Case Title: U.S. Bancorp v. Dept. of Rev.

Citation: 

Docket Number: S51013

State: oregon

Court: Oregon Supreme Court

Date: 2004-12-16T00:00:00Z

Document:
FILED:  December 16, 2004
IN THE SUPREME COURT OF THE STATE OF OREGON
U.S. BANCORP and SUBSIDIARIES,
Respondent,
v.
DEPARTMENT OF REVENUE, 
Appellant.
(OTC 4531; SC S51013)
En Banc
On review from the Oregon Tax Court.*
Carl N. Byers, Senior Judge (summary judgment); Henry C.
Breithaupt, Judge (trial).
Argued and submitted September 8, 2004.
Jas. Jeffrey Adams, Assistant Attorney General, Salem,
argued the cause for appellant.  With him on the briefs were
Hardy Myers, Attorney General, Mary H. Williams, Solicitor
General, and Robert B. Rocklin, Assistant Attorney General.
Bruce L. Campbell, of Miller Nash LLP, Portland, argued the
cause for respondent.  With him on the briefs was Ryan R. Nisle.
CARSON, C.J.
The decision of the Tax Court is reversed in part and
affirmed in part, and the case is remanded to the Tax Court for
further proceedings.
*15 OTR 375 (2001).
CARSON, C.J.
This dispute concerns the Oregon corporate excise tax
liability of U.S. Bancorp (taxpayer) for tax years 1988 through
1992. (1)  The primary question before us is whether, during
the tax years at issue, the Department of Revenue (department)
had authority to require taxpayer to depart from the rule
prescribing the standard apportionment formula for financial
organizations governed under ORS 314.280, (2) because that
formula failed to provide an accurate reflection of taxpayer's
net income from business done within Oregon.
The department assessed additional taxes against
taxpayer for tax years 1988 through 1992 based upon its
determination that inclusion of taxpayer's intangible personal
property resulted in a more accurate apportionment of taxpayer's
income to Oregon under ORS 314.280.  Taxpayer appealed from those
notices of deficiency to the Oregon Tax Court.  
In the Tax Court, taxpayer first argued that ORS
314.280, and the rules that the department had promulgated
pursuant to that statute, precluded the department from including
taxpayer's intangible personal property in the apportionment
computations for the tax years at issue.  As relevant here,
taxpayer also argued that the department's notices of deficiency
for tax years 1988 and 1989 were time-barred because, according
to taxpayer, the department had received notice of corrections to
taxpayer's federal tax liability more than two years before the
department had entered into an agreement with taxpayer that had
extended the limitations period for those years.  See ORS
314.410(3) (providing two-year period of limitations from notice
of federal correction for department to issue notice of
deficiency); ORS 314.410(6) (providing that parties may enter
extension agreement before expiration of any period of time
prescribed for giving of notice of deficiency); see also
generally ORS 314.410(1) (providing that department generally has
three years after return is filed to issue notice of deficiency). 
The department answered and filed a counterclaim, asserting an
additional deficiency relating to the receipts factor of the
apportionment formula.
On taxpayer's motion for partial summary judgment, the
Tax Court concluded that the department lacked authority to
include taxpayer's intangible personal property in the
apportionment formula for tax years 1988 through 1992.  U.S.
Bancorp v. Dept. of Rev.,, 15 OTR 375 (2001).  The case proceeded
to trial on taxpayer's statute of limitations claim and the
department's counterclaim.  At trial, taxpayer conceded the
department's counterclaim except as to its timeliness.  As to
taxpayer's statute of limitations claim, the Tax Court held that
taxpayer bore the burden of proving that the parties' extension
agreement was defective because the department had received
notice of corrections to taxpayer's federal tax liability more
than two years before the parties had executed that agreement. 
Because taxpayer had failed to prove that fact, the Tax Court
concluded that the extension agreement was valid and,
consequently, that the department's notices of deficiency for
1988 and 1989 were timely.
The department appealed to this court, assigning error
to the Tax Court's grant of taxpayer's motion for partial summary
judgment.  In a cross-assignment of error, taxpayer contends that
the Tax Court erred by ruling that, as to taxpayer's statute of
limitations claim, taxpayer bore the burden of proving when the
department first received notice of corrections to taxpayer's
federal tax liability for 1988 and 1989.
