How does Oregon's Measure 50 property tax framework treat the expiration of enterprise zone and key industry exemptions?

Plain-English summary

Measure 50 (Article XI, section 11 of the Oregon Constitution), approved May 20, 1997, restructured Oregon's property tax limits. The Director of the Oregon Economic Development Department asked the AG how Measure 50 interacts with two existing property tax exemption programs: enterprise zone exemptions (ORS 285.560 to 285.617) and key industry development project exemptions (ORS 285.399 and 307.123). Specifically, what happens when those exemptions expire?

Attorney General Hardy Myers concluded that expiration of either exemption qualifies as "disqualification from exemption" under Article XI, section 11(1)(c)(E). That means the property gets revalued at the ratio of average maximum assessed value to average real market value of comparable property, an exception to Measure 50's standard 3% annual growth cap. For partial key-industry exemptions, the first $100 million in real market value (growing at 3% annually after 1997-98) is taxable, with the rest exempt. The county assessor's duty under ORS 285.615(4) to note real market value and potential additional taxes on the tax roll continues unchanged. Both Article XI, section 11(1)(c)(A) (new improvements) and (E) (disqualification) can apply when an exemption expires, and either provides the same authority to exceed the 3% growth limit.

Currency note

This opinion was issued in 1997. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: What is an enterprise zone exemption?
A: Under ORS 285.597, qualified firms in designated enterprise zones can get property tax exemptions for newly constructed, modified, or installed qualifying property. The exemption applies for the tax year following completion and for two more years (or up to five total, if extended by the local sponsor under ORS 285.605).

Q: What's a key industry development project?
A: Under ORS 285.399, the Oregon Economic Development Commission can determine that real and personal property of an "eligible project" benefiting a "key industry" qualifies for partial property tax exemption under ORS 307.123 if the project's total cost exceeds $100 million. The first $100 million in real market value (growing annually) is taxable; the rest is exempt for 15 years.

Q: What does "disqualified from exemption" mean under Measure 50?
A: The AG read "disqualified" in its ordinary sense, deprived of the qualities, properties, or conditions necessary for the purpose. Expiration of the statutory exemption period is a disqualification, no different in effect than any other disqualifying event.

Q: What's the assessor's duty after an exemption expires?
A: Under ORS 285.615(4), the assessor records the property's real market value and the amount of additional taxes that would be due if it weren't exempt. Measure 50 changes how property taxes are calculated, but doesn't alter the assessor's duty to make these notations.

Q: How is the 3% growth applied to key industry project property?
A: The taxable value of the project starts at $100 million in real market value and grows at 3% annually (after the 1997-98 tax year). The rest is exempt for 15 years. Under section 6 of Oregon Laws 1997, ch. 541, the property's assessed value is the lesser of its maximum assessed value or its real market value.

Background and statutory framework

Measure 50 replaced the prior Article XI, section 11 with a new framework: the maximum assessed value for the 1997-98 tax year was set at 90 percent of the property's 1995 real market value, and the maximum assessed value grows at 3% per year thereafter. Section 11(1)(c) lists exceptions that allow valuation at the ratio of average maximum assessed value to average real market value of comparable property. The opinion turns on two of those exceptions: new property or new improvements (subsection A) and property disqualified from exemption (subsection E).

Enterprise zone exemptions are time-limited (typically 3 years, up to 5 under ORS 285.605). When they expire, the property loses the exemption: that's an (E) disqualification. Key industry development project partial exemptions under ORS 307.123(1)(b) last 15 years, expiration similarly triggers (E).

The opinion also covers the interaction between (A) (new improvements) and (E) (disqualification) when an enterprise zone or key industry project ends. Both can apply, but they provide the same exception to the 3% growth limit for that first year. After that, the 3% limit resumes.

