United Streetcar, LLC v. Dept. of Rev.

418 July 11, 2019 No. 20

IN THE OREGON TAX COURT

REGULAR DIVISION

UNITED STREETCAR, LLC,

Plaintiff,

v.

DEPARTMENT OF REVENUE,

State of Oregon,

Defendant,

and

CLACKAMAS COUNTY ASSESSOR,

Defendant-Intervenor.

(TC 5318)

At issue in the motions for summary judgment of Plaintiff, United Streetcar,

LLC (taxpayer) and the Defendant-Intervenor, Clackamas County Assessor (the

county) were the tax years to which an enterprise zone exemption applied and

whether taxpayer met its minimum employment requirements. The court deter-

mined the start and end dates of the enterprise zone exemption period, based

on interpretation of taxpayer’s contract with the zone sponsor and the timeline

of actions of taxpayer and the sponsor, including taxpayer’s application for and

claiming of a construction-in-progress exemption. Further, the court concluded

that a material issue of fact remained as to whether taxpayer maintained the

required number of employees performing eligible activities within the enter-

prise zone during the relevant period. The court held that a firm applying for an

enterprise zone exemption is not restricted to those eligible activities specifically

marked on its exemption application. The court denied both motions for summary

judgment.

Oral argument on Cross-Motions for Summary Judgment

was held October 17, 2018, in the courtroom of the Oregon

Tax Court, Salem.

Michael J. Mangan, Tonkon Torp, LLP, Portland, filed

the motion and argued the cause for Plaintiff (taxpayer).

Marilyn J. Harbur, Senior Assistant Attorney General,

Department of Justice, Salem, filed a response for Defendant

Department of Revenue.

Kathleen J. Rastetter, Assistant Clackamas County

Counsel, Oregon City, filed the motion and argued the cause

for Defendant-Intervenor Clackamas County Assessor (the

county).

Decision rendered July 11, 2019.

Cite as 23 OTR 418 (2019) 419

ROBERT T. MANICKE, Judge.

I. INTRODUCTION

Defendant-Intervenor Clackamas County Assessor

(the county) notified Plaintiff United Streetcar, LLC (tax-

payer) on July 12, 2016, that taxpayer’s property in the

Milwaukie/North Clackamas enterprise zone was disqual-

ified from enterprise zone exemption for property tax year

2016-17, and that additional tax attributable to taxpayer’s

entire five-year extended enterprise zone exemption period

would be assessed. This case is before the court on appeal

from a Magistrate Division decision upholding disqualifica-

tion. Taxpayer moves for summary judgment, arguing that

the term of its enterprise zone exemption ended with the

prior year, such that there was no exemption in place for tax

year 2016-17, and therefore no basis for the county to dis-

qualify the property. The county opposes taxpayer’s motion,

asserting that the enterprise zone exemption term included

tax year 2016-17 as the last year of the five-year period. The

county also moves for summary judgment on the merits of

the disqualification, arguing that documentary evidence

makes it clear that taxpayer failed to meet the applicable

employment requirements for exemption for tax year 2016-17.

Defendant Department of Revenue (the department) joins in

the county’s filings.

II. ISSUES

Was the final year of taxpayer’s five-year enterprise

zone exemption period tax year 2015-16 or 2016-17?

If the final year was 2016-17, did taxpayer meet its

minimum employment requirements for that year?

III. STATUTORY BACKGROUND

The Oregon Enterprise Zone Act provides tem-

porary exemption from property taxation for “quali-

fied” business firms that invest in “qualified” property

and increase their employment within any of numerous

enterprise zones located throughout the state.1 Under the

1

ORS 285C.050 to 285C.250. Unless otherwise indicated, all references

to the Oregon Revised Statutes (ORS) are to the 2015 edition. The Oregon

Enterprise Zone Act has been amended and recodified several times since it

420 United Streetcar, LLC v. Dept. of Rev.

“standard”2 enterprise zone program, a firm seeking to

become qualified must (1) be “eligible” based on its proposed

activities or operations; and (2) become “authoriz[ed].” See

ORS 285C.140(1)(a) (eligibility a prerequisite to authoriza-

tion), ORS 285C.200 (authorization a prerequisite to qual-

ification). To be “eligible,” the firm generally must, within

the zone, provide goods, products or services to businesses

or other organizations through “activities including, but not

limited to, manufacturing, assembling, fabrication, process-

ing, shipping or storage.” ORS 285C.135(1); see also ORS

285C.050(13)(a) (defining “new employees hired by the firm”

to include “only those employees * * * engaged for a major-

ity of their time in eligible operations”), ORS 285C.200(1)(a)

(qualified firm must be “engaged in eligible business oper-

ations under ORS 285C.135”). An eligible firm must apply

for authorization with the zone sponsor before commencing

construction or hiring employees. See ORS 285C.140(1). The

application must describe the proposed operations within

the zone and include an estimate of the number of new

employees and the estimated value of the proposed quali-

fied property, among other data, as well as commitments to

meet all requirements imposed pursuant to any agreement

with the sponsor. See id. As relevant to this order, “qual-

ified property” generally must (1) be newly constructed or

installed; (2) meet a minimum cost requirement; (3) be con-

structed or installed for approved income-producing pur-

poses of the firm; (4) be owned or leased by an authorized

firm; and (5) be of the same “general type,” and in the same

location inside the geographic boundaries of the enterprise

zone, as described in the firm’s application for authorization.

See ORS 285C.180.

was first enacted in 1985, but as relevant to this order has been unchanged

for the property tax years 2010-11 through 2016-17. See Or Laws 2010, ch 39

(allowing waiver of certain requirements and extensions of certain deadlines

during periods of economic downturn as measured by statewide nonfarm payroll

employment).

2

The Enterprise Zone Act includes several variations with different statu-

tory requirements; this order discusses only the standard three-year exemption

with optional extension of up to two years. Cf., e.g., ORS 285C.400 to 285C.420

(long-term rural enterprise zone program); ORS 285C.300 to 285C.320 (reserva-

tion enterprise zones); ORS 285C.540 to 285C.559 (renewable energy resource

equipment manufacturing).

