Gray v. Dept. of Rev.

220 December 20, 2018 No. 11

IN THE OREGON TAX COURT

REGULAR DIVISION

Diane R. GRAY,

Plaintiff,

v.

DEPARTMENT OF REVENUE,

Defendant.

(TC 5324)

Plaintiff challenged the Linn County Assessor’s assessment of Plaintiff’s

property as to tax years 2014-15, 2015-16, and 2016-17 at the Magistrate Division,

which decided in the assessor’s favor. Plaintiff appealed to the Regular Division.

Defendant filed a motion to dismiss Plaintiff’s complaint as to tax years 2014-15

and 2015-16 for lack of subject matter jurisdiction and failure to state ultimate

facts sufficient to constitute a claim. The court granted Defendant’s motion, hav-

ing held that, although the court does have subject matter jurisdiction, Plaintiff

failed to request that the court change the property’s real market value on the

tax roll by at least 20 percent. Plaintiff alleged a difference in value exceeding

the 20 percent threshold only as to the improvements to the land, not the value of

the improvements and the land together.

Submitted on Defendant’s Motion to Dismiss.

Diane R. Gray, Plaintiff, filed a response pro se.

Nate Carter, Assistant Attorney General, Department of

Justice, Salem, filed the motion for Defendant.

Decision for Defendant rendered December 20, 2018.

ROBERT T. MANICKE, Judge.

I. INTRODUCTION

This matter is before the court on the remainder

of Defendant Department of Revenue’s (the department’s)

motion to dismiss Plaintiff Diane Gray’s (taxpayer’s) com-

plaint as to tax years 2014-15 and 2015-16 for lack of subject

matter jurisdiction and failure to state ultimate facts suffi-

cient to constitute a claim.1 The court previously denied the

department’s motion to strike the complaint for failure to

properly sign it. Gray v. Dept. of Rev., TC 5324 (May 30, 2018).

1

Taxpayer’s complaint also contains a claim regarding tax year 2016-17. The

department did not move to dismiss taxpayer’s complaint as to that year.

Cite as 23 OTR 220 (2018) 221

II. FACTS

The record that the court considers on a motion to

dismiss depends on the basis asserted for dismissal. See

Tax Court Rule (TCR) 21 A. On a motion to dismiss for fail-

ure to state ultimate facts sufficient to constitute a claim,

the court’s review is limited to the allegations, accepted as

true, made in the complaint. Work v. Dept. of Rev., 22 OTR

396, 397-98, aff’d, 363 Or 745, 429 P3d 375 (2018) (quoting

Douglas County v. Smith, 18 OTR 450, 453 (2006)). On a

motion to dismiss for lack of subject matter jurisdiction,

the court also may consider “matters outside the pleading,

including affidavits, declarations and other evidence.” Work,

22 OTR at 398. Taxpayer’s complaint alleges the following:

“[Taxpayer] is owner of certain property in Linn

County, Oregon, identified by the assessor’s office as Account

number 219358.” “[Taxpayer] appealed an act, omission,

order, or determination of a county board of property tax

appeals, a county assessor, other county official, or the

Department of Revenue for such property to the Magistrate

Division of the Oregon Tax Court.” “The Magistrate’s deci-

sion is in error for the reasons stated below.”

The amounts discussed in the remaining recita-

tion of facts are illustrated in tables in the Analysis section

below. For tax year 2014-15, taxpayer challenges the real

market value (RMV)2 of “all structures” on her property.

Those structures include a “residential two-story home”

and a “pole barn.” Taxpayer alleges the RMV for all struc-

tures is $78,860. The RMV for all structures as listed on

the tax roll is $147,630, a difference of $68,770 or approx-

imately 47 percent.3 Taxpayer claims relief for tax year

2014-15 under ORS 305.288(1)4 “based on the evidence the

2

“Real market value” means “the amount in cash that could reasonably be

expected to be paid by an informed buyer to an informed seller, each acting with-

out compulsion in an arm’s-length transaction occurring as of the assessment

date for the tax year.” ORS 308.205(1).

3

Taxpayer also mentions a “requested” RMV for the structures of $112,169.

It is unclear to the court whether this reference is to a value Taxpayer requested

at some earlier time. The court interprets Taxpayer’s complaint as requesting an

RMV of $78,860.

4

Unless otherwise noted or the context dictates otherwise, all references to

the Oregon Revised Statues (ORS) are to the 2013 and 2015 editions.

222 Gray v. Dept. of Rev.

tax roll RMV was overstated by 20%.” Taxpayer also alleges

that the land RMV for her property is $104,270, but her

complaint does not inform the court of the land RMV on the

tax roll, or whether she requests a value for the land that

is different from the roll value. Accordingly, without look-

ing beyond the complaint, the court cannot determine the

percentage difference between the RMV on the tax roll for

the entire property and the RMV taxpayer requests for the

entire property.5

For tax year 2015-16, taxpayer challenges the RMV

of both the land and improvements on her property. As to

improvements, taxpayer alleges the tax roll RMV of $163,340

should be reduced to $103,935, a difference of $59,405 or

approximately 36 percent. As to land, taxpayer alleges the

RMV should be $105,626. Because taxpayer alleges that

the RMV of the entire property on the tax roll is $226,720,

the court can deduce that taxpayer alleges that the land

RMV on the tax roll is $63,380.6 Accordingly, taxpayer seeks

an increase in the RMV of the land. Just as with tax year

2014-15, taxpayer claims relief for tax year 2015-16 under

ORS 305.288(1) “based on the evidence the tax roll RMV

was overstated by 20%.” Although the complaint requests

a change in both land and improvement values, the court

interprets taxpayer’s complaint as seeking relief based

on the requested change in value of the improvements

alone.7

III. ISSUE

Under ORS 305.288(1)(b), must the court apply the

“20 Percent Correction Test” (defined below) using the total

real market value of all associated real property (in this

case, land plus improvements), or using the separate value

of each component that the party seeks to appeal (in this

case, improvements alone)?

5

The department states in its motion that the land value as stated on the tax

roll is $59,400.

6

($226,720 – $163,340 = $63,380).

7

Taxpayer’s requested change to the RMV of the entire property would result

in a difference of approximately 7.6 percent (($226,720 – $209,561) / $226,720).

Cite as 23 OTR 220 (2018) 223

IV. ANALYSIS

Relief under ORS 305.288(1) is a remedy for over-

valuation of property used primarily as a dwelling. The

relief is “in addition” to other remedies (ORS 305.288(6)),

but taxpayer’s complaint requests relief only under ORS

305.288(1), and there is no basis to conclude that tax-

payer has pursued any other route to relief as to tax years

2014-15 and 2015-16. See Work, 22 OTR at 404-05 (summa-

rizing the four potential sources of relief). The statute pro-

vides, in relevant part:

“The tax court shall order a change or correction appli-

cable to a separate assessment of property to the assessment

and tax roll for the current tax year or for either of the two

tax years immediately preceding the current tax year, or

for any or all of those tax years, if all of the following condi-

tions exist:

“(a) For the tax year to which the change or correc-

tion is applicable, the property was or is used primarily as a

dwelling (or is vacant) and was and is a single-family dwell-

ing, a multifamily dwelling of not more than four units, a

condominium unit, a manufactured structure or a floating

home.

“(b) The change or correction requested is a change in

value for the property for the tax year and it is asserted in

the request and determined by the tax court that the dif-

ference between the real market value of the property for

the tax year and the real market value on the assessment

and tax roll for the tax year is equal to or greater than

20 percent.”

ORS 305.288(1) (emphases added). The court must correct

“a separate assessment of property” for the current year,

either of the prior two years, or any or all of those years,

if two conditions are met. First, “the property” must meet

the dwelling requirements. ORS 305.288(1)(a). Second, the

change in value must be equal to or greater than 20 percent

of “the property’s” RMV as shown on the assessment roll (the

20 Percent Correction Test). ORS 305.288(1)(b).

This case requires the court to interpret the phrase

“the property” as used in the 20 Percent Correction Test.

Taxpayer argues that “the property” can mean any one of

224 Gray v. Dept. of Rev.

three things whose value is listed on the assessment roll,

(1) land only: the “land, excluding all buildings, structures,

improvement and timber thereon,” (2) improvements only:

the aggregate of all “buildings, structures and improve-

ments thereon,” or (3) land + improvements: the “parcel of

real property assessed.” See ORS 308.215(1)(a)(E), (F), (I).

Taxpayer cites a 2001 decision from the Magistrate Division

that reasoned that, because the legislature has required the

assessor to determine these three values and record them

on the roll, and because case law allows a party to appeal

the value of land or improvements separately, the 20 Percent

Correction Test applies to land or improvements separately.

See Ferschweiler v. Clackamas County Assessor, 16 OTR-MD

429, 434 (2001).

