Bill helps businesses in tax court

AOI Introduces Bill to Level the Playing Field for Oregon Companies in Tax Court
By  J.L. Wilson
Associated Oregon Industries

A new bill has been introduced by AOI that will level the playing field for Oregon companies in Tax Court – a concept that is intended to result in less litigation and less contentiousness – and reduce litigation costs for Oregon business.

The bill, HB 2731, was introduced last week by Representative Vicki Berger (R-Salem) at the request of AOI.

Currently, all private real estate appraisers must abide by uniform appraisal standards known as the Universal Standards of Professional Appraisal Practice (USPAP).  All private real estate appraisals must be compliant with USPAP.  Private appraisers can lose licensure through non-compliance with USPAP.

With government appraisals, it’s a different story.  There are no appraisal standards for appraisals conducted by the Department of Revenue or counties.  This is a source of tremendous conflict and many contentious cases pend in Oregon Tax Court.  The fact that government appraisals have no mandate to abide by common appraisal standards can lead to expensive litigation and has the effect of preventing job-creating projects from moving forward.

HB 2731 requires that USPAP standards be used by the Oregon Department of Revenue and by counties when the appraisal is pending before the Oregon Tax Court.  While the original bill was drafted too broadly, AOI intends to narrow the scope to apply only to Tax Court proceedings when a county or the Department of Revenue (DOR) is involved.

AOI members believe this is a common sense issue that will reduce litigation costs – that the same standard that all private appraisals must conform to should also apply to government appraisals before the Tax Court.

On a separate issue, AOI is also concerned that the Department of Revenue is using the cost and expense of a second trial as a weapon against taxpayers who prevail at the Tax Court Magistrate Division.  It is creating an undue burden to reach prudent decisions on property valuation.

Currently, if the taxpayer wins at the Magistrate Division, the Department will appeal and the taxpayer will have to spend money for another trial all over again at the Regular Division.  ORS 305.490 (4) was enacted to award attorney fees to taxpayers who prevailed, especially those who prevailed at the Magistrate Division and were re-affirmed at the Regular Division.

However, the Oregon Supreme Court in Clackamas County v Village at Main Street (2012) ruled against the taxpayer who was awarded attorney fees after prevailing twice in Tax Court, reasoning that ORS 20.075 was the governing statute, not ORS 305.490.  ORS 20.075 allows attorney fees for reckless, willful, malicious and bad faith conduct.  The Supreme Court reasoned that Clackamas County was not unreasonable or acting in bad faith.

However, there is now a new precedent that is taking hold as a result of this Supreme Court decision:  the DOR or county government can now force a taxpayer to litigate its position twice, and prevail twice, with no repercussion to the government entity for needlessly dragging the taxpayer through a second costly trial.  The government is using the second trial as a tool to wear down taxpayers.

AOI agrees with the Oregon Tax Court in its original ruling in Village at Main Street that “the county essentially re-litigated positions on which, as discussed in a reasoned decision of the Magistrate Division, it had lost.  The county has the right to appeal from a decision of the Magistrate Division.  But, in cases such as this, where it does so and again fails to prevail, it is appropriate to relieve the taxpayer of the reasonable fees incurred in defending the appeal.”

The DOR and counties now have no fear of re-litigating its failed positions in Tax Court, and it is wielding this new Supreme Court decision as a weapon against taxpayers.

AOI will re-implement the attorney fee statute with HB 2731 so that taxpayers will again be awarded attorney fees for prevailing a second time in Tax Court.

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