U.S. Law Firm Group
State and Local Taxation Committee Meeting
October 1, 2002
SIGNIFICANT TAX LAW DEVELOPMENTS IN OREGON
2001–2002
JOHN H. GADON
NICHOLAS P. NGUYEN
LANE POWELL SPEARS LUBERSKY LLP
This outline is provided for informational purposes only and is not intended as legal advice or to
create an attorney-client relationship.
 2002 Lane Powell Spears Lubersky LLP
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I.
LEGISLATIVE DEVELOPMENT HIGHLIGHTS
In the following, we describe the tax highlights of the 2001 regular legislative session.
At the end of the outline, we also note the tax ballot measures in statewide elections. Some of
these ballot measures are presented for voter approval by the special 2002 legislative sessions
(convened to deal with emergency budgetary issues).
Like-kind Exchanges Extended to Oregon Tax Deferral
Under prior law, there was no automatic deferral of gain for Oregon tax purposes in the
case of a Section 1031 like-kind exchange or a Section 1033 involuntary conversion if the
replacement property was located outside of Oregon. Resident individuals, resident shareholders
of S corporations and resident partners of partnerships could elect to defer gain in qualifying
like-kind exchanges for Oregon tax purposes if they agreed to report the gain upon a taxable
disposition of the replacement property. Non-residents and C corporations were not eligible for
this deferral election and had to report the gain in the year in which the Oregon property was
disposed of. This statutory scheme was held to be unconstitutional by the Magistrate Division of
the Oregon Tax Court.
Under the new law, all taxpayers may defer gain realized in a qualifying like-kind
exchange even if the replacement property is located outside the state.
The new law applies to tax years beginning on or after January 1, 1998 and to any tax
year for which an amended return may still be filed or for which tax may be assessed on or after
October 6, 2001. Thus, if a C corporation exchanged Oregon for non-Oregon property in a likekind exchange in 1999 and reported the gain from that transaction on its Oregon tax return, the
corporation could file an amended return. There are many considerations that a taxpayer should
take into account in deciding whether to file an amended return for an open year. Taxpayers
should consult with their tax advisors if they contemplate securing a tax refund or filing an
amended return under this new law.
Modification to Business Income Apportionment
Under present law, business income is generally apportioned to Oregon for Oregon
income and corporate excise tax purposes using a weighted average of the following three
factors: 50% sales, 25% property and 25% payroll.
For tax years beginning on or after May 1, 2003, the apportionment formula will be
changed to 80% sales, 10% property and 10% payroll factors.
Public utilities are subject to special apportionment rules. For tax years beginning on or
after May 1, 2003, a public utility may elect to apportion business income either under the old
50-25-25 formula or the new 80-10-10 formula.
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Attorney Fees in Property Cases in the Oregon Tax Court
At present, a prevailing taxpayer can recover attorney fees in individual income tax cases
before the Regular Division of the Oregon Tax Court. Effective with cases filed on or after
January 1, 2002, a prevailing taxpayer (including a corporate taxpayer) will be able to recover
attorney fees in property tax cases before the Regular Division of the Oregon Tax Court.
No New Taxes on Internet Access
The state of Oregon and its political subdivisions and municipal corporations may not
impose, assess or collect any new tax on Internet access if the tax is not already in effect on
October 6, 2001.
Tax measures submitted for voter approval in statewide elections:
Measure 20 (Special September Election): The measure (referred by the legislature)
proposes to increase cigarette taxes by 60 cents per each 20-cigarette pack. Based on
preliminary figures from the special September 17 election, this measure appears to have been
approved by voters.
Measure 18 (General November Election): If passed, the measure (referred by the
legislature) would amend the state constitution to allow certain local taxing districts to divide
into tax zones and to establish permanent rate limits on property tax for such tax zones if a
majority of voters in each proposed tax zone approve the zone and its rate limit.