The department argues that taxpayer is focusing

on the wrong statute. Instead of considering the statute

that tells the assessor what values to list on the tax roll,

the court should base its decision on the statute that allows

taxpayer’s appeal only if the 20 Percent Correction Test is

satisfied: ORS 305.288(1). That statute requires “the prop-

erty” to be primarily used as a “dwelling.” According to the

department, the only way to compare the value of “the prop-

erty” as a dwelling with the value of “the property” on the

assessment roll is to limit the meaning of “the property” to

the land and improvements together.8

The parties’ calculations for each tax year are

expressed in the tables below as a ratio or percentage, with

the numerator representing the requested change in RMV

of the property, and the denominator representing the RMV

of the property as shown on the assessment roll. To resolve

the department’s motion, the court must decide whether

taxpayer has correctly limited her calculation of the value

of “the property” to the value of the improvements, which

for each of tax years 2014-15 and 2015-16 would result in

a percentage change exceeding the threshold prescribed by

the 20 Percent Correction Test.

8

The department defines a dwelling to mean either the land plus all improve-

ments, or just the residential structure. Because individual structures are not

listed on the assessment roll, the department argues that the “dwelling”—and

therefore “the property”—must be the land plus all improvements. The court dis-

cusses each party’s arguments at the end of this order.

Cite as 23 OTR 220 (2018) 225

Taxpayer’s Department’s

Position Position

Tax Year 2014-15

(Improvements (Land +

Only) Improvements)

RMV Change Requested $68,7709 $23,90010

RMV on Tax Roll $147,630 $207,03011

Percentage Change

(Must exceed 20% under 46.58% 11.54%

20 Percent Correction

Test)

Taxpayer’s Department’s

Position Position

Tax Year 2015-16

(Improvements (Land +

Only) Improvements)

RMV Change Requested $59,40512 $17,15913

RMV on Tax Roll $163,340 $226,720

Percentage Change

(Must exceed 20% under 36.37% 7.57%

20 Percent Correction

Test)

The department asks the court to dismiss taxpayer’s claims

as to tax years 2014-15 and 2015-16, claiming that the

requirements of ORS 305.288(1)(b) were not met for those

9

This number is calculated by subtracting the requested value of the

improvements from the value of the improvements shown on the assessment roll

for tax year 2014-15 ($147,630 – $78,860 = $68,770).

10

This number, which is based on the department’s allegations, is illustra-

tive only, as taxpayer’s complaint does not supply an RMV on the roll for the land

for 2014-15. The number is calculated by subtracting the requested value of the

land and improvements from the value of the land and improvements shown on

the assessment roll for tax year 2014-15 ($207,030 – $183,130 = $23,900).

11

This number, which is based on the department’s allegations, is illustra-

tive only, as taxpayer’s complaint does not supply an RMV on the roll for the land

for 2014-15.

12

This number is calculated by subtracting the requested value of the

improvements on taxpayer’s property from the value of the improvements on the

assessment roll for tax year 2015-16 ($163,340 – $103,935 = $59,405).

13

This number is calculated by subtracting the requested value of the land

and improvements from the value of the land and improvements on the assess-

ment roll for tax year 2015-16 ($226,720 – $209,561 = $17,159).

226 Gray v. Dept. of Rev.

years. The department gives two independent legal theo-

ries, citing this court’s recent decision in Work, which has

recently been affirmed on appeal to the Oregon Supreme

Court.14 The department asserts, first, that the court lacks

subject matter jurisdiction (TCR 21 A(1)), and second, that

taxpayer failed to state ultimate facts sufficient to consti-

tute a claim (TCR 21 A(8)). The department explains:

“The Tax Court recently has stated, in Work v. Dept. of Rev.,

[22 OTR 396 (2017),] that motions to dismiss for failure to

satisfy the requirements of ORS 305.275 and 305.288 are

properly characterized as motions to dismiss for failure to

state a claim, rather than motions to dismiss for lack of

subject matter jurisdiction, because the Tax Court gener-

ally has jurisdiction over any claims arising under the tax

laws of this state under ORS 305.410. See Work, [22 OTR at

402-03]. Work presently is under appeal. However, for pur-

poses of this motion, it is not necessary to argue the ques-

tion presented by Work, as the Department moves under

both TCR 21 A(1) and (8) with respect to the 2014-15 and

2015-16 tax years.

A. Subject Matter Jurisdiction

The department first argues that the court lacks

subject matter jurisdiction because the record to date fails

to show that the 20 Percent Correction Test is satisfied. The

court applies its decision on subject matter jurisdiction in

Work, which the Supreme Court did not disturb on appeal.

22 OTR at 402-03.

The department does not dispute that taxpayer’s

property tax burden would be lower if the court were to

grant her request to reduce the property’s RMV. See Sanok

v. Grimes, 294 Or 684, 697, 662 P2d 693 (1983) (stating that

“questions which must be resolved in order to decide tax-

ability or the amount of tax do arise under the tax laws”

and are within the Tax Court’s jurisdiction). Therefore, the

court has subject matter jurisdiction over taxpayer’s claims,

even if the court ultimately disagrees. The court denies the

department’s motion to dismiss to the extent it is based on

lack of subject matter jurisdiction (TCR 21 A(1)).

14

Work v. Dept. of Rev., 363 Or 745, 429 P3d 375 (2018).

Cite as 23 OTR 220 (2018) 227

B. Failure To State Ultimate Facts Sufficient To Constitute

a Claim

The court now considers the department’s second

argument, that taxpayer has failed to state ultimate facts

sufficient to constitute a claim (TCR 21 A(8)). The tables

above show that, if taxpayer’s interpretation of “the prop-

erty” in ORS 305.288(1)(b) is correct, she will have “asserted”

a change in RMV satisfying the 20 Percent Correction Test

and she will be entitled to pursue relief as to both 2014-15

and 2015-16. But if the department’s interpretation is cor-

rect, taxpayer will have failed to assert a change satisfy-

ing the 20 Percent Correction Test, and the court will be

required to dismiss her appeals as to those two years with-

out ordering a change to the roll for either year. Thus, the

court will resolve the department’s motion as to tax years

2014-15 and 2015-16 based on the department’s argument

that taxpayer has failed to state ultimate facts sufficient to

constitute a claim (TCR 21 A(8)).

C. Substantive Analysis: Defining “the Property” as Used in

ORS 305.288(1)(b)

When discerning the meaning of the statutory term

“the property” for purposes of the 20 Percent Correction

Test, the court considers the text, context, and legislative

history of ORS 305.288(1). See State v. Gaines, 346 Or 160,

206 P3d 1042 (2009). As explained below, the court concludes

that “the property” in ORS 305.288(1)(b) and its antecedent

“a separate assessment of property” refer to the land plus

the improvements because real property (except in circum-

stances not applicable here) is assessed as a whole parcel that

includes the land and any improvements. Taxpayer relies in

part on a 2001 Magistrate Division decision that supports

her position that “the property” refers to either land or

improvements separately because the value of each of those

items is listed separately on the assessment roll. In addi-

tion, the court has discovered language in nonprecedential

prior opinions of the Regular Division that also would sup-

port taxpayer’s position. Because the court now overturns

those cases to the extent that they conflict with today’s order

governing application of the 20 Percent Correction Test, the

court sets forth its reasoning at some length.

228 Gray v. Dept. of Rev.

1. Text and Context

As its first step, the court determines that the

phrase “the property” in ORS 305.288(1)(b) refers to its

antecedent “a separate assessment of property” earlier in

the same subsection. ORS 305.288(1), logically and gram-

matically, is a single sentence that starts with an overall

direction to this court and ends with two enumerated tests in

paragraphs (a) (the “dwelling” test) and (b) (the “20 Percent

Correction Test”). In each of paragraphs (a) and (b), the

antecedent can only be the same “property” referred to in

subsection (1), within the phrase “separate assessment of

property.” Accordingly, in order to follow the direction in

ORS 305.288(1)(b) to order a change or correction, the court

must determine the difference between the actual RMV and

the RMV on the roll for the property that is the subject of a

separate assessment of property. The court first will exam-

ine the legislature’s use of the complete phrase “separate

assessment of property,” and then analyze the terms “prop-

erty” and “assessment.”

a. The legislature uses the phrase “separate assess-

ment of property” in contrast to actions taken on

a class of property.

To find the meaning of “separate assessment of

property,” the court first looks at other places in Oregon tax

law where the legislature has used the same phrase. See

Comcast Corp. v. Dept. of Rev., 356 Or 282, 296-97, 337 P3d

768 (2014) (explaining need to analyze “data transmission

services” as a technical phrase). This approach reveals that

the legislature uses “separate assessment of property” to

distinguish actions of an assessor or the department with

respect to a discrete item of property from actions with

respect to an entire class or other grouping of property.

The legislature used the phrase in ORS 306.115,

which invests in the department general supervision and

control over the system of property taxation throughout the

state. Subsection (2) of that statute gives the department

broad authority to order a change to the tax roll for “all real

or personal property of the same class or in the same area,”

so long as the change is for the current tax year only and

Cite as 23 OTR 220 (2018) 229

the department issues the order no later than October 15.

ORS 306.115(2) (emphasis added); see generally OAR 150-

308-0310(8) (listing department’s description of property

“classes”). By comparison, the next subsection authorizes

the department (in its discretion) to order a change to the

tax roll for a “separate assessment of property” not only

for the current year but also for either of the two tax years

immediately preceding the current year, in order to “con-

form the roll to applicable law.” ORS 306.115(3).