We review for errors of law, ORS 305.445, and discuss
both the department's assignment of error and taxpayer's cross-assignment of error separately below.  For the reasons that
follow, we conclude that the Tax Court erred by holding that the
department had lacked authority to include taxpayer's intangible
personal property in the apportionment formula used to allocate
taxpayer's income to Oregon under ORS 314.280 for tax years 1988
through 1992.  We further conclude that the Tax Court correctly
determined that taxpayer bore the burden of proving that the
parties' extension agreement was defective because the department
had received notice of corrections to taxpayer's federal tax
liability more than two years before the parties had executed
that agreement.  Based upon those conclusions, we reverse the
decision of the Tax Court in part and affirm it in part, and
remand the case to that court for further proceedings. 
DEPARTMENT'S ASSIGNMENT OF ERROR
To provide context for the facts and the parties'
arguments respecting the department's authority to require
taxpayer to utilize an alternative apportionment formula, we
first provide background as to the statutory and regulatory
framework that underlies this dispute.  Taxpayer is a unitary
financial organization that does business both in Oregon and in
other states.  See ORS 314.610(4) (defining "financial
organization"
  for purposes of ORS 314.605 to 314.675).  As a
financial organization, it is excluded from the coverage of the
Uniform Division of Income for Tax Purposes Act (UDITPA), (3)
and, instead, its net income for purposes of the Oregon corporate
excise tax is determined under ORS 314.280.  See ORS 314.615
(excluding financial organizations with taxable income from both
within and outside Oregon from UDITPA).  During 1988 through
1992, the tax years at issue in this dispute, ORS 314.280
provided, in part:
"(1) If a taxpayer has income from business
activity as a financial organization * * * which is
taxable both within and without this state * * * the
determination of net income shall be based upon the
business activity within the state, and the department
shall have power to permit or require either the
segregated method of reporting or the apportionment
method of reporting, under rules and regulations
adopted by the department, so as fairly and accurately
to reflect the net income of the business done within
the state.
"(2) The provisions of subsection (1) of this
section dealing with the apportionment of income earned
from sources both within and without the State of
Oregon are designed to allocate to the State of Oregon
on a fair and equitable basis a proportion of such
income earned from sources both within and without the
state.  Any taxpayer may submit an alternative basis of
apportionment with respect to the income of the
taxpayer and explain that basis in full in the return
of the taxpayer.  If approved by the department that
method will be accepted as the basis of allocation."
Pursuant to the authority that ORS 314.280 confers upon
it, the department has adopted administrative rules governing
methods of income reporting for taxpayers governed under that
statute.  For the tax years at issue, as is also true now, many
of the department's rules promulgated under ORS 314.280
incorporated provisions of UDITPA or rules that the department
had adopted to implement UDITPA.  As pertinent here, OAR 150-314.280-(C) adopts by reference the UDITPA requirement that a
taxpayer utilize the apportionment method of income allocation
when the taxpayer's business activities in Oregon are part of a
unitary business that is carried on both within and outside the
state.  OAR 150-314.280-(C) (incorporating OAR 150-314.615-(D));
OAR 150-314.615-(D) (requiring apportionment method in such
circumstances).  During the relevant tax years, the department
also required financial organizations to apply a modified version
of the UDITPA three-factor apportionment formula.  See generally
Twentieth Century-Fox v. Dept. of Rev., 299 Or 220, 224, 700 P2d
1035 (1985) (describing operation of UDITPA three-factor
apportionment formula).  OAR 150-314.280-(E) (1987) provided, in part:
"After deducting the nonapportionable income, the
remainder shall ordinarily be apportioned to this state
by giving equal weight to three factors.
"For a financial organization, the three factors
shall be payroll, property and gross revenue.
"'Property' means real and tangible personal property used in the business." (4)
(Emphasis added.)  See also OAR 150-314.280-(F) (1987)
(incorporating UDIPTA methodology for determining "property
factor" set out in ORS 314.655 and its related rules).  
In addition to those provisions, during the relevant
tax years, the department also imported restrictions from UDITPA
that narrowly limited the department's authority to permit or
require a taxpayer to deviate from standard methods of income
reporting that the department had prescribed by rule under ORS
314.280.  Under the rule adopting those limits, the department
possessed authority to permit or require a taxpayer to utilize an
alternative income reporting method only if the applicable
standard method did not represent fairly the taxpayer's "business
activity" in Oregon and resulted in a violation of the taxpayer's
state or federal constitutional rights.  Specifically, OAR 150-314.280-(M) (1987) provided, in part:
"If the allocation and apportionment provisions of
OAR 150-314.280-(A) to 150-314.280-(L) do not fairly
represent the extent of the taxpayer's business
activity in this state and result in the violation of
the taxpayer's rights under the Constitution of this
state or of the United States, the taxpayer may
petition for and the department may permit, or the
department may require, in respect to all or any part
of the taxpayer's business activity:
"(1) Separate accounting;
"(2) The exclusion of any one or more of the
factors;
"(3) The inclusion of one or more additional
factors which will fairly represent the taxpayer's
business activity in this state; or 
"(4) The employment of any other method to
effectuate an equitable allocation and apportionment of
the taxpayer's income." 
