Exceptions Manual Calculating Maximum Assessed Value, 150-303-438

exception \ik- sep-sh n\ n ... 2: one that is excepted;

esp : a case to which a rule does not apply

Webster’s 9th Edition

Maximum Assessed Value Manual

There are always exceptions...

150-303-438 (Rev. 05-18)

Section 1: Maximum assessed value and assessed value ............................................................................... 1-1

Section 2: Introduction to property classication. ........................................................................................... 2-1

Section 3: Changes to property and the changed property ratio .................................................................. 3-1

Section 4: New property or new improvements ............................................................................................. 4-1

Section 5: General ongoing maintenance and repair (GOMAR) ................................................................... 5-1

Section 6: Minor construction ............................................................................................................................ 6-1

Section 7: Rezoned and used consistently with the rezoning ....................................................................... 7-1

Section 8: Subdivided or partitioned property ................................................................................................ 8-1

Section 9: Omitted property ............................................................................................................................... 9-1

Section 10: Exemption, partial exemption, and special assessment ............................................................. 10-1

Section 11: Lot line adjustments .........................................................................................................................11-1

Section 12: Destroyed or damaged property ................................................................................................... 12-1

Section 13: Property tax account modications ............................................................................................... 13-1

Section 14: Maximum assessed value corrections ........................................................................................... 14-1

Section 15: Manufactured structure exception guidelines ............................................................................. 15-1

Section 16: Calculation ordering when multiple exceptions occur .............................................................. 16-1

Section 17: Appendix ........................................................................................................................................... 17-1

Table of contents

150-303-438 (Rev. 05-18)

1-1

In November 1996, Oregon voters passed Measure 47, a citizen initiative and constitutional amendment.

It rolled back property taxes for each property in the state (not assessed values) for the 1997–98 tax year

to the 1995–96 level and restricted increases in taxes to no more than 3 percent per year. There were a

number of technical problems with Measure 47, so the 1997 Legislature drafted Measure 50 to replace it.

Measure 50 was passed by voters in May 1997.

Measure 50 replicated the tax cuts intended by Measure 47, but focused on taxable values and tax rates,

rather than taxes. The principal features of the measure were a “cut” and “cap.” The “cut” rolled back a

property’s taxable value and reduced taxing district levies. In addition, most local government tax levies

were replaced with permanent tax rates. Measure 50 introduced maximum assessed value, which acts as

a “cap” on the growth of taxable (assessed) value for most property.

How it works:

Measure 50 initially established MAV for all assessable properties as 10 percent less than the 1995–96 real

market value (RMV). MAV growth is limited to 3 percent per year. Combined with permanent tax rates,

Measure 50 effectively limited tax increases, except under specific circumstances.

Maximum assessed value defined ORS 308.146 (1)

Property: All property included within a single property tax account, except for property centrally

assessed by the department, for which property means the total statewide value.

Property tax account: The division of property for purposes of listing it on the assessment roll.

Each property that isn’t exempt or specially assessed has a MAV and an assessed value (AV) as described

in statute:

ORS 308.146 (1). The maximum assessed value of property equals 103 percent of the property’s assessed

value from the prior year or 100 percent of the property’s maximum assessed value from the prior year,

whichever is greater.

Based on the statute, there are only two possible outcomes to what value becomes the MAV; it’s either the

prior year’s assessed value multiplied by 1.03 or the prior year’s MAV—whichever is greater. In addition,

the following conditions apply:

• MAV can’t increase by more than three percent (the maximum); or

• MAV may increase anywhere between -0- and 3 percent each year; or

• MAV can’t change (it freezes) in the year after RMV falls over 3 percent below MAV.

Let’s demonstrate how MAV is calculated so we can test these conditions and provide some concrete

examples. This is the first test and it is often referred to as “The 103 percent test”.

Maximum Assessed Value (MAV). The 103 percent test:

• Calculate the prior year’s assessed value x 1.03.

• Compare to prior year’s maximum assessed value.

• Whichever is greater becomes the current maximum mssessed value (MAV).

Section 1—Maximum assessed value (MAV)

and Assessed value (AV)

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MAV Chart 1: The 103 percent test; “Prior year AV x 1.03” is greater than “Prior MAV”,

therefore the prior year Av x 1.03 becomes the current MAV.

Explanation of MAV Chart 1:

• Column (1) shows the prior year assessed value (AV) of $229,068.

• Column (2) shows the calculation to establish current MAV: Prior year AV ($229,068) multiplied by 1.03

equals $235,940.

• Column (3) shows the prior year maximum assessed value (MAV) ($229,068).

• Compare column (2) to column (3), whichever one is greater becomes the new MAV ($235,940).

• In this instance, the prior year AV x 1.03 is greater than the prior MAV and prior year AV x 1.03 becomes

current (new) MAV (4).

In the above example, MAV increased to the maximum 3% allowed by law.

MAV Chart 2: The 103 percent test; “Prior MAV” is greater than “Prior AV x 1.03”,

therefore the prior MAV becomes the current MAV.

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Explanation of MAV Chart 2:

• Column (1) shows the prior year assessed value (AV) of $198,568.

• Column (2) shows calculation: Prior year AV ($198,568) multiplied by 1.03 equals $204,525.

• Column (3) shows the prior year maximum assessed value (MAV) (226,518).

• Compare column (2) to column (3), whichever one is greater becomes the new MAV ($226,518).

• In this instance, the prior year MAV is greater and becomes the current MAV (4).

Note: MAV can’t change in a year after RMV falls below MAV.

There are conditions when MAV doesn’t increase the full 3% and when MAV will freeze until the

market/RMV increases above MAV.

MAV Chart 3: The 103 Percent Test; MAV Increases by less than 3%:

One MAV per account

Oregon Revised Statute (ORS) 308.215 requires that RMV of land be listed on the assessment roll

separately from all buildings, structures, and improvements on the land. However, Measure 50 provides

that MAV be established for each unit of property in the state. By requiring each unit of property to have

an MAV, the Supreme Court determined that each tax account will have an MAV. MAV isn’t separately

determined for the land and the buildings within the tax accounts. Refer to Flavorland Foods v. Washington

County Assessor and Dept. of Revenue, 344 Or. 562, 54 P.3d 582 (2002) in the appendix.

Uniformity in taxation not required for MAV

The Oregon Constitution requires that any assessment of taxes be done uniformly on the same class of

subjects throughout the state. However, Measure 50 added another section to the Oregon Constitution

that exempts itself from the uniformity requirements.

MAV is strictly driven by a mathematical formula. After it’s established, it’s no longer linked to RMV

beyond the possible effect of the 103 percent test. Because of this, the framers of Measure 50 understood

that it’s somewhat artificial and arbitrary.

For a variety of reasons, two houses side-by-side with the same RMV may have dramatically different

MAVs, and, therefore, dramatically different tax burdens.

Assessed value defined

AV equals either MAV or RMV, whichever is less.

AV is the value used to calculate the taxes assessed on property. For most properties, RMV is substantially

greater than MAV, so AV is limited to equaling MAV. However, for various reasons, including a declining

market, a property’s RMV may be less than MAV. In that case, the property is assessed at its RMV.

AV must be calculated after MAV.

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After maximum assessed value (MAV) is calculated (103 percent test), perform the second test—

whichever is less wins this test:

• Compare current maximum assessed value (MAV) to RMV.

• Whichever one is less becomes the New Assessed Value (AV).

• AV is the value used to calculate the taxes assessed on property and can’t exceed RMV.

Just remember: Whichever is less wins this test.

AV Chart 5: The Second Test: Which is less? Current MAV or RMV?

Current MAV is less than RMV and becomes New AV.

Explanation of AV Chart 5:

Tax year 09–10:

• Column (4) shows the current MAV ($219,920) (The 103 percent test result).

• Column (5) shows the RMV ($224,624) compare, and

• Whichever is less wins this test and becomes the new AV (column 6).

• Result: For year 09–10, Current MAV is less and becomes new AV ($219,920).

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AV Chart 6: The second test: Which is less? Current MAV or RMV?

Current RMV is less than MAV and becomes the new AV.

Explanation of AV Chart 6:

Tax year 10–11:

• Column (4) shows the current MAV ($226,518) (The 103 percent test result).

• Column (5) shows the RMV ($190,931) compare and discover that the RMV is less.

• Whichever is less wins this test and becomes the new AV.

• Result: For tax year 10–11, RMV is less and becomes new AV ($190,931) (column 6).

Note: When a property or market is declining, a property’s RMV may fall below or be less than the MAV.

When this occurs, the RMV becomes the AV and MAV freezes and doesn’t change in a year after RMV

falls more than 3% below MAV. If RMV is below MAV, but is within 3%, then MAV may increase by less

than 3%.

Note: What happens in tax year 11–12 and tax year 12–13?

Both Tax Years indicate the RMV is less than the MAV. Remember that AV can’t exceed RMV and that

MAV “freezes” and doesn’t change in a year after RMV falls more than 3% below MAV.

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AV Chart 7: The Second Test: Which is less? Current MAV or RMV?

Current MAV is less than RMV and becomes the new AV.

Explanation of AV Chart 7:

Tax year 13–14:

• Column (4) shows the current MAV ($229,068) (The 103 percent test result).

• Column (5) shows the RMV ($249,084). Compare and discover that the current MAV is now less.

• Whichever is less wins this test and becomes the new AV.

• Result: For tax year 13–14, current MAV is less and becomes new AV ($229,068) (column 6).

Note: Since the RMV is greater, MAV is no longer “Frozen” and can continue to increase up to the 3%

limit.

150-303-438 (Rev. 05-18)

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Relationship of RMV, MAV, and AV

Using one property as an example, real market value has been plotted on the chart below.

The RMV, as assessed, in year 2003–04 was approximately $260,000 and, over the course of the next 11

years, the RMV went as high as $330,000 and as low as $190,000 ending the timeframe illustrated at

$300,000.

2003–04

2004–05

2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

2012–13

2013–14

2014–15

$160,000

$180,000

$200,000

$220,000

$240,000

$260,000

$280,000

$300,000

$320,000

$340,000

Value

RMV

Tax year

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By adding MAV to our chart (in Red), the relationship of MAV and RMV becomes clearer. When the RMV

is below MAV, MAV is primarily a straight and level line. By definition, MAV is determined by comparing

103 percent of the previous year’s AV to the previous year’s MAV. The greater amount becomes the new

MAV. Since MAV can always be, at a minimum, equal to its prior year’s MAV, it will never go down in the

“normal” course of events’ such as if the property doesn’t change, meaning that a qualifying event that

allows the MAV to increase or decrease hasn’t occurred.

In 2003–04, this property’s MAV was approximately $190,000. The MAV steadily increased from -0- to 3

percent (when allowed) over the next 14 years to approximately $245,000 in MAV for 2014–15.

RMV vs MAV

RMV

MAV

2003–04

2004–05

2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

2012–13

2013–14

2014–15

$160,000

$180,000

$200,000

$220,000

$240,000

$260,000

$280,000

$300,000

$320,000

$340,000

Value

Tax year

Note the following:

In 2008–09 MAV = $220,000 (approximate values)

In 2009–10 MAV = $226,800

In 2010–11 MAV = $226,800

In 2011–12 MAV = $226,800

In 2012–13 MAV = $231,500

Why did the MAV stop increasing in Tax years 2009–10, 2010–11, and 2011–12?

When the RMV dips below MAV, MAV “freezes” and doesn’t change in a year after RMV falls at least 3%

below MAV. In 2012–13, RMV increases well above the MAV. However, due to a second test, determining

AV, MAV didn’t increase the full 3%. Let’s take a look at the second test.

150-303-438 (Rev. 05-18)

1-9

The next chart adds the third component, AV (represented in yellow). This is established by comparing

RMV to MAV, whichever is less wins this test and becomes the new AV.

RMV vs MAV vs AV

RMV

MAV

2003–04

2004–05

2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

2012–13

2013–14

2014–15

$160,000

$180,000

$200,000

$220,000

$240,000

$260,000

$280,000

$300,000

$320,000

$340,000

Value

Tax year

150-303-438 (Rev. 05-18)

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From 2003–04, AV follows the MAV line up to the point it crosses RMV in 2008–09, then it follows the

RMV—the RMV is less and wins the 2nd test).

Historically, in 2003–04, this property’s taxes were based on approximately $190,000 in AV. Notice that the

RMV was $260,000 and the MAV became the AV as MAV was less. The RMV increased significantly in the

next few years and yet, due to Measure 50, the property’s MAV had a maximum 3% increase over those same

years and the MAV became the AV as it was the lesser value in the 2nd test.

When the RMV (market) declined (from 2006 through 2009–10), the MAV won the test and became the AV

because it was still less than the RMV. MAV continued to increase by 3% until the RMV declined below the

MAV, then MAV “froze” and the RMV won the test and became the new AV.

In 2008–09, the RMV significantly dropped below MAV and the RMV became the basis for calculating

the AV for taxes; approximately 14% less than the previous year. This illustrates that AV isn’t tied to the 3%

increase in MAV. From 2009 through 2010–11, the taxpayer continued to benefit from lower taxes because the

RMV was lower.

In 2011–12, the RMV came within 3% of RMV. In 2012–13 MAV did increase but not up to the maximum 3%.

Then the RMV began increasing rapidly; it crossed back above the MAV allowing the MAV to begin

increasing up to the 3% limit as designed by Measure 50.

This next chart is a close-up of a single property that experienced large fluctuations over 4 years. For

illustration purposes, values have been added and are approximate.

Two things are illustrated in this very short period of time: MAV may increase by less than the 3% and AV

can increase or decrease more than the 3% MAV limit because AV is calculated based on the previous year’s

AV or RMV, whichever is less.

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Both tests are performed annually:

In year 1: First test; Prior MAV ($220,000) is greater than prior years AV x 1.03 = $219,000. MAV is greater

and becomes new MAV. RMV plunged downward from $227,000 to $190,000. Second test: Compare RMV

($190,000) to the new MAV ($220,000); RMV is less and becomes new AV. This is roughly an 18% decline in

assessed value.

In year 2: First test: Prior year’s MAV ($220,000) is greater than prior years AV ($190,000) x 1.03. Prior year

MAV ($220,000) becomes the new MAV and MAV doesn’t increase; it can’t change in the year after RMV

remains over 3 percent below MAV. RMV compared to new MAV, which is less? RMV becomes assessed

value.

In year 3, First test: Prior year’s MAV is greater than prior year AV x 1.03. Prior year MAV becomes the new

MAV. RMV, which is slightly less than MAV, becomes AV. Note that AV increased by approximately 12%.

In year 4, two things occurred:

• RMV increased above prior year’s MAV allowing MAV to begin to move again.

• Prior AV x 1.03 was higher than existing MAV so MAV increased, but by less than 3%. AV increased by 3%.

This last chart is an example of the convergence of the three values and illustrates that MAV may increase

any amount between -0- and the maximum 3 percent. In this scenario, MAV increased only 1 percent

between years 2 and 3. In year 3, RMV crossed above the MAV and increased well above 3 percent which

allowed the MAV to continue upward increasing at the maximum 3% in year 4.

RMV

MAV

Time

RMV

Year 1 Year 2

Year 3

Year 4

AV set by

the RMV

AV set by

the MAV

Recap: Measure 50 established the 1997–98 maximum assessed value (MAV) as 90% of a property’s

1995–96 real market value (RMV) and established assessed value (AV) which can’t be greater than RMV.

Each year the two tests are performed to establish MAV and AV for each account that requires MAV in

the assessment year.

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Test 1: Establish MAV: The 103 Percent Test:

• Calculate the prior year’s assessed value x 1.03.

• Compare to prior year’s maximum assessed value.

• Whichever is greater becomes the current maximum assessed value (MAV).

• MAV can’t increase by more than three percent (the maximum); or

• MAV may increase anywhere between -0- and 3 percent each year; or

• MAV can’t change (freezes) in the year after RMV falls more than 3% below MAV.

Test 2: Establish AV: Second test; Whichever is less wins this test:

• Compare current maximum assessed value (MAV) to RMV.

• Whichever one is less becomes the new assessed value (AV).

In addition:

• MAV is strictly driven by a mathematical formula.

• MAV will never go down in the normal course of events.

• MAV isn’t fair. For a variety of reasons, two houses side-by-side with the same RMV may have dramati-

cally different MAV’s and, therefore, dramatically different tax burdens:

• AV can increase or decrease more than the 3% MAV limit.

• Measure 50 also changed the property tax system from “levy based” to a permanent rate based system.

150-303-438 (Rev. 05-18)

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Section 2—Introduction to basic property

classification

Before we can delve into exceptions to the MAV limitation, we must cover some basic foundational

practices. It may seem strange to begin our discussion on exceptions to MAV by looking at the property

classification system but being able to understand how each individual parcel of property is classified is

necessary to fundamentally ensure that properties are treated uniformly. In order to assess the thousands

of properties that exist in each county the assessor must classify and assign a property classification code

number that supports the highest and best use of the property. For example, single family homes that are

being used as a home are identified as residential use, whereas a retail grocery store would be identified

as commercial use a different property classification entirely.

Property classification has a rational basis and helps to protect the uniformity of classification of

property. Once assigned, most parcels of property maintain the same property class annually. These

classifications organize the data for future observations, calculations and annual studies.

OAR 150-308-0310 governs property classification. The assessment roll must include the property

classification code number for each parcel of real property in the county, except for those properties

assessed by the department under ORS 308.505 to 308.665 (utilities, railcars). All classifications must be

based upon highest and best use of the property. The term “highest and best use” is defined in OARs

150-308-0240 and 150-308-0260. The class associated with the property may or may not be its current use.

(8) Denitions for property classication system:

The property classification system uses a three-digit number to represent all property types and the

assessor is required to maintain the proper classification on each parcel of property based on highest and

best use of the property.

The first digit of the property class system also determines “primary type of use” of the property. The Property

class is the basis for compiling the data for calculating the changed property ratio (CPR). In order to compute

the exception MAV and add the associated increase in exception value to the assessment role, the RMV and

150-303-438 (Rev. 05-18)

2-2

MAV of all the unchanged properties in each property class is arrived at first. Without this information, it

wouldn’t be possible to calculate the exception ratio (CPR) for all the properties that have changed.

In addition, there are some instances when the property classification on record changes in a given year

as outlined in:

OAR 150-308-0100 Determining maximum assessed value when the property class is

changed.

(1) The single act of changing the property classification, described in OAR 150-308-0310, to better

reflect the highest and best use of the property, doesn’t qualify as an exception to the 3 percent limitation

on growth in the maximum assessed value (MAV), as described in ORS 308.146(1).

(2) Any exception value added to the base MAV after the change is made to the property class will be

calculated by applying the changed property ratio of the current property class to the real market value of

any qualified exception identified in ORS 308.146.

This rule illustrates that more than just the “single act” of changing the property classification need to

occur in order to qualify for an exception to MAV increase. It does outline which property class will be

utilized when making the adjustments. This may be an occasion when the new property class CPR would

be appropriate for calculating the exception MAV when a qualifying event has occurred.

More on these types of exceptions will be covered in later sections.

Recap: Property classification is foundational; if you have the correct classification, you can ascertain the

overall value of each property and, when properties are deemed affected by allowed exceptions, the correct

adjustments to maximum assessed value can be achieved.

The first digit of the property class determines the property type and this is used for calculating the CPR

for each property class and allows for new property to receive the benefit of Measure 50.

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3-1

Specific types of changes to the property that increase RMV can change MAV more than the 3 percent

limit. These changes are referred to as “exceptions” because they represent exceptions to the normal 3

percent limit. For a change to qualify as an exception, it must fall within one of the following:

• New property or new improvements to property.

• The property has been partitioned or subdivided.

• The property has been rezoned and is being used consistent with the rezoning.

• Previously omitted property has now been taken into account.

• The property has been disqualified from exemption, partial exemption, or special assessment.

• A lot line adjustment is made, but the total assessed value of all property affected by the adjustment

won’t exceed the total MAV the property would have had if the lot line adjustment hadn’t occurred.

Changed property ratio (CPR)

To determine the adjustment to MAV for an exception, the general rule is to multiply the RMV of the

exception (the value of the changed property) by the CPR and add the product to MAV. This provides the

changed property the same Measure 50 benefits as property that originally existed in 1995.

The classification system described in Section 2 organizes the data for the calculation of the CPR.

However, only the first digit of the property class (representing highest and best use) needs to be

considered for purposes of calculating the CPR. Therefore xx represent the second and third digits in the

following list of classifications:

0xx—Miscellaneous 1xx—Residential

2xx—Commercial 3xx—Industrial

4xx—Tract 5xx—Farm

6xx—Forest 7xx—Multi-family

8xx—Recreation

The CPR for each property classification represents all property within the county for that classification.

The CPR is calculated as the following ratio:

Average MAV of unchanged property

CPR =

_________________________________

Average RMV of unchanged property

The average MAV is the total of MAVs for all properties in a class divided by the number of accounts for

that class. Properties with exceptions aren’t included in the calculation of the average MAV.

The average RMV is the total of RMVs for all properties in a class divided by the number of accounts for

that class. Properties with exceptions aren’t included in the calculation of the average RMV.

For properties that are partially specially assessed, only the portions not specially assessed will be

used to calculate the ratio. Property classes may be combined to arrive at a ratio. The resulting ratio

would become the CPR for each property class used to calculate the ratio. Property class 1xx includes all

manufactured structures and floating homes not assigned to other property classes.

Section 3—Changes to property and the

changed property ratio

150-303-438 (Rev. 05-18)

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OAR 150-308-0170 Establishing a Changed Property Ratio (CPR)

(1) The assessor must establish a CPR for property classes -0- through 8 each assessment year. For

determining the ratio of the average maximum assessed value over the average real market value, only the

first digit of the property class needs to be recognized. These ratios must be rounded to three decimals.

(a) Property classes may be combined to arrive at a ratio. The resulting ratio would become the CPR for

each property class used to calculate the ratio.

(b) For specially assessed properties, only the non-specially assessed portion of value will be used to

determine a ratio. For specially assessed properties such as farm or timber, the assessor may use either of

the following methods to arrive at a CPR:

(A) The non-specially assessed portion of the unchanged 5-x-x or 6-x-x property classes may be used to

create the CPR for those classes; or,

(B) The 4-x-x property class values may be combined with the non-specially assessed values from the

5-x-x and/or 6-x-x property classes to calculate the ratio. The resulting ratio would become the CPR for each

property class used to calculate the ratio.

(2) Residential property class (1-x-x) includes all manufactured structures and floating homes not

assigned to other property classes.

(3) For locally and centrally assessed property, the value of the CPR may not be greater than 1.000.

OAR 150-308-0140 Computation of Changed Property Ratio for Centrally Assessed

Property

The ratio of average maximum assessed value to average real market value, also known as the changed

property ratio, shall be rounded to two decimal places for purposes of assessed value calculation. See

also OAR 150-308-0570. Note: Centrally assessed properties are only assessed by the Department of

Revenue.

In addition, for properties that are partially specially assessed, only the portions not specially assessed

will be used to calculate the ratio.

Property classes may only be combined as stated in OAR 150-308-0170 to arrive at a ratio.

In the case of a zone change that actually impacts the first digit of the property class, here is the authority

to utilize the current (new) property type to determine CPR calculations:

OAR 150-308-0100 Determining Maximum Assessed Value when the Property Class is

changed

(1) The single act of changing the property classification, described in OAR 150-308-0310, to better

reflect the highest and best use of the property, doesn’t qualify as an exception to the 3 percent limitation

on growth in the maximum assessed value (MAV), as described in ORS 308.146(1).

(2) Any exception value added to the base MAV after the change is made to the property class will be

calculated by applying the changed property ratio of the current property class to the real market value of

any qualified exception identified in ORS 308.146.

Calculating the CPR—Changed property ratio

To determine the annual CPR ratios for each property class involves a step by step procedure and

is in conjunction with certifying the assessment roll. This may be performed by a data analyst as it

encompasses thousands of properties on the roll.

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3-3

Once the adjustments to RMV for all properties has been certified, the average MAV and average RMV

are then calculated for all unchanged properties following the rule for establishing CPRs (including the

rounding parameters). The resulting CPR ratio for each property classification has now been completed

and will be utilized for making adjustments to MAV for properties having allowable changes in

exception value.

Step 1—Compute the average MAV: The average MAV is the total of MAV for all properties in a

class divided by the number of accounts for that class. Properties with exceptions are not included in the

calculation of the average MAV.

Step 2—Compute the average RMV: The average RMV is the total of RMV for all properties in a

class divided by the number of accounts for that class. Properties with exceptions are not included in the

calculation of the average RMV.

Step 3—Compute the CPR for the property class and remember: These ratios must be rounded to three

decimals for all property types except centrally assessed:

CPR =

Average MAV of unchanged property in the same area in the same property class.

Average RMV of unchanged property in the same area in the same property class.

Industrial property

Industrial property is generally dominated by real property machinery and equipment. Since machinery

and equipment depreciate over time, they will generally have a CPR of one. However, some industrial

warehouses aren’t significantly different than commercial warehouses. This results in similar types

of buildings receiving significantly different MAVs when they are first constructed, which leads to

protracted litigation.

In 2012, the Oregon Legislature addressed this problem by requiring real property machinery and

equipment to be classified separately. The legislation also classified industrial property, which is

appraised by the department under ORS 306.126 separately. Industrial property, other than machinery and

equipment, appraised by the county assessor is combined with commercial property to calculate the CPR.

The goal of each of the remaining sections will be for the reader to have the ability to:

• Determine if an exception to the 3 percent growth limitation of MAV is allowable by law.

• Calculate exception values correctly for each circumstance.

• Clearly explain the MAV adjustments to tax payers, BoPTA, and others with a need to know.

We will be covering each of the exception events listed in ORS 308.146(3) and at the beginning of this

section. Some of these sections require more complex calculations so we may address them out of the

sequence they appear in statute.

There are procedures for each exception; those will be listed before the actual examples including

calculations take place. Becoming familiar with each nuance is an important part of applying exception

value correctly.

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New property and new improvements to property are common exception events. First, we will cover some

definitions and test our knowledge on which definition qualifies in a couple of scenarios. After we are confident

in relating to the definitions, actual math examples will be given in this chapter for ease of application. We will

then show a more complex scenario-that of adding an addition to an already existing improvement. These will

assist in building foundational knowledge for more complex situations that may arise.

Denitions:

New construction: Any new structure, building, addition, or improvement to the land (including site

development).

Reconstruction: Building or replacing the existing structure with one of comparable utility.

Major addition: An addition with an RMV of over $10,000 and that adds square footage to an existing

structure.

Remodeling: A type of renovation that changes the basic plan, form, or style of the property.

Renovation: The process by which older structures or historic buildings are modernized, remodeled, or

restored.

Rehabilitation: To restore to a former condition without changing the basic plan, form, or style of the

structure.

If you build a brand new home on bare land, does this qualify for exception MAV? If so, which definition

supports this conclusion?

• New construction? Yes, this is a brand new structure.

• Reconstruction? No, this did not replace the existing structure.

• Major addition? No, no square footage was added.

• Remodeling? No, this didn’t change a basic plan, form or style of the property.

• Renovation? No, it’s not an older or historic structure being modernized, remodeled, or restored.

• Rehabilitation? No, it wasn’t restored to a former condition.

If you upgrade your kitchen in your 2010 home, which adds $28,000 in value to your home, does this qualify

for exception MAV? Which definition supports this conclusion?

• New construction? No, not a new structure.

• Reconstruction? No, this didn’t replace the existing structure.

• Major addition? No, no square footage was added.

• Remodeling? Yes, the upgrade resulted in a renovation that changed the basic plan, form or style.

• Renovation? No, it’s not an older or historic structure being modernized, remodeled, or restored.

• Rehabilitation? No, it wasn’t restored to a former condition.

Manufactured structures or floating homes

New property and/or improvements exceptions for manufactured structures or floating homes can be

from siting, installation, or rehabilitation.

Section 4—Calculating MAV for new property

or new improvements

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Other changes

New property and/or improvements exceptions can also result from the addition of:

• Machinery.

• Fixtures.

• Furnishings.

• Equipment.

• Other taxable real or personal property.

Property moved between tax code areas

Property is considered to be new or improved if taxable property is located in a different tax code area on

January 1 of the current assessment year than on January 1 of the preceding assessment year.

Retirements

Value attributable to new property and/or new improvements may be offset by value loss due to

retirements in the same year. Adjustments to MAV are based on the net increase in RMV after deduction

for retirements, multiplied by the CPR for the property’s class. Offsets due to value loss by retirements in

the same year can’t go below zero.

For buildings, if MAV is adjusted as a result of a fire or act of God, or demolition or removal of the

building, it isn’t considered a retirement. For more information on both of these situations, see the

corresponding rules: OAR 150-308-0120 Reduction of Maximum Assessed Value (MAV) When a

Building is Demolished or Removed, OAR 150-308-0110 Reduction of Maximum Assessed Value (MAV)

for Property Destroyed or Damaged by Fire or Act of God.

Integral property

ORS 308.153(3) provides that property that has been continuously in existence since a prior tax year

but wasn’t included in an assessment for any prior tax year shall be considered new property, or new

improvements to property. This provision applies where the property that hasn’t been assessed is an

integral part of the land or improvements on the assessment roll, either on the assessment date or the date

of a site inspection by the assessor for appraisal purposes for any prior tax year. The Oregon Tax Court

has ruled that such property doesn’t constitute omitted property under ORS 308.156 and 311.216.

MAV adjustment

The proper method is to determine the current RMV of the property as it now exists and subtract what the

current RMV of the property would have been as if no new property had been added during the prior year.

This ensures any changes in value over time are eliminated from the calculation.

So, for any new property exception, Exception RMV equals:

RMV of the property as of the current assessment date minus the RMV the property would have

had if the exception didn’t occur as of the current assessment date.

To calculate the adjustment to MAV, the CPR for the corresponding property class is multiplied by the

Exception RMV of only the affected/new property or new improvements. The formula would be:

Exception RMV of new property x CPR = Exception MAV adjustment.

Then we just add together the base MAV and the Exception MAV adjustment to arrive at the new MAV:

Exception MAV adjustment + Base MAV = New MAV (Only one MAV per account).

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If the new property consists of stand-alone new construction, such as a new building, its RMV is simply

the RMV of the building. However if the new improvement is a remodel or restoration, the determination

of RMV can be trickier. We will cover some examples so the mathematical calculations are clear.

A common error is to calculate RMV of new improvements as the difference between the RMV of the

property for the current year and the RMV of the property on the tax roll for the prior year. However,

that calculation also includes changes to the value of the existing property due to market fluctuations.

The proper method is to determine the RMV of the property for the year in question and subtract what

the RMV of the property would have been as of that same date if no new property had been added, or

other exception event had occurred, during the prior year. This ensures any changes in value over time

are eliminated from the calculation.

So, for any exception, RMV of the exception equals:

RMV of the property as of the current assessment date minus RMV the property would have had

if the exception didn’t occur.

Calculating the MAV for a new improvement

There are 6 steps in determining the new MAV for a property on which new improvements have been

added. It’s important to note that there is only one MAV per account.

Step 1: Establish base MAV: Always start with the property as if no changes had occurred. Apply the 103

percent test from section 2. This results in the Base MAV.

Step 2: Determine the unaffected RMV: Determine what the RMV of the property would be if property

hadn’t changed (unaffected).

Step 3: Determine the new RMV of the property with the changes (affected portion and possibly unaffected

portion).

Step 4: Calculate the amount of exception RMV:

New RMV—Unaffected RMV = Exception RMV

Step 5: Calculate the exception MAV: this we be the amount we are authorized to add to MAV:

Exception RMV x CPR = Exception MAV

Step 6: Calculate the new MAV:

Exception MAV + Base MAV = New MAV (Only one MAV per account)

New improvement example #1:

During 2015, the homeowner adds a covered porch to the home. RMV for the home increases to $280,000 for

the 2016–17 tax year (due partly to market appreciation). If the homeowner hadn’t added the covered porch,

the RMV for the 2016–17 tax year would have been $268,000.

The home had the following values for the 2015–16 tax year:

RMV = $ 250,000

MAV = $ 180,000

AV = $ 180,000

The CPR for residential 1xx property will be 0.790 for the 2016–17 tax year in that county.

150-303-438 (Rev. 05-18)

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Step 1: Establish base MAV: Start with the property as if no changes had occurred. Apply the 103 percent

test from section 2. This results in the Base MAV.

AV—$180,000 x 1.03 = $185,400 or MAV-$180,000. Which one is greater? = AV x 1.03.

Base MAV = $185,400

Step 2: Determine the unaffected RMV: Determine what the RMV of the property would be if property

hadn’t changed (unaffected).

Unaffected RMV for 2016–17 = $268,000

Step 3: Determine the new RMV of the property with the changes:

RMV for 2016–17 = $280,000

Step 4: Calculate the amount of exception RMV:

New RMV—Unaffected RMV = Exception RMV

$280,000 - $268,000 = $12,000 exception RMV

Step 5: Calculate the exception MAV: this is the amount we are authorized to add to MAV:

Exception RMV x CPR = Exception MAV

$12,000 x 0.790 = $9,480 exception MAV

Step 6: Calculate the new MAV:

Exception MAV + Base MAV = New MAV (Only one MAV per account)

$9,480 + $185,400 = $194,880

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New house improvement example #2:

A three bedroom, two bath home was built on a lot. The project was started and was 100% completed in

2016.