Citations and references

Constitutional provisions and statutes:

• Article XI, section 11, Oregon Constitution (Measure 50)
• ORS 285.560 to 285.617, Enterprise Zone Act
• ORS 285.399, key industry development authorization
• ORS 307.123, key industry partial property tax exemption
• ORS 285.615(4), assessor's tax roll duties
• Oregon Laws 1997, chapter 541 (SB 1215-B)

Cases:

• Jones v. Hoss, 132 Or 175, 285 P 205 (1930), plain meaning rule

Source

• Landing page: https://www.doj.state.or.us/oregon-department-of-justice/office-of-the-attorney-general/attorney-general-opinions/
• Original PDF: https://www.doj.state.or.us/wp-content/uploads/1997/12/op8253.pdf

Original opinion text

December 8, 1997
No. 8253
This opinion is issued in response to questions presented by William C. Scott, Director, Oregon Economic Development
Department, concerning the effects of newly enacted Article XI, section 11, of the Oregon Constitution on tax exemptions
for qualified properties under the Enterprise Zone Act of 1989, ORS 285.560 to 285.617, or for properties of "key
industry" development projects under ORS 285.399, 285.765(3) and 307.123. New sections 11 and 11a of Article XI were
approved by the people as Ballot Measure 50 (Measure 50) at the May 20, 1997, special election.(1) Measure 50 also
repealed the existing sections 11 and 11a, as well as sections 11f, 11g, 11h, 11i and 11j, which were approved by the
people as Ballot Measure 47 at the November 5, 1996, general election. Like its predecessor, the new Article XI, section
11, limits the amount of ad valorem property taxes that may be imposed on properties, but it does so by different means.
FIRST QUESTION PRESENTED
Does the expression "disqualified from exemption, partial exemption or special assessment," under the
newly adopted Article XI, section 11(1)(c)(E), of the Oregon Constitution, apply to:
(a) Expiration of an enterprise zone exemption after three, four or five years under ORS 285.597(3),
285.605(3), (4) or (6)?
(b) Expiration of a key industry development project exemption after fifteen years under ORS
307.123(1)(b)?
ANSWER GIVEN
A property would be disqualified for exemption under Article XI, section 11(1)(c)(E), of the Oregon Constitution upon the
expiration of the statutory period for which the exemption may be allowed, as provided in ORS 285.597(3), 285.605(3),
(4) or (6) and 307.123(1)(b).
SECOND QUESTION PRESENTED
How is the growth in taxable value of property subject to the partial key industry development project
exemption under ORS 307.123(1)(a) to be calculated?
ANSWER GIVEN
The taxable value of property subject to the partial exemption allowed by ORS 307.123(1)(a) is, initially, $100 million and
increases annually at the rate of six percent, prior to the tax year commencing July 1, 1997, and at the rate of three percent
on and after that date. The property that is "taxable at its assessed value" under ORS 307.123(1)(a) is the entire property
subject to the partial exemption. There is no provision in law for a separate assessment of some portion of the property
equal to the taxable value. Therefore, the limitations of "assessed value" and "maximum assessed value" that appear in
Oregon Laws 1997, chapter 541, section 6, apply to the whole property, not separately to the taxable value.
THIRD QUESTION PRESENTED
ORS 285.615(4) requires the county assessor to enter on the tax roll the real market value of a property
subject to an enterprise zone exemption and also to note the amount of property taxes that would be due if
the property were not exempt. Does Measure 50 authorize or require the assessor to adjust this notation
subject to the three percent limitation or other provisions of the measure?
ANSWER GIVEN
No. Measure 50 does not authorize or require the county assessor to change the tax roll entries required by ORS
285.615(4) of the assessed value of a property subject to an enterprise zone exemption or the amount of additional taxes
that would be due if the property were not exempt. However, the limitations of Measure 50 do change the amount of
additional taxes that would be due if the property were not exempt.
FOURTH QUESTION PRESENTED
Upon the expiration or disqualification of property for an enterprise zone or a key industry development
project exemption from property taxes, would the taxation increase be governed by section 11(1)(c)(E),
which relates to disqualification from exemptions, or section 11(1)(c)(A), which relates to new
improvements to property, or both?
ANSWER GIVEN
Under Measure 50, both section 11(1)(c)(E) and 11(1)(c)(A) could apply, but in both instances the same provision
authorizes taxes in excess of the three percent limitation of section 11(1)(b).
DISCUSSION
I. "Disqualified for Exemption or Special Assessment"
With certain exceptions Measure 50 generally limits the growth of property taxes to three percent per year. Or Const Art
XI, § 11(1)(b). One exception is found in Article XI, section 11(1)(c), which reads in pertinent part:
(c) Notwithstanding paragraph (a) or (b) [relating to the three percent limit on the growth of property taxes]
of this subsection, property shall be valued at the ratio of average maximum assessed value to average real
market value of property located in the area in which the property is located that is within the same property
class, if on or after July 1, 1995:

