7 Or. Tax 357 | Or. T.C. | 1978
Submitted on stipulation and briefs.
Decision for plaintiff rendered March 6, 1978.
The Director of the Department of Assessment and Taxation of Lane County, Oregon (hereinafter designated the "county assessor"), has appealed to this court from the Department of Revenue's "supervisory order," Order No. VL 76-673, dated November 12, 1976, applying to the tax year 1975-1976. Provision for the appeal is found in ORS
Although one or more important facts are not presented as clearly as is desirable in a cause thus submitted, enough is offered to enable the court to render a decision. These facts (derived from the stipulation and exhibits) are set out in chronological order below, together with the legal questions suggested by them. (Unless otherwise stated, all citations to the Oregon Revised Statutes are taken from the 1973 Replacement Part, the law pertinent to the tax year involved, 1975-1976.) The stipulation provides that the transcript of the hearing, held by the defendant's hearing officer on April 12, 1976, pursuant to Mr. Engel's petition, may be considered by the court in making its decision. The court will also be guided by the pertinent disputable presumptions stated in ORS
The taxpayer-intervenor, Mr. Engel, was and is engaged in the real estate business in Springfield, Lane County. Associated with him are Mr. H. Doyle *360
McMillin, Mr. Richard Bye and perhaps others. Prior to 1973, Mr. and Mrs. Engel were owners of certain forest land known to them as the "Wallace Creek property." On February 21, 1973, Mr. and Mrs. Engel made application to place this land under the provisions of the Timber Tax Act. This act is chiefly designed to encourage the propagation of merchantable timber by "large" holders of forest land (more than 1,000 acres). It establishes a method of taxation "which will permit sustained yield forestry" (ORS
"(L) A statement that the applicant is aware of the potential tax liability involved when the land ceases to be designated as forest land."
On the February 21, 1973, application, Mr. and Mrs. Engel signed an affirmation, under penalties for false swearing, which included the following statement:
"As owner(s) of the above-described land, I (we) indicate by my (our) signature(s) below that I (we) are aware of the potential tax liability involved when the land ceases to be designated as forest land. (See Item 11 on back.)"
On April 8, 1973, the land was approved as forest land by the county assessor and the provisions for a tax deferral were placed in effect by him.
Subsequently, Mr. Engel, Mr. McMillin and Mr. Bye obtained other forested lands as tenants in common and considered the possibility of placing them *361 under "some tax relief plan." (Mr. Engel, Tr, Departmental Hearing, 1.) In early 1974, after discussion of the question with Mr. Engel (and at the latter's request), Mr. McMillin visited the office of the Lane County Department of Assessment and Taxation to inquire about timber tax deferral. He testified that he was referred by that office to the local branch of the State Department of Forestry, located in the Santa Clara area of Eugene. At the forestry office, Mr. McMillin talked to a forester on duty, Mr. Williams,
"* * * and told him about all these different properties that we had, * * *.
"* * * So anyway, he explained, as I recall, about three different, it seemed like it to me, there was three different ways you could go, anyway, the small woodlands act [the Optional Tax Act] as I remember is what he called it. * * * He just described the different programs but that he questioned me about what our plans were and he seemed to think that was the best way for us to go and he never mentioned that if you owned a piece of property that was in one kind of a timber deal that if you went to another one, why then, that changed the whole thing and of course, I didn't own anything that was any different but I knew Daren [Engel] did, and this was just never mentioned at all. * * * He stated, as I remember, the difference being that the way Daren's was in, that you pay a whole gob at the time you harvest your tax, I believe that's correct, and the way we're going to pay a little more a year, I think, is this correct? Yeah. And that way you don't get hit so hard. So, anyway, that was the way he thought we ought to go, * * *." (Tr, Departmental Hearing, 4.)
"* * * * *
"[Williams] [j]ust explained all the different programs, you know, and in questioning about what our plans were, suggested his plan." (Tr, Departmental Hearing, 9.)