Another statute distinguishing a separate assess-

ment from a class of property is the so-called “adjudicated

value” statute, which applies after a property tax valuation

dispute is resolved by this court, the department, or the

local board of property tax appeals. ORS 309.115 generally

freezes, for up to five years, the adjudicated real market

value of a “separate assessment of property.” As an excep-

tion, however, the statute allows an adjustment for “[a]nnual

trending or indexing applied to all property of the same

property class in the county, or within clearly defined areas

of the county under this chapter.” ORS 309.115(2)(a) (empha-

sis added).

Both ORS 306.115 and ORS 309.115 tend to

undermine any notion that “separate assessment of prop-

erty” refers to the separate listing of values for land and

improvements.

b. Neither the plain meaning of “property” nor the

statutory definition of “real property” answers

the question.

The court next considers the plain meaning, and

any statutory definition, of portions of the phrase, start-

ing with the term “property.” See PGE v. Bureau of Labor

and Industries, 317 Or 606, 610-11, 859 P2d 1143 (1993). No

statute defines “property” for purposes of ORS 305.288(1).15

15

ORS 308.142(1) generally defines “property” as “[a]ll property included

within a single property tax account,” a definition consistent with this court’s

interpretation of “separate assessment of property” in this case. However, the

definition in ORS 308.142(1) is for purposes of determining whether the assessed

value of property exceeds the property’s maximum assessed value permitted

under Measure 50 (Or Const, Art XI, § 11). The court assigns no weight to the

definition in ORS 308.142(1).

230 Gray v. Dept. of Rev.

The plain meaning, as found in the dictionary, is unhelpful

because it encompasses any “real estate” and thus all three

contenders (land, improvements, or land + improvements).16

See Webster’s Third New Int’l Dictionary 1818 (unabridged

ed 2002). The statutes do define “real property,” but with

a similarly unhelpful result. ORS 307.010(1)(b), which the

legislature has declared applicable to all “property tax laws

in this state,” provides:

‘ “Real property’ includes:

“(A) The land itself, above or under water;

“(B) All buildings, structures, improvements, machin-

ery, equipment or fixtures erected upon, above or affixed to

the land;

“(C) All mines, minerals, quarries and trees in, under

or upon the land;

“(D) All water rights and water powers and all other

rights and privileges in any way appertaining to the land;

or

“(E) Any estate, right, title or interest whatever in the

land or real property, less than the fee simple.”

ORS 307.010(1)(b). The connector “or” allows the possibility

that the term “real property” may refer to fewer than all

of the rights listed in ORS 307.010(1)(b), or it may refer to

all of them together, including land, improvements, or both.

Application of this definition to ORS 305.288(1) requires

additional context.

c. “Separate assessment” involves more than sepa-

rate valuation.

The court finds it significant that ORS 305.288(1)

refers to a separate “assessment” of property, as opposed

to separate “valuation” of property. Whatever else may

be said about the undefined term “assessment” in Oregon

16

Neither party has asserted that any personal property is at issue here, and

personal property in any event is subject to a number of distinct rules govern-

ing reporting of value, assessment, and collection of tax. See, e.g., ORS 308.290

(requiring, among other things, annual tax returns reporting the RMV of taxable

personal property such as business personal property).

Cite as 23 OTR 220 (2018) 231

property tax law,17 the term includes, but also may mean

more than, “valuation.”18 It is true that valuation of prop-

erty, as of each January 1, is a key step in the annual task of

assessment; hence the general requirement in ORS 308.210

that the assessor “assess the value of all taxable property

within the county.” ORS 308.210(1) (emphasis added). How-

ever, the same statute makes it clear that the assessor’s

overall task is much larger than valuation: Preparing the

“full and complete record of the assessment” that consti-

tutes the “assessment roll” requires the assessor to engage

in substantial legwork and decision-making behind the

scenes and throughout the year.19 Paragraph (1)(a) of ORS

308.215 requires the assessor to create and maintain a cat-

egorization system that includes “account numbers,” “code

areas,” and “property classes.” See ORS 308.215(1)(a)(B),

(C). The assessor also must gather and maintain specific

information such as ownership, acreage, and description by

metes and bounds or otherwise. See ORS 308.215(1)(a)(A),

(B), (D). Other statutes require the assessor to update the

roll to track events such as divisions, combinations, and

transfers, as well as changes to the boundaries of taxing

districts. See ORS 308.210(3) - (5); ORS 308.225. Finally, the

assessor must make and record determinations about the

property’s eligibility for any of Oregon’s programs of special

assessment for farm, timber, and other particular uses,20 or

17

See, e.g., Northwest Natural Gas Co. v. Dept. of Rev., 347 Or 536, 553, 226

P3d 28 (2010) (declining to “engage in the complicated and nuanced analysis of

whether and when ‘assessment’ is ‘taxation’ ”).

18

The dictionary definition of “assessment” runs the gamut, covering “a

valuation of property usu[ally] for the purpose of taxation,” “a valuation and an

adjudging of the sum to be levied on property,” “a specific charge or tax determined

upon by assessing,” and “the entire plan or scheme fixed upon for charging or

taxing.” Webster’s Third New Int’l Dictionary 131 (unabridged ed 2002) (emphases

added).

19

See Multnomah County Assessor v. Portland Devel. Comm., 20 OTR 395,

396-97 (2011) (describing the “annual and inexorable process that makes possible

the proper administration of the property tax system and the collection of reve-

nue on which so many local governments depend”).

20

See, e.g., ORS 308A.083 (requiring assessor to record on the roll “potential

additional tax liability” that will apply if property is disqualified from exclu-

sive or nonexclusive farm use zone special assessment); ORS 308A.119 (requir-

ing assessor to abate deferred additional taxes, subject to certain conditions, for

disqualified nonexclusive farm use zone farmland); ORS 308A.706(3) (requiring

the assessor to continue the “potential additional tax liability” notation on the

rolls for property that has been disqualified from farmland, forestland, and other

232 Gray v. Dept. of Rev.

programs of full or partial exemption from tax.21 Thus, by

referring to property subject to “separate assessment” when

it could have referred to separate valuation, the legislature

signaled at least the possibility that it did not intend that

the 20 Percent Correction Test apply to each separately val-

ued component of real property.

(1) The “property” that is subject to “separate

assessment” is a “parcel.”

The foregoing analysis still does not answer whether

the 20 Percent Correction Test applies to the value of land

and improvements separately, or only to the aggregate

value of land and improvements. The answer lies in the text

and context of the first sentence of ORS 305.288(1), which

directs this court to order a change or correction “to the

assessment and tax roll” if the requisite 20 percent value

difference is present. Preparing the annual assessment roll,

certifying it, and delivering it to the county tax collector

before the start of the annual billing cycle in late October

is the ultimate job of each county assessor.22 The content

of the roll, as prescribed in ORS 308.215 and discussed in

part above, must include numerous data points, including

the identity of the owner, the legal description, the acreage,

the RMV of the land alone, the RMV of the improvements

alone, and the “total” RMV, assessed value, and maximum

assessed value. See ORS 308.215(1)(a)(A) - (I).23 For present

special assessment programs but additional taxes have been deferred); ORS

308A.312 (requiring the assessor to add potential additional tax notation on the

tax roll for “open space lands” special assessment program); ORS 308A.362(6)

(similar for “riparian habitat exemption” program); ORS 308A.427(2) (similar for

“wildlife habitat special assessment”); ORS 308A.459(4) (similar for “conserva-

tion easement special assessment”).

21

See, e.g., ORS 307.115(3) (assessor must add to the roll property disquali-

fied from nonprofit parks exemption); ORS 307.157(3) (notation of potential addi-

tional taxes for certain property transferred out of cemetery use); 2017 Or Laws

2017, ch 537, § 3(4) (similar for property exempt under seismic retrofitting pro-

gram); see also ORS 307.035 (requiring assessor to “publish” summary valuations

of all property that is subject to certain exemptions).

22

See ORS 311.115 (requiring delivery of the roll). The offices of assessor

and collector are distinct but may be occupied by the same individual. See ORS

311.020.

23

The terms “assessed value” and “maximum assessed value” are rele-

vant only for purposes of Measure 50 and are not discussed further in this

order.

Cite as 23 OTR 220 (2018) 233

purposes, the critical feature of ORS 308.215 is that the

assessor must record each such data point “[f]or each parcel

of real property.” ORS 308.215(1)(a) (emphasis added). Thus,

for real property, the entire roll is organized by parcel. See

Oakmont, LLC v. Dept. of Rev., 359 Or 779, 781, 377 P3d 523

(2016) (“The county assessor must determine the real mar-

ket value of each parcel of property ‘as of’ January 1 of the

assessment year.”).

(2) A “parcel” comprises a “tract of land” and

includes any improvements.

