of no motion to compel filed by tax-
payer requesting this court to force the department to provide the requisite infor-
mation, and this court will not hold the record open any longer. Accordingly, with
no evidence to show that taxpayer’s construction of the CPR statutes would differ
in result from the department’s, this court declines to address the issue, and will
treat the CPR as 1.00.
90
The department does not dispute that the MAV in this case will be calcu-
lated in accordance with these principles, but the department has stated that it
intends to appeal this court’s Order on New Property Exception to Measure 50.
10
This rule was renumbered to OAR 150-308-0150 in 2016, but was not
materially changed. This court will cite the new numbering of the rule.
448 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
valued at $52,662,823 multiplied by the CPR of 1.0. Taxpayer
calculated its new property figure by applying a deprecia-
tion percentage and a market-to-book ratio to the net addi-
tions figure of $86,000,000. Taxpayer used the department’s
figures to determine the applicable depreciation percentage
and market-to-book ratio.
The court will address these differences, and the
ultimate calculations of MAV and AV for tax year 2009-10
in the analysis section of this opinion.
2. Tax year 2009-10 discrimination claims
With respect to its discrimination claims, which
relate to tax year 2009-10, taxpayer has introduced and
relies upon a significant amount of evidence that it argues
shows an intentional and systematic pattern of discrimina-
tion in favor of over-the-air and radio broadcasters (collec-
tively referred to as broadcasters), or at least against cable
companies.
Although the department disputes some charac-
terizations made by taxpayer,11 the department does not
materially dispute the evidence introduced or relied upon
by taxpayer.
That evidence can be summarized as follows:
First, the department has for many years wanted to
subject the intangible property of cable companies to assess-
ment and taxation. To this end, the department made var-
ious legal arguments and submitted legislative testimony
over the years, arguing, in one way or another, that cable
property was subject to central assessment and taxation.
Second, when its arguments and testimony failed
to achieve the intended results, the department pursued
rulemaking to interpret the definition of a “communication”
company to subject the property of cable companies to cen-
tral assessment, which property would then include intangi-
ble property. See ORS 307.030(2). However, the department
was unable to develop a set of neutral criteria that would
subject cable companies, but not broadcasters, to central
11
E.g., whether certain statements made by departmental personnel can be
imputed to the department itself.
Cite as 22 OTR 442 (2017) 449
assessment. The department attempted to exclude broad-
casters from central assessment because it did not think
they were subject to central assessment.12
Accordingly, and third, having failed to ascertain
neutral criteria that would not also subject broadcasters
to central assessment, the department issued a rule before
the assessment date for tax year 2009-10 that provided
that cable companies are considered “communication” com-
panies, which are subject to central assessment. That rule
was later invalided for procedural defects.13 See Oregon
Cable Telecommunications v. Dept. of Rev., 237 Or App 628,
240 P3d 1122 (2010). However, the department pursued its
assessment of taxpayer for tax year 2009-10 on the basis
that it had the statutory authority to do so.
Fourth, at the time that the department assessed
taxpayer’s property for tax year 2009-10, the department
was, at the very least, unable to satisfactorily indicate why
the property of broadcasters should not also be subject to
central assessment. However, the department now admits
that both radio and television broadcasters “transmit infor-
mation in electronically coded form over a distance and
across a network,” and that “the radio and tv broadcasting
industry is comprised of communication companies involved
in data transmission services.”
Fifth, and finally, the department did not—and
has not—subjected the property of broadcasters to central
assessment, notwithstanding the fact that the Supreme
Court has since held that the property of companies used
in data transmission services, or “services that provide the
means to send data from one computer or computer-like
device to another across a transmission network” regardless
of the type of technology used, are subject to central assess-
ment. Comcast Corp., 356 Or at 315.
12
The department offered many reasons why it did not think that broadcast-
ers were subject to central assessment. The precise reasons are not relevant to
this decision and are therefore not discussed. It is enough to say that the depart-
ment had a variety of reasons that were based on real or perceived differences
between cable companies and broadcasters, none of which now withstands scru-
tiny under the Supreme Court’s opinion as to central assessment or the record in
this case for this tax year.
13
There was no ruling on the substantive nature of the rule.
450 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
The court will address whether these facts consti-
tute discrimination in tax year 2009-10 for purposes of tax-
payer’s discrimination claims in the analysis section of this
opinion. Additional facts relevant to this court’s analysis
will be discussed below.
III. ISSUES
There are four issues before the court. The first issue
is the determination of the MAV of taxpayer’s property for
tax year 2009-10. The second issue is whether the depart-
ment discriminated against taxpayer in tax year 2009-10
for purposes of Article I, section 32, and Article IX, section
1, of the Oregon Constitution. The third issue is whether
the department discriminated against taxpayer in tax year
2009-10 for purposes of the Equal Protection Clause of the
United States Constitution. The fourth and final issue is
whether the department’s assessment of taxpayer’s property
in tax year 2009-10 violates the ITFA.
IV. ANALYSIS
The court will first consider the MAV of taxpayer’s
property for tax year 2009-10. Then, it will consider together
taxpayer’s federal and state constitutional discrimination
claims. Finally, this court will consider taxpayer’s claim
under the ITFA.