Measure 23 (General November Election): If passed, the measure would establish a
new Oregon Comprehensive Health Care Finance Plan, to be funded in part by additional
personal income tax (up to a maximum of $25,000 per taxpayer) and employer payroll tax (based
on progressive rate between a minimum of 3% and a maximum of 11.5% on non-exempt wages).
Special January Election: The fifth special session of the legislature passed a bill to
submit for voter approval at a special January statewide election certain increases in personal
income and corporate excise tax rates.
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II.
A.
CASELAW DEVELOPMENT HIGHLIGHTS
PROCEDURAL ISSUES.
1.
Oregon Tax Court Changed Its Interpretation of Pre-1997 Statute of
Limitation for Oregon Tax Assessment.
Hallmark Marketing Corp. v. Department of Revenue,
(August 13, 2002).
OTR
, No. 4514
Oregon has a general three-year statute of limitation for state income tax assessment.
ORS 314.410(1). However, the period of limitation is extended by certain statutory exceptions.
One exception allows the Department of Revenue to issue a notice of deficiency within two
years of being notified by the taxpayer or the IRS of any federal tax correction. ORS 314.410(3).
Another exception allows the Department of Revenue to issue a notice of deficiency within six
months of the expiration of any agreed federal extension, or if later, within the limit of other
statutory extensions. ORS 314.410(8).
In IBM Corp. v. Department of Revenue, 15 OTR 162 (Or Tax 2000), the Oregon Tax
Court concluded, based on its reading of the Oregon Supreme Court opinion in Swarens v.
Department of Revenue, 320 Or 326 (1994), that the two-year extension under the pre-1997
version of ORS 314.410(3) applies only if the IRS correction is made within the basic three-year
period of limitation. In that case, the three-year statute of limitations for Oregon tax purposes
had already expired before the IRS made any corrections. Therefore, the Oregon Tax Court held
that the two-year extension did not apply.
In Hallmark Marketing Corp., the Tax Court reconsidered the issue and changed its
interpretation of the pre-1997 statute of limitation. After examining the Swarens opinion again,
the Tax Court now concluded that the two-year extension applies if the IRS correction is made
within any period that is still open for Oregon assessment under any applicable extension. In
particular, if there is an IRS adjustment during an agreed federal extension period, then because
Oregon can still make an assessment during that agreed extension pursuant to ORS 314.410(8),
the two-year extension would still apply.
In IBM Corp., the Tax Court also suggested that for the two-year extension to apply, the
Department of Revenue must also receive notice of the IRS adjustment within the basic threeyear period of limitation. The Tax Court now disclaims that suggestion as non-binding or
incorrect dicta. The court observed that there is no statutory basis for requiring the notification,
which is outside the control of the Department of Revenue, to fall within any stated time limit.
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2.
The Tax Court Is Limited By Pleadings In Property Valuation Cases.
Chart Development Corporation v. Department of Revenue and Washington County,
____ OTR ___, No. 4513 (December 4, 2001).
Taxpayer owned a number of undeveloped lots in Beaverton, Oregon. As of January 1,
1999, the county valued the lots at $124,000 each. Over the following two years, taxpayer sold
the lots for prices ranging from $86,800 to $112,000. Upon petition by the taxpayer, the
Magistrate Division of the Oregon Tax Court reduced the real market values of the lots to their
ultimate sales price for purposes of the 1999-2000 property tax assessment. Taxpayer then
requested the Regular Division of the Oregon Tax Court to reduce the real market values further
by discounting the ultimate sales price for a time factor of 9 percent back to January 1, 1999. In
its pleadings, the county requests affirmation of the magistrate determination. However, at trial,
the county submitted an appraisal report showing a higher-than-actual-sales valuation, and
argued for the higher appraised values.
The court, although finding the county’s argument at trial persuasive, concluded that the
Oregon Tax Court would limit its determination to the values stated in the pleadings of the
parties. The court reached this threshold decision due in part to the repeal of ORS 305.435
effective September 1, 1997 (that former statute made clear that the court was not limited by the
pleadings in property valuation cases), and in part to policy reasons in favor of avoiding unfair
surprises. The court therefore affirmed the Magistrate Division, as originally requested by the
county in its pleadings.
