Willamette Table Tennis Club v. Marion County Assessor

• Court: Oregon Tax Court
• Decided: July 10, 2017
• Docket: TC-MD 160257R
• Status: Unpublished

Opinion

IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax

WILLAMETTE TABLE TENNIS CLUB, ) ) Plaintiff, ) TC-MD 160257R ) v. ) ) MARION COUNTY ASSESSOR, ) ) Defendant. ) FINAL DECISION1

Plaintiff appealed Defendant’s denials of Plaintiff’s application for exemption dated

September 28, 2015, for the 2015-16 tax year and April 26, 2016, for the 2016-17 tax year, for

property identified as Account R68516. On September 28, 2016, the parties submitted stipulated

facts. On November 30, 2016, Defendant filed a Motion to Dismiss the 2015-16 Tax Year and

Motion for Summary Judgment on the 2016-17 Tax Year. On December 22, 2016, Plaintiff filed

its response to Defendant’s Motion to Dismiss and its own Motion for Summary Judgment. Oral

argument was held at the Oregon Tax Court in Salem, Oregon on January 3, 2017. Ben Bednarz

appeared on behalf of Plaintiff. Scott A. Norris, Assistant Legal Counsel for Marion County,

appeared on behalf of Defendant. The matter is ready for decision.

I. STATEMENT OF FACTS

This case is before the court on the following stipulated facts:

1. Plaintiff is organized as a mutual benefit nonprofit corporation under Oregon law.

2. Plaintiff’s purpose is stated generally in Article 2B of its restated articles as follows:

///

1 This Final Decision incorporates the court’s Decision, entered June 20, 2017. A scrivener’s error on Page 8 was corrected; otherwise, the Decision is unchanged. The court did not receive a statement of costs and disbursements within 14 days after its Decision was entered. See Tax Court Rule–Magistrate Division (TCR–MD) 16 C(1).

FINAL DECISION TC-MD 160257R 1 “Willamette Table Tennis Club (WTTC) is organized and operated for educational purposes and to foster national and international amateur sports, and specifically to promote table tennis for members and non-members; to hold tournaments; to promote the sport nationally and internationally; to be a member of the United States Table Tennis Association (USTTA); to promote and teach table tennis to children; and to promote table tennis in general. The organization may engage in any lawful activity for which corporations may be organized under the [Oregon Nonprofit Corporation Act].”

3. Article 2D of Plaintiff's restated articles reads as follows:

“No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, directors, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in these articles. No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of any candidate for public office.”

4. Plaintiff is exempt from federal income tax pursuant to Internal Revenue Code (IRC)

section 501(c)(3).

5. The subject property is a commercial property located at 1960 Oak Street SE, Salem,

OR 97301. Plaintiff leases the subject property from Starbuck Properties, LLC. The subject

property is comprised of the eastern portion of the northwest building at the landlord’s site, plus

the surrounding outdoor space, all of which comprises approximately 10,500 square feet.

6. Pursuant to section 2.1 of the lease, the original term expired on December 31,

2015. However, pursuant to section 2.3, the lease term is presumed to renew on an annual

basis for up to three additional years unless the landlord declines in writing to accept the

renewal on or before December 1 of any given year.

7. Pursuant to section 3.1 of the lease, the annual rent due on or before January 1 of

each calendar year is $100.00. The lease states the following about the rent: “This rent

FINAL DECISION TC-MD 160257R 2 amount is far less than the fair market value of the space. The difference in rent charged is

a result of the non-profit status of the tenant.”

8. Section 3.2 of the commercial lease agreement is a property tax clause which reads

as follows:

“Taxes. Landlord shall be responsible for all real property taxes. However, as an [sic] material inducement for Landlord to enter into this Lease on the terms and conditions herein. Tenant has agreed to apply for as [sic] use its best efforts to obtain tax exemption from the local government taxing officials. Tenant shall be responsible for all costs and expenses in achieving the tax exempt status.”

