YU Contemporary, Inc. I v. Dept. of Rev. ( 2017 )

No. 37 February 9, 2017 349
37 Contemporary, Inc. I v. Dept. of Rev.
YU February22
9, OTR
2017
IN THE OREGON TAX COURT
REGULAR DIVISION
YU CONTEMPORARY, INC.,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
Defendant,
and
MULTNOMAH COUNTY ASSESSOR,
Defendant-Intervenor.
(TC 5245)
Plaintiff (taxpayer) appealed from a Magistrate Division decision as to
exemption from property tax based on taxpayer’s nonprofit status. At trial,
Defendant-Intervenor Multnomah County Assessor (the county) and Defendant
Department of Revenue (the department) argued that taxpayer’s property was
not exempt because the primary use of the property was not a qualifying use, but
was instead mixed with other commercial, non-art displaying uses and activities
and therefore any qualifying uses were incidental at best, and not the primary
purpose. The department argued that promotion of artists and creation of art
was the primary use of the property by taxpayer, rather than the display of art to
the public. Finding for taxpayer, the court concluded that the record in the case
on actual use supported a conclusion that the property (with certain stipulated
exceptions as to portions of the property) satisfied the statutory definition of an
art museum, and as such was exempt from property tax.
Trial was held April 5, 2016, in the courtroom of the
Oregon Tax Court, Salem.
Michael J. Millender, Tonkon Torp LLP, Portland, argued
the cause for Plaintiff (taxpayer).
Carlos A. Rasch, Multnomah County Counsel, Portland,
argued the cause for Defendant-Intervenor Multnomah
County Assessor (the county).
Daniel Paul, Assistant Attorney General, Department
of Justice, Salem, appeared for Defendant Department of
Revenue (the department).
Decision rendered February 9, 2017.
HENRY C. BREITHAUPT, Judge.
350 YU Contemporary, Inc. I v. Dept. of Rev.
I. INTRODUCTION
This property tax exemption case is before the court
after trial. Certain facts were established by stipulation.
The year at issue is 2014-15. Plaintiff (taxpayer) asserts
that its property, with certain exceptions, is exempt from
property taxation. Defendant Department of Revenue (the
department) and Intervenor-Defendant Multnomah County
Assessor (the county) assert that the property does not qual-
ify for exemption.
II. FACTS
A. Stipulated Facts
(1) Taxpayer is an Oregon public benefit nonprofit
corporation that was incorporated on October 15, 2009,
under the name “YU Center for the Arts.” The incorporators
were Aaron Flint Jamison and Curtis Knapp. On March 2,
2011, taxpayer filed Amended Articles of Incorporation that
changed its name to “YU Contemporary, Inc.”
(2) Taxpayer’s bylaws state that its “primary
purpose shall be to provide a permanent national caliber
professional arts center for the display of national, regional
and local visual and performing arts; to provide infrastruc-
ture to promote and support the Portland arts commu-
nity; to create a vehicle to expose contemporary arts and
the Portland art community to the City of Portland and
the nation at large; and to provide other activities and ser-
vices that are necessary or appropriate to carry out these
purposes.”
(3) On January 25, 2011, the Internal Revenue
Service granted taxpayer’s application for exemption
from tax under 26 USC 501(c)(3), with an effective date of
September 15, 2009.
(4) Taxpayer files annual returns with the IRS on
Form 990. Taxpayer’s Form 990s state that “YU is a center
for contemporary art in Southeast Portland, Oregon. It is led
by a desire to support emerging and under-acknowledged
contemporary artists, propose new modes of production, and
stimulate the ongoing public discourse around art.”
Cite as 22 OTR 349 (2017) 351
(5) Taxpayer’s activities are overseen by its Board
of Directors, whose size has grown from four to eight mem-
bers. The Board of Directors meets quarterly.
(6) During the 2013-15 period, Taxpayer applied for
and received grants to support its general operations from the
following organizations: The Foundation for Contemporary
Arts, the Andy Warhol Foundation for the Visual Arts, the
Autzen Foundation, the Foundation for Contemporary Arts,
the Oregon Arts Commission, the Schwabe Charitable Fund,
the Henry Lea Hillman, Jr. Foundation, and the James F. &
Marion L. Miller Foundation.
(7) Taxpayer also received funding from the Meyer
Memorial Trust, the Kinsman Foundation, and HCP, Inc.
for the specific purpose of making necessary upgrades to its
real property.
