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It ain’t over till it’s over! This long running battle between a taxpayer and Clackamas County has now spawned three Supreme Court opinions, in the process providing a history lesson on real property assessment in Oregon.
It all starts in 2005, when an employee of the assessor’s office visited an apartment complex under construction in Clackamas County. At that point site improvements were mostly complete, but the buildings were not. The assessor’s office failed to factor the value of those site improvements into the land value of that property for the following two tax years. Realizing this error, in 2007 the assessor added the value of the site improvements as “omitted property”. Taxpayer appealed that decision, resulting in the Supreme Court’s opinion in Village I, holding that the site improvements did not qualify as omitted property. Round one to the taxpayer.
While Village I was pending in the Supreme Court, taxpayer petitioned the Tax Court for attorney fees. The Tax Court granted that petition, finding an award of fees to be appropriate whenever the losing governmental party appeals from a well-reasoned opinion of its Magistrate Division. In Village II the Supreme Court rejected that standard. It also reversed the award, finding the County had an objectively reasonable basis to appeal the magistrates ruling in light of the serious issue of statutory construction addressed in Village I. Round II to the County.
This brings us to Round III. In addition to the omitted property issue, taxpayer also appealed the valuation of improvements to its property. That litigation was stayed during litigation of the omitted property issue. The Supreme Courts Village I decision now brought that issue front and center. But first the legislature tossed a wrench into the works!
When the improvement value was appealed, Oregon limited the issues on appeal to only the component of assessed value challenged by the party filing the appeal. This rule could result in an under assessment if the total valuation was correct, but that assessment was not correctly allocated between land and improvement values. During the 2011 session the legislature addressed this issue, amending ORS 305.287 to permit the non-appealing party raise the value of the unappealed component. This change took effect while taxpayer’s improvement value appeal was pending before the Regular Division of the Tax Court. Citing that amendment, the County moved to raise the issue of land value in response to taxpayers improvement value appeal. The Tax Court denied that motion, interpreting the amended statute as applying only to appeals to the Magistrate Division. This is the issue decided yesterday by the Supreme Court in Village III. Its conclusion, the unappealed value component can be raised at any level of appeal except for an appeal before the Supreme Court. Round III to the County.
Yesterday’s opinion ended by remanding this case to the Tax Court for further proceedings. Standby for round IV!
Note: Full disclosure, the author was involved in some of the aspects of this litigation.
Today the Supreme Court granted review of one of the petitions to watch highlighted in our Supreme Court Preview.
In Armour, et al., v. Indianapolis, et al., the City adopted a new way to finance sewer improvements, easing the transition by discharging outstanding assessments. Taxpayers who had already paid the old assessment sued for refunds, claiming violation of the Equal Protection Clause of the Fourteenth Amendment. The Indiana Supreme Court found that the City did not violate the Equal Protection Clause because its decision was rationally related to a legitimate governmental interest. The Supreme Court is now set to weigh in on the following question:
“Whether the Equal Protection Clause precludes a local taxing authority from refusing to refund payments made by those who have paid their assessments in full, while forgiving the obligations of identically situated taxpayers who chose to payover a multi-year installment plan.”