The court later affirmed this pleading requirement in Woods v. Department of Revenue
and Grant County Assessor,
OTR
, No. 4566 (August, 2002).
B.
CORPORATE EXCISE (INCOME) TAX ISSUES.
1.
Property Factor Does not Include Intangible Personal Property Under
Pre-1995 Law.
In U.S. Bancorp and Subsidiaries. v. Department of Revenue,
OTR
, No. 4531
(September 19, 2001), the Oregon Tax Court concluded that under pre-1995 law, the Department
of Revenue had no authority to include intangible personal property in computing the property
factor for apportionment purposes.
Under the Oregon statute, the Department of Revenue had authority to permit or require a
financial or utility company to report Oregon income under either the segregate method or the
apportionment method, under rules and regulations adopted by the Department. Until 1995,
administrative rules by the Department of Revenue mandated the use of the apportionment
method. These rules were invalidated by the Oregon Supreme Court in a 1995 decision, Fisher
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Broadcasting, Inc. v. Department of Revenue, 321 Or 341 (1995). In response, the Department
of Revenue adopted a new administrative rule effective December 31, 1995, OAR 150-314.280(M), which allows the Department to require an alternative method of apportionment in any case
in which the usual method is not accurate.
In an audit for a pre-1995 taxable year, the Department required U.S. Bancorp to include
intangible personal property in its property factor in order to arrive at a more fair and accurate
apportionment of income. The Oregon Tax Court concluded that the Department did not have
authority to require such an ad hoc adjustment. The court noted that the Department’s statutory
authority must be exercised under “rules and regulations,” as intended by the legislature. The
court found that the pre-1995 administrative rules did not provide any exception for the
Department to include intangible personal property in computing the property factor.
2.
Settlement Received in Contract Interference Case is Unitary Business
Income Apportionable to Oregon.
Pennzoil Co. v. Department of Revenue, 332 Or 542 (2001), aff’g 15 OTR 101 (Or Tax
2000).
In 1988 Pennzoil received a $3 billion settlement payment from its lawsuit against
Texaco for improper interference with its contract to acquire Getty Oil Company. When
Pennzoil filed its 1988 Oregon consolidated excise tax return, it treated the net settlement
proceeds as non-business, non-apportionable income.
The Oregon Tax Court, however, disagreed with Pennzoil. The court concluded that the
settlement proceeds were unitary business income and therefore must be apportionable to
Oregon. On appeal, the Oregon Supreme Court affirmed.
Oregon applies both a transactional and a functional test to determine whether a
particular item of income is business income subject to apportionment. Under the transactional
test, the Court relied on principles of federal tax law to find that the money Pennzoil received in
the settlement had the same character as the subject matter of the lawsuit, i.e., the Getty contract.
In addition, the Court found that the Getty contract, notwithstanding its rarity, was an activity in
the regular course of Pennzoil’s unitary business because the stated purpose of the agreement
was to acquire an interest in established oil reserves.
The Court therefore concluded that as income arising from the Getty contract, the
settlement proceeds are business income apportionable to Oregon under the transactional test.
Because the Court found that the proceeds were business income under the transactional test, it
did not consider the functional test.
Penzoil also argued that it was unconstitutional for Oregon to impose its income tax on
the settlement proceeds because the settlement had little connection with Oregon and any Oregon
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income tax on the proceeds would be out of proportion with the amount of business Penzoil
actually conducted in the state. The Court rejected these constitutional arguments.
C.
PERSONAL INCOME TAX ISSUES.
1.
Guaranteed Payments for Services Performed by Nonresident Partners are
Taxable in Oregon to the Extent that They are Sourced in Oregon.
Reeve v. Department of Revenue, 333 Or 190 (2001), aff’g 15 OTR 148 (Or Tax 2000).
