Summary
This Oregon Supreme Court opinion addresses whether the Tax Court was bound by a Department of Revenue administrative rule incorporating the WSATA Handbook for determining the real market value of centrally assessed utility property. The court holds that lawfully promulgated administrative rules carry the force of law and must be applied by courts absent a facial or as-applied invalidity challenge. Consequently, the court reverses the Tax Court’s decision and remands the case for reconsideration under the correct legal standard.
Topics
Practice areas
Questions Presented
- Whether the Department of Revenue had statutory authority to adopt the WSATA Handbook as an administrative rule prescribing methods and procedures for determining real market value.
- Whether a validly promulgated administrative rule prescribing valuation methods and procedures binds the Tax Court unless the rule is invalid facially or as applied.
- Whether the Tax Court erred by treating the WSATA Handbook as nonbinding and failing to analyze whether its application would produce a result inconsistent with constitutional or statutory real-market-value requirements.
- Whether the Tax Court's error required reversal and remand because it may have affected the court's evaluation of the valuation evidence.
Holdings
- The Department of Revenue had statutory authority under ORS 308.205(2), reinforced by ORS 308.655, to adopt the WSATA Handbook as an administrative rule prescribing methods and procedures for determining real market value in centrally assessed property-tax cases.
- A valid administrative rule has the force of law and binds the Tax Court unless it is invalid on its face or invalid as applied to the facts before the court.
- The Tax Court erred by concluding that the WSATA Handbook had no binding role and by failing to determine whether applying particular handbook provisions to the evidence would produce a result inconsistent with the constitutional and statutory definition of real market value.
- Reversal and remand were required because the Tax Court's legal error may have affected its evaluation of the valuation evidence.
Key quotations
“Absent a determination that the rule is invalid facially or as applied, the department’s rule is law, and it must be given legal effect.” (374 Or. at 191)
“But if an administrative rule is valid—that is, if it was adopted through lawful procedures and is neither invalid on its face nor invalid as applied—then it is law, and a court is bound by it.” (374 Or. at 193)
“We hold only that the court erred by failing to treat the department’s rule as a relevant source of law that controls unless, if applied in fact, it would compel a result contrary to the constitution or statute.” (374 Or. at 211)
Factual background
PacifiCorp is an electric utility operating inside and outside Oregon and is centrally assessed by the Department of Revenue. For tax year 2020-21, PacifiCorp's expert valued the company at $14.85 billion, with $2.23 billion allocated to Oregon, while the Department's expert valued it at $22.50 billion, with $3.71 billion allocated to Oregon. The dispute included PacifiCorp's deduction for obsolescence in its cost approach and its use of a no-growth model in its income approach, both of which the Department argued deviated from the WSATA Handbook.
Procedural history
The Tax Court rejected PacifiCorp's constitutional challenge to Oregon's taxation of its intangible property and determined PacifiCorp's real market value and Oregon allocation. It concluded that the administrative rule incorporating the WSATA Handbook did not bind the Tax Court and accepted PacifiCorp's no-growth income model. The Oregon Supreme Court affirmed without further discussion as to PacifiCorp's appeal, reversed the Tax Court's treatment of the administrative rule on the Department's cross-appeal, and remanded for reconsideration under the correct legal standard.
Remand instructions
The Tax Court must reconsider the case and the evidentiary valuation issues while treating the Department's rule incorporating the WSATA Handbook as a relevant and controlling source of law unless application of a provision would compel a result contrary to the Oregon Constitution or statutes defining real market value. The Tax Court must apply the correct as-applied-validity standard.