Cite as 23 OTR 418 (2019) 421

The basic exemption period for the standard enter-

prise zone program is three years (ORS 285C.175(2)(a)); how-

ever, before authorization, a firm desiring a longer period

of exemption may enter into a written agreement with the

zone sponsor to extend the exemption period for up to two

additional years, resulting in a total exemption period of

no more than five consecutive years. ORS 285C.160(3). The

sponsor may set additional reasonable requirements (such as

requirements to hire and maintain more employees than the

statutory minimum) as a condition of the extended exemp-

tion period. Id. For the first year of the exemption period, the

statutory minimum generally is a 10 percent increase (com-

pared to the firm’s average employment in the zone over the

12 months before the firm applied for authorization) no later

than April 1 following the year the investment is made; or,

for a firm without any previous employees in the zone, one

new employee. See ORS 285C.200(1)(c), (8)(a). Thereafter, the

firm must not “substantially curtail operations” within the

zone, based on a multiprong test set forth in ORS 285C.210.

To be counted toward the minimum, an employee generally

must work 32 hours per week in a nontemporary and non-

construction job and spend a majority of his or her time in

eligible operations within the zone. ORS 285C.050(7); ORS

285C.200(8)(b).

A firm anticipating enterprise zone exemption may

apply for a construction-in-process (CIP) exemption for its

owned or leased property under ORS 285C.170.3 The CIP

exemption, which the assessor can approve annually up to a

maximum of two years, applies if the firm has been autho-

rized and the property is expected to satisfy all requirements

for enterprise zone exemption after construction or instal-

lation is complete and after the property has been “placed

in service.” Id. at (1)(h). Property is “in service” when it is

“being used * * * for commercial purposes consistent with

the intended operations of the business firm as described

in the application for authorization.” ORS 285C.050(11). The

assessor determines whether to approve the CIP exemption.

ORS 285C.170(3).

3

The terms of the CIP exemption available pursuant to ORS 285C.170 are

generally similar to the widely applicable cancelation of assessment for construc-

tion in process pursuant to ORS 307.330.

422 United Streetcar, LLC v. Dept. of Rev.

From January 1 through April 1 immediately after

the “assessment year”4 in which the property is placed in

service, the firm may file its first claim for enterprise zone

exemption with the assessor. ORS 285C.220(1)(a). Among

other data, the claim must include the number of employees

within the zone on April 1 (or on the date the claim is filed,

whichever is earlier); as well as the annual average number

of employees in the zone during the preceding assessment

year; and the annual average number of employees in the

zone during the 12 months preceding the application for

authorization. ORS 285C.220(1)(c). The assessor reviews the

claim for compliance with minimum employment and other

requirements and decides whether to grant the exemption.

ORS 285C.220(4). Like other property tax exemption stat-

utes,5 the Enterprise Zone Act refers to the exemption period

sometimes as a period of assessment years and sometimes

as a period of tax years. For example, ORS 285C.175 pro-

vides that, when the assessor approves a claim, the enter-

prise zone exemption period begins with the first tax year

after the assessment year in which the qualified property

is in service6 and continues for the prescribed number of

4

“Assessment year” means the calendar year starting on January 1 and end-

ing on December 31, and “tax year” means a period of 12 months beginning on

July 1 and ending on June 30. See ORS 285C.050(20) and (22) (incorporating

ORS 308.007(1)(b), (c)). For example, assessment year 2011 begins on January 1,

2011, and ends on December 31, 2011, while the corresponding tax year begins on

July 1, 2011, and ends on June 30, 2012.

5

Compare, e.g., ORS 307.166(3)(a)(A) (governing application process for prop-

erty leased from one organization to another; referring to “exemption[ ] claimed for

the assessment year”), ORS 307.260(1)(a) (veteran housing exemption; referring

to “assessment year for which the exemption is claimed”), ORS 307.330 (general

CIP exemption; declaring property “exempt from taxation for each assessment

year”), with ORS 307.112(4) (lease to public body; claim must be filed on or before

April 1 preceding “tax year for which the exemption is claimed,” “exemption first

applies for the tax year beginning July 1”), ORS 307.162(1)(a) (governing applica-

tion process for property leased from nonexempt owner; requiring application on

or before April 1 “preceding the tax year for which the exemption is claimed”).

6

The court notes that the 2015 Legislative Assembly amended the statute

governing the commencement of the exemption period to clarify that the qual-

ified property must be in use or occupancy before July 1 of the year immedi-

ately following the year during which the property “was first placed in service.”

Or Laws 2015, ch 648, § 21 (amending ORS 285C.175(4)(d)) (emphasis added).

The quoted language replaced a requirement that construction of the property be

completed and thus harmonized the statute with the general requirement that

the property be placed in service on or before the January 1 preceding the first

tax year of exemption.

Cite as 23 OTR 418 (2019) 423

successive tax years. ORS 285C.175(2)(a).7 On the other

hand, the period for compliance with the minimum employ-

ment requirements generally is measured by assessment

years, as in the definition of “substantial curtailment,” which

requires the assessor to determine whether the “annual

average number of employees within the enterprise zone

during the first assessment year for which the exemption

under ORS 285C.175 is granted, or any subsequent year in

which an exemption is claimed,” is reduced below the greater

of one of two measurements. ORS 285C.210(1)(c) (emphasis

added). After filing the first claim, the firm must file a claim

on or before April 1 for each subsequent year for which it

seeks enterprise zone exemption. ORS 285C.220(1)(a).

The exemption applies to 100 percent of the assessed value

of the qualified property in each of the tax years for which

the exemption is available. ORS 285C.175(3)(a).

Among other possible triggering events, a firm’s

property may be disqualified from enterprise zone exemption

if at any time during the exemption period the firm substan-

tially curtails its business operations, or if the firm fails to

meet additional terms imposed by any extension agreement.