(E) The property becomes disqualified from exemption, partial exemption or special assessment[.]
The obvious intent of this provision is to restore, subject to the limitation of equal treatment, the value of property for
property tax purposes upon the disqualification of the property for an exemption or special assessment. However, the
constitution does not define what is meant by "disqualified." Because it does not have a well-established special technical
or legal meaning, "disqualified" should be understood in terms of its plain and ordinary meaning. See Jones v. Hoss, 132
Or 175, 285 P 205 (1930) and 46 Op Atty Gen 388 (1990) for other citations supporting this principle. We look to standard
dictionaries for guidance as to the common meanings of words. Webster's Third New International Dictionary (hereinafter
Webster's) (unabridged 1993), at 655, defines "disqualify" as:
1 : to deprive of the qualities, properties, or conditions necessary for a purpose * * *
2 : to deprive of a power, right, or privilege * * *
With the foregoing definitions in mind, we turn next to the provisions of the tax laws that govern the termination of
property taxation exemptions for qualified properties within enterprise zones and properties of key industry development
projects.
A. Expiration of an Enterprise Zone Exemption
Under ORS 285.600 and 285.615(1), a qualified firm that owns or leases qualified property located in an enterprise zone
may apply for an exemption from property taxes on the property as allowed under the provisions of ORS 285.597. If the
assessor determines that the property meets the requirements of ORS 285.597, the assessor is required to grant the
exemption for each year that the property is exempt from taxation.(2) ORS 285.615(4). This exemption first applies to the
tax year immediately following completion of the construction, addition, modification or installation of the property for
which the exemption was sought and for two succeeding tax years if the property remains qualified for the exemption.(3)
See ORS 285.597(3)(a). Notwithstanding the foregoing, the city or county acting as enterprise zone "sponsor" under ORS
285.560(11) may set a period of tax abatement of up to five consecutive tax years under the provisions of ORS
285.605(3),(4) and (6).
Thus, a property may qualify for the enterprise zone exemption only for the period of time during which the exemption is
granted. Correspondingly, the expiration of that period is a disqualifying event, no less significant to the continuation of
the exemption than any other basis for disqualification. Therefore, we conclude that the expiration is a disqualification of
exemption for purposes of Article XI, section 11(1)(c).
B. Expiration of Key Industry Development Project Exemption
Pursuant to ORS 285.399, the Oregon Economic Development Commission (commission) may determine that the real and
personal property of an "eligible project" that directly benefits a "key industry" is eligible for the partial property tax
exemption provided in ORS 307.123, if the total cost of the eligible project exceeds $100 million.(4) An "eligible project"
is an economic development project used in connection with a revenue producing enterprise, except electrical facilities,
and which satisfies commission rules. See ORS 285.315. A "key industry" is one in which firms sell goods or services in
national or international markets and which makes a major contribution to the economy of Oregon. See ORS
285.765(3),(5). If the commission has determined that the property is exempt under ORS 285.399, the first $100 million of
real market value of the eligible project, initially, and increasing annually, is taxable and the remainder of the real market
value is exempt from taxation for 15 years. ORS 307.123(1)(b) (see further discussion below).
The Economic Development Commission's determination of eligibility for exemption is conclusive as long as the property
included in the eligible project is constructed and installed in accordance with the application that was approved by the
commission. ORS 307.123(5). However, if the owner or lessee of the exempt property fails to pay the fee required by ORS
285.400(4)(b) when due, the exemption must be revoked and the property is fully taxable for the following tax year and
each year thereafter for which the fee remains unpaid. ORS 307.123(6). If the fee is paid after the exemption is revoked,
the property again may become eligible for exemption, beginning with the tax year following the payment. Reinstatement
of exemption following such payment, however, does not extend the 15-year exemption period.
Our analysis of the expiration of the key industry exemption under ORS 307.123(1) is the same as that of the expiration of
the enterprise zone exemption under ORS 285.617. Both expirations constitute a disqualification of exemption for
purposes of Article XI, section 11(1)(c).
II. Calculation of the Growth of the Taxable Portion of Property
ORS 307.123(1)(a), as amended by Oregon Laws 1997, chapter 541, section 412 (SB 1215-B), states:
The first $100 million in real market value, increased annually for growth at the rate of three percent shall
be taxable at its assessed value under section 6 of this Act.
(Emphasis added.) These amendments took effect with the tax year commencing July 1, 1997. See Or Laws 1997 ch 541 §

