Dept. of Rev. v. New Friends of the Beaverton City Library

512 November 26, 2019 No. 23

IN THE OREGON TAX COURT

REGULAR DIVISION

DEPARTMENT OF REVENUE,

Plaintiff,

and

WASHINGTON COUNTY ASSESSOR,

Intervenor-Plaintiff,

v.

THE NEW FRIENDS OF

THE BEAVERTON CITY LIBRARY,

Defendant.

(TC 5311)

Intervenor (the county) denied Defendant’s (taxpayer) property tax exemp-

tion for the subject property, which Defendant primarily used to operate a used

bookstore. Defendant appealed to the Magistrate Division, which decided in

Defendant’s favor. Plaintiff (the department) appealed to the Regular Division.

On Defendant’s motion for summary judgment, the court held that, although

Defendant is a charitable institution because its primary purpose is to donate

time and resources to the Beaverton City Library, the subject property is not enti-

tled to exemption under ORS 307.130(2)(a) because Defendant’s use of the prop-

erty is primarily operating a retail establishment at market prices. Longstanding

case law prohibits treating that operation as a charitable use despite Defendant’s

charitable purpose. The court further held that Defendant is not a “literary

institution.”

Oral argument on Defendant’s Motion for Summary

Judgment was held December 4, 2018, in the courtroom of

the Oregon Tax Court, Salem.

Darren Weirnick, Senior Assistant Attorney General,

Department of Justice, Salem, filed a response and argued

the cause for Plaintiff (the department).

Brad Anderson, Washington County Counsel, filed a

response and argued the cause for Plaintiff-Intervenor (the

county).

Ivan R. Gutierrez, Miller Nash Graham & Dunn

LLP, Portland, filed the motion and argued the cause for

Defendant (taxpayer).

Decision for Plaintiff and Intervenor rendered November 26,

2019.

Cite as 23 OTR 512 (2019) 513

ROBERT T. MANICKE, Judge.

I. INTRODUCTION

For the property tax year 2016-17, the Washington

County Assessor (the county) denied an application for

exemption filed by Defendant, The New Friends of the

Beaverton City Library (taxpayer) for a lot and buildings at

which taxpayer conducts operations, including sales of used

books. The county’s stated ground was that the property was

“primarily used for the generation of income/fundraising

for a charitable institution * * * [p]er OAR 150-307.130-(A)

(5)(a).”

Taxpayer timely appealed to the Magistrate

Division, which decided in taxpayer’s favor, concluding that

taxpayer’s operation of a bookstore was a use qualifying the

property for tax exemption1 under ORS 307.130(2).2 Plaintiff

Department of Revenue (the department) timely appealed

as the plaintiff by operation of law in this division of the

court, and the county joined as Plaintiff-Intervenor. See

ORS 305.501(1). Taxpayer moves for summary judgment on

the substantive claim that it is a charitable or literary insti-

tution, and that its use of the subject property entitles the

property to exemption under ORS 307.130(2). The depart-

ment and the county join in opposing taxpayer’s motion.3

II. FACTS

The following facts are not in dispute and, unless

otherwise indicated, applied at all relevant times. Taxpayer

is an Oregon nonprofit corporation and is exempt from

federal income tax under section 501(c)(3) of the Internal

Revenue Code. See ORS 65.001(29); IRC § 501(c)(3).

Taxpayer’s bylaws state that its mission is to (1) “Support

and strengthen” the Beaverton City Library; (2) “Cooperate

with the library in expanding the library services for the

1

The magistrate concluded that the county agreed that taxpayer was a char-

itable institution, a point that the Department of Revenue as plaintiff in this

de novo appeal disputes.

2

The court’s references to the Oregon Revised Statutes (ORS) are to the 2015

edition.

3

From this point, references to the department include the county unless

otherwise indicated.

514 Dept. of Rev. v. New Friends of the Beaverton City Library

community”; (3) “Create an appreciation of library ser-

vices”; and (4) “Promote the development of library pro-

grams.” The bylaws also state that taxpayer “will accom-

plish this mission by acquiring and selling books, as well

as audio visual materials in various formats and levels of

ability.” The Beaverton City Library (the Library) is part

of, and is operated by the City of Beaverton, a municipal

corporation.

The subject property is located at 12470 SW 5th

Street, Beaverton, OR 97005, essentially across the street

from the Library and a large public park. It includes a two-

story former residence with a total interior area of 1,812

square feet on an approximately 2,430 square foot lot with

exterior landscaping, access ways, and areas for parking.

A sign in the front yard, shaped like three large hardcover

books, reads: “Book Corner Used Books.” Taxpayer’s web-

site shows that an open space on the first floor is lined with

bookshelves to a height of approximately six feet and other-

wise holds a long table full of books in the middle of the

room, an office desk and chair, a fireplace, and two large

windows. A back room is used for sorting, pricing and tem-

porary storage of inventory, and upstairs space is used to

process online sales. Taxpayer leases the subject property

from the City of Beaverton at a rate that the parties agree

is below market for purposes of ORS 307.166(1).

Taxpayer operates under the name “The Book

Corner.” In 2015 and 2016 taxpayer offered for sale and sold

to the public at the subject property used books donated by

the public and used books the Library removed from circu-

lation, as well as CDs and DVDs. During 2015 and through

the end of July 2016, taxpayer also sold used books and

other materials to the public through Amazon at the sub-

ject property. During 2015 and through the end of October

2016, taxpayer employed two part-time employees at the

subject property to manage in-store and online sales. All

other activities at the subject property were undertaken by

volunteers, members of taxpayer’s board of directors, or the

public. For tax years 2015 through 2017, taxpayer gave a

total of $49,455 to the Library.

Cite as 23 OTR 512 (2019) 515

The court will discuss additional facts where

appropriate.

III. ISSUES

(1) Is taxpayer a charitable institution within the meaning

of ORS 307.130(2)?

(2) If taxpayer is a charitable institution, does taxpay-

er’s use of the subject property entitle the property to

exemption?

(3) Alternatively, is taxpayer a literary institution within

the meaning of ORS 307.130(2)?

(4) If taxpayer is a literary institution, does taxpayer’s use

of the subject property entitle the property to exemption?

IV. 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 mat-

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

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 man-

ner most favorable to the adverse party, no objectively rea-

sonable [factfinder] 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 persua-

sion at trial. Id. As applied to this case, this standard means

that taxpayer as the party moving for summary judgment

must point to facts in the record that prove taxpayer’s right

to the exemption such that no reasonable factfinder could

find in favor of the department, even though the court

must view the record in a manner most favorable to the

department.

516 Dept. of Rev. v. New Friends of the Beaverton City Library

B. Legal Framework and Taxpayer’s Factual Assumption

for Purposes of Its Motion

Oregon law provides a property tax exemption for

properties owned by or leased to certain organizations.4

ORS 307.130(2) reads, in pertinent part:

“* * * [T]he following property owned or being purchased

by * * * incorporated literary, benevolent, charitable and sci-

entific institutions shall be exempt from taxation.

“(a) * * * [O]nly such real or personal property, or propor-

tion thereof, as is actually and exclusively occupied or used

in the literary, benevolent, charitable or scientific work car-

ried on by such institutions.”

(Emphasis added.) The court views the statute as imposing

two sets of requirements, which the court refers to here as

the “entity-level” requirements contained in the flush lan-

guage of subsection (2), and the “property use” requirements

contained in paragraph (2)(a). The entity-level require-

ments differ, depending on whether the organization seeks

exemption as a charitable,5 literary, or scientific institution.

Claims of exemption on the basis that the taxpayer is a

“charitable” institution using the property in its “charitable

work” are common and are governed by an extensive body

of Oregon Supreme Court decisions that this court, as a

lower court, is bound to follow. See Re v. PERS, 256 Or App

52, 54, 301 P3d 932, rev den, 353 Or 867 (2013) (“It is not

this court’s role to overrule, directly or indirectly, Supreme

Court case law.”); State v. Turner, 235 Or App 462, 466, 234

P3d 993 (2010) (declining state’s invitation to cease treating

venue as a material allegation that must be proved beyond

a reasonable doubt “because we remain bound by Supreme

Court precedent until such time as that court reconsid-

ers and disavows it”). Regarding the use requirement,

courts have long required the use to be “primarily,” rather

than literally “exclusively,” dedicated to the exempt work.

4

ORS 307.166 imposes additional requirements for properties leased from

one organization whose property is eligible for exemption to another. In this case,

neither the department nor the county challenges exemption on the basis of any

such additional requirement.