The intervenor's testimony leaves us in doubt as to the weight to be given to the McMillin-Williams interview. For estoppel purposes, there may well be a difference between a "recommendation" and a "suggestion." In the present record, it is difficult to *362 measure the responsibility Mr. Williams assumed. He was never interrogated for the purposes of the hearing or of this trial.
Mr. McMillin admitted at the administrative hearing that he had never specifically asked Mr. Williams about the tax consequences of shifting from one forest land tax deferral plan to another. He didn't realize it would be a relevant question in the circumstances, although he knew of the Engel's Wallace Creek classification.
The State Forester's office supplies forms pursuant to ORS
"Only owners having a total ownership of forest land in western Oregon not in excess of 1,000 acres shall be entitled to classify forest land under this section. In computing an owner's acreage for purposes of this subsection, his total ownership shall be included even though portions of his forest land may not be eligible for classification under subsection (1) of this section. As used in this subsection, 'total ownership' includes forest land owned by the applicant owner individually and also any forest land owned by any corporate or other group owner in which the applicant owner holds a share of ownership of 10 percent or more." (Emphasis supplied.)
Another restriction, important to carry out the stated legislative intent in ORS
*363"An owner electing to classify any of his eligible forest lands under ORS
321.705 to321.765 must classify all of his eligible lands." (Emphasis supplied.)
Having obtained the application forms (Department of Forestry Form 629), the cotenants filled them out and, in order to meet the requirement (stated in the form) to list "all of my (our) eligible forest land in Western Oregon except land that is presently classified in my (our) name under this Act," properly included the Wallace Creek property which was owned solely by the Engels.
ORS
"(1) If land is designated as forest land as a result of an application being filed therefor * * * and the designation is later removed, there shall be added to the tax extended against the land on the next property assessment and tax roll, * * *:
"(a) The total amount by which the taxes assessed against the land would have been increased if it had been valued without regard to subsection (3) of ORS
321.617 and subsection (1) of ORS321.619 during the five years preceding such extension on the roll * * *."
ORS
"Within 30 days after removal of a designation of forest land, the assessor shall so notify in writing both the taxpayer and the Department of Revenue and shall specify the reasons for the removal."2
The letter of advice written by the county assessor, under date of August 21, 1975, addressed to Mr. Engel, omitted the amount of the tax adjustment, $3,431.63. It read:
"This is to notify you that our office must remove the Forest Deferral Classification from your land described above due to it now being certified under Western Oregon Small Tract Optional Tax Law.
"The additional tax will be extended against the land and will appear as a Special Assessment #9 on your tax statement this fall."
Although the amount of tax was not specified, Mr. Engel made no inquiry of the assessor as to the total *365
effect of the assessor's act of removal. However, ORS
Mr. Engel had consulted legal counsel before the hearing. Although the attorney was not present, he had prepared a statement of facts and issues as an aid to the hearing officer and this was received as an exhibit. The counsel's memorandum refers to Mr. McMillin's interview with Mr. Williams of the state's Department of Forestry, and Mr. Williams' failure to speak of the tax adjustments which would follow the shift of forest land from one category to another. Counsel did not spell out the requirements necessary to prove equitable estoppel in his brief.
The Department of Revenue's Order No. VL 76-362 was issued on May 26, 1976, following the administrative hearing of April 12, 1976. It concludes that a representative of the State Forester had "recommended" the use of the Optional Tax Act for the land owned jointly by Messrs. Engel, McMillin and Bye and that, while the representative had not advised Mr. McMillin that such option must necessarily encompass all of the timberland any of the taxpayers owned, "no misinformation" was given to him. Petitioner's signed statement in the application for forest land designation of his awareness of the potential tax liability was *366 also noted.3 The department rejected the theory of estoppel as inapplicable, finding that there had been no "misinformation" given by the forester to Mr. McMillin. "The most that can be said is that all aspects of the Western Oregon Small Tract Option were not fully set forth. * * *" (Order No. VL 76-362, at 2.) The defendant's conclusion follows the holding in Woodv. Ore. St. Bd. of Forestry, supra, but does not cite it.
The department's order ends with the stock clause regularly used by defendant, immediately under the signature of the director or deputy director:
"Note: If you are dissatisfied with this decision, you may appeal to the Oregon Tax Court in the manner provided by ORS306.545 within 60 days after the date the Department's order was mailed to you."