(Emphasis added.)  See also ORS 314.670 (1987) (similarly
restricting variation from standard apportionment provisions of
UDITPA).
In 1995, this court issued its decision in Fisher
Broadcasting, Inc. v. Dept. of Rev., 321 Or 341, 898 P2d 1333
(1995).  In that case, the taxpayer had challenged the validity
of OAR 150-314.280-(I) (1983) (5) –- the predecessor rule to
OAR 150-314.280-(M) (1987) -- which similarly incorporated
restrictions from UDITPA limiting the department's authority to
permit or require deviation from the department's rules
prescribing standard methods of income reporting under ORS
314.280.  After reviewing the text and context of ORS 314.280,
this court agreed with the taxpayer that the restriction against
alternative reporting methods set out in OAR 150-314.280-(I)
(1983) was beyond the scope of the department's rulemaking
authority under ORS 314.280.  In reaching that conclusion, the
court first observed that the legislature expressly had excluded
certain taxpayers from the coverage of UDITPA and, in doing so,
had demonstrated an intent to preserve for those taxpayers "the
advantages of individual judgment and flexibility" that had
existed under ORS 314.280.  Id. at 353-55.  Because the
department lacked authority to override that legislative choice,
the court concluded that the department was not authorized to
subject taxpayers covered under ORS 314.280 to the same
restrictions against utilizing alternative methods of income
reporting that existed for taxpayers governed by UDITPA.  Id. at
355.  The court went on to observe that, even if the department
had been authorized to limit its power in such a way, the UDITPA
standard incorporated under OAR 150-314.280-(I) (1983) was
incompatible with the text of ORS 314.280.  Specifically, the
court pointed out that, although ORS 314.280 directs the
department to adopt reporting methods that "'fairly and
accurately reflect the net income of the [taxpayer's] business
done within the state[,]'" the UDITPA standard incorporated under
OAR 150-314.280-(I) (1983) authorized the department to permit or
require alternative reporting methods only when the standard
method did not "'fairly represent the extent of the taxpayer's
business activity in this state.'"  Id. at 355 (quoting ORS
314.280 and OAR 150-314.670 (1987)) (emphasis in Fisher
Broadcasting).  Thus, the court determined that OAR 150-314.280-(I) (1983) also was invalid because, contrary to the legislative
mandate of ORS 314.280, that rule did not allow a taxpayer to
challenge the application of a standard income reporting method
upon the ground that it did not result in an accurate reflection
of the taxpayer's net income from business done within the state. 
Id. at 359.
In 1995, in response to this court's decision in Fisher
Broadcasting, the department amended the rule governing its
authority to permit or require deviation from the department's
rules prescribing methods of income reporting under ORS 314.280. 
The department's new rule provided that the department had
authority to permit or require an alternative reporting method –-
including the use of an additional factor in an apportionment
formula -- whenever a standard method did not "fairly and
accurately" reflect the taxpayer's net income from business done
within Oregon.  OAR 150-314.280-(M) (1995) provided, in part:
"(1) For taxpayers that are taxable both within
and without Oregon, the provisions of ORS 314.280 will
ordinarily require apportionment to arrive at a fair
and accurate measure of net income from business
activity in Oregon.  If the taxpayer can show that no
unitary relationship exists between its business
activities within Oregon and those activities outside
Oregon, then taxpayer may use separate accounting.
"(2) If the allocation and apportionment
provisions of OAR 150-314.280-(A) to 150-314.280-(N) do
not fairly and accurately reflect the net income of the
business done within Oregon, based on the taxpayer's
business activity within Oregon, the department may
require or the taxpayer may request an alternative
method of apportionment and the department may approve
that method of apportioning all or any part of the net
income from the taxpayer's business activity within
Oregon:
"* * * * *
"(4) Examples of alternative methods of
apportionment include:
"(a) The exclusion of any one or more of the
factors;
"(b) The inclusion of one or more additional
factors which will fairly and accurately reflect the
taxpayer's net income from business activity in Oregon;
or
"(c) The employment of any other method to
effectuate an equitable allocation and apportionment of
the taxpayer's income."
(Emphasis added.)  
