*1 5, 1990, Argued September judgment and submitted Tax Court 29, 1991 August affirmed Charles J. MATHIAS Mathias, and Charlotte Respondents, REVENUE, OF DEPARTMENT Appellant.
(OTC
S37159)
2910; SC
No contra. Fox, Salem, Willard E. brief on filed a behalf of amicus curiae State Home Builders Association.
FADELEY, J.
FADELEY, J. vacant
Taxpayers their complain fully developed, lot at higher residential subdivision was valued and taxed amounts than identical lots to it in the same subdivi- adjacent does not contest that Department sion. Defendant of Revenue lot at a purposes was valued real taxpayers’ substantially higher applied amount than the taxable valuation lots, or to lots located elsewhere in the same subdivi- adjacent sion, nearby other subdivisions within very similar authority. Instead, the boundaries of the same taxing taxable value of the other- dispariiy defends on a similar, vacant lots fully developed, relying wise The amendment added a new subsection statutory amendment. (3) that: 308.205, to ORS providing four or more lots within one
“If the consists of subdivision, the lots ownership, and the lots are held under one recognizes which the time shall be valued under a method lots must sold in order to realize over those he period which lots.” prices current market for those amendment mandates Taxpayers that the 1989 allege valuation, same class of property “double standard *3 (subdivision of of lots),” uniformity the rule thereby violating I, Article by taxation for the same class property required assessment, and collection 32,1 levy, the uniform section and DC, l,2 of Constitution. Oregon Article section required by summary and filed cross-motions for taxpayers thus raised. on the constitutional issues judgment lot is based on market taxpayers’ The taxable value owner single sales. Where by comparable value established with a started lots, the authorities also multiple taxing held same sales but then substan- comparable value based in all for tax situations purposes reduced that value tially lot had same owner. Taxpayers’ or more lots which four value. Other lots held no reduction from market received 32, I, provides part: Article section subjects within be uniform on same class “[A]ll taxation shall added.) authority levying (Emphasis the tax.” limits of the territorial IX, 1, provides part: Article section * ** Assembly by Legislative provide law rules shall “The uniform general under taxes shall levied and collected and taxation. All assessment added.) uniformly throughout (Emphasis operating the State.” laws ownerships through one three likewise lots received no from reduction comparable-sales market value. department’s claim that
Rejecting disparate were permissible valuations for four or lots more because the was authorized disparity numerical-ownership classifica- statute, tion in the new the tax court stated: “The court finds that the statute violates the directly basic I, Article protection afforded section of the i.e., class, Constitution. of the same lots in Property subdivi sions, subject are not to uniform Owners of lots of taxation. true cash equal pay equal value would not taxes on values. This not because the are properties is different or used differ ently but simply because owners are It different. is difficult this court imagine discriminatory a more scheme.” Rev., Dept. Mathias v. OTR
The tax court entered a declaratory judgment that: “ORS violates the taxation require- IX, ments of Article and Article section Oregon Constitution, is, therefore, null and void.” The issue presented by department’s of the tax appeal court — decision whether the classification four attempted treating or more lots for ad differently one, valorem tax than purposes — two, or three otherwise identical lots constitutionally permissible. We agree with the tax court that it is not and, therefore, affirm.
HISTORY OF THE CONTROVERSY
LEADING TO THIS CASE of this with a background case starts memoran- dum that one of the sent department’s managers county assessors 1983. The memorandum department’s 1983 indi- cated a “discount” could be used to reduce the assessed developed subdivision, two more lots where fully had a That did not single owner. memorandum réquire It that four or more lots be owned. did not limit the *4 commonly discount to an subdivider. It described the reduction or original by discount method as different from valuation comparable in bulk in one transaction. groups sales of lots described the “discount” approach
The memorandum on sales of individual lots. The cash as based true comparable first by value of each and individual lot was obtained every if it Then, actual sales. the assessor estimated that comparable than one to sell all of the lots in a year would take more multiple- dis- permitted percentage lot the memorandum ownership, to cash value each lot to reduce count to be the true applied lot from taxable value of each and below the derived every sales. The of reduction was increased comparable percentage taxes were to be paid annually. allow for the fact is, discount offset future taxes applied That the reduction or its to new would be on the lot sale assumedly paid prior effect, at of the taxes on the lots held part owner. In least individually would be shifted onto the multiple-lot ownership owned lots.
