Opinion ID: 835098
Heading Depth: 2
Heading Rank: 2

Heading: The department's alternative contentions.

Text: We next address the department's alternative arguments that, even if ORS 307.020 does not render the business inventory exemption inapplicable to centrally assessed taxpayers, the statutory scheme as a whole demonstrates that the legislature did not intend the business inventory exemption to apply to centrally assessed taxpayers. The department relies on the following in support of that contention: (1) contextual provisions in ORS chapter 307 and the central assessment statutory scheme; (2) the legislative history of ORS 307.400; and (3) the method of valuation for centrally assessed property. We consider each in turn.
The department's first theory is that certain contextual clues in the statutory scheme reveal that the legislature did not intend the business inventory exemption to apply to centrally assessed property: (1) inventories of centrally assessed taxpayers are expressly assessable; and (2) the business inventory exemption statute neither expressly references the central assessment statutes, nor is it part of the central assessment scheme. As we explain below, none of the department's propositions is convincing. According to the department, the fact that the legislature expressly included inventories as property that is assessable under ORS 308.510(1) demonstrates that the legislature did not intend to exempt that property from taxation. The department's contention on that point is necessarily premised on its view that assessment is synonymous with taxation. That is, the department urges that [a]ll property listed in ORS 308.510(1) is taxable under the central assessment statutes, if used or held by a company in a business designated as centrally assessed under ORS 308.515. Because the term inventories is included in the scope of centrally assessed property, the department contends inventories are, in turn, taxable. Taxpayer, on the other hand, argues that it is irrelevant whether inventories [are] included in the scope of property that is centrally assessed, because that merely determines how the property is to be assessed ( i.e., centrally or locally), not whether it is taxed. We decline to engage in the complicated and nuanced analysis of whether and when assessment is taxation. That is so, because, even if we were to agree with the department that, as a general rule, property that is assessed is ultimately taxed, the legislature has clearly demonstrated that there are express exceptions. That is, some property expressly assessable under ORS 308.510(1) (all property used or held by a company under ORS 308.515(1) required to be centrally assessed) is exempt from taxation. See, e.g., ORS 308.558(5) (exempting aircraft of foreign-owned carriers); ORS 308.559(2)(a) (exempting aircraft undergoing major work); ORS 308.665(1) (exempting private railroad cars undergoing major work). Accordingly, the department's contention is refuted by the statutory scheme itself. [10] The department next asserts that when the legislature provides a tax exemption for centrally assessed property, it does so only by either codifying the exemption within the central assessment scheme ( i.e., ORS 308.505 to 308.665) or by expressly referencing the central assessment statutes. According to the department, because the business exemption statute meets neither criterion, it does not apply to centrally assessed taxpayers. We disagree with the department's premises and, therefore, with its conclusions. We first disagree with the department's contention that, when the legislature has provided a tax exemption for centrally assessed taxpayers, it has done so only within the central assessment statutory scheme. True, the central assessment statutes do contain provisions that exempt centrally assessed property from taxation, as well as provisions that designate certain property as not centrally assessable. See, e.g., ORS 308.558(5) (exempting aircraft of foreign-owned carriers); ORS 308.559(2)(a) (exempting aircraft undergoing major work); ORS 308.665(1) (exempting private railroad cars undergoing major work); ORS 308.510(1) (excluding certain intangible property from central assessment); ORS 308.515(3) (excluding specific property from central assessment  e.g., property of interstate ferries). However, those provisions, by their terms, apply only to centrally assessed property, and not to locally assessed property. See ORS 308.510(1) (intangible personal property subject to central assessment); ORS 308.515(1) (property of air transportation, water transportation, and private railcar transportation companies subject to central assessment). It makes particular sense for the legislature to include them in the central assessment scheme because, as a practical matter, they apply to nothing else. The fact that the legislature has included tax exemptions for centrally assessed property in the central assessment scheme thus does not foreclose the possibility that it has and also would do so through the exemption and taxation provisions in ORS chapter 307. Rather, an exemption that applies more generally to both locally and centrally assessed property would more appropriately be located in ORS chapter 307  a chapter of general applicability. To the extent that the department suggests that ORS chapter 307 and the central assessment statutes are two separate schemes of taxation  in addition to separate schemes for assessment  we further disagree. The legislature has expressly differentiated the assessment processes for centrally assessed and locally assessed property. See ORS 308.005-308.343 (general assessment scheme); ORS 308.505-308.665 (central assessment scheme); D.R. Johnson Lumber Co., 318 Or. at 335-36, 866 P.2d 1227 (explaining the provisions of general applicability and the particular assessment schemes in ORS chapter 308). ORS