With that background in mind, we turn to the facts of this case.  Taxpayer filed its Oregon corporate excise tax
returns for the years 1988 through 1992 by applying the standard
three-factor apportionment formula that the department had
prescribed for financial organizations at that time.  See __ Or
at __ (slip op at 6-7) (setting out OAR 150-314.280-(E) (1987)). 
Consistently with the definition of the "property" factor of that
formula, taxpayer did not include intangible personal property in
its apportionment computations.  See OAR 150-314.280-(E) (1987)
(defining "property" factor as "real and tangible personal
property used in the business").
In 1998, the department audited taxpayer's tax returns
for the years at issue and determined that inclusion of
taxpayer's intangible personal property in the apportionment
formula resulted in a more accurate allocation of taxpayer's net
income to Oregon.  Applying the 1995 version of OAR 150-314.280-(M), set out above, the department included taxpayer's intangible
personal property in the apportionment calculation, and, based
upon that inclusion, it issued notices of deficiency against
taxpayer for the five years at issue.
Taxpayer appealed from those notices of deficiency to
the Oregon Tax Court.  On taxpayer's motion for partial summary
judgment, the Tax Court concluded that the department's rules
precluded the department from including taxpayer's intangible
personal property in the apportionment formula for the tax years
at issue.  U.S. Bancorp, 15 OTR at 379-80.  The Tax Court also
rejected the department's assertion that OAR 150-314.280-(M)
(1995) applied to the disputed tax years, concluding that "that
rule was not expressly made retroactive and therefore will not be
applied by the court to the years in question."  Id. at 380. 
Based upon those conclusions, the Tax Court granted summary
judgment in favor of taxpayer and awarded taxpayer refunds for
the years at issue. 
As noted above, the department appealed the Tax Court's
grant of taxpayer's summary judgment motion, asserting that the
Tax Court erred in concluding that the department had lacked
authority to include taxpayer's intangible personal property in
the apportionment formula.  Before this court, the parties'
arguments focus upon the applicability of OAR 150-314.280-(M)
(1995) to the years in question.  Both parties agree that, if OAR
150-314.280-(M) (1995) governs this dispute, then the department
had authority under that rule to include taxpayer's intangible
personal property in the apportionment calculation. (6) 
Taxpayer, however, argues that applying OAR 150-314.280-(M)
(1995) to the tax years at issue would amount to a "retroactive"
application of that rule, and, according to taxpayer, the
department did not manifest an intent for such an application in
promulgating OAR 150-314.280-(M) (1995). (7)  Taxpayer further
contends that, if this court were to construe OAR 150-314.280-(M)
(1995) as applicable to the tax years at issue, then that
application would violate taxpayer's substantive due process
rights under the federal constitution.  We address each of
taxpayer's arguments in turn below.
We first consider whether applying OAR 150-314.280-(M)
(1995) to tax years 1988 through 1992 properly is characterized
as a "retroactive" application of that rule.  
The department
contends that, because the tax years at issue were open to
examination, the application of OAR 150-314.280-(M) (1995) to
those years would not constitute a "retroactive" application of
that rule.  As we understand its argument, the department appears
to suggest that the application of a later-promulgated rule
cannot be characterized as a "retroactive" application of that
rule if the department retains authority to assess deficiencies
against a taxpayer.  We disagree with that assertion.
This court previously has explained that, as a general
matter, a retroactive legislative action is one that affects
existing legal rights or obligations arising out of past
transactions or occurrences.  Fromme v. Fred Meyer, Inc., 306 Or
558, 561-62, 761 P2d 515 (1988); see also Whipple v. Houser, 291
Or 475, 488-89, 632 P2d 782 (1981) (Linde, J., concurring)
("'Retroactivity' itself is a deceptively simple word for a
complex set of problems.  In real time, all laws can operate only
prospectively, prescribing legal consequences after their
enactment; they cannot change the past.  On the other hand, all
new laws operate upon a state of affairs formed to some extent by
past events.").  In this case, OAR 150-314.280-(M) (1995) did
nothing to alter taxpayer's existing obligation under ORS 314.280
to allocate its net income to Oregon based upon business done
within this state.  Nevertheless, in light of the restriction set
out in OAR 150-314.280-(M) (1987), we agree with taxpayer that it
was entitled to presume that its maximum tax liability for the
years at issue would be based upon the three-factor apportionment
formula set out in OAR 150-314.280-(E) (1987).  Because, under
the circumstances here, OAR 150-314.280-(M) (1995) would
authorize the department to increase that liability based upon
the inclusion of an additional apportionment factor, we conclude
that the application of that rule to taxpayer for the years at
issue would impose new obligations with respect to past
transactions and, therefore, properly is characterized as a
"retroactive" application of that rule.