Thereafter, the tax court limited this so-called devel where the value discount to “those cases approach oper’s yet worth of which is sought present has no or authority legal and held that “the developed” basis for the value each unit because rational discounting Rev., 10 CKW OTR Enterprises Dept. who owns unit.” another case later, Two the tax court decided years discount, or calculated cost urged that a taxpayer which sale, to reduce price be deducted from market hold until should Rev., 10 OTR Dept. In First Interstate Bank v. taxable value. “The issue before the (1987), the tax court stated: lot should be the assessed value each court is whether two more lots are owned or reduced because discounted the same party.” case, who was the original taxpayer fully into of multiple but who had come
subdivider, possession foreclosure, department’s relied on developed memorandum and court rejected memorandum. The tax it, stating: based contentions taxpayer’s ** rejecting the* “Perhaps compelling reason the most requirement is the constitutional memorandum * ** contiguous to one of If lot is the individual’s taxation. lots, listed for sale at $14,000 both lots are plaintiffs $9,000, is no there $14,000, lot is assessed plaintiffs but omitted). (footnote at 456-57 uniformiiy.” 10 OTR *5 court, On to this the appeal taxpayer argued that the value of the real the property, by as fixed was too department, because it to failed allow for either a dis- high “developer’s count” or a to reduction value for an assumed cost hold until an undetermined future time when the be sold. might This court the rejected argument: agree
“We the the developer’s with Tax Court that discount not permissible a method of valuation in present the case. Because we that of decide this method assessment does not comply statutory with requirements, we do not decide whether a application of discount would result in a developer’s 32, violation of Article section the Oregon Constitution. <<* [*] * * *
“* * * The cost to hold is
different
not
from
rate of
return used in
developer’s
discount
true
method. The
cash
value,
308.205(1),
value is the market
ORS
not the market
Rev.,
value less a cost to hold.” First
Dept.
Interstate Bank v.
455-56,
450,
306 Or
‘‘The by itself, value of each lot portion larger not as a piece of a property, [In must a assessed. footnote court * * * explained that] certain [i]n situations it would be appro- to priate assess that lot based on its value as a of a part group. That is not the situation case.” Or present at 453 (citation omitted). —
This court rejected taxpayer’s argument that the lots should be as one lumped together unit valuation — purposes because the fully lots were and were on developed the market individually, concluding that:
“Therefore, this method of valuation does not assess value the appropriate Although separate unit. a is assigned value lot, whole, to each part this is the value of the lot as a not its as a Or at separate property.” 306
Turning adjacent discussion tract separate, by owned the same taxpayer that had been divided into yet utilities, lots nor with roads and the court separate improved indicated that assessment of the undivided tract one unit was appropriate. The court as to tract: “Its explained, that undivided affects its value, status, status but it is that undivided not the common ownership, affects market value.” 306 Or at 456. in First Interstate Bank
After this court’s decision Rev., ORS 308.205 Dept. supra, amended add a new Laws chapter stated, relies (3), quoted subsection above. As the department on classification enacted that amendment the numerical taxable that it has applied only the reduced valuation justify four more but not to identical or similar lots, lots of owners of three or lots are owned. In December when fewer had taxpayers’ departmental appeal after it ruled 1,1988, January for the assessment year,3 taxable value used also based on the regulation promulgated disparate institutionalizes treatm *6 1989 amendment the The relied on its as well as regulation, ent.4 (3) 1989, 32, chapter section makes the new subsection Laws Taxpayers’ appeal applicable “any appeal pending the on March 1989.” of to disparate pending taxable valuation was date. 150-308-205(3) part: provides OAR “ appraisal concept group means a of ‘Total valuation’ an wherein unit ownership property’ of
separately properties under one become one ‘unit identified purposes determining market of value. only valuing applicable “The unit valuation’ method of subdivision lots ‘total ownership in property comprised more lots under one the of four or vacant when being actively fully developed marketed. and the lots are the same subdivision [*] * * [*] concept group total shall be “An of for a of lots under the unit estimate following
accomplished through use of either of the methods: the “(a) comparable, By comparison groups or lots which are with sales of of direct lots, comparable, subject properly adjusted in terms of number of to to the he conditions, amenities, may any have an influence and other factors which market on market value. “(b) adjust by By of the values indicated sales of a ‘discount’ method use comprising group the the total single at an ofvalue for lots lots arrive estimate unit.” discount; produces example percent explaining “discount” method An this Rev., 452, 456 (1987), appears Dept. the n 3 it First Bank v. OTR Interstate percent taxpayer’s appraiser asserted an 81 discount. ‘ ’ multiple-lot regulation the method to the nor the limits ‘discount’ Neither statute regulation incorporates, by department’s as a ownership the subdivider or builder. The valuations, requirement “the the use method to lower condition for ofthe discount face, 308.205(3), being actively such on its contains no lots marketed.” ORS requirement enjoying preferential in valuation. its reduction * * * and return on investment provides: also “The discount rate includes The rule Thus, portion effectively at least a the rule shifts a rate for taxes.” lots held in owner- already-reduced paid on four or lots onto property taxes more ships of three fewer. (a) paragraph groups under present does involve bulk sale case not regulation. changes, statutory support summary judgment in its favor action declaratory judgment now before us. Because the challenged selective reduction taxable value is now author- ized both statute kind of by regulation, non-constitu- this court in the First Interstate Bank tional disposition made We, therefore, case is turn a discussion of the possible. I, of Article decision meaning preparation section for a whether ORS and the department’s implementing regulations violate its commands.
