Crossridge Church v. Washington County Assessor

• Court: Oregon Tax Court
• Decided: July 23, 2020
• Docket: TC-MD 190336N
• Status: Unpublished

Opinion

IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax

CROSSRIDGE CHURCH, ) ) Plaintiff, ) TC-MD 190336N ) v. ) ) WASHINGTON COUNTY ASSESSOR, ) ) ORDER GRANTING DEFENDANT’S Defendant. ) MOTION FOR SUMMARY JUDGMENT ) AND DENYING PLAINTIFF’S MOTION ) FOR SUMMARY JUDGMENT

This matter came before the court on the parties’ cross-motions for summary judgment.

The parties filed stipulated facts on March 9, 2020; cross-motions on April 17, 2020; and responses

on May 1, 2020. Oral argument was held by telephone on May 19, 2020. William E. Smith, an

Oregon attorney, appeared on behalf of Plaintiff. Jason Bush, Assistant County Counsel II,

appeared on behalf of Defendant. This matter is now ready for the court’s determination.

I. STATEMENT OF FACTS

Plaintiff Crossridge Church was formed on October 4, 2012, as the result of a merger of

Rock Harbor Church (Rock Harbor) and Sherwood Baptist Church (Sherwood Baptist). (Stip

Facts at 1-2, ¶ 1, 3.) The congregations and individual assets of Rock Harbor and Sherwood

Baptist joined to form Plaintiff, but the merger did not meet the formal requirements of ORS

65.484. (Id. at 1, ¶ 1.) Rock Harbor and Sherwood Baptist dissolved on October 4, 2012, and

May 31, 2013, respectively. (Id. at 1-2, ¶ 3.) The parties clarified during oral argument that

Account R557882 (the subject property) was transferred from Sherwood Baptist to Plaintiff in

2013 by a deed that was properly recorded with the county. (See also id. at 1, ¶ 2 (characterizing

transfer as name change).)

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT TC-MD 190336N 1 Defendant did not discover the change in ownership of the subject property until 2017.

(Stip Facts at 1, ¶ 2; Ex A.) Defendant determined that the change in ownership that resulted

from the 2013 merger disqualified the subject property from exemption. (Def’s Mot Summ J at

2.) On December 29, 2017, Defendant issued a letter to Plaintiff explaining its intention to

return the subject property to the tax roll for the 2018-19 tax year unless a timely application for

exemption was filed. (Stip Facts, Ex A at 2.) In its letter, Defendant asserted that the previous

tax exemption of the subject property granted to Sherwood Baptist should have been removed

when the property was transferred to Plaintiff on October 4, 2013. (Id.) Defendant’s letter

included a link to the exemption application forms and advised Plaintiff of the April 1, 2018,

application deadline and the December 31, 2018, late application deadline. (Id.) Defendant also

sent a letter notifying Sherwood Baptist of the termination of its tax exemption for the subject

property and informed Sherwood Baptist of its own right to appeal Defendant’s decision. (Stip

Facts at 2, ¶ 7; Ex A at 1.) No evidence was presented indicating that an appeal was taken from

Defendant’s decision to disqualify the subject property from exemption.

Plaintiff did not file an application for property tax exemption for the 2018-19 tax year by

the April 1, 2018, deadline. (Stip Facts at 2, ¶ 8.) Plaintiff also failed to timely apply for

exemption with a late filing fee by the December 31, 2018, deadline. (Def’s Mot Summ J at 3.)

Consequently, Defendant returned the subject property to the tax roll for the 2018-19 tax year

and issued a tax bill for $14,298.69. (Stip Facts at 2, ¶ 9; Ex B.) Plaintiff did not take an appeal

from the property tax statement issued for the 2018-19 tax year. (Def’s Mot Summ J at 3.)

