Court Opinion

ID: 4017854
Source: CourtListenerOpinion
Date Created: 2016-07-21 15:11:17.483046+00
Date Added: 2024-06-11T12:17:53.727223
License: Public Domain

46	                       July 21, 2016	            No. 49

             IN THE SUPREME COURT OF THE
                   STATE OF OREGON

                       Stuart ETTER,
                          Appellant,
                              v.
                 DEPARTMENT OF REVENUE,
                       State of Oregon,
                         Respondent.
                    (TC 5027; SC S063061)

   En Banc
   On appeal from the Oregon Tax Court.*
   Henry C. Breithaupt, Judge.
   Argued and submitted March 8, 2016.
   Gregory P. Bessert, The Bessert Law Firm, Battle
Ground, Washington, argued the cause and filed the briefs
for appellant.
   Keith L. Kutler, Assistant Attorney General, Salem,
argued the cause and filed the brief for respondent. With
him on the brief were Ellen F. Rosenblum, Attorney General,
and Paul L. Smith, Deputy Solicitor General.
   BALDWIN, J.
   The judgment of the Tax Court is affirmed.

______________
	  *  22 Or. Tax 18 (2015).
Cite as 360 Or 46 (2016)	47

    Case Summary: Taxpayer , a Washington resident, sought a refund of state
tax paid to Oregon for work performed as an aircraft dispatcher at Horizon Air’s
Portland operations center. The Department of Revenue (department) denied the
refund request and taxpayer appealed to the Oregon Tax Court. Taxpayer argued
that he was exempt from Oregon taxation under 49 USC § 40116(f)(2), which pro-
vides relief from multiple state taxation to an air carrier employee “having reg-
ularly assigned duties on aircraft in at least 2 States.” Taxpayer relied upon the
annual flight deck observations required by the Federal Aviation Administration
– in taxpayer’s case, 10 hours annually – to support his exemption entitlement.
The Tax Court disagreed and denied taxpayer’s appeal. Held: under 49 USC
§ 40116(f)(2), an air carrier employee’s “regularly assigned duties” in multiple
states must be those that are normal, typical, and routine. It is insufficient for an
employee to perform some work in multiple states – the employee must be regu-
larly assigned to such work.
    The judgment of the Tax Court is affirmed.
48	                                                   Etter v. Dept. of Rev.

	          BALDWIN, J.
	        This direct tax appeal involves whether a
Washington state resident who works in Oregon is exempt
from individual Oregon income tax. Taxpayer is an air-
craft dispatcher for Horizon Air Industries, Inc. (Horizon
Air), who works almost entirely in Portland. To work as a
dispatcher, however, he must spend five hours each year
riding along in the cockpit for each aircraft group that he
dispatches. Taxpayer argues that, pursuant to a federal
statute—49 USC § 40116(f)—that flight time exempted him
from paying Oregon income tax in the tax year 2000. The
Tax Court concluded that taxpayer did not meet the require-
ments of the federal statute and denied his exemption. On
appeal, taxpayer renews his arguments. We affirm.
	        The Tax Court ruled on the parties’ cross-motions
for summary judgment. The motions were based on stipu-
lated facts, and taxpayer submitted a declaration in support
of his motion. We present the facts and the inferences to be
drawn from them in the light most favorable to taxpayer, the
nonmoving party.1 See TCR 47 C.2
	       Taxpayer is a Washington resident employed
by Horizon Air as an aircraft dispatcher at Horizon Air’s
Portland operations center. His “primary and regular duties
were to plan and monitor flights from Horizon Air’s Portland
operations center.” Taxpayer’s listed job duties did not involve
	1
        The facts in the declaration may not be entirely consistent with the facts
in the stipulation. For purposes of this opinion, we will not attempt to determine
whether they are truly consistent, but will simply construe the facts in favor of
taxpayer, regardless of their source.
	2
        TCR 47 C provides in part:
     “The court shall grant the motion [for summary judgment] if the pleadings,
     depositions, affidavits, declarations, and admissions on file show that there is
     no genuine issue as to any material fact and that the moving party is entitled
     to prevail as a matter of law. No genuine issue as to a material fact exists if,
     based upon the record before the court viewed in a manner most favorable to
     the adverse party, no objectively reasonable juror could return a verdict for
     the adverse party on the matter that is the subject of the motion for summary
     judgment.”
	    Unless otherwise noted, all references to statutes and administrative rules
refer to the versions in effect for the year 2000, when taxpayer earned the income
at issue. With regard to TCR 47, we refer to the version in effect for 2015 when the
Tax Court granted summary judgment.
Cite as 360 Or 46 (2016)	49