TAX
LAW
CLASSIFICATION
Co.,
In East Portland v.Multnomah
been considered the courts. The of the result decisions is that throughout the tax must be uniform the taxing district. A is to apportioned state; tax, state tax be through county tax, through county; a city through city. If the rule of apportionment throughout district, is uniform taxing provision object constitutional is not consti- violated. tutional provision is that one simply proportion community compelled shall not unequal to contribute an share a fund *7 and a proportionally more favored class be relieved.” Different classifications of to different tax rates property subject court, were the recognized by notwithstanding “equal the and v. In Kelly, Smith 464, 33 uniform” clause. 24 P (1893), Or 642 the that court said where all of one distinct class of property equally value, assessed the fact another proportion its that class may be assessed at a different is not a of rate violation this provision. 1917, I, 32,
In the amended Article section of the people Oregon Constitution the That consti- by deleting “equal.” word tutional amendment retained the word “uniform” and added “on the same limits class within territorial of the subjects the of (1917) Const, I, authority § the tax.” Or Art 32 levying added); A of (emphasis Carey, History the Constitution 58 (1926).5
404,
of
451
Deletion
the word
authorized tax
“equal”
classifications based on
thus
voter
facilitating
ability
pay,
state income tax. See Tharalson
enactment of a
graduated-rate
Rev.,
v. State
(1978);
Dept. of
9, 16,
281 Or
In State
rel. v. Malheur
185 Or
(1949),
412,
59
parties
agreed
on
placed
the property was its
actual
However,
value.
the Board of Equalization
a 20
granted
percent reduction below true cash value for all other properties
within the taxing authority,
except
the Reynolds property.
Sustaining.the
taxpayer’s
position
appeal, this court held
that,
there
and
“[w]here
conflict between ‘true’ value
assessment,
uniformity
requirement of uniformity is
Reynolds
paramount.”
court
quoted Appeal of Kliks, 158
Or 669, 685, 76 P2d
(1938),
974
that “[ujniformity is more
important
to the taxpayer than [accuracy of]
appraisal
terms
of the correct number of dollars.”
In Penn Com., Lands Phillips v. Tax 247 Or 385-86, 430 P2d (1967), the court held that discrimination in enforcement of tax laws current by applying market price establish taxable value of one parcel while applying out-of-date, lower to establish prices taxable value for other adjacent parcels “offends the clauses uniformity of our own constitution. Ore gon Constitution, I, § Art IX, § Art 1.”
Our more recent cases continue the requirement that a classification, to survive the of the protections taxation clauses of the constitution, state must be based on real between the treated subjects disparately differences classification. A of those sampling cases follows. * * * * * *
“[W]e conclude that a classification
constitu
tionally permissible
it is
based upon qualitative
also
if
differ
* * *
ences.
This requirement
upon
is based
the principle
established in our previous decisions that a tax classification is
genuine
it rests upon
constitutionally
See
valid
if
differences.
Johnson,
Huckaba v.
23, 25-26,
(1978),]
Or
[281
“ ‘* * * reasonable, arbitrary [I]f the classification is upon ground having and rests some of difference a fair object legislation, substantial relation to the so * * *’ persons similarly situated shall be treated alike.
“* * * It, however,
merely point
is not sufficient to
out differ-
between
groups
taxpayers
divergent
ences
treatment.
The differences justifying
attempted
classification must
legislative
bear a
relationship
purpose.”
reasonable
to the
Johnson,
Huckaba v.