Plaintiff applied for exemption for the 2018-19 and 2019-20 tax years on March 26,

2019. (Stip Facts at 2, ¶ 10; Ex C.) On August 13, 2019, Defendant informed Plaintiff by letter

that the subject property would be exempt from property taxation for the 2019-20 tax year, but

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT TC-MD 190336N 2 not for the 2018-19 tax year. (Stip Facts at 3, ¶ 11; Ex D.) Plaintiff appeals Defendant’s denial

of its 2018-19 property tax exemption application.

II. ANALYSIS

Plaintiff claims exemption under ORS 307.140. 1 Plaintiff’s status as a religious

organization entitled to exemption under that statute is not at issue. Rather, the issue is whether

the subject property qualifies for property tax exemption for the 2018-19 tax year despite

Plaintiff’s failure to timely file its application under ORS 307.162.

Defendant maintains that, because Plaintiff failed to timely apply for exemption, the

subject property is not exempt from taxation for the 2018-19 tax year. (Def’s Mot Summ J at 4.)

Plaintiff raises two challenges in response to Defendant’s position. First, Plaintiff argues that the

prior tax-exempt status of the subject property transferred upon merger of Sherwood Baptist and

Rock Harbor; therefore, Plaintiff was not required to apply for exemption. (Ptf’s Mot Summ J at

5.) Alternatively, if a new application was required, Plaintiff argues that its late application for

the 2018-19 tax year qualifies for the “good and sufficient cause” exception in ORS

307.162(2)(a)(B). (Ptf’s Mot Summ J at 3.)

Tax Court Rule (TCR) 47 C states that summary judgment shall be entered 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.” Plaintiff has the burden of proof and must establish its case by a preponderance of the

evidence. ORS 305.427. A “[p]reponderance of the evidence means the greater weight of

evidence, the more convincing evidence.” Feves v. Dept. of Rev., 4 OTR 302, 312 (1971). “[I]f

///

1 The court’s references to the Oregon Revised Statutes (ORS) are to 2017.

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT TC-MD 190336N 3 the evidence is inconclusive or unpersuasive, the taxpayer will have failed to meet [its] burden of

proof * * *.” Reed v. Dept. of Rev., 310 OTR 260, 265 (1990).

A. Whether Exemption Application Required for the 2018-19 Tax Year

Qualifying property of religious organizations is entitled to exemption from property

taxation under ORS 307.140. However, exemption is not automatic and even when exemption is

permitted, it is available “only in accordance with specified conditions.” Erickson v. Dept. of

Rev., 17 OTR 324, 328 (2004). ORS 307.140 provides that property of religious organizations

may be exempt only “[u]pon compliance with ORS 307.162.” Under ORS 307.162(1)(a), the

organization seeking exemption “must file a claim with the county assessor, on or before April 1

preceding the tax year for which the exemption is claimed.” A “tax year” is defined as “a period

of 12 months beginning on July 1.” ORS 308.007(1)(c).

As long as ownership of all property included in the claim filed with the county assessor

for a prior year remains unchanged, an organization previously approved for property tax

exemption need not renew its application annually. ORS 307.162(1)(b). By implication, a new

application for exemption is required under ORS 307.162(1)(b) if ownership of the property

changes. Genesis Community Fellowship v. Multnomah County Assessor, TC-MD 110934C,

2012 WL 92904 at *1 (Or Tax M Div Jan 12, 2012). Ownership is defined as “legal and

equitable title.” ORS 307.162(4)(c). Thus, a change in either legal or equitable title triggers a

requirement to file a new application for exemption.