A. MAV Claim
The dispute regarding the MAV of taxpayer’s prop-
erty concerns the proper interpretation of a stipulation of
fact entered into by the parties. That stipulation provides:
“For purposes of the 2009-2010 tax year, Comcast’s net
additions under [OAR 150-308-0150] are $86,000,000.”
The parties disagree on the meaning of the $86,000,000
figure.
Taxpayer argues that the stipulation provides for
the cost of net additions for purposes of tax year 2009-10,
which must then be adjusted to determine the value of new
property. That number can then be multiplied by the CPR of
1.0 to determine the amount of new property for purposes of
calculating the MAV under Measure 50.
Cite as 22 OTR 442 (2017) 451
The department argues that the stipulation pro-
vides for the value of new property. The department argues
that the only calculation required to determine the amount
of new property for purposes of Measure 50 is to multiply
the $86,000,000 figure by the CPR of 1.0.
Oregon courts interpret stipulations as they would
any other agreement between parties. May Trucking Co. v.
Dept. of Transportation, 203 Or App 564, 579, 126 P3d 695
(2006). First, the court must “determine whether the lan-
guage [of the stipulation] is ambiguous by examining the
text and context of the document as a whole.” Id. If the lan-
guage is unambiguous, which is a question of law, that ends
the inquiry. Id.If, however, the language is ambiguous, the court
may consider extrinsic evidence to determine the meaning
of the stipulation. See Couch Investments, LLC v. Peverieri,
359 Or 125, 134, 371 P3d 1202 (2016). That determination is
one of fact. Id.The court first looks to the text of the stipulation. It
is clear that net additions are equal to $86,000,000. What is
not clear from the text of the stipulation is whether the term
“net additions” refers to cost or value. Accordingly, this court
reviews the OAR referenced in the stipulation.
OAR 150-308-0150 is an administrative rule defin-
ing terms and providing guidance for purposes of ORS
308.149(5). Before looking at the text of the rule, the court
considers the text of ORS 308.149(5)—the context for the
administrative rule. ORS 308.149(5) provides a definition of
new property for purposes of Measure 50:
“(a) ‘New property or new improvements’ means
changes in the value of property as the result of:
“(A) New construction, reconstruction, major addi-
tions, remodeling, renovation or rehabilitation of property;
“(B) The siting, installation or rehabilitation of manu-
factured structures or floating homes; or
“(C) The addition of machinery, fixtures, furnishings,
equipment or other taxable real or personal property to the
property tax account.
452 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
“(b) ‘New property or new improvements’ does not
include changes in the value of the property as the result of:
“(A) General ongoing maintenance and repair; or
“(B) Minor construction.
“(c) ‘New property or new improvements’ includes tax-
able 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.”
ORS 308.149(5) (emphases added). ORS 308.149(5) addresses
what constitutes new property and describes such property
in terms of value.
With that background in mind, this court now turns
to the text of OAR 150-308-0150. That rule provides, in rele-
vant part:
“Net Capitalized Additions
“(1) Definitions:
“(a) For purposes of centrally-assessed property, the
term ‘improvements’ means changes in the value of prop-
erty (as defined in 1997 OR Law Ch. 541, Sect. (7)(1)(b))
as the result of new construction, reconstruction, major
additions, remodeling, renovation, rehabilitation or acqui-
sition of property except on-going maintenance and repair.
‘Improvements’ are measured by changes in Oregon net
capitalized additions as defined below.
“(b) The term ‘capitalized’ refers to company expendi-
tures for certain assets with a useful life typically extend-
ing beyond one year. These assets are aggregated in fixed
asset accounts subject to annual depreciation charges,
rather than repair and maintenance expense accounts.
Examples include acquisitions of or changes to buildings,
equipment, and personal property such as furniture and
fixtures.
“(c) The term ‘net additions’ means the difference
between the aggregate costs of Oregon assets in the prior and
current years. For the 1997-98 implementation year, addi-
tions include the change from the 1995-96 base year. In all
subsequent years, additions include the change from the
prior year.
Cite as 22 OTR 442 (2017) 453
“(d) The term ‘net capitalized additions’ means ‘net
additions’ as calculated using capitalized costs in the com-
pany’s annual reports.
“* * * * *
“(3) For purposes of computing maximum assessed
value for centrally-assessed property, the aggregate Oregon
net capitalized additions shall be adjusted to reflect their
real market value as a result of wear, aging, and the impact
of market conditions since placement in service. The net
capitalized additions shall then be multiplied by the state-
wide maximum assessed value to real market value ratio
for centrally-assessed property (always 1.00 or less). The
maximum assessed value shall be compared to the real
market value, and the lesser of the two shall be placed on
the roll as the company’s assessed value.”
OAR 150-308-0150 (emphases added).
Taxpayer argues that the use of the term “net addi-
tions” in the stipulation, and the citation to OAR 150-308-
0150, gives the $86,000,000 number a particular meaning.
It is “the difference between the aggregate costs of Oregon
assets in the prior and current years.” OAR 150-308-0150
(1)(c) (defining “net additions”). Taxpayer does not dis-
pute that all of these additions are capitalized additions.
Accordingly, taxpayer concedes that the $86,000,000 in the
stipulation represents the net capitalized additions for pur-
poses of OAR 150-308-0150(1)(d).