5

As used in ORS 307.130(2)(a), the word “benevolent” means charitable. See

Behnke-Walker v. Multnomah County, 173 Or 510, 519, 146 P2d 614 (1944).

Cite as 23 OTR 512 (2019) 517

E.g., Mult. School of Bible v. Mult. Co., 218 Or 19, 31, 343

P2d 893 (1959). Taxpayer first argues that it fulfills the

entity-level requirements as a charitable institution and

that it fulfills the use requirements by primarily using the

subject property to carry on its charitable work of support-

ing the Library and advancing literacy. Alternatively, tax-

payer contends that it is a “literary institution” primarily

using the subject property to further its literary objectives,

a claim governed by fewer Supreme Court decisions.6 In

contrast to the Magistrate Division proceedings, where the

county appears to have agreed that taxpayer satisfies the

entity-level requirements, the department now challenges

taxpayer’s status as a charitable or literary institution, and

in either event it contends that taxpayer does not satisfy the

property use requirements. Solely for purposes of its motion,

taxpayer asks the court to assume that it charged market

rate prices for its inventory.

C. Is taxpayer a charitable institution?

To satisfy the entity-level requirements for a char-

itable institution under ORS 307.130(2): “(1) the organiza-

tion must have charity as its primary, if not sole, object;

(2) the organization must be performing in a manner that

furthers its charitable object; and (3) the organization’s per-

formance must involve a gift or giving.” SW Oregon Pub.

Def. Services v. Dept. of Rev., 312 Or 82, 89, 817 P2d 1292

(1991) (citing Dove Lewis Mem. Emer. Vet. Clinic v. Dept.

of Rev., 301 Or 423, 428, 723 P2d 320 (1986), and former

OAR 150-301.130-(A)7). Taxpayer contends that it satis-

fies all three requirements. The department acknowledges

that taxpayer has articulated a charitable purpose of sup-

porting the Library, and that taxpayer devotes some of

its efforts to performing in a manner that supports that

object, but the department contends that the retail sale of

books at market prices to raise money is, or has become,

taxpayer’s true primary purpose and is inherently not

charitable.

6

Taxpayer does not argue that it is a scientific institution within the mean-

ing of ORS 307.130(2).

7

This administrative rule has since been renumbered to OAR 150-307-0120.

518 Dept. of Rev. v. New Friends of the Beaverton City Library

As to the first requirement, taxpayer’s bylaws provide:

“The mission of New Friends of the Beaverton City Library is to:

“• Support and strengthen the library

“• Cooperate with the library in expanding library ser-

vices for the community

“• Create an appreciation of library services

“• Promote the development of library programs

“[Taxpayer] will accomplish this mission by acquiring and

selling books as well as audio and visual materials in vari-

ous formats and levels of ability.”

This mission statement articulates an “object” that is inher-

ently charitable—supporting the Library’s services and

programs and promoting the Library. Taxpayer unquestion-

ably does maintain this object. And as the discussion below

will show, the court concludes that supporting the Library

remains taxpayer’s “primary” object despite inferences that

the department draws from the uncontested factual record.

The court concludes that taxpayer satisfies the first entity-

level requirement.

The second requirement tests whether the organi-

zation acts in a manner that furthers its charitable object.

In many cases the issue is whether the organization has a

sufficiently high level of activity overall, or whether the orga-

nization acts in ways that benefit members or other insiders

instead of focusing on its charitable mission. See, e.g., Dove

Lewis, 301 Or at 429 (finding taxpayer veterinary clinic’s

referral process generated a private advantage to taxpay-

er’s founders). Here, too, the department essentially argues

that the activity of running the bookstore is, or recently has

become, taxpayer’s main reason for being and has eclipsed

the purpose of supporting the Library. As with the first

requirement, the court finds that the evidence is sufficient

to sustain taxpayer’s position on summary judgment; the

court will discuss the reasons for its conclusion below, in

the course of addressing the department’s primary argu-

ment based on an alleged lack of “gift or giving.” Moreover,

at least in this case, the court concludes that accepting the

department’s argument would convert the charitable activ-

ity requirement into a recapitulation of the “property use”

Cite as 23 OTR 512 (2019) 519

test, which has its own separate function that is defined by

different case law. The court is not aware of precedent that

would brand an organization as not a charitable institution

simply because it sells goods or services as the means to

pursue its charitable object. The court concludes that tax-

payer satisfies the second entity-level requirement.

Regarding the final entity-level requirement, in

cases involving organizations that charge for goods or ser-

vices, the Oregon Supreme Court has identified the follow-

ing factors as particularly probative of “gift or giving”:

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

maintenance and equipment of the institution or are other-

wise employed;

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

ment irrespective of their ability to pay;

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

and without discrimination as to race, color or creed;

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

if made, are lesser charges made to the poor or are any

charges made to the indigent.”

SW Oregon Pub. Def. Services v. Dept. of Rev., 312 Or 82, 92,

(1991) (quoting OAR 150-307-0120(4)(d)(C) (emphases omit-

ted)). None of the factors are required, nor is the list exhaus-

tive. Methodist Homes, Inc. v. Tax Com., 226 Or 298, 309-10,

360 P2d 293 (1961); see also Serenity Lane, Inc. v. Lane County

Assessor, 21 OTR 229, 236 (2013); Hazelden Foundation v.

Yamhill County Assessor, 21 OTR 245, 250 (2013).8

8

In Hazelden Foundation (which should be read together with Serenity

Lane), this court rejected the taxpayer’s “quantitative approach” as to whether

the organization was charitable, which relied on an incorrect reading of YMCA

v. Dept. of Rev., 308 Or 644, 784 P2d 1086 (1989) (YMCA II). In YMCA II, the

Supreme Court found insufficient “gift or giving” in the operations of two fitness

centers that offered “scholarship giving” amounting to “less than four percent”

of the organization’s total annual revenue. 21 OTR at 250-51 (citing YMCA II,

308 Or at 653-54). In Hazelden Foundation, this court rejected the taxpayer’s

argument “that the ‘gift or giving’ requirement is met simply because taxpayer’s

patient aid exceeds four percent of annual revenues and more than eight per-

cent of taxpayer’s patients receive such aid.” 21 OTR at 251 (emphasis added).

This court instead approved taxpayer’s “qualitative approach,” which relied on

the qualitative criteria adopted by the Supreme Court in SW Oregon, 312 Or at

82 (quoting OAR 150-307.130-A(4)(d)(C)), as “more in keeping with the cases of

this court and of the Supreme Court on the subject of exemption for charitable

institutions.” Hazelden Foundation, 21 OTR at 251.

520 Dept. of Rev. v. New Friends of the Beaverton City Library

The first of the four “gift or giving” factors func-

tions mainly to sift out institutions whose activities inure

to the benefit of those who organize or run it. See Hazelden

Foundation, 21 OTR at 252. The department alleges no

such private advantage here, and the court finds none. The

remaining three factors focus on the extent to which a tax-

payer ensures that the poor9 have access to the products or

services that the taxpayer sells. In this case, taxpayer iden-

tifies four activities that it contends prove the element of gift

or giving: its gifts of books to other organizations, its cash

and in-kind gifts to the Library, its use of volunteers and its

special sale pricing.

The court first turns to taxpayer’s cash gifts to the

Library. A review of taxpayer’s most recent federal income

tax returns10 in the record, for calendar years 2015 and 2016,

shows that taxpayer donated cash amounts to the Library

that the department acknowledges are “not insignificant”:

$15,125 in 2015 and $18,174 in 2016. In each year, these

cash donations comprised the majority of taxpayer’s net

income after all expenses,11 which consist of typical items

such as rent and total wages of about $33,000 for the two

part-time employees who managed the sales and the volun-

teers. Solely to put these amounts in perspective, the court

notes that taxpayer’s respective total receipts for each year

(before any reduction for cost of goods sold) were $86,170 and

$97,011, meaning that taxpayer gave the Library about 18

percent of its total receipts for each year.12 In consultation

9

The department raises, and the court sees, no issue regarding unfair

treatment of other disadvantaged groups.

10

Like most nonreligious exempt organizations of even modest size, taxpayer

was required to file, under penalty of perjury, annual “information” returns with

the Internal Revenue Service on Form 990 reporting detailed information about

its receipts, expenditures, and governance.

11

The court emphasizes that its discussion of quantitative evidence, whether

expressed as absolute dollar amounts, percentages of revenues, number of vol-

unteers, or volunteer hours, does not set a threshold or safe harbor for any other

case. See Hazelden, 21 OTR at 251 (emphasizing qualitative approach in lieu of

taxpayer’s proffered test).