chapter 307, on the other hand, is not about assessment at all. It is a chapter pertaining to taxation and exemption, and contains no provision limiting its application to locally assessed taxpayers. Thus, ORS chapter 307 is a chapter of general applicability. At the very least, if the legislature intended to create a separate system of taxation and exemption for centrally and locally assessed taxpayers, it has neither declared as much nor structured the statutes in that way. We acknowledge that, in certain circumstances, the legislature has expressly treated the taxation and exemption of the two categories of taxpayers differently. See, e.g., ORS 307.030(2) (taxing intangible personal property of centrally assessed taxpayers and exempting it for all others). [11] But that fact is further evidence that the taxation and exemption provisions in ORS chapter 307 generally encompass centrally assessed taxpayers, because the legislature has demonstrated that it knows how to expressly exclude centrally assessed taxpayers from those provisions when it opts to do so. Because ORS 307.400 does not expressly remove centrally assessed property from its reach, the most natural conclusion to draw is, as we have described, that the legislature intended that the exemption apply to centrally assessed and locally assessed taxpayers alike. The department disagrees and asserts that any provisions that expressly remove centrally assessed property from the scope of a statute's exemption are merely redundant. Citing Thomas Creek Lumber and Log Co. v. Dept. of Rev., 344 Or. 131, 138, 178 P.3d 217 (2008), the department argues that the legislature is not prohibited from saying the same thing twice. According to the department, the fact that ORS 307.400 does not contain such a redundant reference does not mean that its exemption must be applied to centrally assessed property. Again, we disagree. In Thomas Creek Lumber and Log Co., this court adopted the department's proposed interpretation of a tax code statute over the taxpayer's: although the department's interpretation    does lead to a redundancy in [one subsection of the statute], taxpayer's interpretation [was] more problematic, because it impermissibly omitted words from and rendered entirely without effect a subsection of another statute. Id. at 137, 178 P.3d 217. The court reasoned that, although the department's interpretation made some words in another statute redundant, nothing prohibits the legislature from saying the same thing twice. Id. at 138, 178 P.3d 217. The court further reasoned that the department's interpretation was preferable, because it would `give effect to' more of the `provisions or particulars' of both statutes than [the] taxpayer's proposed interpretation. Id. (citing ORS 174.010). Contrary to the department's position, Thomas Creek Lumber and Log Co. does not stand for the broad principle that an interpretation rendering provisions of a statute redundant is generally permissible. The general rule is that this court interprets statutes to give effect to all provisions. See ORS 174.010 (where there are several provisions or particulars such construction is, if possible, to be adopted as will give effect to all); Union Pac. R.R. Co. v. Bean, 167 Or. 535, 549, 119 P.2d 575 (1941) (a construction of a statute that renders certain provisions unnecessary will not be adopted by the court, and it should not be presumed that any provision is redundant or useless). Thomas Creek Lumber and Log Co. does not conflict with that general rule. Rather, it stands for the more modest proposition that an interpretation rendering a provision redundant is preferable when it gives effect to more provisions or particulars of the applicable statutes than would some other interpretation. The department suggests that that would be the case here, arguing that taxpayer's proposed interpretation omits and renders ineffective the substantive definition of assessable property in the form of `inventories,' `appliances,' `merchandise,' and `all other goods' in ORS 308.510(1). As already noted, however, 557 Or. at 552-54, ___ P.3d at ___-___, property may be both centrally assessed and exempt from taxation. Thus, taxpayer's proposed construction would not render those provisions inoperable. Moreover, even were we to assume, arguendo, that taxpayer's proposed interpretation would render ineffective the provision in ORS 308.510(1) requiring assessment of inventories, the department's proposed interpretation would render several more provisions  the multiple provisions in ORS chapter 307 removing centrally assessed taxpayers from the statutes' effect  useless. Accordingly, the department's proposed construction is not preferable under the circumstances. We also disagree with the department that, when the legislature provides a tax exemption for centrally assessed property outside the central assessment scheme, the legislature uniformly does so by expressly cross-referencing the central assessment statutes. That contention is foreclosed by the existence of exemption statutes in ORS chapter 307 that are silent as to central assessment, but that necessarily apply to centrally assessed property. For example, as the department concedes, ORS 307.126 (exempting Federal Communications Commission licenses) applies to the property of centrally assessed taxpayers, even though the statute does not refer expressly to those taxpayers or otherwise reference the central assessment statutes. See ORS 308.515(1)(h) ([c]ommunication companies subject to central assessment). See also ORS 307.205 (exempting real property owned by a railroad that is temporarily being put to a public alternate transportation use). [12] Based on the foregoing analysis of the text and context, we conclude that the legislature did not intend to limit the business inventory exemption statute, ORS 307.400, to locally assessed taxpayers.
