Property taxation and assessment treatment of some industries is highly regulated. With rising costs and technological advancements, the assessed values of these industries, which are often based on the cost approach, are becoming increasingly misaligned with market values. For taxpayers in these industries, continuously increasing assessed values give rise to questions about the accuracy of valuation methods and the equity of the approach. These issues were highlighted in recent cases decided by Oregon’s Supreme Court.
Background
Oregon law requires that certain industries, whose properties cross county lines, to be assessed centrally by the Department of Revenue. These industries, which include rail, air, and water transportation; communication; utilities; and pipelines, are assessed subject to a separate set of statutes. While the general provision in Oregon’s assessment statute is that “intangible personal property is not subject to assessment and taxation,” the definition of property in the central assessment statute specifically includes intangibles. In addition, the Department of Revenue’s rule OAR 150-308-0690 d mandates that valuation of centrally assessed properties be prepared in accordance with the Western States Association of Tax Administrators (WSATA) handbook. In a process called “unit valuation,” the assessor calculates a value for the business and then determines the portion of that value attributable to its Oregon locations.
The Issues
Two centrally assessed companies, Delta Air Lines and PacifiCorp, a regional utility company, each filed appeals on the grounds that inclusion of intangible values in their assessments, but not the assessments of locally assessed properties, was contrary to the state’s constitutional requirement for uniformity in assessment and taxation.
PacifiCorp raised additional issues regarding the valuation. The taxpayer’s appraiser prepared values using methodologies that departed from the WSATA handbook. When applying the cost approach, the taxpayer’s appraiser deducted additional obsolescence. The taxpayer’s income approach assumed no future growth in revenue, as the utility’s rates were subject to regulation. Both of these adjustments were discouraged by the WSATA handbook.
The Oregon Tax Court did not consolidate the cases but issued one decision addressing the constitutional issue: Delta Air Lines, Inc. v. Dept. of Rev., 25 OTR 308 (2023). It decided in favor of the airline but rejected the claim of the utility. The unsuccessful parties both appealed the issue to the Supreme Court.
In a separate decision: PacifiCorp v. Dept. of Rev., 25 OTR 227 (2023), the Tax Court determined that it did not owe deference to the administrative rule requiring use of the WSATA handbook, as it was free to disregard the values presented by both parties and to determine a value based on the evidence. The Department of Revenue appealed this decision.
Oregon Supreme Court Decisions
Constitutionality
In Delta Air Lines, Inc. v. Dept. of Rev., 374 Or 58 (SC S070593, July 24, 2025), the Court noted that Article I, Section 32 of the Oregon Constitution provides in part: “[A]ll taxation shall be uniform on the same class of subjects within the territorial limits of the authority levying the tax.” [Emphasis added.] The Court found that the state’s separate statutes for centrally assessed properties and locally assessed properties had a rational basis and that the statute was consistently applied to taxpayers within a similar class.
Deference
In PacifiCorp v. Dept. of Rev., 374 Or 189 (SC S070564, September 18, 2025), the Court held that the “Tax Court’s conclusion that it was not required to defer to the rule was legally erroneous. 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.” The decision was remanded to the Tax Court.
Notably, the Supreme Court set out a process for determining the validity of a rule: Was the department granted authority to adopt the rule? If so, did adoption follow proper procedures? And if so, did the substance of the rule depart from a legal standard in the law?
Key Takeaways
- Oregon is one of the few places in the U.S. that taxes intangibles. As the value of intangibles grows, will this be an obstacle to investment in the state?
- The PacifiCorp case highlights the importance of understanding the assessor’s methodology and administrative rules, to ensure taxpayers provide appropriate evidence to challenge that methodology.
- Taxpayers should understand the standards for challenging administrative rules/regulations adopted by the Department of Revenue.
The issue in PacifiCorp brings to mind the U.S. Supreme Court’s decision in Loper Bright Enterprises v. Raimondo,1 which overturned the longstanding rule of agency deference first articulated in 1984 in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.2 Chevron stood for the proposition that when a statute is ambiguous, courts should defer to a federal agency’s reasonable interpretation of that statute.
The Loper Bright decision limited deference to an agency where Congress expressly delegated authority to such agency. In this instance, the Oregon Court noted that the state legislature did in fact make such delegation under O.R.S. § 308.205(2): “Real market value in all cases shall be determined by methods and procedures in accordance with rules adopted by the Department of Revenue….” General rule-making authority is granted to the department pursuant to O.R.S. § 305.100. This does not mean that department regulations cannot be challenged. The PacifiCorp decision laid out further steps for a challenge. Taxpayers can challenge whether agency procedures were properly followed and, if they were, whether the regulation “departed from a legal standard expressed or implied in the particular law being administered or contravened some other applicable statute.”
Contact Ryan’s tax experts today to explore how these rulings could affect your property tax assessments and to strategically navigate your appeals process.
1 Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024).
2 Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
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- Mark LoRusso
- Property Tax
- Oregon