9. Plaintiff applied for exemption of the subject property for the 2016-17 tax year on

March 29, 2016. Plaintiff claimed exemption for the subject property pursuant to

ORS 307.130.

10. In a letter dated April 26, 2016, Defendant denied Plaintiff’s application for

exemption for the 2016-17 tax year, on the basis that Plaintiff does not meet the statutory

guidelines for exemption as a charitable organization under ORS chapter 307.130.

In addition to the stipulated facts the court also finds the following:

11. Plaintiff filed an application for exemption from property tax for the 2015-16 tax

year on September 15, 2015. (Aff of Scott A. Norris, Ex A.)

12. Defendant mailed a letter to Plaintiff on September 28, 2015, denying Plaintiff’s

application for exemption of the subject property for the 2015-16 tax year. (Aff of Scott A.

Norris, Ex B.)

13. Plaintiff filed its appeal of the September 28, 2015, denial of exemption letter on

June 29, 2016.

FINAL DECISION TC-MD 160257R 3 II. ANALYSIS

The issues in this case are whether Plaintiff timely appealed Defendant’s denial of

application for property tax exemption for the 2015-16 tax year under ORS 305.2802 and

whether Plaintiff is a charitable organization qualified for a property tax exemption under

A. Defendant’s Motion to Dismiss

On September 28, 2015, Defendant mailed Plaintiff a letter denying its application for an

exemption from property tax for the 2015-16 tax year. Plaintiff filed an appeal to the Tax Court

on June 29, 2016. That interval is longer than the 90 days required by ORS 305.280(1), which

states in pertinent part:

“Except as otherwise provided in this section, an appeal under ORS 305.275 (1) or (2) shall be filed within 90 days after the act, omission, order or determination becomes actually known to the person, but in no event later than one year after the act or omission has occurred[.]”

Plaintiff argues that “Defendant’s actions failed to provide Plaintiff an opportunity to

seek redress on the exemption denial * * *.” (Ptf’s Resp at 1.) Plaintiff cites to Defendant’s

letter dated September 28, 2015, essentially arguing it was defective. Defendant’s letter

identified its reason for the exemption denial: “[b]ecause the primary purpose of your

organization is a sports club and the use of this property is for the benefit of your members, it

does not meet the statutory guidelines to be granted as a charitable organization.” (Aff of

Scott A. Norris, Ex B.) The letter further states: “If you disagree with this decision you have the

right to file an appeal with the Magistrate Division of the Oregon Tax Court.” Plaintiff’s

argument that Defendant’s denial letter failed to put Plaintiff on notice of the reasons for denial

or information regarding an appeal is without merit. Plaintiff has not presented any fact or

2 The court’s references to the Oregon Revised Statutes (ORS) are to 2013.

FINAL DECISION TC-MD 160257R 4 argument that prevents the application of the 90-day deadline to appeal Defendant’s action.

Defendant’s Motion to Dismiss with respect to the 2015-16 tax year is granted.

B. Burden of Proof and General Rules of Construction for Property Tax Exemptions

The parties have filed cross-motions for summary judgment. Summary judgment is

proper where, construing the facts in the light most favorable to the adverse party, “there is no

genuine issue as to any material fact” such that “the moving party is entitled to prevail as a

matter of law.” Tax Court Rule 47 C.

The burden of proof rests on the taxpayer to prove by a preponderance of the evidence

that a claim for property tax exemption meets the statutory requirements. ORS 305.427; Golden

Writ of God v. Dept. of Rev., 300 Or 479, 483, 713 P2d 605 (1986). In resolving exemption

controversies, the court is guided by the principle that “[t]axation is the rule and exemption from

taxation is the exception.” Dove Lewis Mem. Emer. Vet. Clinic v. Dept. of Rev. (Dove Lewis),

301 Or 423, 426, 723 P2d 320 (1986) (citation omitted). Exemption statutes are strictly but

reasonably construed. German Apost. Christ. Church v. Dept. of Rev., 279 Or 637, 640, 569 P2d

596 (1977); Washington County. v. Dept. of Rev., 11 OTR 251, 254 (1989). This court has ruled

that “[s]trict but reasonable construction does not require the court to give the narrowest possible

meaning to an exemption statute. Rather, it requires an exemption statute to be construed

reasonably, giving due consideration to the ordinary meaning of the words of the statute and the

legislative intent.” North Harbour Corp. v. Dept. of Rev., 16 OTR 91, 95 (2002).