ORS 285C.240(1)(a) - (f). If the disqualifying event occurs at

any time during the exemption period, the assessor “shall

disqualify the property for the assessment year following

the disqualifying event and 100 percent of the additional

taxes calculated under ORS 285C.175 shall be assessed

against the property for each year for which the property

had been granted exemption under ORS 285C.175.” ORS

285C.240(3)(a) (emphasis added); see also ORS 285C.175(7)

(requiring the assessor to enter on the roll the assessed

value and the “amount of additional taxes that would be

due if the property were not exempt”). That means even if

the disqualifying event occurs in the last year of a five-year

exemption period, the statute mandates that the assessor

assess the previous four years’ worth of tax on the property

in addition to the amount of tax assessed for the fifth year.

ORS 285C.240(3)(a). See Keeter Manufacturing, Inc. v. Dept.

of Rev., 13 OTR 124, 125-30 (1994) (explaining that “dis-

qualification occurs at the time of the disqualifying event,”

7

Therefore, in the example above, qualified property placed in service on or

before December 31, 2011, would be exempt for tax year 2012-13.

424 United Streetcar, LLC v. Dept. of Rev.

and, “upon disqualification, 100 percent of the taxes previ-

ously exempted [are] to be recaptured”); see also Columbia

Sun, Inc. v. Dept. of Rev., 321 Or 514, 516, 900 P2d 1039

(1995) (discussing assessor’s assessment of an additional

four years’ worth of taxes in addition to the amount of prop-

erty tax assessed for the year of disqualification).

IV. FACTS

The following facts are not in dispute. For tax

years 2010-11, 2011-12, 2012-13, 2013-14, 2015-16, and

2016-17, taxpayer leased land and an existing building

within the Milwaukie/North Clackamas enterprise zone,

which is jointly sponsored by Clackamas County and the City

of Milwaukie. In August 2010, taxpayer applied for authori-

zation, stating that it planned to construct improvements

costing approximately $4 million.8 Taxpayer’s application

stated that it intended to “maintain at least [five employ-

ees] as an annual average employment during the exemp-

tion period.” Before its authorization, taxpayer and the zone

manager, on behalf of the sponsors, signed an agreement

(the Extension Agreement) extending the statutory three-

year exemption period by an additional two tax years. The

Extension Agreement provided, in relevant part:

“The Zone Sponsor extends The Firm’s property tax

exemption an additional two years on all property that

initially qualifies in the Milwaukie / North Clackamas

Enterprise Zone in or before the assessment year begin-

ning on January 1, 2011 and, thus, sets a total period of

exemption of five consecutive years during which statutory

requirements for the standard three-year enterprise zone

exemption must also be satisfied and maintained.

“United Streetcar, LLC will hire and maintain at least

5 full time positions by December 31, 2011 as submitted in

the Oregon Enterprise Zone Authorization Application and

any other positions added that result from their investment

at the compensation levels described below[.]

“* * * * *

8

Both parties rely on the same documents submitted in separate declara-

tions. As a matter of convenience unrelated to the merits of either party’s decla-

ration, the court will cite to the Declaration of Rastetter when citing a document

contained in both parties’ declarations.

Cite as 23 OTR 418 (2019) 425

“3. Only employees working at jobs filled for the first

time after the application for precertification but prior to

July 1 following the first full year of the exemption and per-

formed within the current boundaries of the Milwaukie /

North Clackamas Enterprise Zone are counted; and

“4. Only full-time, year-around and non-temporary

employees engaged a majority of their time in The Firm’s

eligible operations under ORS 285B.707[9] are counted,

regardless if such employees are leased, contracted for

or otherwise obtained through an external agency or are

employed directly by The Firm.”

(Emphasis added.) On March 22, 2011, taxpayer applied for CIP

exemption to build a “[s]treetcar test track and maintenance/

testing building,” in the enterprise zone. Taxpayer’s applica-

tion listed the “[s]tarting date of construction” as “05/01/2010”

and the “[e]stimated completion date of construction” as

“Mar. 31, 2011.” The county approved taxpayer’s CIP exemption

on April 14, 2011, by countersigning taxpayer’s application.

On March 30, 2012, taxpayer filed an “Oregon

Enterprise Zone Exemption Claim” on Department of Rev-

enue Form No. 150-310-075. Taxpayer attached Depart-

ment of Revenue Form No. 150-310-076, entitled “OREGON

ENTERPRISE ZONE PROPERTY SCHEDULE For Quali-

fied Property of a Qualified Business Firm Placed in Service

at a Location in the Enterprise Zone” (uppercase in orig-

inal), on which taxpayer listed a “Streetcar Test Track &

Maintenance Bldg (OIW)” at a cost of $4,098,344, improve-

ments to existing structures at a cost of $377,809, and real

property machinery and equipment at a cost of $1,100,923.

For each item of property, taxpayer indicated a “date placed

in service” as on or before December 31, 2011. On Line 5b

of the claim form, taxpayer responded affirmatively to the

question: “[I]s this the first property schedule filed with an

exemption claim subject to this authorization?” On June 25,

2012, the county sent a letter to taxpayer approving its

application for enterprise zone exemption. The letter stated:

9

Former ORS 285B.707 contained the criteria for eligibility. The legislature

recodified the provision as ORS 285C.135 in 2003. See also Or Laws 2015, ch 648,

§ 20 (amending ORS 285C.135(5)(d) to include certain types of business firms

within zones designated for electronic commerce).

426 United Streetcar, LLC v. Dept. of Rev.

“The application filed on April 2, 2012 claiming the

Enterprise Zone exemption for the ensuing 2012-13 tax

year has been approved. This is the first year of exemption

under this program.”