The department next asserts that the historical context and legislative history of ORS 307.400 reveal that the legislature intended to provide relief from the personal property tax only as to locally assessed, not centrally assessed, business inventory. The legislature first provided a partial tax exemption for business inventory in 1965, under the Inventory Tax Relief Act, codified at former ORS 310.605 to 310.625 (1965), repealed by Or. Laws 1969, ch. 612, § 5. See Or. Laws 1965, ch. 604, §§ 1-12 (HB 1498). The Inventory Relief Act reduced the personal property tax on inventory based on a percentage calculation. Former ORS 310.605. The major purposes of phasing out the taxation of inventory were to create new businesses in Oregon, prevent employee cutbacks, and reduce the seasonal aspect of Oregon's economy. [13] Tape Recording, House Committee on Taxation, HB 1498, Mar. 16, 1965, Tape 16, Side 1 (statement of Sen. Victor Atiyeh). The legislature was also concerned with how the personal property tax on inventory affected Oregon businesses' ability to compete in the market, because other states had a relatively small tax on inventory. See Minutes, Senate Committee on Taxation, Apr. 26, 1965, 3, 7. In 1969, the legislature repealed the 1965 Inventory Tax Relief Act, Or. Laws 1969, ch. 612, § 5, and enacted a permanent tax reduction program for the personal property tax imposed on inventory, codified at former ORS 310.608 (1969), renumbered as ORS 307.400 (1981). Or. Laws 1969, ch. 612, § 1, 2 (HB 1214). Former ORS 310.608(1) provided an exemption for the taxpayer's inventory, one that increased at a rate of five percent per year for four years, and ten percent per year thereafter. A complete exemption was enacted in 1979. Or. Laws 1979, ch. 692, § 5. The statute was renumbered as ORS 307.400 in 1981. During hearings on the 1969 bill, the legislature again heard concerns from industry regarding Oregon's seasonal economy. Minutes, Senate Taxation Committee, May 13, 1969, 2 (statement of Douglas Heider, Retail Council Director of Associated Oregon Industries). The legislature expressed concern that Oregon was falling behind other western states in inventory tax relief and was continuing to lack competitiveness in the market. Id. (statement of Rep Jason Boe). The department cites portions of the 1965 Inventory Tax Relief Act, as well as several statutes that predated that act, in support of its contention that the legislature never intended for the business inventory exemption to benefit centrally assessed taxpayers. [14] The department's basic theory is that centrally assessed property was not subject to the locally assessed ad valorem tax on inventory (emphasis in original) and, thus, was not intended to benefit from the exemption. We find nothing in either the 1965 Inventory Tax Relief Act or the statutes predating that act that leads us to conclude either that a separate tax on inventory existed or that it applied only to locally assessed taxpayers. The property tax imposed on inventory was the property tax on tangible personal property  and that tax applied generally. See ORS 307.030(1) (1965) ([a]ll    tangible personal property    shall be subject to assessment and taxation). Further, the main purpose behind the 1965 Inventory Tax Relief Act convinces us that the legislature wanted to reduce  and ultimately exempt  the personal property tax on inventory for all Oregon businesses that held inventory for sale. As noted, the legislature was concerned with the seasonal aspect of Oregon businesses holding inventory for sale, which affected their ability to compete in the market because other states were not taxing inventory. Considering the purpose behind the legislation, we see no reason why a centrally assessed company holding inventory for sale  and thus, suffering from similar seasonal hardships  would not have been an equal target of the 1965 and 1969 legislation. [15] Accordingly, the legislative history provides no basis to conclude that the legislature intended to exclude centrally assessed taxpayers either from the phasing out of personal property tax imposed on inventory, or from its ultimate exemption. [16]
