Serenity Lane, Inc. v. Lane County Assessor

No. 31 August 30, 2013 229

IN THE OREGON TAX COURT

REGULAR DIVISION

SERENITY LANE, INC.

and Serenity Lane Health Services,

Plaintiffs,

v.

LANE COUNTY ASSESSOR

and Department of Revenue,

Defendants.

(TC 5082)

Plaintiffs (taxpayer) appealed disqualification by Defendant Lane County

Assessor (the county) of taxpayer’s status as a charitable institution exempt from

ad valorem property tax for the 2010-11 tax year. The county and Department of

Revenue (the department) argued that taxpayer’s addiction treatment programs

and activities lacked the statutory “gift or giving” component required to qual-

ify for exemption. Following trial, the court found that taxpayer had provided

extensive testimony and evidence showing that it had intent to make its services

widely available to poor and indigent individuals, as well as to those more readily

able to pay for treatment, that taxpayer provided treatment to patients at a cost

well below the market rate, and that this factor as well as other factors involved

with taxpayer’s activities, met taxpayer’s burden of proof as to the gift or giving

element, and that as a whole, taxpayer was a charitable institution for purposes

of the statute, and the subject property was exempt from taxation pursuant to

ORS 307.130.

Trial was held January 28, 2013, in the courtroom of the

Oregon Tax Court, Salem.

Dennis W. Percell, Arnold Gallagher Percell, et al.,

Eugene, argued the cause for Plaintiffs (taxpayer).

Steven E. Dingle, Lane County Counsel, Eugene, argued

the cause for Defendant Lane County Assessor (the county).

Darren Weirnick, Assistant Attorney General, Depart-

ment of Justice, Salem, appeared for Defendant Department

of Revenue (the department).

Decision for Plaintiffs rendered August 30, 2013.

HENRY C. BREITHAUPT, Judge.

I. INTRODUCTION

This case comes before the court for decision follow-

ing a trial in the Regular Division. Plaintiffs Serenity Lane,

230 Serenity Lane, Inc. v. Lane County Assessor

Inc. and Serenity Lane Health Services (Serenity) appealed

from the disqualification, by Defendant Lane County

Assessor (the county), of taxpayer’s status as charitable

institutions exempt from ad valorem property tax for the

2010-11 tax year.1 Serenity argues that they are charitable

institutions, as that term is used in ORS 307.130 and that

they actually and exclusively use the property at issue in

this case to conduct their charitable work—treating the dis-

ease of substance addiction. The county agrees that Serenity

has many of the salient features of a charitable institution

and does not challenge Serenity’s allegations regarding

exclusive use or possession. The county does argue, however,

that Serenity’s operations do not involve the “gift or giving”

required for exemption as charitable institutions.

This Opinion should be read in context with this

court’s Opinion in Hazelden Foundation v. Yamhill County

Assessor, 21 OTR 245 (2013).

II. FACTS

Serenity operates addiction treatment programs

throughout this state. Serenity’s operational hub is located

in central Eugene, between the downtown commercial dis-

trict and the campus of the University of Oregon. The physi-

cal plant of Serenity’s central Eugene location has expanded

over time, and by the tax year at issue had come to occupy

substantially all of one full city block and parts of an adja-

cent block. At the time of trial Serenity had plans in the

future to sell this facility and to construct a new, larger

facility in the nearby town of Coburg.

Serenity is composed of two separate legal enti-

ties, SLI and SLHS. Both entities are organized as IRC

section 501(c)(3) nonprofit corporations.2 In the late 1980s

1

In opinions and orders of the Oregon Tax Court, the plaintiff is normally

referred to as “taxpayer” in the body of the opinion or order. In this case the

activities of the two plaintiffs are so extensively intertwined that despite the

existence of two separate legal entities, Plaintiffs may best be considered as one

singular operation. That being the case, in this opinion Plaintiffs are collectively

referred to as “Serenity.” When the individual plaintiffs are discussed separately,

Serenity Lane, Inc. is referred to as “SLI” and Serenity Lane Health Services is

referred to as “SLHS.”

2

All references to the Internal Revenue Code (IRC) are to the 2008 edition.