(Emphasis added.) Taxpayer filed additional claims for

enterprise zone exemption in March of 2013, 2014, 2015,

and 2016. The county approved the exemption for tax years

2013-14, 2014-15, and 2015-16. The county denied the

claim for tax year 2016-17. In addition, on July 12, 2016,

the county sent a letter notifying taxpayer that its property

was disqualified from enterprise zone exemption effective

with the 2016-17 tax year because taxpayer had not met the

minimum employment requirements as of April 1, 2016. As

a result, the county assessed tax equal to 100 percent of

the tax for the five-year exemption period, totaling approxi-

mately $322,000.

V. ANALYSIS

A. Summary Judgment Standard

The court grants a motion for summary judgment

only if “the pleadings * * * declarations, and admissions on

file show that there is no genuine issue as to any material

fact and that the moving party is entitled to prevail as a

matter of law.” Tax Court Rule (TCR) 47 C. See Christensen

v. Dept. of Rev., 23 OTR 155, 162-63 (2018) (citing Two Two v.

Fujitech America, Inc., 355 Or 319, 331, 325 P3d 707 (2014)).

“No genuine issue as to a material fact exists if, based upon

the record before the court viewed in a manner most favor-

able to the adverse party, no objectively reasonable [fact-

finder] could [find] for the adverse party on the matter that

is the subject of the motion for summary judgment.” TCR

47 C. The adverse party has the burden of producing evidence

on any issue raised in the motions as to which the adverse

party would have the burden of persuasion at trial. Id. See,

e.g., Hagler v. Coastal Farm Holdings, Inc., 354 Or 132, 142,

144-45, 309 P3d 1073 (2013) (nonmoving party—an injured

customer—had the burden on summary judgment to pro-

duce evidence sufficient to create a genuine issue of material

fact that the moving party—a business owner—“knew or

should have known” that the manner in which it shelved

Cite as 23 OTR 418 (2019) 427

certain merchandise posed a danger to customers) (citation

omitted).

B. Parties’ Arguments

1. Taxpayer’s motion

Taxpayer moves for summary judgment on the

ground that the five-year enterprise zone exemption period

for its property commenced with tax year 2011-12 and

ended with tax year 2015-16; therefore, as a matter of law,

taxpayer was not required to meet minimum employment

requirements specified in the Enterprise Zone Act or in the

Extension Agreement for tax year 2016-17. Taxpayer asserts

that it claimed exemption for tax year 2016-17 only by its

own mistake, and that the county improperly disqualified

the property based on a misinterpretation of the enterprise

zone statutes and the Extension Agreement.

Taxpayer argues that by “extend[ing] the Firm’s

property tax exemption” on or for property that “ini-

tially qualifies” in or before the assessment year 2011, the

Extension Agreement “sets forth the period for which the

qualified property may continue to receive the exemption as

starting with ‘the assessment year beginning on January 1,

2011.’ ” (Emphasis added.)

The county counters that taxpayer’s property could

not have been entitled to enterprise zone exemption for

tax year 2011-12 because the record shows taxpayer was

approved for CIP exemption for that year. According to the

county, that CIP exemption, and the fact that taxpayer never

filed a claim for enterprise zone exemption for 2011, pre-

clude enterprise zone exemption for taxpayer’s property for

tax year 2011-12, irrespective of the terms of the Extension

Agreement.10

In interpreting the Extension Agreement, the court

applies standard principles of contract interpretation. See

10

As will be discussed when the court turns to the county’s motion, the

county argues that, but for taxpayer’s disqualification, taxpayer’s property would

have been entitled to five consecutive years of enterprise zone exemption in tax

years 2012-13, 2013-14, 2014-15, 2015-16, and 2016-17.

428 United Streetcar, LLC v. Dept. of Rev.

Yogman v. Parrott, 325 Or 358, 361, 937 P2d 1019 (1997)

(examining text of disputed provision in context of document

as a whole; extrinsic evidence of parties’ intent if provision

is ambiguous; and appropriate maxims of construction if

first two steps have not resolved the ambiguity). However,

the “context” of any term or provision of the Extension

Agreement necessarily includes the Enterprise Zone Act.

The act prescribes the parties’ authority to contract with

each other for property tax exemption, as Article IX, sec-

tion 1, of the Oregon Constitution requires a county or other

local property taxing jurisdiction to levy property taxes

(including the conferring of any exemptions) “under general

laws operating uniformly throughout the State.” Or Const,

Art IX, § 1; see also Or Const, Art I, § 32; Corporation of

Sisters of Mercy v. Lane Co., 123 Or 144, 152, 261 P 694

(1927) (“There is never an exemption from taxation unless

it is provided for by law.”). Accordingly, any interpretation of

the Extension Agreement that conflicts with the Enterprise

Zone Act or other statutes is suspect.

The court concludes that taxpayer misreads the

Extension Agreement and ignores the significance of tax-

payer’s CIP exemption for the 2011-12 tax year. The premise

of taxpayer’s argument is that the language of the Extension

Agreement quoted above declares the starting year of

the enterprise zone exemption period. Yet the Extension

Agreement nowhere expressly states the starting year. The

court concludes that the language quoted above simply pre-

scribes a deadline of December 31, 2011,11 for taxpayer’s

property to become “qualified.”12 As summarized above,

property generally is “qualified” if it is new, meets minimum

cost requirements, was constructed to further the produc-

tion of income, is owned or leased by an authorized firm, is

11

Because an “assessment year” means the calendar year (ORS 308.007

(1)(b)), the phrase “in or before the assessment year beginning on January 1,

2011” means anytime through December 31, 2011.

12

Taxpayer may be reading the term “extends” in the passage quoted above

to mean that the sponsor “confers” or “grants” exemption on property that qual-

ifies on or before December 31, 2011. Consistent with ORS 285C.160(1)(a), how-

ever, the court reads the term to refer to the parties’ authority to lengthen the

duration of the exemption period beyond the default period of three years. See

Webster’s Third Int’l Dictionary 804 (unabridged ed 2002) (defining “extend” to

mean “to cause to be longer”).

