Lauer v. Dept. of Rev. ( 2021 )

610 October 29, 2021 No. 26
IN THE OREGON TAX COURT
REGULAR DIVISION
Gregory T. LAUER,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
Defendant.
(TC 5424)
On Defendant Department of Revenue’s (the department’s) motion to dismiss
for failure to state facts sufficient to constitute a claim under Tax Court Rule 21
A(8), Plaintiff argued that he held his property by “allodial title” and that Oregon
therefore could not tax it pursuant to an agreement with the federal government
at the time of statehood. Under ORS 307.030(1), “all real property” in the state is
“subject to assessment and taxation in equal and ratable proportion.” The court
concluded that Plaintiff had not substantiated his argument because he pointed
to no state or federal law, nor to any agreement between the federal government
and the territorial or state government of Oregon that would prevent the appli-
cation of ORS 307.030(1).
Submitted on Defendant’s Motion to Dismiss.
Daniel Paul, Assistant Attorney General, Department of
Justice, Salem, filed the motion for Defendant.
Gregory T. Lauer, Plaintiff, filed a response pro se.
Decision for Defendant rendered October 29, 2021.
ROBERT T. MANICKE, Judge.
Plaintiff (taxpayer) appeals from a decision in the
Magistrate Division dismissing his appeal and awarding
attorney fees and a penalty of $500 under ORS 305.437.1
This matter is before the court on the motion of Defendant
Department of Revenue (the department) to dismiss taxpay-
er’s Complaint for failure to state ultimate facts sufficient to
constitute a claim under Tax Court Rule (TCR) 21 A(8). The
department asks the court to enter a judgment giving effect
to the decision in the Magistrate Division. Taxpayer filed a
Response on June 28, 2021.
1
The court’s references to the Oregon Revised Statutes (ORS) are to 2019.
As recounted below, taxpayer seeks exemption “as of May 31, 2017,” when he
allegedly changed the title to his property to “homestead/allodial.” The statutes
cited in this order have not materially changed since January 1, 2017.
Cite as 24 OTR 610 (2021) 611
In his complaint in this division, as in the Magistrate
Division, taxpayer claims that his property, a parcel in Grant
County, is entitled to exemption from property tax based on
its status as “homestead/allodial titled property.”2 Taxpayer
requests that the court issue a judgment “declaring that my
homestead/allodial titled private land be removed from the
tax rolls and be declared exempt from property taxes as of
May 31, 2017.” Taxpayer also alleges that the magistrate
erred in failing to conduct mediation.
The department argues that taxpayer “seeks a
judgment to enforce a property tax exemption that does not
exist and therefore fails to state a valid claim for relief.” The
department also points out that taxpayer has not alleged
that either party requested mediation in the Magistrate
Division—let alone both parties, as required before a magis-
trate may consider whether to hold mediation.
In his Response, taxpayer alleges that the state
obtained its right to tax his property—and other similarly
situated properties—by way of fraud and in violation of an
alleged “agreement” between or among the United States
government, Oregon’s territorial government, and the
Oregon state government, by which the territory or the state
agreed to impose no tax on certain parcels while held by the
“heirs and assignees” of original homesteaders. According
to taxpayer, the existence of this agreement makes any
effort to tax his property illegal. Taxpayer also appears to
modify his claim regarding mediation, asserting that the
magistrate erred in failing to hold trial as required by “Rule
6 B.”
The court reviews a magistrate’s procedural deci-
sions de novo. See ORS 305.425(1); Salisbury v. Dept. of
Rev., TC 5400, 2021 WL 1323313 at *6 n 13 (Or Tax, Apr 8,
2021). Accordingly, the court considers whether the mag-
istrate’s decision to dismiss taxpayer’s appeal was proper
before considering the merits of the appeal. See id. In
this case, however, the procedural and substantive issues
substantially overlap because the magistrate’s dismissal
2
Taxpayer asserts that “homestead/allodial titled property is exempt from
property tax assessment by lesser government agencies (state and local vs.
federal).”
612 Lauer v. Dept. of Rev.
was based on the legal conclusion that taxpayer’s position
lacked any objectively reasonable basis and was frivolous.
The court will analyze de novo whether dismissal is proper
based on the record in this division of the court, including
dismissal without engaging in mediation or conducting a
trial.
I. ANALYSIS
A. Does taxpayer’s complaint lack an objectively reasonable
legal basis?
In considering a motion to dismiss for failure to
state ultimate facts sufficient to constitute a claim for relief
under TCR 21 A(8) the court assumes that the facts alleged
in the complaint are true and draws all reasonable infer-
ences in the plaintiff’s favor. Bailey v. Lewis Farm, Inc., 343
Or 276, 171 P3d 336 (2007); see also Work v. Dept. of Rev.,
22 OTR 396, 397-98 (2017), aff’d, 363 Or 745 (2018) (“[T]he
court’s review is limited to the facts alleged in the com-
plaint, accepting those facts as true.”). Although the rule
refers to “ultimate facts,” the court may dismiss a complaint
if the taxpayer’s position is “entirely devoid of factual or
legal support.” Detrick v. Dept. of Rev., 311 Or 152, 806 P2d
682 (1991).