The lot had the following values for the 2015–16 tax year:

RMV LAND = $ 87,000

RMV OSD = $ 0

RMV IMP = $ 0

MAV = $ 75,000

AV = $ 75,000

The CPR for residential 1XX property will be 0.790 for the 2016–17 tax year in that county.

150-303-438 (Rev. 05-18)

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New property or new improvements to property don’t include general ongoing maintenance and repair

(GOMAR). GOMAR preserves the condition of the existing improvements. It allows improvements to

achieve a useful life that is typical for the type and quality of the original improvements. Regardless of

the cost, the value of GOMAR may not be included as additions for the calculation of MAV.

GOMAR allows for the replacement of worn out components. A change to the modern equivalent of

original materials for the same class of construction is allowed, such as the replacement of old aluminum

frame windows with new vinyl windows that would be used in the same class of building today.

GOMAR doesn’t include new structures or additions, or any significant changes in the design of

property. It doesn’t include the replacement of original materials with substitutes of a higher quality class

or that increase the useful life of the property beyond what would otherwise be typical. For example,

if the aluminum frame windows discussed above were replaced by triple pane, hurricane-rated vinyl

windows expected only in a higher class of construction, the difference in value between the upgraded

windows and windows that are equivalent to the original material should be considered an exception.

For income producing properties, GOMAR must be part of a regularly scheduled maintenance program.

This can include improvements that occur either on a frequent basis, or for which funds are set-aside in

anticipation of infrequent maintenance activities.

The determination of whether an improvement constitutes GOMAR or an exception is the most

subjective issue relating to MAV. While the examples below are intended to provide some guidance

regarding what is and what isn’t GOMAR, factors in each specific situation must be considered. You must

determine whether the activity maintains the property as it existed when first constructed, or improves

the property beyond what was originally constructed.

For some guidance from the Oregon Tax Court, refer to the decisions in Hoxie v. Department of Revenue, 15

OTR 322 (2001) and Magno v. Department of Revenue, 19 OTR 51 (2006), in the appendix.

Examples which typically qualify as GOMAR include:

• Replacing a worn out composition roof cover on a house with a new one of like quality and material.

• Resurfacing or hot-mopping a 40,000 square foot built-up roof on an industrial structure.

• Replacing defective siding with a non-defective equivalent.

• Replacing a few broken deck boards on a marine pier to maintain normal and constant use.

• Replacing a worn bearing in a board edger (equipment) at the sawmill.

• Replacing worn out kitchen floor covering, appliances, and counter tops in a house.

• Annually repainting the interiors, re-carpeting, and replacing countertops and lavatories in 20 percent

of the rooms of a four-star hospitality property (hotel).

Examples which typically don’t qualify as GOMAR include:

• Replacing a deteriorated composition roof cover with a roof of superior materials, such as tile or heavy shakes.

• Adding a second floor to a house (adds additional square footage).

• Expanding the floor area of a processing plant.

• Replacing all or most decking boards on a pier (constitutes reconstruction).

• Replacing a board edger at the sawmill (the complete replacement of an item isn’t maintenance).

• Replacing kitchen floor covering, appliances, counter tops, and cabinets in a 10-year-old house. (This

wouldn’t be typical for most homes of this age. There may or may not be an increase in RMV. If there

is, then there will be a corresponding increase in MAV. Usually replacing 10-year-old kitchen cabinets

is more than just maintaining the property.).

• Repainting the interiors, re-carpeting, and replacing countertops and lavatories in all of the units of a

motel. Since it impacts a substantial portion of the property, it would qualify as rehabilitation.

Section 5—General ongoing

maintenance and repair

150-303-438 (Rev. 05-18)

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ORS 308.149 Definitions for ORS 308.149 to 308.166

(5) “Minor construction” means additions of real property improvements, the real market value of

which doesn’t exceed $10,000 in any assessment year or $25,000 for cumulative additions made over five

assessment years.

OAR 150-308-0160 Minor Construction

(1) Definition: “Minor construction” is an improvement to real property that results in an addition

to real market value (RMV), but doesn’t qualify as an addition to maximum assessed value (MAV) due

to a value threshold. The value threshold is an RMV of over $10,000 in any one assessment year, or over

$25,000 for all cumulative additions made over five assessment years.

(2) Minor construction doesn’t include general ongoing maintenance and repairs.

(3) When testing the over $25,000 threshold, use the cumulative RMV of all minor and major

construction over a period not to exceed five consecutive assessment years.

(a) Minor and major construction values are not market trended.

(b) Values for retirements are not considered in the threshold test.

MAV are subtracted from the minor construction cumulative RMV.

(4) Once the over $25,000 threshold is met, use the following steps to calculate the MAV adjustment:

(a) Use minor construction values that are not market trended.

(b) Make adjustments for any retirements from the prior assessment year. The net value of additions

and retirements may not go below zero.

to M AV.

(d) Reset the cumulative RMV for minor construction to zero and restart the 5-year period. The

following examples demonstrate the over $25,000 threshold. RMVs in the following examples are not

market trended and/or depreciated.

Minor construction means additions of real property improvements where RMV doesn’t exceed

$10,000 in one year, and the total accumulated RMV of the improvements doesn’t exceed $25,000 in five

consecutive years.

Minor construction results in an increase in RMV, but doesn’t qualify as an addition to MAV until one of

the valuation thresholds has been surpassed. In the year that minor construction is added to RMV, the

properly trended RMV of the minor construction for that year, is added to the minor construction pool,

which is tracked for five cumulative and consecutive years. Once in the pool, these values aren’t market

trended again.

Values for minor construction items that are removed or destroyed prior to a MAV adjustment are

subtracted from the minor construction pool.

In addition, the RMV of any retirements aren’t considered when determining if either threshold has been

met.

If the RMV of new improvements exceeds the $10,000 threshold in a single year, this would qualify for an

adjustment to MAV as a major construction improvement plus the RMV of those improvements are still

added to the minor construction pool.

Section 6—Minor construction

150-303-438 (Rev. 05-18)

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Minor construction doesn’t include GOMAR.

When the $25,000 threshold is exceeded within a consecutive five-year period, the RMV in the pool

minus the RMV of any new improvements that already resulted in an adjustment to MAV (because

they exceeded the $10,000 threshold) becomes the RMV of the exception. In addition, adjustments for any

retirements for the year that the $25,000 threshold is exceeded must be made prior to calculating the MAV

adjustment. The CPR for the year the cumulative RMV exceeds the $25,000 threshold is used to calculate

the MAV adjustment.

Whenever the $25,000 threshold is exceeded and an adjustment is made to MAV, the cumulative RMV in

the pool is reset to zero, and the five-year period is restarted.

OAR 150-308-0160 provides the following examples to illustrate how RMV is tracked in the minor

construction pool, and how adjustments to MAV are made when the thresholds are exceeded.

150-303-438 (Rev. 05-18)

6-3

Example 1—Over $25,000 not met

Year

New improvement

value

Cumulative

total Comment

1 $8,000 $8,000 Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

2 None $8,000 No change.

3 $7,000 $15,000 Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

4 None $15,000 No change.

5 $5,000 $20,000 Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

RMVs in the following examples aren’t market trended and/or depreciated.

Example 2—Over $25,000 not met, prior years drop off

Year

New improvement

value

Cumulative

total Comment

1 $8,000 $8,000 Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

2 None $8,000 No change.

3 $5,000 $13,000 Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

4 None $13,000 No change.

5 $7,000 $20,000 Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

6 $11,000 $23,000 Year 6 qualies individually as is over $10,000.

Prior years still don’t qualify, as 5 year cumulative

total is under $25,001. (Remember, year 1 has

dropped off the 5 year cumulation.

$11,000 x CPR = adjustment to MAV.)

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6-4

Example 3—Cumulative RMV reset

Year

New improvement

value

Cumulative

total Comment

1 $8,500 $8,500 Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

2 $100,000 $108,500 Year 2 qualies individually as RMV is over

$10,000. Year 1 qualies as 5 year cumulative total

is over $25,000. $108,500 x CPR = adjustment to

MAV. Cumulative total and ve year period reset

for the next year.

1 $9,500 $9,500 Cumulative total and ve year period have

reset. Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

Example 4—Cumulative RMV reset

Year

New improvement

value

Cumulative

total Comment

1 $8,000 $8,000 Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

2 $5,000 $13,000 Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

3 $15,000 $28,000 Year 3 qualies individually as RMV is over

$10,000. Years 1 and 2 qualify as 5 year

cumulative total is over $25,000. $28,000 x CPR =

adjustment to MAV. Cumulative total and ve year

period reset for the next year.

1 None $0 Cumulative total and ve year period have reset.

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6-5

Example 5—Individual year and cumulative year adjustments

Year

New improvement

value

Cumulative

total Comment

1 $5,000 $5,000 Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

2 None $5,000 No change.

3 $15,000 $20,000 Year 3 qualies individually as RMV is over

$10,000. Year 1 doesn’t qualify as cumulative RMV

is under $25,001. $15,000 x CPR = adjustment to

M AV.

4 $7,000 $27,000 Years 4 and 1 qualify as cumulative RMV is over

$25,000. $12,000 x CPR = adjustment to MAV.

Cumulative total and ve year period reset for the

next year.

1 None $0 Cumulative total and ve year period have reset.

Example 6—Removal of destroyed minor construction

Year

New improvement

value

Cumulative

total Comment

1 $8,000 $8,000 Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

2 $5,000 $13,000 Doesn’t qualify as an adjustment to MAV.

Individual year RMV is under $10,001 and

cumulative RMV is under $25,001.

3 -$8,000 $5,000 Improvement added in year 1 is destroyed and is

removed from the cumulative RMV pool.

150-303-438 (Rev. 05-18)

7-1

What is zoning and why is it important? Zoning is a tool of urban planning that controls land uses in a

city. Land uses are divided into residential, commercial and industrial areas, now referred to as zones or

zoning districts in cities.

Why do we have zoning? Zoning laws are government restrictions on how a particular piece of land can

be used or developed and is established by a governmental body that regulates zoning.

What does zoning do? Besides restricting the uses that can be made of land and buildings, zoning laws

also may regulate the dimensional requirements for lots and for buildings on property located within the

town and the density of development (floor area ratio and/or site coverage). Zoning can protect the value

of property by assuring that incompatible uses will be kept apart; such as building an industrial plant in a

residential neighborhood. Zoning also provides for more orderly development.

What happens when zoning changes? The governmental body that regulates zoning has the responsibility

of changing zoning and the assessor’s office may or may not receive information on changes from these

governmental bodies. It is still the responsibility of the assessor’s office when performing appraisals to

verify if zoning has changed when questions arise. This can impact the RMV, since RMV is based upon a

property’s highest and best use.

OAR 150-308-0240(1)(e) “Highest and best use” means the reasonably probable use of vacant land or an

improved property that is legally permissible, physically possible, financially feasible, and maximally

productive, which results in the highest real market value.

It is not enough for property to be rezoned to calculate an exception to the 3 percent growth limitation for

MAV. ORS 308.146(3)(c) indicates two requirements must be met to qualify:

1. Property is rezoned, and

2. Property must also be used consistently with the rezoning to qualify for MAV exception value to be

added to the roll.

In the fall of 2016, OAR 150-308-0200, Rezoned property—Calculating maximum assessed value (MAV),

was rewritten to provide more in-depth guidance. Included in the new descriptions are:

• Definitions of necessary terminology have been added at the beginning of the rule and provide signifi-

cant clarification;

• “Primary use” and “Accessory use” are clearly defined;

• Rezoning is described as three distinct, qualifying changes in zone designations or allowed property

use made by the governmental body.

OAR 150-308-0200 (In part) Rezoned property—Calculating maximum assessed value

(MAV)

(1) For the purposes of determining MAV under ORS 308.142 to 308.166 and this rule, the following

definitions apply:

(a) “Primary use” means an activity or combination of activities of chief importance on the site and is

one of the main purposes for which the land or structures are intended, designed, or ordinarily used. A

site may have more than one primary use, such as mixed use buildings with commercial use on the ground

floor and residential use on upper floors.

(b) “Accessory use” means a use or activity that is incidental and subordinate to the primary use of the

property. A use designated as “accessory “or “auxiliary” by an applicable zoning code is presumed to be

accessory unless that designation is clearly inconsistent with the ordinary legal meaning of “accessory,” as

Section 7—Rezoned and used

consistently with rezoning

150-303-438 (Rev. 05-18)

7-2

determined by relevant criteria such as the relative size of the area used and the impact of the use on the

surrounding neighborhood. Accessory uses may include, but are not limited to:

(A) In residential zones, recreational activities, hobbies, home businesses, or pet raising;

(B) In commercial office zones, cafeterias, health facilities, or other amenities primarily for employees;

(D) In industrial zones, storage, rail spurs, lead lines, or docks;

(E) Parking in any zone, unless commercial parking is designated or allowed as a primary use, such as

for parking structures; and

(F) Accessory structures such as accessory dwelling units limited in size, garages, car ports, decks,

fences, and storage sheds.

(d) “Floor area ratio” means the relationship of the total allowed area of above ground floors of a

building to the total area of the parcel of land on which it is sited.

(e) “Site coverage ratio” means the relationship of the total area covered by the footprint of a building

to the total area of the parcel of land on which it is sited.

(f) “Rezoned” means on or after July 1, 1995, the governmental body that regulates zoning:

(A) Made any change in the zone designation, including but not limited to an overlay, plan district, or

floating zone designation, of the property;

(B) Made a change in one or more of the permitted primary types of use of the property; or

(i) The number of dwelling units, other than accessory dwelling units, allowed per acre, or other legal

limitation on the number of dwelling units, other than accessory dwelling units, in a given area;

(ii) The allowed floor area ratio; or

(iii) The allowed site coverage ratio.

Additional questions to qualify for rezoned:

In addition to providing clearer definitions, supplementary questions need to be investigated to determine

if a property actually qualifies as rezoned. What appeared to be “a simple two-part qualification”, as

previously indicated in statute, gives rise to these questions:

1. What are the definitions of “Primary” and “Accessory” use?

2. Can new Accessory uses qualify for rezoned?

3. What is “Type of Use”? Can it change? Does it always trigger exception?

4. What does floor area ratio mean and why is this important?

5. What does site coverage ratio mean and why is this important?

6. What is “Rezoned” and why is it date specific?

7. So when has property been rezoned?

8. What does it mean to be used consistently with the rezoning?

9. When a property qualifies for rezone and consistent use Exception…Now what?

a. What does “affected” and “not affected” portions mean?

b. What are the calculations for determining exception MAV?

150-303-438 (Rev. 05-18)

7-3

A “Rezone matrix” is included at the back of this chapter. This one page chart is exclusive to rezoning

questions and their relationship to the expanded guidance in OAR 150-308-0200. Following the Matrix

sequentially should help in determining if rezoning has indeed occurred. Let’s take a look at each question

and answer:

Primary versus accessory uses

1. What are the definitions of “primary” and “accessory” uses?

A primary use is an activity or combination of activities of chief importance on the site and is one of the

main purposes for which the land or structures are intended, designed, or ordinarily used. A site may

have more than one primary use, such as mixed use buildings with commercial use on the ground floor

and residential use on upper floors.

An accessory use is a use or activity that is a subordinate part of a primary use of the property and is

clearly incidental to the primary use under the zoning. A use designated as “accessory “or “auxiliary”

by an applicable zoning code is presumed to be accessory unless that designation is clearly inconsistent

with the ordinary legal meaning of “accessory,” as determined by relevant criteria such as the relative

size of the area used and the impact of the use on the surrounding neighborhood. Accessory uses

include, but are not limited to:

• In residential zones—recreational activities, hobbies, home businesses, or pet raising.

• In commercial office zones—cafeterias, health facilities, or other amenities primarily for employees.

• In commercial retail zones—offices or storage of goods.

• In industrial zones—storage, rail spurs, lead lines, or docks.

• Parking in any zone, unless commercial parking is designated or allowed as a primary use, such as for

parking structures.

• Accessory structures such as accessory dwelling units limited in size, garages, carports, decks, fences,

and storage sheds.

Any change in allowed accessory uses doesn’t constitute “rezoning” for purposes of calculating MAV.

This includes accessory dwelling units, which are specifically excluded from the definition as noted

above.

2. Can “accessory uses qualify for rezoned?

Any change in allowed “accessory uses” won’t constitute “rezoning” for purposes of calculating

Exception MAV. This includes accessory dwelling units (ADU), which are specifically excluded from the

definition as noted above.

Type of use

3. What is type of use? Can it change? Does it always trigger exception MAV?

The definition of “rezoned” includes changes in the allowed primary type of use, which are identified

by the first digit in the property classification system described in section 2. Therefore, changes in the

allowed uses that fall within the same type of use don’t constitute rezoning. For example, if a zoning

ordinance is amended to allow a beauty school in a commercial office zone, property hasn’t been rezoned

as long as the actual zone designation didn’t change. This is because both commercial office use and the

new use of a beauty school are both within the same type of use, which is commercial 2xx.

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Floor area ratio (FAR) and Site coverage ratios

4. What is floor area ratio (FAR)?

5. What is site coverage ratio?

“Rezoned” also includes a change to either of these two ratios. They are defined as:

Floor area ratio (FAR): The relationship of the total allowed area of above ground floors of a building to

the total area of the parcel of land on which it’s sited.

Site coverage ratio: The relationship of the total area covered by the footprint of a building to the total

area of the parcel of land on which it’s sited.

Increasing either or both of these ratios also can have a significant impact on the value of property.

A higher ratio allows for more intensive development of the land and changes the nature of the

neighborhood.

Rezoned before July 1, 1995:

6. Why is “rezoned” date specific?

For the purposes of calculating MAV, only property that is rezoned after July 1, 1995, (which is the

assessment date for the RMV that originally established MAV under Measure 50), is considered.

Why? If a property was rezoned before July 1, 1995, the RMV of the property would have already

reflected an adjustment for those considerations and, when MAV was established, those changes would

have already be incorporated in the real market value.

7. So when has property been rezoned?

Jurisdictions can significantly alter the allowed uses of property without actually changing the zoning

designation. As a result, this may seem like a long and complicated definition of “rezoned.” However

it really comes down to asking three questions corresponding to the three paragraphs in OAR 150-308-

0200(1)(f):

1. Has the governing body that regulates zoning, since July 1, 1995, changed the zone designation of the

property? OAR 150-308-0200(1)(f)(A).

2. Has the governing body that regulates zoning, since July 1, 1995, made a change to the zoning ordinances

to allow a new type of use, other than an accessory use, of the property? OAR 150-308-0200(1)(f)(B).

3. Has the governing body that regulates zoning, since July 1, 1995, made a change to the number of

allowed dwelling units (other than accessory dwelling units) per acre or other given area, or changed

the allowed floor area or site coverage ratios? OAR 150-308-0200(1)(f)(C).

If the answer to any one of these questions is yes, then the property has been rezoned. However, the MAV

isn’t affected unless the property is also used consistently with the rezoning.

8. What does it mean to be used consistently with the rezoning?

According to OAR 150-308-0310, all properties have been assigned a property classification which

includes a zone designation as the second digit described in section 2. It is when changes to zoning or

“re-zoning” occurs and the second test, consistent use, align that MAV exception value is required to be

added to the roll.

Property is “used consistently with the rezoning” when it’s put to a newly allowed use. This doesn’t

include situations where the use of the property was an allowed use both before and after the rezoning.

For example, if a vacant parcel is rezoned from single- to multi-family housing, but single-family

dwellings are still allowed under the new zone, when a single-family dwelling is constructed the

property hasn’t been used consistently with the rezoning. Be aware that this example would still qualify

for MAV exception; just not under rezoned. See Section 6—“New Improvements” for how this example

would qualify.

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Both tests, rezoned and use consistent with the rezoning, must be met before MAV can be recalculated

as an exception. However it isn’t necessary for the rezoning to occur first. For example, a house in a

residential zone may be used as a commercial office. When the zoning is later changed from residential

to commercial, the property is now used consistently with the rezoning. The commercial use was a

nonconforming use under the prior zoning, and is a now a newly permitted use. Therefore this property

is now used consistently with the zoning and qualifies for exception MAV.

Property qualies as rezoned

When a property or portion of property qualifies as rezoned, now what? Determine if there are “affected”

and “unaffected” portions as defined by administrative rule.

Affected property

OAR 150-308-0180 defines “affected property” as property that “is subject to one or more of the

following events: partitioned or subdivided; added to the account as omitted property; rezoned and used

consistent with the rezoning; disqualified from a special assessment, exemption, or partial exemption.”

When property is rezoned and used consistently with the rezoning, the affected property includes all

improvements that are constructed for or converted to the newly allowed use as described in:

OAR 150-308-0200

(2) For the purposes of calculating maximum assessed value when a property is rezoned and used

consistently with the rezoning, the portion of the property that is “affected” includes:

(a) Improvements that are converted to the newly allowed use; and

(b) All land that supports a newly allowed use, including, but not limited to:

(A) Land under newly constructed or converted improvements put to the newly allowed use;

(B) Ingress and egress related to the newly allowed use;

(D) Landscaping;

(E) Yard areas; and

(F) Parking.

In some cases, only a portion of a property tax account may lie within an area (such as a taxing district)

that has been rezoned or only a portion of the property may have been used in a manner consistent with

a zone change. In this case, you would adjust the MAV of only the affected property for the exception.

As discussed in earlier sections, each property tax account has only one MAV. When one of the allowable

exceptions qualifies, MAV must be allocated between the affected and unaffected portions of the property as

the unaffected portion of MAV doesn’t have an exception event.

The allocation of MAV is proportionate to the allocation of RMV between the affected and unaffected portions

of the property.

To begin, an example has been provided for an entire affected property and a second example of the more

complex partial rezone containing “affected” and “unaffected” property follows.

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Example #1: Entire property is rezoned and used consistently:

Property was rezoned from residential to commercial two years ago. Last year, the entire property

was developed under one of the new permitted uses:

A one and a half acre lot has been developed into a bicycle sales and service shop. The shop,

including all parking and landscaping, occupies half of an acre and the rest of the land was

developed as an off road bicycle skills course. It’s determined that the entire property qualifies as

rezoned:

Because the rezone affects the entire property, multiply the current year RMV of the entire property

by the CPR. This becomes the new MAV for the entire property.

Current year RMV of the affected portion = $750,000.

Current year CPR for this property type = 0.800.

$750,000 x 0.800 = $600,000 (current year MAV for the affected portion).

New: Current year values:

RMV = $750,000

MAV = $600,000

AV = $600,000

Summary steps:

The entire property is rezoned:

1. Calculate the current year RMV (both land and improvements).

2. Multiply current year RMV by CPR for property class to determine new MAV and AV.

3. Allocate the RMV to the land and improvement portion of the account.

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Example #2: Complex: A portion of a property is rezoned and used consistently:

Property was rezoned from residential to commercial in 2015. In 2016–17, a portion of a one and a half

acre lot has been developed into a bicycle sales and service shop. The shop, including all parking and

landscaping, occupies half of an acre. The rest of the land (one acre) remains undeveloped.

In this more complex example, the rezoning and consistent use affects just a portion of the property.

This means some of the MAV remains unaffected and won’t be changed. This requires 6 steps:

For a partial rezoning, we begin with valuing the property as if no changes had occurred:

Prior year 2015–16 values:

RMV = $150,000

MAV = $101,000

AV = $101,000

Current year 2016–17 RMV of affected portion = $700,000 ($20,000 OSD’s and $680,000 shop).

Current year 2016–17 CPR for this property type = 0.800.

Step 1. Establish base MAV. Start with the property as if no changes had occurred (Apply the 103

percent test).

Multiply the prior year AV by 1.03. Compare the result to the prior year’s MAV to determine which

one is greater. This becomes the current year Base MAV as if the account hadn’t changed:

AV $101,000 x 1.03 = $104,030 or $101,000. Which one is greater? = AV x 1.03.

$104,030 = Current year MAV of the unchanged account.

Step 2. Calculate the RMV that remains unaffected using the prior year’s total RMV: (to establish the

value of the “unaffected” portion of RMV).

For this example, we determined that each 0.50 of an acre = $50,000.

Unaffected = 1 acre or 0.50/acre + 0.50/acre.

Result: There is one acre that is unaffected: $50,000 + $50,000 = $100,000 (Prior year RMV of

unaffected portion).

Step 3. Calculate the RMV ratio (to establish the percentage of the “unaffected” portion of RMV).

Divide the prior year RMV of unaffected portion by the prior year’s total RMV for the whole account.

This produces the percentage of the account that is unaffected by the change to the property. The

formula is:

Prior year RMV

of unaffected portion

= Percent of account unaffected

Total prior year RMV

$100,000 Prior year RMV of unaffected portion (one acre).

$150,000 Total prior year RMV of one and one half acres.

Formula applied:

$100,000

= 0.666 or 66.6% (percentage of the account that is unaffected)

$150,000

RMV Ratio = 0.666

Step 4. Calculate the current year MAV for the unaffected portion.

Multiply the base MAV of the unchanged account (from Step 1) by the RMV ratio (Step 3).

This is the current year MAV for the unaffected portion.

$104,030 x 0.666 = $69,283 (current year MAV for the unaffected portion).

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Step 5. Calculate the MAV for the affected portion.

Multiply the current RMV of the affected portion by the CPR. This is the MAV for the affected portion.

$700,000 (New RMV) - $100,000 (Unaffected RMV) = $600,000 x 0.800 = $480,000 (current year MAV for

the affected portion).

Step 6. Calculate new MAV for the entire account.

Add MAV for the unaffected portion (Step 4) and MAV for the affected portion (Step 5) to get total MAV

for the account.

$69,283 + $480,000 = $549,283 (New MAV for the entire account).

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The property is partially rezoned:

Step 1. Establish the current year base MAV of the account (as if there were no changes to the account).

Step 2. Calculate the unaffected RMV (Unaffected portion minus the Prior Year’s total RMV).

Step 3. Calculate the RMV Ratio to determine percent of account unaffected:

Prior year RMV

of unaffected portion

= Percent of account unaffected

Total prior year RMV

Step 4. Calculate the current year MAV for the unaffected portion:

[Current year MAV (Step 1)] x [Percent of account unaffected (Step 3)] = Current MAV for unaffected

portion.

Step 5. Calculate the current year MAV for affected portion.

Current affected RMV x CPR = Current year MAV for affected portion.

Step 6. Calculate new one MAV for the entire account.

[MAV for unaffected portion (Step 4)] + [MAV for affected portion (Step 5)] = MAV for the account.

ReZONE matrix

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Partitions and subdivisions create new legal lots where none existed before. This requires approval from

the city or county planning authority.

In order to discuss what actually constitutes an MAV exception event in this section, one must first clarify

what doesn’t qual ify.

Splitting tax lots along originally platted lot lines = No exception event.

There is nothing to prevent the assessor from valuing each platted lot individually and then summing the

values to come to the total value of the combined tax lots for billing purposes. This is a convenience to both

the assessor and the taxpayer.

When a taxpayer is requesting that the bill be separated along pre-existing lot lines and, upon further

research it’s determined that the tax lot lines were indeed already platted, the action of separating the

bill doesn’t constitute a partition for MAV exception. This is actually an “account modification” and is

addressed in Section 12. When a taxpayer is requesting a separation for billing purposes and those platted

tax lots already existed, our authority comes from ORS Chapter 92.

Surprisingly, there is no definition for partition in Chapter 308—only in Chapter 92. The tax court places

little weight on the definitions in Chapter 92 because those definitions are specifically applied only to

ORS 92.010 to 92.190. However, with existing plat lines, the court has determined that the partition or

subdivision occurs when the original parcel is platted into lots, regardless of whether or not those lots were

later aggregated into a single tax lot.

Here’s an example of a “Before and after” plat map to assist visually. The Before-platted shows dashed lines

indicating divisions that are pre-existing so dividing the property along these won’t qualify as a partition:

See section 12 for the actual segregation process and the mathematical steps required.

Partition and subdivision approval

One of the main considerations in determining when a tax lot split is actually a bona fide partition/

subdivision is in the requirement of the taxpayer to go through the planning process to create new legal

lots.

Section 8—Subdivided or partitioned property

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Since an actual partition or subdivision requires approval from the city or county planning authority,

review available documentation that a plan has been approved. In addition, speak with the taxpayer

wishing to make the changes and take the time to view the original plat map and the changes being

proposed. Once you have determined whether the request is indeed a partition, subdivision, or just a

billing change, the correct course of action can be taken. Keep the documentation available with the

accounts as the changes may generate questions in future years.

In addition, statute indicates that the assessor shouldn’t indicate any changes, divisions or transfers of

properties which occurred before, on or after January 1 as a result of the division of a larger parcel of land

until all ad valorem taxes, fees and other charges placed upon the tax roll on the entire parcel of property

that have been certified for collection under ORS 311.105 and 311.110 have been paid.

Partition and subdivision dened

Partitioning land means dividing land into not more than three parcels including the original parent

account. A visual way to remember that a partition can divide land up to three parcels is to divide the

word “partition” into “parts” as shown below. These are usually requested by a single person requesting

the change so the “i” represents the individual. Notice there are only 3 parts remaining:

Subdividing land means to divide land into four or more parcels including the original parent account.

The easy way to remember four or more is to think about what is occurring to the land- usually

subcontractors are involved and this means more “division” of work being performed.

Process 1—Segregation

If property is partitioned or subdivided during the current assessment year, ORS 308.162 establishes the

procedure to allocate the RMV and MAV balance first. We will refer to this process as the segregation.

Segregation means ‘the act of setting apart”. In the segregation process, the objective is to allocate the

value of the original account (parent) to each of the new lots. This must occur before the exception event

that will be processed in the following year. The segregation process will not generate exception value.

The sole purpose is to permit the assessor to reflect the changes in ownership as described in ORS

308.210(2).

Segregation apportions the prior year MAV and RMV that exists on the parent account among all the new

accounts. In addition, the 103 percent MAV test is not performed for process 1 as the values utilized for

this process are prior year values.

Once the segregation is completed, the RMV and the MAV reflect the total balance (value) of the parent

account as of the assessment year as if the split had not occurred. Said in another way—the starting RMV

and MAV should match the ending RMV and MAV when totaled.

Summary steps:

The property is segregated in year one:

Step 1—Determine allocation of RMV from parent to the child account(s).

Step 2—Determine RMV ratio.

Step 3—Balance MAV proportionate to RMV.

Step 4—Verify the math works. Starting RMV and MAV should match the ending RMV and MAV when

totaled.

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Process 2—MAV exception

The actual MAV exception process occurs for the assessment date following the date that planning

approved the partition or subdivision. This may or may not be the tax year following the segregation. The

partitioning or subdividing event occurs and becomes MAV exception following established procedures

per ORS 308.156:

(MAV of the unaffected portion) + (RMV of the affected portion x CPR) = New MAV

ORS 308.156(1) and 308.156(5) Subdivision or partition; rezoning; omitted property; disqualification from

exemption, partial exemption or special assessment; rules.

(1) If property is subdivided or partitioned after January 1 of the preceding assessment year and on

or before January 1 of the current assessment year, then the property’s maximum assessed value shall be

established as provided under this section.

(5) The property’s maximum assessed value shall be the sum of:

(a) The maximum assessed value determined under ORS 308.146 that is allocable (assigned or

charged) to that portion of the property not affected by an event described in subsection (1), (2), (3), or (4)

(a) of this section; and

(b) The product of the real market value of that portion of the property that is affected by an event

described in subsection (1), (2), (3), or (4)(a) of this section multiplied by the ratio, not greater than 1.00, of

the average maximum assessed value over the average real market value for the assessment year in the

same area and property class.

Formula: (Avg MAV / Avg RMV) = CPR

Though the exception process appears reasonably straight forward, it’s important to determine if there

are “unaffected” and “affected” portions of property in order to calculate proper allocated portions for

each lot.

Aected and unaected property

“Affected” property includes the entire land subdivided or partitioned. Buildings and structures

(improvements to the land) require a closer look on whether they are considered unaffected or affected

and we look to rule for guidance for the qualifying conditions:

150-308-0190 Subdivided and partitioned property MAV

For purposes of calculating maximum assessed value when a property is subdivided or partitioned, the

portion of the property that is “affected” includes:

(1) The entire land that was subdivided or partitioned into smaller lots or parcels, if any.

(2) The improvements if one or more of the following apply:

(a) The act of subdividing or partitioning the land results in the apportionment of a single

improvement (building or structure) to more than one tax lot.

Example 1: A lot improved with a duplex is partitioned such that the duplex is split into two single-

family residences.

(b) The act of subdividing or partitioning the land changes the market’s perception of the value of the

improvements.

Example 2: A partition includes a vacant warehouse that was previously part of a large industrial

complex. Prior to the partition, the market perceived the warehouse as unnecessary to the industrial

complex and of little or no value. After the partition, the warehouse is a stand-alone improvement no

longer associated with the industrial complex. The market now perceives the warehouse as a property

that can be used for many different purposes with considerable value. By contrast, there is no change in

market perception regarding the remaining improvements in the industrial complex.

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Example 3: The legal subdivision of an apartment building into condominium units.

Let’s do some examples of properties that are partitioned including the steps necessary to perform both

processes—the segregation and the MAV exception.