What, then, is a “parcel of real property”? No stat-

ute defines the phrase for this purpose. However, the plain

meaning of “parcel” is a “tract or plot of land.” Webster’s at

1640 (emphasis added). This indicates that the legislature

viewed each tract of land as the primary unit of real prop-

erty to record on the assessment roll, and that it intended the

various subparagraphs in ORS 308.215(1)(a) as attributes to

be noted as part of the record for each tract. Among those

attributes are the RMV of any improvements on the tract of

land (subparagraph (F)), the RMV of the tract of land itself

(subparagraph (E)) and the total RMV (subparagraph (I)).

This statutory context strongly suggests that, by requiring

this court to order a change to the “roll” that applies to a

“separate assessment of property,” the legislature was refer-

ring to a change applicable to an entire tract of land, includ-

ing all improvements on that tract of land. See Shields v.

Dept. of Rev., 266 Or 461, 470, 513 P2d 784 (1973) (“Gener-

ally, real property is assessed as a whole in the name of the

owner. An exception is where the buildings, improvements,

etc., are owned separately and apart from the land, in which

case ORS 308.115(2) requires the assessor to assess and tax

them separately.”).

d. Additional statutory context confirms that land

and improvements are considered together.

In addition to the foregoing, the court notes the fol-

lowing indications that the phrase “separate assessment

of property” refers to the entire parcel, including land and

improvements.

234 Gray v. Dept. of Rev.

(1) The legislature created exceptions to the

general rule that land and improvements

are assessed together.

The court finds most compelling the fact that the

legislature expressly provided for the assessment of two

kinds of property separately from the land. ORS 308.115(3)

provides for separate assessment of land and improvements

in cases where the ownership differs:

“Whenever any building, structure, improvement,

machinery or equipment is owned separately and apart from

the land or real property on which it stands or to which it is

affixed, such building, structure, improvement, machinery

or equipment shall be assessed and taxed in the name of

the owner.”

ORS 308.115(3) (emphasis added). This means that, unless

the land and improvements are under different ownership

from the land, they are assessed together. Otherwise, ORS

308.115(3) would be superfluous. ORS 174.010; Northwest

Natural Gas Co. v. Dept. of Rev., 347 Or 536, 556, 226 P3d 28

(2010). Similar assessment treatment exists for mineral or

gas and oil rights under different ownership from the land.

ORS 308.115(1) and (2).

(2) ORS 308.235 treats improvements as attri-

butes of the real property.

In the primary statute directing assessors how to

value real property, the legislature omitted any distinc-

tion between land and improvements. See ORS 308.235.

When assessing real property, an assessor must “take[ ] into

consideration”:

“(a) The applicable land use plans, including current

zoning and other governmental land use restrictions;

“(b) The improvements on the land and in the sur-

rounding country and also the use, earning power and use-

fulness of the improvements, and any rights or privileges

attached thereto or connected therewith; and

“(c) The quality of the soil, and the natural resources

in, on or connected with the land, its conveniences to trans-

portation lines, public roads and other local advantage of a

similar or different kind.”

Cite as 23 OTR 220 (2018) 235

ORS 308.235(1) (emphases added). Thus, improvements

and their specific traits, are valued as attributes of the real

property as a whole.

2.  Statutory and legislative history supports treating

land and improvements together.

The court now considers the statutory development

and legislative history of ORS 305.288(1). Neither party

provided any legislative history to the court, nor is there

any legislative history directly on point. However, the court

finds it relevant that the legislature has, from a very early

date, consistently treated land and the improvements on the

land together for assessment purposes, subject to specific

statutory exceptions.

a. Pre-1951 law assessed all real property together

and created exceptions.

Similar to today’s statutes, Oregon territorial law

provided that “lands” were required to be valued for tax-

ation purposes, “taking into consideration the improve-

ments on the land.” General Laws of Oregon, Miscellaneous

Laws, ch LVII, § 16, pp 751-52 (Deady & Lane 1843-1872).

Both “real property” and “land” were defined to “mean and

include not only the land itself, whether laid out into town

lots or otherwise, with all things contained therein, but

also all buildings, structures, improvements, trees and other

fixtures of whatever kind thereon, and all right and privi-

leges belonging or in any wise appertaining thereto.” Id. § 2,

p 748 (emphasis added). As of 1854, on the assessment roll

the assessor was required to separately list only:

“1. The names of all the taxable persons in his county;

“2. A description of each tract or parcel of land to be taxed

specifying under separate heads, the township, range and

section, in which the land lies; or if divided into lots and

blocks, then the number of the lot and block;

“3. The number of acres and parts of an acre, as near as

the same can be ascertained, unless the land be divided

into blocks and lots;

“4. The full cash value of each parcel of land taxed;

236 Gray v. Dept. of Rev.

“5. The full cash value of all the taxable personal prop-

erty owned by, or to be taxed to such person, as provided

by law;

“6. The total valuation of all property taxed, real and

personal.”

Id. § 29, p 754.

The rule that land and all associated real property

were valued and recorded on the roll together remained

firmly in place until after the First World War. The leg-

islature created the first exception in 1919, for sepa-

rately owned mineral interests. Or Laws 1919, ch 356, § 1

(“[W]henever any mineral gas, coal, oil or other similar inter-

ests in real estate are owned separately and apart from and

independently of the rights and interests owned in the sur-

face of such real estate, such * * * interests may be assessed

and taxed separately from such surface rights * * *.”) (later

codified as Oregon Code, title LXIX, ch 2, § 69-211 (1930))

(emphases added). The general rule continued to apply to tim-

ber interests, however. See Nehalem Timber Co. v. Columbia

Co., 97 Or 100, 106-07, 189 P 212 (1920), reh’g den, 97 Or 100,

191 P 318 (1920). There, the court held that timber rights

must be assessed together with the land. Id. (“For tax pur-

poses [the definition of ‘lands,’ ‘real estate,’ and ‘real prop-

erty’] inseparably yokes the timber to the land on which it

is growing.” (brackets added)). Relying in part on Nehalem

Timber, as well as the specific statutory exception for min-

eral interests, in 1934 the Attorney General concluded that a

county was prohibited from assessing timber separately from

the land and thus could not foreclose on timber separately

from the land. 16 Op Atty Gen 643 (1934), available at 1934

WL 31303. The following year, the 1935 legislature amended

Oregon Code § 69-211 to allow timber interests owned sepa-

rately from the land to be assessed separately from the land.

Or Laws 1935, ch 274, § 5. This was later codified into Oregon

Compiled Laws Annotated (OCLA) § 110-314.24 It is notable

24

Section 110-314 provides:

“Whenever any standing timber, or any mineral, coal, oil, gas or other

severable interests in or part of real property is owned separately and apart

from the rights and interests owned in the surface ground of such real prop-

erty, such standing timber, minerals, coal, oil, gas or other such interests

or parts may be assessed and taxed separately from such surface rights and

Cite as 23 OTR 220 (2018) 237

that, at this time, Oregon law still did not require an assessor

to separately state the value of land and improvements on the

assessment roll. OCLA § 110-336.

The last major exception, for separately owned

improvements, came about during the Second World War.

In 1942, the Oregon Supreme Court decided First National

Bank v. Marion County, a case concerning whether fixtures

could be assessed separately from the land and the building

for tax years 1929 to 1939. 169 Or 595, 603, 130 P2d 9 (1942).

The fixtures were assessed to the plaintiff bank (or its ven-

dor), and the land and the building were assessed to an unre-

lated Oregon corporation. Id. at 597, 601-02. After reviewing

a variety of cases, including Nehalem Timber Company, the

court concluded that “various interests in real property are

not, for the purpose of taxation, made severable and assess-

able in the names of the owners of the respective interests,

except in certain specified instances, such as those men-

tioned by section 69-211, Oregon Code 1935 Supplement.”

Id. at 613. Because the county assessor had no authority to

impose the assessments on the fixtures separately, the court

held that the assessments were void. Id. at 616.

In 1943, in the wake of First National Bank of

Portland, and of importance to this case, the legislature

amended OCLA section 110-314 to allow separate assessment

of improvements if they are owned separately from the land:

“Whenever any standing timber, or any mineral, coal,

oil, gas or other severable interest in or part of real prop-

erty is owned separately and apart from the rights and

interests owned in the surface ground of such real prop-

erty, such standing timber, minerals, coal, oil, gas or other

such interests or parts shall be assessed and taxed as real

interests in said real property and may be sold for taxes in the same manner

and with the same effect as other interests in real property are sold for taxes.

It is intended that this section shall apply to any severable interest in or

part of real property owned separately and apart from the surface ground of

such real property, whether the deed or other instrument whereby any such

interest or part was conveyed or reserved be unconditional or conditioned on

the removal of such standing timber, mineral, coal, oil, gas or other part of

such real property in a specified manner or within a limited time; provided,

however, that this section shall not apply to any such interest in or part of

real property sold under an executory contract.”

(Emphases added.)

238 Gray v. Dept. of Rev.

or personal property in accordance with existing law in the

name of the owner thereof, separately from such surface

rights and interests in said real property and may be sold

for taxes in the same manner and with the same effect as

other interests in property are sold for taxes. Similarly,

whenever any building, structure, improvement, machinery,

equipment or fixture is owned separately and apart from

the land or real property whereon it stands or to which it is

affixed, such building, structure, improvement, machinery,

equipment or fixture shall be assessed and taxed in the name

of the owner thereof.”