As a state, Oregon enjoys lawmaking authority that
is “plenary, subject only to limits that arise either from the
Oregon Constitution or from a source of supreme federal
law.” Kellas v. Dept. of Corrections, 341 Or 471, 478, 145 P3d
139 (2006); see also Hon. Jack L. Landau, An Introduction to
Oregon Constitutional Interpretation, 55 Willamette L Rev
261, 284 n 151 (2019). The people of Oregon, in adopting
the Oregon Constitution, have delegated lawmaking power
to the elected legislature, subject only to the people’s right
to make and approve laws directly through the processes
of initiative and referendum. See Or Const, Art IV, § 1.
Therefore, the court will start its analysis by considering
whether any statutes enacted by the legislature or the peo-
ple exempt taxpayer’s property. The court will then consider
whether any limits in the Oregon Constitution or the United
States Constitution restrain Oregon from taxing taxpayer’s
property.
Cite as 24 OTR 610 (2021) 613
The legislature has enacted a law declaring:
“All real property within this state and all tangible per-
sonal property situated within this state, except as other-
wise provided by law, shall be subject to assessment and
taxation in equal and ratable proportion.”
ORS 307.030(1). “Real property” includes land, improvements
and fixtures affixed to the land, and certain other inter-
ests. ORS 307.010(1)(b)(E).3 Taxpayer refers to no Oregon
law granting an exemption to “allodial titled property,” or
to property held by “homestead/allodial” title or “allodial/
fee simple absolute” title. Nor does he cite any other Oregon
statute that would confer exemption, and the court is aware
of none. Oregon law exempts certain property of the federal
government, but only while the federal government owns
or possesses it. See ORS 307.040(2) (granting exemption to
“all property of the United States, its agencies or instru-
mentalities * * * to the extent that taxation of the property
is forbidden by law”); see also ORS 307.050 (federal property
under contract of sale); ORS 307.060 (federal property under
lease); Crawford v. Dept. of Rev., 14 OTR 554, 555 (1999)
(explaining that “once a mining claim patent issues * * *
[t]he United States government no longer has any interest in
such property right, and the property is no longer exempt”);
Utterback v. Dept. of Rev., 17 OTR 276, 277 (2003) (rejecting
taxpayers’ argument that as distant successors in title of
the federal government under the Homestead Act of 1862,
they were not subject to Oregon property tax assessment).
Taxpayer repeatedly acknowledges that he owns the subject
property,4 and he nowhere asserts that the federal govern-
ment owns it. Therefore, the general rule—that all property
is subject to tax—applies to taxpayer’s property unless “a
source of supreme federal law” confers an exemption. The
court now turns to federal law to determine whether any
exemption exists there.
3
Taxpayer asserts, incorrectly, that “real property” is limited to interests
less than fee simple because ORS 307.010(1)(b)(E) states that “ ‘real property’
includes” an interest in real property “less than fee simple.” The Oregon Supreme
Court rejected the same argument in Smith v. Dept. of Rev., 330 Or 227, 229, 998
P2d 675 (2000).
4
Taxpayer’s assertion that he holds the property by “homestead/allodial
title” is a further indication that he claims to own it. See Black’s Law Dictionary
(11th ed 2019) (defining “allodial” as “[h]eld in absolute ownership”).
614 Lauer v. Dept. of Rev.
When federal law applies, it prevails over any con-
flicting state law. See US Const, Art VI (“This Constitution,
and the Laws of the United States * * * shall be the supreme
Law of the Land * * *.”). However, the federal government
is one of limited powers; therefore, it can impair Oregon’s
authority to tax only if a particular federal statute or federal
constitutional principle applies. King v. City of Portland, 2
Or 146, 152-53 (1865) (noting that the U.S. Constitution
is the “sole source of power and authority for the national
government” whereas state power is “unrestrained,” subject
only to the limits contained in the U.S. Constitution).
One federal constitutional principle recognized by
case law is immunity from state and local tax for property
owned or possessed by the federal government. See Irwin v.
Wright, 258 US 219, 228, 42 S Ct 293, 66 L Ed 573 (1922) (“[N]o
state can tax the property of the United States.”). The stat-
utory exemptions under Oregon law incorporate this prin-
ciple in declaring property of the United States exempt “to
the extent that taxation of the property is forbidden by law.”
ORS 307.040(2). However, as discussed, taxpayer’s property
cannot benefit from this immunity because he owns it and
the federal government does not.
Taxpayer claims that the federal government, when
it owned his land, “withheld” Oregon’s taxing jurisdiction
from his parcel and others, but that Oregon fraudulently
ignored this. Taxpayer refers to an “agreement” between or
among the United States government, Oregon’s territorial
government, and the Oregon state government, by which
the territory or the state agreed to impose no tax on certain
parcels as long as held by the “heirs and assignees” of orig-
inal homesteaders. Taxpayer claims to have “restor[ed] the
original homestead/land patent contract” and made himself
such an assignee. As discussed above, the court is aware of
no Oregon law that memorializes any such arrangement.