Example 4: Process 1—Segregation

In February, a property is partitioned into three bare land lots with the documentation from the county

planning authority. The segregation is performed in year one. The tax lot 1106 is partitioned as follows:

The prior year roll values of the parent account 1106 are used to allocate the value of RMV and MAV

between all three tax lots. Note that the RMV/MAV when combined for all account must match the

parent account without any changes:

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Example 4: Year 2—Process 2—MAV exception

Now the 2nd process—the MAV exception can be calculated. For year 2, the entire property is affected for

all three tax lots. The two completed homes are affected as new improvements to property. This becomes

a one-step process:

Determine RMV of entire parcel and multiply by the CPR for that property type to determine the new

MAV and AV.

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Example 5: Year 1—Process 1—Segregation

In March, a property is partitioned into three lots with the documentation from the county planning

authority. The segregation is performed in year one.

As in the previous example, the prior year roll values of the parent account 100 are used to allocate the

value of RMV and MAV between all three tax lots (note that the RMV/MAV when combined for all

accounts must match the parent account without any changes):

Example 5: Year 2—Process 2—MAV exception—Portion unaffected and affected

When a portion of the property remains unaffected, (as is the case of TL 100 and TL 101) there will be

additional steps to determine the “unaffected” and “affected” portions”. The RMV that is unaffected

needs to remain and the affected RMV calculated. In order for the affected portion to receive the Measure

50 benefit, the CPR will be applied to the affected RMV portion. There will also be “unaffected” MAV

and “affected” MAV. Since there can only be one MAV per account, both portions of MAV will be

summed in order to create the new MAV:

1. Calculate the base MAV. Perform 103 percent test.

2. Calculate the RMV that remains unaffected.

3. Calculate the RMV Ratio (the percentage of the unaffected portion by apportioning the prior year’s

RMV between the affected and unaffected portions).

(Prior year RMV of unaffected portion / Total prior year RMV = Percent of account affected).

4. Calculate the MAV for the unaffected portion:

[Base MAV (Step 1)] x [RMV ratio (Step 3)] = Unaffected MAV.

5. Calculate MAV of affected portion.

Current affected RMV x CPR = Current year MAV for affected portion.

6. Calculate new one MAV for the entire account.

[MAV for unaffected portion (Step 4)] + [MAV for affected portion (Step 5)] = MAV for the account.

Attached are the three individual account screens with and the calculations for each one (Unaffected

portion hi-lighted in pink):

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Whenever an assessor has reason to believe that any real or personal property has been omitted from

assessment and taxation, the assessor must initiate the procedural steps required to add the property

to all of the tax rolls from which it was omitted for a period not exceeding five years prior to the last

certified roll. The Oregon Constitution and statutes allow MAV to increase for omitted properties. The

intent is to correct the tax roll for current and prior years as if the omitted property had been included.

If the property that was omitted from the tax rolls was first constructed or acquired within the current

or five prior tax years, it’s added to MAV as of January 1 following the calendar year of construction or

acquisition by multiplying its RMV by the CPR for that year. If it was first constructed or acquired earlier

than the sixth calendar year prior to the current certified roll, then the first year it can be taken into

account is the fifth year prior to the current certified roll. It’s added to MAV for the fifth year prior to the

current certified roll by multiplying its RMV by the CPR for that year. Don’t look beyond the fifth year

prior to the current certified roll to calculate MAV.

The omitted property’s trended RMV is added to each subsequent year’s roll. MAV for each subsequent

year is the greater of the prior year’s corrected AV multiplied by 103 percent, or the prior year’s corrected

M AV.

Example

A property was built in 2003 and should have been added to the 2004–05 tax roll. The assessor discovers

the property in December 2014 and adds it to the 2009–10 through 2014–15 tax rolls.

Year 2009–10 2010 –11 2011–12 2012–13 2013–14 2014–15

Original RMV $140,711 $133,675 $126,992 $133,341 $140,008 $147,00 9

Corrected RMV $16 6, 211 $157,9 0 0 $150,005 $157, 50 6 $165,381 $173,650

Original MAV $106,359 $109,550 $112,836 $116,221 $119,708 $123,299

Corrected MAV $128,034 $131,875 $135,831 $139,906 $144,103 $148,426

Original AV $106,359 $109,550 $112,836 $116,221 $119,708 $123,299

Corrected AV $128,034 $131,875 $135,831 $139,906 $144,103 $148,426

RMV trend 5% -5% -5% 5% 5% 5%

Section 9—Omitted property

Omitted property 2009–10

RMV $25,500

CPR 0.85

Exception $21,675

Note: RMV of the new construction is determined to be $25,500 as of

January 1, 2009. The RMV of the year of construction isn’t relevant, as

it’s prior to five years before the last certified roll.

RMV of $25,500 is multiplied by the 2009–10 CPR to determine an

adjustment to the 2009–10 MAV of $21,675. Each subsequent year the

103 percent test is performed using the prior year’s corrected MAV

and AV. The AV fore each year is determined by comparing the

corrected RMV to the corrected MAV.

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When property is exempt from taxation, it doesn’t have a MAV. If it’s subject to a partial exemption or

special assessment, MAV is reduced to reflect the partial exemption or special assessment.

When an entire property is disqualified from exemption, a new MAV is calculated by multiplying the RMV of the

property for the year of disqualification by the CPR. If only a portion of the property is disqualified from exemption,

then the MAV of the affected portion is calculated by multiplying the RMV of the affected portion by the CPR.

Exemption versus partial exemption

At this point we need to clarify some terminology:

Exemption: Property or a portion of property is 100% exempt.

Partial exemption: Property or a portion of property is subject to an exemption that is less than 100% exempt.

Partially exempt: The reference used for property that has a partial exemption.

So for example, if the second floor of an office building is exempt due to the charitable use by the tenant,

then the second floor is 100% exempt. Alternatively, property that qualifies for a vertical housing exemption

gets a 20% partial exemption for each floor of qualified residential housing, limited to 4 floors or 80%. No

part of the property is 100% exempt. If a building has 5 floors of qualified residential housing, the entire

project receives an 80% exemption.

Section 10—Exemption, partial exemption,

special assessment disqualification

Tax lot C

Original account

Part B

Part

After disqualication

Example 1: Part of exempt property

disqualified

The assessor discovers or is notified that a

portion of a property that is totally exempt

no longer qualifies for exempt status.

Originally tax lot C was 100 percent exempt.

No MAV is required to be kept on this

account.

When part B is disqualified, part A is still

exempt.

RMV for portion B = $200,000

RMV for portion A = $ 40,000

RMV for tax lot C = $240,000

CPR = 0.65

New MAV = RMV of portion B x CPR.

New MAV = $200,000 x 0.65 = $130,000.

Example 2: Property disqualified from exemption

where a portion of the property was exempt

The year following the disqualification of part

B in example 1 above, part A is disqualified.

RMV for portion B = $210,000

RMV for portion A = $ 45,000

RMV for tax lot C = $255,000

CPR = 0.70

MAV of the affected portion = RMV of the

affected portion x CPR.

$45,000 x 0.70 = $31,500.

MAV of the unaffected portion = the greater of

103 percent of the prior year’s AV or 100 percent

of the prior year’s MAV of the unaffected

portion (apply the 103 percent test).

$130,000 x 1.03 (103%) = $133,900.

New MAV = MAV of the affected portion +

MAV of the unaffected portion.

$31,500 + $133,900 = $165,400.

Disqualiﬁcation from exemption

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MAV upon qualification for exemption of a portion of property, partial

exemption, or special assessment

When a portion of property is granted an exemption, MAV must be allocated between the affected and

unaffected portions. In the year a portion of the property becomes exempt, first do the 103% test to

determine the current year MAV of the entire property. Then reduce that number by the MAV allocated

to the exempted portion.

If a property becomes partially exempt, and the entire property is subject to the percentage exemption,

then the new MAV for the property is the RMV after taking into account the percentage of exemption

multiplied by the CPR. If there is a disqualification that reduces the percentage of the exemption,

the MAV is recalculated as the RMV after taking into account the reduced percentage of exemption

multiplied by the CPR for that year.

Most statutes governing special assessments also govern the calculation of MAV for property subject to

those special assessments. However, if the statutes don’t specifically prescribe a method, the first year of

the special assessment is calculated by multiplying the specially assessed value by the CPR.

Calculation of additional tax

When property is disqualified from certain special assessments, additional taxes are calculated based

upon the difference between the taxes that would have been paid if the property hadn’t been specially

assessed for prior years, and the taxes that were paid. The number of prior years to be used in the

calculation is established by ORS 308A.703(3) and is known as the “lookback period.”

OAR 150-308-1500 governs the calculation of the additional tax. It provides that effective August 15, 2018,

to calculate the MAV for the computation of the additional tax, multiply the RMV of the special assessed

land being disqualified for the earliest year in the lookback period by that year’s appropriate CPR for

the classification of the disqualified property as if it wouldn’t have been specially assessed. For each

subsequent year, calculate the MAV as if the property hadn’t been specially assessed per ORS 308.146.

150-303-438 (Rev. 05-18)

11-1

All of the land included in a lot line adjustment is affected property for purposes of calculating MAV.

Buildings and structures are unaffected property, unless the lot line divides a building.

The MAV of property after a lot line adjustment is the RMV of the affected property multiplied by the

CPR, plus the MAV of any unaffected property. However, the statute provides an additional restriction

regarding lot line adjustments. The total MAV of all of the affected property after the lot line adjustment

can’t exceed the total MAV of the affected property before the lot line adjustment.

This doesn’t mean that the MAV of affected property is simply allocated to the new accounts after the lot line

adjustment. Lot line adjustments are exceptions and must be calculated using the current year’s CPR. However,

after the MAV of the affected property has been calculated, the MAV of the accounts must be proportionately

reduced to not exceed the MAV the property would have had if there hadn’t been a lot line adjustment.

Example:

The following example consists of one unimproved lot and one improved lot. This example, together

with the examples found in OAR 150-308-0230, demonstrate the math involved. This example uses

the information below to calculate MAV for each lot. There is also a diagram of the lot layout below.

Remember that the affected portion for land is all the land subject to the lot line adjustment.

TL4600 TL4700

Vacant lot Improved with residence

RS-7000 zoning (7K minimum building site) RS-7000 zoning (7K minimum building site)

5,000 sf (not buildable) 10,000 sf (buildable)

Land value $25,000; $5/sf Land value $100,000; $10/sf

Improvement value $0 Improvement value $360,000

MAV = $11,250 MAV = $276,000

After lot line adjustment —

7,000 sf (buildable) 8,000 sf (buildable)

Value $70,000; $10.00/sf* Value $80,000 $10.00/sf

* Buildable sites in this market are worth $10.00/sf CPR = 0.65

Lot line adjustments

2 1

4500

100'

4600

20'

4700

70'

80'

{

Zoning in the area is RS-7000

(7,000 sf minimum)

CPR (class 1XX) = 0.650

After the adjustment:

TL4600 TL4700

Vacant Improved with house

70 x 100 = 7,000 sf 80 x 100 = 8,000 sf

Value = $70,000** Value = $80,000 land**

= $360,000 imp*

Based on—

* Prior year RMV

** Prior year $/sf RMV

Section 11—Lot line adjustments

150-303-438 (Rev. 05-18)

11-2

How to calculate MAV of the affected portions before a lot line adjustment:

1. Calculate a ratio of affected portion RMV to the total RMV.

TL 4600: $25,000 (affected portion RMV) ÷ $25,000 (total RMV) = 1.00

TL 4700: $100,000 (affected portion RMV) ÷ $460,000 (total RMV) = 0.217391

2. Multiply the result of step 1 times the MAV to calculate the amount of MAV that is attributable to

each affected portion prior to lot line adjustment.

TL 4600: 1.00 (Step 1) x $11,250 (MAV) = $11,250 (MAV attributable to affected portion)

TL 4700: 0.217391 (Step 1) x $276,000 (MAV) = $60,000 (MAV attributable to affected portion)

3. Add MAV attributable to each affected portion calculated in Step 2.

$11,250 (Step 2)

+ $60,000 (Step 2)

$71,250 = Total MAV of both affected portions (prior to lot line adjustment)

How to calculate the total MAV for the affected portion after a lot line adjustment:

After lot line adjustment, TL 4600 is 7000 SF and TL 4700 is 8000 SF. Both are now buildable. Since

buildable lots sell for $10 per SF, the lots are now worth $70,000 and $80,000, respectively. The CPR is 0.65

4. Multiply the RMV of the affected portion (after lot line adjustment) times the CPR as follows:

TL 4600: $70,000 (RMV) x 0.65 = $45,500 (MAV) (after lot line adjustment)

TL 4700: $80,000 (RMV) x 0.65 = $52,000 (MAV) (after lot line adjustment)

5. Add MAV attributable to each affected portion calculated in Step 4 as follows:

$45,500 (Step 4)

+ $52,000 (Step 4)

$97,500 = Total MAV of both affected portions (after lot line adjustment)

6. The total MAV after lot line adjustment (for all accounts) must not exceed the total MAV prior to the

lot line adjustment (for all accounts). To achieve this, the total MAV after lot line adjustment must be

proportionally adjusted for each account.

To make a proportional adjustment, a ratio is calculated by dividing the total MAV of the affected

portions before lot line adjustment by the total MAV of the affected portions after the lot line

adjustment as follows:

TL 4600–$71,250

(total MAV affected portions before) (Step 3)

---------------------------------------------------------------------------------------------------------

= 0.730769

TL 4700–$97,500

(total MAV affected portions after) (Step 5)

7. Reduce MAV proportionally based on the proportional adjustment ratio calculated in Step 6, so that

total MAV prior to the lot line adjustment equals total MAV after lot line adjustment.

TL 4600: 0.730769 x $45,500 (MAV of affected portion after) (Step 4) = $33,250 (Reduced MAV after)

TL 4700: 0.730769 x $52,000 (MAV of affected portion after) (Step 4) = $38,000 (Reduced MAV after)

150-303-438 (Rev. 05-18)

11-3

8. Calculate MAV attributable to the unaffected portions after lot line adjustment. Subtract the amount

of MAV attributable to the affected portions from the total MAV for the account. The balance will be

MAV attributable to the unaffected portion of the account as follows:

TL 4600:

$11,250 (total MAV) (Step 2)

–$11,250 (MAV of affected portion) (Step 2)

$0 (MAV attributable to the unaffected portion)

TL 4700:

$276,000 (total MAV) (Step 2)

–$60,000 (MAV of affected portion) (Step 2)

$216,000 (MAV attributable to the unaffected portion)

9. Add MAV for affected portion (after reduction) to any unaffected MAV to determine the total MAV for

each account as follows:

TL 4600: $33,250 + $0 = $33,250

(total MAV for the account after)

TL 4700: $38,000 + $216,000 = $254,000

(total MAV for the account after)

Total MAV (both accounts) after lot line adjustment = $287,250.

Total MAV (both accounts) prior to lot line adjustment = $287,250.

150-303-438 (Rev. 05-18)

12-1

When property is destroyed or damaged there are three separate issues to address:

• Adjustment of MAV.

• Timing of the adjustments.

• Proration of taxes for the current tax year.

The criteria used to address each of these issues is separate, even though the decisions may be made

simultaneously.

Adjustment of MAV

When a property is destroyed or damaged, the assessor is required to recognize the loss in RMV as of

the assessment date immediately after the loss is known. It doesn’t matter whether the property was

destroyed or damaged during the previous assessment year or during an earlier year. The determination

of whether MAV can be adjusted to reflect the loss depends on the cause of the destruction or damage.

If the destruction or damage is from a fire or act of God, MAV must be adjusted to reflect the loss in the

same year that RMV is adjusted. The property owner doesn’t have to file an application in order for the

assessor to calculate a new RMV, MAV, and AV for the next January 1 assessment date.

Fire

MAV can be adjusted if the destruction or damage was caused by accidental fire or controlled burns. This

differs from acts of God because fire can be caused by human action.

The only restriction placed on adjusting MAV due to fire is when the owner of the property is convicted

of arson, in such a case no adjustments can be made to MAV. All other arson related fires continue to

qualify. In addition, the owner must be convicted, not merely suspected or charged, with arson to deny

relief. Since it may take more than a year for an arson case to be resolved, you may have to grant the

reduction in MAV, only to correct the roll again after the conviction.

Act of God

There are two criteria that must be considered when determining if an event was caused by an act of God.

First, the damage must result from an extraordinary force of nature. No human action or intervention can

be a contributing factor to the damage.

Second, the occurrence or resulting consequence must not have been reasonably foreseeable or preventable.

The gradual removal of foundation support from dwellings on coastal bluffs isn’t an act of God, because the

natural actions and consequences of weather and waves are both known and reasonably foreseeable.

Which properties are destroyed or damaged?

A landslide occurs in a subdivision. There was no human involvement in the event. Some properties

were physically damaged or destroyed by the landslide. Other properties weren’t physically affected by

the slide, but may have a suffered a decrease in real market value due to the stigma in the subdivision

created by the damage sustained by other properties.

Question: Which properties are considered destroyed or damaged and eligible for a MAV adjustment?

Answer: Only those properties physically degraded by the slide qualify for relief. To qualify as

“destroyed or damaged,” real or personal property must be physically degraded. This doesn’t include

value decreases of property in proximity to destroyed or damaged property.

Section 12—Destroyed, damaged,

demolished, or removed property

150-303-438 (Rev. 05-18)

12-2

Example—MAV reduction for fire or act of God

House destroyed by fire on November 15, 2014 and not replaced. No other changes to property.

Given:

2014–15 2014–15

RMV MAV

House $140,000

Barn 25,000

G.P. Bldg. 5,500

Land 160,000

Total $330,500 $242,917

Calculate 2015–16 MAV

Current year MAV as if property hadn’t changed (103 percent test):

Prior year AV times 1.03 $250,204

Prior year MAV $242,917

Current year MAV of unchanged account $250,204

RMV of the unaffected portion from prior year:

Prior year total RMV $330,500

Less prior year RMV of the affected portion – $140,000

Equals prior year RMV of the unaffected portion $190,500

Percentage of unaffected portion:

RMV of the unaffected portion from the prior year $190,500

Divided by total prior year RMV ÷ $330,500

Equals the percentage of unaffected property 57.64%

MAV adjusted to reflect the loss from fire or act of God:

Unadjusted current year MAV $250,204

Percentage of unaffected property x 0.5764

MAV adjusted to reflect the loss from fire or act of God $144,217

Demolishing or removing a building

MAV may also be reduced when a building is demolished or removed. It doesn’t matter whether the

building was demolished or removed during the previous assessment year or during an earlier year.

However, unlike property destroyed or damaged by a fire or act of God, two critical requirements must be

met before MAV may be adjusted.

First, the statute specifically applies to the demolition or removal of a building. This means the entire

building must be demolished or removed, not just a part of a building.

What constitutes a “building” isn’t defined in statute. However, the dictionary definition of “building” is:

“…a constructed edifice designed to stand more or less permanently, covering a space of land, usually covered by a

roof and more or less completely enclosed by walls, and serving as a dwelling, storehouse, factory, shelter for animals,

or other useful structure—distinguished from structures not designed for occupancy (as fences or monuments) and

from structures not intended for use in one place (as boats or trailers) even though subject to occupancy.”

The second requirement that differentiates demolishing or removing a building from destruction or

damage by fire or act of God is that, in order to reduce MAV, the owner of the property must file an

application. Without an application, the assessor has no authority to adjust MAV, even if the assessor is

150-303-438 (Rev. 05-18)

12-3

aware of the demolition or removal. The application must be filed by December 31 of the assessment year

for which the MAV reduction is requested.

July 1 determination of value

ORS 308.146(6) allows the owner or person assessed for property that is destroyed or damaged after the

January 1 assessment date, but prior to or on the July 1 beginning of the tax year, to request that their property

be valued as it exists on July 1 rather than the normal assessment date for the tax year. Thus, the taxpayer

doesn’t have to pay taxes on property that no longer exists or is substantially diminished when the tax year

begins.

To receive relief the taxpayer must file an application with the assessor. The application must be filed

by August 1 of the current assessment year, or the 60th day after the destruction or damage occurred,

whichever is later, or by December 31 with a late fee which is the greater of $200 or one-tenth of one

percent of the real market value of the property. As with the adjustment to MAV for demolishing or

removing a building, the assessor has no authority to provide relief unless an application is filed, even if

the assessor is aware of the destruction or damage.

Note that a building that is demolished is also considered destroyed. Therefore, if a building is

demolished between January 1 but prior to or on July 1, the owner may file two separate applications.

One of the applications is for the determination of value as of July 1, and would be due by August 1, or

the 60th day after the demolition, or by December 31 with a late filing fee. The other application would be

for the adjustment of MAV for the demolition of a building, and would be due by December 31.

Timing of MAV adjustments

If a property wasn’t destroyed or damaged by fire or act of God, nor had a timely application for the

adjustment of MAV for a building demolished or removed then MAV can’t be adjusted regardless of

whether the property is assessed as of January 1 or July 1. For destruction or damage by fire or act of God

or a timely application for the removal of a building, MAV is adjusted for the year in which the event is

reflected by a reduction in RMV.

Therefore, if there is no application for a determination of value as of July 1, any adjustment of MAV will

be for the assessment year starting the following January 1. If there is an application for a determination

of value as of July 1, the adjustment of MAV will be for the tax year beginning July 1.

The phrase “reduction in RMV” means that the total RMV after adjustment is less than it would

otherwise have been, had the damage, destruction, demolishment, or removal not occurred. This includes

situations where the total RMV of the property may have increased from the prior year due to the

addition of other new improvements unrelated to damage, destruction, demolishment, or removal. This is

because RMV would be higher if those hadn’t occurred.

Example—When value change is reected

Situation 1: Property damaged (fire or act of God) on March 5, 2014. RMV of damage = $50,000.

No application for July 1 determination of RMV.

Note: RMV reduction reflected on the 2015–16 tax roll.

2013–14 Values 2014–15 Values 2015–16 Values

RMV 150,000 RMV 150,000 RMV 100,000

M AV 13 5,9 23 MAV 140,000 M AV 96,13 8

AV 13 5,923 AV 140,000 AV 96,138

150-303-438 (Rev. 05-18)

12-4

Reduction of MAV

MAV had property not changed: Greater of (140,000 x 1.03) or 140,000 = 144,200.

RMV of affected portion = 50,000.

RMV of unaffected portion = 100,000 (150,000 – 50,000).

Percentage of unaffected portion = 0.6667 (100,000 ÷ 150,000).

MAV adjusted to reflect loss = 96,138 (0.6667 x 144,200).

Situation 2: Property damaged (fire or act of God) on March 5, 2014. RMV of damage = 50,000.

With application for July 1 determination of RMV.

Note: RMV reduction reflected on the 2014–15 tax roll.

2013–14 values 2014–15 values 2015–16 values

RMV 150,000 RMV 100,000 RMV 100,000

M AV 13 5,9 23 M AV 93, 3 38 M AV 96,13 8

AV 13 5,923 AV 93, 3 38 AV 96,13 8

Reduction of MAV

MAV had property not changed: Greater of (135,923 x 1.03) or 135,923 = 140,000.

RMV of affected portion = 50,000.

RMV of unaffected portion = 100,000 (150,000 – 50,000).

Percentage of unaffected portion = 0.6667 (100,000 ÷ 150,000).

MAV adjusted to reflect loss = 93,338 (0.6667 x 140,000).

Proration of taxes for the current tax year

ORS 308.425 provides for the proration of taxes for the current tax year when property is destroyed or

damaged by a fire or act of God. This provision relates specifically to relief from taxes, not any reduction

in RMV, MAV, or AV on the tax roll for the current year.

The destruction or damage must be from a fire or act of God. To receive relief from the taxes for the tax

year in which the damage occurs, a taxpayer must file an application with the tax collector no later than

the end of the tax year (June 30) or sixty days following the destruction or damage, whichever is later.

If property is damaged, the tax collector reduces the taxes for each month that the property is damaged,

proportionately to the reduction in assessed value caused by the damage. The reduction in assessed value

is determined for proration purposes only. The assessed value on the roll isn’t adjusted.

If the property is totally destroyed, the tax collector only extends taxes for those months or fraction of

a month that the property existed. The taxes attributed to the destroyed property are canceled for the

remainder of the tax year. Each month’s taxes are calculated as one-twelfth of the taxes imposed on the

property for the tax year.

Situation 1:

RMV of damage = 50,000

No application: No July 1 determination of RMV

Damage 3-5-2014

Tax year affected

2015-16

Tax yearTax year

Tax year

7-1-13

1-1-14

7-1-14

7-1-15

7-1-161-1-15

1-1-16

Assessment year

Situation 2:

RMV of damage = 50,000

With application

: July 1 determination of RMV

Damage 3-5-2014

Tax year affected

2014-15

Tax yearTax year

Tax year

7-1-13

1-1-14

7-1-14

7-1-15

7-1-161-1-15

1-1-16

Assessment year

RMV reduction

Timing example

150-303-438 (Rev. 05-18)

13-1

If two or more tax accounts are merged into a single account, the MAV may be adjusted to reflect the change.

However, the MAV of all accounts affected may not exceed what the total MAV would have been if the change

hadn’t occurred. This isn’t an exception, and MAV isn’t recalculated by multiplying the RMV of the new

account by the CPR. The MAV of each of the separate accounts is added together to calculate the MAV of the

combined account.

If a single property tax account is divided into two or more accounts, the MAVs of all the property affected by the

division may not exceed what the total MAV would have been if the change hadn’t occurred. Therefore, the MAV

of the parent property tax account is allocated to the new accounts proportionately based on the RMV of each

new account.

This isn’t to be confused with a partition or subdivision. Partitions and subdivisions create new legal lots

where none existed before. The division of a property tax account under ORS 308.162 must not involve the

creation of new legal tax lots, which would require approval from the city or county planning authority.

Example 1—Account modication:

A taxpayer makes the request to “partition” their property. Upon investigation, it’s discovered that they

haven’t been to planning to create new lots—they just want to separate the ownership on billing and are

filing deeds showing new ownership. The plat map (Before-platted) reveals that indeed, the lots lines

previously existed and were billed as one unit.

Section 13—Property tax

account modifications

150-303-438 (Rev. 05-18)

13-2

Example 2—Account modication

For the 2014–15 tax year, a manufactured structure exempt from title is assessed as real property in the

same account as the underlying land. The values on the 2014–15 tax roll are as follows:

Land RMV $ 45,000

MS RMV $ 30,000

Total RMV $ 75,000

MAV $ 50,000

AV $ 50,000

The owner sells the manufactured structure in 2014, but retains ownership of the underlying land. The

manufactured structure isn’t moved.

In this situation, the billing of the manufactured structure must be moved to its own property tax account

because the ownership is different and the tax statement needs to reflect the correct owner. However, there

is no exception that would allow MAV of either property tax account to be recalculated using the current

year’s CPR.

Step 1. Determine allocation of RMV.

All land and OSD remains on TL 100 = RMV $45,000, MS account = RMV $30,000.

Step 2. Determine RMV Ratio:

Tax lot 100-Land RMV ÷ Total RMV = RMV ratio.

$45,000 ÷ $75,000 = 0.60.

Tax lot MS RMV ÷ Total RMV = RMV ratio.

$30,000 ÷ $75,000 = 0.40.

150-303-438 (Rev. 05-18)

13-3

Step 3. Balance MAV proportionate to RMV.

2014–15 Total MAV = $50,000 x 0.60 = $30,000 MAV allocated to TL 100 (land).

2014–15 Total MAV = $50,000 x 0.40 = $20,000 MAV allocated to MS account.

Step 4. Verify the math. Starting RMV and MAV should match the Ending RMV and MAV when totaled.

Eminent domain

When a portion of a property is transferred to a public right-of-way, MAV is adjusted in the same way.

The only difference is that the portion that is transferred isn’t given its own account with its own RMV,

and the MAV of that portion is zero because it’s exempt.

It’s important to note that the owner of a property is given “just compensation” by the right of way

agency. This amount isn’t to be confused with the market value of their property. For instance, the owner

may have been compensated for the “inconvenience”, landscaping, or other various reasons that may not

reflect a significant change in their market value. It still requires appraisal judgment to determine if there

is a reduction in value.

Example 3—ROW:

A residence on a quarter acre lot has the following tax roll values for the 2014–15 tax year:

RMV

Land $62,000

OSD $18,000

Improvements $210,000

Total RMV $290,000

MAV and AV $195,000

In February of 2014, the city takes a 30 foot wide swath in a Right of way taking (ROW) from one side of the

lot for a street. It’s determined that the removal of the swath does impact the market value of the property

and RMV is reduced by $10,000 – all attributable to the land portion of the account.

150-303-438 (Rev. 05-18)

13-4

Step 1. Determine allocation of RMV

All land, OSD, and IMPs remain on TL 100 = RMV $290,000, ROW = RMV $10,000

Step 2. Determine RMV ratio:

Tax lot 100—Land RMV ÷ Total RMV = RMV ratio.

$280,000 ÷ $290,000 = 0.966.

ROW RMV ÷ Total RMV = RMV Ratio.

$10,000 ÷ $290,000 = 0.034.

Step 3. Balance MAV proportionate to RMV.

2014–15 Total MAV = $195,000 x 0.966 = $188,276 MAV allocated to TL 100.

2014–15 Total MAV = $195,000 x 0.034 = $6,724 MAV allocated to ROW becomes zero.

Step 4. Verify the math. Starting RMV and MAV should match the ending RMV and MAV when totaled.

Note: MAV of the property taken by the city is zero, since it’s exempt.

150-303-438 (Rev. 05-18)

13-5

Splitting tax lots within platted subdivisions

When tax lots are split on existing plat lines within a subdivision, that action doesn’t constitute a

partition for Measure 50 purposes. There is no definition for partition in Chapter 308, only in Chapter 92.

The tax court places little weight on the definitions in Chapter 92, because those definitions are

specifically applied only to ORS 92.010 to 92.190. However with existing plat lines, the court has

determined that the partition or subdivision occurs when the original parcel is platted into lots,

regardless of whether or not those lots were later aggregated into a single tax lot. There is nothing to

prevent the assessor from valuing each platted lot individually and summing the values to come to the

value of the tax lot. Therefore, one of the main considerations in determining when a tax lot split is a

partition is if there is a requirement to go through the planning process to create new lot lines, or if the

lot lines being used previously existed.

The creation of tax lot 101 was accomplished by deed with no legal requirement to involve the planning

department. The plat lines that were previously created were used to set the lot lines. Therefore, MAV

before the tax lot was split will be allocated between the tax lots and not be recalculated as a Measure 50

exception.

Before

Lot 1 Lot 2 Lot 3

Lot 6 Lot 5 Lot 4

TL 100

Block 5

After

Lot 1 Lot 2 Lot 3

Lot 6 Lot 5 Lot 4

TL 100

TL 101

Conversely, when new tax lots are created by splitting on other than platted lot lines within a

subdivision, as shown below, that action requires planning department approval. Because of this process,

this tax lot split is a partition for Measure 50 purposes and an exception. The new MAV is calculated by

multiplying the RMV of each resulting tax lot by the appropriate CPR.

Before

Lot 1 Lot 2 Lot 3

Lot 6 Lot 5 Lot 4

TL 100

Block 5

After

Lot 1 Lot 2 Lot 3

Lot 6 Lot 5 Lot 4

TL 200

TL 201

Block 5

150-303-438 (Rev. 05-18)

14-1

Application for correction of MAV

ORS 311.234 provides for the correction of MAV for two circumstances. The first is where the square

footage of the property shown in the assessor’s records is incorrect. The error must be present as of the

current assessment date.

The second circumstance for which MAV may be adjusted is if the assessor added exception value in

any prior year, and the new property, or improvement to property, to which the exception related never

actually existed. It must not have existed in the year it was added nor in any subsequent year.

The taxpayer must file an application with the assessor by December 31 of the current tax year before the

MAV may be corrected in either circumstance. Our form, Application for Correction of Maximum Assessed

Value, 150-310-092, is available at www.oregon.gov/dor.

Correcting a square footage error

To properly adjust MAV for errors in square footage, the taxpayer must demonstrate a difference between

actual square footage and the square footage shown in the assessor records. The assessor then must

determine the change to the RMV resulting from that difference in square footage.

The correction to the MAV must be proportional to the correction of the RMV due to the error in square

footage. However, the correction can’t increase the MAV by more than 3 percent.

Example

A property consists of a 3-acre land parcel and two buildings.

Building 1 was incorrectly valued as having 2,000 square feet, when in fact it has only 1,500 square feet.

Current real market value (RMV) of the building with the error is $80,000.

Corrected RMV of the building with the error is $60,000.

The square footage on the land and other building is correct.

The property’s total RMV is $400,000.

The property’s total MAV is $300,000.

1. Correct RMV ÷ RMV of record = $380,000 ÷ $400,000 = 0.95

2. 0.95 x $300,000 Base MAV = $285,000 Corrected MAV

Note that prior to the legislative change prescribing that the correction to MAV be proportional to the

correction to RMV, it was necessary to identify and apportion the MAV between the property affected

and unaffected by the error in square footage. However since the correction is now proportionate to the

correction to RMV, going through that procedure results in the same outcome, which in this case is a

corrected MAV of $285,000.

Section 14—Maximum

assessed value corrections

150-303-438 (Rev. 05-18)

14-2

Correcting for new property or new improvements to property added in error

The county assessor has the discretion to determine how best to reflect the removal of the new property

or new improvements from the assessment and tax rolls. However, the correction may not be made if

the taxpayer merely demonstrates a difference in the nature, extent, or value of new property or new

improvements to property. The new property or new improvements must not exist at all for the current or

any prior assessment date. An example may be when a taxpayer obtained permits for a significant remodel

of a structure, but never carried out the remodel. If the assessor added exception value to MAV due to the

remodel, and the taxpayer files an application, the MAV can be corrected.