(8) Additionally, taxpayer has two tiers of mem-
bership opportunities. Members who contribute between
$60 and $1,199 annually receive discounted entry to con-
certs, mailed invitations to exhibits, previews of exhibits,
and an invitation to taxpayer’s yearly member and volunteer
event. Members who contribute $1,200 or more annually are
also invited to attend Board meetings, invited to taxpayer’s
annual staff dinner, and are given keycard access to tax-
payer’s building during regular office hours for taxpayer-
related purposes.
(9) Taxpayer owns real property, known as the
Yale Union Laundry Building, which is located at 800 SE
Tenth Avenue in Portland (the “property”).
(10) On October 16, 2013, Alter, LLC, an Oregon
limited liability company (“Alter”), donated the property to
taxpayer by special warranty deed.
(11) The property is identified by the Multnomah
County Assessor as account number R150452.
(12) The property is approximately 28,800 square
feet in total.
(13) The property contains an upstairs ballroom
or gallery that is taxpayer’s primary space used for cul-
tural events and private rentals. Prior to renovations in
352 YU Contemporary, Inc. I v. Dept. of Rev.
2014, taxpayer also maintained a downstairs ballroom that
it used for the same purposes. As part of the 2014 renova-
tions, the downstairs ballroom was remodeled and divided
into taxpayer’s administrative offices and the commercially
leased space described in paragraph 14, below.
(14) 4,647 square feet of the property is leased to
commercial tenants (the “Leased Space”). The Leased Space
was taxable during the 2014-15 tax year.
(15) Since taxpayer acquired the property on
October 16, 2013, it has held cultural events at the property
including, but not limited to, those described in paragraphs
16 through 47, below.
(16) Between October 5 and December 1, 2013,
taxpayer exhibited manuscripts by poet Susan Howe.
Admission to the exhibition was free. In addition to taxpay-
er’s general sponsors, sponsors of the exhibition included
The Fields Fund of the Oregon Community Foundation,
Work for Art, Vista Capital, Umpqua Private Bank, and
Literary Arts.
(17) In connection with the Howe exhibition,
Marjorie Perloff, Professor Emerita of English at Stanford
University, gave a talk at the property on November 9, 2013.
(18) Between November 15 and December 1, 2013,
taxpayer exhibited a video installation by artist Liz Magic
Laser. Admission to the exhibition was free. In addition
to taxpayer’s general sponsors, sponsors of the exhibition
included Work for Art, Vista Capital, and Umpqua Private
Bank.
(19) Between April 26 and June 29, 2014, tax-
payer exhibited a visual art installation by Japanese artist
Yuji Agematsu. In addition to taxpayer’s general sponsors,
sponsors of the exhibition included The Fields Fund of the
Oregon Community Foundation, Work for Art, Vista Capital,
Umpqua Private Bank, and Literary Arts.
(20) In connection with the Agematsu exhibition,
taxpayer presented the following auxiliary programs at
the property: a talk by Andrew Lampert, a filmmaker and
film scholar, on May 31, 2014; a performance by Graham
Cite as 22 OTR 349 (2017) 353
Lambkin, a musician, on June 8, 2014; and an installation
of a performance tape by Japanese choreographer Tatsumi
Hijikata, which ran throughout the exhibition.
(21) Between September 5 and October 19, 2014,
taxpayer exhibited an audio/visual installation by artist
Park McArthur. Admission was free. In addition to taxpay-
er’s general sponsors, sponsors of the exhibition included
Jason Hirata, Umpqua Private Bank, and Work for Art.
(22) In connection with the McArthur exhibition,
Vanessa Place and Alex Fleming performed a reading at the
property on September 5, 2014. Vanessa Place is a writer
and criminal appellate attorney from Los Angeles and Alex
Fleming is an artist from New York.
(23) Between November 8 and December 21, 2014,
taxpayer exhibited a sculpture and visual arts installation
by British sculptor and artist Terry Atkinson. Admission
to the exhibition was free. In addition to taxpayer’s gen-
eral sponsors, sponsors for the exhibition included Umpqua
Private Bank and Work for Art.
(24) In connection with the Atkinson exhibition,
Terry Atkinson and guest curator Richard Birkett gave a
talk at the property on November 9, 2014.
(25) On March 13 and 14, 2015, taxpayer pre-
sented a performance and video installation by visual art-
ist and musician Charlemagne Palestine. Admission to the
exhibition was free. In addition to taxpayer’s general spon-
sors, sponsors for the performance included the Regional
Arts & Culture Council, Pacific Northwest College of Art,
and the Martin family.