Taxpayer’s reference to an “agreement” implies that the
rights he asserts derive from an intergovernmental con-
tract relating to his property and certain other properties.
However, even assuming—for purposes of this motion to
dismiss—that such an agreement exists and purports to
confer exemption, any such exemption would be unenforce-
able under the Uniformity Clauses of Oregon’s Constitution.
Cite as 24 OTR 610 (2021) 615
The Uniformity Clauses require that all taxes apply
uniformly on the same class of subjects, and that taxes be
levied and collected under “general laws.” Or Const, Art I,
§ 32 (“[A]ll taxation shall be uniform on the same class of
subjects within the territorial limits of the authority levying
the tax.”); Or Const, Art IX, § 1 (“The Legislative Assembly
shall, and the people through the initiative may, provide
by law uniform rules of assessment and taxation. All taxes
shall be levied and collected under general laws operating
uniformly throughout the State.”). The term “general law”
means a law that is not specific to a particular person, a
particular property, or an identified portion of the state. See
State ex rel. v. Malheur County Court, 185 Or 392, 414, 203
P2d 307 (1949). The “agreement” taxpayer describes, assum-
ing it exists, would amount to a “special” law, applicable to
particular properties, that would be incapable of conferring
an exemption from the general law requiring assessment
and taxation of “all” property within this state. See ORS
307.030(1).5
For the foregoing reasons, the court concludes that
taxpayer’s claim for exemption is entirely devoid of legal
support.
B. Mediation and Trial in the Magistrate Division
The legislature has authorized the Magistrate
Division to conduct proceedings “in any manner that will
achieve substantial justice,” subject to rules of practice and
procedure that the court establishes. ORS 305.501(4)(a). The
court has specific authority to “establish procedures for mag-
istrate division hearings and mediation.” ORS 305.501(3).
The court’s enabling statute provides further that a party
to a Magistrate Division appeal “may request mediation, or
the tax court on its own motion may assign the matter to
mediation.” ORS 305.501(2) (emphases added).
5
The people adopted the express “general law” requirement in a 1917
amendment to Article IX, section 1, of the Oregon Constitution. However, even
if the alleged “agreement” was entered into before that amendment, taxpayer’s
exemption claim would fare no better. The original text of Article IX, section 1,
allowed exemption “only for municipal, educational, literary, scientific, religious,
or charitable purposes, as may be specially exempted by law.” Or Const, Art IX,
§ 1 (1857); see Crawford v. Linn County, 11 Or 482, 494, 5 P 738 (1885) (Pre-1917
Uniformity Clause “actually forbids the exemption from taxation of any property
whatever, except that specifically enumerated in the clause.”).
616 Lauer v. Dept. of Rev.
Unless the context requires a different construc-
tion, “may” is permissive; “it denotes permission, authority,
or liberty to do something.” Scott v. Dept. of Rev., 358 Or
795, 801, 370 P3d 844 (2016). Consistent with the statute,
the Magistrate Division’s rules allow any party to request
mediation. Tax Court Rule – Magistrate Division (TCR-MD)
10 A; see also TCR-MD 8 A(2) (mediation may be requested
orally at the initial case management conference or in writ-
ing at any time but in no event later than 45 days prior to
scheduled trial). Taxpayer has pointed to no statute, rule,
or legal principle requiring the magistrate to assign a case
to mediation. Taxpayer has not alleged that any party—he
or the department—requested mediation. Nor has he iden-
tified any authority that would require the magistrate to
grant such a request. Accordingly, the court finds that tax-
payer has failed to state facts sufficient to constitute a claim
for relief on this issue.
Regarding taxpayer’s claim that the magistrate
erred in failing to hold trial, taxpayer has not identified,
and the court is not aware of, any statute or rule requir-
ing the magistrate to hold a trial in every case. Taxpayer
appears to refer to TCR-MD 6 B which provides that “[a]
trial date may be scheduled at the initial case management
conference.” (Emphasis added.) The rule does not purport to
guarantee that the court will hold a trial. The magistrate,
having concluded that taxpayer’s claim was frivolous based
on the filings, was under no obligation to undertake the bur-
den and expense of trial. See Glasgow v. Dept. of Rev., 356
Or 511, 340 P3d 653 (2014) (concluding that taxpayer’s argu-
ments in each division were frivolous; holding that the court
did not err in dismissing taxpayer’s complaint). The court
concludes that taxpayer has failed to state facts sufficient to
constitute a claim for relief on this issue.
II. CONCLUSION
Having drawn all reasonable inferences in taxpay-
er’s favor, the court concludes that taxpayer’s claims are
entirely without merit and that the department’s motion
should be granted. Now, therefore,
IT IS ORDERED that Defendant’s Motion to Dis-
miss is granted;
Cite as 24 OTR 610 (2021) 617
IT IS FURTHER ORDERED that Plaintiff’s claim
for property tax exemption is denied; IT IS FURTHER
ORDERED that, as previously awarded by the magistrate,
Plaintiff shall pay to Defendant a penalty of $500 under
ORS 305.437, in addition to attorney fees payable to the
Grant County Assessor of $3,488 under ORS 20.105(1). The
court will enter a judgment to this effect.