Cite as 23 OTR 418 (2019) 429

located within the zone and is the same “general type” of

property described in the firm’s application for authoriza-

tion. See ORS 285C.180(1). The enterprise zone exemption

period, however, does not start until the tax year that starts

after an additional condition is satisfied: the qualified prop-

erty must have been placed in service. ORS 285C.175 pre-

scribes when the exemption period begins:

“(1) Property of an authorized business firm is exempt

from ad valorem property taxation if:

“(a) The property is qualified property under ORS

285C.180;

“* * * * *

“(A) The exemption allowed under this section applies

to the first tax year for which, as of January 1 preceding the

tax year, the qualified property is in service. * * *”

ORS 285C.175(1) - (2)(a)(A) (emphases added).13 Regardless

of taxpayer’s intentions when it applied for authorization,14

the record is clear that taxpayer ultimately placed its prop-

erty in service during 2011, not 2010. (Taxpayer’s March 30,

2012, enterprise zone exemption claim listing the subject

property as placed in service on December 15, 2011.)

The record also shows that taxpayer applied for, and

was granted, CIP exemption for tax year 2011-12. Although

the CIP exemption and the enterprise zone exemption are

part of the same statutory scheme, each is separately avail-

able depending on different criteria, and their respective

terms cumulate to a maximum of seven possible years of

13

Taxpayer also misreads ORS 285C.160(2), which states (emphasis added):

“The period for which the qualified property is to continue to be exempt must

be set forth in the [extension] agreement and may not exceed two additional

tax years.” Taxpayer seems to assume that the word “period” refers to a specific

year; from that premise, taxpayer argues that the reference in the Extension

Agreement to 2011 marks that year as the commencement of the enterprise zone

exemption period. However, correctly read, “period” refers not to one specific year

or another (2011 vs. 2012), but to the duration of the extension (one year vs. two).

14

Taxpayer cites its application for enterprise zone authorization as evi-

dence that it “expected to apply for property tax exemption in 2011, 2012, 2013,

2014, and 2015.” (Emphasis added.) Indeed, the application for authorization, as

amended, does state: “The anticipated first year(s) for the exemption period(s) is

(are): 2011.” The application indicates further that, when taxpayer signed it on

August 17, 2010, taxpayer expected to finish construction of two new buildings

and a new addition by October 2010.

430 United Streetcar, LLC v. Dept. of Rev.

exemption overall. See ORS 285C.170(4) (CIP exemption

“does not depend on the property or the authorized business

firm receiving the [enterprise zone] exemption under ORS

285C.175.”); ORS 285C.175(5) (“Property is not required to

have been exempt under ORS 285C.170 [CIP exemption]

in order to be exempt under this section [enterprise zone

exemption].”); ORS 285C.170(1)(h) (requiring, as a condition

of CIP exemption, that there be “no known reason” to con-

clude that the property “will not” satisfy the requirements of

the enterprise zone exemption upon being placed in service).

The fact that the subject property was exempt pursuant

to a CIP exemption for tax year 2011-12 proves that it was

not entitled to, and could not have received, enterprise zone

exemption for tax year 2011-12.

The court finds the following ultimate facts: (1) tax-

payer became authorized for enterprise zone exemption

in 2010; (2) taxpayer applied for and received CIP exemp-

tion for tax year 2011-12; (3) taxpayer placed the subject

property in service during 2011; (4) taxpayer filed its first

enterprise zone exemption claim in March 2012; and (5) the

county approved taxpayer’s claim in April 2012. On these

facts only one conclusion is possible: the property could not

have enjoyed enterprise zone exemption for tax year 2011-12,

and the first year of enterprise zone exemption was tax year

2012-13. There is no dispute that the Extension Agreement

granted taxpayer’s property an additional two years of prop-

erty tax abatement in addition to the standard three-year

exemption. Because the statutes allow a total of five consec-

utive years of exemption, the court concludes that taxpay-

er’s property was entitled to enterprise zone exemption in

tax years 2012-13, 2013-14, 2014-15, 2015-16, and 2016-17

unless disqualified at any point during those tax years.

Taxpayer’s motion is denied.

2. County’s motion

Because the court concludes that the enterprise

zone exemption period for taxpayer’s property continued

through tax year 2016-17, the court now must rule on the

county’s motion. The county asserts that taxpayer failed to

meet its employment requirements under the statutes and

the Extension Agreement for the period relevant to tax year

Cite as 23 OTR 418 (2019) 431

2016-17. The court views the county as making four spe-

cific points: that taxpayer (1) failed to maintain at least five

full-time employees who were (2) “engaged in the approved

work” and (3) performing the approved work a majority of

their time (4) inside the enterprise zone. By “approved work,”

(which the county sometimes refers to as “authorized work”

or “approved activities”) the county apparently means “man-

ufacturing, assembly or fabrication,” in contrast to, for exam-

ple, “act[ing] as a middle-man for parts,” without fabricat-

ing or assembling the parts within the zone. (“The company

must do the work approved by the Enterprise Zone sponsor

* * *.”) Among other evidence, the county relies on taxpay-

er’s enterprise zone exemption claim for tax year 2016-1715

and, in significant part, on emails between a staff member

in the assessor’s office and Don Hutchison, an employee of

taxpayer.

Taxpayer defends on the ground that genuine

issues of material fact preclude summary judgment. As

the nonmoving party, taxpayer has the burden of “produc-

ing evidence” now on any issue raised in the motion as to

which it would have the burden of persuasion at trial. TCR

47 C. Because taxpayer would bear the burden of proof at

trial as to its entitlement to exemption from tax, taxpayer

must now produce evidence countering each of the county’s

four allegations, to the extent those allegations are based on

valid requirements under the law. See, e.g., Hagler, 354 Or

at 144-45.

Much of taxpayer’s evidentiary showing in response

to the county’s motion misses the mark.16 However, taxpayer

15

Taxpayer now asserts that it filed this claim by mistake. For purposes of

its motion, the county cites the claim because taxpayer’s response to question 7

on the claim form states that taxpayer had “0” employees within the zone as of

March 29, 2016.