(26) Between May 30 and July 19, 2015, taxpayer
exhibited an installation by Willem Oorebeek, a Dutch
artist who works with photography and print media. In
addition to taxpayer’s general sponsors, sponsors for the
exhibition included The Mondriaan Fund and the Martin
family.
(27) Between August 1 and September 6, 2015,
taxpayer exhibited the works of Richard Hawkins, Jason
Simson, Lily van der Stokker, Leidy Churchman, and
354 YU Contemporary, Inc. I v. Dept. of Rev.
Clement Rodzielski in a partnership with the Paris art gal-
lery castillo/corrales. Admission to the exhibition was free.
In addition to taxpayer’s general sponsors, sponsors for the
exhibition included the Consulate General of France (San
Francisco) and the Martin family.
(28) In connection with the castillo/corrales
exhibit, taxpayer presented a performance at the property
on August 1, 2015, by Jeff Witscher, a musician, and a talk
at the property on August 2, 2015, by Richard Hawkins, one
of the artists in the exhibit.
(29) Between October 10 and December 20, 2015,
taxpayer exhibited a group show called MOMMY, a mixture
of sculptures and other visual art. Admission to the exhibi-
tion was free.
(30) In connection with the MOMMY exhibit, tax-
payer presented a performance at the property on November 14,
2015, by Karin Schneider, an artist, and a screening on
December 18, 2015, by Paul McCarthy, a painter and
performer.
(31) Since October 16, 2013, taxpayer has also
presented a number of musical performances and other cul-
tural programs at the property.
(32) Between January 4 and February 6, 2014,
taxpayer and the Northwest Film Center co-presented a
documentary film series, with related talks by guest speak-
ers, titled “The Devil, Probably.” Showings were held in
Whitsell Auditorium at the Portland Art Museum, but the
following speakers used studios at the property during their
visits to Portland: Thomas Beard, Programmer at Large
for the Film Society of Lincoln Center, January 10-13, 2014;
Hartmut Bitomsky, a German filmmaker and producer,
January 17-20, 2014; Thom Andersen, a filmmaker, film
critic, and faculty member at the California Institute of
the Arts, January 23-26, 2014; and Andy Rector, an actor,
February 1-3, 2014.
(33) On February 28, 2014, taxpayer presented a
performance at the property by Lubomyr Melnyk, a com-
poser and pianist.
Cite as 22 OTR 349 (2017) 355
(34) On March 22, 2014, YU and Reed College
co-presented a performance of electronic compositions by
Madalyn Merkey. The performance was held at Reed, but
Madalyn Merkey used studios at the property during her
visit to Portland.
(35) On April 4, 2014, taxpayer presented a musi-
cal performance at the property by Evol, a computer musical
performance group. The artists also used studio space at the
property.
(36) On April 22, 2014, taxpayer presented
Representative Earl Blumenauer’s annual Congressional
Art Competition for young people who live in his district.
(37) On May 30, 2014, taxpayer presented a read-
ing and film screening at the property by Andrew Lampert.
Andrew Lampert used a studio at the property during his
visit to Portland from May 29 to June 2, 2014.
(38) On November 15, 2014, taxpayer presented a
talk at the property on publishing and printed matter by
James Hoff, an artist. James Hoff used a studio and the
print shop at the property during his visit to Portland
between November 14 and 17, 2014.
(39) On November 21, 2014, taxpayer presented a
performance of electronic experimental music at the prop-
erty by DJ Stingray. DJ Stingray used a studio at the prop-
erty as a green room.
(40) Between November 22 and December 2,
2014, Lucas Quigley, a visiting curator, used a studio at the
property.
(41) On February 8, 2015, taxpayer presented
a screening and talk at the property by Mike Kuchar, a
filmmaker.
(42) On February 27, 2015, taxpayer presented
a performance at the property by Mark Fell, a British
musician.
(43) Between March 19 and 23, 2015, taxpayer and
the Portland Institute for Contemporary Art co-presented
a dance residency at the property by Sarah Michelson, a
British dancer and choreographer.
356 YU Contemporary, Inc. I v. Dept. of Rev.
(44) On April 10, 2015, taxpayer presented a per-
formance at the property by Loren Connors, a musician from
New York.
(45) On May 2, 2015, taxpayer presented a per-
formance at the property by Keyon Gaskin, a performance
artist.
(46) On June 6, 2015, taxpayer presented a talk
and performance at the property by Elysia Crampton, a
musician.
(47) On November 5, 2015, taxpayer presented a
performance at the property by M.E.S.H., a German music
producer.