Cite as 21 OTR 229 (2013) 231

Serenity’s management decided to separately incorporate

the two entities as a way of shielding Serenity’s assets from

potential civil liability. SLHS owns Serenity’s physical plant

and provides administrative support for SLI. SLI, in turn,

leases the physical plant from SLHS and operates Serenity’s

addiction treatment programs.

Serenity’s primary use for its real property in cen-

tral Eugene during the tax year at issue was to operate an

inpatient residential addiction treatment facility. Serenity’s

facility was licensed as a specialty hospital and employed a

medical staff of physicians and nurses in addition to coun-

selors trained in treating substance addiction.

Serenity offers inpatient residential treatment

and detoxification (detox) at its central Eugene location.

Serenity’s staff are equipped for “uncomplicated detox.” The

court understands that term to mean medically managed

detox of an individual, without the need to simultaneously

treat other acute medical conditions that are independent of

the patient’s addiction. Most of Serenity’s patients undergo

detox as a preliminary step in either inpatient residential

treatment or intensive outpatient treatment, but the testi-

mony at trial indicated that detox is a separate service that

is billed at a different rate by service providers and reim-

bursed at different rates by the Centers for Medicare and

Medicaid Services (CMS) and other insurance providers.

Serenity also offers outpatient treatment. Outpatient

treatment takes two forms: intensive outpatient treatment

and nonintensive outpatient treatment. Intensive outpatient

treatment requires a relatively substantial time commit-

ment from patients over a span of several weeks and seeks

to produce many of the salutary effects of inpatient residen-

tial treatment, while still allowing patients to accommodate

work schedules and avoiding some of the costs associated

with housing and feeding inpatient residential patients.

Serenity offers intensive outpatient treatment as a lower

cost alternative to inpatient residential treatment and uses

intensive outpatient treatment as the principal treatment

option for the indigent and low-income patients served

through Serenity’s “New Hope” program. Serenity offers

nonintensive outpatient treatment primarily in the form of

232 Serenity Lane, Inc. v. Lane County Assessor

“recovery support” for patients who have already completed

either inpatient residential treatment or intensive out-

patient treatment. Patients who undertook treatment with

Serenity receive an allotment of free recovery support hours

at no additional charge. Serenity also offers recovery support

treatment, for a fee, to patients that undertook either resi-

dential or outpatient treatment with other service providers.

Serenity’s “New Hope” program exists to offer treat-

ment options for indigent and low-income individuals. It is

housed out of a facility separate from Serenity’s downtown

residential treatment facility. The testimony at trial was to

the effect that Serenity typically serves patients who have

insurance through the Oregon Health Plan through the

New Hope program, but also looks for other signs of acute

financial distress, such as reliance on food stamps. While

neither party has given precise figures for the number of

patients treated through the New Hope program during

the 2009-10 and 2010-11 tax years, the record indicates

that during Serenity’s 2009 and 2010 fiscal years, Serenity

treated 137 patients with insurance coverage through the

Oregon Health Plan.3 Serenity also offered detox treatment

to patients on the Oregon Health Plan, though this service

falls outside of the New Hope program.

In addition to its treatment of individuals suffering

from substance addiction, Serenity also sponsors an intern-

ship program to train aspiring addiction counselors. Serenity

hosts ten interns per year in a program aimed at achieving

the training necessary for certification as a Certified Alcohol

and Drug Counselor (CADC). The interns do not pay for this

training, and are given a stipend to help defray living expenses

while involved with the program. Interns obtain hands-on

experience counseling Serenity’s patients under the supervi-

sion of Serenity’s CADCs in the internship program and in

many instances Serenity has hired former interns to work

as CADCs after completing the program. The testimony at

3

At trial, Serenity’s CEO also mentioned so-called “free slots” associated

with the New Hope program. Neither party developed on this testimony, but in

context the mention of “free slots” appeared to suggest the presence of patients in

the New Hope program in addition to those with insurance coverage through the

Oregon Health Plan. The record does not contain figures showing how many such

patients might exist, if any.

Cite as 21 OTR 229 (2013) 233

trial was to the effect that Serenity’s interns receive, free of

charge, an education that is equivalent to what is offered by

counseling programs at several institutions of higher learn-

ing in this state, and that upon completion of the program

Serenity’s interns have the requisite knowledge to take the

CADC licensing examination. Over the years, Serenity has

hired several of its former interns to work as CADCs. Interns

are not, however, in any way bound to work for Serenity after

completing the program.