16

Taxpayer referred at times to facts stated in the magistrate’s decision but

not contained in evidence introduced in this division by stipulation, declaration

or otherwise. It should be obvious to counsel that facts recited in a magistrate’s

decision are not automatically evidence in this division because of the require-

ment that the judge hear an appeal from the Magistrate Division de novo. See

ORS 305.425(1); ORS 305.501(6). It is also fundamental that, because a magis-

trate is not bound by the evidentiary requirements that apply in this division,

no part of a magistrate’s findings constitutes a “record” on which this division

can rely. See ORS 305.501(4)(a) (magistrate not bound by evidentiary rules). The

court also notes that taxpayer has placed into the record in this division a list of

432 United Streetcar, LLC v. Dept. of Rev.

has introduced a declaration of taxpayer’s human resources

manager, Rochelle Burbank, identifying taxpayer as a

wholly owned subsidiary of “Vigor Iron Works LLC and its

predecessor Oregon Iron Works,” and otherwise stating in

relevant part:

“3. As of March 29, 2016, the date of USC’s fifth and

final Oregon Enterprise Zone Exemption Claim, at least

seven full-time (i.e., more than 32 hours/week) employees

worked at the facility at and adjacent to 9200 SW Mather

Road, Clackamas, Oregon (the ‘Facility’) on USC projects.

Prior to 2016, they were paid by USC through ADP® pay-

roll service, but after a computer conversion, they were all

converted to Vigor employees even though they continued

to work on USC projects.

“4. In addition, at least 400 full-time employees worked

at the Facility on Vigor projects in 2016, including on the

design of specialized rail cars for use by the United States

Department of Defense.”

Burbank addresses points (1) and (4) of the county’s argu-

ments by stating under penalty of perjury that more than

five employees were engaged full time within the zone at the

date of taxpayer’s claim, as of March 29, 2016.17 The court

finds that taxpayer has carried its burden of “producing

evidence” on those two points, and that the Burbank decla-

ration contradicts the county’s factual position, creating a

genuine issue of material fact as to those points.

There remain points (2) and (3)—respectively, the

county’s assertions that the employees were not engaged in

documents that taxpayer claims to have produced to the Department of Revenue

in discovery. Taxpayer then appears to rely on the list itself as evidence support-

ing exemption. The court sees no probative value in such a list of documents.

Merely describing documents that a party could introduce into evidence comes

nowhere close to satisfying a party’s burden to “produce evidence” on an issue as

to which the party would have the burden of persuasion at trial.

17

The Burbank declaration is not entirely clear regarding whether taxpayer

or either of its parent entities during the tax years at issue (Vigor Works LLC or

its predecessor Oregon Iron Works) was the contractual or common-law employer

of the employees. The declaration does, however, specify that taxpayer was a

“wholly owned” subsidiary of Vigor Works LLC (and previously, of Oregon Iron

Works). The county does not cite the possible involvement of either parent com-

pany as a ground for disqualification, possibly because the Enterprise Zone Act

allows two firms to elect to be treated as one if one owns 100 percent of the equity

interest of the other. See ORS 285C.135(4).

Cite as 23 OTR 418 (2019) 433

the “approved” or “authorized” “work” or “activities,” and that

that work or those activities did not amount to a majority of

the workers’ time. As to the precise nature of the activities,

the county asserts that only three activities are permissi-

ble: “manufacturing, fabrication or assembly for [taxpayer].”

Although the county does not fully explain this restrictive

interpretation—and taxpayer inexplicably does not attempt

to refute it—the court infers that the county takes the posi-

tion that taxpayer’s exemption required it to perform only

those three activities that taxpayer selected from a list

of 12 checkboxes on the Department of Revenue form on

which taxpayer applied for authorization. Other activities

on the application form included “Shipping,” “Storage,” and

“Other,” none of which taxpayer marked.18 The briefing does

not allow the court to determine whether the county’s posi-

tion is that every firm seeking even the minimum three-year

exemption is restricted to only those activities as to which

the firm checks a box on the authorization application form,

or whether only those firms that enter into an extension

agreement that incorporates the authorization application

by reference are bound by the boxes they check. The court

finds neither position convincing in this case.

The statutory origin of the form’s list of activi-

ties is the requirement in ORS 285C.135 that an eligible

firm “provid[e] goods, products or services to businesses or

other organizations through activities including, but not

limited to, manufacturing, assembly, fabrication, process-

ing, shipping or storage.” ORS 285C.135(1).19 The court is

not aware of any statutory authority that would limit every

applicant for authorization to only those eligible activities

that the applicant specifically identifies on the application

form. Applying the Oregon Supreme Court’s methodology

of statutory analysis, the court considers the text, context

18

The remaining checkboxes on the form are for “Bulk Printing,” “Agricultural

Production,” “Energy Generation,” “Processing,” “Software Publishing,” and

“Back-office Systems.”

19

The same section of the application form also includes a list of “ineligible”

activities (such as retail sales, health care, professional services, or construction),

as well as four “Special Cases”: operating a hotel, motel or destination resort; a

call center; a “headquarters” facility or an “electronic commerce investment.” The

entire section of the form is entitled “Business Eligibility,” and the topics it covers

closely track the content of ORS 285C.135.

434 United Streetcar, LLC v. Dept. of Rev.

and—where useful—relevant legislative history. State v.

Gaines, 346 Or 160, 171-72, 206 P3d 1042 (2009). The defi-

nitional statute broadly states that a firm seeking to be

“eligible” must engage in the “business of providing goods,

products or services to businesses or other organizations.”