Or Laws 1943, ch 304, § 2 (emphasis added). It was then

clear that improvements that were owned separately and

apart from the land could be assessed separately.

b. 1951 amendments required itemized values,

retained assessment of land and improvements

together, created first percentage-based test

The requirement to itemize the value of land and

improvements owned by the same person entered the law in

1951, as one of three relevant provisions enacted that year.

The legislature amended OCLA section 110-336 to require

the assessor to separately state the value of the land and the

improvements on the roll:

“The assessor shall set down in the assessment roll, in

separate columns, and according to the best information he

can obtain:

“(1) The names of all taxable persons in his county.

“(2) A description of each tract or parcel of land to be

taxed, specifying under separate heads the township and

range in which the land lies, according to the government

survey, except where the same is described by metes and

bounds; or, if divided into lots and blocks, then the number

or numbers thereof; provided, however, that the assessor

shall describe lands in tracts not larger than a quarter-

section when so requested by the owner or mortgagee thereof;

and provided further, that the owner thereof shall, upon the

request of the assessor, furnish a description of said prop-

erty from which the area thereof can be computed accurately

and the location and boundary lines made certain.

Cite as 23 OTR 220 (2018) 239

“(3) The number of acres and parts of an acre of each

parcel assessed, as nearly as can be ascertained, unless the

same be divided into blocks and lots.

“(4) The true cash value25 of each parcel of land

assessed, excluding all buildings, structures and improve-

ments thereon.

“(5) The true cash value of all timber assessed.

“(6) The true cash value of all buildings, structures

and improvements assessed.

“(7) The taxable personal property of each person,

as provided by law, and the true cash value thereof, and

exemptions allowed, if any.

“(8) The total valuation of all real property and, like-

wise, of all personal property assessed.”

Or Laws 1951, ch 541, § 1 (emphases added). For purposes

of this case, this provision as amended contains the same

essential requirements now codified in ORS 308.215(1)(a)(A) -

(I): to record data by parcel, to itemize the value of the

land and improvements, and to record the total value.26

25

The phrase “true cash value” expressed a fair market value standard that

for purposes of this case is similar to today’s “real market value.” Compare Or

Laws 1941, ch 440, § 4 (defining “true cash value” as “the amount such property

would sell for at a voluntary sale made in the ordinary course of business, taking

into consideration its earning power and usefulness under normal conditions”)

with ORS 308.205(1) (defining “real market value” as “the amount in cash that

could reasonably be expected to be paid by an informed buyer to an informed

seller, each acting without compulsion in an arm’s-length transaction”).

26

The court notes that, effective from 1963 to 1999, the legislature changed

the description of the values required to be shown for land, improvements, and in

total, from the “true cash value” of each item to the “assessed value.” See Or Laws

1963, ch 270. Barring further inquiry, this phrase might have led a reader to con-

clude that land and improvements were “separately assessed” for purposes of the

20 Percent Correction Test. In fact, however, the 1963 Legislative Assembly made

this change only to conform to a short-lived regime, adopted in 1961 and repealed

in 1967, under which all property was assessed at 25 percent of its true cash

value. See former ORS 308.232(2) (1959) (“Except as provided in subsection (3) of

this section, beginning with the assessment date January 1, 1961, all property

shall be assessed at 25 percent of true cash value.”). The calculation of “assessed

value” was a simple arithmetic exercise, unlike today’s more complex process

under Measure 50. The legislative history of the 1963 change makes clear that

the new reference to “assessed” value was mere housekeeping, and the court has

found no evidence of an intention to depart from the principle that a “separate

assessment” referred to both land and improvements together. See Minutes,

House Committee on Taxation, Apr 26, 1963, 2 (testimony of Don Burnett, State

Tax Commission) (“In the process of changing the expression from tcv to assessed

valuation in the field of ad valorem taxation, it was overlooked that ORS 308.215

240 Gray v. Dept. of Rev.

Also in 1951, the legislature amended the omit-

ted property provisions to specifically add the discovery of

improvements previously omitted from the roll as an event

requiring an assessor to correct the roll for up to the prior

five years. Prior law had required correction upon the dis-

covery of “any real * * * property.” Or Laws 1951, ch 577,

§ 1.27 As the State Tax Commission explained in a letter

urging passage:

“Under the existing law, real property is defined to include

the improvements thereon, and likewise all trees upon the

land, and thus an assessment of real property is conclu-

sively presumed to include the improvements and timber

located thereon, even though such improvements and tim-

ber have not in fact been taken into consideration in mak-

ing the assessment. By amending the omitted property

statute so that it refers specifically to improvements and

timber, a way would be provided to add the same to the

rolls as omitted property.”

Letter from State Tax Commission to Dean Walker,

Chairman, Senate Committee on Assessment and Taxation

at 2 (Jan 16, 1951) (on file with Oregon State Archives). By

referring to improvements “on land previously assessed

still speaks in terms of tcv.”). Although the legislature repealed the 25 percent

assessment regime in 1967, the legislature left the reference to “assessed value” in

ORS 308.215 until the 1999 “cleanup” bill in the aftermath of Measure 50, when

it substituted the current references to “real market value” essentially reverting

to the pre-1963 language. See Or Laws 1967, ch 293, § 6 (amending ORS 308.232

to state: “All real or personal property within each county shall be assessed at

100 percent of true cash value.”); Tape Recording, House Committee on Revenue,

Mar 17, 1999, Tape 92, Side B; Tape 93, Side A, (testimony of James Manary,

Department of Revenue, discussing need to avoid confusion with “assessed value”

as defined under Measure 50).

27

As amended, the provision stated:

“Whenever, after the return of the assessment rolls to the county assessor by

the board of equalization, the officer having the possession of the roll shall

discover or receive credible information, or if he has reason to believe that

any real or personal property, or any buildings, structures, improvements or

timber on land previously assessed without the same, has from any cause, been

omitted, in whole or in part, in the assessment of any year or number of years

not exceeding five years prior to the last roll so equalized and returned, or

from the assessment roll or the tax roll, he shall proceed to correct the assess-

ment or tax roll in his hands, and add such property thereto, with the proper

valuation, and charge such property and the owner thereof with the proper

amount of taxes thereon at the rate which the said property would have been

taxed had it been properly upon the tax roll for the year or years as to which

it was omitted[.]”

Or Laws 1951, ch 577, § 1 (emphasis added to show new text).

Cite as 23 OTR 220 (2018) 241

without the same,” the legislature reinforced the existing

general rule that an assessment ordinarily must include

improvements as part of an assessment of the land. The new

law simply provided a mechanism to correct an assessor’s

failure to do so.

Finally, the 1951 Legislative Assembly also enacted

a new provision requiring the assessor to notify the taxpayer

when the value of real property has increased by more than

$100 or five percent, whichever is greater, over the assessed

value of the preceding year, subject to certain exceptions

(the Five Percent Notice Requirement). Or Laws 1951,

ch 516, § 2. This requirement was codified as ORS 308.280

and remained in place until the legislature repealed it in

1991 as inconsistent with Measure 5.28 It appears to have

been a model for what is now the 20 Percent Correction Test

in ORS 305.288(1); both provisions are based on a percent-

age change in the value of a “separate assessment of * * *

property”:

“(1) Whenever, in any year, the county assessor shall

increase the assessed valuation of any separate assessment

of real property more than $100 or five percent, whichever is

greater, over the assessed valuation of the preceding year,

unless such increase represents an increase in certain pro-

portion applicable to all real property upon the assessment

roll, and whenever, in any year, the county assessor shall

increase the unit valuation of personal property valued

uniformly throughout the county on a unit basis and not

on an individual basis, the said assessor shall give notice of

such increase in valuation as hereinafter provided.”

Or Laws 1951, ch 518, § 2 (emphases added).

c.

1971 amendments created predecessor to

20 Percent Correction Test

In 1971, the legislature amended the Five Percent

Notice Requirement in ORS 308.280 to require the assessor

28

See Or Laws 1991, ch 96 (explaining that county board of equalization

hearings each May are “redundant” in light of Measure 5); see also Or Laws 1991,

ch 459 (HB 2550) (implementing Measure 5, Or Const, Art XI, § 11b). See gener-

ally Multnomah County v. Dept. of Rev., 13 OTR 281, 285 (1995) (“Adoption of sec-

tion 11b required the 1991 Oregon Legislature to reevaluate and reexamine the

whole property tax system.”). Among many other things, HB 2550 changed the

assessment date from January 1 to July 1. See Or Op Atty Gen OP-6425 (1991).