12

The department contends that taxpayer more recently has been reducing

its donations to the Library while simultaneously growing its cash reserves,

apparently implying that the reserves exceed taxpayer’s reasonable needs, or that

the level of taxpayer’s giving to the Library has become inconsistent with taxpay-

er’s stated purpose. But the department offers as evidence only the treasurer’s

one-page “Annual Report” through September 30, 2017. The Annual Report does

Cite as 23 OTR 512 (2019) 521

with taxpayer, the Library used the donated funds to pay for

an annual “wish list” of items outside the Library’s normal

budget, such as furniture for new Library branches, books,

marketing efforts, and Library staff appreciation events.

The court finds that taxpayer’s cash gifts to the Library are

strong evidence of an element of “gift or giving.”

Taxpayer also received donations of books, sorted

them, and transferred to others those books it decided not to

sell at retail.13 The detailed evidence of this activity paints a

mixed picture that does, as the department argues, appear

to change over time. Taxpayer points out that, in 2015, tax-

payer transferred 1,287 boxes of books that it did not sell at

retail. Of these, about 53 percent went to the Salvation Army

and 19 percent to a Rotary chapter.14, 15 About 21 percent

went to a for-profit company (Better World Books), which

paid taxpayer for the books, and the remaining 7 percent

went to four organizations or schools, including Children’s

Book Bank, Cranes of Hope, Operation Paperback, and the

Vose School. On the other hand, the department points out

that, during the first six months of 2016, taxpayer increased

its share of transfers to for-profit entities from 21 percent to

43 percent, and late in that period (in May 2016), taxpayer

decided to cease all transfers to the Salvation Army, in favor

of a for-profit company, Discover Books, which not only paid

taxpayer for the books but picked them up from taxpayer’s

location without requiring taxpayer to first box them up.

As the Salvation Army had been by far taxpayer’s largest

charitable transferee, receiving 68 percent of taxpayer’s

not contradict the tax returns because its 12-month period does not align with

the calendar year that taxpayer used for income tax reporting purposes, and

the Annual Report uses undefined expense categories that do not appear to cor-

respond to the line items in the federal tax return. The Annual Report thus is

inadequate as evidence that taxpayer reduced its giving to the Library, nor does

the Annual Report provide enough context about taxpayer’s use of funds to create

a question of material fact about whether the required element of gift or giving

was lacking.

13

Over three-quarters of the books taxpayer accepted during 2016 were

donated by the general public; the remainder was from the Library.

14

Taxpayer seems to assume that the Salvation Army and the Rotary chap-

ter are charitable organizations, at least in a general sense, and the department

does not dispute that assumption.

15

The court notes that the exhibit contains an arithmetic error; the totals do

not reflect transfers made in December 2015.

522 Dept. of Rev. v. New Friends of the Beaverton City Library

transfers to charities and 39 percent of all transfers during

the first half of 2016, taxpayer’s decision implies a dramatic

shift, from giving away most of its nonretail inventory to

charities toward essentially selling most of it at wholesale

to for-profit distributors. The court hesitates to declare a

trend from such a limited data set, but the court concludes

that the evidence from the first half of 2016 seriously weak-

ens taxpayer’s claim that its donations of books to chari-

table causes constituted evidence of an element of “gift or

giving.”

Taxpayer also cites its use of its employees and vol-

unteers to provide in-kind services to the Library as evi-

dence of the element of “gift or giving.” Taxpayer appears to

refer to the service of removing older books from circulation

at the Library to make room for new ones. The court agrees

that this service is of some value to the Library, and the use

of staff and volunteers to perform this service is some evi-

dence of “gift or giving,” although not conclusive by itself. See

Salem Non-Profit Housing, Inc. v. Dept. of Rev., 9 OTR 265,

268 (1982) (“The fact that dedicated members of plaintiff’s

board of directors have unselfishly contributed hundreds of

unpaid hours to the creation and administration of a highly

commendable project does not make the operation charita-

ble per se.”); OAR 150-307-0120(4)(d)(D) (stating rule).16

The court finds nothing in taxpayer’s special sale

pricing that supports its position as to the element of “gift or

giving,” given the assumption that all pricing is at market.

In sum, the evidence of an element of “gift or giv-

ing” in this case consists overwhelmingly of taxpayer’s

donations of cash and time to the Library.17 In the depart-

16

However, returning momentarily to the second requirement in the entity-

level test, the court does find taxpayer’s ability to attract and retain volunteers,

as well as donations of books, to be substantial additional evidence that taxpayer

is performing in a manner that supports its charitable purpose. Taxpayer’s vol-

unteers logged 6,707 hours of volunteer time during 2015 and more than 3,500

hours during the first half of 2016. Taxpayer reported the number of volunteers

at nearly 50 in mid-2016. Taxpayer’s newsletter regularly solicited volunteers

and made clear that their service would benefit the Library. Taxpayer describes

its volunteer program as a “joint effort” with the Library, noting that taxpayer

and the Library use the same volunteer coordinator.

17

Taxpayer also at times refers to its activities to promote the Library

and other activities it regards as charitable. The court finds it noteworthy

Cite as 23 OTR 512 (2019) 523

ment’s view, these gifts are inadequate because taxpayer is

not giving the cash directly to poor customers in the form

of discounts or free books. The department’s argument is

consistent with its position, discussed below, that a retail

store selling at market prices cannot be exempt unless the

retail store engages in charitable giving through the act of

selling, for example by intentionally training or providing

long-term employment to persons who otherwise would have

barriers to employment.18 Although taxpayer’s donations to

the Library differ from the direct customer discounts for

the poor discussed in SW Oregon, YMCA II, and Hazelden/

Serenity Lane, the court concludes that taxpayer’s donations

to the Library suffice in this case because they fulfill the

underlying purpose of the “gift or giving” requirement by

providing the poor with access to books. The city-owned

Library already provides books (and many other materi-

als and services) to the community at no charge. Taxpayer,

located across the street from the Library, need not repli-

cate that activity in order to demonstrate an element of “gift

that taxpayer organized a public reading and book signing with Bill Hall, the

author of a book about former Oregon Governor Tom McCall at the Library on

October 25, 2015. Paula Gunning, McCallandia Author to Speak at “Friends”

Annual Meeting, The Book-Mark at 1-2 (Sept/Oct 2015) (newsletter). The event

was “free and open to the public * * * with complimentary refreshments.” Id. The

court sees the author event as an indicator that supporting the Library remained

taxpayer’s primary focus.

In addition, taxpayer presented evidence of numerous sales and promotions,

some of which seem linked by theme or timing to coincide with Library program-

ming. For example, taxpayer held a “Star Wars sale Dec 1-14” that appears to

have coincided with an “Open House/Tree Lighting” ceremony. See Jessica Miele,

Yoga Storytime: Stretching Kids’ Bodies and Imaginations, The Book-Mark at

2-3 (May/June 2016) (newsletter explaining Star Wars-themed yoga storytelling

event held at the Library). In summer 2015, taxpayer offered a 50-cent bookstore

coupon to participants in the Library’s summer reading program. Taxpayer pro-

vided lawn space for one of four stages for an event called “Ten Tiny Dances,” the

other stages having been set up in the same park across the street that houses

the Library. In 2015 and 2016, taxpayer offered discounted theater tickets to

productions at the Beaverton Civic Theater for customers who donated books

to taxpayer. The court finds that these activities generally do “double duty,” in

the sense that they seem designed to promote taxpayer’s sales as much as to

promote the Library. The court assigns little weight to these activities, whether

as an indicator of “gift or giving” or as an overall indicator of actions furthering

taxpayer’s charitable object.

18

The Oregon Supreme Court has explained that when determining whether

an element of “gift or giving” is present, the “appropriate perspective * * * is that

of the recipient of the charitable giving.” Dove Lewis, 312 Or at 91 (citing former

OAR 150-307.130(A)(3)(d)).

524 Dept. of Rev. v. New Friends of the Beaverton City Library

or giving”; it is sufficient that taxpayer devotes most of its

net profit, as well as the time of numerous volunteers, to

the Library so that the Library itself is better able to make

books available to everyone, including the poor.19 In a real

sense, taxpayer sells books as a continual fundraiser in

order to help the Library make books available for free. The

court concludes that taxpayer fully satisfies the entity-level

requirements and qualifies as a charitable institution.

D. Is the subject property actually and exclusively used to

accomplish taxpayer’s charitable purpose?