C. Exemption Under ORS 307.130

ORS 307.130(2) exempts from taxation “property owned or being purchased” by a

charitable organization that “is actually and exclusively occupied or used” in the organization’s

charitable work. Property that a taxable owner holds and leases to a charitable organization that

FINAL DECISION TC-MD 160257R 5 is eligible for tax exemption under ORS 307.130 may be exempt from property taxation under

ORS 307.112, provided that certain requirements are met.3

1. Charitable organization

The Oregon Supreme Court has developed a three-prong test for analyzing if an

organization qualifies as a “charitable institution”; i.e., if all three prongs are satisfied, then the

organization is a charitable organization for purposes of ORS 307.130: “(1) the organization

must have charity as its primary, if not sole, object; (2) the organization must be performing in a

manner that furthers its charitable object; and (3) the organization’s performance must involve a

gift or giving.” SW Oregon Pub. Def. Services v. Dept. of Rev. (SW Oregon), 312 Or 82, 89, 817

P2d 1292 (1991); see also OAR 150-307-0120.4

2. Charity as primary object

As to the first prong of the SW Oregon test, the Oregon Supreme Court has held that an

organization’s articles of incorporation and bylaws serve as prima facie evidence of the character

of the organization. Dove Lewis, 301 Or at 427. Defendant argues that Plaintiff’s articles state it

is a mutual benefit corporation and not a public benefit corporation and, thus, Plaintiff “does not

have charity as its primary, if not sole, object.” (Def’s Mot at 5.) Defendant cites to Columbia

Empire Region Volleyball Ass’n v. Multnomah County Assessor (Columbia Empire), TC-MD

150421N (Aug 30, 2016) and Rogue Gem v. Josephine County Assessor (Rogue Gem),

17 OTR-MD 446 (2003) to support its contention. Defendant’s reliance on Columbia Empire is

misplaced. In Columbia Empire, the entity seeking a property tax exemption was not a mutual

benefit corporation. Although Columbia Empire cites to Rogue Gem, it does so only to address 3 Because the case is decided on other grounds, the court will not analyze Plaintiff’s compliance with ORS 307.112. 4 The court’s references to the Oregon Administrative Rules are to the 2016 version, which was renumbered as of September 1, 2016.

FINAL DECISION TC-MD 160257R 6 arguments made by the parties in that case. Rogue Gem, however, appears to be directly on

point. In that case, the court discussed in significant detail the legislative history and purpose of

the mutual benefit corporation and held that “a mutual benefit corporation is not charitable in

nature, therefore its property does not qualify for exemption.” Rogue Gem, 17 OTR-MD at 452.

The Tax Court Regular Division has not directly ruled on that issue, however, in Oregon School

Boards Ass’n v. Dept. of Rev., TC 5262, WL 5888932 (Oct 7, 2016), the court noted the holding

in Rogue Gem “was demanded by the definitions of a mutual benefit corporation and a public

benefit corporation.” Id. at *5.

Plaintiff argues that because of its 501(c)(3) tax exempt status and “because Defendant

has failed to show in any way where Plaintiff is operated for the benefit of a select group” the

type of incorporation should not determine its status. It would be difficult for this court to ignore

the holding in Rogue Gem. However, in the interest of completeness, this court will look at

Plaintiff’s documentation as a whole. Plaintiff’s articles of incorporations state that it

“is organized and operated for educational purposes and to foster national and international amateur sports, and specifically to promote table tennis for members and non-members; to hold tournaments; to promote the sport nationally and internationally; to be a member of the United States Table Tennis Association (USTTA); to promote and teach table tennis to children; and to promote table tennis in general.”

