Habitat for Humanity of the Mid-Willamette Valley v. Department of Revenue

No. 57 September 15, 2016 257
IN THE SUPREME COURT OF THE
STATE OF OREGON
HABITAT FOR HUMANITY OF
THE MID-WILLAMETTE VALLEY,
Plaintiff-Appellant,
v.
DEPARTMENT OF REVENUE,
State of Oregon,
Defendant-Respondent,
and
MARION COUNTY ASSESSOR,
Intervenor-Respondent.
(TC 5234, SC S063542)
En Banc
On appeal from Oregon Tax Court.*
Argued and submitted June 14, 2016.
Gina Anne Johnnie, Sherman, Sherman, Johnnie &
Hoyt, LLP, Salem, argued the cause and filed the brief for
appellant.
Robert M. Wilsey, Assistant Attorney General, Salem,
argued the cause and filed the brief for respondent
Department of Revenue. With him on the brief were Ellen F.
Rosenblum, Attorney General, and Paul L. Smith, Deputy
Solicitor General.
No appearance on behalf of respondent Marion County
Assessor.
WALTERS, J.
The judgment of the Tax Court is reversed. The case is
remanded to the Tax Court for further proceedings.
______________
*  22 OTR 102 (2015).
258 Habitat for Humanity v. Dept. of Rev.
Case Summary: Taxpayer sought direct judicial review of a decision by the
Tax Court denying taxpayer’s eligibility under ORS 307.130(2)(a) for exemption
from property taxes on a vacant lot upon which taxpayer intended to construct
low-income housing. Held: taxpayer’s primary charitable purpose and integrated
activities as a property developer established that the vacant lot at issue was
actually and exclusively “used in the literary, benevolent, charitable or scientific
work carried on” by taxpayer, as required by ORS 307.130(2)(a).
The judgment of the Tax Court is reversed. The case is remanded to the Tax
Court for further proceedings.
Cite as 360 Or 257 (2016) 259
WALTERS, J.
In this direct appeal from the Regular Division
of the Tax Court (Tax Court), we consider whether tax-
payer, Habitat for Humanity of the Mid-Willamette Valley
(Habitat), is entitled to an exemption from property taxes
assessed on a vacant lot that it owned. During the relevant
time, Habitat intended to build a home on the lot but had
not yet started construction. The Marion County Assessor
(the county) denied Habitat’s application for a tax exemp-
tion under ORS 307.130(2)(a), which provides nonprofit
institutions with a tax exemption on “such real or personal
property, or proportion thereof, as is actually and exclu-
sively occupied or used in the literary, benevolent, charita-
ble or scientific work carried on by such institutions.” The
Tax Court affirmed, holding that Habitat was not using the
vacant lot to carry out its charitable work at the time of the
assessment. For the reasons stated below, we disagree and
reverse the Tax Court’s ruling.
The parties do not dispute the relevant facts.
Habitat is a nonprofit corporation. According to the stipu-
lated facts, Habitat’s articles of incorporation state that one
of its purposes is to acquire vacant lots and build affordable
housing on those lots. Consistent with that, in September
2012, Habitat acquired a residentially zoned vacant lot in
Marion County for “the sole purpose of later building a res-
idential home on it using volunteer labor and selling it to a
low-income family at a price below market.” In August 2013,
Habitat applied to the county for an exemption from 2013-14
property taxes under ORS 307.130(2)(a), which provides,
“[T]he following property owned or being purchased by
art museums, volunteer fire departments, or incorporated
literary, benevolent, charitable and scientific institutions
shall be exempt from taxation:
“(a)  * * * [O]nly such real or personal property, or pro-
portion thereof, as is actually and exclusively occupied or
used in the literary, benevolent, charitable or scientific
work carried on by such institutions.”
Later that month, the county denied Habitat’s exemption
application, stating that the lot was not being “ ‘actually and
exclusively occupied or used’ for the charitable purpose of
260 Habitat for Humanity v. Dept. of Rev.
providing homes to the needy.” In September 2013, Habitat
applied for a building permit. Upon receiving the building
permit in October 2013, Habitat began constructing a home
on the property.