Taxpayers were Washington partners of a law partnership with an office in Oregon. The
partnership agreement provided for annual base compensation payments to the partners.
Taxpayers argued that the annual base compensation amounts that they received from the
partnership were guaranteed payments for services performed entirely in Washington, and
therefore were not taxable in Oregon.
The Oregon Tax Court, however, held that the annual base compensation amounts are in
part Oregon-source income, taxable by Oregon. Although Oregon follows the Internal Revenue
Code with respect to the taxation of partnership profits, the court found that the “guaranteed
payment” characterization does not apply for Oregon tax purposes because of ORS 316.124(2),
which generally disregards any characterization of payments to partners as being for services or
for the use of capital. The court interpreted that restriction as an intent by the Oregon legislature
to treat payments to partners as nonguaranteed payments for the sole purpose of determining the
source of income. That narrow purpose, in the view of the court, was consistent with the rest of
the statute.
On appeal, the Oregon Supreme Court affirmed.
2.
Short Visits to Out-of-State Locations Twice a Year Are Sufficient for Nonresident Trucking Mechanic to Qualify for Oregon Tax Exemption under the
Amtrak Act.
Department of Revenue v. Hughes, _____ OTR _____, No. 4460 (March 14, 2001).
Taxpayer is resident of Washington and works as the maintenance supervisor at the
Portland terminal of a regional trucking firm. As part of his duty, taxpayer visited other
terminals outside of Oregon twice a year to perform safety inspections and other services.
Taxpayer spent on average about 10—18 days out-of-state on these working assignments.
The Oregon Tax Court found that taxpayer is a qualified employee within the meaning of
the Amtrak Reauthorization and Improvement Act of 1990, which exempts certain motor carrier
employees from income taxation outside their states of residence. In addition, the court must
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determine whether taxpayer “performs regularly assigned duties in two or more states” as
required by 45 USC 11504(b)(1). The Department of Revenue argued that because taxpayer
spent less than five percent of his working days outside of Oregon, his short out-of-state
assignments should not be treated as regular assignments for purposes of the Amtrak Act.
However, the court disagreed, finding that the out-of-state visits constitute regular assignments
because they usually happen twice a year (in the spring and in the fall), notwithstanding the lack
of a fixed schedule.
In conclusion, the court found that taxpayer qualified for exemption from Oregon income
tax under the Amtrak Act.
3.
Oregon May Tax Pensions Received by Retired Public Employees from
Other States.
Sherman v. Department of Revenue,
ORT
, No. 4547 (August, 2002).
Taxpayers in this consolidated case are retired public employees from the state of New
York. Taxpayers filed refund claims arguing that retired Oregon public employees received
better tax treatment than retired employees from other states, and this differential treatment is a
constitutional violation.
Under ORS 280.380, certain retired Oregon public employees can receive a rebate,
designed to provide the employees with a net after-tax amounts equal to what the employees
would have received if the pension payments had been exempt from Oregon income tax. The
rebate is equivalent to an Oregon income tax exemption for certain retired public employees.
The Oregon Tax Court concluded that Oregon could tax pension payments by other states
while effectively exempting its own pension payments. The court noted that the question had
been adequately addressed in a former opinion affirmed by the Oregon Supreme Court.
The court also found some of the taxpayers’ arguments to be inapplicable, because they
relied on legal doctrines regarding unequal treatment of federal employees.
D.
PROPERTY TAX ISSUES.
1.
“Measure 5” Limitations on Property Taxes Depend on Intended Use of
Taxes Collected Rather than Function of Taxing Agency.
Shilo Inn v. Multnomah County, et al., 333 Or 101 (2001), modified 334 Or 11 (2002).