23, 25-26,
281 Or
“Thus several methods be determine value, used, is irrespective of the method true cash value but * * * is rules of assessment. assessment one the basic [Z]/'the valuation of similar reasonably prop- to assessed proportionate any violate county, in the assessment does not erties added.) statutory provisions.” (Emphasis or constitutional discussion, some con principles From the foregoing may The emerge. legislature clause cerning into different classes on a subjects divide different property differently. classes be treated basis, may rational and different and tax must be uniform However, valuation methods rates valorem taxation ad subjects” within “the same class Classifications, state pass to taxing authority. a throughout muster, inherent, be qualitative, must based constitutional rational differences between the classes genuine, mind, With those principles accorded different treatment. of this case. we turn to the decision CONTENTIONS DEPARTMENT’S A. Asserted Basis for Classification “rational contends there department 308.205(3) numerical classification in ORS basis” for the taxation, with statutes, directly concerned because other more into four or larger parcel between division of distinguish three fewer of a into or parcel lots as with division compared designed makes no other contention department lots. The a tax those individual lots granted disclose a difference between it. and those denied break that, legislature asserts because context, land division classification
made a numerical the same numerical division making for there is a rational basis cites The department for taxation. of valuation purposes Com., the proposi- supra, v. Tax ‘to Corp. Dutton Lbr. support classification.” has discretion as to “wide tion that a in the proposition of that accuracy Without questioning court, corpora- note that the Dutton considering abstract, we application its question, required excise tax tion related “reasonably distinctions upon classification be based object legislation” so that situ- taxpayers “similarly ated shall be treated alike.” 228 Or 539-40. 92.010(7)
ORS labels the process dividing land into or as two three within “partition parcels, year, one calendar ” land, while ORS labels the process dividing land or “into four more lots within a calendar year” as to “subdivide ”6 land. Both partitioning are, however, and subdividing subject to identical or nearly identical regulatory requirements. For example, recorded of the land plats division are required whether the process was labeled a or a partition subdivision. 92.010(8); ORS ORS 92.040. ORS 92.017 provides: parcel lawfully
“A lot or created shall remain a lot discrete parcel, or parcel changed unless lot lines or vacated or divided, parcel lot or provided by further law.” *10 These regulatory provisions do not relate taxation and, thus, are not themselves within the of the scope uniformity I, taxation mandate of Article section 32. Land division regulations are, therefore, not directly subject Article Their existence not does a rational for provide basis a tax law classification or three fewer from distinguishing lots four or Moreover, more. statutory parlance, only where a subdivision is involved are individual tracts land resulting 92.010(1). from the division properly denominated ORS “lots.” If that parlance is 308.205(3), used ORS parsing simply it reinforces the sameness of the favored and the disfavored — parcels are, subdivisions, all “lots” identically, not proper- ties of different kinds or inherently uses.
There is no rational basis for tax treatment disparate based on this only contention. It is the basis on which the claims a department valid classification was legislatively A attempted. close of legislative history examination confirms the land division only statutes were the source of the classifying does not contend that reason a for division of partitioning subdividing parcels parcels any land into three as but into four bears purposes. relation to a reason a similar numerical classification for tax valuation party property any No contends that the real to be other valuation is basis 308.205(3) highest permitted by than the and best use law or that ORS modifies that As amicus principle. points out in its brief: 308.205(3) tax, change subject i.e. ‘true cash “ORS does not or basis value’ or ‘market value’ of the as of assessment date.” three but includ- attempted excluding numerical classification ing four.7 if some regulatory
Even one assumes that there is in one reason for a division of land into four tracts treating three, than a division into that ration- differently calendar year ale, and transferred to an ad valorem tax when borrowed override the constitutional setting, necessarily would Were it in that taxation context. requirement uniformity otherwise, general subject “classification” statutory ineffective all matter for could render any purpose subject taxation constitutional where protections general matter was involved. sum, of moment only provided distinction in the bor- three or fewer and four or more division between — are “parcel”
rowed statute is one of labels
“partition”
into three or fewer
to divisions of land
nomenclatures applied
applied
and “lot” are
in one
while “subdivide”
pieces
year,
That
year.
or more
in one
pieces
of land
four
divisions
into
effect,
purpose,
difference
distinction is without
real
dividing
created
subjects
to the
of taxable
single
relation
class
then fully develop-
into smaller ones and
of land
parcels
larger
lots
the individual
where
them for residential
ing
purposes,
The amount of
separately.
and taxed
thereafter
assessed
basis for
owns
not a rational
that a
taxpayer
other
for tax pur-
identical
between otherwise
distinguishing
inherent,
lacks the
accordingly
The classification
poses.8
Committee,
Minutes,
April 5 and
See
Finance
House Revenue and School
Minutes,
Subcommittee,
1989;
Ways and Means Com
Joint
General Government
23,1989.
legislation
mittee,
Ironically,
original proposal for
became
which
June
require
“will
more
all lots in subdivisions that
would have covered
ORS
*11
prices
by
The four-or-more
year
current
lot sales.”
than one
to sell at
reflected
selecting
reasoning
by
department.
suggested
No
was
later
distinction
point
beginning
other than
favoritism was articulated
of four lots as the
of
number
land use laws use other
already in
“land use laws.” Other
it
number
that was a
(ten
used).
dividing
dividing
line
lot
See
lines.
ORS 92.375
numbers of lots as
8
upon
purely
of
purposes
characteristics
based
Classifications
Fisher,
180, 292 P
v.