The property use test differs from the entity-level

test in that the property use test reflects the in rem nature

of property taxation. To administer the property tax, each

county assessor must determine whether to classify each

parcel of real property, and each item of personal property,

as either taxable or exempt in the course of the annual

assessment process. See Gray v. Dept. of Rev., 23 OTR 220,

223-24 (2018). Whereas the entity-level test asks whether

the property’s owner or lessee generally is acting for the

benefit of the public or those in need, as opposed to in self-

interest, the property use test asks how closely a particular

parcel or item of property is connected to the owner’s or les-

see’s charitable purpose. See Benevolent Society v. Kelly, 28

Or 173, 190, 193-97, 42 P 3 (1895) (interpreting prior law

requiring that property be “actually occupied” for literary,

benevolent, charitable, or scientific purposes); Mult. School of

Bible, 218 Or at 31, 36-37 (interpreting current law requiring

that property be “actually and exclusively occupied or used”

for such purposes; holding the property must be “reason-

ably necessary” to accomplishment of organization’s prime

purposes).20

19

Without minimizing the barriers that even small dollar amounts can cre-

ate for the indigent, the court also observes that books and DVDs are in a price

class very different from hospital services, addiction treatment, and health club

memberships.

20

In YMCA v. Dept. of Rev., 268 Or 633, 635 n 1, 522 P2d 464 (1974) (YMCA I),

the court referred to a use of property that “substantially contributes” to further-

ance of the overall goals of the charitable organization, apparently paraphrasing

the “reasonably necessary” test articulated in Mult. School of Bible. In Habitat

for Humanity v. Dept. of Rev., 360 Or 257, 264-66, 381 P3d 809 (2016), the court

again applied the “reasonably necessary” test.

Cite as 23 OTR 512 (2019) 525

As an important limitation within the property use

test, longstanding Oregon precedent declares that if the

primary use of the subject property is to make money to

fund charitable operations occurring on other properties,

the connection to the organization’s charitable purpose is

too attenuated to support exemption of the subject prop-

erty. The Oregon Supreme Court first considered—and

rejected—the so-called “destination of income” theory of

charitable exemption in 1895. Benevolent Society, 28 Or at

189. In that case, the taxpayer owned a three-story build-

ing in Portland, of which the ground floor was rented for

stores, the second story rented for offices (except one room

that the taxpayer occupied), and the third story rented for a

public hall. Id. The taxpayer was a benevolent society that

provided a disability benefit to certain Irish persons and

persons of Irish descent. The county argued both that the

taxpayer was not a charitable institution (because of the

limitations on persons who could participate) and that the

taxpayer did not use the property for charitable purposes.

The court concluded that taxpayer could theoretically be a

charitable institution under the Oregon statute even though

its benefits were not available on a “universal” basis.21

But, regardless of that possibility, the court held that the

property was not exempt from tax because it was “used for

other and different purposes” that were “in competition

with the property of other owners.” Id. at 193. The court

stated:

“It is the actual occupancy of the property which deter-

mines its right to exemption, and not the use made of its

proceeds. The plain and obvious meaning of the statute

is that only the real estate actually occupied and in use

by these different institutions for the purposes for which

they were organized shall be exempt from taxation. While

so occupied and used, it does not come in competition with

the property of other owners, and the purpose for which

it is used was supposed by the legislature to be a suf-

ficient benefit to the public to justify its exemption from

the burdens of taxation imposed upon other property.

21

Because the taxpayer did not meet the use requirement, the court never

reached a conclusion as to whether the taxpayer was in fact a charitable institu-

tion. Id. at 193.

526 Dept. of Rev. v. New Friends of the Beaverton City Library

But when such property is used for the purpose of accu-

mulating money, the law imposes upon it the same bur-

den of taxation as it imposes upon other property similarly

situated.”

Id. at 193-94 (emphases added); see also Willamette University

v. Knight, 35 Or 33, 46, 56 P 124 (1899) (real property leased

to nursery company held not exempt because it was used

for a purpose other than the university’s charitable pur-

pose and generated profit “in direct competition with busi-

ness of like nature and kind carried on elsewhere by other

persons”).

A court today faced with the facts of Benevolent

Society could readily deny exemption on the simple ground

that the charitable owner had rented out the property,

which destroys exemption unless the lessee applies for and

receives a determination of exemption in its own right. See

ORS 307.166 (requiring lessee to apply for exemption); Or

Laws 1973, ch 476 (first enacting predecessor, former ORS

307.164). But the Supreme Court has applied the reason-

ing of Benevolent Society even to property used for retail

purposes by the same entity that operates as an undis-

puted charity in other locations. Mult. School of Bible, 218

Or at 24-26, 37. In that case, the taxpayer operated a reli-

gious college on a campus in the eastern part of Portland,

but it also owned the subject property, a retail book and

religious “Christian Supply Center” several miles away,

downtown. Id. at 38. The taxpayer argued that “all prof-

its from the Christian Supply Center are immediately

channeled back into the treasury of the school, where it is

employed for the purposes for which the school was orga-

nized.” Id. at 39. The court saw no reason to question that

assertion but denied the exemption, citing Benevolent

Society:

“We hold plaintiff’s business, known as the Christian

Supply Center, is an enterprise for the purpose of business

and profit which comes in direct competition with busi-

nesses of like nature and kind carried on elsewhere by other

persons and does not comply with ORS 307.130, supra, so

as to entitle it to the tax relief sought, even though its net

gains flow to and are devoted by the Bible School to religion

or education.”

Cite as 23 OTR 512 (2019) 527

Id. at 42. The Supreme Court’s rejection of the destination-

of-income theory of exemption is thus firmly embedded in

today’s law.22

The Supreme Court’s most recent opinion involving

the charitable exemption does not change the analysis. In

Habitat for Humanity, 360 Or at 264, the court held that

a vacant lot that the taxpayer (“Habitat”) held for later

improvement and eventual sale satisfied the property use

requirement. The issue was whether the requisite “use” was

occurring even though Habitat was not actively construct-

ing housing on the lot on the assessment date. Because

Habitat’s charitable purpose necessarily involved holding

and improving real property, in contrast to taxpayers such

as the hospital and university involved in prior leading cas-

es,23 the court held that Habitat’s mere holding of the lot

satisfied the use requirement. Importantly for this case,

however, the court never had to consider its prior rejection

of the destination-of-income theory of exemption because

the parties had stipulated that Habitat acquired the lot “for

‘the sole purpose of later building a residential home on it

using volunteer labor and selling it to a low-income family

at a price below market.’ ” Id. at 259 (emphasis added). For

Habitat, use of the property consisted, ultimately, of trans-

ferring it to the poor at a below-market discount—the lot

was, in a general sense, part of Habitat’s inventory held for

sale. By contrast, taxpayer asks the court to assume that it

does not sell below market—to anyone, rich or poor. Selling

books to the poor at a discount below market value is not

part of taxpayer’s charitable mission; rather, taxpayer’s

mission is to send money from book sales to the Library,

22

Prior decisions of this court and the Oregon Supreme Court have all ana-

lyzed the “destination of income” issue under the “property use” requirement of

the two-part analysis. See Benevolent Society, 28 Or at 193-97; Willamette Univ.,

35 Or at 44-46; Corp. Presiding Bishop v. Dept. of Rev., 6 OTR 268, 269 (1975),

aff’d, 276 Or 775, 556 P2d 685 (1976) (religious organization was not entitled

to exemption with respect to its farm property from which profits were derived

despite contention that the rental income was used for the care of the poor and

needy); see also Kiwanis Club v. Dept. of Rev., 12 OTR 318, 320 (1992) (rejecting

destination of income as grounds to exempt a retail store stocked with donated

goods); YMCA II, 308 Or at 655 (rejecting use of income to support charitable

affiliate as basis to exempt fitness centers that generated the income).

23

See Eman. Luth. Char. Bd. v. Dept. of Rev., 263 Or 287, 502 P2d 251 (1972);

Willamette Univ. v. Tax Com., 245 Or 342, 344-45, 422 P2d 260 (1966).

528 Dept. of Rev. v. New Friends of the Beaverton City Library

which does make books available to rich and poor alike.

Praiseworthy though taxpayer’s use of its property is, it is

exactly analogous to the use that the court found ineligible

in Mult. School of Bible.24

Thus the same facts that support the court’s favor-

able determination of taxpayer’s status as a charitable insti-

tution work against a favorable determination under the

property use test. Taxpayer’s overall mission is to support

the Library. Its declared strategy for doing so is “by acquir-

ing and selling books” and other materials. Taxpayer’s pri-

mary use of the subject property implements exactly that

strategy. Taxpayer uses the property primarily to run an

impressive operation of employee-led volunteers who receive

donated books, sort them, and sell them at market prices.

However, Mult. School of Bible precludes exemption for this

use.

Taxpayer asserted at oral argument that Mult.