ORS 285C.135(1).20 There follows an expressly nonexclusive

(“including, but not limited to”) list of six named activities

that fit this broad description. Id. Far from limiting a firm

to specific activities on the list, the statutory text allows a

firm to engage in any business-to-business transaction that

is not prohibited elsewhere in statute.21

The question then becomes whether the legisla-

ture intended to “lock in” a firm at the moment of autho-

rization by requiring the firm to commit to a specifically

identified subset of eligible activities. The authorization

statute does require an applicant to include “[a] description

of the nature of the firm’s current and proposed business

operations inside the boundary of the enterprise zone.” ORS

285C.140(2)(a). But the statutory requirements for exemp-

tion do not expressly limit the firm to this description. See

ORS 285C.200 (“qualified” firm must be “authorized”; no

requirement to adhere to specific eligible activities).22 A firm

20

By contrast, the same statute counts as “ineligible” a firm that provides

goods or services to the general public, including retail sales or services, child

care, housing, health care, tourism, entertainment, financial or professional ser-

vices, or property management. See ORS 285C.135(2). This restriction on purely

local business activity recognizes that an enterprise zone is, by definition, gener-

ally located in an area of low income and high unemployment unlikely to sustain

a market for local goods and services. See ORS 285C.090. The restriction is also

consistent with the legislature’s express desire to use the enterprise zone pro-

gram and other economic development programs to “strengthen[ ] traded sector

industries,” i.e., to attract businesses that can choose where to locate their opera-

tions because they sell their goods or services into markets for which national or

international competition exists. See ORS 285A.020(1)(i); ORS 285A.010(17).

21

In fact, the application form itself lists nearly twice as many eligible activ-

ities as those stated in the statute (not counting the catch-all “Other” category

on the form). See Decl of Rastetter B, Ex 1 at 2. This suggests that the form’s

authors, Defendant and the Oregon Business Development Department, inter-

pret the statutory list as nonexclusive. See ORS 285C.140(2)(g) (Defendant and

Oregon Business Development Department to determine additional information

for form).

22

A statutory exception shows that the legislature knows how to require

scrutiny and approval of the precise nature of the activities: a “headquarters”

facility that merely supports the operation of the same firm, as opposed to other

firms, can nevertheless be eligible if the facility provides administrative, design,

financial, management, or marketing support to the firm’s statewide, regional,

Cite as 23 OTR 418 (2019) 435

“may” amend its authorization application until the enter-

prise zone exemption period begins, but nothing requires it

to do so. See ORS 285C.140(3). The disqualification statute

provides a safeguard by requiring the assessor to disqualify

the firm if its activities are not “eligible” activities; however,

the statute does not purport to allow disqualification if the

firm switches from one kind of eligible activity to another.

See ORS 285C.240(1)(e). Thus, neither the statutory text nor

the immediate context appears to confine an applicant firm

to only those eligible activities that the firm marks on its

application.

Taking a more expansive view of statutory context,

the court finds it significant that the step of applying for

authorization occurs relatively early, before a firm has started

construction or hired any employees. ORS 285C.140(1)(a).

The authorization statute expressly requires the firm to

disclose only the “estimated” value of new improvements

and an “estimate” of the number of new employees. ORS

285C.140(2)(b), (c). Rather than forcing a firm to commit to

a rigidly fixed state of future facts, the statute requires the

firm to disclose presently known facts (such as the number

of employees within the zone in the previous 12 months) and

a set of future projections.

Likewise, the legislative history of the bill that

introduced the term “authorization” into the Enterprise

Zone Act also provides clues indicating that the term should

not be read to restrict a firm from pursuing different eligi-

ble activities beyond those marked on the application form.

Before 2003, the predecessor to ORS 285C.140 required a

firm to apply to the zone sponsor for “precertification” before

commencing construction or hiring employees. Former ORS

285B.719(1)(a) (2001). In a bill overhauling and reorganizing

the act, however, the 2003 Legislative Assembly replaced

national, or international operations. See ORS 285C.135(5)(b). But authorization

of a headquarters facility requires an additional step—the zone sponsor must

make a “formal finding” that the size of the proposed investment, the employ-

ment at the facility, “or the nature of the activities undertaken by the firm within

the enterprise zone will significantly enhance the local economy, promote the

purposes for which the zone was created and increase employment within the

zone.” ORS 285C.140(7). The authorization statute requires no such scrutiny

if the firm’s activities fit within the general description of eligible business-to-

business activities in ORS 285C.135(1).

436 United Streetcar, LLC v. Dept. of Rev.

the term “precertification” with “authorization.” Or Laws

2003, ch 662, § 30. The assistant director of the economic

development agency now known as the Oregon Business

Development Department testified that the purpose of the

change was to eliminate confusion:

“In the current law there’s a term called ‘precertifica-

tion.’ ‘Precertification’ has been confusing because there’s

no subsequent ‘certification.’ People do the precertification

to essentially put the assessors on notice that they’re pur-

suing an enterprise zone exemption. The term ‘precertifica-

tion’ means it takes place before construction begins. We’re

changing that—or we’re proposing to change that—to

‘authorization’ instead of ‘precertification’ [because] there’s

no subsequent ‘certification.’ ”

Testimony, House Committee on Trade and Economic

Development, HB 2299, Feb 23, 2003, Ex B at 3 (statement

of Mike Burton). This testimony suggests that the bill’s pro-

ponents had no intention that the change in terminology

would require the zone sponsor or the assessor to “autho-

rize” which eligible activities the firm could pursue; rather,

the authorization process served a general notice function.

The minutes summarizing the 12 days of testimony before

four legislative committees give no indication that legisla-

tors questioned or disagreed with this view. Minutes, House

Committee on Trade and Economic Development, Feb 24,

2003, 1-4, Feb 26, 2003, 3-5, Apr 7, 2003, 1-3, Apr 9, 2003,

2-3; Minutes, House Committee on Revenue, Apr 21, 2003,

4-7, Apr 28, 2003, 1-3, Apr 30, 2003, 1-3; Minutes, Senate

Committee on Revenue, May 29, 2003, 1-7, June 10, 2003,

5-9, June 12, 2003, 1-3; Minutes, Conference Committee,

July 15, 2003, 1-3, July 17, 2003, 1-2.23 By providing notice,

the authorization process weeds out projects that would be

ineligible before either the firm or the zone sponsors invest

substantial resources in them. Authorization at an early

23

Documents accompanying the agency’s oral testimony indicate that the

agency intended the 2003 change to “confirm that [a firm’s] descriptions only

matter in the most general terms of the proposed location and broad property

types, except for [‘headquarters’ facilities]. * * * Estimates and descriptions with

authorization can be critical information, but were never supposed to confound

exemption to the business firm’s disfavor.” House Committee on Trade and

Economic Development, HB 2299, Feb 23, 2003, Ex B at 4; see also id. Ex B at 9;

id. Ex A at 2; House Trade and Economic Development Committee, HB 2299-3,

Apr 7, 2003, Ex B.

