Real market value defined
- rules
Source:
Section 308.205 — Real market value defined; rules, https://www.oregonlegislature.gov/bills_laws/ors/ors308.html.
Notes of Decisions
True cash value
Book value is not, as matter of law, true cash value. La Pointe’s, Inc. v. Dept. of Rev., 4 OTR 512 (1971)
Without a valid foundation for different assessments, the assessment of part of the land of a shopping center at a dollar rate per square foot different from the remaining land of the center is a violation of the uniformity clauses of the Ore. Const. Henshaw v. Dept. of Rev., 5 OTR 263 (1973)
In reaching determination of true cash value of “super-custom built home” appraisers for both parties properly recognized that overbuilding is type of obsolescence which must be considered in determining value of property for assessment purposes. Fritz v. Dept. of Rev., 7 OTR 375 (1978)
Where property was listed for sale at price of $230,000 but evidence was clear that nothing came of the listing in spite of market activity, such listing price was not evidential of market value. Tannler v. Dept. of Rev., 7 OTR 392 (1978)
Goal of appraisal process is to determine property’s true cash value, which is its market value as of assessment date. Bylund v. Dept. of Rev., 7 OTR 532 (1978)
Evidence showed that on facts of case income approach yielded better measure of property’s true cash value than cost approach, but because this approach resulted in higher value than that pled by Department of Revenue decree was modified to conform to pleadings. Brooks Resources Corp. v. Dept. of Rev, 286 Or 499, 595 P2d 1388 (1979)
Enforcement of Revenue Department’s subpoena of cable television company’s income and expense records is proper where company can cite no rule or regulation, promulgated under this section, that would exclude from determination of true cash value consideration of income derived from operations. Southern Oregon Broadcasting Co. v. Dept. of Revenue, 287 Or 35, 597 P2d 795 (1979)
If the highest and best use of land as vacant and available reduced value of existing improvements so that total value of land and improvement is less than value of existing improvements and their corresponding current land use value, then property should be valued at its existing use. Oregon Broadcasting Co. v. Dept. of Rev., 287 Or 267, 598 P2d 689 (1979)
While land and improvements are to be valued separately, when both are at issue, they should be valued so that together they constitute highest and best use of property as a whole. Oregon Broadcasting Co. v. Dept. of Rev., 287 Or 267, 598 P2d 689 (1979)
Mandate of this section that if property has no immediate market value true cash value is amount of money that justly compensates owner for loss of property was not followed when single fixed value was applied to wells and septic systems in face of uncontroverted testimony revealing that costs could vary depending on conditions. McConoughey v. Dept. of Rev., 10 OTR 125 (1985)
Where court found highest and best use of subject property was its current use and there were little usable sales and income data, court gave most weight to cost approach in finding true cash value of property. Freedom Fed. Savings and Loan v. Dept. of Rev., 11 OTR 317 (1989), aff’d 310 Or 723, 801 P2d 809 (1990); STC Submarine, Inc. v. Dept. of Rev., 13 OTR 14 (1994), aff’d 320 Or 589, 890 P2d 1370 (1995)
Appraisal made for purposes of financing or obtaining loan is not evidence of true cash value, rather, test of true cash value is value in exchange. Skerritt v. Dept. of Rev., 12 OTR 65 (1991)
Offers to purchase conditioned upon obtaining conditional use permit to build were persuasive evidence of true case value. Hines v. Dept. of Rev., 12 OTR 78 (1991)
Test of highest and best use is not mechanical application of whether use is physically possible, legally permissible, financially feasible and maximally productive, but each of those conditions must be related to market conditions and where use made is more intensive than market, true cash value must be determined based on market’s probable use of property at economic rent. Fred Meyer, Inc. v. Dept. of Rev., 12 OTR 85 (1991)
Where improvements to land were inconsistent with highest and best use of land for agriculture and grazing, cost of improvements was improperly considered in determining true cash value of land. Connecticut General Life Ins. Co. v. Dept. of Rev., 12 OTR 461 (1993)
Factors affecting value
In the valuation of a “going concern,” the market to be used is that of the operator of a going concern rather than for a sale on liquidation. Avison Lbr. Co. v. Dept. of Rev., 5 OTR 45 (1972)
Real property (golf course) could be restricted to open use, operated as a loss and still have market value if there was possibility of profitable operation in foreseeable future. Willamette Factors v. Department of Revenue, 8 OTR 400 (1980), aff’d 291 Or 568, 633 P2d 781 (1981)
Federal and state investment and energy income tax credits, partially available to subsequent purchaser of subject property, had direct influence on market value as of assessment date. Joseph Hydro Associates, Ltd. v. Dept. of Rev., 10 OTR 277 (1986)