However, taxpayer argues that the term “net capi-
talized additions” only represents the cost of the additions,
not the value. To corroborate its assertion that the net addi-
tions figure is one of cost, taxpayer relies upon portions of
testimony during the 2010 trial in which taxpayer’s witness
answered in the affirmative to whether taxpayer’s “new tan-
gible personal property additions that are net or [sic] retired
assets [was] approximately $86 million in 2009.” Taxpayer’s
witness expected the new additions in 2008 to be roughly
the same.
Pursuant to ORS 308.153(2)(a), it is the “real mar-
ket value of the new property or new improvements” that is
considered for purposes of Measure 50. See also ORS 308.149
454 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
(5)(a)(C) (defining new property as “changes in value” result-
ing from additions to the property tax account). Accordingly,
taxpayer argues that the cost of the net capitalized addi-
tions must be adjusted to determine its value.
Taxpayer argues that OAR 150-308-0150(3) pro-
vides the key to taxpayer’s adjustment of the cost of the net
capitalized additions to their value. That subsection pro-
vides, in relevant part, that the “net capitalized additions
shall be adjusted to reflect their real market value as a
result of wear, aging, and the impact of market conditions
since placement in service.” OAR 150-308-0150(3).
To make the adjustment contemplated by OAR
150-308-0150(3), taxpayer relies upon testimony from the
2010 trial in which the department’s witness Michael Olson
described the department’s process for adjusting “net addi-
tions” to determine the amount of new property for purposes
of ORS 308.153(2)(a). First, the department must determine
“what the market-to-book ratio is at the correlated system
value.” Once that ratio is determined, it is then applied to
the net additions figure.
Second, the department determines a depreciation
factor for the property. That factor is based in part on the
depreciation expense rates reported by the company and
in part on a “half-year convention” as an approximation
because it may not be known when the property was placed
into service. That factor is then applied to the product of
the net additions figure multiplied by the market-to-book
ratio.
In sum, to adjust the cost of net additions for
Measure 50, the department’s witness Olson explained:
“What we would have to do is then calculate the—our
estimated real market value of those net additions. We’ve
got the net, so now we’re going to have to calculate the mar-
ket-to-book ratio at the system level. We’re going to have to
calculate the estimated depreciation expense at the system
level, take 50 percent of that, multiply our net additions
times the market-to-book ratio times the depreciation per-
centage, [that] would equal the net additions for Measure
50 purposes for the current year only.”
Cite as 22 OTR 442 (2017) 455
That calculation yields what is commonly considered to be
“exception maximum assessed value,” which is added to the
prior year’s MAV as adjusted by ORS 308.146.
Essentially, taxpayer argues that use of the term
“net additions” in the stipulation means that the $86,000,000
figure is one of cost as defined in OAR 150-308-0150, which
rule is specifically referenced in the stipulation. Taxpayer
then argues that cost figure must be adjusted as contem-
plated by the rule and in accordance with the department’s
own practices. Notably, taxpayer in its calculations uses the
department’s own figures for the market-to-book ratio and
depreciation percentage to arrive at its figure for new prop-
erty of $52,662,823.
The department disputes taxpayer’s use of OAR
150-308-0150. The department argues that the reference to
OAR 150-308-0150 in the stipulation was included to show
that the $86,000,000 figure was the value of new property
as calculated under OAR 150-308-0150. In support of its
reading, the department argues that, at the time that the
parties entered into the stipulation, the department was
relying upon the court’s interpretation, in its Order on New
Property Exception to Measure 50, of taxpayer’s concession
regarding the $86,000,000 figure.
The department raises an interesting question:
whether the court can consider its prior decisions in a case
to interpret a stipulation made later in that same case, or
whether such decisions are extrinsic evidence not to be con-
sidered unless an agreement is ambiguous.
It is a rule in contract law that the circumstances
surrounding an agreement must be taken into account—
they are not considered extrinsic or parole evidence. As
explained in Williston on Contracts:
“Ordinarily, the circumstances surrounding the execu-
tion of a contract may always be shown and are relevant
to a determination of what the parties intended by the
words they chose. In construing a contract, a court seeks
to ascertain the meaning of the contract at the time and
place of its execution. Thus, although the parties may not,
because of the parol evidence rule, testify as to agreements
they made before or contemporaneously with the execution of
456 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
the contract, the circumstances surrounding the execution of
the contract bear on the contract’s meaning.
“Some courts, not fully appreciating the distinction
between the rule that permits evidence of the surrounding
circumstances to be considered and the rule which prohib-
its the introduction of evidence of collateral agreements,
have held that the former rule runs afoul of the latter, the
parol evidence rule. Indeed, pronouncements can be found
in numerous cases to the effect that evidence of the cir-
cumstances surrounding the execution of a contract may
be admitted, like any other parol evidence, only when the
contract’s meaning is ambiguous.