(48) In addition to the exhibitions, performances
and other programming listed above in paragraphs 16-47,
above, taxpayer rented out space at the property to indi-
viduals, companies, and groups for their events between
October 16, 2013 and December 31, 2015, as described in
paragraphs 49-78, below:
(49) Between December 7 and 8, 2013, the upstairs
ballroom was rented out for the Laika Holiday Party for
$5,800.
(50) Between December 13 and 14, 2013, the
upstairs ballroom was rented out for the Smarsh Holiday
Party for $8,400.
(51) Between October 13 and December 21, 2013,
taxpayer earned approximately $14,200 in income from
event rentals.
(52) Between January 4 and 5, 2014, the upstairs
ballroom was rented out for the Williams Wedding for
$5,200.
(53) On January 18, 2014, the upstairs ballroom
was rented out for the Frey Wedding for $3,450.
(54) Between February 7 and 9, 2014, the upstairs
and downstairs ballrooms were rented out for The One
Motorcycle Show for $15,000.
(55) On March 8, 2014, the upstairs ballroom was
rented out for the Nishida Wedding for $3,800.
Cite as 22 OTR 349 (2017) 357
(56) Between March 14 and 17, 2014, the upstairs
ballroom was rented out for the Nike, Inc., Offsite Brand
Leadership Briefing for $9,600.
(57) Between May 17 and 18, 2014, the upstairs
ballroom was rented out for the Buckman Arts Focus
Elementary School Gala and Auction for $5,150.
(58) On May 24, 2014, the upstairs ballroom was
rented out for the Chau Wedding for $3,000.
(59) On June 28, 2014, the upstairs ballroom was
rented out for the Johnson Wedding for $2,400.
(60) On August 9, 2014, the upstairs ballroom was
rented out for the Brown Wedding for $3,450.
(61) Between August 16 and 17, 2014, the upstairs
ballroom was rented out for the Heino Wedding for $4,150.
(62) Between August 30 and 31, 2014, the upstairs
ballroom was rented out for the Gilbert Wedding for $5,350.
(63) Between September 12 and 14, 2014, the
upstairs ballroom was rented out for XOXO for $20,000.
(64) Between October 25 and 26, 2014, the upstairs
ballroom was rented out for the Valadez Wedding for $7,000.
(65) In 2014, taxpayer earned approximately
$87,550 in income from event rentals.
(66) On January 2, 2015, the upstairs ballroom
was rented for the Moore Wedding for $2,500.
(67) Between January 20 and 21, 2015, the
upstairs ballroom was rented out for the Nike Leadership
Offsite for $7,350.
(68) Between April 25 and 26, 2015, the upstairs
ballroom was rented out for the Buckman School Auction for
$6,000.
(69) Between May 24 and 25, 2015, the upstairs
ballroom was rented out for the Dahle Wedding for $5,175.
(70) Between June 27 and 28, 2015, the upstairs
ballroom was rented out to Julie Miller for $6,150.
358 YU Contemporary, Inc. I v. Dept. of Rev.
(71) Between September 10 and 13, 2015, the
upstairs ballroom was rented out for XOXO for $20,000.
(72) Between October 16 and 17, 2015, the upstairs
ballroom was rented out for the O’Leary Wedding for $5,250.
(73) On November 7, 2015, the upstairs ballroom
was rented out for the Attar Wedding for $4,800.
(74) Between December 5 and 6, 2015, the upstairs
ballroom was rented out for the Valari Wedding for $5,250.
(75) On December 12, 2015, the upstairs ballroom
was rented out for the Ruby Receptionists Holiday Party for
$3,900.
(76) Between December 19 and 20, 2015, the
upstairs ballroom was rented out for the Puppet Labs
Holiday Party for $5,250.
(77) In 2015, taxpayer earned approximately
$71,625 in income from event rentals.
(78) Between October 16, 2013 and December 31,
2015, taxpayer earned approximately $173,375 in income
from event rentals.
(79) Between October 16, 2013 and December 31,
2015, taxpayer presented nine exhibitions and 23 musical
performances and other cultural programs at the prop-
erty, and it rented out space at the property for 26 private
events.
(80) Prior to June 2014, Chroma Games, Inc., a
Delaware corporation (“Chroma”), was among the tenants
in the Leased Space.
(81) On July 25, 2013, Chroma filed an Amendment
to Annual Report/Information Statement with the Oregon
Secretary of State to reflect that the property was its princi-
pal place of business and mailing address.
(82) Upon vacating the Leased Space in June
2014, Chroma did not amend its Annual Report/Information
Statement with the Oregon Secretary of State to reflect that
the property was no longer its principal place of business
and mailing address.