Measure 5, a 1990 constitutional amendment approved by the voters, provides that taxes
imposed upon any property shall be separated into two categories: one which dedicates revenues
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raised specifically to fund the public school system and one which dedicates revenues raised to
fund government operations other than the public school system. For the 1995-1996 tax year and
thereafter, taxes in each category were limited to $5.00 per $1,000 of real market value for the
public school system and $10.00 per $1,000 of real market value for other governmental
functions.
Taxpayer, a hotel chain, owned two properties within Multnomah County. The hotel
argued that part of the taxes that were designated on the tax bill for schools was actually paid to
the urban renewal agency in excess of the Measure 5 limits.
In a first Shilo opinion, The Oregon Supreme Court concluded that the Measure 5
property tax limitation is based on intended use rather than the principal function of the taxing
district whose rate generates the tax. Accordingly, the urban renewal agency could not receive
property taxes in excess of the rate established by Measure 5 for government operations other
than public schools.
On petition for reconsideration, the Supreme Court affirmed its holding in the second
Shilo opinion without discussion of any arguments. However, the Court agreed to clarify a
passage in the introductory section of its first Shilo opinion (which had no bearing on the
outcome of the case) in order to avoid confusion.
2.
Maximum Assessed Value under Constitutional Limitation Imposed by
Measure 50 Must be Calculated Jointly for Land and Improvements.
Flavorland Foods dba New Season Foods, Inc. v. Washington County Assessor and
Department of Revenue,
Or
(September 19, 2002), rev’g 15 OTR 182 (Or Tax
2000).
This important case addresses the question of whether the maximum assessed value
limitation should be separately calculated for land and for improvements.
Measure 50, a 1997 amendment to the Oregon Constitution, limited increases in property
taxes by means of a cap on assessed value called “maximum assessed value." (Assessed value
for property tax purposes is now the lesser of maximum assessed value or real market value.)
For the 1997-98 tax year, a property’s maximum assessed value was generally equal to its
real market value for the 1995-96 tax year less ten percent. Thereafter, a property maximum
assessed value generally could not increase by more than ten percent per year (excluding
increases in value due to additions or improvements).
Under Measure 50, the maximum assessed value applies to “each unit of property in this
state.” Article XI, section 11(1)(a) of the Oregon Constitution, as amended by Measure 50. The
Oregon Tax Court concluded that the phrase “each unit of property in this state” refers to each
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unit of assessable property. Because land and improvements are assessed separately, the Tax
Court concluded that Measure 50 requires separate maximum assessed values for land and
improvements. Thus, where the value of the land increased and the value of the improvements
decreased significantly, the maximum assessed value limitation applied separately to the land
and to the improvements, reducing the aggregate assessed value for the combined property. On
appeal, the Oregon Supreme Court reversed.
The Supreme Court acknowledged that the ordinary meaning of “each unit of property in
this state” could refer to either land and improvements separately, or to all the property in a
property tax account. However, after examining the context surrounding Measure 50 and the
history of that measure, the Court concluded that the voters intended the phrase to refer to all
property in a property tax account, which includes both land and improvements.
This is a significant victory for the Department of Revenue, who litigated this issue at
least three times without success (in three different cases) before the Tax Court before prevailing
in the Flavorland case before the Supreme Court.
3.
Increase in Value Due More to Cleaning and Good Luck Rather than to New
Improvements.
Hoxie v. Department of Revenue,
OTR
, No. 4494 (April 11, 2001).
Under Measure 50 and its implementing statute, the cap on maximum assessed value
does not apply to new improvements on or after July 1, 1995. With new improvements, the
maximum assessed value for the property is adjusted for an exeption value to reflect the value of
the new improvements. For this computation, the statute measures the net increase in value of
the property as a result of the improvements rather than the cost of the improvements.
Taxpayer purchased a commercial property and proceeded to clean up and renovate the
buildings. In order to determine the maximum assessed value of the property for the 1997-98 tax
year, the Oregon Tax Court has to determine the value of the improvements to the property
between July 1, 1995 and July 1, 1997.