Current year only

The correction of MAV for either of the circumstances in ORS 311.234 is allowed for the current tax year

only. Of course, the change to the MAV for the current tax year will be reflected in future tax years.

However, the statute doesn’t allow corrections to any prior tax years.

Clerical errors or errors of any kind under ORS 311.205

If a clerical error or error of any kind not involving valuation judgment occurs, and that error affected

MAV, the MAV may be corrected under ORS 311.205(1)(a) or (b)(C). However, the error that affected MAV

must have occurred within the time frame allowed for such corrections, which is for any tax years not

exceeding five years prior to the last certified roll. If the MAV for all of the tax years you can reach is

simply the application of the 103 percent test to the prior year’s values, then there is no error in MAV. This

is true even if there was a clerical or other error in the calculation of MAV six or more years ago.

Example 1

During the preparation of the 2016–17 assessment roll, it’s discovered that when the RMV for a new

building was added to an account for the 2012–11 tax year, no exception value was added to the MAV.

Since the last certified roll is the 2015–16 tax roll, it’s still possible to correct all tax rolls from 2010–11

forward, so the 2012–13 MAV and the MAV for all subsequent years may be corrected.

Example 2

During the preparation of the 2016–17 assessment roll, it’s discovered that when the RMV for a new

building was added to an account for the 2008–09 tax year, no exception value was added to the MAV.

Since it’s now too late to correct the 2008–09 tax roll, no correction can be made to any tax year for the

error.

150-303-438 (Rev. 05-18)

15-1

Scenario: Land and real property manufactured structure on same account

For these examples the following facts apply:

• The manufactured structures are real property and are listed on the same account with the land and

on-site development (OSD).

• All actions during an assessment year are considered simultaneous unless specifically addressed in

ORS 308.166 (order of exceptions).

• OSD and off-site development are included as an increment to the land value.

The 103 percent test is assumed to have been performed prior to the calculations in the examples.

Example 1: New real property manufactured structure moved on to property.

Beginning values:

RMV of land and OSD = $100,000

MAV of land and OSD = $65,000

Value of new manufactured structure = $120,000

CPR = 0.75

RMV of manufactured structure times CPR = the change to MAV

Addition to MAV = $120,000 x 0.75 = $90,000

New values:

Total RMV $100,000 + $120,000 = $220,000

Total MAV $65,000 + $90,000 = $155,000

Example 2a: Real property manufactured structure moved o property and no

application led:

Since there was no application for MAV reduction under ORS 308.146(8), there is no adjustment to MAV.

Only the RMV attributable to the manufactured structure can be subtracted from the total RMV.

Beginning values:

RMV of land and OSD = $100,000

RMV of manufactured structure before move = $40,000

MAV total before move = $91,000

1. No application for MAV reduction under ORS 308.146(8).

Manufactured structure RMV removed from total RMV.

No adjustment to MAV.

New values:

Total RMV $140,000 - $40,000 = $100,000

Total MAV $91,000 - $0 = $91,000

Section 15—Manufactured structures

150-303-438 (Rev. 05-18)

15-2

Example 2b: Real property manufactured structure moved o property and an

application is led:

In this instance, the taxpayer filed the application for MAV reduction under ORS 308.146(8). As in the case

when no application is filed, the manufactured structure’s RMV is subtracted from total RMV. In addition,

the MAV is adjusted to reflect removal of the manufactured structure also.

Beginning values:

RMV of land / OSD = $100,000

RMV of manufactured structure before move = $40,000

MAV total before move = $91,000

Step 1—Manufactured structure RMV is subtracted from total RMV

* $140,000 - $40,000 = $100,000

Step 2—Calculate unaffected RMV ratio (to determine ratio for MAV calculation)

Unaffected RMV (land / OSD) divided by Total RMV = unaffected RMV Ratio

* $100,000 / $140,000 = 0.7143

Step 3—Determine MAV of unaffected property:

MAV as if no change x Unaffected ratio = Unaffected MAV

* $91,000 x 0.7143 = $65,001

New values:

Total RMV $140,000 - $100,000 = $100,000

Total MAV (See calculations above) = $65,001

Example 3a: Real property manufactured structure moved o property and replaced

with new real property manufactured structure. No application for reduction was led.

Assume removal and replacement happens in the same assessment year.

Beginning values:

RMV of land and OSD = $100,000

RMV of existing manufactured structure = $40,000

Total MAV = $91,000

RMV of new manufactured structure = $120,000

CPR = 0.75

No application for MAV reduction under ORS 308.146(8).

Net RMV of removed and new manufactured structure.

Multiply netted RMV times CPR as an adjustment to MAV.

Calculate RMV of new manufactured structure less RMV of removed manufactured structure (netting).

$120,000 - $40,000 = $80,000

Multiply netted RMV by CPR as an addition to MAV.

$80,000 x 0.750 = $60,000

New values:

Total RMV $100,000 + $120,000 = $220,000

Total MAV $91,000 + $60,000 = $151,000

150-303-438 (Rev. 05-18)

15-3

Example 3b: Real property manufactured structure moved o property and replaced

with new real property manufactured structure with an application led for reduction.

If application for MAV reduction under ORS 308.146(8) these steps are followed:

Reduce MAV for removal of old manufactured structure.

Multiply new improvement (manufactured structure) RMV by CPR as an adjustment to MAV.

Calculate unaffected portion: $100,000

Calculate unaffected portion:

$100,000

= 0.7143

$140,000

Calculate unaffected MAV: $91,000 x 0.7143 = $65,001

Calculate adjustment to MAV: $120,000 x 0.750 = $90,000

New values:

Total RMV $100,000 + $120,000 = $220,000

Total MAV $65,001 + $90,000 = $155,001

Example 4: Real property manufactured structure is sold and becomes personal

property but isn’t moved. One account becomes two accounts.

In this example, start with the land and manufactured structure as one account. When the manufactured

structure is sold, a new manufactured structure personal property account must be created.

Note: For more information, refer to 308.162 property tax account modifications; subsection (2), if a single

property tax account is divided into two or more accounts.

Beginning values:

RMV of land and OSD = $100,000

RMV of manufactured structure = $40,000

MAV total = $91,000

Allocate MAV between the two accounts.

Calculate percentage of RMV for the real property.

$100,000

= 0.7143

$140,000

Calculate percentage of RMV for the personal property manufactured structure.

$40,000

= 0.2857

$140,000

Calculate MAV for the real property portion.

0.7143 x $91,000 = $65,001

Calculate MAV for the personal property manufactured structure account.

0.2857 x $91,000 = $25,999

New values: (assuming no RMV change due to the split)

Real property RMV = $100,000

Real property MAV = $65,001

Personal property RMV = $40,000

Personal property MAV = $25,999

150-303-438 (Rev. 05-18)

15-4

Scenario: Land and personal or real property manufactured structure are

separate accounts

For these examples the following facts apply:

• Manufactured structures are on a separate account from the land and OSD.

• The 103 percent test is assumed to have been performed prior to the calculations in the examples.

Example 1: New manufactured structure moved on to land under same ownership.

RMV of manufactured structure x CPR = MAV for new real property manufactured structure account.

Example 2: Manufactured structure moved off property.

This example can be handled in two different ways:

1. Account transferred to new location with new RMV x CPR = MAV; or

2. Manufactured structure account cancelled with no RMV or MAV.

Example 3: Manufactured structure moved off and replaced with new manufactured structure.

Old manufactured structure account:

1. Old account transferred to new location with new RMV x CPR = MAV; or

2. Account inactive with no RMV or MAV.

New manufactured structure account:

RMV x CPR = MAV for new real property manufactured structure account.

Example 4: Real property manufactured structure is sold and becomes personal property, but isn’t

moved. Land is a separate account.

Manufactured structure account coded to reflect it’s now personal property manufactured structure.

Calculate new RMV. MAV remains the same.

150-303-438 (Rev. 05-18)

16 -1

ORS 308.166 provides guidance for situations where two or more changes affect a property in a single

assessment year. Each subsection describes a particular set of exceptions and indicates which exception is

calculated first. Calculate MAV adjustment for, in order of priority:

1. Destruction or damage by a fire or act of God, or the removal or demolition of a building.

2. New property or new improvements to property.

3. Subdivision or partition, rezoning, omitted property, disqualification from exemption, partial

exemption, or special assessment.

4. Lot line adjustments.

Section 16—Order of calculations

when multiple exceptions occur

150-303-438 (Rev. 05-18)

17-1

Changed property analysis matrix ...................................................................................................................... 17-2

Measure 50 definitions .......................................................................................................................................... 17-7

ORS 307.032, Maximum Assessed Value and Assessed Value of Partially Exempt Property

and Specially Assessed Property ........................................................................................................................17-8

ORS 308.142 through 308.166, Maximum Assessed Value and Assessed Value .........................................17-9

ORS 311.234, Correction in Maximum Assessed Value; Requirements; Limitation;

Filing Deadline; Appeals .................................................................................................................................... 17-15

OAR 150-308-0100 through 150-308-0230, Maximum Assessed Value and Assessed Value .................. 17-15

OAR 150-308-1090, Calculation of MSAV when SAV Soil Classification is Changed ...............................17-30

OAR 150-311-0240, Procedure to Correct MAV when Square Footage Error Exists ..................................17-31

Flavorland Foods v. Washington County Assessor, 334 Or. 562, 54 P.3d 582 (2002) ....................................17-33

Hoxie v. Dept. of Revenue, 15 OTR 322 (2001) ................................................................................................... 17-47

Magno v. Dept. of Revenue, 19 OTR 51 (2006) ...................................................................................................17-52

Section 17—Appendix

Table of contents

150-303-438 (Rev. 05-18)

17-2

Sub-category: Structures

Description of change

Changed

property

category

Allows

change

MAV?

Allows

change

RMV?

ORS and

OAR

reference

Any new construction / major addition

totaling more than $10,000 in one year or

$25,000 over ve years.

Exception Yes Yes

ORS 308.149 & 308.153

OAR 150-308-0160

Reconstruction of existing property. Exception Yes Yes

ORS 308.149 & 308.153

OAR 150-308-0130

Remodeling of existing property. Exception Yes Yes

ORS 308.149 & 308.153

OAR 150-308-0130

Renovation of existing property. Exception Yes Yes

ORS 308.149 & 308.153

OAR 150-308-0130

Rehabilitation of existing property. Exception Yes Yes

ORS 308.149 & 308.153

OAR 150-308-0130

Restoration of existing property. Exception Yes Yes

ORS 308.149 & 308.153

OAR 150-308-0130

Property that was an integral part of

property on the roll, but wasn’t included in

the assessment for a prior tax year, added

as new property.

Exception Yes Yes ORS 308.153(3)

General ongoing maintenance and repair

of any value.

RMV change No Ye s

ORS 308.149(6)

OAR 150-308-0130

Minor construction totaling less than

$10,001 in one year, or less than $25,001

over ve years.

RMV change No Ye s

ORS 308.149(5) & (6)

OAR 150-308-0160

Improvement physically moved to different

location. (Unless subject to ORS 308.162.)

Exception Yes Yes ORS 308.149(6)

Value of structure moved from one account

to another. Structure not physically moved.

MAV balance Balance Balance ORS 308.162

Error in square footage calculation

corrected by review or reappraisal. No

structural change.

RMV change No Ye s

Error in square footage indicated by taxpayer

application. Allows for reduction only.

Exception Yes No

ORS 311.234

OAR 150-311-0240

Floor levels reclassied after base year. RMV change No Yes

Inventory record corrected upon review or

reappraisal after base year unless omitted

property.

RMV change No Ye s

Loss in value of property if destroyed

or damaged due to a re or act of God.

Allows for reduction only.

Exception Yes Yes

ORS 308.146(5)

OAR 150-308-0110

Building removed / demolished, not by re

or act of God. Allows for reduction only.

Exception Yes Yes ORS 308.146(8)

Changed property analysis matrix

150-303-438 (Rev. 05-18)

17-3

Sub-category: Land

Description of change

Changed

property

category

Allows

change

MAV?

Allows

change

RMV?

ORS and

OAR

reference

Improvements to land, either on-site

or off-site greater than $10,000 in one

year or $25,000 within ve years. (ORS

307.010.)

Exception Yes Yes

ORS 308.153 & 307.010

OAR 150-307-0010

Event on property or on contiguous

property triggers change in value

attributed to existing physical

characteristic of land.

RMV change No Ye s

Combination of two or more accounts. MAV balance Balance Yes ORS 308.162

Previously existing landscaping revalued. RMV change No Yes

Property is rezoned and use doesn’t

change.

RMV change No Ye s ORS 308.156(2)

Property is rezoned and use is consistent

with new zoning.

Exception Yes Yes

ORS 308.156(2)

OAR 150-308-0200

Lot lines of property are adjusted. Exception

Yes

limit

Yes

ORS 308.159

OAR 150-308-0230

Property is subdivided or partitioned

under Chapter 92. (Not subject to ORS

308.162.)

Exception Yes Yes

ORS 308.156(1)

OAR 150-308-0190

Property is subdivided or partitioned

only by deed division or court order. (Not

subject to ORS 308.162.)

Exception Yes Yes

ORS 308.156(1)

OAR 150-308-0190

Property is divided on existing lot

lines established by prior Chapter 92

subdivision or partition process.

MAV balance Balance Yes ORS 308.162

Portion of property valued as a unit or

part of total is sold.

RMV change No Ye s

150-303-438 (Rev. 05-18)

17- 4

Sub-category: Personal property / MS / M & E

Description of change

Changed

property

category

Allows

change

MAV?

Allows

change

RMV?

ORS and

OAR

reference

Siting/installation of MS or oating

structure.

Exception Yes Yes ORS 308.149(5)

Rehabilitation of MS or oating structure. Exception Yes Yes ORS 308.149(5)

MS transferred from one roll to another,

but not physically moved.

MAV balance Balance Yes ORS 308.162

MS physically moved to different location. Exception Yes Yes ORS 308.149(5)

Change of classication of M & E from

real to personal or personal to real.

MAV balance Balance Yes ORS 308.162

New account is created for new personal

property.

Exception Yes Yes ORS 308.153

Personal property physically moved from

one account to another, unless subject to

ORS 308.162.

Exception Yes Yes ORS 308.153

Personal property value transferred from

one account to another, but not physically

moved.

MAV balance Balance Yes ORS 308.162

M & E transferred from one account to

another, but not physically moved.

MAV balance Balance Yes ORS 308.162

Sub-category: Code area changes

Description of change

Changed

property

category

Allows

change

MAV?

Allows

change

RMV?

ORS and

OAR

reference

Code area changes for any reason.

Not a

change

NA NA

Property physically moved to different

code area.

Exception Yes Yes ORS 308.149(5)

150-303-438 (Rev. 05-18)

17-5

Sub-category: Exemptions and special assessments

(MV = market value MAV; SA = specially assessed MSAV)

Description of change

Changed

property

category

Allows

change

MAV?

Allows

change

RMV?

ORS and

OAR

reference

Property changed from exempt or

partially exempt to taxable.

Exception Yes—MV Yes*

ORS 308.156(4)

OAR 150-308-0220

Property disqualied from special

assessment.

Exception Yes—MV Yes*

ORS 308.156(4)

OAR 150-308-0220

Property changed from one special

assessment, exemption, or partial

exemption to another special

assessment, exemption, or partial

exemption.

MSAV

change

Yes—MV

Yes—SA

Yes

ORS 308.156(4) &

308A.724

Error in classication of specially

assessed land corrected after base year.

Land isn’t changed or improved.

MAV / MSAV

change

No—MV

Yes—SA

Yes OAR 150-308-1090

Classication of specially assessed land

is changed due to improvements to the

land and land is revalued.

Exception

Yes—MV

Yes—SA

Yes

Newly qualied property changed from

market to specially assessed.

No—MV

Yes—SA

Sub-category: Miscellaneous

Description of change

Changed

property

category

Allows

change

MAV?

Allows

change

RMV?

ORS and

OAR

reference

Property class change. Not rezoned. RMV change No Ye s OAR 150-308-0100

Property contaminated. RMV reduced to

reect contamination.

RMV change No Yes OAR 150-308-0270

Correction of contamination. If RMV was

reduced to reect contamination, then

RMV and MAV adjusted as clean-up

occurs.

Exception Yes Yes OAR 150-308-0270

Market area changed (neighborhood,

value area).

RMV change No Yes

Every property in Oregon is required to have a RMV that reflects 100 percent of the current market value.

When a property is disqualified, the assessor may correct RMV that is used to establish the exception value.

150-303-438 (Rev. 05-18)

17- 6

Sub-category: Corrections

(MV = market value MAV; SA = specially assessed MSAV)

Description of change

Changed

property

category

Allows

change

MAV?

Allows

change

RMV?

ORS and

OAR

reference

Omitted property added to roll. Exception Yes Yes

ORS 308.156(3)

OAR 150-308-0210

Correction of clerical error or error or

omission of another kind.

Exception* Ye s Yes ORS 308.156(3)

Settlement of appeal affects value for

base year and changes MAV.

Changes

base

MAV

Yes

Appeal reduces total value of property

after base year, unless a MAV change is

included in order / decision.

RMV change No Yes

Appeal reduces total value of property.

Property includes an exception added

after base year. Use best information

to arrive at value attributable to the

exception.

Exception Yes Yes

* Only if the clerical error affected MAV, and the year the error actually occurred is within the time frame

spanning the current certified roll and five prior rolls.

150-303-438 (Rev. 05-18)

17-7

Measure 50 definitions

Area: The county in which a property is located. If the property is centrally assessed under ORS 308.505

to 308.665, “area” refers to this state. Cities in Multnomah County may adopt an ordinance to define

“area” as the city.

Assessed value (AV): Lesser of the property’s MAV or RMV. For specially assessed property, the lesser

of RMV or MAV for any market portion, plus the lesser of the SAV or MSAV for each individual soil class,

qualified homesite, and on-site development.

Average maximum assessed value: The average MAV of unchanged properties in an area, determined

by dividing the total MAV of all unchanged properties in the area in the same property class by the total

number of those properties.

Average real market value: The average RMV of unchanged properties in an area, determined by

dividing the total RMV of all unchanged property in the area in the same property class by the total

number of those properties.

Changed property ratio (CPR): Ratio determined by dividing the average MAV by the average RMV for

the same area and property class of unchanged property.

Exception: A change to property that allows MAV to increase by more than 3 percent, which doesn’t

include general ongoing maintenance and repair.

General ongoing maintenance and repair: The repair or replacement of existing materials due to normal

wear, tear, or deterioration. Examples of ongoing maintenance and repair may include: roof replacement,

painting, replacement of floor, or wall covering. MAV of the property can’t be increased based on general

ongoing maintenance and repair.

Lot line adjustment: Any addition to the square footage of the land for a real property tax account and

the corresponding subtraction of square footage of the land from a contiguous real property tax account.

Major addition: An addition that has a RMV over $10,000 and adds square footage to an existing

structure.

Maximum assessed value (MAV): The maximum (limit) for a property’s AV, as required by Measure 50.

For the 1997–98 tax year, MAV was the 1995–96 RMV less 10 percent. For tax years after 1997–98, MAV is

the greater of 103 percent of the property’s AV from the prior year or 100 percent of the property’s MAV

from the prior year. MAV may increase to reflect changes to the property (exceptions).

Maximum specially assessed value (MSAV): The maximum (limit) for a property’s SAV. For the 1997–98

tax year, MSAV was the 1995–96 SAV less 10 percent. MSAV may be increased or recalculated under

certain circumstances to reflect changes to the property. For tax years 1997–98 through 2002–03, MSAV

increased by 3 percent per year. For tax years after 2002–03, MAV is the greater of 103 percent of the

property’s AV per acre from the prior year or 100 percent of the property’s MSAV per acre from the prior

year.

Minor construction: An improvement to real property that results in an addition to RMV, but doesn’t

qualify as an addition to MAV due to a RMV threshold. The threshold necessary to result in an addition

to MAV is an addition to RMV of over $10,000 in any one assessment year, or over $25,000 for all additions

made over five assessment years.

Modernization: A type of renovation in which worn or outdated elements are replaced with their current

counterparts.

Net additions: In calculating the addition to MAV for new property and new improvements, the amount

added will be RMV of the new property or new improvements less RMV of retired property, but it can’t

be total less than zero.

New construction: Any new structure, building, addition, or improvement to the land, including site

development.

150-303-438 (Rev. 05-18)

17-8

Omitted property: Property discovered and added to the roll after the roll is certified to the tax collector.

Property: All property included within a single property tax account, or if centrally assessed, the total

statewide value of all property assessed to a company.

Property class: The classification of property adopted by the Department of Revenue by rule, except for

property assessed under ORS 308.505 to 308.665. Property class is the total of all property set forth in

the assessment roll prepared under ORS 308.540. Only the first dig it’s considered, which represents the

property’s highest and best use.

Real market value: The amount, in cash, that could reasonably be expected to be paid by an informed

buyer to an informed seller, each acting without compulsion in an arm’s length transaction occurring as

of the assessment date for the tax year, as established by law.

Reconstruction: To rebuild or replace an existing structure with one of comparable utility.

Rehabilitation: To restore to former condition without changing the basic plan, form, or style of the

structure.

Remodeling: A type of renovation that changes the basic plan, form, or style of the property.

Renovation: The process by which older structures or historic buildings are modernized, remodeled, or

restored.

Restoration: A type of renovation in which a property is returned to its original appearance and

condition.

Statutes for MAV and AV

ORS 307.032 Maximum assessed value and assessed value of partially exempt property

and specially assessed property.

(1) Unless determined under a provision of law governing the partial exemption that applies to

the property, the maximum assessed value and assessed value of partially exempt property shall be

determined as follows:

(a) The maximum assessed value:

(A) For the first tax year in which the property is partially exempt, shall equal the real market value

of the property, reduced by the value of the partial exemption, multiplied by the ratio, not greater than

1.00, of the average maximum assessed value over the average real market value for the tax year of

property in the same area and property class.

(B) For each tax year after the first tax year in which the property is subject to the same partial

exemption, shall equal 103 percent of the property’s assessed value for the prior year or 100 percent of the

property’s maximum assessed value under this paragraph from the prior year, whichever is greater.

(b) The assessed value of the property shall equal the lesser of:

(A) The real market value of the property reduced by the partial exemption; or

(B) The maximum assessed value of the property under paragraph (a) of this subsection.

(2) Unless determined under a provision of law governing the special assessment, the maximum

assessed value subject to special assessment and the assessed value of property subject to special

assessment shall be determined as follows:

(a) The maximum assessed value:

(A) For the first tax year in which the property is specially assessed, shall equal the specially

assessed value of the property multiplied by the ratio, not greater than 1.00, of the average maximum

150-303-438 (Rev. 05-18)

17-9

assessed value over the average real market value for the tax year of property in the same area and

property class.

(B) For each tax year after the first tax year in which property is subject to the same special

assessment, shall equal 103 percent of the property’s assessed value for the prior year or 100 percent of

the property’s maximum assessed value subject to special assessment from the prior year, whichever is

greater.

(b) The assessed value of the property shall equal the lesser of:

(A) The specially assessed value of the property as determined under the law establishing the special

assessment; or

(B) The property’s maximum assessed value subject to special assessment as determined under

paragraph (a) of this subsection.

(3) As used in this section, “area” and “property class” have the meanings given those terms in ORS

308.149.

[2003 c.169 §6]

Generally

ORS 308.142 “Property” and “property tax account” dened.

For purposes of determining whether the assessed value of property exceeds the property’s maximum

assessed value permitted under section 11, Article XI of the Oregon Constitution:

(1) “Property” means:

(a) All property included within a single property tax account; or

(b) In the case of property that is centrally assessed under ORS 308.505 to 308.665, the total statewide

value of all property assessed to a company or utility that is subject to ORS 308.505 to 308.665.

(2) “Property tax account” means the administrative division of property for purposes of listing on the

assessment roll under ORS 308.215 for the tax year for which maximum assessed value is being determined

or, in the case of a private railcar company, the administrative division provided under ORS 308.640.

[1997 c.541 §7; 1999 c.223 §7]

ORS 308.146 Determination of maximum assessed value and assessed value; reduction

in maximum assessed value following property destruction; eect of conservation or

highway scenic preservation easement.

(1) The maximum assessed value of property equals 103 percent of the property’s assessed value

from the prior year or 100 percent of the property’s maximum assessed value from the prior year,

whichever is greater.

(2) Except as provided in subsections (3) and (4) of this section, the assessed value of property to

which this section applies equals the lesser of:

(a) The property’s maximum assessed value; or

(b) The property’s real market value.

(3) Notwithstanding subsections (1) and (2) of this section, the maximum assessed value and

assessed value of property must be determined as provided in ORS 308.149 to 308.166 if:

(a) The property is new property or new improvements to property;

(b) The property is partitioned or subdivided;

150-303-438 (Rev. 05-18)

17-10

(d) The property is first taken into account as omitted property;

(e) The property becomes disqualified from exemption, partial exemption or special assessment; or

(f) A lot line adjustment is made with respect to the property, except that the total assessed value

of all property affected by a lot line adjustment may not exceed the total maximum assessed value of the

affected property under subsection (1) of this section.

(4) Notwithstanding subsections (1) and (2) of this section, if property is subject to partial exemption

or special assessment, the property’s maximum assessed value and assessed value must be determined

as provided under the provisions of law governing the partial exemption or special assessment.

(5)(a) Notwithstanding subsection (1) of this section, when a portion of property is destroyed or

damaged due to fire or act of God, for the year in which the destruction or damage is reflected by a

reduction in real market value, the maximum assessed value of the property must be reduced to reflect

the loss from fire or act of God.

(b) This subsection doesn’t apply:

(A) To any property that is assessed under ORS 308.505 to 308.665.

(B) If the damaged or destroyed property is property that, when added to the assessment and tax

roll, constituted minor construction for which no adjustment to maximum assessed value was made.

(6)(a) If, during the period beginning on January 1 and ending on July 1 of an assessment year, any

real or personal property is destroyed or damaged, the owner or purchaser under a recorded instrument

of sale in the case of real property, or the person assessed, person in possession or owner in the case of

personal property, may apply to the county assessor to have the real market and assessed value of the

property determined as of July 1 of the current assessment year.

(b) The person described in paragraph (a) of this subsection must file an application for assessment

under this section with the county assessor on or before the later of:

(A) August 1 of the current year; or

(B) The 60th day following the date on which the property was damaged or destroyed.

subsection on or before December 31 of the current assessment year, if the application is accompanied by

a late filing fee of the greater of $200 or one-tenth of one percent of the real market value as of the most

recent assessment date of the property to which the application relates. The county assessor shall deposit

a late filing fee collected under this paragraph in the county general fund.

(d) If the conditions described in this subsection are applicable to the property, then notwithstanding

ORS 308.210, the property must be assessed as of July 1, at 1:00 a.m. of the assessment year, in the manner

otherwise provided by law.

(7)(a) Paragraph (b) of this subsection applies if:

(A) A conservation easement or highway scenic preservation easement is in effect on the assessment date;

(B) The tax year is the first tax year in which the conservation easement or highway scenic

preservation easement is taken into account in determining the property’s assessed value; and

or following the date the easement was recorded.

150-303-438 (Rev. 05-18)

17-11

(b) The assessed value of the property must be as determined in the report issued under ORS

271.729, but may be further adjusted by changes in value as a result of any of the factors described in

ORS 309.115(2), to the extent adjustments don’t cause the assessed value of the property to exceed the

property’s maximum assessed value.

(8)(a) Notwithstanding subsection (1) of this section, when a building is demolished or removed from

property, for the year in which the demolition or removal of the building is reflected by a reduction in

real market value, the maximum assessed value of the property may be reduced to reflect the demolition

or removal of the building.

(b) This subsection doesn’t apply:

(A) To any property that is assessed under ORS 308.505 to 308.665.

(B) If the demolished or removed property is property that, when added to the assessment and tax

roll, constituted minor construction for which no adjustment to maximum assessed value was made.

property owner must file an application with the county assessor after the demolition or removal and on

or before December 31 following the assessment date if the demolition or removal occurred:

(A) Before the January 1 assessment date; or

(B) During the period beginning January 1 and ending on the July 1 assessment date if the property

owner has applied to have the real market and assessed value of the property determined under

subsection (6) of this section.

(d) As used in this subsection:

(A) “Minor construction” has the meaning given that term in ORS 308.149.

(B) “Property owner” means an owner or purchaser under a recorded instrument of sale in the case

of real property, or the person assessed, person in possession or owner in the case of personal

[1997 c.541 §6; 1999 c.1003 §1; 2001 c.925 §12; 2003 c.46 §15; 2003 c.169 §7; 2007 c.450 §1; 2007 c.516 §1; 2009 c.443 §1; 2015

c.92 §1; 2015 c.480 §1]

Special determinations of value

ORS 308.149 Denitions for ORS 308.149 to 308.166. As used in ORS 308.149 to 308.166:

(1) “Area” means:

(a) The county in which property, the maximum assessed value of which is being adjusted, is located,

including the area of any city located within the county that has adopted an ordinance or resolution

pursuant to ORS 308.151;

(b) The city in which property, the maximum assessed value of which is being adjusted, is located, if

the city has adopted an ordinance or resolution pursuant to ORS 308.151; or

that is centrally assessed under ORS 308.505 to 308.681.

(2)(a) “Average maximum assessed value” means the value determined by dividing the total

maximum assessed value of all property in the same area in the same property class by the total number

of properties in the same area in the same property class.

(b) In making the calculation described under this subsection, the following property isn’t taken into

account:

(A) New property or new improvements to property;

(B) Property that is partitioned or subdivided;

150-303-438 (Rev. 05-18)

17-12

(D) Property that is added to the assessment and tax roll as omitted property; or

(E) Property that is disqualified from exemption, partial exemption or special assessment.

maximum assessed value in the case of property centrally assessed under ORS 308.505 to 308.665.

(3)(a) “Average real market value” means the value determined by dividing the total real market value

of all property in the same area in the same property class by the total number of properties in the same

area in the same property class.

(b) In making the calculation described under this subsection, the following property isn’t taken into

account:

(A) New property or new improvements to property;

(B) Property that is partitioned or subdivided;

(D) Property that is added to the assessment and tax roll as omitted property; or

(E) Property that is disqualified from exemption, partial exemption or special assessment.

real market value in the case of property centrally assessed under ORS 308.505 to 308.665.

(4) “Lot line adjustment” means any addition to the square footage of the land for a real property tax

account and a corresponding subtraction of square footage of the land from a contiguous real property

tax account.

(5) “Minor construction” means additions of real property improvements, the real market value of

which doesn’t exceed $10,000 in any assessment year or $25,000 for cumulative additions made over five

assessment years.

(6)(a) “New property or new improvements” means changes in the value of property as the result of:

(A) New construction, reconstruction, major additions, remodeling, renovation or rehabilitation of

property;

(B) The siting, installation or rehabilitation of manufactured structures or floating homes; or

property to the property tax account.

(b) “New property or new improvements” doesn’t include changes in the value of the property as

the result of:

(A) General ongoing maintenance and repair; or

(B) Minor construction.

assessment year is located in a different tax code area than on January 1 of the preceding assessment

year.

(7) “Property class” means the classification of property adopted by the Department of Revenue by

rule pursuant to ORS 308.215, except that in the case of property assessed under ORS 308.505 to 308.665,

“property class” means the total of all property set forth in the assessment roll prepared under ORS

308.540.

[1997 c.541 §9; 1999 c.579 §20; 2012 c.30 §2; 2017 c.414 §3]

150-303-438 (Rev. 05-18)

17-13

308.151 Certain cities authorized to dene “area” as city by ordinance or resolution;

supermajority required; software costs withheld from property taxes.

(1) This section applies to a city if the majority of the population of the city resides in a county with a

population greater than 700,000.

(2)(a) For purposes of ORS 308.149, the governing body of a city may adopt an ordinance or resolution

defining “area” to mean the city.

(b) An ordinance or resolution may be adopted under this section only after a public hearing and

must be approved by a three-fifths majority of the members of the governing body of the city.

(3) A governing body that adopts an ordinance or resolution under this section must notify the

county assessor on or before January 1 of the assessment year for which the city first intends the

definition to apply.

(4) The governing body of a city may not adopt an ordinance or resolution under this section, or

repeal such an ordinance or resolution, more often than once in five years.

(5)(a) The county assessor may withhold from property tax distributions made under ORS 311.395 to

cities located in the county amounts for the actual costs incurred by the county for software upgrades

required because of the adoption by the cities of ordinances and resolutions under this section.

(b) Amounts withheld under this subsection:

(A) Shall be in proportion to the total property taxes imposed in the current tax year by cities

adopting ordinances or resolutions under this section; and

(B) May not exceed $60,000 in total. [2017 c.414 §2]

Note: Section 5, chapter 414, Oregon Laws 2017, provides:

Sec. 5. (1) A definition of “area” adopted under section 2 of this 2017 Act [308.151] may not be applied

to any assessment year beginning before January 1, 2019.

(2) Notwithstanding subsection (1) of this section, a definition of “area” adopted under section 2 of

this 2017 Act may be applied to assessment years beginning on or after January 1, 2018, with the written

consent of the assessor of the county in which the city adopting the definition is located. [2017 c.414 §5]

ORS 308.153 New property and new improvements to property.