However, Mr. Engel never utilized his legal remedy (a failure which is discussed below). Before the 60-day period of appeal to this court had elapsed, the intervenor, at a casual meeting on July 1, 1976, spoke to Oregon's governor about his problem. At the governor's suggestion, Mr. Engel mailed to the governor his statement of the facts in his case, accompanied by some exhibits, on July 6, 1976. On July 16, 1976, the governor forwarded the plaintiff's letter and exhibits to the defendant's director, asking him to examine them and to advise the governor if any relief for the taxpayer was possible. (The governor's duty thus to *367
inquire is implicit in Or Const, Art V, §§ 10 and 13.) On August 2, 1976, the director responded by letter, advising the governor of his personal review of the recorded testimony and exhibits, stating that the pertinent statutes and case law had been reviewed by tax counsel from the office of the Attorney General, and the finding that the law had been followed. (The director also referred to the 1975 act, sponsored by the defendant, creating ORS
On August 18, 1976, Mr. Engel's counsel mailed to the governor's office a copy of the letter dated August 21, 1975 written to Mr. Engel by the county assessor, quoted above. On August 26, 1976, the then legal counsel to the governor issued a memorandum to another member of the governor's staff, respecting the "Daren Engel Tax Appeal," discussing the estoppel theory and undertaking to distinguish the fact situation in the Engel case from Wood v. Ore. St. Bd. ofForestry, supra.
On November 12, 1976, the department issued its Order No. VL 76-673, reversing its Order No. VL 76-362, resulting in the present appeal to this court by Kenneth J. Bylund, Director, Lane County Department of Assessment and Taxation. The revising order recites, in part, at 1-2:
"Since the issuance of Opinion and Order No. VL 76-362, it has come to the attention of this Department *368 that the said Opinion and Order served to perpetuate a gross injustice to this petition[er].
"ORS
"It has been a continuing policy of this Department to exercise its general supervisory authority to prevent gross injustices to taxpayers. * * *
"It is my opinion that Petitioner had a right to rely on the competency and completeness of advice from the State Board of Forestry. The inadequacy of that advice led directly to the grossly unjust assessment stemming from the declassification of Petitioner's forestland. The ultimate result was that Petitioner, rather than secure the advantage of preferential tax treatment for that portion of his property he wished assessed under the Western Oregon Small Tract Optional Tax, received an unanticipated declassification for lands already classified under the Western Oregon Ad Valorem Tax. It is my opinion that this is not the result the legislature intended by the enactment of these laws."
The defendant's order then requires that its first order, No. VL 76-362, be rescinded. The county assessor is then required to remove the Wallace Creek property portion of intervenor's property placed under the Optional Tax Act and restore the classification thereof under the Timber Tax Act. Further, it is ordered that the tax added for 1975-1976 on the intervenor's Wallace Creek property, resulting from the declassification, must be abated and stricken from the rolls and, if the intervenor has paid any or all of said tax, the amount must be refunded to him with interest from date of payment.
The plaintiff submits five "issues to be decided" (Pl Opening Br, 2); each will be considered in turn. *369
I. Does the Department of Revenue have the jurisdiction and power to order the cancellation of a tax which the county assessor is required by law to assess and collect?
This question merely begs the issue. The problem for the court is to ascertain what is "required by law." The statutory provision for the supervisory power chiefly relied upon by the defendant, ORS
[1.] In reaching a decision, the court's first duty is to ascertain and carry out the intent of the legislature as expressed in the pertinent statutes, found in Oregon Revised Statutes (1973 Replacement Part, applicable during the period of all the intervenor's transactions here involved, February 21, 1973, through August 21, 1975), unless some bar or defense is found which, for reasons of public policy, requires a different result in the particular instance.