That conclusion, however, does not end our inquiry.  As
this court repeatedly has observed, retroactive application of a
rule is not necessarily impermissible.  See Delehant v. Board on
Police Standards, 317 Or 273, 278, 855 P2d 1088 (1993) (so
stating).  Rather, in deciding whether to apply a rule
retroactively, we must discern the intent of the promulgating
agency.  Id.; cf. Whipple, 291 Or at 480 ("[I]n determining
whether to give retroactive effect to a legislative provision, it
is not the proper function of this court to make its own policy
judgments, but its duty instead is to attempt to 'discern and
declare' the intent of the legislature.").  To do so, we first
consider the text and context of the rule at issue.  See
generally Abu-Adas v. Employment Dept., 325 Or 480, 485, 940 P2d
1219 (1997) (in interpreting administrative rule, court first
considers text and context of rule to discern intent of enacting
body).
The text of OAR 150-314.280-(M) (1995) is silent as to
whether the department intended that rule to apply
retrospectively or, instead, to only tax years subsequent to its
enactment.  As we explain below, however, the context of that
rule makes clear that the department intended OAR 150-314.280-(M)
(1995) to operate retrospectively.
We first observe that the circumstances surrounding the
promulgation of OAR 150-314.280-(M) (1995) suggest that the
department intended that rule to apply retrospectively.  As
discussed previously, the department adopted OAR 150-314.280-(M)
(1995) in direct response to this court's decision in Fisher
Broadcasting.  It is of no consequence whether taxpayer is
correct in insisting that OAR 150-314.280-(M) (1995) provides the
department with greater flexibility than the decision in Fisher
Broadcasting mandates.  Rather, the circumstances surrounding the
department's promulgation of OAR 150-314.280-(M) (1995) offer
insight into the department's intent, because those circumstances
illustrate that the department adopted that rule in response to a
judicial decision that, by declaring its previous rule defective,
had left in a gap in the department's existing regulatory
framework under ORS 314.280.
We do not suggest that those circumstances, without
more, establish that the department intended OAR 150-314.280-(M)
(1995) to operate retrospectively.  However, in this case, other
rules in existence at the time that the department promulgated
OAR 150-314.280-(M) (1995) confirm that view.  As the department
points out, OAR 150-305.100-(B) provides that "[a]dministrative
rules adopted by the department, unless specified otherwise by
statute or by rule, shall be applicable to all periods open to
examination."  Thus, at the time that it adopted OAR 150-314.280-(M) (1995), the department had expressed its intent to apply all
tax regulations to all periods open to examination unless a
particular statute or rule provides a contrary instruction. 
Because OAR 150-314.280-(M) (1995) does not do so, OAR 150-305.100-(B) directs us to apply that rule to the tax years in
question.      
Taxpayer seeks to avoid that result by arguing that OAR
150-305.100-(B) cannot inform our determination of the
department's intent in promulgating OAR 150-314.280-(M) (1995)
for two reasons.  First, taxpayer asserts that the department
intended OAR 150-305.100-(B) to apply to only new rules, rather
than also to amendments to existing rules.  Taxpayer, however,
cites no authority to support that proposition, and we do not
perceive such a distinction in the wording of OAR 150-305.100-(B).  
Taxpayer also argues that, because the department
promulgated OAR 150-305.100-(B) nine years before it promulgated
OAR 150-314.280-(M) (1995), it "seems to defy logic" that OAR
150-305.100-(B) is relevant to determining the department's
intent respecting the retrospective application of that later-promulgated rule.  We again disagree and, indeed, consider OAR
150-305.100-(B) relevant precisely because it provided a
presumption of retroactive application to all periods open to
examination at that time when the department promulgated OAR 150-314.280-(M) (1995).  With such a presumption in place under the
existing regulatory framework, the department had no need to
express an intent respecting the retroactive operation of OAR
150-314.280-(M) (1995) unless it intended that rule to operate
differently.  Thus, we must infer from the lack of an instruction
to the contrary that the department intended OAR 150-314.280-(M)
(1995) to conform to the presumption set out in OAR 150-305.100-(B) and to apply to all periods open to examination. 
In anticipation of that conclusion, taxpayer next
argues that, even if the department intended OAR 150-314.280-(M)
(1995) to operate retrospectively, that rule cannot apply to the
tax years in question because such an application would violate
taxpayer's rights under the Due Process Clause of the Fourteenth
Amendment to the United States Constitution. (8)  To support
that proposition, taxpayer relies upon the United States Supreme
Court decision in United States v. Carlton, 512 US 26, 114 S Ct
2018, 129 L Ed 2d 22 (1994).  In that case, the taxpayer had made
a securities transaction to take advantage of an estate tax
deduction that existed under the Internal Revenue Code at that
time.  Almost a year later, Congress amended the tax code to
eliminate that deduction retrospectively and, as a result of that
amendment, the taxpayer no longer qualified for the deduction. 