Habitat appealed the denial of the exemption request
to the Magistrate Division of the Tax Court. “The burden of
establishing entitlement to an exemption is on the taxpayer
claiming the exemption.” Dove Lewis Mem’l Emergency
Veterinary Clinic, Inc. v. Dept. of Rev., 301 Or 423, 426-27,
723 P2d 320 (1986). The magistrate held that, as a mat-
ter of law, Habitat failed to establish its entitlement to an
exemption; accordingly, it denied Habitat’s motion for sum-
mary judgment and granted the cross-motion for summary
judgment filed by the county and intervenor Department
of Revenue (the department). Habitat for Humanity of the
Mid-Willamette Valley v. Marion Cty. Assessor, TC-MD
130518C, 2014 WL 3890325 (Or Tax M Div, Aug 8, 2014).
Habitat then appealed to the Regular Division of the Tax
Court, which also denied Habitat’s motion for summary
judgment and granted the department’s cross-motion for
summary judgment. Habitat for Humanity v. Dept. of Rev.,
22 OTR 102 (2015).
In reaching that result, the Tax Court relied on this
court’s case law interpreting ORS 307.130(2)(a), which the
Tax Court read as precluding an exemption for vacant land.
Id. at 104 (citing Emanuel Lutheran Charity Bd. v. Dept. of
Rev., 263 Or 287, 502 P2d 251 (1972)). Further, the Tax Court
contrasted the statutory language in ORS 307.130(2)(a),
which refers to real property being “occupied or used,” with
other exemption statutes that distinguish between “using”
property and “holding” property. Id. at 104-05. Based on
that analysis, the Tax Court entered a general judgment
in favor of the department, reasoning that Habitat did not
qualify for an exemption under ORS 307.130(2)(a) because
Habitat was merely holding its land rather than using it.
Habitat directly appealed that decision to this
court. See ORS 305.445 (authorizing such appeals). This
court’s review of a Tax Court decision is “limited to errors or
questions of law or lack of substantial evidence in the record
to support the tax court’s decision or order.” ORS 305.445.
Cite as 360 Or 257 (2016) 261
Because this is an appeal from a grant of summary judg-
ment, the issue presented is a question of law: whether the
Tax Court erred in concluding that there was no genuine
issue of material fact and that the department was enti-
tled to judgment as a matter of law. TCR 47 C (standard
for granting summary judgment); see also Tektronix, Inc. v.
Dept. of Rev., 354 Or 531, 533, 316 P3d 276 (2013) (applying
standard). As noted above, the parties do not dispute the rel-
evant facts. The question before us is whether, under those
undisputed facts, the Tax Court correctly interpreted and
applied the relevant exemption provision, ORS 307.130(2)(a),
in determining that the department was entitled to judg-
ment as a matter of law.
On that question, the parties dispute whether,
the lot at issue was “actually and exclusively occupied or
used” by Habitat in carrying on its charitable works. ORS
307.130(2)(a). That is a question of statutory interpretation.
In attempting to resolve questions of statutory interpreta-
tion, our goal is to discern what the legislature intended a
provision to mean by reviewing the text in context as well as
any pertinent legislative history. Comcast Corp. v. Dept. of
Rev., 356 Or 282, 295, 337 P3d 768 (2014). If the legislature’s
intent remains unclear, then we resolve any ambiguity by
applying appropriate canons of statutory construction. State
v. Gaines, 346 Or 160, 172, 206 P3d 1042 (2009).
However, “[w]e also consider this court’s prior con-
struction of the statutes at issue.” State v. McAnulty, 356 Or
432, 441, 338 P3d 653 (2014), cert den, 136 S Ct 34, 193 L Ed
2d 48 (2015); see also Liberty Northwest Ins. Corp., Inc. v.
Watkins, 347 Or 687, 692, 227 P3d 1134 (2010) (“As part of
the first level of analysis, this court considers its prior inter-
pretations of the statute.”). This court has construed the rel-
evant exemption provision in numerous previous decisions.