There appears to be no question as to the legislative intent;i.e., to encourage the production of merchantable timber through the holding and prudent cultivation of timber and timberlands by persons capable of carrying out such a program.See ORS
The intervenor here made his election under ORS
[2.] The court concludes that Mr. Engel acted without due care in making an important election, under which he is bound (estoppel not being approved in defendant's Order No. VL 76-362). Georgia-Pacific v. Dept. of Rev.,
II. Does the Department of Revenue have the jurisdiction and power to order a county assessor to declassify lands which the State Forester has classified under the Optional Tax Act?
[3.] ORS
III. Does the Department of Revenue have the jurisdiction and power to order that some but not all of a taxpayer's eligible properties be declassified from the Western Oregon Small Tract Optional Tax?
[4.] The court concurs with the plaintiff that the department had no power to give an order which would "scramble" the classifications of the taxpayer's properties so that forest lands owned by him would come under both acts, contrary to ORS
"* * * Plainly, the participation in the Small Tract Optional Tax program is an all-or-nothing proposition with respect to eligible land, and there is no exception to this rule provided by the Legislature. The result of the Department's order is to place Intervenor Engel in an extraordinarily privileged position, not contemplated or allowed by the statute; the order is therefore invalid."
IV. Does the receipt of factual and legal information by the Department of Revenue from one of the parties to an appeal, without notice of or an opportunity to rebut such information given to the other party, render a subsequent decision in the appeal invalid? *372
This is a very important point. The defendant has not established rules for the exercise of the supervisory powers and it may well be that there are instances in which such power should be exercised without the delay of hearings. Cf.Domogalla et al v. Dept. of Rev.,
V. Does the Department of Revenue have the jurisdiction and power to review and reverse its adjudicative determinations?
The defendant's predecessor, the State Tax Commission, formerly was empowered to grant rehearings. See ORS
"Subject to judicial review by the Oregon Tax Court and the Supreme Court, the hearing [conducted by the Department of Revenue] shall determine finally all questions of law and fact arising under the tax laws * * *." (Emphasis supplied.)
[5.] It is apparent that the legislative intent was to provide for an appeal to this court from all orders lawfully issued by the then State Tax Commission, eliminating a rehearing by the commission and vesting in the Tax Court "the sole, exclusive and final authority for the hearing and determination of all questions of law and fact arising under the tax laws of the state in cases within its jurisdiction. * * *" Or Laws 1961, ch 533, §§ 12 and 16. This rule applies to the Department of Revenue, which recognizes it (and *373 seeks to aid the taxpayer) by printing at the end of each of its orders a notice of the taxpayer's right to appeal from the department's determination to the Oregon Tax Court within 60 days. (Mr. Engel had this notice but waived the opportunity it presented.)
[6,7.] Because of the statutory procedural scheme established by the Legislative Assembly, for the direction of the appeals to and from the Department of Revenue, the mode becomes the measure of the power. The administrative agency has no powers except as they are clearly found in statutory grants of authority. Gouge v. David et al.,
"The Tax Commission [now Department of Revenue] does not have the inherent power to reopen the proceedings after its final determination because unlike a court of general jurisdiction its adjudicatory powers are only those conferred by statute either expressly or by necessary implication. [Citations omitted.] The operative statute does not grant to the commission any power to review its determinations, once they are made, * * *. * * * [T]he commission had no power to recall the case for review after issuance of its final order. Thus, it had no jurisdiction to withdraw its order and the order of withdrawal is of no force or effect."
The defendant is powerless to adjudicate the issues once formally determined by it, either by means of a rehearing or under the guise of a "supervisory order."5 The defendant's use of the supervisory power in this instance was not "according to law" and it served improperly to oust the jurisdiction of this court. What *374 it could not do by a rehearing cannot be done under the yet-to-be defined supervisory power.
Whether the plea of estoppel was properly denied by defendant in the first instance was not submitted to this court.
The defendant's Order No. VL 76-673 is set aside and held for naught. The defendant's Order No. VL 76-362 was the legal judgment of the defendant and must be obeyed by the plaintiff and the intervenor.
Each party shall bear its own costs.
"Are you aware of the potential tax liability involved when your forest land should cease to be classified under this Act (ORS321.705 to321.765 )? Yes [ ] No [ ]."
The inclusion of this specific question in the form is required by ORS