Opinion ID: 835098
Heading Depth: 2
Heading Rank: 1

Heading: The relationship between ORS 307.020 and ORS 307.400.

Text: We begin with the department's reliance on the definitions contained in ORS 307.020. The business inventory exemption statute exempts [i]tems of tangible personal property consisting of inventory[.] (Emphasis added.) The term tangible personal property is defined in ORS 307.020(1)(c) as follows: As used in the property tax laws of this state, unless otherwise specifically provided:      (c) `Tangible personal property' includes but is not limited to all chattels and movables, such as boats and vessels, merchandise and stock in trade, furniture and personal effects, goods, livestock, vehicles, farming implements, movable machinery, movable tools and movable equipment. As that statute provides, the definitions provided in ORS 307.020(1) apply to the entirety of the Oregon tax code, unless the legislature expressly provides otherwise. ORS 307.020(2) embodies just such an express exception, and specifically provides that the definitions contained in ORS 307.020(1), including the definition of tangible personal property, do not apply to any person, company, corporation or association covered by [the central assessment statutes,] ORS 308.505 to 308.665. [7] The department essentially urges this court to conclude that, because the statutory definition of tangible personal property does not apply to centrally assessed taxpayers, their property is not within the scope of property subject to the business inventory exemption statute, ORS 307.400. That argument is predicated on the department's view that ORS 307.400 exempts only tangible personal property as it is defined in ORS 307.020. The department's argument has two flaws in its logic. First, ORS 307.020 is a definitional provision only. It merely defines what is encompassed in various types of personal property, including tangible personal property, for one class of taxpayer  i.e., locally assessed taxpayers. The fact that the definitions in that statute do not apply to centrally assessed taxpayers does not mean that no other definition applies. Neither does it mean that centrally assessed taxpayers do not own the types of property that ORS 307.020 defines, including tangible personal property, for tax purposes. [8] Rather, it means only that what qualifies as tangible personal property for centrally assessed taxpayers is determined by some other source of law. That source of law is ORS 308.510(1), which, as earlier quoted, provides that the property of centrally assessed taxpayers, for tax purposes, includes all property, real and personal, tangible and intangible   . See also ORS 307.030 (intangible personal property held by centrally assessed taxpayers is subject to assessment and taxation). Although the legislature did not set forth an express definition of tangible personal property in ORS 308.510(1) as it applies to centrally assessed taxpayers, that fact means only that we look to the common, ordinary meaning of the term to determine what property, when held by a centrally assessed taxpayer, qualifies as tangible personal property. See Friends of Parrett Mountain v. Northwest Natural Gas Co., 336 Or. 93, 114, 79 P.3d 869 (2003) (we give terms that do not have special statutory definitions or any well-understood legal meaning their plain, natural, and ordinary meanings). The second flaw in the department's argument is its assumption that the business inventory exemption, as set forth in ORS 307.400, extends only to tangible personal property as defined in ORS 307.020. By its terms, the business inventory exemption is not so limited. As we have described, it does not distinguish between types of taxpayers or otherwise differentiate between locally assessed and centrally assessed taxpayers. Neither does it incorporate only a single definition of tangible personal property. Nothing precludes the legislature from defining that term differently for different taxpayers, while still providing those different taxpayers with a common exemption for their tangible personal property, however defined, if it otherwise qualifies as business inventory. As a matter of plain text, that is what the legislature appears to have done. In arguing to the contrary, the department places significant reliance on this court's decision in Saunders v. Dept. of Rev., 300 Or. 384, 711 P.2d 961 (1985). In Saunders, a locally assessed taxpayer sought a determination that certain farm structures qualified for the business inventory exemption under ORS 307.400. Id. at 386, 711 P.2d 961. This court explained that, to qualify for that exemption, the property must meet two requirements: (1) the movable requirement contained in ORS 307.020 (tangible personal property includes all chattels and movables); and (2) the use requirement contained in ORS 307.400 (property that is or will become part of the stock in trade of the taxpayer held for sale in the ordinary course of business). The parties in Saunders agreed that the subject property satisfied the use requirement, but disputed whether it was movable for purposes of ORS 307.020. Id. at 387, 711 P.2d 961. This court held that the subject property was not movable as ORS 307.020 requires, because it was real property, not tangible personal property. Id. at 387, 391, 711 P.2d 961. In reaching that conclusion, this court relied on 1977 legislative amendments to the predecessor business inventory exemption statute, former ORS 310.608 (1975), renumbered as ORS 307.400 (1981). Id. at 388-89, 711 P.2d 961. Those amendments had come after the Tax Court's decision in Eastern Ore. Farming Co. et al. v. Dept. of Rev., 7 OTR 74, 79, 1977 WL 1599 (1977), in which the Tax Court had held that [t]he distinction between real and personal property is irrelevant in determining whether property is inventory subject to exemption under former ORS 310.608. Rather, the Tax Court determined, it was sufficient if the subject property came within the special definition of inventory contained in the business inventory exemption itself ( former ORS 310.608). 