School of Bible is distinguishable because taxpayer sells

exclusively books that are donated, by either the Library or

the public, and because taxpayer relies heavily on numerous

volunteers in addition to its two part-time paid employees.

But neither the statute nor the case law supports an excep-

tion to Mult. School of Bible based on those facts. An orga-

nization’s ability to attract donations of goods and volunteer

labor is a factor that repeatedly has moved the legislature

to amend ORS 307.130 to extend exemption to retail oper-

ations that support charitable activity in other places, but

only in combination with other factors not present here. A

“retail store dealing exclusively in donated inventory” may

be exempt under ORS 307.130(2)(d), but that provision also

requires that the proceeds be used to support a “welfare

program,” defined as the “providing of food, shelter, cloth-

ing or health care * * * to needy persons without charge.” See

Kiwanis Club v. Dept. of Rev., 12 OTR 318, 320 (1992) (finding

24

Habitat for Humanity also is distinguishable because in taxpayer’s case

the property at issue is not taxpayer’s inventory being held for sale (which con-

sists of books that, as personal property, already would enjoy exemption under

ORS 307.400), but rather the facility at which taxpayer performs its activities.

The inventory exemption was not available for the taxpayer’s personal prop-

erty in Mult. School of Bible because the legislature did not enact the inventory

exemption until 1969. Or Laws 1969, ch 612, § 1 (HB 1214).

Cite as 23 OTR 512 (2019) 529

taxpayer’s activities were not limited to a “welfare program,”

with the consequence that taxpayer’s retail store was not

entitled to exemption under former ORS 307.130(1)(d)).

Providing books or literature is outside the scope of a “wel-

fare program.” A “retail store deal[ing] primarily and on a

regular basis in donated and consigned inventory” may be

exempt under ORS 307.130(2)(e), but only if “all individuals”

who operate the store are volunteers. Taxpayer is ineligible

because it has two paid employees. A “retail store deal[ing]

exclusively in donated inventory” may be exempt under ORS

307.130(2)(h), but only if its proceeds are used to support a

specific type of “not-for-profit housing program.”25 The court

in Mult. School of Bible articulated two reasons to deny

exemption: the moneymaking use of the retail store is dif-

ferent from the use for which exemption is allowed at the col-

lege’s other location, and the use of the property of the retail

store competes with other businesses. 218 Or at 36-37, 42. See

also Benevolent Society, 28 Or at 193-97; Willamette Univ., 35

Or at 44-46; Corp. Presiding Bishop v. Dept. of Rev., 6 OTR

268, 269 (1975), aff’d, 276 Or 775, 556 P2d 685 (1976). Both of

those reasons apply here as well. Taxpayer’s use of the subject

property does not make books available to the poor, for free

or at below-market prices, at the subject property; meanwhile,

taxpayer’s use of the subject property for on-site and online

sales competes with other retail booksellers. The generosity

of the donating public and numerous volunteers enables tax-

payer to raise substantial funds for the Library even while

keeping prices low, but the use of donated inventory and vol-

unteer time does not overcome the restriction on exemption

imposed by the Oregon courts’ rejection of the destination-of-

income theory under the property use requirement.

Taxpayer advances other uses it makes of the subject

property, but none of them rise to the level of the “primary”

use. Taxpayer does use the property to receive, identify, and

package or otherwise prepare some books for donation to

other charitable institutions. But even applying the avail-

able numbers from 2015 before taxpayer ceased donations to

its largest charitable donee (the Salvation Army), taxpayer’s

25

Other provisions exempt a “retail outlet” of a “rehabilitation facility,” as

defined (ORS 307.130(2)(c)), or a “retail store” of a “history museum or science

museum.” ORS 307.130(3).

530 Dept. of Rev. v. New Friends of the Beaverton City Library

donations to other charitable institutions amounted to 1,017

boxes and bags of books out of more than 4,000 boxes and

bags received.26, 27 This implies that taxpayer gave to charity

about 23 percent of the books it received; sold about 6 per-

cent at wholesale; and sold the remaining approximately 71

percent at retail. The court thus finds that processing books

for donation to other charitable institutions was not the pri-

mary use of taxpayer’s property. Similarly, taxpayer uses

the property to temporarily house books that the Library

needs to dispose of in order to make room for newer materi-

als. This use of the property may relieve a burden of govern-

ment, as the Library is a municipal institution. But books

from the Library amount to only 25 percent of taxpayer’s

inventory; the rest come from the general public. At that

level, disposing of older Library books cannot be the pri-

mary use of the property even if the court ignores the fact

that intake, sorting, and storage activities also make it pos-

sible for taxpayer to sell the overwhelming majority of these

books.

The court does not question the charitable motiva-

tion of taxpayer’s board, officers or other volunteers, but it is

clear to the court that Oregon precedent does not allow the

court to treat the subject property as “actually and exclu-

sively occupied or used” in taxpayer’s charitable work as

ORS 307.130(2)(a) requires.

E. Is taxpayer a literary institution?

Taxpayer makes the alternative argument that the

subject property is exempt from taxation because taxpayer

qualifies as a “literary institution” and actually and exclu-

sively uses the subject property for its literary work pur-

suant to ORS 307.130(2)(a). Taxpayer argues in its motion

that its “whole purpose and all of its activities are directed

to the ‘propagation and spread’ of literature. ” (Quoting OAR

26

Exhibit A to Bartos’s declaration contains an apparent typographical or

arithmetic error indicating that taxpayer donated only 1,204 boxes during 2015.

Of the correct total donated, 270 went to Better World Books, a for-profit entity

as previously noted. 1,287 (total) – 270 (Better World) = 1,017.

27

The average total of boxes and bags per month, based on the most com-

plete monthly summaries (for January through March and September through

December 2015) is 374, from which the court extrapolates an estimated number

of 4,483 for the calendar year 2015.

Cite as 23 OTR 512 (2019) 531

150-307-0130(1).) In addition to accepting books from the

Library, taxpayer identifies several activities at the subject

property that it asserts contribute to the spread of liter-

ature, such as book fairs, community book sales, reading

events, author talks and festivals. The department, while

acknowledging that taxpayer’s donations of money to the

Library and its donations of some portion of its inventory

may help “propagate and spread” the study of books, argues

that the court need not focus on the distinct meaning of

“literary institution” because a correct reading of the rel-

evant Oregon Supreme Court precedent requires even an

entity seeking exemption as a literary institution to have

charity as its primary object, which the department claims

taxpayer does not.28 The court does not decide whether the

department’s reading is accurate because the court already

has concluded that taxpayer has charity as its primary

object, in the foregoing analysis of the entity-level require-

ments for a charitable institution. The court therefore turns

to analysis of taxpayer’s argument, focusing on the term

“literary institution.”

Compared to the term “charitable institution,”

Oregon Supreme Court decisions provide relatively lit-

tle guidance on the meaning of “literary institution.”

Accordingly, the court approaches taxpayer’s alternative

claim as a question of statutory interpretation requiring

the court to examine the statute’s text, context and (to the

extent available and helpful) legislative history, as well

as general rules of construction to resolve any remaining

uncertainty. State v. Gaines, 346 Or 160, 171-72, 206 P3d

1042 (2009). In doing so, the court applies Oregon Supreme

Court decisions wherever applicable. As noted most recently

by the Oregon Supreme Court in Theatre West of Lincoln

City, Ltd. v. Dept. of Rev., 319 Or 144, 873 P2d 1083 (1994),

28

The department argues that this court’s opinions holding that a literary

or scientific institution need not have charity as its primary purpose misinter-

pret the Oregon Supreme Court’s holding in Theatre West of Lincoln City, Ltd.

v. Dept. of Rev., 319 Or 144, 117, 873 P2d 1083 (1994), and conflict with Behnke-

Walker, 173 Or at 520 (citing Math Learning Center v. Dept. of Rev., 14 OTR 62,

65-66 (1996), and Oregon Writer’s Colony v. Dept. of Rev., 14 OTR 69, 73 (1996)).

Because the court has already concluded above that taxpayer satisfies the higher

standard for a charitable institution under the three-part test in SW Oregon,

the court need not revisit the standards expressed in Math Learning Center and

Oregon Writer’s Colony.

532 Dept. of Rev. v. New Friends of the Beaverton City Library

the key statutory language exempting property of all “liter-

ary, benevolent, charitable and scientific institutions” has

remained unchanged since the territorial legislature origi-

nally enacted it in 1854. See Theatre West, 319 Or at 119.29

As to the text, the term “literary institution,” like the more

common term “charitable institution,” is recognized as a

standalone term but is not defined in statute. See id. at 118.