Prior to the 2010-11 tax year, the county consid-

ered SLI and SLHS charitable institutions exempt from

ad valorem property tax under ORS 307.130. In March of 2010,

the county began a review of the exempt status of both entities

and requested documents from Serenity substantiating their

charitable nature. Serenity complied with this request, but

the response failed to satisfy the county. Following a further

exchange of letters, the county removed the exemptions of both

SLI and SLHS. Serenity then appealed that decision of the

county to the Magistrate Division. The magistrate found for

the county, and Serenity appealed to this division of the court.

III. ISSUE

Whether Serenity’s operations involve the “gift or

giving” required for exemption from property tax as chari-

table institutions.

IV. ANALYSIS

A. Statutory Framework

As an initial matter, the court will address the stat-

utes that the court must consider in analyzing this case.

ORS 307.130(2) 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) * * * 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 car-

ried on by such institutions.” 4

4

All references to the Oregon Revised Statutes (ORS) are to the 2009 edition.

234 Serenity Lane, Inc. v. Lane County Assessor

Observant readers will note that the way that Serenity has

structured its operations poses a problem in directly apply-

ing ORS 307.130 to Serenity’s particular situation. While

SLI and SLHS might be said to form an overall whole—

Serenity—that whole is comprised of two distinct legal enti-

ties, one of which, SLI, leases the real property at issue in

this case from the other, SLHS. As a result of this arrange-

ment, ORS 307.130 cannot apply directly to SLI because by

its own terms the statute applies only to “property owned or

being purchased” by a qualifying institution.

ORS 307.166(1) provides the way forward. The rele-

vant text of ORS 307.166(1) provides:

“If property is owned or being purchased by an institution,

* * * that is granted exemption or the right to claim exemp-

tion for any of its property under a provision of law con-

tained in this chapter, and the institution, organization or

public body leases or otherwise grants the use and posses-

sion of the property to another institution * * * that is like-

wise granted exemption or the right to claim exemption for

property under a provision of law contained in this chapter,

the property is exempt from taxation if used by the lessee

or possessor in the manner, if any, required by law for the

exemption of property owned or being purchased by the les-

see or possessor * * *.”

Phrased differently, if an institution that is entitled to claim

exemption from property tax under a provision of ORS chap-

ter 307 leases its property to another institution that is also

entitled to claim exemption from property tax for property

that it owns, then the property remains exempt from prop-

erty tax as long as the lessee institution uses the property

in the manner required under the statute that would entitle

that lessee institution to claim exemption for the property if

it owned the property.

The result is that, because of Serenity’s internal

organization, each of the two components of Serenity must

individually qualify as charitable institutions to satisfy the

terms of ORS 307.166. The saving grace is that in the past

this court has concluded, when presented with analogous

separations of administrative functions from the substan-

tive work of a charitable institution, that property devoted

to the administrative functions of an otherwise charitable

Cite as 21 OTR 229 (2013) 235

institution is exempt when it is not used in a profit-making

business and is used for the advancement of the charitable

work of the institution. Archdiocese of Portland v. Dept. of

Rev., 5 OTR 111, 124 (1972). Because the county has not

raised the separate existence of SLI and SLHS as a bar to

exemption, the court will take a similar approach on the

grounds that, while SLI and SLHS are separate legal enti-

ties, they operate under unified management and can most

reasonably be described as component parts of an overall

whole. In other words, the court will look at Serenity’s over-

all operation as if it were one allegedly charitable institu-

tion. If the court concludes that these overall operations are

charitable for purposes of ORS 307.130, it will then conclude

that SLHS and SLI are each individually charitable institu-

tions for purposes of applying ORS 307.166.

B. Whether Serenity is a Charitable Institution

When determining whether an allegedly chari-

table institution meets the requirements of ORS 307.130,

Oregon courts look to whether the institution meets three

requirements:

(1) Charity as the organization’s “primary, if not sole,

object”;

(2) The organization’s operations must serve the charita-

ble mission of the organization; and

(3) The presence of an element of “gift or giving” in the

activities of the organization.