(Stip Facts at 1, ¶ 2.) Plaintiff focuses its argument on its IRC section 501(c)(3) status. That is

one element of the analysis, but that alone is not sufficient. Promoting sports under certain

circumstances may demonstrate a charitable purpose. But here, Plaintiff does not show anything

more. Plaintiff’s articles of incorporation do not show by a preponderance of the evidence that

charity is Plaintiff’s primary object.

FINAL DECISION TC-MD 160257R 7 3. Gift or giving5

Defendant argues that Plaintiff’s organization does not perform in a manner that involves

“a gift or giving.” SW Oregon, 312 Or at 89; see also OAR 150-307-0120-(4)(d). The SW

Oregon court concluded that, when analyzing the “gift or giving” requirement, it is proper to

determine whether the donor had an expectation of remuneration from the recipient. SW Oregon,

312 Or at 92. That conclusion is consistent with paragraph (d) of the rule cited above: “This

element of gift and giving is giving something of value to a recipient with no expectation of

compensation or remuneration.” OAR 150-307-0120(4)(d).

This court has stated that the elements of gift or giving by the following factors:

“(1) Whether the receipts are applied to the upkeep, maintenance and equipment of the institution or are otherwise employed; “(2) Whether patients or patrons receive the same treatment irrespective of their ability to pay; “(3) Whether the doors are open to rich and poor alike and without discrimination as to race, color or creed; and “(4) Whether charges are made to all and, if made, are lesser charges made to the poor or are any charges made to the indigent.”

Serenity Lane, Inc. v. Lane County Assessor, 21 OTR 229, 236 (2013) (citations omitted.)

Plaintiff did not present evidence on how receipts are employed. The parties agree that

Plaintiff provided an opportunity for members and nonmembers to play table tennis. They also

agree that the website provided that nonmembers are charged $4 to play and that the website

states “[a] player who regularly ignores the Visitors fee may be banned (until he/she starts

paying)[.]” (Aff of Scott A. Norris, Ex E.). There are two free play sessions according to

Plaintiff’s website: Thursdays from 6:00 to 7:00 p.m. and free beginner lessons on Mondays

from 7:00 to 9:00 p.m. (Id. at Ex D.) That is evidence of some giving, but it appears to be

5 Because Plaintiff did not meet the first prong under the SW Oregon test, it is unnecessary to analyze the second prong.

FINAL DECISION TC-MD 160257R 8 incidental rather than its main purpose. Plaintiff argues that its website is inaccurate and that

Plaintiff does not follow its published rules in charging all participants. That argument is not

persuasive because, from the perspective of the public who is looking at its website, playing is

not free, and inability to pay is not a consideration. There is insufficient evidence presented to

show that individuals have access to Plaintiff’s services regardless of their ability to pay. Thus,

as a whole, Plaintiffs have not demonstrated an element of gift or giving.

III. CONCLUSION

After careful consideration, the court finds that tax year 2015-16 should be dismissed for

failure to file timely. The court also finds that charity is not the primary purpose of Plaintiff’s

organization and its performance does not involve sufficient gift or giving to qualify as a

charitable institution under ORS 307.130(2). Plaintiff’s appeal must be denied. Now, therefore,

IT IS THE DECISION OF THIS COURT that Plaintiff’s Motion for Summary Judgment

is denied; and

IT IS FURTHER DECIDED that Defendant’s Motion to Dismiss the 2015-16 Tax Year

and Motion for Summary Judgment on the 2016-17 Tax Year are granted.

Dated this day of July, 2017.

RICHARD DAVIS MAGISTRATE

If you want to appeal this Final Decision, file a complaint in the Regular Division of the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563; or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.

Your complaint must be submitted within 60 days after the date of the Final Decision or this Final Decision cannot be changed. TCR-MD 19 B.

This document was filed and entered on July 10, 2017.

FINAL DECISION TC-MD 160257R 9