In discerning the plain meaning of multiword terms, the

Oregon Supreme Court recently has taken the systematic

approach of looking first for a definition of the phrase as a

whole. See, e.g., Comcast v. Dept. of Rev., 356 Or 282, 297-98,

337 P3d 768 (2014) (determining at the outset of its analysis

that phrase “data transmission services” has no familiar

or common meaning; rejecting as “futile” an approach that

would require the court to “cobble together definitions of the

individual words to make collective sense of the phrase as a

whole”); Tharp v. PSRB, 338 Or 413, 423, 110 P3d 103 (2005)

(analyzing meanings of “mental disease or defect” and “per-

sonality disorder” as complete phrases “although they con-

sist of common individual words”).

As with any term, Oregon courts often consult dic-

tionary definitions of multiword phrases, on the assumption

that, if the legislature did not give the term a specialized

definition, the dictionary definition in use at the time best

29

The phrase “literary, benevolent, charitable and scientific institutions”

first appeared in an act of the territorial legislature dated January 27, 1854, in a

provision materially identical to the relevant portion of today’s ORS 307.130(2):

“The following property shall be exempt from taxation:

“* * * * *

“(4) The personal property of all literary, benevolent, charitable and sci-

entific institutions incorporated within this territory, and such real estate

belonging to such institutions as shall be actually occupied for the purposes

for which they were incorporated.”

The Statutes of Oregon, Enacted and Continued in Force by the Legislative

Assembly at the Session Commencing 5th December, 1853, ch I, tit I, § 4 (Bush

1854); compiled in General Laws of Oregon, Civ Code, ch LIII, title I, § 4, p 894

(Deady 1845-1864) (“Section Four”), also codified at Codes and General Laws

of Oregon, ch XVII, title I, § 2732 (Hill 1887), available at https://heinonline.

org/HOL/P?h=hein.sstatutes/coglwor0002&i=226; The Codes and Statutes of

Oregon, title XXX, ch I, § 3039 (Bellinger & Cotton 1901), available at https://

heinonline.org/HOL/P?h=hein.sstatutes/codsor0002&i=250 (emphasis added).

See Behnke-Walker, 173 Or at 513 (“Ever since its enactment by the territorial

legislature in 1854 * * * [the statute] has remained unamended, except that the

word “territory” therein has been changed to “state.” (Citation omitted.)).

Cite as 23 OTR 512 (2019) 533

reflects the meaning that the legislature would naturally

have intended. Comcast, 356 Or at 296. The court has found

no dictionary definition of “literary institution” contempo-

raneous with 1854, although a contemporaneous dictionary

does use the phrase as follows:

“Institution—A system, plan or society established,

either by law or by the authority of individuals for promot-

ing any object, public or social. We call a college or an acad-

emy, a literary institution; a bible society, a benevolent or

charitable institution; a banking company and an insur-

ance company are commercial institutions.”

Noah Webster, 1 An American Dictionary of the English

Language 114 (1828) (emphasis added). The same dictionary

defines “collegian” as a “member of a college, particularly of

a literary institution so called; an inhabitant of a college.”

Id. at 41 (emphasis added).30 In contrast to a definition of

the phrase as a whole, the use of the phrase leaves open the

possibility that a “college or an academy” was only one type

of “literary institution.”

The court turns to the statutory context. To start

with, the court has searched for other contemporaneous uses

of the phrase “literary institution” in Oregon statutes, but

the court has found nothing useful there.31 The court notes

that the 1957 Legislative Assembly created a specific exemp-

tion for certain educational institutions or organizations:

“If not otherwise exempt by law, the schools, acade-

mies and student housing accommodations, owned by

incorporated eleemosynary institutions or by incorporated

30

“College” being defined, in pertinent part, as “the society of persons

engaged in the pursuits of literature, including the officers and students.” Id.

31

In 1849, the territorial legislature passed a law exempting “the prop-

erty of all literary institutions, together with public buildings, and other

property belonging to the Territory[.]” See An Act, to provide for assessing

and collecting County and Territorial Revenue (Sept 29, 1849). Two years

later, the legislature deleted the phrase “literary institution” from the act.

See An Act, amendatory to an act * * * passed September 29, 1849 (Feb 7,

1851). Nothing in either act defines “literary institution,” and the court has

found no cases interpreting the 1849 or 1851 acts. Aside from the limited

(and for this purpose uninformative) legislative record preserved in the jour-

nals of the territorial legislature, the court is unaware of any legislative his-

tory of the acts of 1854, 1851, or 1849 to assist in the interpretation of “literary

institution.”

534 Dept. of Rev. v. New Friends of the Beaverton City Library

religious organizations, used exclusively by such institu-

tions or organizations for or in immediate connection with

educational purposes, are exempt from taxation.”

ORS 307.145. The existence of ORS 307.145 implies that the

legislature in 1957 at least questioned whether the existing

phrase “literary, benevolent, charitable and scientific insti-

tutions” already exempted the property described in ORS

307.145. Any such perception of ambiguity in 1957 is, of

course, not relevant to the instant case, as it does not reveal

the intention of the territorial legislature more than 100

years earlier. DeFazio v. WPPSS, 296 Or 550, 561, 679 P2d

1316 (1984) (“The views legislators have of existing law may

shed light on a new enactment, but it is of no weight in inter-

preting a law enacted by their predecessors.”).32 In any event,

there is evidence that the 1957 Legislative Assembly had no

intention of changing the application of prior exemption pro-

visions: the text of ORS 307.145 expressly exempts property

“[i]f not otherwise exempt by law,” and one of the senators

is recorded as having remarked during a committee meet-

ing that the bill “was put in to clarify and not to disturb

the existing law.” Minutes, Senate Committee on Taxation,

32

In addition, a close reading of the text of ORS 307.145 suggests that the

legislature in 1957 was concerned largely with specific types of property, the sta-

tus of which may have been unclear under the general exemption for “literary

institution” property. First, the reference to “schools” may have been an effort

to clarify that exemption applied to property used for education below the col-

lege level. The reference to “student housing accommodations” seems to clarify,

or possibly extend, the scope of the exemption. By including property used by

“religious organizations” for educational purposes, ORS 307.145 eliminates doubt

as to whether those schools were eligible. And the phrase “for or in immediate

connection” with educational purposes suggests that exemption might apply to

a somewhat broader range of properties than even student dormitories. The leg-

islative history supports these inferences. The minutes of the Senate Taxation

Committee initially suggest that the purpose of the bill was to ensure exemption

for four educational institutions in Portland notwithstanding the fact that nuns

and priests who worked there also used portions of the premises as living quar-

ters. Minutes, Senate Committee on Taxation, Mar 28, 1957, 1-2; see also id.,

Apr 18, 1957, 3. (It is unclear from the surviving committee minutes whether the

proponents were concerned about loss of exemption for all of the property at each

facility or only about loss of exemption for the living spaces.) Counsel for the State

Tax Commission, Ted de Looze, testified to the effect that “there was not a spe-

cific statute exempting property of educational institutions. They obtain because

they come within [ORS] 307.130 because they are literary, scientific, educational,

etc.” Minutes, Senate Committee on Taxation, Mar 29, 1957, 5. de Looze went on

to mention married student housing and dormitories as among issues that the

bill should address specifically. Id., Mar 29, 1957, 6.

Cite as 23 OTR 512 (2019) 535

Apr 18, 1957, 3 (statement of Sen Ohmart). In short, noth-

ing in ORS 307.145 suggests that the existing exemption

for property of “literary institutions,” now codified in ORS

307.130, applies to property of a bookstore.