Id. at 28-30.  
Before the Supreme Court, the taxpayer challenged the
validity of the retroactive tax legislation upon substantive due
process grounds.  In considering the taxpayer's challenge, the
Supreme Court clarified that retroactive economic legislation,
including retroactive tax legislation, satisfies due process
requirements so long as "the retroactive application of a statute
is supported by a legitimate legislative purpose furthered by
rational means[.]"  Id. at 30-31 (quoting Pension Benefit
Guaranty Corporation v. R. A. Gray & Co., 467 US 717, 729-30, 104
S Ct 2709, 81 L Ed 2d 601 (1984)) (internal quotation marks
omitted).  Applying that standard, the Court upheld the
retroactive legislation against the taxpayer's due process
challenge.  In explaining that conclusion, the Court relied upon
the facts that Congress had acted to cure a mistake in the
original legislation and that "Congress had acted promptly and
established only a modest period of retroactivity."  Carlton, 512
US at 32-33.
In this case, we do not understand taxpayer to argue
that the department's rule was enacted for an illegitimate
purpose.  Rather, as we understand taxpayer's challenge, taxpayer
contends that application of OAR 150-314.280-(M) (1995) to the
tax years in question would exceed the scope of permissible
retroactivity.   The Supreme Court, however, has upheld the
retroactive application of economic legislative actions with
comparable time periods.  See, e.g., General Motors Corp. v.
Romein, 503 US 181, 112 S Ct 1105, 117 L Ed 2d 328 (1992) (six
years).  Based upon that precedent, together with the fact that
the rule at issue applied to only tax years still open to
examination, we conclude that application of OAR 150-314.280-(M)
(1995) to the tax years at issue would not violate the
requirements of due process.  Thus, for the reasons stated above,
we conclude that the Tax Court erred by holding that the
department lacked authority to include taxpayer's intangible
personal property in the apportionment formula used to allocate
taxpayer's income to Oregon under ORS 314.280 for tax years 1988
through 1992. 
TAXPAYER'S CROSS-ASSIGNMENT OF ERROR
As previously described, __ Or at __ (slip op at 1-3),
after the Tax Court granted taxpayer's summary judgment motion
respecting the inclusion of taxpayer's intangible personal
property in the apportionment formula, the case proceeded to
trial on taxpayer's statute of limitations claim and the
department's counterclaim relating to the receipts factor of the
apportionment formula.  At trial, taxpayer conceded the
department's counterclaim on the merits but, as relevant here,
asserted that that claim was time-barred for tax years 1988 and
1989.  Specifically, taxpayer challenged the validity of the
parties' agreement extending the limitations period for 1988 and
1989 upon the ground that the department had notice of
corrections to taxpayer's federal tax liability more than two
years before that extension agreement had been executed.  See ORS
314.410(3) (providing two-year period of limitations from notice
of federal correction for department to issue notice of
deficiency); ORS 314.410(6) (providing that parties may enter
extension agreement before expiration of any period of time
prescribed for giving of notice of deficiency).  After concluding
that the evidence as to that question was in "a position of
equipoise[,]" the Tax Court rejected taxpayer's argument, because
it determined that taxpayer bore the burden of persuasion under
ORS 305.427 (9) and that taxpayer had failed to satisfy that
burden.
 In a cross-assignment of error, taxpayer contends that the Tax Court erred by holding that taxpayer bore the burden of
proving that the parties' extension agreement was invalid because
the department had received notice of federal corrections to the
1988 and 1989 tax years more than two years before the parties'
agreement had been executed.  Based upon that argument, taxpayer
asserts that, if this court concludes that the department had
authority to include taxpayer's intangible personal property in
the apportionment formula, then this court nevertheless should
affirm that part of the judgment awarding taxpayer refunds and
interest for the 1988 and 1989 tax years on statute of
limitations grounds. 