Fact that plaintiff is federal government and able to avoid certain market expenses, such as construction insurance, is not relevant for purposes of establishing fair market value. General Services Adm. v. Dept. of Rev., 10 OTR 290 (1986)
Provision of this section establishing different tax valuation for four or more lots held by same owner within same subdivision violates Article I, section 32 of Oregon Constitution by establishing classification of property for purpose of taxation that is not based on inherent, qualitative, genuine and rational differences between classes of property. Mathias v. Dept. of Revenue, 11 OTR 347 (1990), aff’d 312 Or 50, 187 P2d 272 (1991)
Market value adjustment to reflect legal restriction on property use applies whether restriction was incurred voluntarily or involuntarily. Bayridge Assoc. Ltd. Partnership v. Dept. of Rev., 13 OTR 24 (1994), aff’d 321 Or 21, 892 P2d 1002 (1995)
Whether compensation for government restrictions on property is part of property’s market value depends on whether compensation is transferable to subsequent purchasers of property. Bayridge Assoc. Ltd. Partnership v. Dept. of Rev., 13 OTR 24 (1994)
Where financial feasibility of development is unknown, market will attribute some value to possibility of development. Sells v. Dept. of Rev., 13 OTR 179 (1994)
Where tax lot is divided into more than one assessment account, proper procedure is to determine value of tax lot as whole, then allocate portion of total tax lot value to each assessment account. Tanner v. Dept. of Revenue, 13 OTR 393 (1995)
Determination of value of property as it exists on assessment date does not preclude reduction in assessed value based on changes occurring during tax year. Shatzer v. Dept. of Revenue, 13 OTR 436 (1996), aff’d 325 Or 211, 934 P2d 1119 (1997)
Where highest and best use of parcel is as part of joint development with adjoining parcels under common ownership, parcels may be valued as single economic unit. White v. Washington County Assessor, 17 OTR 45 (2003)
Under public interest rule for valuing property subject to governmental restrictions, value of property without regard to restrictions minus value of government interest yields value of taxable private interest in property. Wilsonville Heights Assoc., Ltd. v. Dept. of Revenue, 17 OTR 139 (2003), aff’d 339 Or 462, 122 P3d 499 (2005)
In adjusting value of affordable housing project, value of government credit support is equivalent to present value of rent lost by property owner due to governmental restrictions. Wilsonville Heights Assoc., Ltd. v. Dept. of Revenue, 17 OTR 139 (2003), aff’d 339 Or 462, 122 P3d 499 (2005)
Governmental restriction that conditions use of property without prohibiting all beneficial use does not render property completely without taxable value. Poddar v. Dept. of Revenue, 341 Or 186, 139 P3d 962 (2006)
Methods of valuation
In absence of direct evidence of value which can be used for market data approach, income or capitalization approach may be used when income attributable to the property can be segregated with reasonable certainty. Houghton v. Dept. of Rev., 4 OTR 451 (1971), aff’d 261 Or 564, 495 P2d 715 (1972)
Capitalization of income was proper method of determining true cash value. Houghton v. Dept. of Rev., 4 OTR 451 (1971), aff’d 261 Or 564, 495 P2d 715 (1972)
Rule-making power given department does not empower it to disqualify a procedure which patently should result in a determination of true cash value. La Pointe’s, Inc. v. Dept. of Rev., 4 OTR 512 (1971)
If improvements on the land would produce income for a buyer purchasing the land for its highest and best use, it is appropriate to add to the value of the land the value attributable to the rental income from the improvements. Nepom v. Dept. of Rev., 264 Or 195, 504 P2d 1039 (1972)
In the valuation of an operating sawmill, the “cost approach is the proper method to be used.” Avison Lbr. Co. v. Dept. of Rev., 5 OTR 45 (1972)
Where information necessary to an evaluation based on the income approach is not available, the cost approach to market value is the proper appraisal method. Shields v. Dept. of Rev., 266 Or 461, 513 P2d 784 (1973)
If sale of property is recent, voluntary, arm’s length transaction between buyer and seller, both of whom are knowledgeable and willing, sales price, while not conclusive, is very persuasive of market value. Kem v. Dept. of Rev., 267 Or 111, 514 P2d 1335 (1973); Rhodes v. Dept. of Rev., 12 OTR 24 (1991)
If market exists, property should be valued by using market data approach. Kem v. Dept. of Rev., 267 Or 111, 514 P2d 1335 (1973)
Principles governing use of dealings in property itself to show its value apply equally to transactions before and after valuation date. Sabin v. Dept. of Rev., 270 Or 422, 528 P2d 69 (1974)
Hypothetical subdivision for assessment purposes is proper when evidence indicates that such division is necessary to effectuate highest and best use. Sabin v. Dept. of Rev., 270 Or 422, 528 P2d 69 (1974)
Although not conclusive, price paid at time of assessment is one of best and most satisfactory standards for estimation of actual value, unless special circumstances or comparable transactions indicate it to be out of line with other market data material. Equity Land Resources, Inc. v. Dept. of Rev., 268 Or 410, 521 P2d 324 (1974)
