Court Opinion

ID: 9617769
Source: CourtListenerOpinion
Date Created: 2023-08-22 05:00:53.005203+00
Date Added: 2024-06-11T18:04:16.113086
License: Public Domain

O’CONNELL, J.,
specially concurring.
I concur in the results but I do not agree with a part of the reasoning which relates to the application of the property factor in the allocation of income.
It is undisputed that the plaintiff has a right to cross certain lands of the federal government and certain lands of private parties, for the purpose of conducting its logging operations. Unlike the interest of members of the general public who use the roads, the plaintiff’s right to cross these lands during the life of the contract was not revocable at the will of the federal government. Such a right is an easement. It is a property interest. The fact that the servient owner also has the privilege of using the way and the privilege of granting a similar use to others does *484not make the dominate owner’s interest any less an easement. Most easements are non-exclnsive. In the absence of a manifested intention to the contrary, an easement is non-exclusive. An easement owner has a non-possessory interest in the servient estate. His right is to use, not to possess. In terms of control over the land subject to the easement Ms interest is slight. Nevertheless, the interest exists; it is a property interest; he “owns” that interest. The plaintiff has such an interest in this case and it uses it in the production of income. If it is to be excluded from the property factor, the reason for doing so must be on some other ground than the non-proprietary nature of the interest. The opinion states that “in addition to the use of property to create income, there must be a proprietary interest in or control thereof by the taxpayer of the property if such property is to be included in the property factor * * *” and it is then stated that “An examination of the facts in this case discloses no proprietary interest in or control of the roads and railroad bed sought to be included.” The basis for this conclusion is not clearly stated. It is said that “the regulations speak only of property owned, rented or leased.” But certainly an easement can be “owned,” as much so as any non-possessory interest can be, and I am quite certain that the majority did not intend to exclude all such interests. The opinion then turns to the manner in which “use value” of property is determined and among other things observes that the regulations do not “place the property factor upon purely a capital investment basis.” This is true, but it does not explain why the plaintiff’s interest in the roads in this case is not property. In arriving at the value of property for the purpose of applying the allocation formula, it is very common to *485accept as the equivalent of the market value the cost of construction less depreciation. Altman & Keesling, Allocation of Income in State Taxation (2d ed) p 115; Oregon State Tax Commission Regulations, Art 507(2) (1946), but cf. Reg 4.280(1)-(B) (1958).
If, in this case, objection to the inclusion of the roads in the property factor is based upon the method of evaluating the interest, then the evil can be corrected by using the proper method of evaluation.
The emphasis in the opinion on the fact that the logging roads in question were used by the general public is intended apparently to support the argument that the plaintiff had no interest in the roads distinguishable from the interest of others. This is not quite true because the roads could not be closed against use by the plaintiff except in unusual circumstances, such as periods of high fire danger, although they could be closed to the public. Furthermore, the argument that plaintiff’s interest in the roads is not distinguishable from the general public’s would not apply to the railroad right of way which the court holds is excluded also.
I have set forth my views as to the nature of the plaintiff’s interest not because I think that by defining plaintiff’s right in the roads as a property interest we solve the problem in this case, but because I feel that we should not invite future litigation in this field by improperly describing the nature of an interest in property.
I think that the logging roads should be excluded from the property factor for the following reasons. It is recognized by the tax commission that the plaintiff’s investment in the roads is an investment in the timber purchased from the federal government. As counsel for the defendant states, “The investment in *486the roads is as much an investment in the timber as is the purchase price of the timber itself” and that “This fact is also recognized by the Forestry Bureau as demonstrated by the fact that the appraised cost of the timber is reduced by the approximate amount of the cost of the road.” The tax commission itself explains its position in this respect in the findings of fact contained in its opinion and order in this proceeding. There it is said:
“In determining the amount to be paid for government owned timber it is a common practice to allocate the purchase price of the timber in part to the timber and in part to any necessary roads which must be built in removing the timber. In other words, if the selling price of the timber is determined to be $15 per thousand and it is further determined that it will cost $3 per thousand to build a roadbed into the timber the selling price of the timber will be allocated, $12 per thousand to the timber and $3 per thousand to the roadbed. The roads so constructed are used by the taxpayer, and others similarly situated, to remove the severed timber from the show to the market.
“If another taxpayer were to purchase timber in the same area and, by reason of the existence of the access road built by Hines, it was unnecessary to build another access road, and it was determined that the value of the timber was still $15 per thous- and, the taxpayer subsequently acquiring the timber would pay $15 per thousand for the timber with none of the purchase price being allocated to roads.”
No significance should be attached to the fact that the timber is bought at the price set by the federal government or the price arrived at by competitive bidding because in either case the price reflects the cost of the road. The foregoing examples indicate quite clearly that the investment in the road was in effect a partial prepayment for the timber. Subsequent *487payments made to the federal government by the plaintiff pursuant to the contract are not regarded by the defendant as an investment in tangible property real or personal but as a payment arising out of an intangible contract right to cut timber. As I understand the defendant’s position, the plaintiff’s interest in the road would not have been included in the property factor if the road had already been constructed at the time timber purchase was made, and as a part of the contract the plaintiff received the right to use the road. Thus, whether a logging road used by a taxpayer will or will not be included as an apportionment factor is made to depend upon a fortuitous circumstance and because it does I think that it reveals the essence of the transaction when the timber purchaser is required to construct the road. The investment required to construct the road is a part payment for timber. If the other payments for timber are not regarded as an investment in real or tangible personal property, it would seem to follow that the payment by way of road construction costs should be regarded in the same light. If, then, the defendant is faithful to its argument it would at least concede that its valuation of the road should not be predicated on the amount paid to construct it, but rather on the appraised value of the road to the plaintiff. If the plaintiff’s interest in the road is evaluated on an appraisal basis, it is then pertinent to inquire whether the easement which the plaintiff has over the government lands should be regarded as having any greater value than the interest of other purchasers of timber from the federal government who, having bid the full price of the timber without a deduction for road costs, would not, as I understand the defendant’s position, be regarded as having an interest in the road subject *488to appraisal. In other words, if the easement which such other timber purchasers acquire to remove government timber would not be treated by the defendant as a species of property under the allocation factor, the plaintiff’s interest should not be included when it is understood that the only difference between the two classes of purchasers is the happenstance that one pays for his timber with money and the other pays for his timber with money and roads.
I would, therefore, exclude the unamortized road costs from the formula.
McAllister, C. J., also concurs in this opinion.