Plaintiff contends that “there was never any transfer of the property from [one] entity to

another that would change the status of the property” such that a new application for exemption

was required. (Ptf’s Mot Summ J at 5.) To support its theory, Plaintiff suggests that it is only

the “current iteration” of Sherwood Baptist, a tax-exempt organization, and that the merger was

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT TC-MD 190336N 4 “more akin to a name change or rebranding” because no gift or sale occurred. 2 (Ptf’s Mot Summ

J at 5.) Plaintiff assumed that because there was no sale or change in the use of the subject

property as a church it would continue to qualify for exemption. (Ptf’s Mot Summ J at 5.) But

that assumption was mistaken. The statute’s definition of “ownership” includes both legal and

equitable title. A transfer of legal title occurs where the grantor conveys its interest in the

property by a signed, recorded deed. Burke v. State ex rel Department of Land Conservation and

Development, 352 Or 428, 443-444, 280 P3d 790 (2012) (distinguishing transfer of legal title by

deed from transfers of other nonpossessory interests such as mortgages and easements). The

parties stipulated that legal title to the subject property was transferred to Plaintiff in 2013. The

court finds that a change in ownership occurred within the meaning of ORS 307.162, triggering

the need for a new application for exemption.

Having concluded that Plaintiff was required to file a new application for exemption, the

court now turns to whether Plaintiff satisfied the application requirements under ORS 307.162.

The tax year at issue is 2018-19, which began on July 1, 2018. To meet the requirements set in

ORS 307.162(1), Plaintiff’s application for exemption must have been filed on or before April 1,

2018. Alternatively, Plaintiff could have submitted a late application by December 31, 2018, if

accompanied by a late filing fee. ORS 307.162(2)(a)(A). Plaintiff did not meet either deadline.

The court turns to Plaintiff’s final available route to relief.

B. Whether Good and Sufficient Cause Exists for the 2018-19 Tax Year

Plaintiff’s final available route to relief is outlined in ORS 307.162(2)(a)(B), which

allows a taxpayer to file their exemption claim on or before April 1 of the tax year if the taxpayer

2 The parties agree that the merger did not meet the formal requirements under ORS 65.484. However, because the court finds that a change in ownership occurred, whether or not the merger met the formal requirements is not relevant.

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT TC-MD 190336N 5 is able to demonstrate “good and sufficient cause” for failing to file a timely claim and pays a

$200 late filing fee. 3

Good and sufficient cause means “an extraordinary circumstance beyond the control of

the taxpayer or the taxpayer’s agent or representative that causes the failure to file a timely

claim.” ORS 307.162(4)(b)(A). The exception is a narrow one. To meet the standard “a

taxpayer needs to show not only that some circumstance occurred, but also that its occurrence

caused [the] failure.” Karamanos Holdings Inc. v. Multnomah County Assessor, 21 OTR 198,

202 (2013) (internal quotations omitted). Moreover, the statute explicitly cautions the taxpayer

that “hardship, reliance on misleading information unless the information is provided by an

authorized tax official in the course of the official’s duties, lack of knowledge, oversight, [and]

inadvertence” do not constitute good and sufficient cause. ORS 307.162(4)(b)(B).

Guided by that framework, the court now turns to whether Plaintiff established good and

sufficient cause for its failure to timely file for exemption for the 2018-19 tax year. Plaintiff

articulates several causes for its failure to timely file: (1) its reliance on the continuation of

property tax exemption for the 2013-14 through 2017-18 tax years; (2) its busy 2018 holiday

season; and (3) its internal confusion about administrative duties. The court addresses each of

those arguments in turn.

1. Plaintiff’s Reliance on Presumed Continuation of Exemption

Plaintiff argues that good and sufficient cause exists for its failure to timely file its

application for property tax exemption because Defendant failed to discover the change in

ownership of the subject property until 2017. (Ptf’s Mot Summ J at 4.) In Plaintiff’s view, this

3 Other avenues of relief are available but not applicable here. (E.g., first-time filer exception under ORS 307.162(2)(a)(B) for filer who did not receive notice “before December 1 of the tax year” of the potential additional tax liability.)

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT TC-MD 190336N 6 “is certainly an ‘extraordinary circumstance beyond the control of the taxpayer.’” (Id.)

Plaintiff’s reliance on this argument is misplaced. Defendant denied Plaintiff’s application for

exemption for 2018-19 because it found Plaintiff’s failure to timely file was due to a “lack of

knowledge and inadvertence.” (Id., Ex D at 1.) The court agrees.

