8 Or. Tax 159 | Or. T.C. | 1979
Plaintiff has appealed from the Department of Revenue's Opinion and Order No. VL 78-75, executed on February 28, 1978, which sustained the decision of the Multnomah County Assessor in his addition of a portion of plaintiffs personal property to the tax rolls as omitted property pursuant to ORS
The facts from which the controversy arises are essentially uncontested. Among these uncontested facts are the following:
Plaintiff, which engaged in the sale of items of personal property and held personal property inventories as of January 1, 1974, failed to file a Multnomah County personal property tax return for the year 1974,* which it was obligated to do on or before March 3, 1974, in accordance with ORS
Because of the failure of the plaintiff to file the required personal property return, the assessor, under ORS
*162"We regret that, according to our records, you have neither filed an Assessment Return form as provided by law, nor answered our previous requests.
"At this date, we have no other alternative than to notify you that unless we can have IMMEDIATE approval of the assessment as shown below, it will be our duty to certify the account to the Tax Collector for collection of the 1974 taxes.
"Your acknowledgments will prevent us from taking this action. Please sign below and return to this office at once.
"The assessed valuation for 1974 Personal Property tax has been fixed as follows:
MDSE 534,710 OFFICE 124,770 MACH EQUIP 776,665 ___________ $1,436,145"
The above form notice was signed and approved by the plaintiff on May 9, 1974. The notice itself was dated May 1, 1974, and was received by the plaintiff on May 2, 1974.
Based on the assessed valuation in the May 1, 1974, notice, a personal property tax bill of $33,966.64 was determined by the assessor's office and was paid in full by plaintiff.
[1.] It should here be noted that ORS
On May 2, 1977, which was approximately three years after the plaintiff had agreed with the assessor's valuation set forth in the May 1, 1974, notice and paid the tax bill based on such valuation, and approximately two and one-half years after the deadline for filling a *163
hardship application had lapsed, the assessor's office, by letter, advised plaintiff that an audit of plaintiff's records revealed that plaintiff had held an inventory with an assessed value of $2,541,897 as of January 1, 1974. In its letter (Pl Ex 3), the assessor's office stated that it considered the difference between the inventory value of $2,541,897 and the prior assessed inventory value of $534,710, or $2,007,187, to be omitted property which the assessor intended to add to the assessment rolls and, in fact, subsequently did. The assessor did not classify any portion of the $2,007,187 as personal property which would be entitled to the free port exemption under ORS
In the prior years of 1971, 1972 and 1973, plaintiff claimed and was granted a free port exemption by the assessor's office. The assessed value of the free port inventory personal property exempted for each of the foregoing years was the following: 1971 — $705,956; 1972 — $541,516; and 1973 — $993,308. (Pl Ex 7.) The assessed values of plaintiff's personal property inventory that was not exempted as free port merchandise (because the items were not shipped outside of the State of Oregon for ultimate sale) were assessed for the same years in the following amounts: 1971 — $518,495; 1972 — $521,225; and 1973 — $486,100. In the year 1974, no free port exemption was granted because of plaintiff's failure to file the necessary exemption form but, in the subsequent years of 1975, 1976 and 1977, the assessed value of exempted free port inventory property was in the respective annual amounts of $903,669; $1,263,422; and $1,276,889.40. (Pl Ex 7.)
At the trial, Mr. Virgil Kuhn, who was the regional controller for plaintiff from January 1, 1970, to April 1, 1977, testified that, although it was his responsibility timely to file for the plaintiff both the personal property return and the free port exemption claim, forms for which were annually mailed to plaintiff's office by the assessor, the actual filing was made by his assistant controller. Because of the illness of the *164 assistant controller, resulting in his hospitalization during the filing period, and because of an extensive audit of plaintiff's business books and records occasioned by a pending corporate merger, the controller assigned the filing of the forms to office personnel, who, according to his testimony, indavertently failed to effect the filings. The controller received the form notice of May 1, 1974, which set forth the assessed value of inventory as $534,710. The controller testified that he assumed the assessed value was determined after the assessor's office made an allowance for the free port exemption, although he further testified that he was familiar with the deadline for filing the free port exemption claim and that he knew the deadline had passed without a filing. He further swore that it did not enter his mind to consider at the time he received the notice of May 1, 1974, whether the assessor had authority to grant a free port exemption. He also testified at the time of the trial that he did not know whether the assessor would have such authority.