135 Or
have
invalid
the owner
been declared
Redfield
Justices,
321, 326,
559, 569, 149 A
Opinion
re
(1931),
NH
and In
84
The dissent asserts there to four significant opposed difference between three lots as a state- supply otherwise identical lots. The dissent does not assertion, of this Instead, support ment of that difference. first chides the court for lack of deference to another dissent Where deference cannot reasonably branch of government. branch of to both the constitution and the acts another paid courts have constitution, reviewed in context of the government the constitution. enforce responsibility also the effect of and ignores supply The dissent all similar within establishing prices falling demand on items Moreover, there exists no likelihood given any market. one will other lot that is particular lot sell before otherwise any identical, where all are offered at the same In that price. circumstance, a time element to one lot but not to applying or another an about which lot requires arbitrary assumption qualitative genuine lots will sell first. No rational basis classification arises arbitrary from an assumption. over the fact that remainder the dissent glosses
the difference between and in ORS partitioning subdividing event, 91 a chapter only that, any is distinction labels all in this are subdivision lots. Authorities cited parcels case they the dissent do not the conclusion for which support classification, cited that a to be because authorities require clauses, valid of taxation must be based against on a difference. qualitative, genuine protection
Authorities bottomed on federal equal cases, here, also cited to save the classification fare no attempted Johnson, Huckaba v. Or at supra, better. For example, 25-26, federal cites a analyzing equal protection guarantees, with dealing decision of the Court of the United States Supreme from a state tax. payroll some complete exemption employers and those The classification of between those taxed employers challenge was exempted upheld against equal protection administrative two rational bases for the classification: finding dissipate could employers cost to the state to tax smaller in the kinds them, from and a difference amount of tax collected *12 64 taxed from contends those No one that employers exempted.9
either basis would to take these identical lots out of apply nearly “the uniformity protections subjects. for same class” of Court,
A later a state decision of that down tax striking where more specific classification fed- exemption purposes provisions involved, eral constitutional were indicates def- has, even scheme, erence to state classifications in the federal significant limits. assuming
“Even estimate value of the State’s relative correct, state and federal retirement benefits is we generally do not believe this suffices to of blanket justify type difference average at issue in While exemption this case. retired larger pension federal civil servant receives a than his state many there counterpart, undoubtedly individual instances A opposite exemption truly in which the true. holds tax intended to account for differences retirement benefits on the basis of the source of those would discriminate benefits, Michigan’s does; rather, statute it would discrimi individ nate on the basis the amount of benefits received Co., 384-385, 4 L supra, at Ed Phillips ual retirees. Chemical Cf. Ct * *." 384, 80 Michigan Treasury, S 474 Dept. 2d Davis v. (1989). 817, 109 1500, 103 L Ct Ed 2d 906 489 US S has also under intentional, That Court held systematic state offi comparable neighboring valuation properties assessing while others at full value violated equal cials Allegheny clause the Fourteenth Amendment. protection L 366, 109 336, 102 Ed 2d County, Pitt. v. Webster 488 US S Ct Vermont, 14, 105 US Ct See also Williams v. S (tax (1985) L Ed 2d 11 credit allowed to Vermont some automobiles out- purchased residents for sales paid Co., 495, 511-12, 57 S & Coke 301 US Ct Carmichael v. Southern Coal (1937), 1245, 1254 explained: Supreme 81 L Court of the United States Ed state, payrolls, hardly to tax that the in order “It would contended taxing employers all cost and burden of
bound to assume the administrative some, any may exempt single employee. having a But if for that or other reason it three, seven, one, question peculiarly draw whether it should the line arbitrary legislative cannot be said to be because it falls decision. The decision plainly which can and twilight zone members the class in the between those plainly expediently be taxed. which those cannot “* * * suggests exemptions simply state has The character of the tax, processes chosen, subject employ labor in the those who as the of its production and distribution.” industrial became buyer if before the of-state, purchased but not allowed resident, protection). violative of federal equal Vermont held Devel- Foster
B. Asserted Intent Subdivision opment and amicus contend, with along *13 to the that the numerical
dissent, argument as an alternative valid, encourage intended to legislature classification is that the land subdividing by investment and effort those by engaged a tax that ORS subsidy. They argue them incentive providing tax is, exemp a form of reality, partial property than activity tion to stimulate subdividers into more designed cite other They “exemp market forces alone would produce. — to farm assessment of land dedicated special tions” such held for sale as use, inventory of that is exemption property facilities while business, and the of commercial exemption of — to intent legislature’s under construction as proof 308.205(3). landowners when it ORS adopted subsidize larger differences in are, course, other based on exemptions Those See exempted property. kind or in the use of the only permitted Municipal (1957) Differentials, Tax 37 Or L Rev Etter, land). on kind or use of distinctions based (discussing the tax argument, to the response department’s limited court out that the benefits of the statute are not pointed being developed. to subdividers or or to developers property application Neither the statute at issue nor department’s to the market of some of the lots under a discount value favoring consideration limits use of the tax valuation method held either to such still multiple ownerships ownerships lots. subdivider or to bulk sales subdivision original necessarily that would not exemption fact it achieve the which the contention goal department’s assigns did not mean, however, does not alone the legislature an from which owners exemption only establish intentionally Therefore, we considera- carry four or more lots would benefit. a bit further. argument tion of the intended-tax-benefit or in the depart in the text of the statute Nothing exemp that a regulation suggests partial ment’s implementing is intended. The statute tion from otherwise due taxes justly taxable reducing a method of only describe regulation those market value of lots below the established for selected lots, method that is not under the statute uniformly applicable all situated Neither lots. the statute nor the similarly regula tion the form or content the other parallels exemption department’s argument. statutes cited in the There is no differ ence kind or use on which to base a selective There is no exemption. simply indication intended a subdi require taxpayers pay part other Instead, vider’s taxes. the text of the subsec statutory in this case intended taxpayers tion issue confirms all Moreover, to be taxed on actual market value. no amendment or other reference to the mandate of ORS 308.23210 occurs in the or in the of its consideration. legislation history