Cite as 22 OTR 349 (2017) 359
(83) On February 23, 2015, Chroma filed an
Amendment to Annual Report/Information Statement
to reflect its new principal place of business and mailing
address.
(84) On April 4, 2014, Alter filed an Amendment
to Annual Report/Information Statement with the Oregon
Secretary of State that listed the property as its principal
place of business.
(85) On February 24, 2015, Alter filed Articles of
Dissolution with the Oregon Secretary of State. The Articles
of Dissolution stated that the date of dissolution was
October 18, 2013.
(86) Prior to March 15, 2013, Marriage Records,
LLC (“Marriage Records”) listed the property as its princi-
pal place of business and mailing address with the Oregon
Secretary of State.
(87) On March 15, 2013, approximately six months
before Alter donated the property to taxpayer, Marriage
Records was administratively dissolved by the Oregon
Secretary of State.
(88) Emprint Press is an assumed business name
that was registered with the Oregon Secretary of State by
Emily M. Johnson on April 14, 2011.
(89) Emily M. Johnson conducts a letterpress
printing business under the name Emprint Press. She used
printing equipment at the property during the relevant time
period.
(90) In both the initial assumed business name
registration and in a renewal of registration filed on April 2,
2013, Emily M. Johnson listed the property as her principal
place of business and mailing address.
(91) The Oregon Secretary of State terminated
the assumed business name registration for Emprint Press
on April 15, 2015, for failure to renew.
(92) From December 15, 2008 to January 19, 2016,
Aaron Flint Jamison listed the property’s address as his own
with the Oregon Department of Motor Vehicles (“DMV”).
360 YU Contemporary, Inc. I v. Dept. of Rev.
(93) From June 6, 2013 to September 19, 2014,
Thomas E. Blood listed the property’s address as his own
with the DMV.
(94) On August 24, 2007, and again on March 4,
2010, and May 17, 2012, Erik W. Gage listed the property’s
address as his own with the DMV.
(95) On May 29, 2013, Thomas E. Blood listed the
property’s address as his own in order to register to vote in
Oregon.
(96) On July 2, 2013, Robert G. Snowden listed the
property’s address as his own with the DMV to register a
certificate of title for a vehicle.
(97) Based on Robert G. Snowden’s representa-
tions to the DMV, the Multnomah County Circuit Court
used the property’s address in a general judgment entered
against him on September 23, 2014, for a moving violation
with the same vehicle.
(98) On August 22, 2014, Robert G. Snowden listed
the property’s address as his own in order to register to vote
in Oregon.
(99) On July 15, 2013, Emily M. Johnson listed the
property’s address as her own with the DMV.
(100) Also on July 15, 2013, Emily M. Johnson
listed the property’s address as her own in order to register
to vote in Oregon.
(101) On December 18, 2013, Curtis J. Knapp
listed the property’s address as his own with the DMV.
(102) Taxpayer timely applied for a property tax
exemption for the 2014-15 year on or about October 16,
2013.
(103) On July 1, 2014, the county conducted an
inspection of the property as part of its investigation into
the exemption application.
(104) On September 9, 2014, the county denied
taxpayer’s application.
Cite as 22 OTR 349 (2017) 361
(105) Taxpayer timely appealed the county’s
denial of its exemption by filing a complaint in this matter
on December 8, 2015.
B. Facts Found After Trial
The court makes the following findings of fact based
on the evidence adduced at trial:
(1) Although certain individuals used the address
of the property on filings with the Department of Motor
Vehicles or other agencies, no individual used the property
as a residence during the year at issue.
(2) Although the assessor’s employee observed
items of personal property in the building at the time
of her visit and concluded that a person or persons used
the property for temporary residential purposes, no such
use occurred. The employee of the assessor was simply
mistaken.
(3) Taxpayer holds itself out to the public as an
organization that uses its real and personal property for the
display of art, including two or three dimensional works of
art, artistic printing, music, and the education of the public
in all these areas.
(4) Use of taxpayer’s property for rentals to nonex-
empt third parties is an incidental use of the property.
(5) Use of the property in question by members of
the board of directors of taxpayer and donors is incidental to
the primary exempt use of the property by taxpayer.
(6) The primary use of the property by taxpayer
is for the display of art to the public and activities in con-
junction with such use. No part of the property is used for
the sale of works of art or other activities specified in ORS
307.130(2)(f).1
III. ISSUE
The issue is whether the property of taxpayer for
which exemption is claimed is in fact exempt.