(1) If new property is added to the assessment roll or improvements are made to property as of

January 1 of the assessment year, the maximum assessed value of the property is the sum of:

(a) The maximum assessed value determined under ORS 308.146; and

(b) The product of the value of the new property or new improvements determined under subsection

(2)(a) of this section multiplied by the ratio, not greater than 1.00, of the average maximum assessed value

over the average real market value for the assessment year.

(2)(a) The value of new property or new improvements equals the real market value of the new

property or new improvements reduced (but not below zero) by the real market value of retirements from

the property tax account.

(b) If the maximum assessed value of property is adjusted for fire or act of God or for demolition or

removal of a building under ORS 308.146, the reduction in real market value due to fire or act of God or

demolition or removal of the building may not be considered to be a retirement under this subsection.

(3)(a) For purposes of this section, property shall be considered new property, or new improvements

to property, for a tax year if the property:

(A) Constituted an integral part of the land or improvements on the assessment date or the date of a

site inspection by the assessor for appraisal purposes for any prior tax year;

150-303-438 (Rev. 05-18)

17-14

(B) Has been continuously in existence since the prior tax year; and

(b) The following is evidence that the property wasn’t included in the assessment of the land or

improvements for a prior tax year:

(A) There is no express reference to the property in the records of the assessor; and

(B) The assessor’s valuation of the land or improvements of which the property is an integral part

increases as a result of inclusion of the property in the assessment.

(4) The property’s assessed value for the year equals the lesser of:

(a) The property’s maximum assessed value; or

(b) The property’s real market value.

[1997 c.541 §11; 1999 c.1003 §4; 2001 c.509 §9; 2007 c.516 §2; 2015 c.97 §2; 2015 c.480 §2]

ORS 308.156 Subdivision or partition; rezoning; omitted property; disqualication from

exemption, partial exemption or special assessment.

(1) If property is subdivided or partitioned after January 1 of the preceding assessment year and on

or before January 1 of the current assessment year, then the property’s maximum assessed value shall be

established as provided under this section.

(2) If property is rezoned and, after January 1 of the preceding assessment year and on or before

January 1 of the current assessment year, the property is used consistently with the rezoning, the

property’s maximum assessed value shall be established under this section.

(3)(a) For the first tax year for which property is added to the property tax account as omitted

property, the property’s maximum assessed value shall be established under this section.

(b) For tax years subsequent to the first tax year for which property is added to the property tax

account as omitted property, the property’s maximum assessed value shall be determined as otherwise

provided by law, taking into account the maximum assessed value of the property as determined under

this section.

(4)(a) If property was subject to exemption, partial exemption or special assessment as of the

January 1 assessment date of the preceding assessment year and is disqualified from exemption, partial

exemption or special assessment as of the January 1 of the current assessment year, the property’s

maximum assessed value shall be established under this section.

(b) If property described in this subsection is eligible for a different type of exemption, partial

exemption or special assessment as of January 1 of the current assessment year, the property’s maximum

assessed value shall be established under the provision granting the partial exemption or special

assessment.

(5) The property’s maximum assessed value shall be the sum of:

(a) The maximum assessed value determined under ORS 308.146 that is allocable to that portion of

the property not affected by an event described in subsection (1), (2), (3), or (4)(a) of this section; and

(b) The product of the real market value of that portion of the property that is affected by an event

described in subsection (1), (2), (3), or (4)(a) of this section multiplied by the ratio, not greater than 1.00, of

the average maximum assessed value over the average real market value for the assessment year.

(6) The property’s assessed value for the year shall equal the lesser of:

(a) The property’s maximum assessed value; or

(b) The property’s real market value.

150-303-438 (Rev. 05-18)

17-15

(7) The Department of Revenue shall provide by rule the method by which the allocations described

in subsection (5) of this section are to be made.

[1997 c.541 §13; 1999 c.500 §1; 1999 c.579 §21; 2001 c.509 §10; 2005 c.213 §1; 2017 c.414 §4]

ORS 308.159 Lot line adjustments.

If a lot line adjustment is made with respect to property, the maximum assessed value of the property

may be adjusted to reflect the lot line adjustment, but the total maximum assessed value of all property

affected by the lot line adjustment may not exceed the total maximum assessed value of the affected

property determined under ORS 308.146, or, if applicable, under ORS 308.153 or 308.156.

[1997 c.541 §15; 1999 c.21 §16]

ORS 308.162 Property tax account modications.

(1) If two or more property tax accounts are merged into a single account, or if property that is

attributable to one account is changed to another account, the maximum assessed value of the property

may be adjusted to reflect the merger or change, but the total maximum assessed value for all affected

accounts may not exceed the total maximum assessed value the accounts would have had under ORS

308.146 or 308.149 to 308.166 if the merger or change hadn’t occurred.

(2) If a single property tax account is divided into two or more accounts, the maximum assessed

value of all property affected by the division may not exceed the total maximum assessed value of the

affected property determined under ORS 308.146 or 308.149 to 308.166.

[1997 c.541 §16a]

ORS 308.166 Ordering provisions when property is subject to multiple special

determinations of value.

(1) If the maximum assessed value of property is subject to adjustment under both ORS 308.153

and 308.156, the maximum assessed value must first be determined under ORS 308.153 and then further

adjusted under ORS 308.156.

(2) If the maximum assessed value of property is subject to adjustment under both ORS 308.153

and 308.159, the maximum assessed value must first be determined under ORS 308.153 and then further

adjusted under ORS 308.159.

(3) If the maximum assessed value of property is subject to adjustment under both ORS 308.156

and 308.159, the maximum assessed value must first be determined under ORS 308.156 and then further

adjusted under ORS 308.159.

(4) If the maximum assessed value of property is subject to adjustment under all of ORS 308.153,

308.156 and 308.159, the maximum assessed value must first be determined under subsection (1) of this

section and then further adjusted under ORS 308.159.

(5) If the maximum assessed value of property is subject to adjustment for fire or act of God, the

maximum assessed value must first be determined under ORS 308.146(5)(a) and then may be adjusted as

provided in subsections (1) to (4) of this section.

(6) If the maximum assessed value of property is subject to adjustment for demolition or removal of

a building, the maximum assessed value must first be determined under ORS 308.146(8)(a) and then may

be adjusted as provided in subsections (1) to (4) of this section.

[1997 c.541 §17; 1999 c.1003 §6; 2003 c.30 §1; 2009 c.443 §2; 2015 c.480 §3]

150-303-438 (Rev. 05-18)

17-16

ORS 311.234 Correction in maximum assessed value; requirements; limitation; ling

deadline; appeals.

(1) The current owner of property or other person obligated to pay taxes imposed on property may

petition the county assessor for a correction in the maximum assessed value of the property for the

current tax year for the circumstances described in subsection (2) of this section.

(2) The assessor shall correct the maximum assessed value of the property for the current tax year if,

in the petition filed under this section, the petitioner demonstrates:

(a) A difference between the actual square footage of the property as of the assessment date for the

current tax year and the square footage of the property shown in the records of the assessor for the tax

year.

(b) That new property, or new improvements to property, added to the tax roll in a prior tax year

didn’t exist as of the assessment date for that prior tax year or any subsequent tax year.

(3)(a) A correction made under subsection (2)(a) of this section must be proportional to the change

in the real market value for the current tax year that is due to the correction of the square footage of the

property.

(b) A correction made under subsection (2)(b) of this section:

(A) Must reflect, in a manner determined by the assessor, the removal of the new property or new

improvements to property from the assessment and tax rolls as accepted by the assessor.

(B) May not be made to the extent that the assessor finds that the new property or new

improvements to property existed on the assessment date of a prior tax year and the petition is best

construed as demonstrating a difference in the nature, extent or value of the new property or new

improvements to property.

(4) Notwithstanding subsection (3) of this section, a correction made under this section may not

cause the maximum assessed value of the property to increase by more than three percent from the

maximum assessed value of the property for the preceding tax year.

(5) A petition filed under this section must be on the form and contain the information prescribed

by the Department of Revenue and must be filed with the county assessor on or before December 31 of

the current tax year.

(6) A decision by the assessor pursuant to a petition filed under this section may be appealed under

ORS 305.275.

[2001 c.764 §2; 2007 c.516 §3; 2009 c.443 §4; 2015 c.39 §1; 2015 c.97 §1a]

Administrative rules for MAV and AV

OAR 150-308-0100 Determining maximum assessed value when the property class is

changed.

(1) The single act of changing the property classification, described in OAR 150-308-0310, to better

reflect the highest and best use of the property, doesn’t qualify as an exception to the 3 percent limitation

on growth in the maximum assessed value (MAV), as described in ORS 308.146(1).

(2) Any exception value added to the base MAV after the change is made to the property class will

be calculated by applying the changed property ratio of the current property class to the real market

value of any qualified exception identified in ORS 308.146.

150-303-438 (Rev. 05-18)

17-17

OAR 150-308-0110 Reduction of maximum assessed value (MAV) for property destroyed

or damaged by re or act of God.

(1) “Fire or act of God” has the same meaning and restrictions as used in ORS 308.425 including the

arson restriction of ORS 308.440.

(2) As used in ORS 308.146(5)(a), “reduction in real market value” means that the total real market

value (RMV) after adjustment is less than it would otherwise have been, had the damage or destruction

by fire or act of God not occurred.

(3) When a portion of property is destroyed or damaged by fire or act of God, use the following

procedure to adjust MAV for the year in which the destruction or damage is reflected by a reduction in RMV.

Note: An example is incorporated into the steps with the following assumptions:

2008–09 MAV = $187,379.

2008–09 (01-01-08) total RMV equals $300,000.

2008–09 assessed value (AV) = $187,379.

09-01-08 the house is destroyed by fire. The house RMV for 01-01-08 was $180,000.

There is no market trending in this area.

Step 1: Multiply the prior year AV by 1.03. Compare the result to the prior year MAV to determine the

larger amount. The larger amount becomes the current year MAV (unadjusted) as if the account hadn’t

changed, such as the larger of: Prior year AV x 1.03 or prior year MAV = current year MAV of unchanged

account.

Example: Larger of: $187,379 x 1.03 = $193,000 or $187,379. Current year MAV = $193,000.

Step 2: Determine the prior year’s RMV for the affected portion. The affected portion is that part of

the property that was destroyed or damaged by fire or act of God. RMV of the loss is RMV of the affected

portion.

Example: RMV of affected portion equals $180,000.

Step 3: Subtract RMV of the affected portion (Step 2) from the prior year total RMV to determine

RMV of the unaffected portion, such as the prior year total RMV - RMV of the affected portion = RMV of

the unaffected portion.

Example: $300,000 - $180,000 = $120,000.

Step 4: Divide RMV of the unaffected portion (Step 3) by the total prior year RMV to determine

the percentage of unaffected property, such as RMV of the unaffected portion / total prior year RMV =

percentage of unaffected property.

Example: $120,000 ÷ $300,000 = 40%.

Step 5: Multiply the unadjusted MAV (Step 1) by the percentage of unaffected property (Step 4) to

determine MAV that has been adjusted to reflect the loss from fire or act of God (MAV attributable to

the unaffected portion only), such as the unadjusted MAV x percentage of unaffected property = MAV

adjusted to reflect the loss from fire or act of God.

Example: $193,000 x 40% = $77,200.

(5) As used in section (4), the “year” in which RMV is reduced due to fire or act of God can be either:

(a) The assessment year.

(b) The tax year if RMV is determined as of July 1 under ORS 308.146(6) or 308.428.

150-303-438 (Rev. 05-18)

17-18

OAR 150-308-0120 Reduction of maximum assessed value (MAV) when a building is

demolished or removed.

(1) As used in ORS 308.146(8)(a), “reduction in real market value” means the total real market value

(RMV) after adjustment is less than it would otherwise have been, had the demolishment or removal not

occurred.

(2) As used in section (3) of this rule, the “year” in which RMV is reduced due to demolishment or

removal is either:

(a) The assessment year, or

(b) The tax year, if RMV is determined as of July 1 under ORS 308.146(6).

(3) When a building is demolished or removed, use the following procedure to adjust the maximum

assessed value (MAV) for the year in which the demolishment or removal is reflected by a reduction in RMV.

Note: An example is incorporated into the steps with the following assumptions:

2007–08 MAV = $87,379.

2007–08 (1-1-07) total RMV = $100,000.

2007–08 AV = $87,379.

There is no market trending in this area.

On September 1, 2007 the house is demolished. The RMV of the house for 1-1-07 was $75,000.

Step 1: Perform the 103 percent test as if the property hadn’t changed. Multiply the prior year

assessed value (AV) by 1.03. Compare the result to the prior year MAV to determine the larger amount.

The larger amount becomes the current year MAV (unadjusted) as if the account hadn’t changed.

Larger of: Prior year AV x 1.03 or prior year MAV = current year MAV of unchanged account.

Example: Larger of: $87,379 x 1.03 = $90,000 or $87,379. Current year MAV = $90,000.

Step 2: Determine the prior year RMV for the affected portion. The affected portion is the building or

buildings that were demolished or removed. The RMV of the loss is RMV of the affected portion.

Example: RMV of affected portion = $75,000.

Step 3: Determine the prior year RMV for the unaffected portion. Subtract RMV of the affected

portion (from Step 2) from the prior year total RMV to determine RMV of the unaffected portion.

Prior year total RMV – RMV of the affected portion = RMV of the unaffected portion.

Example: $100,000 - $75,000 = $25,000.

Step 4: Determine the percentage of the unaffected property. Divide RMV of the unaffected portion

(from Step 3) by the total prior year RMV to determine the percentage of the unaffected property.

RMV of the unaffected portion ÷ total prior year RMV = percentage of the unaffected property.

Example: $25,000 ÷ $100,000 = 25%.

Step 5: Determine MAV that has been adjusted to reflect the loss. Multiply the unadjusted MAV

(from Step 1) by the percentage of the unaffected property (from Step 4) to determine an MAV that has

been adjusted to reflect the loss from demolishment or removal (MAV attributable to the unaffected

portion only).

Unadjusted MAV x percentage of unaffected property = MAV adjusted to reflect the loss from

demolishment or removal.

150-303-438 (Rev. 05-18)

17-19

Example: $90,000 x 25% = $22,500.

OAR 150-308-0130 Denitions

(1) For purposes of ORS 308.149:

(a) “New construction” means any new structure, building, addition, or improvement to the land,

including site development.

(b) “Reconstruction” means to rebuild or replace an existing structure with one of comparable utility.

footage to an existing structure.

(d) “Remodeling” means a type of renovation that changes the basic plan, form, or style of the

property.

(e) “Renovation” means the process by which older structures or historic buildings are modernized,

remodeled or restored.

(f) “Rehabilitation” means to restore to a former condition without changing the basic plan, form, or

style of the structure.

(2)(a) For purposes of ORS 308.149 “general ongoing maintenance and repair” means activity that:

(A) Preserves the condition of existing improvements without significantly changing design or

materials and achieves an average useful life that is typical of the type and quality so the property

continues to perform and function efficiently;

(B) Doesn’t create new structures, additions to existing real property improvements or replacement

of real or personal property machinery and equipment;

reconstruction, major additions, remodeling, renovation, or rehabilitation; and

(D) For income producing properties is part of a regularly scheduled maintenance program.

(b) Regardless of cost, the value of general ongoing maintenance and repairs may not be included as

additions for the calculation of maximum assessed value.

OAR 150-308-0140 Computation of changed property ratio for centrally assessed

property.

The ratio of average maximum assessed value to average real market value, also known as the changed

property ratio, shall be rounded to two decimal places for purposes of assessed value calculation. See

OAR 150-308-0570.

OAR 150-308-0150 Net capitalized additions.

(1) Definitions:

(a) For purposes of centrally-assessed property, the term “improvements” means changes in the

value of property (as defined in 1997 OR Law Ch. 541, Sect. (7)(1)(b)) as the result of new construction,

reconstruction, major additions, remodeling, renovation, rehabilitation or acquisition of property except

on-going maintenance and repair. “Improvements” are measured by changes in Oregon net capitalized

additions as defined below.

(b) The term “capitalized” refers to company expenditures for certain assets with a useful life

typically extending beyond one year. These assets are aggregated in fixed asset accounts subject to

annual depreciation charges, rather than repair and maintenance expense accounts. Examples include

acquisitions of or changes to buildings, equipment, and personal property such as furniture and fixtures.

150-303-438 (Rev. 05-18)

17-20

the prior and current years. For the 1997–98 implementation year, additions include the change from the

1995–96 base year. In all subsequent years, additions include the change from the prior year.

(d) The term “net capitalized additions” means “net additions” as calculated using capitalized costs

in the company’s annual reports.

Examples:

(A) For the current year, a new transformer is added for $100,000 and there are no retirements. The

net addition is $100,000.

(B) A seven-year old transformer with a ten-year life expectancy (net book value of $30,000) is retired

from service and replaced by a new transformer (cost $100,000). The net addition is $70,000, reflecting the

additional 7 years’ life expectancy. (The remaining $30,000 is considered maintenance).

transformers. No other transformers are retired; however, $30,000 of other capitalized equipment is

retired. The net addition is still $70,000.

Typical fixed asset accounting procedures provide for annual removal of retired assets. Using successive

years’ account totals to determine maximum assessed value will result in a netting of retirements against

true improvements.

(D) Same as (B) above, except that no new transformer is added. The net capitalized addition is $0,

since there have been no improvements.

(E) If the change in Oregon assets can only be determined by an allocation of system additions, then

these changes shall be allocated to Oregon in the same manner as other company property.

(F) In the case of mobile property, additions shall also include the change in presence in the state as

measured by the change in allocation factors.

(e) The term “ongoing maintenance and repair” means expenditures which the company has elected

to record as an expense in repair and maintenance accounts rather than aggregate in a fixed asset account as

described (1)(b). Items may be expensed because the useful life of the expenditures doesn’t extend over one

year, or because their associated dollar amounts are too small to qualify as a capital asset under company

capitalization threshold guidelines. Typical examples include spare parts and maintenance supplies.

Example:

A private car company maintains a capitalization threshold for its equipment accounts of $2000.

The company frequently makes purchases of spare parts for its repair shops. One of these was a bulk

purchase of miscellaneous car bearings for $1000, and the company expensed this item. The company

also decided to upgrade half of its fleet with a $20,000 investment in specialized bearings which would

allow the cars to travel at significantly higher speeds. This investment was capitalized. The expenditure

of $1000 would be considered “ongoing maintenance and repair.” The expenditure of $20,000 would be

considered an “improvement.” The fact that each expenditure is for bearings isn’t controlling.

(2) Application of Definitions:

(a) In the case of companies which don’t keep fixed asset accounts, the department may make a

reasonable analysis of reported assets using capitalization practices under accepted accounting principles.

(b) In cases where the Department of Revenue annual company reporting is based on aggregate account

balances, the department won’t undertake an item-by-item analysis of the amount and purpose of each

expenditure within statutory appraisal timelines. Expensed items shall be considered “ongoing maintenance

and repair” and net capitalized additions shall be considered “improvements.” The department may undertake

an item-by-item analysis when the appraisal is challenged by the taxpayer in litigation or otherwise.

for different types of expenditures. The department recognizes that certain assets which qualify as

150-303-438 (Rev. 05-18)

17-21

improvements under the law may be expensed as a matter of company policy. In these cases, the

department shall presume that the minor construction thresholds of $10,000 and $25,000 are addressed by

this accounting convention. The department may make a reasonable adjustment when the application of

this approach results in a material error.

(3) For purposes of computing maximum assessed value for centrally-assessed property, the aggregate

Oregon net capitalized additions shall be adjusted to reflect their real market value as a result of wear,

aging, and the impact of market conditions since placement in service. The net capitalized additions shall

then be multiplied by the statewide maximum assessed value to real market value ratio for centrally-

assessed property (always 1.00 or less). The maximum assessed value shall be compared to the real market

value, and the lesser of the two shall be placed on the roll as the company’s assessed value.

OAR 150-308-0160 Minor construction.

(1) Definition: “Minor construction” is an improvement to real property that results in an addition

to real market value (RMV), but doesn’t qualify as an addition to maximum assessed value (MAV) due

to a value threshold. The value threshold is an RMV of over $10,000 in any one assessment year, or over

$25,000 for all cumulative additions made over five assessment years.

(2) Minor construction doesn’t include general ongoing maintenance and repairs.

(3) When testing the over $25,000 threshold, use the cumulative RMV of all minor and major

construction over a period not to exceed five consecutive assessment years.

(a) Minor and major construction values aren’t market trended.

(b) Values for retirements aren’t considered in the threshold test.

to MAV are subtracted from the minor construction cumulative RMV.

(4) Once the over $25,000 threshold is met, use the following steps to calculate MAV adjustment:

(a) Use minor construction values that aren’t market trended.

(b) Make adjustments for any retirements from the prior assessment year. The net value of additions

and retirements can’t go below zero.

(d) Reset the cumulative RMV for minor construction to zero and restart the five-year period.

(5) For implementation of the five-year period, the first year is 1997–98 reflecting minor construction

added after July 1, 1995, and on or before July 1, 1997.

The following examples demonstrate the over $25,000 threshold. RMVs in the following examples aren’t

market trended and/or depreciated.

150-303-438 (Rev. 05-18)

17-22

Example 1—Over $25,000 not met

Year

New improvement

value

Cumulative

total Comment

1 $8,000 $8,000 Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

2 None $8,000 No change.

3 $7,000 $15,000 Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

4 None $15,000 No change.

5 $5,000 $20,000 Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

Example 2—Over $25,000 not met, prior years drop off

Year

New improvement

value

Cumulative

total Comment

1 $8,000 $8,000 Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

2 None $8,000 No change.

3 $5,000 $13,000 Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

4 None $13,000 No change.

5 $7,000 $20,000 Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

6 $11,000 $23,000 Year 6 qualies individually as is over $10,000.

Prior years still don’t qualify, as 5 year cumulative

total is under $25,001. (Remember, year 1 has

dropped off the 5 year cumulation.

$11,000 x CPR = adjustment to MAV.)

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17-23

Example 3—Cumulative RMV reset

Year

New improvement

value

Cumulative

total Comment

1 $8,500 $8,500 Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

2 $100,000 $108,500 Year 2 qualies individually as RMV is over $10,000.

Year 1 qualies as 5 year cumulative total is over

$25,000. $108,500 x CPR = adjustment to MAV.

Cumulative total and ve year period reset for the

next year.

1 $9,500 $9,500 Cumulative total and ve year period have reset.

Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

Example 4—Cumulative RMV reset

Year

New improvement

value

Cumulative

total Comment

1 $8,000 $8,000 Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

2 $5,000 $13,000 Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

3 $15,000 $28,000 Year 3 qualies individually as RMV is over $10,000.

Years 1 and 2 qualify as 5 year cumulative total is

over $25,000. $28,000 x CPR = adjustment to MAV.

Cumulative total and ve year period reset for the

next year.

1 None $0 Cumulative total and ve year period have reset.

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17-24

Example 5—Individual year and cumulative year adjustments

Year

New improvement

value

Cumulative

total Comment

1 $5,000 $5,000 Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

2 None $5,000 No change.

3 $15,000 $20,000 Year 3 qualies individually as RMV is over $10,000.

Year 1 doesn’t qualify as cumulative RMV is under

$25,001. $15,000 x CPR = adjustment to MAV.

4 $7,000 $27,000 Years 4 and 1 qualify as cumulative RMV is over

$25,000. $12,000 x CPR = adjustment to MAV.

Cumulative total and ve year period reset for the

next year.

1 None $0 Cumulative total and ve year period have reset.

Example 6—Removal of destroyed minor construction

Year

New improvement

value

Cumulative

total Comment

1 $8,000 $8,000 Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

2 $5,000 $13,000 Doesn’t qualify as an adjustment to MAV. Individual

year RMV is under $10,001 and cumulative RMV is

under $25,001.

3 -$8,000 $5,000 Improvement added in year 1 is destroyed and is

removed from the cumulative RMV pool.

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OAR 150-308-0170 Establishing a changed property ratio.

(1) The assessor must establish a CPR for property classes 0 through 8 each assessment year. For

determining the ratio of the average maximum assessed value over the average real market value, only the

first digit of the property class needs to be recognized. These ratios must be rounded to three decimals.

(a) Property classes may be combined to arrive at a ratio. The resulting ratio would become CPR for

each property class used to calculate the ratio.

(b) For specially assessed properties , only the non-specially assessed portion of value will be used

to determine a ratio. For specially assessed properties such as farm or timber, the assessor may use either

of the following methods to arrive at a CPR:

(A) The non-specially assessed portion of the unchanged 5-x-x or 6-x-x property classes may be used

to create CPR for those classes; or,

(B) The 4-x-x property class values may be combined with the non-specially assessed values from the

5-x-x and/or 6-x-x property classes to calculate the ratio. The resulting ratio would become CPR for each

property class used to calculate the ratio.

(2) Residential property class (1-x-x) includes all manufactured structures and floating homes not

assigned to other property classes.

(3) For locally and centrally assessed property, the value of CPR may not be greater than (1.000).

OAR 150-308-0180 Denition of aected.

“Affected property” means property that is subject to one or more of the following events: partitioned or

subdivided; added to the account as omitted property; rezoned and used consistent with the rezoning;

disqualified from a special assessment, exemption, or partial exemption.

OAR 150-308-0190 Subdivided and partitioned property MAV.

For purposes of calculating maximum assessed value when a property is subdivided or partitioned, the

portion of the property that is “affected” includes:

(1) The entire land that was subdivided or partitioned into smaller lots or parcels, if any.

(2) The improvements if one or more of the following apply:

(a) The act of subdividing or partitioning the land results in the apportionment of a single

improvement (building or structure) to more than one tax lot.

Example 1: A lot improved with a duplex is partitioned such that the duplex is split into two single-family residences.

(b) The act of subdividing or partitioning the land changes the market’s perception of the value of

the improvements.

Example 2: A partition includes a vacant warehouse that was previously part of a large industrial complex. Prior

to the partition, the market perceived the warehouse as unnecessary to the industrial complex and of little or no

value. After the partition, the warehouse is a stand-alone improvement no longer associated with the industrial

complex. The market now perceives the warehouse as a property that can be used for many different purposes with

considerable value. By contrast, there is no change in market perception regarding the remaining improvements in

the industrial complex.

Example 3: The legal subdivision of an apartment building into condominium units.

150-303-438 (Rev. 05-18)

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OAR 150-308-0200 Rezoned property—calculating maximum assessed value (MAV).

(1) For the purposes of determining MAV under ORS 308.142 to 308.166 and this rule, the following

definitions apply

(a) “Primary use” means an activity or combination of activities of chief importance on the site and

is one of the main purposes for which the land or structures are intended, designed, or ordinarily used.

A site may have more than one primary use, such as mixed use buildings with commercial use on the

ground floor and residential use on upper floors.

(b) “Accessory use” means a use or activity that is incidental and subordinate to the primary use of

the property. A use designated as “accessory “or “auxiliary” by an applicable zoning code is presumed

to be accessory unless that designation is clearly inconsistent with the ordinary legal meaning of

“accessory,” as determined by relevant criteria such as the relative size of the area used and the impact of

the use on the surrounding neighborhood. Accessory uses may include, but are not limited to:

(A) In residential zones, recreational activities, hobbies, home businesses, or pet raising;

(B) In commercial office zones, cafeterias, health facilities, or other amenities primarily for employees;

(D) In industrial zones, storage, rail spurs, lead lines, or docks;

(E) Parking in any zone, unless commercial parking is designated or allowed as a primary use, such

as for parking structures; and

(F) Accessory structures such as accessory dwelling units limited in size, garages, car ports, decks,

fences, and storage sheds.

(d) “Floor area ratio” means the relationship of the total allowed area of above ground floors of a

building to the total area of the parcel of land on which it is sited.

(e) “Site coverage ratio” means the relationship of the total area covered by the footprint of a building

to the total area of the parcel of land on which it is sited.

(f) “Rezoned” means on or after July 1, 1995, the governmental body that regulates zoning:

(A) Made any change in the zone designation, including but not limited to an overlay, plan district,

or floating zone designation, of the property;

(B) Made a change in one or more of the permitted primary types of use of the property; or

(i) The number of dwelling units, other than accessory dwelling units, allowed per acre, or other legal

limitation on the number of dwelling units, other than accessory dwelling units, in a given area;

(ii) The allowed floor area ratio; or

(iii) The allowed site coverage ratio.

Example 1: The zone designation on a zoning map is changed from light industrial to commercial.

Property has been rezoned.

Example 2: Prior to July 1, 1995, a city’s zoning ordinances allowed a small degree of office space,

ordinarily a commercial use, in an industrial zone as accessory to industrial uses. No other commercial

uses were permitted in that zone. The city later amends the zoning ordinances to allow office space as

a primary use of property in those industrial zones. Because the zone now permits both commercial

and industrial uses as primary uses, the permitted primary types of use of the property have changed.

Property has been rezoned.

150-303-438 (Rev. 05-18)

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Example 3: Any amendment is made to the zoning ordinances increasing the number of dwelling

units, other than accessory dwelling units, allowed per acre. Property has been rezoned.

(D) “Rezoned” doesn’t include:

(i) Changes in the authorized uses of the property that were imposed before July 1, 1995, by the

governmental body that regulates zoning of the property;

(ii) Satisfaction of conditions or restrictions on the authorized uses of the property that were

imposed before July 1, 1995, by the governmental body that regulates zoning of the property;

(iii) Changes in the authorized types of use of the property imposed by a governmental body other

than the government that regulates zoning of the property; or

(iv) Changes in allowed accessory uses.

Example 4: The ordinances governing single-family residential zones are amended to allow a single

accessory structure, designated as an “accessory dwelling unit.” The accessory dwelling unit is limited

in size either to a maximum square footage or in proportion to the primary dwelling. The zoning

amendment changes the allowed accessory uses of property. Property has not been rezoned.

Example 5: The ordinances governing single-family residential zones are amended to allow the

operation of a home business in a residential zone. The amendment designates the home business as

an “accessory use” and imposes limitations on the business to preserve the residential character of the

zone in which it is conducted, such as limitations on the type of business conducted or the number of

employees allowed. The business activity is incidental to the primary use of the home. Property has not

been rezoned.

Example 6: An amendment is made to the zoning ordinance to allow high-technology manufacturing

in a light industrial zone. The zone designation has not changed. Light industrial use and the new use of

high-technology manufacturing are both within the same type of use, which is industrial. Property has

not been rezoned.

Example 7: An amendment is made to the zoning ordinance to allow a beauty school in a commercial

office zone. The zone designation has not changed. Commercial office use and the new use of a beauty

school are both within the same type of use, which is commercial. Property has not been rezoned.

(g) “Used consistently with the rezoning” means the property is put to a newly permitted use under

the rezoning. It does not include a use that was permitted under the prior zoning. It often includes, but

does not require, a physical change to the property.

Example 8: Single-family dwellings are a permitted use under multi-family zoning. If a vacant parcel

is rezoned from single- to multi-family, and a new single-family house is later constructed, the new use

is not consistent with the rezoning because the use was allowed prior to the rezoning. The exception for

property rezoned and used consistently with the rezoning has not occurred.

Example 9: A house in a residential zone is used as a commercial office. The residential zone is

changed to a commercial zone in a later year. The property is used consistently with the rezoning

because the commercial use was previously a nonconforming use, and is now a newly permitted use

under the rezoning. The exception for property rezoned and used consistently with the rezoning has

occurred.

Example 10: A city decides to revise their zoning code, and the zone designation for a commercial

zone on a map is changed from “C5” to “GC.” However, there is no change to the permitted uses.

Although property has been rezoned, no property will be “used consistently with the new zoning”

because all of the uses were permitted under the prior zoning.

(2) For the purposes of calculating maximum assessed value when a property is rezoned and used

consistently with the rezoning, the portion of the property that is “affected” includes:

(a) Improvements that are converted to the newly allowed use; and

150-303-438 (Rev. 05-18)

17-28

(b) All land that supports a newly allowed use, including, but not limited to:

(A) Land under newly constructed or converted improvements put to the newly allowed use;

(B) Ingress and egress related to the newly allowed use;

(D) Landscaping;

(E) Yard areas; and

(F) Parking.

Example 11: A house in a neighborhood recently rezoned from residential to commercial is converted

into a commercial office. The house is used consistently with the new zone and is affected property.

All of the land is affected property, unless a portion is clearly distinguishable as “excess” land: land

unrelated to the new commercial use.

(3) The assessor will calculate the MAV for the property tax account for the current assessment year

under this subsection, if:

(a) The entire property has been rezoned;

(b) The entire property is used consistently with the rezoning; and

before January 1 of the current assessment year.

Example 12: In 1998, the zoning ordinance was amended to permit additional primary types of use in the

zone. The designation on the zoning map didn’t change. Last year the entire property was developed for

one of the primary types of uses first permitted under the 1998 amendment.

Prior Year Values: Real Market Value (RMV) = $250,000; MAV = $97,088; Assessed Value (AV) = $97,088.

Current year RMV of the affected portion = $750,000.

Current year changed property ratio (CPR) for this property type = 0.80.

Because the rezone affects the entire property, multiply the current year RMV of the entire property by

CPR. This is MAV for the entire property.

$750,000 x 0.80 = $600,000 (Current year MAV for the entire property.)

(4) The assessor will calculate the MAV for the property tax account for the current assessment year

under this subsection, if:

(a) The property or a portion of the property has been rezoned;

(b) A portion of the property is used consistently with the rezoning; and

before January 1 of the current assessment year.