The value of a specialized building having no immediate value may be assessed at its replacement cost, less depreciation. Benevolent Protective Order of Elks, Lodge 1680 v. Dept. of Rev., 6 OTR 488 (1976)
If an active market for used machinery and equipment exists, those costs, and not new costs less depreciation, are to be used to establish true cash value. Lamers v. Dept. of Rev., 8 OTR 106 (1979)
Where residence had been on market for years at price lower than assessed valuation, true cash value was “amount of money that would justly compensate owner for loss of property,” with bona fide listing price as upper limit. Martin v. Dept. of Rev., 8 OTR 141 (1979)
Where there was abundance of economic data in record from comparable buildings, income approach to valuation of medical office building was appropriate despite newness of construction. Portland Adventist Hospital v. Dept. of Rev., 8 OTR 342 (1980)
Separate assessment of unique commercial tenant improvements using cost basis was inappropriate absent evidence that capitalization of rent did not reflect improvement value. Bylund v. Dept. of Revenue, 9 OTR 4 (1981), aff’d 292 Or 582, 641 P2d 577 (1982)
Since former versions of ORS 215.203 and 215.213 provided that dwellings provided in conjunction with farm use were nonfarm uses, half-acre homesite on 111 acre parcel zoned Exclusive Farm Use was properly valued as homesite rather than farmland. Chapin v. Dept. of Revenue, 290 Or 931, 627 P2d 480 (1981)
In assessing bare forest land for purpose of ad valorem taxation, Department of Revenue’s utilization of “abstraction” approach to establishing market value was appropriate, however Department erred in failing to give consideration to prepurchase valuation of merchantable timber by knowledgeable parties to sales transactions of timber land in area. Publishers Paper v. Dept. of Rev., 292 Or 836, 644 P2d 1089 (1982)
Where taxpayers owned buildings but not land beneath them, best measure of market value was depreciated cost of buildings, because until landowners take action to terminate taxpayers’ use of land, taxpayers have full use of buildings. Cove Sportmans Club v. Dept. of Rev., 11 OTR 40 (1988)
When taken in context of other relevant statutes, this section required true cash value of each tax lot in fully developed subdivision to be assessed by itself, not as portion of larger piece of property. First Interstate Bank v. Dept. of Revenue, 306 Or 450, 760 P2d 880 (1988)
Where property is under nonconforming use under nontransferable, limited, revocable use permit, property is unmarketable as it exists and must be valued under this section at amount that would justly compensate owner for its loss; under this method of value, it is appropriate to use actual rent rather than estimated market rent because loss to owner would be actual rent. Wy’East Color, Inc. v. Dept. of Rev., 12 OTR 102 (1991)
In appraising self-storage facility, appraiser should use data and methods market uses. Mikkelson v. Dept. of Rev., 12 OTR 111 (1991)
Where uniqueness of property made traditional valuation difficult, sale of highly publicized property within a few months of assessment date was best indicator of value. Ernst Brothers Corp. v. Dept. of Rev., 12 OTR 527 (1993), aff’d 320 Or 294, 882 P2d 591 (1994)
Income approach was improper where income attributable to taxable tangible property could not be distinguished from income attributable to nontaxable business operation. Lincoln County v. Dept. of Rev., 12 OTR 548 (1993)
Real market value of personal rental property is taxpayer’s cost of obtaining property, not sales price upon disposition. H-P Ventures, Inc. v. Dept. of Rev., 13 OTR 330 (1995)
Where property improvement is partially completed, improvement value is based on sum of improvement component values determined by percentage completion for each component, not percentage completion for improvement as whole. Watkins v. Dept. of Revenue, 14 OTR 227 (1997)
Use of different calculation methods to determine real market value of various property types does not violate Oregon constitutional requirement for uniformity of assessment or requirement for equal treatment of citizens. Brummell v. Dept. of Revenue, 14 OTR 303 (1998)
For purposes of valuing private interest in property subject to governmental restrictions, capitalization rate must be based on estimated terms and returns necessary to attract debt and equity capital from general market sources on date of assessment. Wilsonville Heights Assoc., Ltd. v. Dept. of Revenue, 17 OTR 139 (2003), aff’d 339 Or 462, 122 P3d 499 (2005)
Where seller and buyer of property had same ownership and board of directors, sale was not “arm’s-length transaction” indicative of real market value. Grant County Assessor v. Hawkeye Mining Co., 19 OTR 382 (2007)
COMPLETED CITATIONS: Oak Acres Mobile Homes Park, Inc. v. Dept. of Rev., 4 OTR 340 (1971), aff’d 260 Or 562, 491 P2d 620 (1971); J. R. Widmer, Inc. v. Dept. of Rev., 4 OTR 361 (1971), aff’d 261 Or 371, 494 P2d 854 (1972)
Law Review Citations
59 OLR 124 (1980)
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