The court found that a substantial part of the increase in value of the property was
attributable to cleaning and good luck rather than to the improvements. The court therefore put
the exception value due to improvements at a level very close to that estimated by the taxpayer’s
appraisal expert.
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4.
OTR
Limited Exemption for New Building Applies To Any Property Built to
Produce Income, Whether from One-Time Sale or from Ongoing Lease or
Business Use.
North Harbour Corporation v. Department of Revenue and Multnomah County Assessor,
, No. 4540 (Aug. 20, 2002).
ORS 307.330 provides a limited exemption from property tax for new buildings or
structures that, among other requirements, are being constructed in furtherance of the production
of income. ORS 307.330(1)(d). Taxpayer argued that this limited exemption applies to its new
condominium project in Multnomah County. The Department of Revenue and Multnomah
County argued that this limited exemption is only available for new construction intended to
produce a stream of income, rather than a one-time realization of income from the sale of the
property or its units.
The Oregon Tax Court first noted that tax exemption statutes are construed in a “strict but
reasonable” manner. “Strict but reasonable” construction does not require the court to give the
narrowest possible meaning to an exemption statute. Instead, it requires the court to construe an
exemption statute reasonably, giving due consideration to the ordinary words of the statute and
the legislative intent. The “strict but reasonable” rule serves as a tie breaker, in cases where no
legislative intent can be discerned, in favor of taxation.
After examining the statutory language and its legislative history, the Oregon Tax Court
concluded that the legislature did not intend to restrict the exemption to new properties built to
produce on-going income. The court therefore held for the taxpayer.
5.
Hunting Preserve Does Not Qualify for Special Farm Use Assessment.
Youngblood v. Department of Revenue and Malheur County,
(February 12, 2002).
OTR
, No. 4545
Taxpayers converted their farmland into a game bird hunting preserve. Taxpayers argued
that the hunting preserve continued to qualify for special farm use assessment because it was still
an agricultural activity. In particular, taxpayer argued that the cultivation, propagation,
maintenance and harvest of game birds constitute farm use, and hunting is a form of “harvesting”
for this purpose.
The Oregon Tax Court disagreed with the taxpayer. After examining the legislative
background and other relevant statutory cross references, the court concluded that hunting does
not qualify as farm use for special property tax assessment.
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6.
Old “Frozen” Assessed Value of Historic Commercial Property Does Not
Carry Over to Second 15-Year Special Assessment Period.
Waldo Block Partners et al. v. Department of Revenue and Multnomah County,
___, No. 4496 (April 18, 2002).
OTR
Under ORS 358.475, the legislature provided an incentive for owners to repair and
improve their historic properties by freezing the assessed values for a 15-year period. In 1995,
the legislature provided a second 15-year special assessment period to qualified historic
commercial properties. The key question in this case is whether the “frozen” value for the
second 15-year special assessment period is the same as the “frozen” value for the first period, or
is the real market value of the property at the time the taxpayer applied for reclassification.
In a 1999 case, Multnomah County v. Department of Revenue, 15 OTR 5 (Or Tax 1999),
the Oregon Tax Court concluded that the “frozen” value from the first special assessment period
carries over to the second period upon reclassification. However, the court now reverses itself,
noting that its conclusion in the 1999 case was wrong because the court did not examine the
legislative history of the relevant statute. The court now holds that the specially assessed
(“frozen”) value for the second 15-year period is based on the real market value of the property
at the time the taxpayer applies for reclassification.
7.
Low-income Housing Restrictions and Subsidies Properly Taken Into
Account in Appraisal.
Piedmont Plaza Investors v. Department of Revenue, 331 Or 585 (2001), rev’g 14 OTR
440 (Or Tax 1998).
At issue in this case were the property tax assessments for two “section 236” low income
housing apartments located in Multnomah County (Piedmont Plaza) and Washington County
(Spencer House) for the 1994-95 and 1995-96 tax years.