Example 13: Property was rezoned from residential to commercial two years ago. A one and a half

acre lot has been developed into a bicycle sales and service shop. The shop, including all parking and

landscaping, occupies half of an acre. The rest of the land remains undeveloped.

Prior year values: RMV = $150,000; MAV $97,088; AV = $97,088.

Prior year RMV of unaffected portion = $100,000.

Current year RMV of affected portion = $700,000.

Current year CPR for this property type = 0.80.

150-303-438 (Rev. 05-18)

17-29

Step 1: Calculate the current year MAV as if the account hadn’t changed.

Multiply the prior year AV by 1.03. Compare the result to the prior year MAV to determine the larger

amount. This becomes the current year MAV as if the account hadn’t changed.

Larger of: Prior year AV x 1.03 compared to prior year MAV = current year MAV of unchanged account.

Prior year AV x 1.03 = 97,088 x 1.03 = $100,000

Prior year MAV = $97,088

Current year MAV of the unchanged account = $100,000

Step 2: Calculate the percentage of the unaffected portion.

Determine the prior year’s RMV for the unaffected portion of the property. Divide that value by the prior

year RMV for the whole account. This is the percentage of the account that is unaffected by the change to

the property.

Prior year RMV (unaffected portion) divided by prior year RMV (total account) = percentage of the

property that is unaffected.

$100,000 = prior year RMV for the unaffected portion.

$150,000 = prior year RMV for the total account.

$100,000 ÷ $150,000 = 66.7% (Percentage of the account that is unaffected.)

Step 3: Calculate the current year MAV for the unaffected portion.

Multiply the current year MAV (Step 1) by the percentage of the unaffected portion (Step 2). This is the

current year MAV for the unaffected portion.

$100,000 x 66.7% = $66,700 (Current year MAV for the unaffected portion.)

Step 4: Calculate MAV for the affected portion.

Multiply the current RMV of the affected portion by the CPR. This is MAV for the affected portion.

$700,000 x 0.80 = $560,000 (Current year MAV for the affected portion.)

Step 5: Calculate MAV for the account.

Add MAV for the unaffected portion (step 3) and MAV for the affected portion (step 4) to get MAV for the

account.

$66,700 + $560,000 = $626,700 (Current MAV for the account.)

OAR 150-308-0210 Omitted property—allocating maximum assessed value (MAV).

(1) When omitted property is added to the property tax account after January 1 preceding the

current assessment year and before January 1 of the current assessment year, only the omitted property

portion is considered affected. The existing property is the unaffected portion. The intent is to correct the

tax roll for current and prior years as if the omitted property had been a regular part of those tax rolls.

(2) To correct the first year’s Assessed Value (AV) when the omitted property is added to the roll:

(a) Multiply the real market value (RMV) of the omitted property for the first year it should have been

added to the roll by that year’s appropriate changed property ratio (CPR) to determine MAV for the omitted

property.

(b) Add RMV and MAV of the omitted portion to the existing RMV and MAV to get a corrected

RMV and MAV for the account.

property been discovered timely.

150-303-438 (Rev. 05-18)

17-30

Example 1: Property was built in 2003 and should have been added to the 2004–05 tax roll. The assessor discovers

the property in December 2004 and adds it to the 2004–05 tax roll.

Tax year 2004–05

RMV 115,76 3

MAV 94,500

AV 94,500

Omitted RMV 21,000

CPR 0.83

MAV 17,43 0

Corrected RMV 136,763

Corrected MAV 111,930

Corrected AV 111,93 0

(3) To correct the AV for subsequent years that omitted property should be added to the roll:

(a) Add the omitted property’s trended or recalculated RMV to the property’s existing RMV to get a

corrected RMV for the account.

(b) Multiply the prior year’s corrected AV by 1.03 and compare to the prior year’s corrected MAV. The

greater of the two will be the corrected MAV for the account.

Example 2: Property was built in 2003 and should have been added to the 2004–05 tax roll. The assessor discovers

the property in December 2008, and adds it to the 2004–05 through 2008–09 tax rolls. RMV trending is 5 percent

per year. Table not included.

Year 04–05 05–06 06–07 07–08 08–09

Original RMV 115,76 3 121,551 127,629 134,010 140,711

Corrected RMV 136,763 143,601 150,781 158,320 166,236

Original MAV 94,500 97,335 100,255 103,262 106,359

Corrected MAV 111,930 115,287 118,745 122,307 125,976

Original AV 94,500 97,335 100,255 103,262 106,359

Corrected AV 111,9 30 115,287 118,745 122,307 125,976

RMV of omitted

property

21,000

CPR 0.83

MAV 17,43 0

Trend 5% 5% 5% 5%

150-303-438 (Rev. 05-18)

17-31

OAR 150-308-0220 Exemption, partial exemption or special assessment

disqualication—allocating MAV.

When an exempt, partially exempt or specially assessed property is disqualified after January 1 of the

assessment year preceding the current assessment year and before January 1 of the current assessment

year, a new MAV for the account must be calculated. The new MAV total will be MAV of any unchanged

portion and the new MAV of any disqualified portion. The new MAV of the disqualified portion is RMV

multiplied by the appropriate changed ratio.

OAR 150-308-0230 Calculation of maximum assessed value (MAV) for lot line adjustments.

(1) For purposes of calculating MAV when properties are subject to a lot line adjustment, the portion

of the property that is “affected” includes:

(a) All the land comprising the properties subject to the lot line adjustment.

(b) Buildings or structures when a new lot line divides the building or structure.

Note: An example of how to perform the mathematics of this rule is incorporated throughout the rule

based upon the following information:

The zoning for both tax lot 100 and tax lot 200 is RR-5 (Rural Residential 5-acre minimum) requiring a

minimum of five acres before a dwelling may be built.

Before the lot line adjustment, tax lot 100 was a vacant 4-acre lot that was unbuildable due to its size.

Undersized lots sell for $7,000 per acre, making the real market value (RMV) of this unbuildable tax lot

$28,000. The associated MAV for this tax lot was $22,400. Tax lot 200 is a vacant 8-acre lot that is buildable

under the current zoning. Buildable lots sell for $15,000 per acre, making RMV of this tax lot $120,000.

The associated MAV for this tax lot is $96,000.

After the lot line adjustment both lots are 6 acres in size and are buildable under the current zoning.

Because buildable lots sell for $15,000 per acre, it makes RMV of each tax lot $90,000.

The changed property ratio (CPR) to be used in this example is 0.80.

(2) Calculate the total MAV of the affected portion before the lot line adjustment as follows:

(a) For each account subject to the lot line adjustment:

(A) Divide the affected portion’s RMV by the total RMV of the account.

Tax Lot (TL) 100: $28,000 ÷ $28,000 = 1.00

Tax Lot (TL) 200: $120,000 ÷ $120,000 = 1.00

(B) Multiply the result of (A) by the property’s total MAV to determine MAV attributable to the

affected portion.

TL 100: 1.00 x $22,400 = $22,400

TL 200: 1.00 x $96,000 = $96,000

(b) Add MAV attributable to the affected portion for each account to determine the total MAV of the

affected portion before the lot line adjustment.

$22,400 + $96,000 = $118,400

(3) Calculate the total MAV for the affected portion after the lot line adjustment as follows:

(a) For each account subject to the lot line adjustment, multiply the new RMV of the affected portion

by the appropriate CPR to determine MAV for the affected portion as follows.

TL 100: $90,000 x 0.80 = $72,000

TL 200: $90,000 x 0.80 = $72,000

150-303-438 (Rev. 05-18)

17-32

(b) Add MAV for the affected portion of each account to determine the total MAV of the affected

portion after the lot line adjustment.

$72,000 + $72,000 = $144,000

(4) Compare the total MAV of the affected portion before the lot line adjustment to the total MAV of

the affected portion after the lot line adjustment as follows:

Before = $118,400. After = $144,000

(a) If the total MAV of the affected portion after the lot line adjustment is equal to or lesser than the

total MAV of the affected portion before the lot line adjustment: Add MAV for the affected portion of

each account to any unaffected MAV for that account to determine the total MAV for each account.

The example doesn’t fit this description. Continue to paragraph (b).

(b) If the total MAV of the affected portion after the lot line adjustment is greater than the total MAV

of the affected portion before the lot line adjustment, MAV for the affected portion of each account must

be proportionally reduced.

The example fits this description. Proceed to paragraph (A).

(A) Divide the total MAV of the affected portion before the lot line adjustment by the total MAV of

the affected portion after the lot line adjustment to determine the proportionate reduction.

$118,400 ÷ $144,000 = 0.822222

(B) Multiply the proportionate reduction by MAV of the affected portion after the lot line adjustment

for each account.

TL 100: 0.822222 x $72,000 = $59,200

TL 200: 0.822222 x $72,000 = $59,200

for that account to determine the total MAV for each account.

TL 100: $59,200 + $0 = $59,200

TL 200: $59,200 + $0 = $59,200

OAR 150-308-1090 Calculation of MSAV when SAV soil classication is changed.

(1) Definitions:

(a) “MSAV” means maximum assessed value for property subject to special assessment (maximum

specially assessed value).

(b) “SAV” means specially assessed value.

percent of the maximum assessed value per acre from the pervious assessment year. The county assessor

is required to develop these tables for each assessment year under ORS 308A.107(3)(b).

(2) When an SAV soil classification is changed, MSAV must use corresponding soil classification

values from MSAV Table if:

(a) There is a physical change such as, but not limited to:

(A) Irrigation is added

(B) Irrigation is removed.

150-303-438 (Rev. 05-18)

17-33

(D) Soil is depleted indefinitely due to extended over use of crop.

(E) Soil is enhanced due to extensive additives to the soil.

(F) Trees are removed so that cultivation can take place and previous classification was based in part

on the inability to cultivate.

(G) Rocks and other debris are removed to enhance cultivation.

(H) Site improvements are added including but not limited to drainage system, fill, contouring,

leveling, and diking.

(b) There are specific non-physical changes such as:

(A) Comprehensive soil reclassification due to a new published government agency soil survey.

(B) Land class acreage adjustments to implement a GIS mapping system.

that it was in during the prior assessment year. The assessor’s determination that the land is no longer

in the same land class can’t be arbitrary, but must be based on preexisting criteria for the respective

land classes. The preexisting criteria for the respective land classes must be clear, objective, consistently

applied and uniform within the county. Land classification changes must be the result of the reasonable

application of the preexisting criteria to the actual condition of the land.

(3) The assessor must calculate the corresponding MSAV for new SAV soil classes using the

following procedure:

(a) Divide the average MSAV for all soil types by the average SAV for all soil types to derive a

changed property ratio.

(b) Multiply SAV value of the new soil type by the changed property ratio to obtain MSAV for the

new soil class.

OAR 150-308-1500 Additional Tax Calculation and When to Impose Additional Tax

(1) For the purpose of this rule “lookback period” means the period established by ORS 308A.703(3).

(2) Effective August 15, 2018, to calculate the maximum assessed value (MAV) for the computation of

the additional tax, multiply the real market value (RMV) of the special assessed land being disqualified

for the earliest year in the lookback period by that year’s appropriate change property ratio (CPR) for

the classification of the disqualified property as if it would not have been specially assessed. For each

subsequent year, calculate the MAV as if the property had not been specially assessed per ORS 308.146.

(3) Under certain circumstances, farm use special assessment may be disqualified after July 1 and

advance collection of additional taxes made. Disqualifications made under these circumstances are

for the next tax year, therefore, the property will remain at its value for farm use on the tax roll until

the following July 1. The collection of the additional tax is provided for in section (4). The specific

circumstances for this type of disqualification are as follows:

(a) For non-exclusive farm use (Non-EFU) zoned farmland:

(A) Subdivision plats under Chapter 92;

(B) At the owner’s request.

(b) For exclusive farm use (EFU) zoned farmland, a non-farm dwelling under ORS 215.236.

(4)(a) Collection of Additional Tax: Advance collections of the additional tax made under the

provisions of ORS 311.370 are entitled to the discount allowed by ORS 311.505 if the assessor can compute

the exact amount of the additional tax at the time the taxes are paid. If the assessor is unable to determine

the exact amount due, the discount is allowed when final settlement is made at the time taxes are

regularly due, as provided by ORS 311.370.

150-303-438 (Rev. 05-18)

17-34

(b) Any additional tax entered on the tax roll becomes part of the tax extended against the property

and is collected in the same manner as other real property taxes. ORS 311.505 governs whether a discount

is allowed or interest is charged.

(5) Distribution of Additional Tax: The total amount of the additional tax added to the tax roll must

be apportioned between the taxing districts in which the property is located.

(a) The apportionment must be based on the ratio that the billing tax rate of each district bears to the

total billing tax rates on the property, as shown on the tax roll on which the additional tax is entered.

(b) In preparing the certificate of the tax roll under ORS 311.105, the assessor must add the additional

tax due to each taxing district to the total amount to be raised for each district under ORS 311.105. The

amount of additional tax due to each taxing district must be included in the percentage distribution

schedule computed by the tax collector under ORS 311.390.

OAR 150-311-0240 Procedure to correct MAV when square footage error exists.

(1) For purposes of this rule, “Current RMV”, as used in subsection (4)(b), is defined as RMV for the

tax year of the petition. For example, a petition submitted in August 2016 will use the roll values for the

2016–17 tax year to calculate the adjustment.

(2) To correct the maximum assessed value (MAV) of a property for an error in square footage, the

assessor must receive a petition from either the current owner of the property or other person obligated

to pay taxes imposed on the property. The petition must be filed with the county assessor on or before

December 31 of the current tax year on a form prescribed by the department.

(3) The correction to MAV by the assessor must be in proportion to the correction to RMV due to the

error in square footage.

(4) The proportion of error and resulting MAV are calculated as follows by the assessor:

(a) For properties described by a single component (for example, land only), use the following

procedure to adjust MAV.

Note: An example is incorporated into the steps with the following assumptions:

The assessor’s records show that a parcel has 435,600 sq. ft. (10 acres), when, in fact, it only has 392,040 sq. ft.

(9 acres).

The existing RMV is $80,000.

The corrected RMV is $75,000.

The existing MAV is $50,000.

Step 1: Divide the correct RMV by the RMV as currently shown in the assessment records to

determine the proportional RMV correction.

Example: $75,000 ÷ $80,000 = 0.9375

Step 2: Multiply the proportional RMV correction (Step 1) by the existing MAV for the property to

determine the corrected MAV for the property.

Example: 0.9375 x $50,000 = $46,875, which is the corrected MAV for the property.

(b) For properties described by multiple components (for example, land and buildings, or more than

one building or structure, or buildings and machinery), use the following procedure to adjust MAV.

Note: An example is incorporated into the steps with the following assumptions:

A property consists of a 3-acre land parcel and two buildings.

Building 1 was incorrectly valued as having 2,000 square feet, when in fact it has only 1,500 square feet.

Current Real Market Value (RMV) of the building with the error is $80,000.

150-303-438 (Rev. 05-18)

17-35

Corrected RMV of the building with the error is $60,000.

The square footage on the land and other building is correct.

The property’s total RMV is $400,000.

The property’s total MAV is $300,000.

Step 1: Determine which component has the square footage error.

Example: Building 1 is the component with the error in square footage.

Step 2: Determine the portion of the property’s total RMV that is contributed by the component with

the square footage error.

Example: Building 1 RMV is given as $80,000.

Step 3: Calculate the ratio of RMV of the component with the error to RMV of the entire property.

Example: Building 1 RMV ($80,000) divided by Total RMV ($400,000) = 0.20.

Step 4: Multiply the property’s total MAV by the ratio obtained from Step 3 to determine MAV

attributable to the component with the error in square footage.

Example: $300,000 x 0.20 = $60,000

Step 5: Subtract MAV attributable to the component with the error in square footage (Step 4) from the

property’s total MAV to determine the base MAV.

Example: $300,000 - $60,000 = $240,000

Step 6: Divide the correct RMV of the component by the RMV of the component as currently shown

in the assessment records to determine the proportional RMV correction ratio.

Example: $60,000 ÷ $80,000 = 0.75

Step 7: Multiply the proportional square footage error ratio (Step 6) by MAV attributable to the

component with the square footage error (Step 4) to determine the corrected MAV attributable to the

component.

Example: 0.75 x $60,000 = $45,000, which is the corrected MAV attributable to the component.

Step 8: Add the corrected MAV attributable to the component (Step 7) to the base MAV (Step 5) to

determine the corrected MAV for the entire property.

Example: $45,000 + $240,000 = $285,000, which is the corrected MAV for the property.

(5) For a building that is valued by summing the individual value contributions from distinct

portions of that building, the particular building portion affected by the square footage error may

be considered as a separate component such as in (4)(b) above when making the correction to MAV.

Examples of this type of building include but aren’t limited to a warehouse with attached offices or a

house with an attached garage.

(6) Notwithstanding that a property’s MAV has been corrected due to a square footage error, the

corrected MAV remains subject to adjustments required by ORS 308.146 to 308.166.

(7) Roll corrections pursuant to ORS 311.234 are to be made using the procedures in 311.205.

150-303-438 (Rev. 05-18)

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Supreme Court of Oregon,

En Banc.

FLAVORLAND FOODS, now doing business as New Season Foods, Inc., Respondent,

WASHINGTON COUNTY ASSESSOR, a political subdivision of the State of Oregon, and

Department of Revenue, State of Oregon, Appellants.

(OTC 4393; SC S47940).

Argued and Submitted Jan. 10, 2002.

Decided Sept. 19, 2002.

Taxpayer appealed decision of a county board of property tax appeals that the constitution

as amended by Ballot Measure 50 did not separately cap the assessed value of land and im-

provements. The Tax Court entered summary judgment in favor of taxpayer. County assessor

and Department of Revenue appealed. The Supreme Court, Leeson, J., held that the phrase

“each unit of property in this state” in constitution which capped maximum assessed value of

each unit of property in this state for ad valorem property tax purposes referred to all property

under one property tax account, including land and improvements, rather than land and im-

provements separately.

Reversed and remanded.

West Headnotes

[1] Taxation 371

2161

371 Taxation

371III Property Taxes

371III(B) Laws and Regulation

371III(B)7 Limitation of Rate or Amount

371k2161 k. In General. Most Cited Cases

(Formerly 371k51)

The phrase “each unit of property in this state” in Ballot Measure 50 which amended con-

stitution to cap maximum assessed value of each unit of property in this state for ad valorem

property tax purposes referred to all property under one property tax account, including land

and improvements, rather than land and improvements separately, and, thus, the taxpayer's

land and improvements did not have separate maximum assessed values. Const. Art. 11, §

11(1)(a).

[2] Constitutional Law 92

584

92 Constitutional Law

54 P.3d 582 Page 1

334 Or. 562, 54 P.3d 582

(Cite as: 334 Or. 562, 54 P.3d 582)

150-303-438 (Rev. 05-18)

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92V Construction and Operation of Constitutional Provisions

92V(A) General Rules of Construction

92k584 k. Intent in General. Most Cited Cases

(Formerly 92k13)

When courts interpret constitutional provisions added by initiative or referendum, they at-

tempt to discern the intent of the voters; the people's understanding and intended meaning of

the provision is critical to courts' analysis.

[3] Constitutional Law 92

591

92 Constitutional Law

92V Construction and Operation of Constitutional Provisions

92V(A) General Rules of Construction

92k590 Meaning of Language in General

92k591 k. In General. Most Cited Cases

(Formerly 92k14)

The best evidence of the voters' intent is the text of the initiated or referred constitutional

amendment.

[4] Constitutional Law 92

593

92 Constitutional Law

92V Construction and Operation of Constitutional Provisions

92V(A) General Rules of Construction

92k590 Meaning of Language in General

92k593 k. Existence of Ambiguity. Most Cited Cases

(Formerly 92k13)

Constitutional Law 92

601

92 Constitutional Law

92V Construction and Operation of Constitutional Provisions

92V(A) General Rules of Construction

92k595 Intrinsic Aids to Construction

92k601 k. Context and Related Clauses. Most Cited Cases

(Formerly 92k13)

If the voters' intent is clear after consideration of text and context of a constitutional

amendment added by initiative or referendum, then the court's inquiry is over.

[5] Constitutional Law 92

593

92 Constitutional Law

92V Construction and Operation of Constitutional Provisions

92V(A) General Rules of Construction

92k590 Meaning of Language in General

54 P.3d 582 Page 2

334 Or. 562, 54 P.3d 582

(Cite as: 334 Or. 562, 54 P.3d 582)

150-303-438 (Rev. 05-18)

17-38

92k593 k. Existence of Ambiguity. Most Cited Cases

(Formerly 92k14)

Courts will not lightly conclude that the text of a constitutional amendment added by initi-

ative or referendum is so clear that further inquiry is unnecessary.

[6] Constitutional Law 92

604

92 Constitutional Law

92V Construction and Operation of Constitutional Provisions

92V(A) General Rules of Construction

92k604 k. History in General. Most Cited Cases

(Formerly 92k16)

If any doubt remains about the meaning of an initiated or referred constitutional amend-

ment, courts will consider the history of the provision in an effort to resolve the matter.

[7] Constitutional Law 92

592

92 Constitutional Law

92V Construction and Operation of Constitutional Provisions

92V(A) General Rules of Construction

92k590 Meaning of Language in General

92k592 k. Plain, Ordinary, or Common Meaning. Most Cited Cases

(Formerly 92k14)

When interpreting the text and context of a constitutional amendment adopted by initiative

or referendum, courts typically give to words of common usage their plain, natural, and ordin-

ary meaning.

[8] Taxation 371

2161

371 Taxation

371III Property Taxes

371III(B) Laws and Regulation

371III(B)7 Limitation of Rate or Amount

371k2161 k. In General. Most Cited Cases

(Formerly 371k51)

Ballot Measure 47 to amend constitution had a close enough relationship to its successor,

Ballot Measure 50, to provide relevant context in interpreting the constitutional cap on max-

imum assessed value of each unit of property for ad valorem property tax purposes. Const.

Art. 11, § 11(1)(a).

[9] Taxation 371

2161

371 Taxation

371III Property Taxes

54 P.3d 582 Page 3

334 Or. 562, 54 P.3d 582

(Cite as: 334 Or. 562, 54 P.3d 582)

150-303-438 (Rev. 05-18)

17-39

371III(B) Laws and Regulation

371III(B)7 Limitation of Rate or Amount

371k2161 k. In General. Most Cited Cases

(Formerly 371k51)

Ballot Measure 5 and judicial interpretation of the word “property” in constitutional provi-

sion created by Measure 5 as a specific unit of realty with or without improvements provided

context for determining the voters' intent when they adopted the phrase “each unit of property

in this state” in the related Ballot Measure 50 which amended constitution to cap maximum

assessed value of each unit of property in this state for ad valorem property tax purposes.

Const. Art. 11, § 11(1)(a, b).

[10] Constitutional Law 92

604

92 Constitutional Law

92V Construction and Operation of Constitutional Provisions

92V(A) General Rules of Construction

92k604 k. History in General. Most Cited Cases

(Formerly 92k16)

In examining the history of a constitutional amendment by initiative or referendum, courts

consider relevant materials contained in the voters' pamphlet, such as the ballot title and the

explanatory statement.

**583 *563 On appeal from the Oregon Tax Court.

FN*

FN* 15 OTR 182, 2000 WL 1038185 (2000).

Robert B. Rocklin, Assistant Attorney General, Salem, argued the cause and filed the brief for

appellant Department of Revenue. With him on the brief were Hardy Myers, Attorney Gener-

al, and Michael D. Reynolds, Solicitor General.

Elmer M. Dickens, Assistant County Counsel, Hillsboro, filed the brief for appellant Wash-

ington County.

David L. Canary, of Garvey, Schubert & Barer, Portland, argued the cause and filed the brief

for respondent. With him on the brief was Richard Baroway.

*564 LEESON, J.

The Department of Revenue and Washington County Assessor (taxing authorities) appeal

from a judgment of the Oregon Tax Court granting summary judgment in favor of Flavorland

Foods (taxpayer). Flavorland Foods v. Washington County Assessor, 15 OTR 182, 2000 WL

1038185 (2000). For the reasons that follow, we reverse the decision of the Tax Court and re-

mand the case for further proceedings.

At issue is the meaning of the phrase “each unit of property in this state” in Ballot Meas-

54 P.3d 582 Page 4

334 Or. 562, 54 P.3d 582

(Cite as: 334 Or. 562, 54 P.3d 582)

150-303-438 (Rev. 05-18)

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ure 50 (1997). Measure 50 amended Article XI, section 11, of the Oregon Constitution.

FN1

The legislature referred Measure 50 to the voters to replace a property tax limitation measure

that the voters had approved in 1996, which had been known popularly as Ballot Measure 47.

As this court recently explained,

FN1. Measure 50 repealed the prior version of Article XI, section 11, of the Oregon

Constitution. Unless otherwise noted, all references to Article XI, section 11, are to

that provision as amended by Measure 50. In this opinion, we use the terms “Measure

50” and “Article XI, section 11,” interchangeably.

“Measure 47 was a short-lived constitutional amendment aimed at closing what its support-

ers considered to be a significant loophole in the property tax limitation goal of Measure 5

[an amendment to the Oregon Constitution adopted in 1990]. Certain practical and technical

difficulties in the application of Measure 47 led the legislature to propose, and the people to

adopt, Measure 50 as its effective replacement.”

Shilo Inn v. Multnomah County, 333 Or. 101, 107 n. 6, 36 P.3d 954 (2001), modified on re-

cons., 334 Or. 11, 45 P.3d 107 (2002) (citations omitted).

Measure 50 was superimposed on an ad valorem real-property tax system in the State of

Oregon in which taxes were levied on a property's real market value. See ORS 308.232 (1995)

(“All real or personal property within each county shall be valued and assessed at 100 percent

of its real market value.”). The assessment rolls set out separate values for the land and the

improvements. ORS 308.215(1)(e), (f) (1995). However, real property generally was taxed as

a whole. See Shields v. Dept. of Rev., 266 Or. 461, 470, 513 P.2d *565 784 (1973) (with some

exceptions, real property taxed as whole); ORS 307.010 (1995) (real property includes land it-

self and all buildings, improvements, machinery, equipment, or fixtures).

As amended by Measure 50, Article XI, section 11(1)(a), of the Oregon Constitution

provides:

“For the tax year beginning July 1, 1997, each unit of property in this state shall have a

maximum assessed value for ad valorem property tax purposes that does not exceed the

property's real market value for the tax year beginning July 1, 1995, reduced by 10 percent.”

**584 (Emphasis added.) A property's maximum assessed value may increase by no more

than three percent per year. Or Const, Art XI, § 11(1)(b). The property is taxed on the lesser

of the maximum assessed value or the real market value. See Or Const, Art XI, § 11(1)(a)

(establishing “maximum assessed value” as upper limit on assessment) (emphasis added); Or

Const, Art XI, § 11(1)(f) (“Each property's assessed value shall not exceed the property's real

market value.”). Thus, if the real market value of property exceeds the property's maximum

assessed value, then property tax is levied based on the maximum assessed value, not the real

market value, of the property.

FN2

FN2. In 1997, the legislature enacted ORS 308.142 (1997) and amended ORS 308.215

(1997) to implement Measure 50. Those statutes appeared to be contradictory in that

ORS 308.142(1)(a) defined “property,” for purposes of Article XI, section 11, as “[a]ll

property included within a single property tax account * * *,” while ORS

54 P.3d 582 Page 5

334 Or. 562, 54 P.3d 582

(Cite as: 334 Or. 562, 54 P.3d 582)

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308.215(1)(e) and (f) provided for the listing of separate maximum assessed values for

land and improvements. In 1999, the legislature again amended ORS 308.215, elimin-

ating the requirement that the taxing authorities list separate maximum assessed values

for land and improvements. See ORS 308.215(1)(e) and (f) (1999) (providing only for

real market value of land and improvements). We conclude that none of those statutes

is relevant to the interpretive issue presented here.

As noted, the issue in this case is the meaning of the phrase “each unit of property in this

state” in Article XI, section 11(1)(a). That issue comes to this court in the context of facts to

which the parties have stipulated.

*566 I. FACTS

Taxpayer owns a parcel of commercial property in Washington County. Taxpayer and tax-

ing authorities agree that, for 1995-96, the real market value of taxpayer's land was $455,000,

and that the real market value of the improvements on that land was $3,267,820, for a total of

$3,722,820. As noted above, 1995 is the year that forms the basis for calculating a property's

maximum assessed value under the “cut and cap” provisions of Article XI, section 11(1)(a). In

1998-99, the tax year at issue here, the real market value of taxpayer's land had increased to

$691,130, but the real market value of the improvements on that land had decreased to

$2,080,030.

In the Washington County Assessor's view, Article XI, section 11(1)(a), created a cap on

the value of the property as a whole. Thus, he concluded that, in calculating the maximum as-

sessed value of taxpayer's property, Article XI, section 11(1)(a), permitted him to increase the

assessed value of the land up to its real market value in 1998-99, so long as the total assessed

value of all the property in taxpayer's tax account did not exceed the total maximum assessed

value of all the property in the tax account for the 1997-98 tax year, plus three percent.

Taxpayer challenged the assessor's calculation of the maximum assessed value for its

property before the Washington County Board of Property Tax Appeals (board). The board re-

jected taxpayer's challenge. Taxpayer then filed its complaint in the Tax Court. Before that

court, the parties filed cross-motions for summary judgment. Taxpayer contended that Article

XI, section 11(1)(a), required the assessor to calculate separate maximum assessed values for

land and improvements. Under that approach, taxpayer argued, the maximum assessed value

of its land for the 1998-99 tax year was $421,785, which was $270,345 less than the real mar-

ket value of the land. Taxpayer did not challenge the assessed value that the assessor had as-

signed to its improvements for the 1998-99 tax year. The tax court granted summary judgment

for taxpayer. Flavorland, 15 OTR at 185. Relying on its decision in Taylor v. Clackamas

County Assessor, 14 OTR *567 504, 1999 WL 38270, modified on recons., 14 OTR 581, 1999

WL 395383 (1999), decision withdrawn by order January 11, 2000 (2000 WL 31987), the Tax

Court held that the phrase “each unit of property in this state” in Article XI, section 11(1)(a),

refers to each unit of assessable property. Flavorland, 15 OTR at 184-85. Because land and

improvements are assessed separately, the Tax Court concluded, Article XI, section 11(1)(a),

requires separate maximum assessed values for land and improvements. Id.

**585 II. ANALYSIS

54 P.3d 582 Page 6

334 Or. 562, 54 P.3d 582

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[1][2][3][4][5][6] On review, taxing authorities contend that the phrase “each unit of prop-

erty in this state” in Article XI, section 11(1)(a), means “all property under one property tax

account, including land and improvements.” Taxpayer argues that the phrase “each unit of

property in this state” refers to land and improvements separately. To resolve the parties' dis-

pute, we must construe Article XI, section 11(1)(a). This court recently summarized the meth-

odology that it employs when interpreting an initiative measure:

“When we interpret either initiated or referred constitutional provisions, we attempt to dis-

cern the intent of the voters. Stranahan v. Fred Meyer, Inc., 331 Or. 38, 56-57, 11 P.3d 228

(2000). That is so because, ‘with respect to [such] provisions, it is the people's understand-

ing and intended meaning of the provision in question * * * that are critical to [this court's]

analysis.’ Id. at 57 [11 P.3d 228]. The best evidence of the voters' intent is the text of the

provision itself. Ecumenical Ministries v. Oregon State Lottery Comm., 318 Or. 551, 559,

871 P.2d 106 (1994); Roseburg School Dist. v. City of Roseburg, 316 Or. 374, 378, 851 P.2d

595 (1993). If the voters' intent is clear after consideration of text and context, then the

court's inquiry is over. Ecumenical Ministries, 318 Or. at 559 [871 P.2d 106]. The court,

however, will not lightly conclude that the text is so clear that further inquiry is unneces-

sary. If any doubt remains, the court will consider the history of an initiated or referred con-

stitutional provision in an effort to resolve the matter. Id.”

Shilo Inn, 333 Or. at 116-17, 36 P.3d 954 (brackets and ellipsis in original). We begin with

the text of the phrase “each unit of property in this state.”

*568 A. Text

[7] When interpreting the text and context of a constitutional amendment adopted by initi-

ative or referendum, this court typically gives words of common usage their plain, natural, and

ordinary meaning. See Ester v. City of Monmouth, 322 Or. 1, 9, 903 P.2d 344 (1995) (so stat-

ing).

Article XI, section 11, does not state what is meant by the phrase “each unit of property in

this state,” and it does not define any of the words in that phrase. Neither does the phrase

“each unit of property in this state” have an established legal meaning. We thus begin our in-

terpretive analysis by determining the plain, ordinary meanings of the words of common us-

age in the phrase in question. Id. We begin with the central term, “property,” which, in this

context, is

“2 a: something that is or may be owned or possessed: WEALTH, GOODS; specif a piece

of real estate * * * c: something to which a person has a legal title: an estate in tangible as-

sets * * *[.]”

Webster's Third New Int'l Dictionary 1818 (unabridged ed 1993). That definition makes

clear that the word “property” refers to a general class of things that can be owned. There is

no dispute that, in this context, “property” refers to real estate.

We turn to the words “unit of,” which modify the word “property.” The term “unit” has

the following potentially relevant definitions:

54 P.3d 582 Page 7

334 Or. 562, 54 P.3d 582

(Cite as: 334 Or. 562, 54 P.3d 582)

150-303-438 (Rev. 05-18)

17- 43

“2 a: a single thing * * * that is a constituent and isolable member of some more inclusive

whole : a member of an aggregate that is the least part to have clearly definable separate ex-

istence and that normally forms a basic element of organization within the aggregate <the

township in the usual [unit] of government> <the family as the basic [unit] of society> * *

*[.]”