The court next considers the relatively few Oregon

judicial opinions that have interpreted the phrase “literary

institution.” The first was a nontax case involving Corvallis

College, which some years previously had been designated

a federal land grant college but still was associated with

its founding body, the Methodist Episcopal Church. Liggett

v. Ladd, 23 Or 26, 31 P 81 (1892). The trustees decided to

deed a previously purchased “agricultural farm” to the

state after it became clear that the college could not raise

the funds from the church or the local community to main-

tain the federally mandated curriculum of “agricultural

studies, military tactics, * * * and the mechanic arts” while

also adhering to the requirement in the college’s articles of

incorporation to “maintain a strictly literary institution for

educational purposes.” Id. at 39-46. The point significant for

this case is that the Supreme Court seemed to agree that

the trustees reasonably were concerned that running an

agricultural college would violate the corporate mandate to

run a “strictly literary institution.” See id. at 44-45. This

court infers that, as of 1892, the phrase “literary institution”

encompassed a college or school, and that a “strictly” liter-

ary institution meant one devoted to courses of study other

than practical pursuits such as agriculture. Arguably, those

meanings relate back to 1868, when the founders drafted

the articles of incorporation.33

33

Later Oregon cases that incidentally mention the phrase give no indication

that the Supreme Court ever sought to broaden the definition of “literary insti-

tution” beyond its original meaning as a type of school. See Barmore v. Board

Medical Examiners, 21 Or 301, 307, 28 P 8 (1891) (quoting Ill. State Bd. of Dental

Examiners v. People, 123 Ill. 227, 242, 13 NE Rep 201 (1887) (citing an Illinois

regulation requiring preliminary examination if “no certificate from a high or

normal school, or other literary institution, is presented by the candidate”));

Philomath College v. Wyatt, 27 Or 390, 396, 31 P 206 (1892), aff’d, 27 Or 390, 37 P

1022 (1894) (stating that Philomath College was organized as a “literary institu-

tion”); University v. Multnomah Co., 31 Or 498, 499, 50 P 532 (1897) (deciding pro-

cedural issues; acknowledging that certain property of Portland University was

exempt as property of a “literary institution”); Security Sav. & Trust Co. v. Lane

County, 152 Or 108, 135, 53 P2d 33 (1935) (citing Williston Seminary v. County

Commissioners, 147 Mass 427, 430, 18 NE 210 (1888) (implying that a seminary

is a literary institution)).

536 Dept. of Rev. v. New Friends of the Beaverton City Library

In Willamette University v. Knight, decided in 1899,

the court’s holding was to deny exemption for a portion of

improved land that the university leased to others for profit,

as noted above. See 35 Or at 44-46. The court freely described

Willamette University as a “literary institution” but saw no

need to define the term. The next case, Kappa Gamma Rho v.

Marion County, 130 Or 165, 279 P 555 (1929), involved prop-

erty owned by an incorporated fraternity and operated as a

residence hall for members attending Willamette University.

The court concluded that the corporation was neither a char-

itable, literary, nor scientific institution. It was not charita-

ble because it was “organized and maintained for the con-

venience of its members.” 130 Or at 176. In rejecting the

taxpayer’s argument that it qualified for the exemption for

literary or scientific institutions, the court stated:

“The literary work is that of a student while attending col-

lege. The scientific phase of plaintiff’s activities is that of a

student while preparing himself for his life’s vocation. Such

pursuits are not generally classed as literary or scientific.

* * * Literary societies are organizations for the propaga-

tion and spread of good literature rather than for one’s own

individual education. Scientific societies are usually and

ordinarily understood to embrace organizations for the pro-

motion of science or the pursuit of scientific studies for the

purpose of developing science, rather than as a student in a

college or university for his own edification.”

Id.34 The court did not question the taxpayer’s assertion that

Willamette University itself was a “literary, benevolent,

charitable and scientific institution * * *.” Id. at 167.

34

The phrase “literary societies,” appearing in Kappa Gamma Rho, may have

had a meaning different from, and broader than, “literary institution.” In 1851

the territorial legislature passed a law providing for the regulation of “all asso-

ciations for literary or religious purposes, except common schools, colleges and

university.” An Act to regulate incorporated Literary and Religious Societies,”

compiled in Statutes of General Nature Passed by the Legislative Assembly of

the Territory of Oregon, 2nd Regular Session (Bush 1851). That 1851 act was

superseded in 1864 by “[a]n Act providing for the incorporation of churches and

religious, benevolent, literary and charitable societies” (the “1864 Act”) (emphasis

added). See General Laws of Oregon, Civ Code, ch IV, title IV, § 1, 632-33 (Deady

1845-1864) (codifying 1864 Act); Benevolent Society, 28 Or at 174 (explaining

that taxpayer’s organization was incorporated under the 1864 Act). In 1937 the

legislature eliminated the words “literary” and “societies” from the statute, Or

Laws 1937, ch 246, § 25-901, and in 1941 the legislature repealed the 1864 Act

in whole and replaced it with a law providing for the incorporation of nonprofit

corporations generally. Or Laws 1941, ch 462, § 1 (repealing 1864 Act; enacting

Cite as 23 OTR 512 (2019) 537

In Behnke-Walker v. Multnomah County, 173 Or 510,

146 P2d 614 (1944), the taxpayer was a business college that

taught “bookkeeping, shorthand, English, arithmetic, busi-

ness administration and kindred subjects.” 173 Or at 511

(internal quotation marks omitted). The taxpayer was orga-

nized as a regular business corporation and not under the

nonprofit corporation statute. Id. at 512. These facts alone

distinguish the instant case, but this court sets forth the

majority and concurring reasoning in order to better explain

this court’s decision. The majority in Behnke-Walker con-

cluded that the taxpayer’s property was not exempt, stating:

“Upon viewing [the original 1854 exemption statute,

including the provisions exempting government-owned

property,] in its entirety, it is apparent that the legislature

did not intend to exempt from taxation private property

used for private profit, and that the only property, public or

private, in fact exempted is such as ‘has been sequestered

or devoted to public uses’ * * *.”

an act “[r]elating to the organization and operation of nonprofit corporations”);

see Benhke-Walker, 173 Or at 515 (discussing the history of the 1864 Act and the

amendatory legislation leading up to its repeal in 1941).

In addition to the cases discussed elsewhere in this opinion, the court is aware of

two other cases that made express reference to the phrase “literary societies,” both

in the context of the 1864 Act: Philomath College v. Hartless, 6 Or 158, 165 (1876)

(stating that plaintiff, a college, would be legally incorporated as a “literary society”

under the 1864 Act), and Landgraver v. Emanuel Lutheran, 203 Or 489, 533-34, 280

P2d 301 (1955) (Brand, J., dissenting), overruled in part by Hungerford v. Portland

Sanitarium, 235 Or 412, 384 P2d 1009 (1963) (discussing the 1864 Act incorpo-

rating “literary and charitable societies” (citing the Supreme Court’s rejection of

the destination-of-income theory in Benevolent Society to justify stripping nonprofit

corporations of immunity for torts committed while the corporation is engaged in

noncharitable activities)). A third case, Burkitt, et al. v. School Dist. No. 1, et al., 195

Or 471, 246 P2d 566 (1952), quoted a California appellate court’s use of the phrase

“literary society” to describe a society that became part of a fraternity. 195 Or at

480 (quoting Bradford v. Board of Education, 18 Cal App 19, 23, 121 P 929 (1912)

(“The first Greek letter society in a secondary school was Alpha Phi, a literary soci-

ety, which became a part of a fraternity in 1876.”)). Although the court has found

no contemporaneous definition of “literary society,” the 1828 edition of Webster’s

dictionary defined the word “society” to include “[a]ny number of persons associated

for a particular purpose, whether incorporated by law, or only united by articles of

agreement; a fraternity * * * we have bible societies for various objects * * * societies

for mechanics, and learned societies; societies for encouraging arts, &c.” Webster’s

American Dictionary of the English Language (unpaginated 1828). The same dictio-

nary entry notes that “Literary society renders a place interesting and agreeable.”

Id. The court interprets the foregoing authorities as strongly suggesting the phrase

“literary society” was less well defined than the phrase “literary institution” and

may have encompassed a broader range of groups that, unlike literary institutions,

did not necessarily maintain an educational curriculum or confer degrees.

538 Dept. of Rev. v. New Friends of the Beaverton City Library

Id. at 520. After reviewing cases from other states on the

subject of exemption for property held by for-profit entities,

the majority concluded:

“We have not discussed or considered whether the plain-

tiff’s business college would fall within the definition of a

‘scientific’ or ‘literary’ institution, if owned and used as a

business college by a non-profit corporation, inasmuch as

it is our conclusion that the plaintiff’s property is used for

private gain and is therefore taxable.”

Id. at 526. The concurring opinion agreed with the result,

but on the separate ground that a business college inher-

ently does not qualify as a “literary institution” because of

the nature of the curriculum, a ground not discussed in the

majority opinion. Id. at 527 (Kelly, J., specially concurring).

The concurrence strongly disagreed with the holding that

incorporation under the nonprofit corporation act is a pre-

requisite to exemption. In doing so, the concurrence charac-

terized the majority opinion as follows:

“As I understand the majority in the case at bar, the

holding is that in order to be exempt from taxation the

institution not only must be scientific or literary but benev-

olent and charitable also. Not only that, it must be incorpo-

rated under the nonprofit corporation statute.”

Id. at 529 (Kelly, J., specially concurring).

