Chapter § 14.5

• Jurisdiction: Oregon

§ 14.5 PROPERTY TAX LIMITATIONS

§ 14.5-1 An Overview of Property Taxation in Oregon

Starting in 1990, the people, through a series of initiative measures and measures referred by the legislature, have transformed Oregon's property tax system. The tax base, which was the total amount of money that each taxing entity was allowed to collect through property taxes, has been replaced by a permanent rate, which is the maximum rate that each taxing district may impose against the assessed value of each property within the taxing entity's area. The aggregate amount of property taxes that may be imposed on any individual property by all taxing districts combined has been limited to 1.5 percent of the property's real market value (one percent for all general government purposes; 0.5 percent for all education purposes). Or Const, Art XI, § 11b(1).

Local taxing districts are allowed to impose local option levies, if approved by the voters. Or Const, Art XI, § 11(4)(a). Local option levies are still subject to the overall 1.5 percent tax limit. If approved by the voters, taxes may be imposed in excess of the 1.5 percent limit only to pay bonded indebtedness for capital improvements. The definition of capital improvements has been enlarged. Or Const, Art XI, § 11L.

COMMENT: Although the State of Oregon has the power to impose ad valorem property taxes, it does not—at least at this writing—do so. Property taxes are the lifeblood of Oregon's cities, counties, school districts, and special districts.

Before 1997, property taxes were structured like a triangle, the three sides being the base, the rate, and the value. And before 1990, Oregon had a levy-based property tax system. Each unit of government that was authorized to levy a property tax established, generally by a vote of its electors, its tax base, which was the total dollar amount that it was authorized to levy through the property tax. That amount could rise by 3 percent per year without a vote of the people, and could be raised higher with the approval of the voters. Each year, the assessor would apportion the tax base among the value of all of the nonexempt property within the taxing entity's boundaries, and would thereby derive the tax rate to be imposed on the value of each property within that unit of government. See Shilo Inn Portland/205, L.L.C. v. Multnomah County, 333 Or 101, 109, 36 P3d 954 (2001), modified on recons, 334 Or 11, 45 P3d 107 (2002). Any given property might be subject to taxation by any number of taxing districts: a city, a county, a school district, an education service district, a park district, a library district, a port district, or a drainage district, to name some of them. Thus, before 1990, only one side of the property tax triangle—the base—was limited by the constitution.

In 1990, the voters approved Measure 5, which added Article XI, section 11b, to the Oregon Constitution. Measure 5 introduced a rate limit on ad valorem property taxes and divided property taxes into two types: those imposed for general government purposes and those imposed for education purposes. Or Const, Art XI, § 11b(1). Subject to a few enumerated exceptions, which are discussed in § 14.5-2 to § 14.5-5, the aggregate amount that can be assessed by all taxing districts against a single property cannot exceed 1 percent of real market value for general government purposes, nor may it exceed 0.5 percent of real market value for education purposes. Or Const, Art XI, § 11b(1). Under Measure 5, a property owner is entitled to have the property assessed at the lowest real market value it had during the tax year. Or Const, Art XI, § 11b(2)(a). Property owners whose property suffered a casualty loss during the tax year were entitled to have the real market value of their property recalculated, and to pay taxes only on the lower rate. Shatzer v. Department of Revenue, 325 Or 211, 219, 934 P2d 1119 (1997).

PRACTICE TIP: The legislature adopted a statutory scheme for challenges under Article XI, section 11b. See ORS 305.580-305.591. Lawyers should be careful to follow the required procedures, and should be aware that some decisions regarding property taxes have a 60-day limitation (see ORS 305.583). Failure to follow the processes set forth in these statutes will cause the loss of what otherwise might be a meritorious claim. See Tilbury v. Multnomah County, 322 Or 112, 902 P2d 577 (1995), cert den, 516 US 1118 (1996) (filing after the 60-day deadline); Smith v. Multnomah County Board of Commissioners, 318 Or 302, 865 P2d 356 (1994) (failure to follow exclusive refund procedure).

After 1990, two sides of the tax triangle—the base and the...