Angel v. Dept. of Rev.

21 Or. Tax 444

• Court: Oregon Tax Court
• Decided: July 24, 2014
• Docket: TC 5126
• Status: Published

Opinion

444 July 24, 2014 No. 56

IN THE OREGON TAX COURT REGULAR DIVISION

Joseph W. ANGEL, Plaintiff, v. DEPARTMENT OF REVENUE and Multnomah County Assessor, Defendants. (TC 5126) Plaintiff (taxpayer) appealed from a Magistrate Division decision as to the disqualification of his real property from forestland special assessment. Defendant Multnomah County Assessor (the county) argued that taxpayer’s abandoned Measure 37 claim and development plans showed that his predom- inant purpose for holding the subject property in the 2011-12 tax year was for some purpose other than harvesting marketable timber and that taxpayer could not hold the subject property predominantly for timber harvest because the sub- ject property was within the City of Portland’s “Environmental Conservation” (C) overlay zone. Following trial, the court found that for the time period at issue, because taxpayer had abandoned the Measure 37 claim and development plans nearly three years prior to the start of the 2011-12 tax year, taxpayer’s conduct regarding the subject property was consistent with a predominant purpose of harvesting the marketable timber growing on the subject property and that tax- payer’s conduct toward the subject property during the time immediately leading up the county’s issuance of the notice of disqualification for the subject property was more consistent with holding the subject property for future timber harvest than for any other purpose discernible from the record.

Trial was held January 15, 2014, in the Multnomah County Courthouse, Portland. Erick J. Haynie, Perkins Coie LLP, Portland, argued the cause for Plaintiff (taxpayer). Lindsay R. Kandra, Multnomah County Counsel, Portland, argued the cause for Defendant Multnomah County Assessor (the county). Decision for Plaintiff rendered July 24, 2014. HENRY C. BREITHAUPT, Judge. I. INTRODUCTION This case comes for decision following a trial in the Regular Division. Plaintiff (taxpayer) argues that Defendant Cite as 21 OTR 444 (2014) 445

Multnomah County Assessor (the county) improperly dis- qualified certain real property owned by taxpayer from Forestland Special Assessment for the 2011-12 tax year. For the convenience of the court and of the parties, trial was held at the Multnomah County Courthouse in Portland. II. FACTS The parties to this case reached a partial stipula- tion of facts prior to trial. The following statement of facts reflects both the stipulations of the parties and the facts established at trial. Plaintiff Joseph W. Angel (taxpayer) owns certain real property adjacent to Forest Park in Portland. Taxpayer’s real property is wholly within the city limits of Portland, but only partially within Urban Growth Boundary (UGB) of the Metro region. The portion of taxpayer’s property at issue in this appeal (the subject property) is outside of Portland’s UGB. The subject property is zoned “Residential Agriculture” (RF) by the City of Portland and is subject to the city’s “Environmental Conservation” (C) overlay.1 Taxpayer acquired the subject property in 1977 for use partially as a personal residence and partially as an investment. Taxpayer and the county agree that the sub- ject property entered Forestland Special Assessment some time prior to 1977 and remained in Forestland Special Assessment through the 2010-11 tax year. Some time prior to 1977 the previous owner of the subject property partially logged the subject property and caused the logged area to be replanted with saplings. At or about the time of the dis- qualification at issue in this case the trees on the subject property were a mix of approximately 90 percent Douglas fir and 10 percent alder trees. Taxpayer and his family lived in a house on the sub- ject property for a number of years before moving to another residence with better access to schools and other amenities. Taxpayer retained ownership of the subject property and rented out the house on the property. 1 The Notice of Disqualification wrongly states that the subject property was also subject to the City of Portland’s “Environmental Protection” (P) overlay. The parties have stipulated that this statement was mistaken. 446 Angel v. Dept. of Rev.