1
Unless otherwise indicated, the court’s references to the Oregon Revised
Statutes (ORS) are to the 2013 edition.
362 YU Contemporary, Inc. I v. Dept. of Rev.
IV. ANALYSIS
At the outset, taxpayer concedes that those portions
of the property leased to third-party nonexempt lessees are
not qualified for exemption. Additionally, the court is of
the opinion that the portion of the property operated as a
print shop by a third party is not qualified for exemption.
Although no cash rent is paid for use of such space, the user
of the space provides services to taxpayer. Exchange of ser-
vices for the right to occupy space is no different from the
exchange of cash for such right. This portion of the property
therefore falls under the same rule as those portions leased
for cash.
The statute under which taxpayer claims exemp-
tion is ORS 307.130, titled “Property of art museums, volun-
teer fire departments or literary, benevolent, charitable and
scientific institutions,” which provides, in relevant part:
“(1) As used in this section:
“(a) ‘Art museum’ means a nonprofit corporation orga-
nized to display works of art to the public.
“* * * * *
“(c) ‘Nonprofit corporation’ means a corporation that:
“(A) Is organized not for profit, pursuant to ORS chap-
ter 65 or any predecessor of ORS chapter 65; or
“(B) Is organized and operated as described under sec-
tion 501(c) of the Internal Revenue Code as defined in ORS
305.842.
“* * * * *
“(2) Upon compliance with ORS 307.162, the following
property owned or being purchased by art museums, volun-
teer fire departments, or incorporated literary, benevolent,
charitable and scientific institutions shall be exempt from
taxation:
“(a) Except as provided in ORS 748.414, 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 carried on by such institutions.
“* * * * *
Cite as 22 OTR 349 (2017) 363
“(f) The real and personal property of an art museum
that is used in conjunction with the public display of works
of art or used to educate the public about art, but not
including any portion of the art museum’s real or personal
property that is used to sell, or hold out for sale, works of
art, reproductions of works of art or other items to be sold
to the public.
“* * * * *
“(3) An art museum or institution shall not be deprived
of an exemption under this section solely because its pri-
mary source of funding is from one or more governmental
entities.
“(4) An institution shall not be deprived of an exemp-
tion under this section because its purpose or the use of its
property is not limited to relieving pain, alleviating dis-
ease or removing constraints.”
A. Time Perspective for Analysis
At trial, the court requested the parties to address
in post-trial briefing the question of the time perspective
that should be used in analyzing the issue in the case. The
court could analyze the use of the property either (1) at the
time of application for exemption, up to perhaps the begin-
ning of the tax year (July 1) of which exemption is being
sought, or (2) during the tax year of which exemption is
being sought, up to the time that an assessor approves or
denies an application.
The parties appear to be of one view on this ques-
tion and the court accepts that view. The issue of exemp-
tion should be based on the assertions in an application for
exemption, that is, on a “looking forward” basis from the
beginning of the tax year. Having granted an exemption,
an assessor can audit actual use or respond to reports of
changes in use. See ORS 307.162(7) (requiring institutions
exempt under ORS 307.130 to report changes in use of the
property to a nonexempt use). If those actions or others jus-
tify a revocation of exemption, that can be done, even for a
limited number of past years by use of the omitted property
statutes. See ORS 311.205 - 311.235; e.g., Erickson v. Dept.
of Rev., 17 OTR 324 (2004) (approving use of omitted prop-
erty statutes to reach to loss of exemption resulting from
364 YU Contemporary, Inc. I v. Dept. of Rev.
sublease of property not in conformity with claimed exemp-
tion statutes).
B. Exemption for Art Musuems
A specific provision is found in ORS 307.130 regard-
ing exempt status for the property of art museums. Although
the department and county suggest otherwise, the court is
of the view that the requirements of the specific statute are
to apply. Those provisions were added by amendment to the
statute and are not simply a rephrasing of requirements
of the statute applicable to several other types of organi-
zations.2 Or Laws 1997, ch 599, § 1 (adding art museum
provisions).
Accordingly, the court addresses the elements of the
statutory definition of an art museum.
The first requirement is that the owner be a non-
profit corporation, a fact that is stipulated. The next require-
ment is that the corporation be organized to display works
of art to the public. The record conclusively demonstrates
that taxpayer is organized to display works of art to the pub-
lic. The exhibitions it sponsors are well within the ordinary
meaning of the term “display,” defined as “a presentation by
representation or narrative : * * * an exhibiting or showing
of something : an unfolding or opening out to view.” Webster’s
Third New Int’l Dictionary 654 (unabridged ed 2002).