Defendant’s delay in discovering the change in ownership may be “beyond [Plaintiff’s]

control” but it did not cause Plaintiff’s failure to timely file for exemption. (Ptf’s Resp at 2.)

Plaintiff received clear and correct instructions for how to apply for exemption for the 2018-19

tax year in Defendant’s December 29, 2017, letter. Joel White (White), Senior Pastor during the

relevant year, admitted that he understood Plaintiff to be “a tax-exempt entity and did not receive

any paperwork or notice from the county to the contrary until December 2017.” (Ptf’s Mot

Summ J, Ex G at 1-2 (emphasis added).) White stated that he “did not respond to the December

2017 paperwork because [he] believed [Plaintiff] to be exempt * * *.” (Id. at 2.)

Despite Plaintiff’s belief that the subject property continued to be exempt from taxation,

Plaintiff received a clear written notice to the contrary from Defendant. “[W]hen written

materials are given to taxpayers containing accurate information and advice, taxpayers may not

continue to rely on an understanding [that is] contrary to the written information.” Smith v. Dept.

of Rev., 13 OTR 206, 210 (1994). Defendant’s conduct in failing to recognize the change in

ownership between 2013 and 2017 cannot reasonably be considered to “neutralize the express

written notice [Plaintiff] received.” Hoyt Street Properties v. Dept. of Rev., 18 OTR 313, 320

(2005). Taken with the fact that each tax year stands alone, any action or inaction between 2013

and 2017 is of no consequence in deciding whether Plaintiff timely filed for exemption for 2018-

19. See Safley v. Jackson County Assessor, TC-MD 091206C, 2010 WL 4923355 at *5 (Or Tax

M Div Dec 2, 2010) (noting that each tax year is its own claim).

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT TC-MD 190336N 7 The precise language of ORS 307.162(2)(a)(B) mandates that “the claimant demonstrates

good and sufficient cause” for failing to timely file. Here, there is no evidence that Plaintiff had

good and sufficient cause for failing to timely file for exemption; to the contrary, Plaintiff’s

evidence merely establishes what Plaintiff believed to be true despite the “unequivocal and

accurate written notifications” it received. Hoyt, 18 OTR at 318.

Defendant’s decision to disqualify the subject property from exemption made the

property subject to taxation as of July 1, 2018. That holds true even if Defendant did not notify

Plaintiff of the disqualification until after July 1, 2018, because Defendant is permitted to alter

position as to exemption without notice to the property owner prior to the issuance of the tax

statement. See Multnomah County Assessor v. Portland Devel. Comm’n., 20 OTR 395, 398

(2011). Both the December 29, 2017, letter and the tax statement contained accurate information

and advice. After receiving those documents, Plaintiff could no longer “reasonabl[y] assume[ ]”

that “these issues were addressed within the first year and a half of [its] existence” because that

understanding was contrary to the written information in Defendant’s letter and tax statement.

(Ptf’s Mot Summ J, Ex H at 1.)

Plaintiff attempts to bolster its argument by noting that Defendant “fail[ed] to take into

consideration its own inadvertence and oversight” when it denied Plaintiff’s application for

exemption. (Ptf’s Mot Summ J at 4.) According to Plaintiff, “[t]he oversight or inadvertence in

this matter is that of [Defendant] to a far greater degree [than] any of that of [Plaintiff].” (Ptf’s

Resp at 2 (emphasis added).) As discussed above, Defendant conduct is only relevant to the

extent that it caused Plaintiff to reasonably rely on misleading information. See ORS

307.162(4)(b)(B); see also Hewlett-Packard Co. v. Dept. of Rev., 13 OTR 247, 251 (1995)

(rejecting taxpayer’s argument for good and sufficient cause where agent’s unawareness of the

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT TC-MD 190336N 8 deadlines caused failure to file even where circumstances might otherwise have qualified as

extraordinary). Even if Defendant did exhibit inadvertence and oversight in failing to discover

the change in ownership, Plaintiff has not established a causal connection between Defendant’s

conduct and its own. See ORS 307.162(4)(b)(A).