Under its third theory, the department asserts that the method of valuation prescribed by the legislature for centrally assessed property is not conducive to identifying, valuing, or exempting inventory. In assessing property subject to central assessment, the department's assessors engage in unit valuation based on information provided by the company in its annual statement. ORS 308.520; ORS 308.555. The unit valuation includes property both within and without the State of Oregon. ORS 308.555. Once the department ascertains the assessable property in Oregon, it apportions the assessed values to each of the counties. Id.; ORS 308.565. As the department explains, unit valuation, as a method of assessment, does not separate real from personal property, or tangible from intangible property. Neither does unit valuation identify a separate value for inventory. The department thus urges that unit valuation does not provide a means by which business inventory can be separately valued and exempted from the value of the unit. The department, however, again ignores the fact that several statutes exempt from taxation certain property that is subject to central assessmentand, thus, unit valuation. See, e.g., ORS 308.665 (exempting railroad cars owned by private car companies undergoing major work). Those statutes foreclose the department's contention that unit valuation precludes, or is otherwise impossible to reconcile with, the valuation and exemption of individual types of centrally assessed property. Furthermore, Oregon has adopted the Western States Association of Tax Administrators, Appraisal Handbook: Valuation of Utility & Railroad Property (1989) (WSATA Handbook) as the official valuation guide for centrally assessed property in this state. OAR 150-308.205-(B). Included in the WSATA Handbook is a prescribed uniform procedure for separating tax exempt property from the unit valuation. The WSATA Handbook explains that, although generally no attempt is made to assign values in a unit appraisal to individual items of property, such value must be assigned if it is a legal requirement. WSATA Handbook at 8. The WSATA handbook thus aims to provide consistent application of allocation techniques for removing nontaxable property from the unit valuation. Id. at 10. The WSATA Handbook further specifies that, under any of several methods of unit valuation, the appraiser must specifically identify and account for exempt property to be excluded from the valuation. See, e.g., id. at 22-23, 38 (appraisers engaged in cost method are required to exclude property exempt from property taxation; common exclusions include inventory); id. at 70, 76 (adjustments to income approach are required to account for assets not taxable); id. at 98 (value contribution of nontaxable assets must be removed from the stock and debt indicator under the stock and debt approach). The department has also acknowledged, via promulgation of its own administrative rule, that assessors are required to value, and remove from the unit, exempt property. The department mandates that the unit value for gas distribution companies be adjusted to exclude nontaxable property included in the unit. OAR 150-308.205-(B)(2)(b). That rule forecloses the department's contention that identifying exempt property and removing it from the unit valuation is impossible or unreasonable. Finally, we observe that, in this case, the department had before it the information necessary to exempt the disputed property. Specifically, taxpayer's annual report expressly identified the property at issue in such a way that the assessed value of that property could be removed from the unit valuation of taxpayer's property. See also ORS 308.525(9) (annual statement must contain a detailed statement of personal property located in Oregon owned by the centrally assessed company); WSATA Handbook at 13 ([m]andatory reporting usually requires a detailed listing of all items of taxable property with descriptions and original cost). Thus, the practicality argument that the department makes finds no support in the statutory scheme or in the record in this case. Accordingly, the method of valuation prescribed by the legislature for centrally assessed property does not convince us that it is impossible to value and exempt inventory subject to central assessment. We therefore decline to read into ORS 307.400 a limitation i.e., an exemption for locally assessed property onlythat the statute does not contain and that the broader statutory scheme does not compel.