7 OTR at 79-80. Following the decision in Eastern Ore. Farming Co. et al, the legislature retroactively amended the business inventory exemption statute to effectively overrule that case by limiting the exemption to tangible personal property. See Or. Laws 1977, ch. 819, § 1(3). [9] Based on that amendment, this court concluded: It is clear from the statute and the legislative history that the legislature intended that the exemption from ad valorem taxes now codified in ORS 307.400 apply only to a category of tangible personal property defined in ORS 307.020(3). Because only tangible personal property qualifies for the exemption under ORS 307.400, we must determine if [the subject property is] real or personal property under ORS chapter 307. For purposes of taxation the definitions in ORS 307.010(1) and ORS 307.020(3) control. Saunders, 300 Or. at 389, 711 P.2d 961. The court determined that the subject property did not qualify as tangible personal property under ORS 307.020 and, accordingly, held that it was not subject to the business inventory exemption under ORS 307.400. Id. at 391, 711 P.2d 961. The department asserts that taxpayer's property is not subject to the business inventory exemption because, under Saunders, that exemption applies only to the tangible personal property defined in ORS 307.020  a term that does not apply to taxpayer as a centrally assessed company. We do not read Saunders so broadly. Certainly, Saunders stands for the proposition that property must be tangible personal property held for sale to qualify as inventory under ORS 307.400. But the holding in Saunders has to be understood in the context of the particular issue that the case presented. Because the taxpayer in Saunders was a locally assessed taxpayer, this court appropriately required the subject property in that case to satisfy the definition of tangible personal property under ORS 307.020  the definition that applies to locally assessed taxpayers. This court was not presented with an issue entailing how the provisions of ORS 307.020, ORS 307.400, and the central assessment statutes are to be read together, and its holding properly cannot be understood to resolve that question. Accordingly, Saunders does not affect our understanding of the plain text of ORS 307.400 and its interrelationship with ORS 307.020. We have, however, examined the legislative history of ORS 307.020 to determine whether it reveals a contrary intent  that is, whether the legislature, in excluding centrally assessed taxpayers from the definitions in ORS 307.020(1), intended to remove centrally assessed property from the scope of property subject to the business inventory exemption statute. See Gaines, 346 Or. at 172, 206 P.3d 1042 (court will consult legislative history even if the court does not perceive an ambiguity in the statute's text). We find nothing in the pertinent history to support that conclusion. What is now subsection (2) of ORS 307.020 was added to the statute in 1977 as part of Senate Bill (SB) 113. Or. Laws 1977, ch. 602, § 1(4). SB 113 made three distinct amendments to the tax code: (1) it expanded the definition of intangible personal property in ORS 307.020(1) to include information-storage media; (2) it excluded certain intangible property from the definition of property subject to central assessment under ORS 308.510(1); and (3) it clarified that the property of centrally assessed companies was not subject to the definitions contained in ORS 307.020-at that time, intangible personal property, and tangible personal property. Or. Laws 1977, ch. 602, §§ 1, 2. The main purpose of SB 113 was the first that we identified, to expand the definition of intangible personal property to include certain information-storage media. Tape Recording, Senate Revenue and School Finance Committee, SB 113, Jan. 24, 1977, Tape 3, Side 1 (statement of Richard A. Munn, Legislative Revenue Officer). The primary concern behind the bill was that counties were treating the property of title companies inconsistently  some counties were assessing and taxing information-storage media; others were not. Id. (statement of Don Fisher, Department of Revenue). In hearings on the bill, the department clarified that the bill amended only the definition of intangible personal property and did not alter what property was taxable or exempt. See Tape Recording, Senate Revenue and School Finance Committee, SB 113, Mar. 21, 1977, Tape 17, Side 1 (statement of Ted De Looze, Department of Revenue) (This only defines this type of property. It does not say what is taxable or what is not taxable. You have to go to the other provisions of the law.    [W]e did not intend this as the rule as to whether it is taxable or not.). However, the 1977 amendments indirectly exempted more personal property for locally assessed taxpayers, because those amendments broadened the definition of intangible personal property; locally assessed taxpayers are exempt from being taxed on such property. See ORS 307.030(2) (Except as provided in [the central assessment statutes,] ORS 308.505 to 308.665, intangible personal property is not subject to assessment and taxation.); Tape Recording, Senate Revenue and School Finance Committee, SB 113, Mar. 21, 1977, Tape 17, Side 1 (statement of Ted De Looze) (admitting that SB 113 maybe indirectly affects the personal property subject to exemption). Consequently, the department recommended expanding the definition of intangible personal property to include information-storage media, because that property was difficult for assessors to value and, thus, should come within the exemption for intangible personal property for locally assessed taxpayers. Tape Recording, Senate Revenue and School Finance Committee, SB 113, Jan. 24, 1977, Tape 3, Side 1 (statement of Don Fisher). Unlike that of locally assessed taxpayers, the intangible property of centrally assessed taxpayers is taxed. ORS 307.030(2); ORS 308.510(1). Utilities requested that the amended definition of intangible personal property not apply to them, because they did not want to be burdened with the difficulty of identifying the values of information-storage media on their annual statements to the department. See Tape Recording, Senate Revenue and School Finance Committee, SB 113, May 6, 1977, Tape 24, Side 1 (statement of Sen. Victor Atiyeh) (opining that separating intangible property in central assessment appraisal process would create more problems for centrally assessed companies in recordkeeping than it would change in value for the utility). The utilities also did not want to disturb prior court cases classifying their property as either tangible or intangible property. See Tape Recording, House Revenue and School Finance Committee, SB 113, June 28, 1977, Tape 37, Side 1 (statement of Assistant Attorney General Ira Jones). The legislature responded to the requests of the utilities and added what is now subsection (2) of ORS 307.020 to exclude centrally assessed taxpayers from the amended and expanded definition of intangible personal property so that the intangible personal property defined under that statute was not included in the property of centrally assessed corporations. Or. Laws 1977, ch. 602, § 1(4); Southern Pacific Trans. Co. v. Dept. of Rev., 295 Or. 47, 62 n. 17, 664 P.2d 401 (1983) (SB 113 excluded centrally assessed taxpayers from the expanded definition of intangible personal property). Also as part of SB 113, the legislature simultaneously amended ORS 308.510(1) to exclude certain intangible property from the definition of property subject to central assessment. Or. Laws 1977, ch. 602, § 2. In doing so, the legislature was codifying the department's practice of not taxing specific intangible property for centrally assessed companies. See Tape Recording, House Revenue and School Finance Committee, SB 113, June 28, 1977, Tape 37, Side 1 (statement of Ira Jones) (explaining that bill codified department's policy of not valuing certain types of intangible property of centrally assessed companies, such as money at interest, bonds, notes, etc.). If we glean anything from the legislative history, it is that the legislature did not consider the effect of SB 113 on the exemption for tangible personal property consisting of inventory. Rather, the legislature's purpose in enacting SB 113 was to define the intangible personal property of locally assessed and centrally assessed taxpayers differently  in effect, to expand the scope of exempted intangible personal property for locally assessed taxpayers and to narrow the scope of taxed intangible property for centrally assessed taxpayers. True, the 1977 amendments to ORS 307.020 removed centrally assessed taxpayers not only from the statutory definition of intangible personal property, but also from the statutory definition of tangible personal property. See Or. Laws 1977, ch. 602, § 1(4). However, considering the bill's focus on intangible personal property, we decline to conclude that the legislature, in doing so, intended that provisions in the tax code applying to tangible personal property  including ORS 307.400  would no longer apply to centrally assessed taxpayers. Accordingly, we agree with the Tax Court that, although the definition of tangible personal property in ORS 307.020 does not apply to centrally assessed companies, it does not follow that the business inventory exemption statute, ORS 307.400, does not apply to those taxpayers. Rather, it means only that, for centrally assessed taxpayers, the term tangible personal property in ORS 307.400 is not statutorily defined. That, in turn, means that we will look to the plain, natural, and ordinary meaning of the term to determine its meaning. If the property is tangible personal property under the plain and ordinary meaning of that term (and also meets the use requirement under ORS 307.400, viz., that the property is or will be stock in trade held for sale in the ordinary course of business), then the property is entitled to the business inventory exemption.