“These decisions reflect a misunderstanding both of the
scope and purpose of the parol evidence rule, and of the
meaning of the phrase ‘surrounding circumstances’; ‘sur-
rounding circumstances’ do not embrace either the prior
or contemporaneous collateral agreements of the parties
or their understanding of what particular terms in their
agreement mean. Rather, the term refers to the commercial
or other setting in which the contract was negotiated and
other objectively determinable factors that give a context
to the transaction between the parties. Such matters as,
for example, whether one or both parties was new to the
trade, whether either or both had counsel, and the nature
and length of their relationship, as well as their age, expe-
rience, education, and sophistication would all be part of
the ‘surrounding circumstances’ admissible, if relevant,
notwithstanding the parol evidence rule.”
11 Williston on Contracts § 32:7 (4th ed) (footnotes omitted)
(emphases added).
Prior judicial decisions are not listed as an example
of “surrounding circumstances,” but they are not excluded.
However, even if such decisions could be considered as a
“surrounding circumstance,” such consideration would not
help the department here. “Surrounding circumstances”
cannot be considered to determine a party’s “understanding
of what particular terms in their agreement mean,” unless
the terms or agreements are ambiguous. Id.
The stipulation here, however, is not ambiguous.
The $86,000,000 figure is specifically described as one of
“net additions,” which term has a specific definition in the
Cite as 22 OTR 442 (2017) 457
administrative rule specifically cited in the text of the stip-
ulation. That definition is one of cost, and subject to the
types of adjustments made by taxpayer in this case under
OAR 150-308-0150(3). Furthermore, the cost value of the
$86,000,000 figure was corroborated by testimony from the
2010 trial, and the type and amount of adjustments made
by taxpayer are supported by evidence introduced by the
department during the 2010 trial.
Because the stipulation is not ambiguous, and the
dispute centers on the meaning of a term used in the stipu-
lation, the court’s statements in its Order on New Property
Exception to Measure 50 are not relevant.14
Accordingly, the court determines that the MAV of
taxpayer’s property is equal to the tax year 2008-09 MAV of
$434,084,202 plus net additions of $52,662,823. That results
in a MAV for tax year 2009-10 of $486,747,025.
B. Constitutional Discrimination Claims
The court now turns to taxpayer’s discrimination
claims under the Oregon Constitution and United States
Constitution.
1. Controlling law
With respect to our state’s constitution, taxpayer
relies upon Article I, section 32, and Article IX, section 1.
Those sections provide:
“No tax or duty shall be imposed without the consent of the
people or their representatives in the Legislative Assembly;
14
It is worth commenting on the court’s inconsistency in its characterization
of taxpayer’s concession. The court variously described taxpayer’s concession as
one of “net tangible property additions,” “new property,” and “new additions.”
Comcast Corp. III, 22 OTR at 240-41, 244, 256-9. That inconsistency is not some-
thing upon which a party should rely in entering into a stipulation, and should
have given the department pause when stipulating to a number for “net additions
under [OAR 150-308.0150].”
In addition, the court notes that the posture of the case was, at the time the
court issued its Order on New Property Exception to Measure 50, quite different
than it is now. The purpose of the court’s discussion of taxpayer’s concession was
primarily to point out that, notwithstanding the court’s rejection of the depart-
ment’s arguments in support of treating all of taxpayer’s property as new prop-
erty for purposes of Measure 50, there was still an amount of new property to be
calculated. The court specifically left the record open to allow further develop-
ment of the total amount of new property. See Comcast Corp. III, 22 OTR at 258.
458 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
and all taxation shall be uniform on the same class of sub-
jects within the territorial limits of the authority levying
the tax.”
Or Const, Art I, § 32.
“The Legislative Assembly shall, and the people through
the initiative may, provide by law uniform rules of assess-
ment and taxation. All taxes shall be levied and collected
under general laws operating uniformly throughout the
State.”
Or Const, Art IX, § 1.
With respect to the federal constitution, taxpayer
relies upon section 1 of the Fourteenth Amendment to the
United States Constitution. That section provides:
“All persons born or naturalized in the United States,
and subject to the jurisdiction thereof, are citizens of the
United States and of the State wherein they reside. No
State shall make or enforce any law which shall abridge the
privileges or immunities of citizens of the United States;
nor shall any State deprive any person of life, liberty, or
property, without due process of law; nor deny to any per-
son within its jurisdiction the equal protection of the laws.”
US Const, Amend XIV, § 1.
Taxpayer, citing Tharalson v. Dept. of Rev., 281 Or
9, 15, 573 P2d 298 (1978), contends that the above-cited pro-
visions, both state and federal, are often analyzed together.
The department does not dispute that contention. Although
such state and federal discrimination claims are often
analyzed together for convenience, Oregon’s constitution is
not linked to the federal constitution in this regard. In an
appropriate case, a court could hold that Oregon’s constitu-
tion provides greater protections than those of the federal
constitution. See id. at 15 n 10.
The overarching principle of these provisions rele-
vant to this case is that “taxing authorities may not single
out one taxpayer for discriminatory, or selective, enforce-
ment of a tax law that should apply equally to all similarly
situated taxpayers.” Penn Phillips Lands v. Tax Com., 247
Or 380, 385-86, 430 P2d 349 (1967).
Cite as 22 OTR 442 (2017) 459
To demonstrate a violation of these provisions, tax-
payers “must demonstrate an intentional and systematic
pattern of discrimination.” Pacificorp Power Marketing v.