See YMCA v. Dept. of Rev., 308 Or 644, 651, 784 P2d 1086
(1989) (so stating and examining history of the tax exemp-
tion statute).1 When a prior construction implicates the
1
In reaching those prior constructions, the court has frequently stated that
tax exemption statutes are subject to the rule of “strict but reasonable construc-
tion.” See, e.g., Emanuel Lutheran, 263 Or at 291 (applying rule); Willamette Univ.
v. Tax Com., 245 Or 342, 344, 422 P2d 260 (1966) (same); Multnomah School of
Bible v. Multnomah Co., 218 Or 19, 28, 343 P2d 893 (1959) (same). The rule of
262 Habitat for Humanity v. Dept. of Rev.
interpretative question before us, “the court may consider
itself bound to follow a prior construction as a matter of stare
decisis.” Halperin v. Pitts, 352 Or 482, 492, 287 P3d 1069
(2012); see also Farmers Ins. Co. v. Mowry, 350 Or 686, 695-
96, 261 P3d 1 (2011) (discussing common considerations that
arise when determining the weight of a previous decision).
According to the department, the Tax Court cor-
rectly concluded that our case law resolves the dispute pre-
sented by this case. Like the Tax Court, the department
maintains that this court’s decision in Emanuel Lutheran,
263 Or 287, establishes a bright-line rule precluding a prop-
erty tax exemption, under ORS 307.130(2)(a), for vacant lots
and requiring at least that the taxpayer have a building
under construction on the property before the taxpayer may
be eligible for the exemption.
In Emanuel Lutheran, the taxpayer operated a non-
profit hospital and had purchased lots around the hospital
for future expansion of the existing hospital. 263 Or at 288-
89. There was no dispute that once those new buildings
were completed, the hospital could receive a tax exemption
for those properties. Nevertheless, the department argued
that the hospital was not yet entitled to an exemption on the
surrounding lots because the lots were vacant at the time of
the assessment.
The hospital countered that the tax exemption
provision extended to property being prepared to serve a
charitable purpose. The hospital based that argument on
Willamette Univ. v. Tax Com., 245 Or 342, 422 P2d 260
(1966), in which the court held that a university was enti-
tled to a property tax exemption for four parcels of land
upon which the university had begun constructing student
strict but reasonable construction is generally in accord with the methodology
noted above. “Strict but reasonable means merely that the statute will be con-
strued reasonably to ascertain the legislative intent, but in case of doubt will
be construed against the taxpayer.” Emanuel Lutheran, 263 Or at 291. In other
words, the court starts by attempting to ascertain legislative intent because “the
intention of the legislature must be the primary objective sought.” Willamette
Univ., 245 Or at 344. But if the court cannot discern the legislative intent, then
the court resolves any ambiguity by applying appropriate canons of statutory
construction. One canon available in tax exemption cases is the canon “that stat-
utes providing exemption from taxation are to be strictly construed” against the
taxpayer and in favor of the state. Id.Cite as 360 Or 257 (2016) 263
housing buildings.2 Id. at 344. In doing so, the court deter-
mined that the phrase “actually occupied and used,” as
it appears in the tax exemption statute, is not limited to
property that directly carries out the taxpayer’s charitable
purposes but also includes property “then being prepared
to carry out the purposes of the exempt charity.” Id. at 349.
Because the university was in the process of constructing
buildings intended to advance its educational purposes,
there was no dispute that the property met that standard—
i.e., that the property was “being prepared to carry out the
purposes of the exempt charity.” Id. As a result, the court
held that the property at issue was “being occupied and
used” to carry on the university’s educational purposes. Id.
at 346.
Like the taxpayer in Willamette Univ., the hospital
in Emanuel Lutheran sought a tax exemption for property
that it was not yet occupying or using to directly carry out
its charitable purposes—namely, providing medical ser-
vices to patients as well as teaching and research services.
Emanuel Lutheran, 263 Or at 288-89. Nevertheless, the
hospital argued that, like the taxpayer in Willamette Univ.,
it was entitled to an exemption because it was preparing
the property to serve those purposes. However, unlike the
taxpayer in Willamette Univ., the hospital in Emanuel
Lutheran had not yet begun construction of the new build-
ings that would serve its charitable purposes. Instead, the
hospital was “preparing” the property to serve its chari-
table purposes only “in the sense that it was taking steps
under its master plan to procure detailed plans and financ-
ing.” Id. at 291. Thus, at the time of the assessment, the
hospital’s lots remained “vacant awaiting future use.” Id.
at 289.