The context of statute does not indicate that excep- tions or benefits for individual landowners were under tax (1989 HB 2338 to which Legislative Assembly), consideration. committee, added amendment focused subsection 3 was true cash and assessment. valuation achieving read nothing legislative history in the Lastly, supports benefit, consciously exemption, as a enacted ing statute *14 argument discussion but an that subsidy. or The recorded by apply current will be obtained more accurate assessed that take some may, arguably, this method to individual ing that use of sell, time to observation augmented by (for few after it years method had been standard practice department first in the 1983 memorandum appeared Interstate First before it was this court’s decision upset by Rev., Bank v. discussion, This and that practice, supra). Dept. of fewer residential lots are not illuminate three or why did further lots for ad valorem tax inherently different than four or more one would take why nor individual lot purposes, assessed value Indeed, comments any to than other similar lot. longer sell mem to the and Means Subcommittee Ways committee staff be might that the act potential disclosed awareness of the bers provides: ORS 308.232 county personal shall valued and “All within each be real or (1991 ORS percent true cash value.” amendments assessed at 100 of its 97.) § change Or Laws ch “true cash” to “real market” value. 308.232 dissent) (and accept Were the invitation of we granting exemption for not all otherwise similar one some but the statute as construe lots, issues readily apparent taxation it is not residential present case would avoided. this unconstitutional for lack of a rational basis for the purely classification, numerical but recommended that the committee include section 30 in HB the “standard enabling practice” deferring based on the 1983 memorandum continue while the constitutionality recording, decision to the courts. Tape Subcommittee, General Government Ways Joint and Means Committee, 23,1989, June side 134-B 210. argument legislature partial intended
exemption subsidy owning those four or more lots at the of other expense properly taxpayers, those including owning lots, fewer is not It cannot validate the supportable. attempted numerical classification a reduction from true cash granting value for only those lots held of four or presently ownerships more in a subdivision. single
CONCLUSION ORS violates the uniformity requirements I, Article Constitution.12 The of the tax judgment court affirmed. HOOMISSEN, J.,
VAN dissenting. I I respectfully dissent. would hold that ORS 308.205(3) does not violate the uniformity requirements Article section 32, of the Oregon Constitution. had legislature a rational basis for concluding time”
“holding or “time-for-sale” affects the market value of the owner to property, entitling differentiated valuation methods that recognize such factors assess- property’s ment value. The decision to draw the line at “four or more lots under one is not This tax treat- ownership” arbitrary. unique ment was intended to those who are in benefit the business subdivision. It was for the to define the appropriate class covered the measure the same ownership *15 statutes, the terms as subdivision which have a similar ration- ale. 12 I, 32, Because this we further case is decided under Article section do not IX, However, question imply
consider the 1. we under Article section do mean to that, reading together, analysis the sections the would differ under an of that result section.
DEFERENCE ACTION TO LEGISLATIVE to, This case involves this court’s and relationship This for, government. a coordinate branch of court respect given great legislature has deference to the its traditionally and We have expressed strong determinations. judgments find statutes be We also have reluctance to unconstitutional. indulge every presumption stated that we should favor legislature and declare no void unless its validity act Anthony, a reasonable doubt. State v. invalidity is shown beyond (1946). view, 282, 301, 169 P2d In my majority 179 Or the case. The has not majority has not followed these rules this is valid. The presumption overcome the that ORS rational, has not looked hard discern non- majority enough true arbitrary legislature’s basis for the conclusion cash be in a manner value of one class of should calculated cash which is different from the manner in which the true of a different class of calculated.
CONSTITUTIONAL HISTORY 1917, inserted “all taxation people phrase I, into Article subjects” shall be uniform on the same class 1917, I, 32, Constitution.1 Before Article Oregon section 1 Preliminarily, necessary is but constitutional it should be noted that there one 308.205(3). validity Taxpayers argue analysis that both to determine the of ORS 32, IX, 1, I, Constitution are violated Article section and Article section I, 32, provides part: taxing section scheme at issue. Article subjects within the shall be uniform on the same class “[A]I1 taxation levying authority tax.”
territorial
limits of the
IX,
1, provides
part:
section
Article
** *
Assembly
provide by
Legislative
uniform rules of
“The
shall
law
general
levied
collected under
All taxes shall be
and
assessment and taxation.
uniformly throughout
operating
the state.”
laws
legislative
majority
void
at issue here is
because
holds that the
classification
I,
32,
I,
under Article
section
it
section 32. Because it decides this case
violates Article
IX,
implies
question
under Article
section This
further consider the
itdoesnot
IX,
1,
may
if
analysis
required
the statute
issue
separate
under Article
section
however,
I,
implication,
to be
with Article
section 32. That
is found
consistent
32,
expressly
Article
section
which
states that
inconsistent with our case law
Eugene,
157,
City
v.