Dept. of Rev., 340 Or 204, 219, 131 P3d 725 (2006), citing
Freightliner Corp. v. Dept. of Rev., 275 Or 13, 17, 549 P2d 662(1976).
A showing that officials made errors of judgment
is insufficient to prove a discrimination claim. Freightliner
Corp., 275 Or at 17, quoting Sunday Lake Iron Co. v.
Wakefield, 247 US 350, 38 S Ct 495, 62 L Ed 1154 (1918).
Indeed, the good faith of officials is presumed. Id. Rather
than mere errors of judgment, a taxpayer must show “ ‘some-
thing which in effect amounts to an intentional violation of
the essential principle of practical uniformity.’ ” Id.In addition to constitutional protections for equal
treatment identified by taxpayer, there are also statutory
provisions which in effect require equality in treatment.
For example, the department is tasked with ensuring that
all of the tax and revenue laws of this state are complied
with, and to make an annual assessment of all companies
subject to central assessment. ORS 305.120; ORS 308.515.
Accordingly, if it determines that a taxpayer is subject to
central assessment and taxation, the department is required
to centrally assess the property of that taxpayer.
2. The arguments of the parties
The department argues that rational basis review
applies to this case, which review entails two principles
vital to its defense. First, that “the Equal Protection Clause
does not demand * * * that a legislature or governing deci-
sionmaker actually articulate at any time the purpose or
rationale supporting its classification.” Nordlinger v. Hahn,
505 US 1, 15, 112 S Ct 2326, 120 L Ed 2d 1 (1992) (emphasis
added); see also Knapp I v. City of Jacksonville, 18 OTR 22,
38 n 9 (2004), aff’d, 342 Or 268 (2007) (explaining that “the
constitutional analysis is about conceivable justifications,
not stated ones”). Second, that a challenger to the classifi-
cation scheme must “negative every conceivable basis which
might support it.” FCC v. Beach Communications, Inc., 508
US 307, 315, 113 S Ct 2096, 124 L Ed 2d 211 (1993).
460 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
Accordingly, the department posits that its assess-
ment must be upheld if there is “any conceivable basis” that
would support the department’s classification between cable
companies and broadcasters. Kane v. Tri-Co. Metro. Transp.
Dist., 65 Or App 55, 60, 670 P2d 178 (1983).
Taxpayer disagrees with the department’s inter-
pretation of the law, arguing that although governmental
decisionmakers have wide discretion (see id. at 59, collect-
ing cases) the any-conceivable-basis standard is tempered
by the requirement that “the legislative facts on which the
classification is apparently based rationally may have been
considered to be true by the governmental decisionmaker,”
Nordlinger, 505 US at 11 (emphasis added).
Taxpayer has made several arguments attempting
to prove that the department has engaged in unconstitu-
tional discrimination against it and other cable companies,
or in favor of broadcasters. Taxpayer argues that every basis
upon which the department has sought to use in support of
its assessment of cable companies—but not broadcasters—
has been discredited. Taxpayer argues that shifting and
inconsistent testimony of departmental witnesses is evi-
dence of discrimination. Taxpayer argues that the depart-
ment has determined that the property of broadcasters is
subject to central assessment, but it has not pursued such
property for assessment and taxation, and that the lack of
pursuit amounts to intentional discrimination.
3. Resolving taxpayer’s claims
Resolution of this case requires particular attention
to be paid to the specific action complained of, the tax year
at issue, and the standard of discrimination.
First, as to the specific action complained of, it is
important to note that the alleged discrimination at issue
is not a legislative classification. The distinction made by
the department between cable companies and broadcasters
is not found in statute. Nor is it an administrative classifi-
cation found in an administrative rule of the department.
The action complained of here was an executive enforcement
decision: the decision of the department to pursue, in the
first instance in tax year 2009-10, the central assessment
of cable and internet companies while also deciding not to
Cite as 22 OTR 442 (2017) 461
pursue at the same time and for the same tax year the cen-
tral assessment of broadcasters. Accordingly, taxpayer must
show that the delay (if it be that) in assessing broadcasters
was, for tax year 2009-10, an act of intentional and uncon-
stitutional discrimination against taxpayer.
Second, recall that the discrimination claims in this
case pertain only to tax year 2009-10. Some of the evidence
introduced by taxpayer relates to actions of the department
after the assessment date for tax year 2009-10. To the extent
that such evidence is relevant to tax year 2009-10, the court
considers it. However, the court does not analyze that evidence
or any other evidence as it might pertain to any other tax year.
