City of Seattle v. Dept. of Rev.

Summarized by:

  • Court: Oregon Supreme Court
  • Area(s) of Law: Tax Law
  • Date Filed: 09-11-2015
  • Case #: S061813
  • Judge(s)/Court Below: BALDWIN, J., for the Court; En Banc.
  • Full Text Opinion

An exclusive right of use, and control of, a definable part of a taxable power facility located in Oregon is sufficient to establish a possessory interest in the facility under Oregon tax law. Under Article IV, section 18 of the Oregon Constitution, a measure that possesses the essential features of levying a tax is subject to the requirements of the Origination Clause.

Three municipal corporations in Washington (taxpayers), appeal two Oregon Tax Court decisions granting summary judgment in favor of the Oregon Department of Revenue (department). The taxpayers each own an interest in electrical transmission capacity purchased from the Bonneville Power Association (BPA), facilitated over the federally administered Pacific Northwest AC Intertie (Intertie). Taxpayers proffer two contentions: (1), the Court incorrectly decided a previous case in Power Resources Cooperative v. Dept. of Rev., 330 Ore. 24, 996 P.2d 969 (2000) (which held that entities such as taxpayers do have a “possessory interest” in a taxable Oregon power facility), as their contracts with BPA are merely transmission agreements and not possessory interests in the Intertie; and (2) that Senate Bill 495 (2009) (removing tax exemptions for foreign corporations’ possessory interest in the Intertie) was unconstitutional in violation of Article IV, section 18 of the Oregon Constitution, which requires revenue raising measures to originate in the Oregon House of Representatives. In regards to taxpayers’ first argument, the Court held that an exclusive right of use, and control of, a definable part of the power system–which taxpayers’ contracts with BPA confer–are sufficient to establish a “possessory interest” in a taxable power facility under Oregon law. As to the taxpayers’ second assertion, the Court held that the dispositive issue in determining whether a measure was subject to Article IV, section 18 was whether a bill that raised revenue possessed the essential features of levying a tax. As SB 495 merely placed foreign entitles on an equal playing field with in-state entities by removing a tax exemption, its revenue raising effect was merely incidental and therefore did not qualify it as a revenue raising measure subject to Article IV, section 18. Affirmed.

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