This court rejected the hospital’s argument and
refused to extend the holding of Willamette Univ. to prepa-
rations so far removed from a taxpayer’s charitable purpose:
2
There was also in dispute a fifth parcel of land that provided parking to
those working on the construction project. Whether the parking lot justified
tax exemption depended on whether the buildings under construction justified
a tax exemption, because the tax exemption statute provided a separate para-
graph exempting parking lots used in conjunction with charitable works. ORS
307.130(1)(b) (1955), renumbered as ORS 307.130(2)(b).
264 Habitat for Humanity v. Dept. of Rev.
“By requiring that exempt property be actually occupied for
charitable or other exempt purposes the legislature must
have meant something more than mere ownership or even
ownership with an intent to put the land to an exempt use
in the future. Actual occupancy must mean as a minimum
that the land be occupied by a building under construction.”
Id. at 291-92. According to the court, “land merely being
held for future use is not being actually occupied or used
for the benevolent or charitable work carried on by [the hos-
pital].” Id. at 292. The court therefore concluded that the
hospital was not entitled to tax exemption on the vacant lots
at issue in that case.
In this case, as noted above, the department reads
Emanuel Lutheran as creating a bright-line rule: To be eligi-
ble for the exemption, property must at least have a building
under construction. The department concludes that, because
Habitat had not yet started construction at the time of the
assessment at issue in this case, Habitat’s property is like
the nonexempt lots in Emanuel Lutheran rather than the
exempt lots in Willamette Univ., thus preventing Habitat
from establishing its eligibility for exemption.
Habitat does not ask us to overrule Emanuel
Lutheran. Instead, it contends that the department misreads
Emanuel Lutheran as turning entirely on the fact that the
property in that case was vacant, rather than considering
how the vacant property fit within the hospital’s charitable
works. Habitat insists that the scope of the exemption statute
should be defined by the specific works carried on by a spe-
cific taxpayer. Thus, according to Habitat, whether property
is “actually and exclusively occupied or used in the literary,
benevolent, charitable or scientific work carried on by such
institutions” will differ depending on the nature of the work
that a taxpayer carries on and the relationship between that
work and the property at issue. ORS 307.130(2)(a).
On that point, Habitat is correct. As this court said
in Multnomah School of Bible v. Multnomah Co., 218 Or 19,
28, 343 P2d 893 (1959), the scope of the exemption statute is
defined by
“the primary purpose for which the institution was orga-
nized and includes any property of the institution used
Cite as 360 Or 257 (2016) 265
exclusively for any facility which is incidental to and rea-
sonably necessary for the accomplishment and fulfillment
of the generally recognized functions of such a charitable
institution.”
Id. at 36-37.
In Multnomah School of Bible, a county refused to
exempt two properties that a college was using as residences
for its dining hall supervisor and superintendent of build-
ings. Id. at 37. The court held that, although the school did
not use the property to directly provide educational instruc-
tion, the school was entitled to an exemption. Id. In reaching
that result, the court avoided broad categorical rules and,
instead, attempted to follow “a road distinguished for its
appreciation of common sense and reason.” Id. at 33. The
court reasoned that because the taxpayer was a college, the
exemption extended to “ ‘any facilities which are reason-
ably necessary for the fulfillment of a generally recognized
function of a complete modern college.’ ” Id. at 30 (quoting
Church Divinity Sch. of Pac. v. Alameda Cty., 152 Cal App
2d 496, 502, 314 P2d 209 (1957)). One reasonably necessary
function of a college, the court said, is “the continuance of
the health, safety and comfort of its students while under
its domain and to the extent reasonably necessary to afford
such protection by the proper maintenance of its plant and
without interruption or delay in the use of its institutional
facilities.” Id. at 37. And, according to the court, that func-
tion was advanced by having staff live near the facilities
that they served. Id. (“[I]t [is] highly expedient that they
should reside where they do and not elsewhere.”).