Third, also recall that the good faith of officials is
presumed. Freightliner Corp., 275 Or at 17. To prove a dis-
crimination claim, taxpayer “must demonstrate an inten-
tional and systematic pattern of discrimination.” Pacificorp
Power Marketing, 340 Or at 219. Mere errors of judgment are
insufficient. Freightliner Corp., 275 Or at 17. Taxpayer must
show “ ‘something which in effect amounts to an intentional
violation of the essential principle of practical uniformity.’ ” Id.(quoting Sunday Lake Iron Co. v. Wakefield, 247 US 350, 353,
38 S Ct 495, 62 L Ed 1154 (1918)).
In the court’s view, under either the state or fed-
eral constitutions, the department’s efforts to distinguish
between cable companies and broadcasters do not evince
discrimination against cable companies or in favor of broad-
casters. In context, it simply shows that the department
grappled with whether broadcasters are generally sub-
ject to central assessment. The department now appears
to have determined that broadcasters are subject to cen-
tral assessment.15 The fact that the department took some
15
The fact that radio and television broadcasters “transmit information in
electronically coded form over a distance and across a network” would appear
to conclusively show that broadcasters are subject to central assessment. The
Supreme Court held that the property of companies used in data transmission
services, or “services that provide the means to send data from one computer or
computer-like device to another across a transmission network” regardless of the
type of technology used, are subject to central assessment. Comcast Corp., 356
Or at 315. This court does not see a material distinction between “transmit[ting]
information in electronically coded form over a distance and across a network”
and “send[ing] data from one computer or computer-like device to another across
a transmission network.”
462 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
additional time to determine whether broadcasters, as
opposed to cable and internet companies, are subject to cen-
tral assessment is perhaps evidence of an error in judgment
in tax year 2009-10,16 but it is not evidence of intentional
discrimination.
The principal reason why the court finds the depart-
ment’s failure to subject broadcasters to central assessment
to be the result of an excusable error in judgment is the
impact of the Supreme Court’s opinion in this case. Comcast
Corp., 356 Or at 282. In that opinion, the Supreme Court
defined the term “data transmission services” as it relates
to communication companies subject to central assess-
ment. Id. at 332-33. That definition settled the question of
whether cable and internet companies are subject to central
assessment.
However, the Supreme Court refused to also hold
that broadcasters are subject to central assessment, not-
ing it would “resolve no dispute other than the ones before
[it].” Id. at 330 n 26. That hesitation is important here, as it
validates the department’s act of considering separately—
for purposes of tax year 2009-10—the question of whether
broadcasters are also subject to central assessment. It also
supports the department taking some additional amount
of time after the Supreme Court’s opinion to conclude that
broadcasters are subject to central assessment.17
Presuming, as this court must, the good faith of
the department, the act of pursuing central assessment of
cable and internet companies first could very well be evi-
dence of cautious review before subjecting another group
of taxpayers to central assessment. In addition, the act of
taking additional time after the Supreme Court’s opinion
could very well be evidence of cautious interpretation of the
higher court’s opinion. At worst, however, this court finds
16
The court is wary of finding that the deliberations of an administrative
agency are evidence of an error in judgment. The conclusion of such deliberations
may evince an error in judgment, but the act of deliberation alone, except, per-
haps, in particular circumstances, does not appear to be the type of action that
should be subject to a judicial admonishment.
17
However, what the department did or did not do after the Supreme Court’s
opinion does not bear on the department’s intent as of when it assessed taxpayer
in tax year 2009-10, or at least taxpayer has not shown why it is relevant.
Cite as 22 OTR 442 (2017) 463
the delay in determining that broadcasters are subject to
central assessment to be an excusable error in judgment.
It is not evidence of intentional discrimination for tax year
2009-10.
Having found that the department at worst made
an error in judgment with respect to its delay in determin-
ing that broadcasters are subject to central assessment,
the court now turns to perhaps taxpayer’s most persua-
sive evidence of discrimination against cable companies or
in favor of broadcasters. To date, the department has not
centrally assessed broadcasters, even though the depart-
ment has now concluded that they are subject to central
assessment.18
The court does not find intentional discrimination
here either. Taxpayer’s arguments fail to put the evidence
into context, given the Supreme Court’s opinion on the defi-
nition of “data transmission services” and this court’s Order
on New Property Exception to Measure 50.
As already discussed, the Supreme Court declined
to determine whether broadcasters are subject to central
assessment. Comcast Corp., 356 Or at 330 n 26. For purposes
of this part of the analysis, the court assumes without decid-
ing that broadcasters are subject to central assessment.19
The Supreme Court’s hesitation is crucial to this
point. It supports the department taking a reasonable
amount of time to determine, under the Supreme Court’s
opinion, whether broadcasters are subject to central
18
With the exception of taxpayer’s wholly owned subsidiary, NBC Universal,
which the department began considering for purposes of valuing taxpayer’s
property within the state and without the state as a unit beginning in tax year
2012-13. See ORS 308.550; ORS 308.555. Taxpayer argues that it is either log-
ically inconsistent or intentionally discriminatory to consider NBC Universal,
a broadcasting company also engaged in motion pictures, cable networks, and
theme parks, a communication company subject to central assessment when no
other broadcasters have been subjected to central assessment. These arguments,
while perhaps important to any discrimination claims in tax year 2012-13 (or
thereafter), are insufficient to demonstrate intentional discrimination by the
department in tax year 2009-10.
19
It certainly appears that they are. See 22 OTR at 449 n 12. In addition, the
department appears to consider them subject to central assessment. (Ptf’s Ex 75
at 1; Def’s Resp to Ptf’s 2d Req for Admiss at 2-3.) However, the court need not
decide that issue to resolve this case, and therefore does not address it.
464 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
assessment. Indeed, the evidence shows that the depart-
ment did later conclude that broadcasters are subject to cen-
tral assessment, at or around which time the department
began its Broadcasters Project to centrally assess the prop-
erty of broadcasters.20 That project began in 2016, but is now
on hold.