The properties were built in the 1970’s as low-income housing under section 236 of the
National Housing Act. Taxpayers purchased the properties in the 1980’s. In 1997, the taxpayers
sold the properties through the statutory “preservation transfer” process, which allowed section
236 housing to be sold at prices adjusted to discount the section 236 restrictions.
At trial, the taxpayers and the Department of Revenue submitted different appraisals.
However, the Oregon Tax Court rejected all the submitted appraisals and found that there was no
immediate market value for the properties. Under ORS 308.205(2)(c), if there is no immediate
market value for a property, then the real market value for property tax purposes would be the
amount of just compensation for the loss of the property. The Tax Court concluded that the 1997
sales price for each property where each property was sold through the preservation transfer
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process was the best evidence of just compensation and therefore chose those amounts as the real
market values for the properties.
On appeal, the Oregon Supreme Court reversed. The Court found that the only issue
before the Court was whether the Tax Court had erred in rejecting the taxpayers’ appraisals
based on the income approach to value.
The Court found that the appraiser for the taxpayers did take into account and properly
consider certain factors that the Tax Court had found lacking. In particular, the Court found that
the appraiser had properly considered the effect of certain low-income housing restrictions in his
income approach to valuation and had reasonably concluded that the amount of an interest
subsidy should not be included as income. The Court also found that it was reasonable for the
appraiser to assume that the properties would remain subject to the low-income housing
restrictions indefinitely. Accordingly, the Court held that the real market values for the
properties in the years at issue are best reflected by the valuations submitted by taxpayers'
appraiser.
8.
Omitted Property
Miller v. Department of Revenue and Tillamook County, ____ OTR ____, No. 4534
(November 29, 2001).
The property in question is a barn located on the taxpayer’s farmland. The barn had been
on the tax roll and assessed in the 1980s. The county assessor was aware of the existence of the
barn prior to 1999; however, the barn was not on the assessment roll or assessed for the tax years
1995-1996 through 1999-2000. The barn was then added to the assessment roll as omitted
property for those years.
The taxpayer challenged the addition, arguing that the omitted property assessment is
improper. Among other things, the taxpayer argued that failure of the assessor to include the
barn in its assessment was undervaluation of the farm as a whole. The Oregon Tax Court
disagreed, finding that the argument is not supported by case law and statutory authority. In
particular, the court noted that Oregon special assessment system for farmland specifically
contemplates that land and buildings are assessed separately and not as one single property.
Taxpayer also argued that because the county once assessed the barn and thereafter failed
to do so, the county is prevented from adding the barn back to the roll. The court disagreed,
finding that the statute allows the county to do just that where the property has been omitted “for
any reason.”
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F.
OTHER TAXES.
1.
Tax on Telecast of Boxing Match Violates First Amendment.
TVKO v. Howland, et al.,
OTR
, No. 4445 (May 17, 2001).
Taxpayer produced and distributed television programming of sporting events through
cable pay-per-view. In March 1999, taxpayer broadcast a heavyweight championship boxing
match staged in New York. The Oregon Boxing and Wrestling Commission demanded that
taxpayer pay a percentage of its gross receipts to the state as required under a statute applicable
to persons who hold distribution rights to pay-per-view telecast of boxing or wrestling events.
Taxpayer brought an action in the Oregon Tax Court, asking for a declaratory judgment that the
statute violates the First Amendment of the U.S. Constitution.
After some procedural analysis, the court found that it had subject matter jurisdiction
over the gross receipts tax provision of the statute (but not its licensing provision). The court
then found that the gross receipts tax, being applied only on telecasts of boxing or wrestling
matches, is a tax on content, and therefore is presumed unconstitutional unless the state can show
a compelling state interest. Because the match happened outside of Oregon, the state did not
have jurisdiction for it to regulate the match. The court also found no legitimate interest for the
state to regulate a boxing match staged outside of Oregon. The court therefore concluded that
the gross receipts tax on pay-per-view telecasts of boxing matches held outside Oregon violates
the First Amendment.
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