any flight time. He asserts, however, that Horizon Air would
assign him other duties when they were necessary to comply
with applicable law.
	        The Federal Aviation Administration (FAA) has
promulgated an administrative rule that prohibits an air
carrier from using a person as an aircraft dispatcher unless
that person has met certain requirements. 14 CFR § 121.463.
That rule requires (among other things) that dispatchers
must familiarize themselves with flight deck operations on
the planes that they dispatch by spending “at least 5 hours
observing operations * * * in one of the types of airplanes in
each group to be dispatched.”
	        Taxpayer could choose the particular flight that
would serve as his observational flight, and he did so in
the tax year 2000. The parties stipulated that taxpayer did
two observational flights that year, one for each of the two
aircraft groups that he monitors. At least one of the flights
that taxpayer chose flew over Oregon, Washington, Idaho,
and Montana. Horizon Air paid taxpayer for his time in the
air.
	        Taxpayer does not rely on any other out-of-state
duties to support his claim to be exempt from taxation. Given
the terms of the relevant federal regulation, taxpayer’s total
flight time would have been approximately 10 hours—five
hours for each of the two aircraft groups. The parties stip-
ulated that taxpayer’s Oregon earnings were “greater than
50 [percent] of [his] total pay” during 2000. Ten hours would
be 0.5 percent of the approximately 2,000 hours per year
worked by a full-time employee.
	        Oregon taxes not only the income of residents, see
ORS 316.037(1), but also the income of nonresidents that
“is derived from sources within the state.” ORS 316.037(3).3
A nonresident’s income is derived from sources within this

	3
       ORS 316.037(1) imposes income taxes on residents. Subsection (3) applies
those taxes to Oregon income paid to nonresidents:
    	 “(3) A tax is imposed for each taxable year on the taxable income of
    every full-year nonresident that is derived from sources within this state.
    The amount of the tax shall be determined in accordance with the table set
    forth in subsection (1) of this section.”
50	                                                   Etter v. Dept. of Rev.

state if it is attributable to the nonresident carrying on an
occupation here. See ORS 316.127(2)(b).4
	        Federal law limits the extent to which states may
tax the income of certain employees of air carriers, however.
49 USC § 40116(f)(2) broadly provides that employees with
“regularly assigned duties on aircraft in at least 2 States”
may be taxed only by the state where they reside or a state
in which they earn more than 50 percent of their pay from
the air carrier.5

	4
     ORS 316.127 provides in part:
 	     “(2)  Items of income, gain, loss and deduction derived from or connected
 with sources within this state are those items attributable to:
 	     “* * * * *
 	     “(b)  A business, trade, profession or occupation carried on in this state[.]”
	5
     Specifically, that subsection provides:
 	     “(f)  Pay of Air Carrier Employees.—
 	     “(1)  In this subsection—
 	     “(A)  ‘pay’ means money received by an employee for services.
 	     “(B)  ‘State’ means a State of the United States, the District of Columbia,
 and a territory or possession of the United States.
 	     “(C)  an employee is deemed to have earned 50 percent of the employee’s
 pay in a State or political subdivision of a State in which the scheduled flight
 time of the employee in the State or subdivision is more than 50 percent of
 the total scheduled flight time of the employee when employed during the
 calendar year.
 	     “(2)  The pay of an employee of an air carrier having regularly assigned
 duties on aircraft in at least 2 States is subject to the income tax laws of only
 the following:
 	     “(A)  the State or political subdivision of the State that is the residence of
 the employee.
 	     “(B)  the State or political subdivision of the State in which the employee
 earns more than 50 percent of the pay received by the employee from the
 carrier.
 	 “(3) Compensation paid by an air carrier to an employee described in
 subsection (a) in connection with such employee’s authorized leave or other
 authorized absence from regular duties on the carrier’s aircraft in order to
 perform services on behalf of the employee’s airline union shall be subject to
 the income tax laws of only the following:
 	     “(A)  The State or political subdivision of the State that is the residence of
 the employee.
 	     “(B)  The State or political subdivision of the State in which the employ-
 ee’s scheduled flight time would have been more than 50 percent of the
 employee’s total scheduled flight time for the calendar year had the employee
 been engaged full time in the performance of regularly assigned duties on the
 carrier’s aircraft.”
Cite as 360 Or 46 (2016)	51