Before turning to the merits, we first address the
department's contention that we are precluded from considering
taxpayer's statute of limitations argument because taxpayer
failed to raise that argument by way of a cross-appeal.  This
court previously has explained that a respondent who seeks only
to sustain a judgment is not required to cross-appeal to assign
error to a ruling of the trial court.  Artman v. Ray, 263 Or 529,
533, 501 P2d 63, 502 P2d 1376 (1972).  In this case, taxpayer
expressly raised its statute of limitations argument only as an
alternative ground for this court to affirm a part of the Tax
Court judgment and, in doing so, waived any claim to additional
relief that it might have been entitled to receive if this court
were to rule in its favor on that issue. (10)  Thus, taxpayer's
proffered statute of limitations argument invokes the "right for
the wrong reason" principle as a ground for affirming the Tax
Court judgment and, as such, properly may be considered in the
absence of a cross-appeal.  See generally Outdoor Media
Dimensions Inc. v. State of Oregon, 331 Or 634, 659-60, 20 P3d
180 (2001) (discussing "right for the wrong reason" principle for
affirming trial court's ruling). 
Having explained why it is properly before us, we now
consider the merits of taxpayer's statute of limitations
argument.  Taxpayer does not dispute that the department's
notices of deficiency for tax years 1988 and 1989 were timely
under the parties' extension agreement.  Instead, taxpayer
challenges the validity of that agreement and, specifically, the
Tax Court's determination that it bore the burden of proving that
that agreement was defective.  In making that challenge, taxpayer
acknowledges that ORS 305.427 places the burden of persuasion
upon the party seeking affirmative relief in Tax Court
proceedings.  See ORS 305.427 (so providing).  It argues,
however, that it is inequitable to apply that rule to its statute
of limitations claim because, according to taxpayer, the
department's record-keeping practices make it impossible for
taxpayer to determine whether the Internal Revenue Service (IRS)
had notified the department of corrections to taxpayer's federal
tax liability more than two years before the parties had executed
their agreement.  For the reasons explained below, we reject
taxpayer's argument.
As noted above, ORS 305.427 places the burden of
persuasion upon the party seeking affirmative relief in Tax Court
proceedings.  We perceive no inequity from the application of
that rule here because, as the Tax Court observed, ORS 314.380(2)
(1995) (11) required taxpayer to notify the department of any
corrections to taxpayer's federal tax liability at the time when
those federal corrections were proposed.  Although the IRS had
issued a correction to taxpayer's 1988 and 1989 federal taxable
income in June 1995, taxpayer does not dispute the Tax Court's
finding that the parties had executed the extension agreement
within two years after taxpayer first notified the department of
those federal corrections in February 1997.  We agree with the
Tax Court that "it is not equitable for taxpayer to plead for
certainty but fail to take acts, required of it under ORS
314.380, which would produce such certainty and satisfy a
statutory obligation."  The Tax Court correctly determined that
taxpayer had the burden to prove that the parties' extension
agreement was defective and that taxpayer had failed to do so.
The decision of the Tax Court is reversed in part and
affirmed in part, and the case is remanded to the Tax Court for
further proceedings. 
1. The parties have engaged in extensive litigation
relating to taxpayer's Oregon corporate excise tax liability for
the tax years 1984 through 1992.  See, e.g., U.S. Bancorp v.
Dept. of Rev., 15 OTR 13 (1999); US Bancorp v. Dept. of Rev., 13
OTR 84 (1994).  This appeal concerns only a part of that
litigation relating to tax years 1988 through 1992.  Our
discussion of the factual and procedural history of this case is
limited to the history that is relevant to the issues before us.  
2. The legislature adopted the version of ORS 314.280 in
effect during the relevant tax years in 1965.  Or Laws 1965, ch
152, § 22.  The text of that statute is set out at __ Or at __
(slip op at 5).  The legislature did not amend ORS 314.280 again
until 2001.  Or Laws 2001, ch 933, § 1.  Neither party contends,
nor do we conclude, that the 2001 version of ORS 314.280 governs
this dispute.  Thus, unless noted otherwise, all references to
ORS 314.280 in this opinion refer to the 1965 version of that
statute.
3. UDITPA, ORS 314.605 to 314.675, is a uniform statute
that the legislature adopted in 1965.  Or Laws 1965, ch 152, §§
20, 21.  For a discussion of the goals of UDITPA, see generally
Twentieth Century-Fox Film v. Dept. of Rev., 299 Or 220, 226-28,
700 P2d 1035 (1985).  
4. The department amended OAR 150-314.280-(E) in 1990 to
add paragraph numbering, but otherwise did not alter the text of
that rule during the tax years at issue.  In 1993, the department
amended OAR 150-314.280-(E) to provide that financial
organizations must apply the apportionment formula set out in OAR
150-314.280-(N).  Both parties, however, recognize that OAR 150-314.280-(N) is inapplicable to this dispute because that rule
expressly provides that it applies to only tax years beginning on
or after January 1, 1993.  See OAR 150-314.280-(N)(1) (so
providing).