The record also conclusively demonstrates that
what is displayed are “works of art.” That term is defined as
“1 : a product of one of the fine arts * * * : a painting or sculp-
ture of high artistic quality 2 : an act or thing giving high
aesthetic satisfaction to the beholder or auditor : something
that has value or gives pleasure apart from its practical
effect or usefulness[.]” Webster’s Third New Int’l Dictionary
2635 (unabridged ed 2002). Accordingly, the term includes
not only the two- or three-dimensional creations of artists
that are displayed, but also the musical performances and
film events that also occur on the property.
2
That is not to say that a property qualifying for exemption as an art
museum could not, in some cases, also qualify for exemption under other provi-
sions of ORS 307.130, a question the court does not address.
Cite as 22 OTR 349 (2017) 365
The record also conclusively supports the conclusion
that the display occurs primarily, if not exclusively, for the
public in general, or at least that portion of the populace
that is attracted to the offerings made by taxpayer.
The statute provides exemption for so much of the
property as is “used in conjunction with the public display
of works of art or used to educate the public about art.” ORS
307.130(2)(f). With respect to the phrase “educate the pub-
lic about art,” the court makes the following observations.
The word “art” standing alone has the ordinary meaning
of “application of skill and taste to production according to
aesthetic principles : the conscious use of skill, taste, and
creative imagination in the practical definition or produc-
tion of beauty[.]” Webster’s Third New Int’l Dictionary 122
(unabridged ed 2002). While a visual form of art might be
conventionally traditional, it can also include music, film
and other expressions with beauty or emotional power. The
record conclusively demonstrates that most, if not all, of the
activities of taxpayer also involve education about art pro-
vided to the public.
Taxpayer argues that the use requirement of the
statute, “used in conjunction,” is less demanding than the
requirement found in ORS 307.130 for other types of organ-
izations. For those other types of organizations, property
must be “actually and exclusively occupied or used.”3 See
ORS 307.130(2)(a). Taxpayer argues that the use of property
by an art museum must only be “to some degree” connected
with activities that the statute specifies as art museum
activities. With that position Defendants disagree, assert-
ing that the “actually and exclusively” requirement appli-
cable to other exemptions under ORS 307.130 must apply to
art museums.
The court need not decide this issue. Even if the
use requirement applicable to other exemptions under
ORS 307.130 is applicable to art museums, the record con-
clusively establishes that the primary use of the property
at issue is for the display of art and education about art.
3
Case law has established that “actually and exclusively” is given a fairly
liberal reading, such that primary use will support exemption. See German
Apost. Christ. Church v. Dept. of Rev., 279 Or 637, 569 P2d 596 (1977).
366 YU Contemporary, Inc. I v. Dept. of Rev.
Importantly, the department appears to agree that the use
of the property by taxpayer is primarily for the display of
art and related education. The department does not assert
that occasional use of the property for weddings and recep-
tions makes the exemption unavailable.4 Nor does the use of
portions of the property for offices and support functions fall
outside the statute. If the legislature meant to exempt only
a display room, and not the offices and supporting spaces
needed for the display, it would have said so. The spaces
involved here are the equivalent of supporting space that is
routinely found to be exempt when it is used in support of
an exempt function and not used primarily for a nonexempt
function. The record indicates that the spaces at issue are
used directly for display or bear an acceptable relationship
to the display activity.
With the foregoing conclusions of the court the
county and the department disagree. To those disagree-
ments the court now turns.
C. Disagreements of the County
The county generally asserts that what it consid-
ers the qualified use of the property is “so mixed with other
commercial-non-art displaying * * * endeavors, that any art
* * * is incidental at best, and certainly not primary.”
This assertion is unsupported in the record. The
court finds that the qualifying activities on the property
are primary. And, as noted above, the department appears
to agree. The court also notes that the areas that are
leased to nonexempt users are distinct from those used by
taxpayer.
The county asserts that exhibitions of art only occur
from time to time and therefore the activities of taxpayer do
not render the property exempt. The evidence is that exhi-
bitions occupied 363 out of 807 days in a period of over two
years. The county then asserts that days when exhibitions
4
Neither the county nor the department assert that any portion of the
property at issue is used “to sell, or hold out for sale, works of art, reproduc-
tions of works of art or other items to be sold to the public.” See ORS 307.130
(2)(C)(f). That partial exclusion from exemption of art museums therefore is
not at issue.