2. Plaintiff’s Busy 2018 Holiday Season

In its written arguments, Plaintiff’s attempt to establish good and sufficient cause rests

solely on Defendant’s failure to discover the change in ownership of the subject property. (Ptf’s

Mot Summ J at 4; Ptf’s Resp at 2.) However, Plaintiff’s exhibits suggest another possible reason

for its failure to timely file: the busy holiday season at the end of 2018. (Ptf’s Mot Summ J, Ex

H.)

In Plaintiff’s “Statement of Good and Sufficient Cause” submitted with its application for

exemption, Plaintiff explains that “October through the first of the year is [its] busiest time of

year for the staff and leaders” especially “[w]ith the holidays quickly approaching.” (Ptf’s Mot

Summ J, Ex H.) However, Plaintiff became aware of the need for a new exemption application

when it received Defendant’s December 29, 2017, letter. A busy time of year is not an

extraordinary circumstance within the meaning of ORS 307.162(4)(b)(B). Plaintiff also did not

explain why it could not have devoted the time and resources to completing the application

before the April 1 late filing deadline. Carver School v. Clackamas County Assessor, TC-MD

130522N, 2014 WL 2488112 at *3 (Or Tax M Div Jun 2, 2014).

3. Plaintiff’s Internal Confusion About Administrative Duties

Plaintiff also notes that “there was a great deal of confusion as to the roles in

administrating the church.” (Ptf’s Mot Summ J, Ex H.) This court acknowledges that, “[a]s a

group, exempt corporations are notorious for their failures to protect their tax advantages” in part

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT TC-MD 190336N 9 due to frequent turnover of officeholders and managers who often are not business-oriented.

Renewal House, Inc. v. Dept. of Rev., 5 OTR 638, 643 (1974). Nevertheless, hardship and

oversight are explicitly excluded from the definition of good and sufficient case; the

responsibility remains with the taxpayer to meet the minimum requirements of ORS 307.162. Id.

at 644.

The court concludes that the subject property does not qualify for property tax exemption

for the 2018-19 tax year. The court understands that its decision in this case imposes a

substantial burden on Plaintiff. As this court has previously observed, despite “the good things

exempt organizations do, their encounters with the property tax system have often been difficult

and have produced seemingly harsh results.” Erickson, 17 OTR at 327. Plaintiff may find this

outcome to be harsh, but the court is bound to apply the law as it is written and “cannot make

determinations that might seem to some people as appropriate, equitable, or fair * * *.” Genesis

Community Fellowship, 2012 WL 92904 at *2.

III. CONCLUSION

After careful consideration, the court concludes that an exemption application was

required because the subject property’s legal title changed in 2013 resulting in a change of

ownership within the meaning of ORS 307.162. Plaintiff’s application for the 2018-19 tax year

was not timely filed and Plaintiff failed to demonstrate good and sufficient cause for its untimely

filing. As a result, the court upholds Defendant’s denial of Plaintiff’s exemption application for

the 2018-19 tax year. Now, therefore,

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT TC-MD 190336N 10 IT IS ORDERED that Defendant’s Motion for Summary Judgment is granted and

Plaintiff’s Motion for Summary Judgment is denied.

Dated this day of July 2020.

ALLISON R. BOOMER PRESIDING MAGISTRATE

This is a dispositive order pursuant to Tax Court Rule – Magistrate Division 16 C(1). The court will issue a decision after waiting 14 days to determine whether there is a dispute about costs and disbursements. Any claim of error in regard to this order should be raised in an appeal of the Magistrate’s decision when all issues have been resolved. See TCR-MD 19.

This document was signed by Presiding Magistrate Allison R. Boomer and entered on July 23, 2020.

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT TC-MD 190336N 11