242 Gray v. Dept. of Rev.

to itemize the value of the land and improvements, as well

as timber.29 Or Laws 1971, ch 472, § 1. The legislative his-

tory suggests that the legislature intended the itemization

to give more detailed information to homeowners as to

the underlying events causing the value increase, such as

a jump in land value or the construction of a home.30 See

Tape Recording, Senate Committee on Taxation, SB 33,

Feb 22, 1971, Tape 3, Side 1 (testimony of Ira Jones, attorney

for department). The court has found no indication, in case

law or in the legislative history of the 1951 and 1971 acts that

created and amended the Five Percent Notice Requirement,

that the legislature intended an assessor to generate a

notice if, for example, only the value of the improvements

on a parcel of real property increased more than five per-

cent. Moreover, the court notes that over the 40-year life of

the Five Percent Notice Requirement, the Attorney General

issued at least two informal opinions concluding that land

and improvements must be counted together in determin-

ing whether the five percent threshold was reached. See

Letter from Ted de Looze of Attorney General’s office to Coos

County Assessor Francis Flanagan (Dec 20, 1966) (concur-

ring with prior opinion of Ira Jones) (available from Oregon

State Archives); Letter from Donald Seymour of Attorney

General’s office to Clackamas County Assessor Donald

Hattan (Sept 22, 1972) (same) (summarized in Or Dept of

Rev, Pub No 150-303-408 “Property Tax Law Abstracts,”

ORS 308.280, OF 1589-V (1993 Cumulative Ed)).

29

To clarify, the legislature appears to have intended the amendment to

require the valuation of land, timber, and improvements on the notice. However,

the specific paragraphs referenced were “(d), (e), and (f) of subsection (1) of ORS

308.215.” Or Laws 1971, ch 472, § 1. At the time, those paragraphs of ORS

308.215(1) (1971) referred to the amount of acreage, and the values of land and

timber, respectively. The apparent mistake appears to have resulted from a

renumbering of ORS 308.215 in Or Laws 1971, ch 568, § 1, adding a new para-

graph (c). The legislature corrected the mistake in 1975 and added a new require-

ment. The notice now had to state the value of the land, timber, improvements,

and any percentage of undivided interest in the common elements of property

subject to ORS 91.505 to 91.675. Or Laws 1975, ch 780, § 6; see ORS 308.215(1)(e) -

(h) (1975).

30

This motivation is in line with the concept that “[a]ssessments showing

separate values for land and improvements are generally more easily justifiable

to the taxpayer.” See Nepom v. Dept. of Revenue, 272 Or 249, 254 n 3, 536 P2d 496

(1975) (quoting International Association of Assessing Officers, Assessing and the

Appraisal Process 16 (2d ed 1968)).

Cite as 23 OTR 220 (2018) 243

In the same 1971 bill in which it amended the Five

Percent Notice Requirement in former ORS 308.280, the leg-

islature also created a new and similar five percent test in

the omitted property provisions of ORS 311.205. Section 3

of the bill enhanced31 the department’s authority to correct

a “separate assessment of property” by allowing the depart-

ment to correct the roll for the prior two years in the case

of a valuation error exceeding $2,000 or five percent of the

assessed value of the property (the Five Percent Correction

Test). Or Laws 1971, ch 472, § 3.32 Over the course of a regret-

tably complex history, summarized below, the Five Percent

Correction Test in ORS 311.205(1) (1971) essentially gave

rise to the current 20 Percent Correction Test now in ORS

305.288(1). The court has found nothing in the statutory

development that suggests that the legislature intended

31

The power to correct a separate assessment of property for the current year

already existed, provided the department made the change by December 31 of the

year. See Or Laws 1971, ch 472, § 3.

32

ORS 311.205 (1971) provides, in pertinent part:

“(1) If after the roll has been returned to the assessor from the board of

equalization, the officer having charge of the rolls discovers errors or omis-

sions of any kind therein, he may, with the assent and concurrence of the

assessor or of the Department of Revenue, properly correct the rolls to con-

form to the facts in whatever manner may be necessary to make the assess-

ment, tax or other proceeding whatsoever regular and valid. The officer in

charge of the roll shall make any change requested by the Department of

Revenue which relates to an assessment of property made by the department.

Such corrections may be made to rolls for any year or years not exceeding five

years prior to the last roll so returned. No change or correction applicable

to all real or personal property of the same class or in the same area shall

be made to the assessment roll for the current assessment year where any

request or order of the Department of Revenue issued under ORS 305.090

or 306.111 is made or mailed later than July 31 of such year. No change or

correction applicable to a separate assessment of property shall be made to

the assessment roll for the current assessment year where any request or

order issued under ORS 305.090 or 306.111 is made or mailed later than

December 31 of such year.

“(2) Notwithstanding the time limitations for corrections contained in

subsection (1) of this section, the Department of Revenue may order the cor-

rection of the rolls for a separate assessment of property for any of the last two

preceding years when all of the following conditions exist:

“(a) The amount of the error is in excess of $2,000 or five percent of

assessed value.

“(b) The aggrieved individual has no statutory right of appeal.

“(c) The aggrieved individual has notified the department of the error

within one year after the error becomes actually known to him.”

(Emphases added.)

244 Gray v. Dept. of Rev.

to depart from the general rule that the phrase “separate

assessment of property” referred to an assessment of the

aggregate land and improvements constituting a parcel.

d. Later history of 20 Percent Correction Test

In 1983, the legislature removed the roll correc-

tion provisions that included the Five Percent Correction

Test from ORS 311.205(2), it also removed the provisions

declaring the department’s supervisory authority from

ORS 306.111, and it combined both sets of provisions into

a new statute codified as ORS 306.115. Or Laws 1983,

ch 605, §§ 1, 5-6. In doing so, the legislature eliminated the

percentage-based correction test altogether, briefly expand-

ing the department’s discretion to determine when to cor-

rect the roll due to an asserted large overvaluation. By

1985,33 however, the department had adopted a rule under

ORS 306.115 specifying a 30 percent “gross error” threshold.

OAR 150-306.115(3)(b)(A)(i) (1985). In 1987, the legislature

amended ORS 306.115 to add the concept of a gross error,

thereby essentially codifying the department’s administra-

tive rule. Or Laws 1987, ch 656, § 1.34 However, the legisla-

ture’s percentage threshold for gross error was 20 percent,

not 30 percent as used in the department’s administrative

33

The department initially promulgated a rule without any percentage

threshold. See OAR 150-306.115 (1984 Supplement).

34

ORS 306.115 (1987) provides:

“(1) The Department of Revenue shall exercise general supervision and

control over the system of property taxation throughout the state. The depart-

ment may do any act or give any order to any public officer or employee that

the department deems necessary in the administration of the property tax

laws so that all properties are taxed or are exempted from taxation according

to the statutes and Constitutions of the State of Oregon and of the United

States. Among other acts or orders deemed necessary by the department in

exercising its supervisory powers, the department may order the correction

of clerical errors, errors in valuation or the correction of any other kind of

error or omission in an assessment or tax roll as provided under sections (2)

to (4) of this section.

“(2) The department may order a change or correction to the assessment

or tax roll for the current assessment year applicable to all real or personal

property of the same class or in the same area if the order of the department

is mailed not later than October 15 of the current assessment year.

“(3)(a) The department may order a change or correction applicable to a

separate assessment of property to the assessment or tax roll for the current

assessment year and for either of the two assessment years immediately pre-

ceding the current assessment year if for the year to which the change or

correction is applicable:

Cite as 23 OTR 220 (2018) 245

rule. ORS 306.115(5)(b) (1987). Notably, the 20 Percent

Correction Test in ORS 306.115 (1987) continued to apply to

a “separate assessment of property” and also referred to the

Five Percent Notice Requirement in ORS 308.280 (1987),

which likewise continued to apply to a “separate assessment

of property.” See ORS 308.280(2) (1987).35

In 1991, the legislature moved the provisions gov-

erning retrospective correction of residential property from

ORS 306.115 to a new provision codified as ORS 306.116. Or

Laws 1991, ch 459, §§ 32, 32a. This change also removed the

gross error provisions from ORS 306.115, thereby limiting

the availability of gross error relief to residential proper-

ties under new ORS 306.116 (1991).36 ORS 306.116 remained

“(A) The assessor or taxpayer has no statutory right of appeal remaining

and the department determines that good and sufficient cause exists for the

failure by the assessor or taxpayer to pursue the statutory right of appeal; or

“(B) The department discovers that with respect to the value given to the

separate assessment of property on the assessment or tax roll that a gross

error in value exists; or

“(C) The department discovers other reason to correct the roll which, in

its discretion, it deems necessary to conform the roll to applicable law with-

out regard to any failure to exercise a right of appeal.

“(b) In the case of property other than residential property, the depart-

ment may not order a change or correction to the assessment or tax roll under

subparagraph (B) of paragraph (a) of this subsection if a notice of the valua-

tion of the property was sent to the owner or person in control of the property

for the year at issue in the manner and at the time provided in ORS 308.280

and 208.289 or 308.595.

“* * * * *

“(5) For purposes of this section:

“(a) ‘Current assessment year’ means the calendar year in which the need

for the change or correction is brought to the attention of the department.

“(b) A ‘gross error in value’ exists if the difference between the value

claimed or requested for the property and the true cash value of the property

as it appears on the assessment or tax roll is equal to or greater than 20 per-

cent of the true cash value as it appears on the assessment or tax roll.

“(6) The remedies provided under this section are in addition to all other

remedies provided by law, including but not limited to those available under

ORS 305.285.”

(Emphases added.)