	        As mentioned, FAA regulations require an airline
dispatcher to spend at least five hours every year observing
flight deck operations on the planes that they dispatch. The
relevant regulation, 14 CFR § 121.463(c), provides in part:
  	 “No certificate holder conducting domestic or flag opera-
  tions may use any person, nor may any person serve, as an
  aircraft dispatcher unless within the preceding 12 calendar
  months the aircraft dispatcher has satisfactorily completed
  operating familiarization consisting of at least 5 hours
  observing operations under this part, in one of the types of
  airplanes in each group to be dispatched. This observation
  shall be made from the flight deck or, for airplanes without
  an observer seat on the flight deck, from a forward passen-
  ger seat with headset or speaker. * * * The requirement of
  this paragraph may be satisfied by observation of 5 hours
  of simulator training for each airplane group in one of the
  simulators approved under § 121.407 for the group.”
	        In 2004, taxpayer sought (among other things)
a refund for his 2000 taxes in the amount of $2,459.43.
The department denied the claim for a refund, and tax-
payer appealed to the Magistrate Division. The Magistrate
Division ruled for the department. Taxpayer, the magistrate
concluded, did not have regularly assigned duties on air-
craft, and so he did not qualify under the statute.
	        Taxpayer appealed to the Regular Division of the
Tax Court. Both parties moved for summary judgment,
and the Tax Court granted the department’s motion and
denied taxpayer’s motion. Etter v. Dept. of Rev., 22 Or. Tax
18, 22, 27 (2015). The court concluded that the general
provision at issue—49 USC § 40116(f)(2)—had to be inter-
preted in context. Id. at 22. Part of that context was 49
USC § 40116(f)(3)(B), which identifies the states allowed
to tax when employees were on authorized leave to engage
in union duties. See Etter, 22 Or. Tax at 23. For those employ-
ees, the statute framed the governing principle in terms of
scheduled flight time across the entire year, allowing taxa-
tion by:
  	 “(B) The State or political subdivision of the State in
  which the employee’s scheduled flight time would have been
  more than 50 percent of the employee’s total scheduled
  flight time for the calendar year had the employee been
52	                                      Etter v. Dept. of Rev.

   engaged full time in the performance of regularly assigned
   duties on the carrier’s aircraft.”
	        The union duties provision applies to only those
employees who would ordinarily have scheduled flying over
a full year, so the court concluded that the rest of the stat-
ute must also be so limited. See Etter, 22 Or. Tax at 23-24.
Therefore, the court held, the statute “only applies to mem-
bers of an airplane crew of an air carrier who fly on a sched-
uled basis.” Id. at 27. By contrast, taxpayer’s schedule was
to be on the ground in Portland, and his regular duties were
to perform dispatching functions there. Id. at 24-25.
	       The Tax Court subsequently entered judgment
against taxpayer. Taxpayer timely appealed to this court
under ORS 305.445 (2013).
	        We review a decision of the Tax Court for “errors or
questions of law or lack of substantial evidence in the record
to support the tax court’s decision or order.” Id. In this case,
the Tax Court ruled on the parties’ summary judgment
motions. The issue, therefore, is whether there was a genu-
ine issue of material fact and whether one of the parties was
entitled to judgment as a matter of law. See TCR 47 C.
	         In general, we consider whether actions are con-
sistent with state law before examining consistency with
federal law. See State v. Sarich, 352 Or 601, 617, 291 P3d
647 (2012) (so noting). Taxpayer makes no argument under
state law that he is not liable for the tax owed, and none
appears to be available. Therefore, the matter at issue here
turns on the meaning of a federal statute. Accordingly, fed-
eral law governs its interpretation. See, e.g., Julian v. Dept.
of Rev., 339 Or 232, 235, 118 P3d 798 (2005) (“In construing
and applying a federal tax statute, federal law, rather than
state law, governs.” (Citations omitted.)). In interpreting a
statute, the federal courts may examine the statute’s text,
its structure, and its legislative history. See, e.g., Dept. of
Revenue of Or. v. ACF Industries, 510 U.S. 332, 339-46, 114 S
Ct 843, 127 L. Ed. 2d 165 (1994) (examining text, structure,
and legislative history of federal statute).
	       In this case, the parties dispute two provisions of
the federal statute. The first issue involves whether the
Cite as 360 Or 46 (2016)	53

