Level 3 Communications, LLC v. Dept. of Rev., 490 P.3d 149

Background

Level 3 Communications, a centrally assessed telecommunications company, owned a continent‑spanning fiber network that had largely become technologically obsolete during the 2014–17 assessment years; growth relied on acquiring new equipment or other companies.
Oregon Department of Revenue used unit valuation (income, market/stock‑and‑debt, and cost approaches) to value Level 3’s tangible and intangible property for 2014–15, 2015–16, and 2016–17; the department relied principally on income and market approaches.
Level 3 challenged the assessments in Tax Court, arguing the department improperly based valuations on enterprise value and “investment attributes” (e.g., future acquisitions, PV of growth, M&A potential) that reflect company or shareholder value rather than property owned or held on the assessment date.
The Tax Court concluded the central‑assessment statutes permit using enterprise value and investment attributes as indicators or proxies for the unit value of a company’s taxable tangible and intangible property, accepted the department’s revenue growth assumptions, and credited the department’s market/stock‑and‑debt indicia; it discounted cost‑approach results.
On review, the Oregon Supreme Court affirmed: it held the Tax Court did not err as a matter of law in allowing enterprise value and investment attributes to inform valuation and found no reversible lack of substantial evidence challenge to the Tax Court’s factual findings.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether central‑assessment statutes permit using enterprise value or company‑level indicators (income, stock & debt) to value taxable property	Level 3: Statutes tax only property used/held on assessment date; enterprise value reflects shareholder/company value, not taxable property	Dept: Unit valuation and ORS 308.545 expressly permit considering earning power, stock/debt and related indicia as proxies for unit property value	Court: Statutes allow using enterprise value/stock‑and‑debt and income indicators as reliable proxies in appropriate circumstances; Tax Court correct
Whether “investment attributes” (future acquisitions, PV of growth, M&A potential) are taxable as property	Level 3: These are attributes of stock or ownership interests and not property used/held by the company	Dept: Those attributes reflect intangible assets used in the business and can be part of the unit’s taxable intangible property	Court: Investment attributes can represent taxable intangible property “used or held” and may inform valuation under unit valuation approaches
Whether the Tax Court effectively held that Oregon taxes enterprise value itself (legal error)	Level 3: Tax Court held enterprise value of company is taxable, contradicting statute	Dept: Tax Court merely allowed enterprise indicators as proxies for property value, not direct taxation of shareholder enterprise value	Court: Tax Court did not hold enterprise value itself is directly taxed; it allowed enterprise indicators as lawful proxies; no legal error
Whether the department’s valuations lacked substantial evidence	Level 3: (Did not press a detailed factual attack on valuation inputs on appeal)	Dept: Appraisals using income and market indicators were supported by evidence and accepted valuation practice	Court: Because Level 3 did not meaningfully dispute the factual bases, the Tax Court’s valuation findings are supported by substantial evidence; affirmed

Key Cases Cited

Comcast Corp. v. Dept. of Rev., 356 Or. 282 (discusses unit valuation capturing intangible franchise/goodwill value)
Delta Air Lines, Inc. v. Dept. of Rev., 328 Or. 596 (distinguishes asset‑level vs. firm‑level income models in valuation)
Union Pacific R.R. v. Dept. of Rev., 315 Or. 11 (recognizes growth from future asset additions may be considered in cash‑flow analysis)
DISH Network Corp. v. Dept. of Rev., 364 Or. 254 (unit valuation treats company as going concern; intangibles may be taxable)
O. & C. R. R. v. Jackson County, 38 Or. 589 (early Oregon approval of stock/debt indicators in valuation)
Cleveland Ry. Co. v. Backus, 154 U.S. 439 (explains unit valuation captures system‑wide value)
Taylor v. Secor, 92 U.S. 575 (historical support for unit valuation concepts)
Adams Express Co. v. Ohio, 166 U.S. 185 (historical unit valuation precedent)
Sanford v. Poe, 165 U.S. 194 (historical unit valuation precedent)
PP&L v. Dept. of Rev., 308 Or. 49 (approves stock‑and‑debt method when comparables are lacking)