SW Oregon Pub. Def. Services v. Dept. of Rev., 312 Or 82,

89, 812 P2d 1292 (1991). The parties are in agreement that

Serenity meets the first two of these requirements. More

specifically, the county agrees that Serenity’s sole purpose is

to operate addiction treatment programs on a not-for-profit

basis and does not dispute that Serenity does, indeed, oper-

ate such programs without an eye to personal gain or profit

for the individuals that own or control Serenity. As often

happens in cases such as this one, however, the parties are

in disagreement as to whether Serenity has shown that its

operations involve the element of “gift or giving” required of

a charitable institution under ORS 307.130.

236 Serenity Lane, Inc. v. Lane County Assessor

When determining whether the operations of a

given institution involve “gift or giving,” Oregon courts turn

to another multi-factor test. Unlike the test for determining

whether an institution is a charitable institution for pur-

poses of ORS 307.130, not all of the factors looked at in this

test need to be present for a court to determine that the “gift

or giving” requirement has been met. Methodist Homes, Inc.

v. Tax Com., 226 Or 298, 310, 360 P2d 293 (1961). In addi-

tion, the list of factors is not exhaustive; a court can find

that sufficient “gift or giving” exists for reasons other than

those specifically listed in this test. Id. However, the factors

listed have been found to be especially probative of the issue

of “gift or giving” and so have been relied upon by this court

and by the Supreme Court in numerous past cases. These

factors are:

“(1) Whether the receipts are applied to the upkeep, main-

tenance and equipment of the institution or are other-

wise employed;

“(2) Whether patients or patrons receive the same treat-

ment irrespective of their ability to pay;

“(3) Whether the doors are open to rich and poor alike and

without discrimination as to race, color or creed; and

“(4) Whether charges are made to all and, if made, are

lesser charges made to the poor or are any charges

made to the indigent.”

SW Oregon Pub. Def. Services, 312 Or at 87 (quoting

Oregon Administrative Rule (OAR) 150-307.130-A(4)(d)(C)).

Serenity argues that its operations involve several different

types of “gift or giving.” Serenity’s alleged “gift or giving”

takes the following forms:

(1) Need-based scholarships to reduce the cost of treat-

ment for some patients;

(2) Charging rates below those that the market for the

type of treatment that taxpayers provide would rea-

sonably bear;

(3) Providing free education to individuals training to

work as drug and alcohol addiction counselors;

(4) Providing treatment for the indigent and for

those enrolled in the Oregon Health Plan at rates

Cite as 21 OTR 229 (2013) 237

substantially below Serenity’s already below-market

rates; and

(5) Community outreach education for employers.

In the following analysis, the court will discuss whether

the forms of gift or giving that Serenity alleges satisfy the

“gift or giving” requirement. In so doing the court will first

analyze Serenity’s alleged giving in light of the four “gift or

giving” factors laid out above. To the extent that any form

of giving alleged by Serenity does not neatly interact with

the four “gift or giving” factors, the court will consider it on

its own terms. Serenity must prove the presence of “gift or

giving” in its operations by a preponderance of the evidence.

ORS 305.427.

1. Consideration of the four traditional “gift or giving”

factors

With regard to the first “gift or giving factor,” SLHS

and SLI are both organized as not-for-profit corporations

under IRC section 501(c)(3). Serenity and the county appear

to be in agreement that with the exception of a cash reserve

necessary for operations, Serenity reinvested the excess

of its revenues over its expenses into expanding its opera-

tions. Serenity’s past expansions of its original facility in

central Eugene and current plans to expand its operations

by constructing a new facility in Coburg is probative of this

issue. The county does not allege that Serenity’s revenues

inured to the benefit of any private individual, other than to

the extent that Serenity’s employees are, of course, paid for

their services.