Over the years, taxpayer has taken various steps to secure the subject property against trespass and vandalism— particularly damage to, or theft of, trees. At the time of tax- payer’s purchase of the subject property, a manned ranger station near the entrance to Forest Park deterred intrusions onto the subject property. The City of Portland subsequently withdrew the staffing for the ranger station and tore down the station itself, which caused the loss of that deterrent effect. Over the years taxpayer has posted “no trespass” signs in the timbered portions of his property and has per- sonally seen off trespassers. Taxpayer has also caused the City of Portland to place a gate near the road access to the subject property to prevent motor vehicle access (while still allowing pedestrian and bicycle access), thus deterring theft of trees for firewood. In 2006 taxpayer initiated a claim under the then- recently passed Measure 37 seeking compensation for loss of fair market value of the subject property arising from the City of Portland’s zoning and land use regulations. However, taxpayer did not pursue this claim and the City of Portland closed taxpayer’s Measure 37 claim on June 20, 2008. Also in 2006 or 2007, taxpayer met with officials of the City of Portland concerning development possibilities for the subject property. As a result of these meetings the City of Portland produced a document titled “Pre-Application Conference Summary Report” detailing the land use changes and other steps necessary to secure approval for a residential development on the subject property. As with the Measure 37 claim, taxpayer did not take any further steps toward developing the subject property following those initial meetings. Taxpayer has not engaged in any new con- struction activity on the subject property since taxpayer’s purchase of the subject property in 1977. Taxpayer has engaged in little active management of the timbered areas of the subject property. Taxpayer has informally sought management advice from social acquain- tances involved in the timber industry. Taxpayer has also monitored the undergrowth in the timbered areas for signs of undesirable plant growth but, not having found any such growth, has not taken any measures to remove or suppress Cite as 21 OTR 444 (2014) 447

noxious or invasive plant life. As was noted above, however, taxpayer has taken active steps to prevent theft or damage to the trees on the subject property by trespassers. On June 22, 2011, the county issued notices of dis- qualification from Forestland Special Assessment to tax- payer for the timbered areas of the subject property.2 The notices specified as the reason for the disqualification that “the land is no longer in qualifying use” on the grounds that restrictions associated with the zoning overlay on the sub- ject property prevented its use as “forestland” for purposes of special assessment. Taxpayer appealed the notices of disqualification to the Magistrate Division of this court. The magistrate, fol- lowing oral argument, granted the county’s motion for sum- mary judgment. Taxpayer then appealed to the Regular Division. In the Regular Division the county again moved for summary judgment. The court denied that motion after oral argument and scheduled the case for trial. Trial was held on January 15, 2014, at the Multnomah County Courthouse. III. ISSUE The issue in this case is whether the subject property was “forestland” for purposes of Western Oregon Forestland Special Assessment during the 2011-12 tax year. IV. ANALYSIS The laws of this state provide for special assessment of forestland for property tax purposes. There are separate sets of statutes for forestland west of the Cascade Range and east of the Cascade Range, but the outlines are broadly similar. For purposes of Oregon west of the Cascade Range, “forestland” is defined as: “[L]and in western Oregon that is being held or used for the predominant purpose of growing and harvesting trees of a marketable species and has been designated as forestland

2 The subject property consists of three separate tax lots and the assessor issued a separate notice of disqualification for each tax lot. Other than the infor- mation identifying the tax lot that was the subject of each notice, the notices of disqualification are substantially identical. 448 Angel v. Dept. of Rev.

or land in western Oregon, the highest and best use of which is the growing and harvesting of such trees.” ORS 321.257(2).3 In other words, there are two ways for land in western Oregon to be “forestland” for purposes of special assessment: (a) it can be designated as forestland and held with the predominant use of growing trees for commercial timber harvest; or (b) it can be land with a “highest and best use” of growing trees for commercial harvest. Neither party has presented arguments on the issue of highest and best use, so this Opinion will focus exclusively on route (a). There is no dispute that the county had previously designated the subject property as forestland and that, on June 22, 2011, the subject property was planted with trees belonging to marketable species. The court must therefore determine whether taxpayer’s “predominant purpose” for holding or using the subject property on or about June 22, 2011, was “growing and harvesting trees of a marketable species.” ORS 321.257(2). The notices of disqualification, dated June 22, 2011, each specify that the county had discovered that the subject property was no longer being used as forestland. Neither the notices themselves nor any other evidence in the record spec- ifies a date for this discovery, so in this Opinion the court will focus its attention on taxpayer’s predominant purpose for the subject property on or about June 22, 2011. Taxpayer’s “predominant purpose” for holding the subject property is a question of taxpayer’s state of mind. As in all such questions, the court cannot rely on taxpayer’s testimony alone, as such testimony tends to be self-serving. Hudspeth v. Dept. of Rev., 4 OTR 296, 298 (1971). Instead, the court must determine taxpayer’s pre- dominant purpose for holding the subject property by reference to taxpayer’s actions and to the objective cir- cumstances as of June 2011. As the plaintiff in this case, taxpayer has the burden of proving his predominant pur- pose for holding the subject property by a preponderance of the evidence. ORS 305.427.