After the Supreme Court’s decision, but before
the department determined that broadcasters are subject
to central assessment, this court issued its Order on New
Property Exception to Measure 50. In that order, the court
rejected the department’s method of determining MAV for
newly centrally assessed taxpayers. (See generally Comcast
Corp. III, 22 OTR 233.)
The department’s new hesitation in assessing broad-
casters even though it has concluded that they are centrally
assessable seems permissible in light of the court’s Order
on New Property Exception to Measure 50. The depart-
ment explained that it intends to appeal the court’s order,
and intends to hold off on assessing additional taxpayers
until the Measure 50 issues are decided with finality. The
court does not find intentional discrimination in the depart-
ment’s decision to delay further assessments until issues
critical to the assessment process are determined with
finality.21
Taxpayer attempts to undercut the department’s
explanation by pointing out that the department, in late
2014, immediately after the Supreme Court’s opinion, added
175 cable and internet companies to the central assessment
roll on a going-forward basis. However, again, taxpayer’s
20
The court notes that the department has wavered on its determination
that broadcasters are subject to central assessment, even after it began the
Broadcasters Project. Such hesitation is not evidence of discrimination for tax
year 2009-10. However, in an appropriate case and in an appropriate year, the
department’s hesitation may eventually lack a rational basis and therefore
become evidence of intentional discrimination.
21
Of course, the department could simply pursue assessing broadcast-
ers with omitted property assessments in lieu of new property assessments,
which approach was almost completely spelled out in the court’s Order on
New Property Exception to Measure 50. Nevertheless, it is within the depart-
ment’s province to wait until the legal issues in this case are settled with final-
ity before pursuing additional assessments related to the legal issues in this
case.
Cite as 22 OTR 442 (2017) 465
argument fails to put the evidence into context with the
timeline of decisions in this case.
The evidence cited by taxpayer shows that the
department added these cable companies to central assess-
ment after the Supreme Court’s opinion and before this
court’s Order on New Property Exception to Measure 50.22
That means that the department added cable and inter-
net companies, which were determined with finality by the
Supreme Court to be subject to central assessment, to the
central assessment roll before this court concluded that the
department’s method of determining MAV was incorrect.
Accordingly, the department was unaware that its method
of determining MAV was incorrect when it assessed those
cable and internet companies, but it is now aware and
appears to have paused in its assessment of additional tax-
payers, including broadcasters.
In sum, there is no intentional discrimination to be
found with grappling initially, for tax year 2009-10, whether
to also subject the property of broadcasters to central assess-
ment and taxation. Nor is there intentional discrimination to
be found in the department’s act of taking time to ascertain
the meaning of the Supreme Court’s decision as it applies to
broadcasters, while at the same time immediately adding
cable and internet companies to the central assessment roll.
Nor is there discrimination to be found in the department’s
act of placing the Broadcasters Project on hold pending the
outcome of this case and the department’s ultimate appeal
of this court’s Order on New Property Exception to Measure
50.
The court is not convinced that the department has
acted in an invidious or discriminatory way under either
the state or federal constitutions in centrally assessing tax-
payer and other cable companies for tax year 2009-10.
22
Taxpayer has pointed to no evidence of the department subjecting addi-
tional cable and internet companies to central assessment after the court’s issu-
ance of its Order on New Property Exception to Measure 50. The fact that the
department has continued to assess certain taxpayers added after the Supreme
Court’s opinion and before this court’s Order on New Property Exception to
Measure 50 is of no moment.
466 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
C. Internet Tax Freedom Act
The court now considers taxpayer’s discrimina-
tion claim under the ITFA.23 The ITFA prohibits two types
of taxes. The first prohibition relates to taxes on internet
access. ITFA § 1101(a)(1). The second prohibition relates to
multiple or discriminatory taxes on electronic commerce.
ITFA § 1101(a)(2).
Taxpayer has admitted that its arguments center on
the discriminatory taxes prohibition. Accordingly, the court
need not analyze the taxes on internet access prohibition.
In addition, taxpayer has not argued that central
assessment is a “multiple” tax. Therefore, the court need
only analyze whether the department’s central assessment
of taxpayer’s property is a “discriminatory” tax.
To bring a discrimination claim under ITFA
§ 1101(a)(2), taxpayer must prove (1) it is engaged in elec-
tronic commerce and (2) it is being taxed in a discriminatory
manner on that electronic commerce.
1. Engaged in electronic commerce
Electronic commerce is defined as “any transaction
conducted over the Internet or through Internet access, com-
prising the sale, lease, license, offer, or delivery of property,
goods, services, or information, whether or not for consid-
eration, and includes the provision of Internet access.” ITFA
§ 1105(3) (emphasis added). Internet access is defined as
“a service that enables users to connect to the Internet to
access content, information, or other services offered over
the Internet.” ITFA § 1105(5)(A).
Taxpayer has shown that, at least through its inter-
net access business, it is engaged in electronic commerce
because it provides “Internet access.” Therefore this court
must determine whether central assessment of taxpayer
and other cable and internet companies, but not broadcast-
ers, is a discriminatory tax on internet access.