Id. at 2500. Reading the definition of “unit” together with the definition of “property,” a

“unit of property” is the “constituent and isolable member” or “the least part to have clearly

definable separate existence and that normally forms a basic element” of “something that is or

may be owned or possessed,” which, in this case, is real estate.

*569 The definition of property that emerges from the plain, ordinary meaning of the

words in the disputed phrase is broad enough to encompass both taxing authorities' and tax-

payer's arguments regarding maximum assessed value under Article XI, section 11(1)(a). On

the one hand, the unit that has a “definable separate existence” for purposes **586 of ad

valorem property taxation could be the parcel of real property which, as noted above, includes

both land and improvements. That perspective supports taxing authorities' contention that the

phrase “each unit of property in this state” refers to all the property contained in an individual

tax account. On the other hand, taxpayer is correct that land and improvements each have a

“definable separate existence” that can be owned or possessed. That perspective supports tax-

payer's argument that, in adopting Measure 50, the voters intended that land and improve-

ments shall have separate maximum assessed values. Because the disputed text plausibly sup-

ports both parties' interpretations, we conclude that the text itself does not assist us in resolv-

ing the question of what the voters intended when they adopted Measure 50.

B. Context

We turn to context, which includes other relevant constitutional provisions and case law

from this court. See Ecumenical Ministries, 318 Or. at 560, 871 P.2d 106 (first level of analys-

is includes provisions of same and related measures); Stranahan, 331 Or. at 61-62, 11 P.3d

228 (context includes relevant case law).

1. Other Provisions of Article XI, Section 11

We begin with other provisions of Article XI, section 11. Taxpayer argues that Article XI,

section 11(1)(c), provides evidence that the voters intended the phrase “each unit of property

in this state” to refer separately to land and improvements.

Article XI, section 11(1)(c), creates a ratio method for valuing property in some circum-

stances. It provides:

“(c) Notwithstanding paragraph (a) or (b) of this subsection [described above], property

shall be valued at the ratio of average maximum assessed value to average real market value

of property located in the area in which the *570 property is located that is within the same

property class, if on or after July 1, 1995:

“(A) The property is new property or new improvements to new property;

“(B) The property is partitioned or subdivided;

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334 Or. 562, 54 P.3d 582

(Cite as: 334 Or. 562, 54 P.3d 582)

150-303-438 (Rev. 05-18)

17- 44

“(C) The property is rezoned and used consistently with the rezoning;

“(D) The property is first taken into account as omitted property;

“(E) The property becomes disqualified from exemption, partial exemption or special as-

sessment; or

“(F) A lot line adjustment is made with respect to the property, except that the total as-

sessed value of all property affected by a lot line adjustment shall not exceed the total max-

imum assessed value of the affected property under paragraph (a) or (b) of this subsection.”

Taxpayer argues that, “[i]n light of the ‘exception value’ structure” in Article XI, section

11(1)(c), “it is inconceivable” that the voters intended maximum assessed value to be calcu-

lated with respect to a parcel of property as a whole. As an example, taxpayer notes that, if

“property” refers to land and improvements collectively, then Article XI, section 11(1)(c)(A),

would authorize a tax assessor to revalue both land and improvements when new improve-

ments alone are added to a property. Similarly, if “property” refers to land and improvements

collectively, then Article XI, section 11(1)(c)(B), which permits alternative valuation when

“property” is partitioned, would permit revaluation of both land and improvements when the

partition involves only the land. Taxpayer provides additional examples under Article XI, sec-

tion 11(1)(c), all of which, it contends, lead to the same conclusion, namely, that Article XI,

section 11(1)(c), makes clear that the voters could not have intended the phrase “each unit of

property in this state” to mean all the property in a tax account. Taxpayer apparently believes

that that is so because taxing authorities' understanding of the phrase does not yield as much

reduction in ad valorem property taxes as does taxpayer's proffered meaning of the phrase.

*571 Taxpayer's arguments under Article XI, section 11(1)(c), do not advance the analyt-

ical effort here, because those arguments assume, rather than demonstrate, the voters' intent in

adopting the phrase “each unit of **587 property in this state” in Article XI, section 11(1)(a).

Taxpayer describes the effects that it believes will result if the phrase “each unit of property in

this state” means all the property in a property tax account. However, without additional tex-

tual evidence that the voters did not intend those effects, taxpayer's argument does not provide

contextual evidence that the voters intended the phrase to refer to land and improvements sep-

arately.

2. Measure 47

[8] We turn to other relevant context, which includes the provisions of other related meas-

ures. Taxing authorities have identified two measures that, in their view, provide relevant con-

text: Measure 47 (1996) and Measure 5 (1990). As noted earlier in this opinion, Measure 47

was the predecessor to Measure 50. Taxing authorities contend that Measure 47 is a vital part

of the context of Measure 50 because both measures aimed generally at tax reduction and

Measure 50 was adopted “in the historical and legal shadow” of Measure 47. Section 11g(1)

of Measure 47 provided:

“(1) Except as provided in subsections (3), (4), and (5) of this section, the ad valorem

property tax on each property for the tax year 1997-98, excluding the portion of the tax that

is levied to pay bonded indebtedness or interest thereon, shall not exceed the lesser of the

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following: (i) the ad valorem property tax on the same property for the tax year ending June

30, 1996, reduced by ten percent (10%), or (ii) the ad valorem property tax on the same

property for the tax year ending June 30, 1995.”

(Emphasis added.) Taxing authorities argue that the phrase “each property” in Measure 47

unambiguously referred to all the property in a property tax account, because property taxes

never have been calculated on the individual components of a property tax account. Although

Measure 50 adjusted the manner in which tax relief is achieved, taxing authorities continue,

Measure 47 provides evidence that the *572 voters intended to apply the limitation on taxes in

Measure 50 to property as a whole.

Taxpayer disagrees that Measure 47 is relevant context for interpreting the voters' intent in

Measure 50. According to taxpayer, Measure 47 sought to achieve property tax relief “by lim-

iting the amount of the tax as applied to the whole property tax account.” (Emphasis in origin-

al.) Measure 50, by contrast, “attacked the assessed value component of the tax equation,” not

the tax itself. (Emphasis in original.)

Taxing authorities are correct that Measure 47 has a close enough relationship to Measure

50 to provide relevant context. However, the text of Measure 47, without more, supports

neither party's argument in this case. That is so, because Measure 47 used the phrase “each

property” in describing property to be taxed. Measure 50, by contrast, used the phrase, “each

unit of property in this state” in referring to the maximum assessed value of property. We

agree with taxpayer that, standing alone, the text of Measure 47 does not help to explain the

voters' intent regarding the meaning of the phrase “each unit of property in this state” in

Measure 50.

3. Measure 5

[9] We turn to taxing authorities' argument regarding Measure 5 as context for understand-

ing the voters' intent regarding Measure 50. Measure 5, which the voters approved in 1990,

became Article XI, section 11b, of the Oregon Constitution. See Shilo Inn, 333 Or. at 105 n. 2,

36 P.3d 954 (explaining history of Measure 5). There is a close link between Article XI, sec-

tion 11b, and Measure 50, which, as noted, became Article XI, section 11. Indeed, Article XI,

section 11, which is at issue in this case, makes more than 10 references to provisions of Art-

icle XI, section 11b. See, e.g., Or Const, Art XI, §§ 11(3)(a)(A), 11(3)(a)(B), 11(3)(h), and

11(5)(b)(B) (referring to section 11b). Article XI, section 11, also provides that the term “real

market value” shall have the same meaning under Article XI, section 11, and Article XI, sec-

tion 11b. See Article XI, § 11(11) (so stating).

In April 1997, the month before the voters adopted Measure 50 in a special election, this

court held that the word *573 “property” in Measure 5 means “a specific unit of realty (with

or without improvements) that is identified**588 by the appropriate authority by tax lot num-

ber or by some other method.” Shatzer v. Dept. of Rev., 325 Or. 211, 219, 934 P.2d 1119

(1997). The voters thus were on notice when they adopted Measure 50 that this court had in-

terpreted the word “property” as being synonymous with the phrase “unit of realty,” with or

without improvements, that is identified by tax lot number or by some other method.

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Taxpayer disagrees that this court's interpretation of the word “property” in Shatzer prop-

erly is considered as part of the context in seeking to understand the voters' intent in Measure

50. For that proposition, taxpayer relies on the following statement in Stranahan:

“Our first level of analysis under Ecumenical Ministries also includes relevant case law in-

terpreting Article IV, section 1. See Coultas [ v. City of Sutherlin, 318 Or. 584, 589-90, 871

P.2d 465 (1994) ] (examining earlier case law construing initiated constitutional amendment

in question ).”

331 Or. at 61, 11 P.3d 228 (emphasis added). According to taxpayer, the phrase “in ques-

tion” in the parenthetical explanation of Coultas means that the only case law from this court

that is relevant context for interpreting an initiative measure is case law interpreting the same

initiative measure. Taxpayer concludes that, because Shatzer interprets Measure 5, not Meas-

ure 50, Shatzer 's holding regarding the meaning of “property” in Measure 5 has no relevance

in seeking to understand the intent of the voters in Measure 50.

Taxpayer misreads Stranahan. In a footnote immediately following the portion of Strana-

han quoted above, on which taxpayer relies, the court stated: “The first level of analysis also

includes context, including related constitutional provisions that were in place when the pro-

vision in question was adopted.” Stranahan, 331 Or. at 62 n. 15, 11 P.3d 228 (emphasis ad-

ded). Constitutional provisions or amendments that are created through either legislative refer-

ral or initiative petition are adopted by the people against the backdrop of an existing constitu-

tional framework. Id. at 57, 11 P.3d 228. That framework includes this court's interpretation of

related constitutional provisions.

*574 Measure 5 was in place as Article XI, section 11b, when the voters approved Meas-

ure 50 and, as we have explained above, Measure 5 and Measure 50 are closely related. We

conclude that both the text of Measure 5, and the interpretation of the word “property” in

Measure 5 in Shatzer, provide context that is helpful in determining the voters' intent when

they adopted the phrase “each unit of property in this state” in Measure 50. We agree with tax-

ing authorities that Measure 5, and this court's holding in Shatzer that the word “property”

means “unit of realty,” with or without improvements, that is identified by a tax lot number or

by some other method, suggests that the voters intended “each unit of property in this state” in

Measure 50 to refer to all the property in a property tax account. See ORS 308.245 (1995)

(each land parcel subject to assessment assigned tax lot or account number).

4. ORS Chapter 308

Finally, taxpayer contends that tax statutes in effect when the voters adopted Measure 50,

particularly those in ORS chapter 308, provide relevant context and support taxpayer's inter-

pretation of the phrase “each unit of property in this state.” Specifically, taxpayer argues that,

under ORS 308.215, land and improvements have been treated as separate parts of property

for assessment purposes. See ORS 308.215(1)(e), (f) (1995) (providing that, for each parcel of

real property, assessor shall set down in assessment roll assessed value of land and assessed

value of improvements). For decades, those separate assessed values have appeared on the tax

bills that taxpayers receive. Accordingly, taxpayer concludes, when they adopted Measure 50,

the voters were aware that the tax rolls include separate entries for the values of land and im-

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provements. Moreover, the voters also were aware that taxpayers may appeal the real market

values of land and improvements separately. See Nepom v. Dept. of Rev., 272 Or. 249, 256,

536 P.2d 496 (1975) (holding taxpayer entitled to challenge value of improvements only

without putting **589 value of land at issue).

FN3

It follows, taxpayer *575 argues, that the

voters intended the phrase “unit of property” to refer to land and improvements separately.

Taxing authorities respond that the connection between the statutory form in which the assess-

ment roll must be prepared and Measure 50, which limits taxes on real estate, is too remote to

provide meaningful insight into the voters' intent in adopting Measure 50.

FN3. We note that, in Nepom, the court did not define the word “property” and did not

refer to land and improvements as “units” of property. Instead, the court in Nepom as-

sumed that the “unit” of property was the parcel as a whole. See 272 Or. at 255, 536

P.2d 496 (“We appreciate that some property, particularly residential, is valued in the

marketplace as a unit.”) (emphasis added).

We agree with taxing authorities. Taxpayer reads too much into the requirement in ORS

308.215(1) (1995) that the tax rolls include separate values for land and improvements. Noth-

ing in ORS chapter 308 referred to land and improvements as “units.”

FN4

Moreover, the stat-

utes governing the form of the assessment rolls also required the assessor to include on the as-

sessment role “[t]he total assessed value and real market value of each parcel of real property

assessed.” ORS 308.215(1)(i) (1995). We believe that, to the extent that the voters considered

those statutes, it is just as likely that they intended the phrase “each unit of property in this

state” to refer to the total assessed value for each parcel of real property assessed, ORS

308.215(1)(i) (1995), as it is that they intended that phrase to refer to individual assessed val-

ues, ORS 308.215(1)(e), (f) (1995).

FN4. The word “unit” in ORS 380.215(1)(g) (1995) refers to condominium “units” un-

der ORS 100.005 to 100.910.

Our review of the relevant context of Article XI, section 11(1)(a), suggests that the voters

most likely intended the phrase “each unit of property in this state” to refer to all the property

in a property tax account rather than to land and improvements separately. We turn to a con-

sideration of the history surrounding the enactment of Measure 50.

C. History

[10] In examining the history of a referred measure, this court considers relevant materials

contained in the voters' pamphlet, such as the ballot title and the explanatory statement. Shilo

Inn, 333 Or. at 129-30, 36 P.3d 954 (so indicating). We turn to the relevant materials regard-

ing the history of Measure 50.

*576 1. Ballot Title and Estimate of Financial Impact

The ballot title for Measure 50 does not mention the phrase “each unit of property in this

state.” Neither does the ballot title indicate that approval of Measure 50 would require county

tax assessors to calculate separate maximum assessed values for land and improvements in

each property tax account. Rather, the ballot title describes the measure as limiting the as-

sessed value of property for tax purposes. The ballot title caption for Measure 50 states:

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“AMENDS CONSTITUTION: LIMITS ASSESSED VALUE OF PROPERTY FOR TAX

PURPOSES; LIMITS PROPERTY TAX RATES”

Official Voters' Pamphlet, Special Election, May 20, 1997, 5 (emphasis added). Similarly,

the “yes” vote result statement states: “A ‘yes' vote adopts amendment limiting property taxes

through restrictions on assessed value of property and property tax rates.” Id. (emphasis ad-

ded). Finally, the ballot title summary explains the measure, in part, as follows:

“This measure changes current provisions relating to property taxation. The measure es-

tablishes the maximum assessed value of property in this state for the 1997-1998 tax year as

90 percent of the property's real market value in the 1995-1996 tax year and then limits any

increase in maximum assessed value for tax years following 1997-1998 to three percent per

year * * *. This reduction will reflect Measure 47 cuts by basing the cuts on the lesser of the

1995-1996 tax minus 10 percent or the 1994-1995 tax, adjusted for voter-approved levies *

* *.”

**590 Id. (emphasis added). In describing Measure 50, the ballot title caption, the “yes”

vote result statement, and the summary do not use the phrase “each unit of property in this

state.” Rather, they refer to the assessed value of “property.” As we have explained above, the

word “property” refers to the general class of things that can be owned, or, in the context of

real property, to real estate in general. The use of the word “property” in the ballot title for

Measure 50, rather than “each unit of property,” suggests that the voters intended the phrase

“each unit of property in this state” in Measure 50 to refer to all the property in a property tax

account.

*577 Reading the summary together with the “estimate of financial impact” bolsters that

conclusion. The estimate of financial impact states that Measure 50 “replaces Measure 47 * *

*.” The summary, quoted above, states that the property tax reductions under Measure 50

“will reflect Measure 47 cuts.” As we have explained earlier in this opinion, Measure 47 dealt

with ad valorem property tax on “each property,” and taxes on real property were not levied

on the individual components of a property tax account. See ORS 307.010(1) (1995) (“real

property” includes land and improvements).

2. Explanatory Statement

We turn to the explanatory statement for Measure 50 that the 1997 Legislative Assembly

provided. That statement first notes that, in 1996, the voters approved Measure 47, which lim-

ited “the amount of property taxes that may be collected from each parcel of property.”

Voters' Pamphlet at 6 (emphasis added). The statement then explains that Measure 50 “would

replace the percentage of tax limitations in Measure 47 with a reduction in the maximum as-

sessed value of property for the 1997-1998 tax year * * *.” Id. (emphasis added). Notably, the

explanatory statement describes the tax limitations in Measure 47 as applying to “parcels” of

property and then draws a correlation between those limitations and the limitations in Measure

50. Moreover, in describing the differences between Measure 47 and Measure 50, the explan-

atory statement does not use the phrase “each unit of property in this state.” Voters who read

the explanatory statement likely would have understood that the property tax limitation in

Measure 50, like the limitation in Measure 47, applied to parcels of property. The explanatory

statement thus suggests that voters intended the phrase “each unit of property in this state” to

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refer to all the property in a property tax account.

3. Legislative Argument in Favor of Measure 50

Finally, we turn to the legislative argument in support of Measure 50. That argument re-

commends a “yes” vote “to ensure you receive the property tax relief expected under Measure

47[.]” Id. at 7. The legislative argument in favor of Measure 50 also states that Measure 50 de-

livers the property tax relief that Measure 47 had promised to the voters, that *578 Measure

50 maintains “a 17% tax cut and a 3% growth cap as promised by Measure 47,” that Measure

50 would save millions of dollars each year because it is easier and cheaper to administer than

Measure 47 or Measure 5, and that Measure 50 maintains the funding priorities for schools

and public safety that Measure 47 had promised. Id. Finally, the legislative argument in sup-

port of Measure 50 states that the measure “rolls assessed property values back to 90% of their

1995-96 level.” Id.

Significantly, the legislative argument in support of Measure 50 does not mention the

phrase “each unit of property in this state” or land and improvements as separate aspects of

property. As we have explained above with respect to the explanatory statement, the use of the

term “property,” and the references to Measure 47 in the legislative argument in favor of

Measure 50, are an indication that the phrase “each unit of property in this state” in Measure

50 refers to all the property in a property tax account.

FN5

FN5. Taxpayer notes that the text of Measure 50, which contains the disputed phrase

“each unit of property in this state,” also appears in the voters' pamphlet. In taxpayer's

view, the appearance of the phrase in the voters' pamphlet is historical evidence estab-

lishing the voters' intent. We already have examined the plain meaning of the text and

found that it plausibly can be read to support both taxpayer's and taxing authorities' ar-

guments.

**591 III. CONCLUSION

In summary, we hold that the text of the phrase, “each unit of property in this state,” in

Article XI, section 11(1)(a), plausibly refers either to land and improvements separately, or to

all the property in a property tax account. However, the context surrounding Measure 50 and

the history of the measure clarify the voters' intent. We conclude that the voters intended the

phrase “each unit of property in this state” to refer to all the property in a property tax ac-

count, which, in this case, includes both land and improvements. By requiring each unit of

property in this state to have a maximum assessed value for purposes of ad valorem property

taxes, Article XI, section 11(1)(a), provides that each property tax account shall have a max-

imum assessed value for purposes of ad valorem property taxes.

The decision of the Tax Court is reversed, and the case is remanded to that court for fur-

ther proceedings.

Or.,2002.

Flavorland Foods v. Washington County Assessor

334 Or. 562, 54 P.3d 582

END OF DOCUMENT

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Judges and Attorneys

Oregon Tax Court, Regular Division.

Ronald P. HOXIE, Plaintiff,

DEPARTMENT OF REVENUE, State of Oregon, De-

fendant,

and

CLATSOP COUNTY ASSESSOR, Intervenor-Defend-

ant.

No. 4494.

April 11, 2001.

OPINION

**323 BYERS, J.

*1 Plaintiff (taxpayer) appeals a magistrate determ-

ination of the exception value used to increase the max-

imum assessed value (MAV) of his property for the

1997-98 tax year. Taxpayer claims the improvements

made were not the source of the great increase in value

between 1995 and 1997. Clatsop County (the county)

intervened and defended the assessment. Trial was held

January 30, 2001, in Astoria, Oregon.

FACTS

The parties agree on many of the facts. The subject

property consists of an entire city block in downtown

Astoria near the county courthouse, improved with two

large buildings and a parking lot. The office building

located at 800 Exchange Street (800 building) was con-

structed in 1923. It has four stories of 4,198 square feet

per floor plus 2,500 square feet in the basement. The

medical clinic building located at 820 Exchange Street

(820 building) was constructed in 1978-79 and has two

stories with 7,600 square feet per floor.

The property's history is interesting and relevant. In

1954, a group of medical doctors purchased the 800

building plus a parking area. In 1978-79, the doctors ac-

quired the rest of the land in the block and constructed

the 820 building at a cost of approximately 1.2 million

dollars. In 1989, U.S. Bancorp foreclosed its mortgage

for $1,465,000, and the subject property was conveyed

to the bank by a deed in lieu of foreclosure.

When the bank took over the property, all of the

buildings were vacant. In 1989, the bank leased the

second floor of the 800 building to a state agency. In

1993, the bank leased the second floor of the 820 build-

ing to a group of doctors. Sometime around 1993, the

bank listed the property for sale at $675,000. The

county considered buying the property and negotiated a

price of $500,000. Taxpayer learned of the availability

of the property by a newspaper article indicating that

the county had declined to purchase it. Taxpayer pur-

chased the property in June 1994 for $500,000. At that

time, the property had an assessed value of $691,360.

Based on the **324 purchase price, taxpayer appealed

to the board of equalization, which reduced the assessed

value of the property to $500,000 for the 1994-95 tax

year. The assessed value was increased for the 1995-96

tax year to $580,000 based on a trending factor of 16

percent.

Taxpayer took possession in September 1994 and

immediately began cleaning the property and started a

maintenance program. Apparently, there was a signific-

ant amount of trash and debris to be removed, and the

800 building was in need of painting and many repairs.

In addition, taxpayer engaged an architect that resulted

in what taxpayer describes as three creative changes.

The changes were: (1) realignment of the lobby area of

the first floor in the 820 building, (2) creation of a new

entrance in the 800 building to open up the first floor

and basement, and (3) installation of a new staircase in

the 800 building from the third floor to the fourth floor.

Taxpayer made a number of other improvements such

as replacing some windows, rewiring the 800 building,

leveling the first floor in the 800 building, and installing

a new fire-alarm system in the 800 building. Many im-

provements were effected to make spaces suitable for

tenants such as moving walls, changing plumbing and

floor covering. Taxpayer testified that he spent $58,664

in improvements from the time of purchase up to July 1,

1995. He stated that he spent $225,265 on improve-

ments between July 1, 1995, and July 1, 1997.

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ISSUE

*2 For purposes of determining the property's MAV

for 1997-98, how much value did the post-1995 im-

provements add?

ANALYSIS

Article XI, section 11, of the Oregon Constitution,

adopted in the May 1997 election, establishes a MAV

for property taxation. Section 11 specifies that the MAV

shall be the 1995 real market value (RMV) reduced by

10 percent. Thereafter, the MAV may increase 3 percent

per year. However, the constitution and implementing

statutes recognize that there are exceptions to the rule.

One specific exception is **325 for new construction or

new improvements to existing property.

Article XI, section 11 has been implemented by

statutes. See Oregon Laws 1997, chapter 541. ORS

308.153

FN1

provides the method for computing a new

MAV where there are new improvements to property.

That statute provides, in relevant part, as follows:

FN1. All references to the Oregon Revised

Statutes are to 1997.

“(1) If new property is added to the assessment roll

or improvements are made to property as of January 1

of the assessment year, the maximum assessed value

of the property shall be the sum of:

“(a) The maximum assessed value determined un-

der ORS 308.146; and

“(b) The product of the value of the new property

or new improvements determined under subsection

(2) of this section multiplied by the ratio of the aver-

age maximum assessed value over the average real

market value for the assessment year.

“(2) The value of new property or new improve-

ments shall equal the real market value of the new

property or new improvements reduced (but not be-

low zero) by the real market value of retirements

from the property tax account.

“(3) The property's assessed value for the year shall

equal the lesser of:

“(a) The property's maximum assessed value; or

“(b) The property's real market value.”

FN2

ORS

308.153.

FN2. Because the constitutional amendment re-

quired a change of the assessment date from

July 1 to January 1, it was necessary to provide

an adjustment for the first year to which the

provision applied. Consequently, Oregon Laws

1997, chapter 541, section 12 provides that for

the tax year beginning July 1, 1997, the value

determined under section 11(2) of the act (ORS

308.153(2)) shall be the real market value as of

July 1, 1997, reduced by retirements.

In construing and applying ORS 308.153, it is ne-

cessary to consider the definitions contained in ORS

308.149. Specifically, ORS 308.149(5)(a) states, in part:

“ ‘New property or new improvements' means

changes in the value of property as the result of:

**326 “(A) New construction, reconstruction, ma-

jor additions, remodeling, renovation or rehabilitation

of property[.]”

Because new improvements are defined as

“changes in value” rather than the improvements them-

selves, it appears that the legislature intended to meas-

ure the increase in RMV of the remodeled property as

opposed to the value of the improvements themselves.

Consequently, remodeling that cost $15,000 might in-

crease the RMV of the property only $9,000, or it could

increase the value $50,000. The statutory test measures

the net increase in value as a result of the improve-

ments.

The parties agree that the critical task for the court

is to determine how much the RMV increased as a res-

ult of the improvements .

FN3

It is a daunting task. In

making the determination, the court must exclude in-

creases in RMV due to cleaning, maintenance and re-

pairs, or minor construction.

FN4

Likewise, the court

cannot consider increases in RMV due to inflation,

changes in market demand, or changes in management

Page 2

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150-303-438 (Rev. 05-18)

17-52

or use of the property.

FN3. There is no real dispute about the

changed property ratio and there is no dispute

with regard to the MAV of the property prior to

the improvements.

FN4. “ ‘Minor construction’ means additions of

real property improvements, the real market

value of which does not exceed $10,000 in any

assessment year or $25,000 for cumulative ad-

ditions made over five assessment years.” ORS

308.149(6). See also OAR 150-308.149-(A).

*3 Obviously, a myriad of factors can affect the

RMV of property. Changes in interest rates, traffic pat-

terns, laws such as the Americans with Disabilities Act,

fire and safety codes, technology, costs, asbestos, and

many other things can all affect RMV. However, none

of those factors constitutes an exception to the MAV.

The exception value is limited to the RMV attributable

to the new improvements. In this case, those new im-

provements are the new entrance to the 800 building,

the new staircase to the fourth floor of the 800 building,

the realigned lobby in the 820 building, and other

changes in walls, bathrooms, floors, wiring, alarms,

windows, and lights. The new improvements do not in-

clude cleaning and painting of the exterior walls and

windows. It also does **327 not include work on the

building where there is no significant change in “design

or materials.” OAR 150-308.149-(A)(2)(b).

The determination of value is made even more dif-

ficult by the fact that there was work in progress as of

July 1, 1995. Improvements made prior to July 1, 1995,

would not be considered “new improvements” under

ORS 308.153. Only those improvements made from Ju-

ly 1, 1995, to July 1, 1997, constitute new improve-

ments for purposes of calculating an exception value.

In his testimony, taxpayer acknowledged his good

fortune. He spent less than $4,000 realigning the lobby

in the 820 building. Nevertheless, by July 1, 1995, he

had leased the entire 820 building for a total monthly

rent of $14,200. He had also leased part of the first floor

and all of the second floor of the 800 building for a total

monthly rent of $5,188. Thus, as of July 1, 1995, tax-

payer was receiving $232,656 in annual gross rent, with

portions of the 800 building yet to be rented. Taxpayer

testified that his management policy was not to build

out or finish space until after a tenant had signed the

lease and that most of the improvements were done to

suit the tenants.

By July 1, 1997, taxpayer was receiving a total of

$314,234 in annual rent. (Ptf's Ex 43.) Taxpayer argues

that because he was receiving 74 percent of the relevant

rent by July 1, 1995, it is unlikely that an additional 26

percent increase in rent created a million dollar increase

in value due to the improvements.

The parties submitted appraisal evidence. When

taxpayer sought financing to purchase the property in

1994, the Bank of Astoria had the property appraised.

The appraiser was aware of the property's history and

offering/listing price of $675,000. That appraiser saw

the market as stagnant with no real growth anticipated.

He also did not anticipate changes in the property,

viewing the “current configuration” of the 800 building

as representing the “most economically optimum use of

the property at this time.” (Ptf's Ex 41 at 8.) Con-

sequently, that appraiser found an as-is value of

$572,500 but a value with stabilized occupancy of

$625,000. He viewed the property as a turn-around

project with higher-than-market risk.

*4 **328 In 1998, taxpayer applied to the Bank of

Astoria for refinancing. The bank again had the prop-

erty appraised, this time by Jackson Roholt. Roholt

opined that the RMV of the property as of March 1998

was $2,050,000. At that point, the property had a poten-

tial gross-rental income of $347,244 per year. Roholt

saw the property in a more positive light. He indicated

that it is located in “the heart of downtown” Astoria and

is in a good neighborhood. He estimated that renova-

tions had reduced the effective age of the 800 building

to 20 years.

Taxpayer was aware of Roholt's appraisal and

asked him to calculate an exception value for purposes

of the property tax appeal. Based on reconstructed in-

come, Roholt calculated the RMV of the property as of

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150-303-438 (Rev. 05-18)

17-53

July 1, 1997, at $1,857,000. (Ptf's Ex 1.) He also calcu-

lated the RMV of the subject property as of July 1,

1995, at $1,524,000. (Ptf's Ex 44.) That resulted in an

increase of $333,000 in value attributable to: (1)

$225,656

FN5

in improvements, (2) increased land val-

ues, and (3) increased rental values due to inflation. Ro-

holt calculated the increase in rent due to inflation as

having a market value of $68,960, leaving $264,040 for

the increase in value due to the improvements and in-

creases in land value.

FN5. Roholt rounded the cost of the improve-

ments to $225,000. (Ptf's Ex 44.)

The county also had the property appraised for the pur-

pose of calculating an exception value to the MAV. The

county appraiser found a RMV as of July 1, 1997, of

$1,904,000, of which she attributed $370,500 to land

and $1,533,500 to improvements. She calculated an ex-

ception value by first determining the RMV of the im-

provements for 1995 and trending them forward to July

1, 1997. That is, of the total $580,000 RMV as of July

1, 1995, the appraiser found that the RMV of the im-

provements was $365,640. She trended that amount for-

ward to July 1, 1997, to arrive at a RMV for the im-

provements of $449,737. She then deducted that amount

from the July 1, 1997, RMV of the improvements to ar-

rive at an exception value of $1,083,763.

The county recognizes that the exception value may not

include increases due to market trends. (Inv's Ex A at

32.) The appraiser **329 attempted to account for mar-

ket trends by applying a trending factor to the original

RMV of the improvements. However, that approach as-

sumes that all of the remaining increase in value is due

to new improvements. The evidence indicates that such

is not the case with this property.

It is apparent that taxpayer's leasing of the 820 building

and the second floor of the 800 building were not due to

new improvements but probably a combination of

cleaning and good luck. Those two leases alone signi-

ficantly increased the income and therefore the value of

the property. Moreover, some of the improvements were

made prior to July 1, 1995, and would therefore be ex-

cluded from consideration.

The assessment history of the subject property is reveal-

ing. The total assessed values by year are as follows:

Year Assessed Value Year Assessed Value

1988-89 $1,340,280 1993-94 $ 691,360

1989-90 $1,165,570 1994-95 $ 500,000

1990-91 $1,015,800 1995-96 $ 580,000

1991-92 $1,015,800 1996-97 $ 713,400

1992-93 $ 750,000 1997-98 $1,590,426

*5 Based on all the evidence, the court is persuaded

that the decline in market value from $1,340,280 in

1988 to $500,00 in 1994-95 was primarily a result of

market demand, rather than deterioration in the prop-

erty. Likewise, the rapid increase in value from 1995 to

1997 was due in large part to changes in market de-

mand. Although the county appraiser applied a trending

factor, it must be remembered that such factors are gen-

eralized from sales data. A specific property may in-

crease in value either at a greater or lesser rate due to its

unique characteristics and circumstances.

Roholt calculated an increase in RMV between July

1, 1995, and July 1, 1997, of $333,000. Because some

of the rents in 1995 were higher than those in 1997, Ro-

holt probably overestimated the 1995 RMV. However,

it does not appear that it would have been excessive by

more than $50,000-$60,000. Roholt also calculated a

capitalized value of the increase in rents after July 1,

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150-303-438 (Rev. 05-18)

17-54

1997, at $68,960. (Ptf's Ex 44.)

**330 Concluding that the increase in rents largely

offsets the excessive rents estimated for the 1995 value,

Roholt's income approach indicates an increase in RMV

of approximately $330,000. The cost approach would

indicate something more than the $225,656 invested be-

cause the value of taxpayer's labor is not included in

those out-of-pocket costs. Because taxpayer's labor in-

cluded management, supervision of cleaning, and other

items not includible in new improvements, it is im-

possible to estimate the value of that factor.

Based on the above analysis, the court finds that the

increase in RMV was $330,000. That increase in RMV

must be multiplied by the changed property ratio of .73,

resulting in an exception value of $240,900. The court

finds that $240,900 should be added to the original

MAV of the improvements of $329,076 for a total im-

provement MAV of $569,976. When added to the MAV

of the land of $192,924, the court arrives at a July 1,

1997, MAV for the subject property of $762,900. Judg-

ment will be entered consistent with this Opinion.