3 The court’s references to the Oregon Revised Statutes (ORS) are to the 2011 edition. Cite as 21 OTR 444 (2014) 449

Taxpayer claims that his predominant purpose for holding the subject property on June 22, 2011, was to even- tually harvest the marketable timber growing on the sub- ject property. The affirmative evidence of this intention is somewhat sparse, but not surprisingly so. At trial the court heard testimony from a witness qualified as an expert in forestry to the effect that trees of the type growing on the subject property may take many decades—or even as much as a century—to grow to marketable size. While they are growing—particularly given the conditions on the subject property—such trees require little, if any, active manage- ment, such as thinning or applying pesticides. In other words, the lack of active management of the timbered por- tions of the subject property was consistent with profes- sional forestry practices for cultivating trees of that type in that environment for eventual commercial harvest. The county makes—in essence—two arguments, neither of which is well taken. First, the county argues that taxpayer’s abandoned Measure 37 claim and development plans show that his predominant purpose for holding the subject property in the 2011-12 tax year was for some pur- pose other than harvesting marketable timber. This is a potentially very good argument for the county’s substantive position that fails in this instance pri- marily due to timing. The question in this case is what tax- payer’s predominant purpose for the subject property was on or about June 22, 2011. While taxpayer’s Measure 37 claim and preliminary development plans are certainly informa- tion that the court must consider in determining taxpay- er’s predominant purpose for the subject property, the court must also consider that taxpayer appears to have aban- doned that claim and those plans nearly three years prior to the start of the 2011-12 tax year. Taxpayer’s actions with regard to the subject property between the summer of 2008 and the date of the notice of disqualification were consis- tent with holding the subject property for purposes of future timber harvest. Because the question is what taxpayer’s predominant purpose for holding the subject property was on the date of the notices of disqualification, taxpayer’s con- duct at or about that time must take precedence over claims for compensation or development plans that taxpayer had 450 Angel v. Dept. of Rev.

abandoned—both at relatively preliminary stages—several years previous. The county’s second argument fares no better. The county argues that taxpayer cannot hold the subject prop- erty predominantly for timber harvest because the subject property is within the City of Portland’s “Environmental Conservation” (C) overlay zone. To be perfectly clear, the county’s position is not that the C overlay zone legally bars taxpayer from harvesting timber on the subject property; rather, the county argues that the C overlay imposes so many administrative hurdles that taxpayer cannot, as a practical matter, have held the subject property for the pre- dominant purpose of future timber harvest. This argument fails because the county has pre- sented no evidence to support its position. ORS 305.427 requires the party seeking affirmative relief to prove its case by a preponderance of the evidence. Taxpayer has presented evidence from which the court could reasonably conclude that taxpayer’s predominant purpose for holding the subject property was to use it as forestland. Given that evidence, the county must come forward with evidence that at least puts the record on that question into equipoise. The county’s sole witness on this issue testified only as to the county’s under- standing of the City of Portland’s zoning overlays. Neither this testimony nor the exhibits placed in the record by the county tends to rebut the evidence placed in the record by taxpayer concerning taxpayer’s predominant purpose for the subject property. The evidence in the record relating to taxpayer’s predominant purpose for holding the subject property on or about June 22, 2011, supports a conclusion that, as of the date that the county claims to have discovered otherwise, taxpayer’s predominant purpose for holding the subject property was for eventual harvest of the commercially mar- ketable timber growing on the subject property. V. CONCLUSION Taxpayer’s conduct regarding the subject property has been, on the whole, consistent with a predominant pur- pose of harvesting the marketable timber growing on the Cite as 21 OTR 444 (2014) 451

subject property. Moreover, taxpayer’s conduct toward the subject property during the time immediately leading up to the county’s issuance of the notice of disqualification for the subject property was more consistent with holding the sub- ject property for future timber harvest than for any other purpose discernible from the record. Now, therefore, IT IS THE DECISION OF THIS COURT that the subject property was forestland for purposes of Forestland Special Assessment during the 2011-12 tax year.