5. OAR 150-314.280-(I) was renumbered to OAR 150-314.280-(M) in 1987.  OAR 150-314.280-(I) (1983) provided: 
"The provisions of OAR 150-314.670-(A) are by this
reference incorporated herein and made a part of this
OAR 150-314.280-(I)."
OAR 150-314.670-(A) (1983), promulgated under the authority of
UDITPA, provided, in part:
"ORS 314.670 provides that if the allocation and
apportionment provisions of ORS 314.610 to 314.655 do
not fairly represent the extent of the taxpayer's
business activity in this state, the taxpayer may
petition for, or the Department may require, in respect
to all or any part of the taxpayer's business activity,
if reasonable:
"(1) Separate accounting;
"(2) The exclusion of any one or more of the factors;
"(3) The inclusion of one or more additional
factors which will fairly represent the taxpayer's
business activity in this state; or
"(4) The employment of any other method to
effectuate an equitable allocation and apportionment of
the taxpayer's income.
"ORS 314.670 permits a departure from the
allocation and apportionment provisions of [UDITPA]
only in limited and specific cases.  ORS 314.670 may be
invoked only where unusual fact situations (which
ordinarily will be unique and nonrecurring) produce
incongruous results under the apportionment and
allocation provisions contained in [the UDITPA
statutes]."
(Emphasis added.)
In 1984, the legislature amended ORS 314.670 to further
restrict deviation from standard methods of income reporting
under UDITPA by allowing alternative methods only when the
presumptive methods would "result in the violation of the
taxpayer's rights under the Constitution of this state or of the
United States[.]"  Or Laws 1984, ch 1, § 17.  In 1999, the
legislature removed that additional criterion from ORS 314.670. 
See Or Laws 1999, ch 143, § 9 (eliminating requirement that
constitutional violation be established before alternative
reporting methods may be utilized under UDITPA).
6. For purposes of its summary judgment motion, taxpayer does not dispute the department's averment
that inclusion of taxpayer's intangible personal property results
in a more accurate apportionment of its net income to Oregon.
7. Before this court, taxpayer also argues that OAR 150-314.280-(M) (1995) is invalid because it exceeds the department's
rulemaking authority under ORS 314.280.  Before the Tax Court,
however, taxpayer emphasized that it did not question the
department's authority to promulgate OAR 150-314.280-(M) (1995),
specifically asserting that "ORS 314.280(1) clearly gives the
Department the authority to promulgate such a rule."  As a result
of that position in the Tax Court, we decline to exercise our discretion to address taxpayer's challenge to the department's authority to promulgate OAR 150-314.280-(M) (1995). See Outdoor Media Dimensions Inc. v. State of Oregon, 331 Or 634, 658-60, 20 P3d 180 (2001) (discussing "right for the wrong reason" doctrine).
8. The Fourteenth Amendment provides, in part:
"No State shall make or enforce any law which shall
abridge the privileges and immunities of citizens of
the United States; nor shall any State deprive any
person of life, liberty, or property, without due
process of law * * *."
(Emphasis added.)
9. ORS 305.427 provides:
"In all proceedings before the judge or a
magistrate of the tax court and upon appeal therefrom,
a preponderance of the evidence shall suffice to
sustain the burden of proof.  The burden of proof shall
fall upon the party seeking affirmative relief and the
burden of going forward with the evidence shall shift
as in other civil litigation."
10. The judgment from the Tax Court provides that,
although taxpayer stipulated to judgment against it on the
department's counterclaim without reservation of a right of
appeal, the parties' stipulation provides that, "if
[taxpayer] prevail[s] on an appeal of [its] statute of
limitations claims for tax years 1988 [and] 1989 * * *, then
the case will be remanded to the Oregon Tax Court for a
corrected judgment that, in addition to other possible
relief, denies the [department] its counterclaim for 1988
[and] 1989 * * *."  By electing not to cross-appeal,
taxpayer has waived any claim to relief as to the
department's counterclaim, even if it were to prevail in its
statute of limitations claim, because such relief would
require a modification of the Tax Court judgment.  See
Booras v. Uyeda, 295 Or 181, 189, 666 P2d 791 (1983)
(failure to file cross-appeal precludes appellate court from
considering argument as basis to modify judgment).  
11. ORS 314.380(2) (1995) provided, in part:
"If the amount of a taxpayer's federal taxable
income reported on a federal income tax return for any
taxable year is changed or corrected by the United
States Internal Revenue Service or other competent
authority, resulting in a change in the taxpayer's net
income which is subject to tax by this state, the
taxpayer shall report such change or correction in
federal taxable income to the department."