With regard to the second “gift or giving” factor,

the record is harder to conclusively assess. Serenity orients

its inpatient residential treatment program toward work-

ing and middle class individuals. Serenity offers treatment

options for the indigent and for individuals on the Oregon

Health Plan, but does not typically admit such individu-

als to inpatient residential treatment. At first glance, this

would appear to weigh against Serenity. However, in his

testimony, Serenity’s CEO offered what the court considers

valid therapeutic reasons for keeping its indigent patients

separate from its inpatient residential patients. Serenity’s

CEO testified to the effect that Serenity treats its indigent

238 Serenity Lane, Inc. v. Lane County Assessor

patients separately from its inpatient residential patients

because indigents suffering from substance addiction tend

to suffer from additional co-morbid conditions that compli-

cate addiction treatment. Serenity has attempted in the

past to comingle its indigent and non-indigent patient pop-

ulations and has found that it resulted in inadequate treat-

ment for both groups. The court accepts this explanation.

However, the second “gift or giving” factor specifically calls

for the “same treatment,” irrespective of ability to pay. The

court concludes that this factor weighs somewhat against

taxpayer, but not so much so as to be determinative of the

issue of the presence of “gift or giving.”

With regard to the third factor, the county does

not allege discrimination on the basis of race, skin color, or

religious convictions, and the record contains no evidence of

such discrimination. The court also concludes that Serenity’s

doors were open to rich and poor alike. While Serenity’s evi-

dent disinclination to take on indigent patients on the same

basis as it took on other patients weighs against it on the

second of the “gift or giving” factors, Serenity’s undertaking

to provide outpatient treatment for indigent patients through

its “New Hope” program clearly evidences a desire to provide

treatment options for the indigent and poor, albeit in a setting

separate from its main treatment facility. Serenity’s accep-

tance of patients on Medicaid and providing detox services to

patients on the Oregon Health Plan further evidences a pos-

itive desire to make its services widely available to the poor,

as well as to the relatively affluent patients that made up the

bulk of Serenity’s inpatient residential patient population.

The record on the fourth factor is mixed but likewise

weighs overall in favor of a finding of the presence of “gift or

giving.” Serenity’s CEO testified to the effect that Serenity

does have a system of “scholarship” giving—in other words,

Serenity gave need-based discounts on the cost of care for

patients with limited financial assets. However, Serenity’s

CEO also testified that Serenity only rarely gave care at

no charge whatsoever. Serenity’s CEO claimed that there

was a legitimate therapeutic reason for this insistence on its

patients paying Serenity something for treatment, in that it

gave its patients a feeling that they had an investment in

their recovery from addiction. This claimed motivation has

Cite as 21 OTR 229 (2013) 239

the potential to be self-serving, but in this case the court

believes that it is genuine. It is consistent with other prac-

tices of Serenity, and Serenity’s CEO made clear in his tes-

timony that Serenity accepted de minimis or token payment

from truly needy patients for whom even a small amount of

money could represent a significant investment.

Two factors limit the amount of weight the court can

give to the existence of Serenity’s scholarship program and

willingness to take token payments from indigent patients.

First, in the case of indigent patients making token payments

it was not clear from the record whether such patients would

have the same treatment options as patients that were better

able to pay for treatment. The record contains an account of

at least one patient admitted to Serenity’s inpatient residen-

tial facility, and subsequently to the EXSL program, but the

testimony at trial suggests that this was a rare case.

Second, the record does not contain any informa-

tion regarding the criteria Serenity uses to qualify patients

for scholarships or to calibrate the amount of the discount

appropriate for any given patient. This court discussed in

Hazelden Foundation v. Yamhill County Assessor, 21 OTR

245 (2013), how the third and fourth “gift or giving” factors

are very closely interrelated. While the existence of a need-

based sliding scale of fees for treatment weighs, at the mar-

gins, in favor of a finding of the presence of “gift or giving,”

the contours of the sliding scale are extremely probative of

whether the doors of an institution are truly open to “rich

and poor alike.” If, as a practical matter, the poor and the

indigent are still generally unable to access the services of

an institution despite the existence of a need-based sliding

scale of fees, then the institution may well be admirable, but

it is not charitable.

The actual dollar amounts of charitable giving

during the 2010 and 2011 tax years are in the record, and

they are not insubstantial; they amount to roughly 2.3 per-

cent of Serenity’s overall revenues during each of those cal-

endar years. Nonetheless, in the absence of evidence tending

to show Serenity’s guidelines for distributing their scholar-

ship money, the court cannot say any more than that the

evidence in the record relating to the fourth gift or giving

240 Serenity Lane, Inc. v. Lane County Assessor

factor weighs marginally in favor of finding the presence of

gift or giving.