Cite as 23 OTR 418 (2019) 437

stage, before commencing construction or hiring employees,

also helps ensure that the enterprise zone program func-

tions as a true “incentive” and does not merely afford exemp-

tion to a firm that has already committed to the new invest-

ment within the zone. See ORS 285C.055 (“[I]t is declared

to be the purpose of ORS 285C.050 to 285C.250 to stimulate

and protect economic success in such areas of the state by

providing tax incentives for employment, business, industry

and commerce * * *.” (Emphasis added.)). In short, the court

has not discovered any evidence of legislative intent to con-

fine a firm to specific activities that fit the definition of “eli-

gible” activities.

The court now considers whether the Extension

Agreement narrows the types of permitted activities. The

Enterprise Zone Act clearly authorizes the firm and the

zone sponsor to agree to “any additional requirement the

sponsor may reasonably require” as a condition of the addi-

tional one or two years of exemption. ORS 285C.160(3)(b)

(allowing reasonable additional conditions in an urban

zone); see also ORS 285C.160(3)(a)(B) (similar in nonurban

zones). In this case, however, the text of the Extension

Agreement places no express restrictions on taxpayer’s

activities beyond those imposed by the statute. Instead, sec-

tion 3 of the agreement states: “Only full-time, year-around

and non-temporary employees engaged a majority of their

time in The Firm’s eligible operations under [former] ORS

285B.707 [now ORS 285C.135] are counted.” (Emphasis

added.) The Extension Agreement does refer at one point

to taxpayer’s authorization application: “United Streetcar,

LLC will hire and maintain at least 5 full time positions

by December 31, 2011 as submitted in the Oregon Enterprise

Zone Authorization Application and any other positions

added that result from their investment at the compensa-

tion levels described below[.]” (Emphasis added.) The county

does not argue expressly that this provision incorporates

by reference all responses set forth in taxpayer’s applica-

tion, and the court declines any implied invitation to inter-

pret the emphasized phrase in the Extension Agreement as

converting all responses on the authorization application

form into hard and fast metrics by which to later test for

disqualification.

438 United Streetcar, LLC v. Dept. of Rev.

The court concludes, therefore, that the Extension

Agreement allowed taxpayer to count any activities or oper-

ations considered “eligible” under the Enterprise Zone Act

when determining whether disqualification was required.

On this summary judgment record, the court cannot deter-

mine that the county is entitled to prevail as a matter of

law regarding whether taxpayer’s activities were “eligible.”

Activities such as “serving as a middle-man for parts” and

“warehousing” appear to be business-to-business activities

as required in ORS 285C.135(1); they are not on the list of

expressly ineligible activities in ORS 285C.135(2); and they

may even constitute “shipping” or “storage” as expressly

permitted by ORS 285C.135(1). Despite taxpayer’s inatten-

tion to this issue, the court concludes that an objectively rea-

sonable finder of fact could well find in favor of taxpayer on

point (2) of the county’s argument. See TCR 47 C.

As to point (3) of the county’s argument, the same

conclusion as to the type of activities that were permissi-

ble prevents the court from determining, based on the

record to date, whether the employees spent the majority of

their time engaged in eligible operations as the Enterprise

Zone Act requires. See ORS 285C.050(13)(a) (definition of

“new employees hired by the firm” includes only employees

“engaged for a majority of their time in eligible operations”);

ORS 285C.200(4)(b) (qualification of firm requires that

employees “work a majority of their time in eligible opera-

tions” in the zone); ORS 285C.200(8)(b)(A) (same). The court

interprets these provisions as establishing a per-employee

test, i.e., the statutes require that each employee whom the

firm wishes to count toward the minimum requirement must

work a majority of the employee’s time in eligible operations

within the zone. The Burbank declaration is ambiguous, if

not silent, regarding whether the seven employees spent the

majority of their time on eligible operations, stating only

that seven “full-time * * * employees worked at the facility

* * * on USC projects.” The court thus has difficulty conclud-

ing that taxpayer has satisfied its burden of producing evi-

dence on how the employees spent the majority of their time.

However, because the parties apparently have proceeded on

an incorrect understanding of the type of activities permit-

ted, the overall record is even less informative about how

Cite as 23 OTR 418 (2019) 439

each employee spent the majority of time than about the

related, but higher-level, question of which activities tax-

payer pursued. As with point (2), the court cannot conclude

that the county is entitled to judgment as a matter of law.

The county’s motion is denied. At trial, taxpayer

may seek to prove its entitlement to exemption, and the

county may defend the assessment based on any applica-

ble arguments, including any or all of the four arguments

raised in its motion.

VI. CONCLUSION

Taxpayer’s motion for summary judgment is denied

because the record before the court proves that the final tax

year of taxpayer’s five consecutive tax years of enterprise

zone exemption was tax year 2016-17. The county’s motion

for summary judgment is also denied because, applying

a correct interpretation of the law governing the employ-

ment requirements, a genuine issue of material fact exists

regarding whether taxpayer maintained five employees per-

forming eligible activities a majority of their time within the

enterprise zone during the period relevant to the tax year

2016-17. Now, therefore,

IT IS ORDERED that Plaintif’s Motion for Sum-

mary Judgment is denied; and

IT IS FURTHER ORDERED that Defendant-

Intervenor’s Motion for Summary Judgment is denied.