23
The ITFA is codified in a note following 47 USC section 151. The USC was
last published in 2012, and therefore does not take into account the subsequent
extensions to the ITFA. Those extensions and the ultimate permanency of the
ITFA were discussed earlier by the court, 22 OTR at 443 n 3.
Cite as 22 OTR 442 (2017) 467
2. Discriminatory taxation
“Discriminatory taxes” are defined, in relevant part
as:
“(A) any tax imposed by a State or political subdivi-
sion thereof on electronic commerce that—
“(i) is not generally imposed and legally collectible by
such State or such political subdivision on transactions
involving similar property, goods, services, or information
accomplished through other means;
“(ii) is not generally imposed and legally collectible at
the same rate by such State or such political subdivision on
transactions involving similar property, goods, services, or
information accomplished through other means, unless the
rate is lower as part of a phase-out of the tax over not more
than a 5-year period;
“(iii) imposes an obligation to collect or pay the tax on
a different person or entity than in the case of transactions
involving similar property, goods, services, or information
accomplished through other means; [or]
“(iv) establishes a classification of Internet access ser-
vice providers or online service providers for purposes of
establishing a higher tax rate to be imposed on such pro-
viders than the tax rate generally applied to providers
of similar information services delivered through other
means[.]”
ITFA § 1105(2)(A).
Taxpayer relies upon subparts (i) and (iv) in its
briefing. (See Ptf’s Opening Br on Discrim Claims at 37-38.)
Accordingly, the court need not analyze subparts (ii) or (iii).
For the reasons explained below, taxpayer has not proven its
claim under the ITFA.
a. Subpart (i)
Subpart (i) prohibits taxes on electronic commerce
that are “not generally imposed and legally collectible by
such State or such political subdivision on transactions
involving similar property, goods, services, or informa-
tion accomplished through other means,” ITFA 1105(A)(i)
(emphasis added).
468 Comcast Corp. IV v. Dept. of Rev. (TC 4909)
The emphasis on the term “transaction” is dispos-
itive as to this subpart. The tax at issue in this case is ad
valorem and not a tax on electronic commerce or a tax on
transactions generally. It is true that by operation of the
central assessment statutes and the Supreme Court’s opin-
ion in this case that companies providing internet access
are subject to central assessment. However, such compa-
nies are subject to assessment and taxation on the value of
their property in this state, as determined by reference to the
value of their property inside and outside this state. They are
not subjected to property assessment and taxation on their
transactions.
Of course, it is possible that the value of an internet
access provider’s property in this state might be related to
the number of transactions the company engages in, such
as the number of internet subscribers it services, such that
its intangible goodwill value increases. However, a tax on
that value is different from a tax on those transactions. This
becomes evident when one considers a hypothetical company
providing internet access services to customers in Oregon
but with no property in Oregon. Regardless of the number
of transactions engaged in between the internet access pro-
vider and its customers, no property tax could be assessed.24
Taxpayer has failed to show that the department’s
central assessment of taxpayer’s property is a discrimina-
tory tax on transactions.
b. Subpart (iv)
The court now considers subpart (iv). It is notable
that the act of central assessment cannot be a discrimina-
tory tax under the terms of subpart (iv), notwithstanding
any alleged bad acts of the department in this case.
Subpart (iv) prohibits taxes on electronic commerce
that “establish[ ] a classification of Internet access service
providers or online service providers for purposes of estab-
lishing a higher tax rate to be imposed on such providers
than the tax rate generally applied to providers of similar
24
That provider may be responsible for other types of taxes, such as the gen-
erally applicable corporate income and excise taxes. See ORS chapters 317, 318.
Cite as 22 OTR 442 (2017) 469
information services delivered through other means.” ITFA
§ 1105(A)(iv) (emphasis added).
Taxpayer has not shown by fact or law that the
department’s central assessment of taxpayer’s property has
subjected that property to a “higher tax rate” in any county
in which taxpayer must ultimately pay the tax. Although
taxpayer’s tax burden is presumably increased in each
county under central assessment (although not as high as it
might otherwise have been if not for the operation of MAV),
taxpayer has not introduced evidence that the associated
tax rate in any county has changed. Instead, taxpayer’s tax
base in each county, the value of the property upon which
each county’s tax rate is applied, has increased.
Therefore, taxpayer has failed to prove its claim
under the ITFA.
V. CONCLUSION
Taxpayer has shown that the MAV for its property
for tax year 2009-10 is $486,747,025. Because the RMV of
$1,013,000,000 is higher than the MAV of $486,747,025,
taxpayer’s AV for tax year 2009-10 is equal to the MAV
of $486,747,025. Taxpayer has failed to prove its discrim-
ination claims under the Oregon Constitution, the United
States Constitution, and the ITFA. Now, therefore,
IT IS THE DECISION OF THIS COURT that the
MAV and AV for Plaintiff’s property for tax year 2009-10 is
$486,747,025.
IT IS FURTHER DECIDED that Plaintiff’s dis-
crimination claims, claims two through four, are dismissed
with prejudice as to tax year 2009-10; and
IT IS ORDERED that Plaintiff is directed to sub-
mit a form of general judgment that will provide for sup-
plemental proceedings under Tax Court Rule (TCR) 68 and
potentially a supplemental judgment.