The next and most recent Oregon Supreme Court

opinion to construe the phrase “literary institution” for prop-

erty tax purposes—and the only one to grant the exemption—

was Theatre West in 1994. There, the Supreme Court

allowed exemption for a nonprofit live theater production

company. The Supreme Court rejected this court’s narrow

interpretation of the term “literary,” which would have lim-

ited the exemption to organizations involved with “litera-

ture or written words” but not “movies, theatre, television or

opera.” 12 OTR at 483. The Supreme Court found evidence

of a broader meaning of the terms “literary” and “literature”

in current dictionary definitions and in sources contempo-

raneous with or predating the 1854 territorial legislature.

319 Or at 118-19. Those definitions led the Supreme Court

to conclude that scripts of plays are literature, and to hold

that “an organization that is devoted to the production of

Cite as 23 OTR 512 (2019) 539

plays that expose actors and audiences to those scripts is a

‘literary institution.’ ” Id. In so holding, the court added the

partial quotation from Kappa Gamma Rho that “ ‘[l]iterary

societies are organizations for the propagation and spread

of good literature * * *.’ ” Id. at 119 (quoting Kappa Gamma

Rho, 130 Or at 176).

None of the Oregon Supreme Court’s opinions

regarding the definition of “literary institution” has involved

a bookstore. Nor have those prior cases required the court

to articulate a general principle that squarely resolves this

case. This court interprets the Supreme Court’s broad ref-

erence to “organizations for the propagation and spread of

good literature” not as a comprehensive definition but as a

statement of one element in determining whether an orga-

nization qualifies as a literary institution, and as a con-

trast not only to the self-serving purpose of the fraternity

house in Kappa Gamma Rho, but also to this court’s narrow

interpretation in Theatre West that would have confined the

exemption to organizations dealing with print materials.

As recounted in the Supreme Court’s opinion, Theatre

West involved actors and production crews engaged in inter-

pretive performances that “expose[d]” actors to scripts and

enabled audiences to “fully explore” the scripts as works of

literature. 319 Or at 118-19. By contrast, taxpayer’s role is

more analogous to a nonprofit ticket service that sells tickets

to plays, donating large portions of the proceeds to a charita-

ble cause. Taxpayer succeeds in its primary purpose by gen-

erating a high volume of sales and by managing its expenses

prudently, not by engaging with its volunteers or its custom-

ers about the literary qualities of particular works. Taxpayer

is a step removed from the kind of activity that the Supreme

Court considered “literary” in Theatre West.

Since Theatre West, the Regular Division has con-

sidered one case in which the taxpayer claimed exemption

as a “literary institution.” Oregon Writer’s Colony v. Dept. of

Rev., 14 OTR 69 (1996). There, the court upheld exemption

for an organization operating a beach house used as a cen-

ter for writer workshops and as a space to which individ-

ual writers could retreat in order to work. The opinion in

that case made clear that the purpose of the organization

540 Dept. of Rev. v. New Friends of the Beaverton City Library

was to “educate” writers and to support them “in produc-

ing literature.” 14 OTR at 71, 73. The court found that the

organization used the property for those purposes. Id. at 76.

The opinion suggests that approximately one-fourth of the

use was for workshops typically led by published writers,

while the primary use was as a retreat location for indi-

vidual writers. Id. at 70-71. The teaching activities in the

workshops can be compared fairly to those of a college or

school. The support to writers seeking a place to create in

peace conceivably could be analogized to the efforts of a the-

ater company that “exposes” actors to scripts and causes

the actors to creatively interpret them for an audience. In

any event, the court declines the department’s invitation to

revisit Oregon Writer’s Colony, as the court is unable to see

any factual analogy between the activities there and the

retail book sales in the instant case; accordingly, Oregon

Writer’s Colony creates no “reasonable expectation” for tax-

payer. See Farmers Ins. Co. v. Mowry, 350 Or 686, 698, 261

P3d 1 (2011).

The court continues its search for relevant context.

Court opinions close in time to 1854 involving the laws of

other states indicate that a college or other type of school

was by far the most common meaning of the phrase “lit-

erary institution,” although courts disagreed about the

type or level of instruction that could qualify.35 In City of

Indianapolis v. McClean, 8 Ind 328, 332 (1856), the Indiana

Supreme Court interpreted the phrase “literary institution”

as part of a nearly identical string of institutions eligible

for property tax exemption: “any literary, benevolent, char-

itable, or scientific institution * * *.” Id. (quoting Revised

Statutes of the State of Indiana, Passed at the Thirty-Sixth

Session of the General Assembly, ch IV, § 5, at 106 (1852)).

In denying exemption for a girls’ boarding school, the court

stated:

“Is the school in question a literary institution? The word

literary having no fixed legal signification, is to be taken

in its ordinary and usual meaning. We speak of literary

persons as learned, erudite; of literary property, as the

35

Cf. Behnke-Walker, 173 Or at 527 (Kelly, J., specially concurring) (rejecting

possibility that a “business” college could qualify as a literary institution).

Cite as 23 OTR 512 (2019) 541

productions of ripe scholars, or, at least, of professional

writers; of literary institutions, as those where the positive

sciences are taught, or persons eminent for learning asso-

ciate, for purposes connected with their professions. This

we think the popular meaning of the word; and that it

would not be properly used as descriptive of a school for the

instruction of youth.”

Id. (emphasis added); see Chegaray v. Jenkins, 5 NY 376,

379 (1851) (referring to “a college, incorporated academy, or

other seminary of learning” in property tax exemption stat-

ute as “literary institutions”); Armstrong v. Athens County,

10 Ohio 235, 238-39 (Dec 1, 1840), aff’d sub nom, Armstrong

v. Treasurer of Athens County, 41 US 281, 16 Pet 281, 10 L

Ed 965 (1842) (referring to “school-houses, academies, or col-

leges”; any “academy or seminary of learning” and “schools,

academies, colleges” in property tax exemption statutes

collectively as “literary institutions”); cf. NH Laws, ch 447

(1839) (preserving voting rights at place of permanent domi-

cile “in all cases where individuals shall leave their home

or place where they reside to attend an academy, college or

other literary institution in any town or place in this state

for the purposes of obtaining an education * * *” (emphasis

added)). Numerous contemporaneous opinions refer to vari-

ous colleges and universities as “literary institutions.” E.g.,

Trustees of Dartmouth College v. Woodward, 17 US 518, 4 L

Ed 629, 4 Wheat 518 (1819) (Marshall, C. J., repeatedly refer-

ring to Dartmouth College as a literary institution); Board

of Trustees of Vincennes University v. Indiana, 55 US 268,

276, 14 How 268, 14 L Ed 416 (1852) (referring to Vincennes

University as literary institution); Washington University v.

Rouse, 75 US 439, 441, 19 L Ed 498, 8 Wall 439 (1869) (refer-

ring to Washington University as a literary institution);

Allen v. McKean, 1 F Cas 489, 503-04 (D Me 1833) (referring

to Bowdoin College as literary institution). There is evidence

that the term also encompassed libraries. E.g., On the Law of

Rating Literary Institutions, 17 Law Magazine: Or Quarterly

Review of Jurisprudence 180, 190-92 (1852) (summarizing

and commenting on English cases exempting literary insti-

tutions from property tax (“ratings”)); see also Commercial

Cities and Towns of the United States, 16 Hunt’s Merchants’

Magazine 596, 598 (1847) (“The Young Men’s Association [of

Buffalo, New York,] is a flourishing literary institution, with

542 Dept. of Rev. v. New Friends of the Beaverton City Library

a library of over 3,000 volumes of well-selected books, and

it sustains an able course of literary and scientific lectures

in the winter season, which are numerously attended.”).

But the court has found no evidence that the term “literary

institution” was used in reference to a bookstore of any kind.

The court concludes that the territorial legislature

in 1854 would not have found taxpayer within the ordinary

meaning of a “literary institution,” as the ordinary meaning

of the term at that time was limited to colleges and schools,

and perhaps libraries. Subsequent Oregon decisions have

not expanded the term to encompass taxpayer’s activities.

Because taxpayer does not fit within the term “literary

institution,” the court need not consider whether its use

of the property is consistent with the purpose of such an

institution.

V. CONCLUSION

The court denies taxpayer’s motion for summary

judgment because, although taxpayer is a charitable institu-

tion, taxpayer primarily uses the subject property as a retail

store for the sale of used books. That use does not further

taxpayer’s charitable purpose except under a “destination of

income” theory, which Oregon courts have squarely rejected.

In addition, the court concludes that taxpayer is not a “lit-

erary institution” within the meaning of ORS 307.130(2)(a).

Now, therefore,

IT IS ORDERED that Defendant’s Motion for

Summary Judgment is denied.