Or
Jarvill
IX,
together.
be read
Article
Court,
392, 411,
County
(1980);
ex
v. Malheur
185 Or
State
rel.
171 n
69
32,
“all
shall
and
required
equal
taxation
uni-
to require
form.” The
was construed
pre-amendment
language
that the rate of taxation “be
all
absolutely equal upon
property
* * *
kind
of whatever
was
to be valued
property
required
[and]
Pierce,
and taxed at
112
equal rates.” Standard Lbr. Co. v.
Or
(1924).
334,
314,
The 1917
permitted
constitutional amendment
“clas
nature,
class,
sification of
to its
respect
condition
and the
thereon
different
imposition
rates of taxation upon
fact,
different classes of
Id. at 335. In
“the
property.”
primary
of the 1917 amendment was to
classification.”
purpose
permit
(1980).
Jarvill v.
Or
P2d 1
City Eugene,
“This
includes the
to
power
subclassify
classify
authority
included in
persons
general
class.” Id. at 183. In addition to
taxation,
classification for different rates of
amend
allowing
ment also allowed taxing authorities to
classify property
impose different methods of valuation on the classes of prop
Com.,
erty. Robinson v.
532, 536,
State Tax
216 Or
The power to make classifications of
for
taxing purposes
solely
the hands of the taxing authority,
Pierce,
this case the legislature. See Standard Lbr. Co. v.
supra,
review. In bases for the classification at majority legislative history refers repeatedly *17 (3) 1989 amendment subsection to ORS 308.205. For adding example, majority the makes such statements as: the legislative history
“A close examination of
confirms that
the
source of the
only
attempted
land division statutes were
including
excluding three
four.”
numerical classification
but
“There is no indication that the a of a require taxpayers pay part property other subdivider’s 312 Or at taxes.” 66. reading the
“[N]othing legislative history supports in the benefit, or consciously exemption, a tax statute as enacted at subsidy.” 312 Or provision on of the legislative history
This focus a break validity sharp issue to determine that is provision’s to this deferential level of review traditionally provided from in the In our review of such legislation category legislation. above, in Huckaba standard, quoted we have looked to the past, Johnson, of the must be supra, legislation that the validity it. if conceivable rational basis support sustained there is any that we look to rejected we have the view contrast, In in the past, dutifully articulated and clearly bases which are only those reviewing legislation In history. in the legislative recorded “Could the asking question, majority case the should this benefit, or exemption, as an legislature enact this statute in the clearly is expressed not whether such an intent subsidy,” history. legislative the legisla- rational bases ignoring
By potential (not consider), the did necessarily could considered ture have than rigorous far more review is standard majority applying view, my In taxation cases. traditional test these requires our it is “conceivable” that this provision enacted one or more of grounds by majority. Any such pointed moreover, minimum, ground, rational, would also be at a as an i.e., aid to the industry, benefited economic development. A. Rational Basis for Classification This case involves classification of legislative prop- on which erty unique method of valuation is imposed. all general, real or valued property, personal, to be required and assessed at 100 cash percent its true value. ORS 308.232. Before “true cash value” was defined: “True cash value of all property, real and means personal, the market value of the property as the assessment date. all True cash value in cases shall be determined methods procedures in accordance with rules adopted Depart- ment Revenue and in following: accordance with the “(1) value, If property has no immediate market its money true cash value is the justly amount of that would compensate the owner for loss property.
‘!(2) If subject governmental property restriction as to use on the assessment date under law or applicable regulation, cash upon true value shall not be based sales that reflect for the property a market would have if the use of the subject were not to the restric adjustments tion unless in value made reflecting the effect of restrictions.” ORS 308.205 *18 In 1989, the legislature amended the definition of cash true value by the adding “developer’s so-called discount.” Or Laws 796, § ch 30. That provision provides: “(3) If property consists of four or lots more within subdivision,
one and the lots are held under one ownership, lots shall be valued recognizes under a method which the time period over which those must sold in order to realize 308.205(3). current market ORS prices.”