35

For nonresidential properties, no correction was available if the assessor

had timely sent the notice of increased property value required by ORS 308.280.

See ORS 306.115(3)(b) (1987).

36

ORS 306.116 (1991) provides:

“(1) The Department of Revenue may order a change or correction

applicable to a separate assessment of property applicable to a separate

246 Gray v. Dept. of Rev.

unchanged until the creation of the Magistrate Division of

the Tax Court, when the legislature amended it to trans-

fer responsibility for correction of gross errors of residential

property to the Tax Court. Or Laws 1995, ch 650, § 66a.37

The legislature also changed the permissive authorization to

the department into a command to the Tax Court. Id. (“The

tax court shall order a change or correction * * *.” (Empha-

sis added.)). In 1997, the legislature moved the provisions

allowing correction of the assessment roll if a taxpayer or

assessor had “good and sufficient cause” for failing to pursue

the normal statutory right of appeal, provisions currently

contained in ORS 305.288(3). Or Laws 1997, ch 541, §§ 89,

92 (deleting “good and sufficient cause” requirement from

supervisory power under ORS 306.115 and adding similar

language to ORS 306.116). In 1997, the legislature recodified

ORS 306.116 to ORS 305.288.38 Also in 1997, in an apparent

“overcorrection” in response to Measure 50’s redefinition of

the term “assessed value” that year, the legislature initially

changed the gross error definition in ORS 306.116 to refer

assessment of the property to the assessment and tax roll for the current tax

year or for either of the two tax years immediately preceding the current tax

year, or for any or all of those tax years, if all of the following conditions exist:

“(a) For the tax year to which the change or correction is applicable, the

property was or is used primarily as a dwelling (or is vacant) and was and is

a single-family dwelling, a multifamily dwelling of not more than four units,

a condominium unit, a mobile home or a floating home.

“(b) The change or correction requested is a change in value for the prop-

erty for the tax year and it is asserted in the request and determined by the

department by order and no appeal is taken from the order, or determined by

the Oregon Tax Court or the Supreme Court by order that constitutes a final

determination of the matter, that the difference between the real market

value of the property for the tax year and the value on the assessment and

tax roll for the tax year is equal to or greater than 20 percent.

“(2) For purposes of this section, ‘current tax year’ has the meaning

given the term under ORS 306.115.

“(3) The remedy provided under this section is in addition to all other

remedies provided by law.”

37

ORS 306.116 as amended by Or Laws 1995, ch 650, § 66a, is set forth in

the 1995 edition of the ORS by note, since the amendments would not become

effective until September 1, 1997, pursuant to Or Laws 1995, ch 650, § 116. ORS

306.116 as amended does not appear in the 1997 edition of the ORS because, as

will be discussed, it was renumbered to ORS 305.288.

38

As indicated by the note after ORS 305.288 (1997), ORS 305.288 was

recodified into chapter 305 but not made a part of any smaller series therein.

ORS 305.288 did not become an official part of chapter 305 until 1999. Or Laws

1999, ch 767, § 3.

Cite as 23 OTR 220 (2018) 247

to the “assessed value,” but as noted above, the 1999 legis-

lature restored the term “real market value” in 1999. See

Or Laws 1997, ch 541, §§ 91-92; Or Laws 1999, ch 767, § 1.

Since 1999, for purposes of this case, ORS 305.288(1) has

remained unchanged.

e.   Conclusions from statutory development and leg-

islative history

One theme in this statutory development stands

out. The exceptions in which land and improvements are

assessed separately were carefully crafted in response

to specific court cases that consistently applied the gen-

eral rule requiring land and improvements to be assessed

together unless otherwise specified. ORS 305.288(1) as it

stands today must be viewed with that lens. By contrast, the

legislature adopted separate listing of values for land and

improvements under the same ownership as a convenience

to taxpayers, and without implying that land and improve-

ments are separately assessed.

3. Additional Case Law

Finally, the court considers additional case law

to the extent that it is relevant. No binding authority has

addressed the precise issue in this case. There are, however,

several cases that support the notion that land value and

improvement value are just two components of one single

assessment. Recently, the Supreme Court recognized that

“an assessment entails separate valuation of both the land

and the improvements.” Village at Main Street Phase II v.

Dept. of Rev., 356 Or 164, 169, 175-76, 339 P3d 428 (2014).

Although this court hesitates to ascribe too much signif-

icance to a single statement of the Supreme Court,39 it is

directly in accord with the holding of the court in this case.

39

This is especially true when the statement was made in a different context.

In Village at Main Street, the taxpayer appealed to the BOPTA and therefore was

not pursuing relief under ORS 305.288. 356 Or at 170. A taxpayer who follows

the normal appeals process through the BOPTA has a wider range of permissible

challenges to the value of the property. The court sees no inconsistency between

allowing a taxpayer in each year to challenge any value in an assessment (so long

as it affects the taxpayer’s tax burden), while also requiring a taxpayer under

ORS 305.288(1) to first show a 20 percent error in the assessment before a correc-

tion to a prior year can be made.

248 Gray v. Dept. of Rev.

A single assessment of property requires separate valuation

of the land and improvements on that property.

In Knapp v. City of Jacksonville, the Supreme Court

stated that “property taxes in Oregon are assessed on real

property as a whole and in the name of the owner of the whole.”

342 Or 268, 275, 151 P3d 143 (2007) (citing ORS 308.215

(1)(a)); see also Shields v. Dept. of Rev., 266 Or 461, 470, 513

P2d 784 (1973). However, the real property that is assessed

includes all lesser interests. Knapp, 342 Or at 275 (citing

ORS 307.010(1)(b)(E)). “The limited instances in which sev-

erable, separately owned interests may be separately taxed

are specifically prescribed.” Id. (citing ORS 308.115); see also

Shields, 266 Or at 470. Although the Supreme Court was

not addressing ORS 305.288(1), its characterization of the

general nature of assessment is consistent with this court’s

interpretation of a “separate assessment of property” under

ORS 305.288(1).

Finally, the court considers Nepom v. Dept. of

Revenue, 272 Or 249, 536 P2d 496 (1975). The Supreme

Court in that case addressed the extent to which a plaintiff

may limit the scope of an appeal in the Tax Court. Id. at 251.

The plaintiff (taxpayer) contended solely that the improve-

ments on her land were overvalued for the two tax years

at issue. Id. at 250. She stipulated that the total value was

as recorded on the assessment roll, and she and the asses-

sor also stipulated that the value of the improvements was

substantially lower than as shown on the roll.40 Pursuant

to the stipulation, the Tax Court reduced the value of the

improvements. Id. at 251. However, the court also increased

the value of the land so that the total value as corrected

would equal the total value already on the roll. Id. The tax-

payer appealed to the Supreme Court.

The Supreme Court concluded that a plaintiff may

frame an appeal so as to challenge the value of the land only,

the improvements only, or both. Id. at 256. Accordingly, the

Tax Court erred in increasing the value of the land above

40

For tax year 1971-72, the value of the improvements on the roll was $73,320

and was stipulated by the parties to be $5,000; for tax year 1972-73, the value of

the improvements on the roll was $75,510 and was stipulated by the parties to be

$5,000. Nepom, 272 Or at 250-51.

Cite as 23 OTR 220 (2018) 249

the amount shown on the roll because the taxpayer had

not appealed the land value. Id. Later cases address vari-

ous procedural issues involving the way parties may or may

not raise the value of particular components. See, e.g., Bear

Creek Plaza v. Dept. of Rev., 12 OTR 272 (1992) (taxpayer

challenged only one component; assessor could not cross-

appeal the other component before department); Willamette

Estates II, LLC v. Dept. of Rev., 357 Or 113, 120 n 2, 346

P3d 1207 (2015) (approving department’s parallel exercise

of supervisory authority on property under appeal to this

court). The legislature later implicitly acknowledged the

right of a party to appeal the value of only one component

separately, when it enacted ORS 305.287 in 2011, allowing

the opposing party to put the value of other components at

issue. See Or Laws 2011, ch 397, § 2. The Supreme Court’s

recent decision in Work is also consistent with this line of

cases and with today’s holding. See 363 Or at 758-59 (“[W]e

conclude that a party may appeal from a separate part of

the magistrate’s decision without necessarily putting the

other parts of the magistrate’s decision at issue before the

tax court.”).

Nothing in Nepom is inconsistent with the holding

in this case. The Supreme Court in Nepom framed the issue

narrowly as a procedural question: whether a party “by stip-

ulation or by attacking only one of the valuations [can] raise

the one specific issue on an appeal.” 272 Or at 254.41 The

court cited ORS 308.215 and recognized the overall impor-

tance of separately stating land and improvement values on

the assessment roll.42 However, the court said nothing about

41

See also Poddar v. Dept. of Rev., 328 Or 552, 560, 938 P2d 527 (1999) (“The

Nepom court did not suggest, let alone hold, that a party bringing a challenge

under ORS 309.100 must challenge the total land valuation or total improvement

valuation because of the structure of ORS 308.215(1). Rather, in Nepom, the court

relied on the unexceptional proposition that parties may stipulate to some factual

matters and dispute others.”).