Mr. Kuhn stated that he signed and approved the May 1, 1974, assessment form for the following basic reasons:
(1) He assumed that the $534,710 figure represented the assessed value of total inventory less inventory eligible for the free port exemption and he further assumed that the assessor had, in fact, considered and allowed the free port exemption in making the assessment;
(2) He found the figure of $534,710 to be reasonable when he compared it with the inventory on the company books and when he took into consideration that approximately 65 percent of such inventory would be subject to exemption as free port merchandise, based on free port exemptions for prior years of which he was aware; and
(3) The peremptory tone and the terms of the May 1, 1974, notice led him to conclude that unless he *165 immediately approved the assessment with the signature of the plaintiff, the tax collector would forthwith proceed to collect the tax based on the assessment; and if he did sign and approve it, the tax would be due and payable several months later in the normal course of assessment and taxation procedures. Mr. Kuhn believed that signing the form notice and paying the tax completed the tax proceedings for the year 1974 and thus he did not consider any subsequent filing of a 1974 personal property tax return or the filing of a free port exemption claim form.
Mr. Thomas Stupfel, the successor to Mr. Kuhn, was the regional controller of plaintiff from April 1977 to January 1979. Mr. Stupfel testified that in the spring of 1977 a routine county audit was performed that eventuated in the notice of intent to assess omitted property under date of May 12, 1977. (Pl Ex 3.) Mr. Stupfel stated that he ascertained after May 12, 1977, from the books and records of plaintiff, that its inventory as of January 1, 1974, should have had an assessed value of $2,541,897.11, that the amount of the free port exemption for that year should have been in the assessed value of $1,441,939.46, and that the difference between these two figures, namely, $1,099,957.65, should have been the amount correctly assessed as inventory subject to taxation for the year 1974 after allowance and deduction of the free port exemption. Based on these calculations, which were supported by computations set forth in Plaintiff's Exhibits 4, 5, and 6, he concluded that the amount of property tax properly payable for 1974 should have been in the amount of $39,465.11 (of which plaintiff, by the assessment made on May 1, 1974, had paid $33,966.63), instead of the amount of $67,434.47 which resulted from the omitted property assessment. Mr. Stupfel further testified that he would have followed the procedure of Mr. Kuhn and not made a calculation upon receiving the assessor's May 1, 1974, notice, because, among other reasons, the assessment set out would have seemed reasonable after taking the *166 free port exemption into account and because any error in the assessment made under that notice would have been rectified by routine audits made every three years by the county.
The remaining witness, Mr. Robert W. McBride, chief personal property appraiser for the assessor's office, testified that if a personal property tax return was not filed by a taxpayer, the assessor, pursuant to his statutory duty under ORS
Based on the foregoing evidence, which was either admitted or substantially uncontradicted, plaintiff contends that either the assessor should be estopped from adding the alleged omitted property to the tax rolls because the assessor's conduct lulled plaintiff into believing that the assessed value of the May 1, 1974, notice was correct or, in the alternative, that plaintiff should be allowed to apply for a recommendation striking the alleged omitted property from the tax rolls on the ground of hardship under ORS
Since the filing deadline for a free port exemption claim and for application for a hardship determination had passed without such filing or application, the plaintiff can prevail on one contention or the other only if the conduct of the county assessor should estop him from asserting such deadlines in opposition to plaintiff's claim. This issue will now be considered.
The legal principle of estoppel, applicable to the issue presented, has been evolved in relatively simple terms by the Oregon Supreme Court and by this court. In Johnson v. TaxCommission,
"* * * The policy of efficient and effective tax collection makes the doctrine [of estoppel] of rare application. It could only be applied when there is proof positive that the collector has misinformed the individual taxpayer and the taxpayer has a particularly valid reason for relying on the misinformation and that it would be inequitable to a high degree to compel the taxpayer to conform to the true requirement. * * *"
In Pilgrim Turkey Packers v. Dept. of Rev.,
"The ambiguous nature of the form and the instructions were enough to mislead a reasonable person. * * *"
[2.] In Cascade Manor, Inc. et al v. Dept. of Rev.,
In Hinson v. Dept. of Rev.,
"* * * It is improper for the assessor to lead a taxpayer to believe, as in this case, that further dealings with the assessor, rather than an appeal to the Department of Revenue, can alter the assessor's action. When the assessor does mislead a taxpayer, the assessor will be estopped from claiming that the taxpayer failed to appeal within the statutory six-month period. * * *"
The doctrine of estoppel enunciated in the foregoing cases may be summarized as follows:
If an official engages in misleading conduct, whether that conduct is manifested by an erroneous factual representation or by a course of dealing or conduct which reasonably but erroneously implies to the taxpayer that he need not pursue certain processes in order to safeguard his legal rights, and if the taxpayer is injured because he does not in good faith pursue those processes as a result of relying on such erroneous factual representation or course of conduct or dealing, the official will be estopped from claiming *170 that the taxpayer cannot avail himself of those processes.
With reference to the facts in the case at bar, it is the view of the court that the assessor's office did engage in misleading conduct when it stated in its notice of May 1, 1974, that the assessed value of merchandise was fixed at $534,710. That figure in fact represented the residual assessed value of merchandise for the prior year of 1973, plus a 10 percent addition thereto, after the deduction of $993,308 as exempted free port inventory from the gross total value of plaintiff's 1973 inventory evaluation.