The court’s analysis of the four traditional “gift or

giving” factors leans somewhat in the direction of concluding

that “gift or giving” is present in Serenity’s operations. The

court finds particularly probative the substantial evidence

in the record before the court of Serenity’s intent to make its

services widely available to poor and indigent individuals,

as well as to those more readily able to pay for treatment.

This conclusion is tempered, however, by Serenity’s general

policy of not admitting indigent patients to its inpatient res-

idential treatment facility and the lack of evidence in the

record before the court detailing the contours of Serenity’s

scholarship program. However, on the whole the analysis

supports a finding of the presence of “gift or giving.”

2. Serenity’s other forms of alleged “gift or giving”

In addition to the forms of giving discussed above,

Serenity alleges three forms of giving that do not mesh

neatly with the four “gift or giving” factors discussed above.

These supposed forms of giving are Serenity’s alleged pro-

vision of treatment at below-market rates, Serenity’s intern-

ship program for aspiring CADCs, and Serenity’s educa-

tional outreach to employers.

The administrative rules of the Department of

Revenue implementing ORS 307.130 recognize that the “gift

or giving” requirement may be met by providing products or

services to those in need at below-market rates. OAR 150-

307.130-(A)(1)(d). At trial, Serenity provided extensive testi-

mony and a report by a professional economist purporting to

show that Serenity provides treatment to patients at a cost

well below the market rate.

The gist of Serenity’s expert report and testimony

was that Serenity most likely charges at or modestly below

the market rate for residential and intensive outpatient

treatment. At the same time, however, the expert’s report

tends to show that Serenity charges substantially below

the market rate for two specific types of treatment: detox

and recovery support counseling for patients who have com-

pleted a course of residential or outpatient treatment. The

Cite as 21 OTR 229 (2013) 241

overall result being that Serenity’s patients are charged sig-

nificantly less than the market rate for overall treatment.

Serenity’s expert sought to establish that Serenity

offers detox at below-market rates by comparing the cost of

detox for patients of Serenity to the rates other hospitals in

this state charge for “uncomplicated detox.” The results of

this comparison approach support a conclusion that Serenity

did provide uncomplicated detox at rates far below what the

market would bear for such treatment. In addition, while

Serenity’s expert discussed this subject in a different section

of his report, the record further indicates that Serenity pro-

vides detox treatment to individuals on the Oregon Health

Plan at a cost significantly reduced from Serenity’s normal

charges for detox—charges that, as noted above, already

appear to be below the market rate.

The county did not place in the record any evidence

tending to contradict the conclusions of Serenity’s expert.

Rather, the county relies entirely on objections to Serenity’s

expert report. The county objects to Serenity’s expert

analysis regarding detox for two reasons: first, the county

argues that the uncomplicated detox services provided by

Serenity and those provided by full-service hospitals are not

comparable because full-service hospitals have the capac-

ity to provide extensive medical treatment in addition to

detox. Second, the county argues that these services are

not comparable because Serenity primarily provides detox

treatment to patients as a preliminary step in residential

treatment—a service that full-service hospitals do not typi-

cally provide.

The county’s sole reliance on such objections reflects

the county’s failure to develop a record on this issue. The

county provided two witnesses to rebut Serenity’s expert

witness report and testimony. However, the first of these

witnesses confined his testimony to criticizing the approach

taken by Serenity’s expert. The county failed to qualify its

second witness as an expert in the market for addiction

treatment services and, as a consequence of this failure, the

court had no choice but to treat this witness’ testimony as

hearsay not subject to any exception to the bar on hearsay

evidence. In short, the county was unable to present any

242 Serenity Lane, Inc. v. Lane County Assessor

admissible evidence tending to rebut Serenity’s expert con-

clusion that Serenity offers detox at below-market rates.

The record before the court with regard to whether

Serenity offers detox to its patients at below-market rates

consists, in its entirety, of a expert report tending to show

that Serenity does, indeed, offer detox at below-market rates.

Serenity has carried the burden of proof on this issue.