Thus, the court’s decision in Multnomah School of
Bible turned on the specific charitable purposes of the tax-
payer and the function of the property to serve those pur-
poses. Similarly, in Emanuel Lutheran, the court defined the
scope of the exemption with reference to the hospital’s chari-
table works. 263 Or at 289 (“The simple issue is whether the
property on the assessment date was ‘actually and exclu-
sively occupied or used’ by Emanuel in the benevolent and
charitable work carried on by it.” (Emphasis added.)); id. at
292 (“[L]and merely being held for future use is not being
actually occupied or used for the benevolent or charitable
266 Habitat for Humanity v. Dept. of Rev.
work carried on by [the hospital].” (Emphasis added.)). Just
as a taxpayer’s entitlement to an exemption for staff resi-
dences turns on the taxpayer’s charitable purposes, so too
does a taxpayer’s entitlement to an exemption for vacant
land. A different taxpayer having charitable purposes dif-
ferent from those of the college in Multnomah School of
Bible, would not necessarily be entitled to an exemption
for staff residences. And, similarly, just because the court
determined in Emanuel Lutheran that a hospital was not
occupying or using vacant land in carrying on its charitable
works does not mean that a different taxpayer with different
charitable purposes also must be denied an exemption for its
vacant land.
In Emanuel Lutheran, the court held that the hos-
pital’s primary charitable purposes were medical, research,
and teaching services. The hospital’s charitable work was
not building a hospital facility, but operating a hospital. The
purpose of the hospital facility was to provide a location for
the hospital’s future charitable works. Thus, developing land
to add more hospital space might allow a hospital to do more
charitable work, but the development of the land was not
itself the hospital’s charitable work. Nevertheless, the court
did not require that the hospital actually complete develop-
ment of the land and conduct medical, research, and teach-
ing services on the land in order to obtain the exemption
it sought. Rather, the court required only that the hospital
take a preparatory step toward completing the development
of its land and toward conducting its charitable activities;
the court required that the hospital demonstrate that the
facility be under construction.
In contrast, here, Habitat’s charitable work is
the acquisition and development of land. As noted above,
Habitat’s primary charitable purpose is to acquire vacant
lots and to build housing on those lots for sale to low-income
families at below market prices. Habitat does not use build-
ings that it constructs to house its charitable operations.
Instead, the land that Habitat acquires and the buildings
that it constructs are Habitat’s charitable works. Thus,
unlike the hospital in Emanuel Lutheran, Habitat directly
performs its charitable works when it acquires and develops
Cite as 360 Or 257 (2016) 267
property. Once the development is completed, Habitat sells
homes to individuals, who then pay property taxes on them.
Said another way, Habitat does not acquire land as a pre-
paratory step in completing a facility that it will use in the
future for its charitable activities; when Habitat acquires
and develops land it is presently using that land to conduct
its charitable activities.
To a property developer, like Habitat, vacant lots
are its stock in trade. It maintains a stock of vacant lots
to be developed as resources become available. To continue
the comparison with a hospital, Habitat uses vacant lots
the same way that a hospital uses medications. A hospital
makes present use of medications not only when its physi-
cians or nurses administer them to specific patients, but
also when the hospital acquires and maintains them as part
of its inventory. Similarly, Habitat makes present use of its
vacant lots not only when it sells homes to low-income fam-
ilies, but also when it acquires and maintains those lots,
even if it cannot immediately begin construction on each of
them.
Although each lot is assessed individually, the court
determines exemption eligibility—that is, whether the prop-
erty is being occupied or used to carry on a taxpayer’s chari-
table works—by considering how each lot fits within the tax-
payer’s entire charitable enterprise. In Multnomah School of
Bible, this court instructed that “ ‘[t]he integrated activities
[of an institution] as a whole must be examined.’ ” 218 Or
at 30 (quoting Serra Retreat v. Los Angeles Cty., 35 Cal 2d
755, 757, 221 P2d 59 (1950)). The charitable use of the staff
residences in that case could only be established by looking
at the role of those residences in the overall operations of the
college.
When we correctly consider Habitat’s integrated
activities as a property developer, as well as its primary
charitable purpose, it is apparent that the real property
at issue was actually and exclusively “used in the liter-
ary, benevolent, charitable or scientific work carried on” by
Habitat. ORS 307.130(2)(a). As a result, we hold that, at the
time of the assessment, Habitat was entitled to receive the
tax exemption that the county denied.
268 Habitat for Humanity v. Dept. of Rev.
The Tax Court, therefore, erred by denying Habitat’s
motion for summary judgment and by granting the depart-
ment’s cross-motion for summary judgment.
The judgment of the Tax Court is reversed. The
case is remanded to the Tax Court for further proceedings.