42

The court stated, “The publication, ‘Assessing and the Appraisal Process,’

prepared by the International Association of Assessing Officers (2d ed 1968),

states, at p. 16:

“ ‘* * * Land and improvements are generally valued separately because of

the different factors affecting the value of each.

“ ‘There are other reasons for placing separate values on land and

improvements, the most important being taxation. In many states the law

requires separate values; in others it is done in order to insure equalization

250 Gray v. Dept. of Rev.

whether a “separate assessment of property” encompasses

a parcel of land and all improvements, as opposed to the

land component or the improvements component, because

the appeal did not involve a statute referring to a separate

assessment of property.43

4. Parties’ Arguments

a. Ferschweiler and other cases are overruled

Taxpayer relies upon Ferschweiler v. Clackamas

County Assessor, 16 OTR-MD 429, 434 (2001). However, that

case is not directly on point, as the issue was whether the

taxpayer could seek a correction under ORS 305.288(1) by

applying the 20 Percent Correction Test to the value of only

one of two buildings. The magistrate correctly decided that

the taxpayer could not do so. In the Decision, however, the

magistrate incorrectly reasoned that the taxpayer could

prevail if the taxpayer could prove that all improvements

collectively were overvalued by at least 20 percent, with-

out regard to the value of the land. Id. at 434. The Decision

implies that the phrase “separate assessment of property”

in ORS 305.288(1) can refer to all improvements taken

together and without the land, or to the land without any

improvements, or to land and improvements taken together.

and uniformity. For example, land values may be changed without disturbing

the value of the improvements, and periodic depreciation may be applied to

improvements without disturbing the land value. Assessments showing sep-

arate values for land and improvements are generally more easily justifiable

to the taxpayer.

“ ‘In addition to these factors, land and improvements should be valued

separately for the following reasons: (1) Mortgages, so that the lending agency

will know the value imputable to the land. (2) Accounting, in order to com-

pute depreciation on improvement value and for income taxes. (3) Appraising,

in order to determine the highest, best and most profitable use of the land—

the key to economic obsolescence where land is under improved. (4) Leases,

in order to compute the amount of the reversion. (5) Residual techniques, in

order to compute the return to buildings.’ ”

Id. at 254 n 3.

43

In fact, the taxpayer in her briefings invited the Supreme Court to hold

that the department had violated the Five Percent Notice Requirement in former

ORS 308.280 by seeking to increase the value of the land in contravention of the

notice requirements. Appellant’s Brief at 6, Nepom, 272 Or 249. Had the court

based its decision on that argument, the analysis in this case might be more

complicated, because former ORS 308.280 referred to a separate assessment of

property, as discussed above. However, the court declined to address that issue

in its opinion.

Cite as 23 OTR 220 (2018) 251

The foregoing analysis of the text, context, and legislative

history of ORS 305.288(1), as well as other precedential case

law, shows that the implication in Ferschweiler is incorrect,

and the court hereby overrules Ferschweiler to the extent

of that implication. The court leaves intact the magistrate’s

conclusion that the value of a separate building cannot be

used for purposes of the 20 Percent Correction Test.44

b. The Department’s Argument Based on “Dwelling”

The department argues that, by using the word

“dwelling” the legislature signaled its intention that land

and improvements should be counted together. The depart-

ment correctly describes the plain meaning of “dwelling”

as “a building or construction used for residence.” (Citing

Webster’s at 706.) The department then points to more

expansive definitions of the synonyms “abode” and “habita-

tion,” both of which encompass a dwelling “place.” According

to the department, however, a dwelling place could encom-

pass all structures plus the underlying land but could not

encompass all structures without the land because the

assessment roll does not itemize the RMV of each struc-

ture on a parcel. From there, the department reasons that,

as between the two possible meanings (“dwelling” means

only the particular structure actually used for residence vs.

“dwelling” means all structures plus the underlying land),

the legislature must have intended the latter.

44

The court also clarifies dicta in Bear Creek Plaza v. Dept. of Rev., 12 OTR

272, 274 (1992). In rejecting the department’s resort to a “cross appeal” under

former law governing administrative hearings, the court stated: “An assessor

is directed by the legislature to properly assess property (see ORS 308.330) and

to assess the value of land separately from the value of improvements. ORS

308.215(1)(e) and (f).” Id. That statement should not be read to mean that the

assessor makes a “separate assessment of property” as to the land and as to the

improvements for purposes of the 20 Percent Correction Test in ORS 305.288(1)(b).

Similar caution should apply with respect to the court’s references in dicta to

the “long-established system of assessing land and improvements separately” in

Taylor v. Clackamas County Assessor (I), 14 OTR 504, 510 (1999), and to the similar

statement on reconsideration in that case, 14 OTR 581, 583 (1999) (“ORS 308.215

has long required the separate assessment of land and improvements.”), with-

drawn, 2000 WL 31987 (Jan 11, 2000). See also Flavorland Foods v. Washington

County Assessor, 15 OTR 182, 185 (2000) (referring to “separate assessments for

land and improvements”), rev’d, 334 Or 562 (2002); Chart Development Corp. v.

Dept. of Rev., 15 OTR 213 (2000), vacated, 335 Or 113 (2002) (“[A]ctual assess-

ments were made by types of property such as land [and] improvements * * *.

Consequently, the total represented separate assessments.”).

252 Gray v. Dept. of Rev.

The court does not find this argument persuasive.

In the same bill in which the legislature first adopted the

dwelling requirement in the predecessor to ORS 305.288(1),

the legislature amended several other property tax statutes

containing the word “dwelling.” See Or Laws 1991, ch 459.

In each of those statutes, “dwelling” referred specifically

to a structure used for habitation, consistent with the first

dictionary definition the department cites here. See, e.g.,

ORS 307.169 (1991), amended by Or Laws 1991, ch 459,

§ 46 (exemption for fallout shelters “located in structures

used as dwellings”); ORS 308.229(4)(b) (1991), amended by

Or Laws 1991, ch 459, § 95 (separately listing “dwelling,”

“other structures,” and “land” in defining “homesite” for

purposes of forestland special assessment); ORS 308.377(3)

(1991), amended by Or Laws 1991, ch 459, § 121 (similar for

farm use special assessment); see also ORS 308.372(3)(a)(A)

(1991), amended by Or Laws 1991, ch 459, § 117a (referring

to land “under dwellings” for purposes of farm use special

assessment). The department points to no evidence that

the legislature intended “dwelling” to mean anything other

than the residential structure itself.

Rather than stretch to find an expansive meaning

of “dwelling,” the court returns to the statutory text. The

key is that “the property” must be “used primarily” as a

dwelling. ORS 305.288(1)(a). The court’s prior analysis

shows that this means that the primary use of improve-

ments and land together must be as a dwelling. Although

the legislature has not provided guidance in ORS 305.288(1)

about how to apply this “primary use” test, the court need

not speculate on its application here because the department

has not raised the issue whether the property in this case is

used primarily as a dwelling.

c. Application of the 20 Percent Correction Test

Having determined that the property whose value

is considered for purposes of the 20 Percent Correction Test

in ORS 305.288(1) is the land plus improvements (unless

they are separately assessed pursuant to ORS 308.115 or

other law), the court now considers whether taxpayer has

adequately stated a claim for relief under ORS 305.288(1).

For tax year 2014-15, taxpayer failed to allege the land

Cite as 23 OTR 220 (2018) 253

value on the assessment roll,45 therefore, the court cannot

calculate the percentage change requested by taxpayer as

to the parcel of real property. For that reason, taxpayer has

failed to state a claim and her claim as to tax year 2014-15

is dismissed with leave to replead if taxpayer can, in good

faith, allege a difference of more than 20 percent. For tax

year 2015-16, taxpayer has alleged only a 7.6 percent differ-

ence between the value of the property requested and on the

roll. Taxpayer’s claim as to tax year 2015-16 is dismissed.

V. CONCLUSION

For purposes of ORS 305.288(1), taxpayer must

demonstrate a 20 percent difference between the RMV

requested and the RMV on the roll with respect to a “sep-

arate assessment of property.” Except in certain statutorily

specified circumstances not alleged to be present here, real

property is assessed as a parcel of real property, and that

parcel includes the land and improvements on the land.

Taxpayer has not alleged sufficient information for the court

to determine whether she requests a change in RMV for the

parcel of real property equal to or greater than 20 percent

for tax year 2014-15. Taxpayer has not alleged a change in

RMV for the parcel of real property equal to or greater than

20 percent for 2015-16. Taxpayer’s claims as to tax years

2014-15 and 2015-16 must be dismissed. Now, therefore,

IT IS ORDERED that Defendant’s motion to dismiss

Plaintiff’s complaint as to tax years 2014-15 and 2015-16 is

granted.

The court will contact the parties to set a case man-

agement conference to discuss how to address Plaintiff’s

complaint as to tax year 2016-17.

45

Recall that the department stated in its motion that the land value for tax

year 2014-15 was $59,400. However, the court cannot consider anything other

than the allegation in a plaintiff’s complaint on a motion to dismiss for failure to

state a claim.