statute applies to taxpayer at all: that is, whether taxpayer
is an “employee of an air carrier having regularly assigned
duties on aircraft in at least 2 States.” 49 USC § 40116(f)(2).
The second issue involves whether, if the statute applies,
Oregon nevertheless may tax taxpayer’s income: that is,
whether Oregon is a state in which taxpayer “earns more
than 50 percent of the pay received by [him] from the car-
rier” and so may tax taxpayer (who contends that the 50
percent rule counts income only from scheduled flight time).
49 USC § 40116(f)(2)(B). As we will explain, we conclude
that taxpayer does not have “regularly assigned duties on
aircraft.” Therefore, we do not need to decide whether tax-
payer earned more than “50 percent of the pay received by
him” in Oregon.
	        With regard to the first issue, the parties agree that
taxpayer is the employee of an air carrier. The dispositive
issue is whether the observation flights required by FAA
regulation qualify as “regularly assigned duties on aircraft
in at least 2 States.” 49 USC § 40116(f)(2).
	        We will assume for purposes of argument that
observation flights qualify as “assigned duties.” Even with
that assumption, however, we must determine whether those
duties are “regularly” assigned duties. Taxpayer asserts
that “regularly” implies only that the duty occurs at regular
but flexible intervals, and he contends that his two required
flights each year qualify. The department maintains that
there is no evidence that the observation flights have to be
taken “in any uniform manner” except as needed to comply
with the observation flight regulation.
	        We now turn to the text of the federal statute pro-
viding protection to a taxpayer who is an “employee of an
air carrier having regularly assigned duties on aircraft in
at least 2 States.” 49 USC § 40116(f)(2). “Regularly” is an
adverb meaning “in a regular, orderly, lawful, or methodi-
cal way : SYMMETRICALLY, CORRECTLY, PROPERLY.”
Webster’s Third New Int’l Dictionary 1913 (unabridged ed
2002). The base word “regular” has a number of meanings,
the following of which might apply in context:
   “3 a : steady or uniform in course, practice, or occurr-
   ence : not subject to unexplained or irrational variation
54	                                         Etter v. Dept. of Rev.

   : steadily pursued : ORDERLY, METHODICAL <~ habits>
   b (1) : returning, recurring, or received at stated, fixed,
   or uniform intervals  [.]”
Id. “Regular” has as synonyms “normal,” “typical,” and “nat-
ural.” Id.
	       Another source characterizes “regularly” as being
“nearly synonymous” with “routinely.” Bryan A. Garner,
A Dictionary of Modern American Usage 565 (1998).
Nevertheless,
   “regularly implies a more orderly sequence at predictable
   intervals. 
   ”
Id. (emphasis in original).
	        “Regularly” thus has two aspects. One is quantita-
tive and relates to the frequency that something happens.
The other is qualitative and relates to the routine nature
of the event. See Kohring v. Ballard, 355 Or 297, 304, 325
P3d 717 (2014) (noting that word “regular” has “two distinct
senses, one connoting a particular quality of activity and
the other connoting the frequency with which an activity
occurs”). As the Court of Appeals has noted:
   “The words ‘regular’ and ‘regularly’ have at least two dif-
   ferent and distinct uses. An example of the first is ‘Joe is a
   regular guy who behaves in a regular manner.’ An exam-
   ple of the second is ‘Joe is a regular consumer of American
   products.’ ”
Burkhart v. Farmers Ins. Co., 144 Or App 594, 599, 927 P2d
1111 (1996).
	        As we stated in Kohring, “we examine word usage
in context to determine which among competing defini-
tions is the one that the legislature more likely intended.”
355 Or at 304. In this case, “regularly” modifies “assigned
duties.” In context, that does not seem to focus on the time
intervals between the duties being assigned. Instead, the
focus appears to be on whether the assigned duties are nor-
mal, typical, or routine. The frequency with which a duty is
assigned would affect whether the duty may be considered
Cite as 360 Or 46 (2016)	55

normal, typical, or routine. An infrequent duty of short
duration assigned twice in a year does not suggest a normal,
typical, or routine assignment.
	        Here, as previously noted, taxpayer’s “assigned
duty” of flight time was approximately 10 hours for the sub-
ject tax year—five hours for each of the two aircraft groups.
That duty represented 0.5 percent of taxpayer’s annual
work hours as a full-time employee. We do not regard such
an infrequent and incidental requirement of short dura-
tion as normal, typical, or routine. Indeed, such a short
amount of flight time could only reasonably be viewed as
de minimis.
	        In support of taxpayer’s contention that “regularly”
means only that the duty occurs at regular but flexible
intervals, he cites three cases: Dept. of Rev. v. Hughes, 15
Or. Tax 316 (2001); Butler v. Dept. of Rev., 14 Or. Tax 195 (1997);
and Fink v. Commissioner of Revenue, 71 Mass App Ct 677,
885 NE2d 859 (2008). Although those cases do not bind us
and are not themselves evidence of congressional intent,
we have considered them and do not find them persuasive.
Butler and Hughes both involved 49 USC § 11504(b)(1), a
parallel provision to the statute at issue here that limits the
states that may tax employees of motor carriers who “per-
form[ ] regularly assigned duties in 2 or more States.” Fink
involved 49 USC § 11502, a similar provision for railroad
employees. However, none of those cases provide a detailed
explanation of the source or meaning of the term “regularly
assigned duties” and, therefore, are not particularly helpful
to our inquiry.
	        Taxpayer contends that the purpose of the federal
statute was to protect all employees of air carriers against
taxation. That contention, however, is directly inconsistent
with the statutory text limiting the exemption to those
employees with “regularly assigned duties” in two or more
states. Simply by omitting “regularly assigned” from the
statute, Congress could have extended the exemption to
apply to all air carrier employees with any duties on air-
craft in two or more states. Nevertheless, we turn to the
legislative history to see whether it suggests a different
conclusion.
56	                                                 Etter v. Dept. of Rev.