Cite as 22 OTR 349 (2017) 367
are not being made must count against taxpayer in consid-
ering the primary use of the property. That assertion finds
no basis in the statutes, any rule of the department, or any
case. There is no statutory requirement that property that
otherwise qualifies for exemption must be continuously used
for the exempt purpose, so long as nonexempt uses do not
become primary. There is nothing in the record that non-
exempt uses occur on “down days,” except perhaps the use
of space for events such as meetings and weddings. As dis-
cussed above, that use is incidental to the exempt uses made
by taxpayer of the property.
The county next asserts that the purpose of tax-
payer is not to display art to the public but rather to “sup-
port the artists themselves.”5 The county says that tax-
payer’s practice is to “pay artists to come and work on their
artwork” and that taxpayer gives artists “work spaces for
free” so that artists “can come and work on their exhibits for
sometimes months at a time.”
The record simply does not support these conten-
tions. In discussing this point, it must be remembered that
the question at hand is the use of property, not the expen-
diture of funds by taxpayer. Taxpayer does pay an honorar-
ium to artists and it appears that taxpayer defrays costs
of artists. However, the use of the property at issue in this
case is for the preparation of display areas and furniture
(such as tables) and the planning for, or finalization of dis-
plays of art, often art that is displayed over a significant
area. The property is also used for educational events and
music events. Music is an art form and education about art
is within the definition of an art museum.
Other uses of the property at issue are for admin-
istration, fundraising, and support activities related to the
completion of exhibit installations. The inspection done by
the county before its decision on exemption was cursory at
best and the witness for the county concluded that not much
of the space in the property was being used. That witness
5
The county also claims that the artists are emerging and unknown artists.
Even if that were true, the county made no record on this point, and can point to
no requirement in the statutes or rules of the department that impose a require-
ment that displayed art must be from established and famous artists.
368 YU Contemporary, Inc. I v. Dept. of Rev.
did not take into account the fact that the date of the visit
occurred just after completion of one exhibit and in what
are significant periods of time between exhibits. The wit-
ness also did not take into account that taxpayer is in its
organizational and operational infancy, or that on the day of
the visit taxpayer was in the process of making major moves
of activity areas due to repositioning of exempt and non-
exempt activities.
The positions of the county as to the use of the space
in question are not supported by the record or the law.
The county, focusing on the statutory phrase “art
museum,” points to the founder of taxpayer and his concep-
tion that the property is a Kunsthalle. Seizing on this tes-
timony, the county concludes that the property is not an art
museum. That is getting things backwards. One must start,
and end, with the statutory definition. Property fitting the
definition—property used for the display of art and educa-
tion about art—is exempt because it is, by statute, consid-
ered an “art museum.” That conclusion follows regardless
of the personal conception that the founder may have about
the name used to describe the property.
D. Disagreements of the Department
The department suggests that the organizational
documents of taxpayer bear on the question of the exemption
for the property. There are cases that indicate that organi-
zational documents may have some bearing. However, the
department has not by rule provided that such organiza-
tional documents are conclusive. In its written closing argu-
ment, the department wisely concludes that actual activity
and use of property should govern. The court has concluded
that the record in this case, on actual use, conclusively sup-
ports a conclusion that the property satisfies the definition
of an art museum.
The department also concludes that promotion of
artists and creation of art is the primary use of the prop-
erty by taxpayer, rather than the display of art to the pub-
lic. The department concludes that “the creation of art is
primary and the display of that art is secondary or inciden-
tal.” In this, the department makes the same mistake as the
Cite as 22 OTR 349 (2017) 369
county. The record establishes that the art displayed in the
space at issue is often, if not always, significant in size and
distribution in space. The art is often, if not always, some-
thing other than a painting that can be executed offsite and
easily brought onsite for display.
The department also makes the same mistake as
the county with respect to the use of the property to support
artists as opposed to displaying art. This may stem from
the fact that the assessor’s employee who made one visit on
one day to the property mistakenly concluded that the prop-
erty was used to provide housing to artists. The record con-
clusively establishes that such use of the property does not
occur.
V. CONCLUSION
The court finds that the property at issue is exempt
as being property used by taxpayer primarily in activities
that are described in the “art museum” provisions of the
statute. There are two exceptions. The first is as to areas the
parties have stipulated are leased to third parties. A similar
conclusion follows as to the area used by a third party as a
print shop, for the reason set out at the beginning of this
Opinion.
The parties are directed to confer about the areas
used by the printing operation and other uses by nonexempt
users. If they cannot agree on the proportion of the space
used for that, further proceedings will be scheduled. Now,
therefore,
IT IS THE OPINION OF THIS COURT that the
parties will confer as directed and report to the court the
results of such conferral.