Plaintiff to recover his costs and disbursements.

Or.Tax Regular Div.,2001.

Hoxie v. Department of Revenue

2001 WL 406248, 15 Or. Tax 322

Judges and Attorneys(Back to top)

Judges

• Byers, Hon. Carl N.

State of Oregon Tax Court

Salem, Oregon 97301

Litigation History Report | Judicial Reversal Report |

Profiler

END OF DOCUMENT

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150-303-438 (Rev. 05-18)

17-55

Judges and Attorneys

Oregon Tax Court, Regular Division.

Thelma C. MAGNO, Plaintiff,

DEPARTMENT OF REVENUE, State of Oregon,

Defendant,

and

Washington County Assessor, Intervenor.

TC 4720.

May 18, 2006.

OPINION

HENRY C. BREITHAUPT, Judge.

**52 I. INTRODUCTION

*1 This case comes before the court for de-

cision after trial. Plaintiff (taxpayer) appeals from a

Magistrate Decision finding that, for the 2003-04

tax year, the real market value (RMV) of certain

residential property owned by taxpayer was

$933,000 and the maximum assessed value (MAV)

and assessed value (AV) of the property was

$893,630. Taxpayer maintains that the actual RMV

of the property was not more than $700,000, and,

alternatively, that the AV of the property should not

have exceeded $800,600. Defendant (the depart-

ment) and Intervenor (the county) ask the court to

find that the RMV of the property was $1,200,000,

or, alternatively, that the MAV and AV of the prop-

erty was $1,093,610.

FN1

FN1. Because the department tendered the

majority of the trial to the county, and be-

cause both the department and county

made the same arguments, the court refers

to the arguments of both as those of the

county.

**53 I. FACTS

Taxpayer purchased certain residential property

in Washington County in June 2000 for $452,500.

Soon thereafter, taxpayer began improving the

landscaping and remodeling the single-family resid-

ence located on the property (together, the remod-

el). The remodel can be described as follows: tax-

payer gutted and rebuilt over half the home; added

approximately 1,000 square feet to its size; and sig-

nificantly updated, remodeled, and refurbished the

rest of the home and the landscaping. By January 1,

2002, taxpayer had completed about half of that

work. The county, as of that date, for purposes of

collecting property taxes for tax year 2002-03, de-

termined that the RMV of taxpayer's property was

$839,270 (of which $187,850 was for the land and

$651,420 for the improvements), and that the MAV

and AV was $777,240. By January 1, 2003, taxpay-

er had completed almost all of the remodeling

work. The county, as of that date, for purposes of

collecting property taxes for tax year 2003-04, de-

termined that the RMV of taxpayer's property was

$1,224,710 (of which $192,780 was for the land

and $1,031,930 for the improvements), and that the

MAV and AV was $1,112,120. The county derived

the figures for the 2003-2004 tax year using an ex-

ception value (EV) of $415,980 and a changed

property ratio (CPR) of 0.749.

Taxpayer appealed the county's assessment for

tax year 2003-04 to the county Board of Property

Tax Appeals (BOPTA), which found taxpayer's

property to have an RMV of $933,000 (of which

$192,780 was for the land and $740,220 was for the

improvements), an EV of $124,270, and an MAV

and AV of $893,630. Taxpayer appealed that de-

cision to the Magistrate Division of this court,

which left the BOPTA values undisturbed. This ap-

peal ensued.

II. ISSUE

What are RMV and MAV of taxpayer's prop-

erty for tax year 2003-2004?

III. ANALYSIS

In Oregon, real property is taxed on the lesser

of the property's MAV or RMV. ORS 308.146(2);

ORS 308.153(3).

FN2

**54 The MAV is normally

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150-303-438 (Rev. 05-18)

17-56

the greater of the property's MAV from the prior

year or 103% of the property's AV from the prior

year. ORS 308.146(1). However, for new property

and new improvements to property, the MAV is

calculated differently. ORS 308.146(3) (a). With

new improvements to property, such as is involved

in the remodel at issue in this case, see ORS

308.149(5)(a)(A) (including “remodeling” in the

definition of “new property or new improve-

ments”); OAR 150-308.149-(A) (1)(d)

FN3

(defining “remodeling” as “a type of renovation

that changes the basic plan, form or style of the

property”), the MAV is the sum of the MAV as de-

rived under ORS 308.146 (the MAV of the property

as if it had not changed) and the MAV of the new

improvements. ORS 308.153(1). The MAV of the

new improvements is the product of the EV and the

CPR. ORS 308.153(1)(b). The EV is the amount by

which the RMV of the new improvements exceeds

the RMV of any retirements. ORS 308.153(2)(a).

The CPR is the ratio of the average MAV for simil-

ar property in the area to the average RMV for sim-

ilar property in the area. ORS 308.153(1)(b); ORS

308.149 (defining terms used in ORS

308.153(1)(b)).

FN4

FN2. All references to the Oregon Revised

Statutes (ORS) are to the 2001 edition.

FN3. All references to the Oregon Admin-

istrative Rules (OAR) are to the current

edition.

FN4. In 2001, the legislature amended

ORS 308.153(1)(b) to state that the CPR

cannot exceed 1.00. Or Laws 2001, ch 509,

§ 9.

*2 The values of several of the above-

mentioned factors are undisputed in this case. The

MAV and AV of the property for tax year 2002-03

was $777,240. Accordingly, the MAV of the prop-

erty for tax year 2003-04, is the greater of the prior

year's MAV ($777,240) or 103% of the prior year's

AV ($800,557) as calculated under ORS 308.146,

which is $800,557. Additionally, it is undisputed

that the CPR relevant to this case is 0.749. What re-

mains in dispute are the values of the two remain-

ing factors that determine the MAV and, ultimately,

the AV of taxpayer's property for tax year 2003-04:

the EV and RMV of taxpayer's property for that

year.

RMV is “the amount in cash that could reason-

ably be expected to be paid by an informed buyer to

an informed seller, each acting without compulsion

in an arm's-length **55 transaction occurring as of

the assessment date for the tax year.” ORS

308.205(1). See Chart Development Corp. v. Dept.

of Rev., 16 OTR 9, 11-13 (2001) (discussing the

concept of RMV). There are three traditional meth-

ods used to calculate RMV: the cost approach, the

income capitalization or income approach, and the

sales comparison approach, also known as the sales

or market approach. Allen v. Dept. of Rev., 17 OTR

248, 252 (2003); see also OAR 150-308.205-(A)(2)

(stating that all three methods must be considered

in determining a property's RMV even if all cannot

be applied). Neither taxpayer nor the county found

the income approach appropriate for taxpayer's

property, and neither does the court, because tax-

payer's property is not used to generate income. See

Appraisal Institute, The Appraisal of Real Estate 62

(12th ed 2001) (stating that the income approach is

“not often used in the valuation of single-family

homes”). The dispute, therefore, centers on the cost

and income approaches.

A. The Cost Approach

“In the cost approach, the value of a property is

derived by adding the estimated value of the land to

the current cost of constructing a reproduction or

replacement for the improvements and then sub-

tracting the amount of depreciation * * * in the

structure from all causes.” Appraisal Institute, The

Appraisal of Real Estate 63. The cost approach is

“particularly useful in valuing new or nearly new

improvements,” id., and taxpayer accordingly

places great reliance on it. However, the cost ap-

proach is less useful where the evidence of cost is

incomplete, distorted, or otherwise unreliable. The

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17-57

county argues that such is the case here and that,

therefore, the cost approach is inappropriate for tax-

payer's property.

Taxpayer presented extensive evidence at trial

showing the costs she incurred remodeling her

property, including financial records prepared by

her business partner, Bruce Deschner, who super-

vised and worked on the remodel. Based on those

records, taxpayer testified that she spent $346,000

on the remodel. That figure was kept low, she testi-

fied, because she did much work herself, sought out

**56 bargains on materials, avoided expensive ma-

terials, and refurbished many materials that were

already in the home. For instance, taxpayer testified

that she bought many plants at bargain basement

prices at an auction and that she avoided expensive

hardwood flooring in favor of pergo. Taxpayer ar-

gues that, given her evidence, and because the con-

struction is new, the cost approach should be accor-

ded great weight in valuing her property.

*3 The reliability of taxpayer's evidence is

placed in some doubt, however, by the testimony of

Deschner, who stated that the $346,000 figure was

low by approximately $10,000 to $15,000 because

he had failed to account for some costs related to

flooring, roofing, and other aspects of the remodel.

Similarly, as the county pointed out, some expens-

ive items, such as certain decking materials, ap-

peared to be missing from taxpayer's cost estimate.

On the other hand, Deschner also testified that the

cost estimate was somewhat high in that it included

some items of personal property, such as a $4,500

refrigerator. Taxpayer's cost estimate was further

undermined by taxpayer's appraiser, Steven

Gentzkow. In his appraisal, Gentzkow valued tax-

payer's property under the cost approach at

$771,233, of which $175,000 was for the land,

$65,000 for the “as-is value of site improvements,”

$737,984 for the reproduction cost of the improve-

ments, and $206,751 for depreciation.

FN5

FN5. Although Gentzkow ultimately found

the market approach the strongest indica-

tion of value, his final conclusion of value

drew support from the cost approach.

The county argues that, in addition to those dis-

crepancies, taxpayer's cost estimate is unsound for a

more fundamental reason: taxpayer did not pay

market price for the remodel. To understand the

county's argument, it is necessary to give some

background information on the relationship

between taxpayer and Deschner. Taxpayer and

Deschner were business partners for many years in

a company called Magno Pacific Construction

(MPC).

FN6

Taxpayer owned 52% of **57 the com-

pany as President and Deschner owned 48% as

Vice-President.

FN7

DESCHNER DID MOST of

the work for mpc, from bidding ON projects to

managing money, while taxpayer participated in

general management. MPC had only a small hand-

ful of permanent employees but as many as 80 tem-

porary employees when it worked on large projects.

The company was primarily engaged in the busi-

ness of working on government construction

projects, although it did work on two residential

projects, an area in which Deschner had much ex-

perience.

FN6. Although taxpayer testified that the

company was founded in approximately

1997 and closed in 2002, Deschner testi-

fied that it was founded in 1990 and closed

in June 2003. The court finds that

Deschner's testimony was generally more

reliable than taxpayer's with regard to fin-

ancial and business matters.

FN7. Those facts are derived from the

testimony of Deschner. Taxpayer testified

that she did not know how many shares of

the company she and Deschner each

owned, and that he was President and she

was Vice-President.

Most of the work on taxpayer's remodel was

performed by her, Deschner, and MPC employees,

although electrical work, plumbing, flooring, roof-

ing, and some other work was done by outside com-

panies. Taxpayer paid contractor rates for materials,

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17-58

which are generally lower than retail rates.

FN8

Ad-

ditionally, as the county points out, taxpayer paid

less than market rate for labor costs because she

was able to cut out the profit element on work per-

formed by MPC employees. Although the testi-

mony was confusing and uncertain on this point, it

appears that taxpayer only paid MPC $9,500 to

$10,000 for work its employees did on the remodel,

even though as many as eight employees worked on

the multi-year project. Deschner calculated total

labor costs at $89,000, of which he received

$25,000 to $35,000 in compensation for his ser-

vices, with some of that coming from MPC, some

from taxpayer herself, and some from another com-

pany, Magno Humphries, of which taxpayer is

President and sole owner and Deschner is a build-

ing supervisor.

FN9

Taxpayer testified that she did

not know which portions of Deschner's compensa-

tion for the remodel came from which of her com-

panies and which came from her personally.

Deschner testified that it was hard to make an ac-

curate cost estimate given **58 that taxpayer paid

the bills for the remodel from several accounts and

that some of the money went to him personally and

some to MPC and outside contractors.

FN10

The

confusion and uncertainty regarding labor costs was

exaggerated by the lack of any budget for the re-

model or a contract between taxpayer and either

Deschner or MPC, which might have specified

costs for labor and materials, how payments would

be made, etc.

FN8. Although taxpayer testified that she

did not know if she paid contractor rates,

stating that instead she might have gotten

some volume discounts on retail prices, the

weight of her testimony and that of

Deschner indicates that she paid contractor

prices.

FN9. Magno Humphries is a vitamin com-

pany that leases land from Magno LLC,

another company solely owned by taxpay-

er.

FN10. Deschner testified that he was paid

as an employee of MPC until June 2002,

and then by taxpayer personally until

March 2003, from which point on he has

been paid as an employee of Magno

Humphries. Deschner did not know how

many hours he worked on the remodel, al-

though he stated that he sometimes worked

10-12 hours per day on it. As an employee

of MPC, he was paid $2,200 every two

weeks, and other MPC employees were

paid $8 per hour.

*4 The court concludes that taxpayer's ultimate

cost estimate is uncertain and unreliable given the

necessary adjustments mentioned at trial, the dis-

crepancy between taxpayer's figure and Gentzkow's

figure, the incomplete and confusing nature of the

evidence and testimony regarding how the remodel

was paid for and by whom, and the close relation-

ship between taxpayer and those who did the work,

both in terms of the contractor discounts that tax-

payer's company, MPC, received for materials, and

in terms of the uncertain rates which taxpayer and

MPC paid for labor. Accordingly, the court con-

cludes that the cost approach is not an appropriate

method to use in valuing taxpayer's property. The

court therefore turns to sales comparison approach.

B. The Sales Comparison Approach

1. Real Market Value

Under the sales comparison approach, the value

of a property is derived by “comparing the subject

property with similar properties, called comparable

sales.” Appraisal Institute, The Appraisal of Real

Estate 63 (emphasis omitted). That comparison is

based on many factors, and adjustments are made

for any differences between the comparable sales

and the subject property so that the appraiser can

derive a value for the subject property. Id. at 63-64.

“The sales comparison approach is most useful

when a number of similar properties have recently

been sold or are currently for sale in **59 the sub-

ject property's market.” Id. at 63. Both parties agree

that the sales comparison approach is helpful in de-

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termining the RMV of taxpayer's property; the

court concurs.

Taxpayer's property is located in the Montclair

neighborhood, which Gentzkow described as an es-

tablished, exclusive residential development with

good market appeal due to its location and lack of

adverse conditions, as well as its large, quality,

well-maintained homes. According to Gentzkow,

taxpayer's property comprises more than 22,000

square feet, with extensive landscaping. After the

remodel, the home comprised nearly 8,000 square

feet with 14 rooms, including 5 bedrooms and 4.2

bathrooms. Much of the house was gutted and re-

built, while the rest was updates, remodeled, and

refurbished: the end product was custom built, high

quality, and new. In addition, there was a three-car

garage, a large, custom, and high-quality rear deck

and patio, and an additional unit described by tax-

payer as a gazebo and by the county as an entertain-

ment pavilion, which contained a living room, bed-

room, bathroom, and kitchen. The home was

equipped with pergo, carpet, and marble floors,

new fixtures and electrical service, a new roof, new

siding and windows, and a new driveway. The kit-

chen had a full line of high-quality, built-in appli-

ances, granite counter tops, custom cabinetry, and

skylights. As of January 1, 2003, some of the work

on the patio remained unfinished, with some foun-

tains and retaining walls yet to be installed and

landscaping work still to do. Although most of the

homes in Montclair were built in the 1960's and

1970's, Gentzkow described taxpayer's remodeled

residence as having an effective age of only five

years.

*5 Gentzkow testified that the remodel

rendered taxpayer's property uncharacteristic for

the neighborhood and thus adversely impacted its

marketability. Gentzkow also felt that marketability

was adversely impacted by taxpayer's unique

choices in custom features, such as bright red kit-

chen cabinets, and by the low quality of some fea-

tures, such as the pergo flooring, which Gentzkow

described as out of place in a home the size of tax-

payer's. Finally, Gentzkow stated that the size of

taxpayer's home was itself a negative factor be-

cause, in a neighborhood of 3,500 to 5,000 square

foot **60 homes, taxpayer's home was over-

improved, rendering the excess space functionally

obsolete.

FN11

FN11. Functional obsolescence, a form of

depreciation, “is caused by a flaw in the

structure, materials, or design of the im-

provement when compared with the

highest and best use and most cost-ef-

fective functional design requirements at

the time of appraisal.” Appraisal Institute,

The Appraisal of Real Estate 403. The

functional obsolescence at issue in this

case, excessive square footage, is known as

“superadequacy, which means that some

aspect of the subject property exceeds mar-

ket norms.” Id. “It represents a cost

without any corresponding increment in

value or a cost that the increment in value

does not meet.” Id. at 404. Most superad-

equacies are difficult to cure, and they of-

ten incur additional expense such as higher

heating costs. Id. at 411. Accordingly, they

do not add to the value of a property, but

usually detract from it. Id. at 411-12. Al-

though functional obsolescence is gener-

ally considered in the cost approach, the

concept has application in the sales ap-

proach insofar as the appraiser must make

adjustments in value when comparing the

subject property with comparable sales.

Gentzkow used three comparable sales in his

appraisal of taxpayer's property. All three compar-

able sales are located in Montclair. Comparable G1

sold in November 2003 for $765,000; it is similar

to taxpayer's property in lot size, landscaping, and

the home's effective age, quality, and amenities;

FN12

however, the home is smaller: Gentzkow ad-

justed Comparable G1 upward $54,000 to equate it

with taxpayer's property, concluding that it indic-

ated a value for taxpayer's property of $819,000.

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Comparable G2 sold in December 2003 for

$682,000; its home is similar in effective age and

quality; however, its lot is smaller, its landscaping

inferior, and the home smaller with inferior amenit-

ies: Gentzkow adjusted it upward $84,300 for a

value of $766,300. Comparable G3 sold in May

2003 for $559,100; it is similar in landscaping and

home quality; however, its lot is smaller, and the

home has an older effective age and is smaller with

inferior amenities: Gentzkow adjusted it upward

$148,075 for a value of $707,175. Weighing the

values of the three adjusted comparable sales and

comparing them to taxpayer's property, Gentzkow

valued taxpayer's property at $750,000.

FN12. By amenities, the court means the

size of the garage and the number of bed-

rooms, bathrooms, and fireplaces, etc.

The county's appraiser, Barbara Miller, used

four comparable sales in her appraisal of taxpayer's

property. Comparable M2 is located in Montclair,

but the other three are located in a relatively similar

neighborhood across the **61 highway that abuts

Montclair and has generally larger homes. Compar-

able M1 sold in October 2002 for $1,100,000; its

home is similar in effective age and quality;

however, its lot is larger, its landscaping inferior,

and its home is smaller with inferior amenities:

Miller adjusted it upward $181,200 for a value of

$1,281,200. Comparable M2 sold in January 2002

for $995,000; its home is similar in effective age;

however, its lot is larger, its landscaping inferior,

and its home superior in quality but inferior in size

and amenities: Miller adjusted it upward $227,980

for a value of $1,222,980. Comparable M3 sold in

July 2003 for $867,500; its lot is much larger, its

landscaping inferior, and its home inferior in size

and amenities, and much inferior in effective age

and quality: Miller adjusted it upward $204,650 for

a value of $1,072,150. Comparable M4 sold in

January 2002 for $810,000; its home is similar in

effective age and amenities; however, its lot is lar-

ger, its landscaping much inferior, and its home

much inferior in quality and size: Miller adjusted it

upward $242,840 for a value of $1,052,840. Weigh-

ing the values of the four adjusted comparable sales

and comparing them to taxpayer's property, Miller

valued taxpayer's property at $1,200,000.

*6 At trial, Gentzkow criticized Miller's ap-

praisal on several grounds. He contended that

Miller was ill trained and inexperienced, that she

made several mistakes, and that her numbers were

misleading insofar as they were accurate. Gentzkow

testified that Miller failed to make necessary adjust-

ments for things such as functional obsolescence

and the unique nature of taxpayer's property.

Gentzkow stated that the nearby neighborhood in

which most of Miller's comparable sales were loc-

ated was nicer and contained larger, estate style

homes. Gentzkow also noted that two of Miller's

comparable sales sold for less their original asking

prices (which were close to values Miller placed on

them). Additionally, Gentzkow questioned how

comparable Miller's comparable sales were, given

that she made as many adjustments as she did; in-

deed, Gentzkow testified that Miller made so many

adjustments so as to render her appraisal in viola-

tion of accepted professional appraisal standards.

To support his own valuation, Gentzkow pointed to

a May 2002 appraisal he had done on taxpayer's

property for insurance purposes; at **62 that time,

he valued the property at $700,000. Gentzkow also

pointed to another insurance appraisal by another

appraiser in July 2004; that appraisal valued the

property at $710,000.

On the other hand, Miller found several faults

in Gentzkow's appraisal. She testified that she con-

ducted in depth visits of each of her comparable

sales and that she spoke with the owners; she also

testified that she did the same for Gentzkow's com-

parable sales. In contrast, Gentzkow admitted that

he had only taken pictures of his comparable sales.

Miller stated that Gentzkow failed to adjust his

comparable sales properly, given their low quality

and the fact that they were each remodeled, some

significantly, immediately after their sales. Miller

also pointed out that Gentzkow, too, had used com-

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parable sales from nearby neighborhoods in his

May 2002 appraisal of taxpayer's property. Addi-

tionally, the court notes that BOPTA considered

Comparable G2 when it valued taxpayer's property,

concluding that Comparable G2 indicated a value

for taxpayer's property of $987,000, substantially

higher than the value Gentzkow reached. Other

factors also weigh against Gentzkow's appraisal and

in favor of Miller's. For instance, Deschner at one

time told an agent of the county that the RMV of

taxpayer's property was around $1,200,000. Finally,

it is questionable why, if taxpayer's appraisers in-

dicated values for the property between $700,000

and $750,000, land included, she insures her home

alone for $780,000 (the land being valued by all

parties and appraisers at just shy of $200,000).

The court finds that neither Gentzkow's nor

Miller's appraisals were fully reliable or persuasive,

although each provides much useful and reliable in-

formation. In the end, as is to be expected,

Gentzkow appears to have chosen comparable sales

that reflect a lower RMV for taxpayer's property

than is appropriate, and Miller appears to have

chosen comparable sales that reflect a higher RMV

than is appropriate Weighing all the testimony and

evidence presented, especially the comparable sales

proffered by both parties, the court determines that

an RMV of $950,000 is proper for taxpayer's prop-

erty.

2. Exception Value

*7 The question that remains is the EV of tax-

payer's property. As stated above, the EV of a prop-

erty is the amount **63 by which the RMV of the

new improvements to it exceeds the RMV of any

retirements. ORS 308.153(2)(a). In making that de-

termination, care must be taken to ensure that only

allowable improvements are included. Those im-

provements are defined as “changes in the value of

property as a result of” various activities listed in

ORS 308.149(5)(a), in this case, remodeling. ORS

308.149(5)(a)(A); OAR 150-308.149-(A)(1)(d).

Other improvements are not to be included in the

calculation of EV; those include general ongoing

maintenance and repair, and minor construction.

ORS 308.149(5)(b); see also ORS 308.149(6)

(defining “minor construction” as “additions of real

property improvements, the [RMV] of which does

not exceed $10,000 in any assessment year”); Hoxie

v. Dept. of Rev., 15 OTR 322, 326 (2001) (stating

that things such as cleaning and painting cannot be

included in the EV). Moreover, the calculation of

EV must also exclude factors such as changes in in-

flation, market demand, and construction codes.

Hoxie, 15 OTR at 326. The court will refer to those

improvements that must be included in the calcula-

tion of EV as new improvements. All other factors,

which cannot be included in the calculation of EV,

will be termed either minor or routine improve-

ments, or market trends.

Taxpayer argues that, in order to properly ac-

count for the distinction between new improve-

ments, on the one hand, and minor or routine im-

provements and market trends on the other hand,

the remodel must be broken down into its compon-

ent parts. Under that theory, the painting and clean-

ing done by taxpayer would not count toward the

EV of her property, nor would those changes that

constitute merely minor construction. There are two

ways that taxpayer's theory could apply in practice.

One the one hand, the court could look at the entire

remodel and ask which aspects of it were minor or

involved routine cleaning or maintenance, exclud-

ing those from the calculation of EV, and which as-

pects were substantial enough to constitute new im-

provements, including those in the calculation. On

the other hand, the court could view the remodel as

a series of several smaller projects, some of which

involved new improvements and some of which did

not. Taxpayer asserts that there were approximately

30 such projects.

In Hoxie, the court described the work done by

the taxpayer as comprising five projects: a new

entry; a new **64 staircase; a new lobby; various

changes involving wiring, plumbing, and the like;

and the “cleaning and painting of the exterior walls

and windows.” Id. at 326. The court counted the

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first four projects towards the taxpayer's EV, but

excluded the cleaning and painting. Id. Hoxie is not

comparable to the present case. In that case, there

were a handful of discrete, easily distinguished

projects, such that the minor and routine improve-

ments could be segregated from the new improve-

ments. Here, taxpayer effectively rebuilt half of her

home, created a large new addition, and signific-

antly updated the rest of the home and the landscap-

ing as well-all as part of one comprehensive

project. Although the work undoubtedly could be

broken down into several small steps, such an ap-

proach would not accurately reflect the nature of

the work done on taxpayer's property, and would

lead to a distorted conception of EV. There was

nothing minor or routine about taxpayer's remodel.

*8 Another point of contention between the

parties concerns the concept of retirements. ORS

308.153(2)(a) requires that the RMV of the retire-

ments involved in taxpayer's remodel be subtracted

from the RMV of the additions to determine the ul-

timate value of new improvements that is the EV.

Retired property is property that is “voluntarily re-

tired or removed from service or use by the owner.”

Chart Development Corp. v. Dept. of Rev., 17 OTR

170, 175 (2003). The parties differ on how to value

the retirements from taxpayer's property.

Taxpayer argues that retirements should be val-

ued based on the RMV of taxpayer's property, using

the following calculations. Beginning with the

$450,000

FN13

that taxpayer paid for the property

in June 2000, she would estimate that, at that time,

the RMV of the land was $150,000 and the RMV of

the improvements was $300,000. Taxpayer then

contends that, because approximately 75% of the

home was retired during the remodel, the value of

the retirements for the entire remodel was 75% of

$300,000, or $225,000. Taxpayer would then apply

approximately half of that figure to tax year

2003-04, because approximately half of the remod-

el **65 work was done between January 1, 2002,

and January 1, 2003.

FN13. Taxpayer rounded the actual sale

price of $452,500 to $450,000 for purposes

of this argument.

The county, on the other hand, would value re-

tirements based on their salvage value, the value

taxpayer could obtain for them on the market. See

ORS 308.153(2)(a) (inquiring into the “real market

value of retirements from the property tax ac-

count”); ORS 308.205(1) (defining “[r]eal market

value” as “the amount in cash that could reasonably

be expected to be paid by an informed buyer to an

informed seller, each acting without compulsion in

an arm's length transaction occurring as of the as-

sessment date for the tax year”); Appraisal Institute,

The Dictionary of Real Estate Appraisal 256 (4

ed 2002) (defining “salvage value” as “[t]he price

expected for [property] that is removed from the

premises usually for use elsewhere”). Because, as

Deschner testified, taxpayer either reused all of the

old materials, such that they were not actually re-

tired, or threw them away as garbage, such that they

were not sold, the county argues that the value of

taxpayer's retirements is zero. Indeed, as the county

points out, that taxpayer did not sell any of the ma-

terials she removed from her property indicates that

she did not find anyone willing to buy them.

The court begins by noting the difficulty with

calculating a value for retirements in the residential

property context. The concept is usually employed

with regard to industrial property such as ma-

chinery and equipment. See Astoria Plywood Corp

v. Dept. of Rev., 6 OTR 40, 46 (1975) (calculating

retirements for industrial machinery and equip-

ment); OAR 150-308.205-(D)(5)(b) (requiring re-

ports of retirements as basic appraisal information

for the assessment of industrial property). Even as

applied to residential property, the concept would

be more workable if the case involved a distinct

physical unit, such as a detached garage or wood-

shed, that was demolished or otherwise retired. In

such a situation, the RMV of the unit could be ap-

proximated, and that value could be subtracted

from the RMV of any new improvements to the

property as a whole. Here, however, much of the

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property that was retired is now part of the property

that has become new improvements. It is more dif-

ficult to place a value on 75% of taxpayer's home

and grounds than merely to take 75% of the RMV

of the improvements pre-remodel, as **66 taxpayer

suggests. For instance, some portions of the im-

provements are more valuable than others. Addi-

tionally, it may be difficult to assess the RMV of

just a retired kitchen or bedroom without taking in-

to account the value of other, integrated improve-

ments. In this case, the difficulty is compounded by

the amount of property that taxpayer either refur-

bished or converted to different uses within the

house or on the property.

*9 Ultimately, taxpayer bears the burden of

proof in this case. ORS 305.427. That includes the

burden of proving the extent and RMV of any re-

tirements. Taxpayer has not provided such proof

either in the form of an appraisal of those portions

of her property that she claims as retirements, or

evidence that she sold any materials once they left

her property, or that she had obtained goods or ser-

vices in kind, or any other form. Regardless of how

retirements are valued, taxpayer has failed to prove

any amount of retirements in this case. Because

there is no evidence in the record of the value of

taxpayer's retirements, the court cannot find that

they have any value.

FN14

FN14. Accordingly, it is not necessary to

decide whether taxpayer's or the county's

method of valuing retirements is correct.

The court notes, however, that the county's

approach seems inconsistent with ORS

308.153(2)(a), which appears to focus on a

value already reflected in the account that

is then removed or destroyed. See also

ORS 308.205(1) (defining RMV as “the

amount in cash that could reasonably be

expected to be paid by an informed buyer

to an informed seller, each acting without

compulsion in an arm's-length transaction

occurring as of the assessment date for the

tax year” ) (emphasis added).

Viewing taxpayer's remodel as one project

without any minor or routine improvements or re-

tirements, it is nonetheless important to include in

the calculation of EV only those changes that oc-

curred between January 1, 2002, and January 1,

2003. Hoxie, 15 OTR at 327. As stated earlier, tax-

payer had completed approximately half of the re-

model by January 1, 2002, and the remodel was al-

most finished by January 1, 2003. The RMV for the

2002-03 tax year was $839,270 and the EV was

$340,510. Because the court has found that the

RMV of taxpayer's property for the 2003-04 tax

year is $950,000, the increase in RMV between

January 1, 2002, and January 1, 2003, was only

$110,730. Part of that increase in RMV is due not

to taxpayer's remodel, but rather **67 to changes in

interest rates, demand, and other market factors that

cannot be included in the calculation of EV.

Gentzkow's appraisal report states that general mar-

ket appreciation in the area of taxpayer's property

was 4.5% in 2003.

FN15

The court finds that

Gentzkow's figure accurately represents the change

in value of taxpayer's property that was not due to

the remodel, but rather to market trends, and that,

therefore, cannot be included in the calculation of

EV.

FN15. That figure includes any appreci-

ation in the value of the land that, along

with the house, comprises taxpayer's prop-

erty.

There are two ways to account for the 4.5%

market appreciation. One method is to first increase

the 2002-03 RMV of taxpayer's property by 4.5%.

That calculation shows what the RMV of taxpayer's

property for tax year 2003-04 would likely be

without any improvements. Here, $839,270 multi-

plied by 1.045 is $877,037. The difference between

that value and $950,000, the ultimate RMV of tax-

payer's property with the improvements, is $72,963,

which must, therefore, be the RMV of the new im-

provements, or the EV of taxpayer's property. The

second method is to subtract from the total increase

in RMV between tax years 2002-03 and 2003-04

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($110,730) an amount equal to 4.5% of the 2002-03

RMV, $839,270. $110,730 minus $37,767 is

$72,963, the same value as derived under the first

method. Accordingly, the court finds that an EV of

$72,963 is proper for taxpayer's property for tax

year 2003-04.

FN16

FN16. Miller calculated an EV of

$391,270. That figure is too large, both be-

cause Miller overvalued the RMV of tax-

payer's property and because the RMV of

new improvements cannot exceed

$110,730, the amount of the increase in the

RMV of taxpayer's property between Janu-

ary 1, 2002, and January 1, 2003.

IV. CONCLUSION

After carefully evaluating all of the evidence

and testimony presented, the court concludes that

the RMV of the subject property for tax year

2003-04 is $950,000 and the EV is $72,963. To de-

termine the MAV for taxpayer's property, the EV

must be multiplied by the CPR (0.749), resulting in

an MAV for new improvements of $54,649, which

must then be added to the MAV as derived under

ORS 308.146 (here, $800,557). ORS 308.153(1).

That calculation results in an MAV for taxpayer's

property of $855,206. Because the AV is **68 the

lesser of the MAV or RMV, ORS 308.153(3), and

here the MAV is less than the RMV, the AV for

taxpayer's property for tax year 2003-04 is

$855,206. The county shall correct the assessment

and tax rolls to reflect the above stated values for

taxpayer's property, with any refund due to be

promptly paid with statutory interest pursuant to

ORS 311.806 and ORS 311.812.

Or.Tax Regular Div.,2006.

Magno v. Department of Revenue

2006 WL 1375113, 19 Or. Tax 51

Judges and Attorneys(Back to top)

Judges

• Breithaupt, Hon. Henry C.

State of Oregon Tax Court

Salem, Oregon 97301

Litigation History Report | Judicial Reversal Report

| Profiler

END OF DOCUMENT

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