With implementation dis “developer’s count,” the legislature power exercised its under Article to real create classification of and impose on method valuation that class that differs from the method valuation for other kinds real See Robinson v. property.2 department recognized “developer’s In First The first discount” 1983. Rev., (1988), 450, 760 however, Dept. Interstate Bank v. 306 Or P2d 880 this court (different Com., of valuation legiti- State Tax methods supra mate for different classes of property). which
In there a rational basis on my opinion, the class selected was could have determined that legislative tax treatment. The unique and unique worthy “inherent, ratio- qualitative, genuine, classification is based on to be accorded nal differences between classes properly different treatment.” 312 Or of ORS and the history plain
The legislative
on which the classifica-
language of the statute reveal the basis
i.e., the
was authorized
the legislature,
tion
the statute
the market value of certain property.
effect of
on
holding-time
is straightforward
behind the classification
assumption
It takes longer
and
backed
common sense and
experience.
three or fewer. The
to sell
or more lots than it does
sell
four
this
For
the attor-
reality.
example,
were
apprised
legislators
and original
Homebuilders Association
for the
ney
the Senate Committee
author of the amendment
explained
School Finance:
Revenue and
when the
recognize
what
here is that
attempting
“So
we’re
$14,000.
sells,
gets
When the owner of 31
single lot
he
owner
lot,
sells,
$9,000 per
looking
and that’s
to the
gets only
he
Carmichael,
Testimony
Committee
market.”
of David
Senate
(SB 2338),
24,1989,
May
Tape
Finance
on Revenue
School
B,
Side
No. 354.
Cue
notes:
history,
majority
In its review of the legislative
that a more
argument
is but an
“The recorded discussion
by applying
value will be obtained
accurate current assessed
arguably,
that may,
to individual lots
[of valuation]
this method
* *
sell
The its brief lots department argues generally, size, in will given relatively a subdivision be of uniform and it is reasonable to conclude that the size of four or more aggregate lots will be than three or fewer. this to be greater Assuming true, the also that the could have concluded market legislature ‘ of a of or more value of four lots large piece ‘property consisting subdivision, one within under one be different ownership,” may and, a therefore, than smaller would a piece property require unique method court example, of valuation. For this has also distinctions recognized marketability larger See, Revenue, smaller land. Ward parcels of e.g., Dept. of (“The (1982) 506, 510, P2d Or market value of a large parcel necessarily does not the sum of market equal value of parts into which may that be divided or parcel subdivided marketable”). because smaller be more parcels may readily B. Reasonable Relationship Objective Permissible The never majority evaluates the of holding-time effect on the market certain as a conceivable property state of facts a supporting classification of that for differenti- property ated tax treatment. Is not “a more accurate current assessed value” permissible legislative objective? may the Why legisla- ture not determine a certain rationally does, class lots fact, thus, take to sell longer and, tax treat- requires unique ment? Why does the statute not to the reasonably legisla- relate goal? tive was legislature careful deciding property or more
consisting single four lots one ownership subdivision is which type is entitled to a differen- property tiated method of valuation purposes. for tax As majority or not correctly states, the number “four more” was “drawn out of four or hat.” Wfiiether consists more property is the is, initial line between whether the dividing property 92.010(14). not, 92.010(13); or is If a subdivision. ORS piece lots, of four then consists or more subject to regulations. why subdivision laws and That drew the line it did. The classification bears a where it sought reasonable to the end to achieve. relationship understands majority department’s argument *20 “four more” legislature that the “borrowed” the number or shall we use? from the subdivision statute be: “What number in the law Well, used the ‘four or more’ subdivision phrase we as well it there, might number seems to work so we use and that just then that the number majority here.” The reasons because not is good is for one mean that it purpose “four or more” does depart- The misunderstands the good majority for another. not the argue The does argument. ment’s laws, number was borrowed from the subdivision merely Rather, any depart- as other. any good number is as that number legislature specifically ment that the chose argues i.e., that there was a laws, because it was used in the subdivision direct the number used the subdivision relationship between Minutes, statutory laws and its use the 1989 amendments. Finance, April House Committee on Revenue and School 5; B, Side Cue No. Tape easily The could have concluded that legislature a influence the might tax treatment of subdivision For a land example, developer of subdivisions. development (create parcel a to subdivide a of land decision contemplating lots) is inevitably prospect paying four or more faced with the taxes on that Without tax treatment subdivision. lots) (four 308.205(3), for ORS provided subdivision more (create lots), four or more developer if the decides to subdivide the retail value of will forced taxes on developer pay is for sale. That being developer each lot while it held individual economically it is not feasible subdivide conclude that might lots) (create ration- legislature The property. four or more have undesirable economic could conclude that that would ally had a rational short, legislature for state. impacts for tax treatment differentiated granting reason under one or more lots within one subdivision four consisting amendments to ORS is permitted by ownership, 308.205. development typically
The
of subdivision
process
taxable
in smaller
with
parcels
greater aggregate
results
See
original
large,
parcel.
market value than the
undivided
Revenue,
The legislature
Dept.
supra,
Ward
“do relate to not taxation are not themselves within I, scope in taxation mandate of Article are, therefore, Land regulations directly section 32. division subject I, to Article Or section 32.” 312 at 61. I,
Whether the subdivision laws are to Article subject of no however, consequence. is at issue is whether question had a rational creating basis classification subject is to Article section'32. For the reasons noted above, I believe that it did. The classification contained in ORS rationally based and related to a reasonably permissible legislative objective. Therefore, the classification is valid.
Carson, J., joins this dissent.