	        The phrase “regularly assigned duties” was origi-
nally enacted into law by the Act of December 23, 1970, Pub
L 91-569, § 4, 84 Stat 1499, 1502.6 Senate Report 91-1261
explained that the purpose of that act was to relieve inter-
state carriers and some of their employees from burdens cre-
ated by multiple state taxation. The report explained:
    	 “The problem addressed by this legislation is peculiar
    to those employees who are required by the nature of their
    employment to work in more than one State on a regular
    basis. Tax policies in some States have created great hard-
    ships both for interstate carriers and interstate carrier
    employees. Certain States have insisted upon withhold-
    ing from employees an amount based upon the employ-
    ee’s entire annual income even though the portion of the
    employee’s income derived from performance of duties
    within the State in question may have represented a very
    small proportion of his total income. * * * It is no answer
    that at the end of the year a good portion of that money
    might be returned to the employee.
    	 “The employer is also confronted with serious problems.
    State withholding provisions typically require that the
    employer determine the amount of income earned by an
    employee in a particular State and that the employer take
    care of all other administrative details that are related
    to withholding. * * * Where several States and numerous
    employees are involved, the administrative load can be
    extremely onerous for the employer.
    	 “However, withholding and the requirement of filing
    information returns with all of the jurisdictions asserting a
    right to tax any portion of the compensation of the employee
    are not the only problems. For the employee multiple State
    tax liability is itself a burden.”
S Rep No 91-1261, 91st Cong, 2d Sess, reprinted in 1970
USCCAN 5039, 5039-40.
	       In the legislative history for Public Law 91-569, the
only discussion that we have been able to locate regarding
“regularly assigned duties” is the first sentence quoted above:
The statement that the act was intended to address a problem

	6
       The statute at issue here was later recodified without substantive change
as 49 USC § 40116 by the Act of July 5, 1994, Pub L 103-272, § 1(e), 108 Stat 745,
1111. See id. §§ 1(a), 6(a) (both so noting).
Cite as 360 Or 46 (2016)	57

“peculiar to those employees who are required by the nature
of their employment to work in more than one State on a reg-
ular basis.” While Congress was thus aware of the problems
created for employees of interstate carriers such as air car-
riers, it apparently intended to protect only those employees
who work “on a regular basis” in more than one state.
	        Thus, Congress may well have intended the statute
to apply only to a very limited set of employees. “Regularly
assigned duties,” in that light, might mean only those per-
sons who perform “some regularly assigned function on the
vehicle.” That could support the Tax Court’s ultimate conclu-
sion that the statutory exemption applied only to air crews.
	       However, we need not resolve that question in this
case. While the legislative history indicates that Congress
intended to protect some employees of interstate carriers
against state income tax liability, that history also confirms
that Congress did not intend to provide that protection to
all employees of interstate carriers. It is not sufficient for
the employee to perform some work in different states to be
protected. The only employees who are protected are those
whose regularly assigned duties require them to work in
more than one state.
	        As we have already concluded, the term “regularly”
indicates that the assigned duties must be normal, typical,
or routine. The parties stipulated that taxpayer’s “primary
and regular duties” were on the ground in Oregon. His duty
to complete the observation flight requirement was not a
normal, typical, or routine duty. Taxpayer was not “required
by the nature of [his] employment to work in more than one
State on a regular basis.” S Rep No 91-1261, 91st Cong, 2d
Sess, reprinted in 1970 USCCAN 5039, 5039.
	        Thus, taxpayer did not qualify under 49 USC
§ 40116(f)(2) as an employee “having regularly assigned
duties on aircraft in at least 2 States.” There was no gen-
uine issue of material fact, and the department was enti-
tled to summary judgment against taxpayer as a matter of
law. The Tax Court did not err in granting judgment for the
department.
	       The judgment of the Tax Court is affirmed.