For the same reason, the court must conclude that

a preponderance of the evidence supports the conclusion

of Serenity’s expert with regard to Serenity’s charges for

recovery support treatment. Here, again, the county failed

to provide competent, admissible evidence tending to show

a different market rate than the one provided by Serenity’s

expert and instead relied upon criticisms of the expert’s

approach. The preponderance of the evidence on this ques-

tion again supports Serenity’s position.

These conclusions, coupled with the evidence tend-

ing to show that Serenity’s charges for inpatient residential

and intensive outpatient treatment were at or near the mar-

ket price for such services, lead to the further conclusion

that Serenity did charge substantially less than the market

rate for its addiction treatment programs. This conclusion,

coupled in turn with the court’s analysis above under the

four traditional “gift or giving” factors, takes the court a

long way toward a finding that “gift or giving” is present

in the activities of Serenity. However, for the sake of thor-

oughness, the court will address the two remaining forms of

giving alleged by Serenity.

The county argues that Serenity’s internship pro-

gram should not be considered as indicating the presence

of “gift or giving” because the program requires an out-

lay of only a very small portion of Serenity’s revenues and

because Serenity obtains certain benefits from the program

by way of recruiting new CADCs. The court disagrees with

both of the county’s arguments. First, when it comes to dis-

cerning the presence of “gift or giving,” the size of a par-

ticular component of a purported package of gifts does not

dictate whether it is worthy of consideration. The question

is whether individuals other than those who own or operate

Cite as 21 OTR 229 (2013) 243

the institution receive a benefit without any expectation of

reciprocity from the recipient. SW Oregon Pub. Def. Services,

312 Or at 91. The size of the purported gift is important in

determining whether, on the whole, an institution’s opera-

tions evince “gift or giving,” but at the margins, any gift

weighs in favor of the purportedly charitable institution.

Taxpayer’s internship program on its own might not be suf-

ficient to show the presence of “gift or giving” in Serenity’s

overall operation, but as part of a larger package of giving it

weighs in Serenity’s favor.

Second, the court does not consider the presence of

an incidental recruiting benefit to Serenity from sponsor-

ing the internship program disqualifying as evidence of the

presence of “gift or giving.” Testimony at trial made clear

that Serenity’s interns did not ease (and in fact, most likely

worsened) the workload for Serenity’s CADCs. Moreover, the

interns had no obligation to work for Serenity after complet-

ing their training. They could, and did, accept employment

with other employers. Whatever recruiting benefit Serenity

derived seems insubstantial and, frankly, unavoidable given

that Serenity both trains and employs CADCs. The overall

character of the internship program adds to the impression

that Serenity’s operations contained the element of “gift or

giving” required of a charitable institution by the courts of

this state.

Finally, the county argues that the court should not

consider Serenity’s community outreach activities as signs

of “gift or giving” because they are de minimis, because

Serenity’s expert counted unpaid time by Serenity’s staff

as giving on Serenity’s behalf, and because these activities

amount to marketing by Serenity. The discussion above con-

cerning Serenity’s internship program dispenses with the

county’s argument that Serenity’s outreach activities are too

small to be considered. However, the court agrees, for rea-

sons stated by the Supreme Court in YMCA v. Dept of Rev.,

that Serenity’s expert erred in counting uncompensated

time spent by Serenity’s employees and board members to

promote the mission of Serenity as “giving” by Serenity. See

YMCA, 308 Or 644, 654, 784 P2d 1086 (1989). The court

gives Serenity’s community outreach activities little weight

244 Serenity Lane, Inc. v. Lane County Assessor

in determining whether it shows the presence of “gift or

giving.”

V. CONCLUSION

Based on the foregoing analysis, the court concludes

that the required element of “gift or giving” is present in the

activities of Serenity. As a consequence, the court concludes

that Serenity, taken on the whole, was a charitable insti-

tution during the 2010-11 tax year. The court further con-

cludes that SLI and SLHS, the separately incorporated legal

entities comprising Serenity, were both charitable institu-

tions for purposes of ORS 307.130 and for purposes of apply-

ing ORS 307.166 during that same tax year. Now, therefore,

IT IS THE DECISION OF THIS COURT that the

property leased to SLI by SLHS is exempt from ad valorem

property tax by reason of ORS 307.166.