The defendant is now in the posture of urging that the value of $534,710 was not only intended as a total inventory valuation, without any free port deduction, but should have been recognized as such by the plaintiff. The court does not agree. For a period of three years preceding 1974, extensive free port exemptions, ranging up to approximately $1,000,000 in the year 1973, had been claimed and granted and, in the same time period, the residual property assessments for which plaintiff was liable, after the deduction of the value of the free port inventory, ranged from a low of $486,100 in 1973 to a high of $521,225 in 1972. In the context of this past assessment experience, the controller of plaintiff, who had been employed from the year 1970 and thus was aware of the past assessments and free port exemptions, could scarcely have concluded that the value of $534,710 set forth in the May 1, 1974, notice did not take into account a free port valuation deduction. Indeed, the controller did testify that the value seemed reasonable, taking into account the free port exemptions allowed in prior years together with valuations on the company's current inventory records. Although the notice of May 1, 1974, on its face, was not ambiguous, it was manifestly misleading when considered in the ambience of the prior three-year assessment relationship between the assessor's office and the plaintiff. *171
[3.] The defendant, however, objects to a conclusion of estoppel in this case primarily on the basis of the case ofJohnson v. Tax Commission, supra. The Johnson case stated that the policy of efficient and effective tax collection makes the doctrine (of estoppel) of rare application. However, the Oregon Supreme Court, after pronouncing that dictum, immediately stated that the doctrine of estoppel can be applied in those cases where there is proof positive that the assessor has misinformed the taxpayer, that the taxpayer has a particularly valid reason to rely on the information, and that it would be inequitable to compel the taxpayer to conform to the true requirement. Stated otherwise, it appears that the Supreme Court is only stating that estoppel situations are rare, but that the estoppel doctrine must be applied when it exists and is proved. This court cannot fault that conclusion.
However, even if the Johnson case can be construed to mean that if an estoppel exists, it should rarely be judicially applied in order that efficient and effective tax collection not be impeded, this court does not agree that invoking the doctrine in this case impedes the efficiency of the tax collection process. It is true, as the defendant observes, that testimony by Mr. McBride states that 3,000 to 4,000 personal property tax accounts do not file returns and thus the assessor's office must list and evaluate the property from the best information available from other sources pursuant to ORS
[4.] The defendant further objects that an estoppel arising from the facts as set forth in the May 1, 1974, notice would impose on the assessor the burden of making a correct assessment when the plaintiff has failed to file a return and, therefore, has not supplied any assessment information at all. However, ORS
The plaintiff, as the defendant asserts, could have calculated its correct assessment after receiving the notice of May 1, 1974, but believing the assessment to be reasonable and to include a free port exemption, it did not do so and awaited the subsequent routine county audit to eliminate any discrepancies. The court cannot conclude, under all the facts and circumstances *173 of this case, that the plaintiff's conduct in this regard is inconsistent with, or detracts from, its good faith reliance on the assessor's May 1, 1974, valuation.
It is also true, as the defendant urges, that the plaintiff's controller knew that a free port exemption claim had not been filed. However, the assessment in the form notice of May 1, 1974, led the controller reasonably to believe that the assessor nevertheless considered the exemption for the reasons above stated in this opinion. It is no more permissible for the assessor to mislead the plaintiff concerning an apparent grant of an exemption than it was for the assessor to mislead the taxpayer in the Hinson case, supra, to believe that further dealings with the assessor could alter the assessor's action when, in fact, the assessor's authority had legally terminated. In the Hinson case, this court, because of the assessor's conduct, invoked the doctrine of estoppel and allowed the Department of Revenue to assume jurisdiction of the taxpayer's case although the statutory time for an appeal to the department had expired. Similarly, in this case, because of the assessor's conduct, the doctrine of estoppel should be invoked and the right by the plaintiff to apply for hardship application should be granted even though the time for such application has expired. Injury to the plaintiff, if it had to comply with the omitted property assessment, which leads to a property tax approximately $28,000 higher than it contends it ought to pay, is clear.
The facts of this case satisfy the doctrine of estoppel as defined by the Oregon courts. There was a misleading representation by the assessor on which the plaintiff reasonably relied, and the plaintiff may be substantially injured unless an estoppel is invoked.
The assessor, a party to the proceeding before the defendant which resulted in defendant's Order No. VL 78-75, will be estopped from claiming that the plaintiff failed to apply for hardship relief within the statutory period allowable under ORS
It is relevant to note that this court neither expresses nor has any jurisdiction to express an opinion on whether plaintiff's hardship application, if plaintiff sees fit to make one, should or should not be given a favorable recommendation under ORS
The court also notes that the plaintiff is not entitled to invoke the doctrine of estoppel to correct the consequences of its failure to file the free port exemption claim on April 1, 1974. It is not chronologically possible for the plaintiff to have relied on the notice of May 1, 1974, in failing to file an exemption claim on April 1, 1974.
Plaintiff is entitled to its statutory costs and disbursements in this court.