464. Before that date, ORS 307.123 provided that the taxable portion of the property value increased six percent annually.
     Moreover, there was no reference to the special concept of "assessed value."
     Section 6(2) of the Act provides that the "assessed value of the property" shall equal the lesser of the property's "maximum
     assessed value" or the property's real market value. The "maximum assessed value" is equal to 103 percent of the
     property's assessed value from the prior year or 100 percent of the property's maximum assessed value from the prior year,
     whichever is greater. Section 6(1).
     In determining how to calculate the growth in taxable value under ORS 307.123(1)(a), as amended, it is necessary to
     determine to what subject the word "its," in the expression "its assessed value," refers. In the sentence, the subject may
     appear to be the words "[t]he first $100 million in real market value." However, that interpretation does not make sense
     because the entire property is assessed, not some taxable value. Plainly, the taxable value of the property grows by three
     percent annually. However, the entire property is taxable at its "assessed value under section 6." This means that the
     taxable value may grow until it reaches the "assessed value," which is defined in section 6(2) as the lesser of the maximum
     assessed value or the real market value. Although it may grow, the taxable value may not exceed this assessed value.
     III. Duty to Enter Real Market Value and Note Taxes on Tax Roll
     Although Measure 50 provides new limitations on property taxes that will tend to limit the significance of real market
     value to the property taxes imposed and to change the amount of additional taxes that would be due if the property were
     not exempt, these new limitations do not alter the basic duty of the county assessor under ORS 285.615(4) to enter on the
     tax roll the real market value of a property subject to an enterprise zone exemption and the amount of additional taxes that
     would be due if the property were not exempt.
     As amended by Oregon Laws 1997, chapter 541, sections 421, 422, ORS 285.615(4) provides:
     (4) If the assessor determines the property for which exemption is sought satisfies the requirements of ORS
     285.597, the assessor shall grant the exemption. Thereafter, for each assessment year that the property is
     exempt from taxation, the assessor shall:
     (a) Enter on the assessment roll, as a notation, the assessed value of the property as if it were not exempt
     under ORS 285.597.
     (b) Enter on the assessment and the tax roll, as a notation, the amount of additional taxes that would be due
     if the property were not exempt.
     (c) Indicate on the assessment and tax roll that the property is exempt and is subject to potential additional
     taxes as provided in ORS 285.617, by adding the notation "enterprise zone exemption (potential additional
     tax)."
     Measure 50 retains the concept of real market value. For example, Article XI, section 11(1)(a), establishes the "maximum
     assessed value" for the tax year commencing July 1, 1997, as 90 percent of the real market value for the tax year beginning
     July 1, 1995. In addition, section 11(1)(c) and other provisions of section 11 limit property tax increases to the ratio of
     average maximum assessed value to average real market value. Thus, the basis for limiting property taxes now depends on
     the "maximum assessed value" and not solely or even directly on real market value. In any event, such limitations reduce
     "the amount of additional taxes that would be due if the property were not exempt" for purposes of ORS 285.615(4)(b).
     However, neither these nor any other provisions of the new section 11 are inconsistent with the basic duties of the county
     assessor under ORS 285.615(4) to note the real market value of the property on the assessment roll or to note the
     additional amount of taxes that would be due if the property were not exempt. Because there is no inconsistency, section
     11 does not limit the assessor's duty. Moreover, section 11 includes no provision expressly or impliedly authorizing or
     requiring the assessor to make notations on the assessment and tax roll in addition to those prescribed by ORS 285.615(4).
     IV. Taxation of Property upon Termination of Exemption
     Because the question concerning the taxation of property upon termination of exemptions was presented to this office
     when Measure 47 was still law and Measure 50 was not yet law, it is useful to compare the two provisions. The now
     repealed Article XI, section 11g(2)(a) of Measure 47 limited the growth of ad valorem property taxes to three percent per
     year. In contrast, the recently approved Article XI, section 11(1)(b) of Measure 50 limits growth of the property's
     maximum assessed value to three percent per year. Both constitutional amendments have exceptions to these limitations
     for improvements and for property that has become disqualified from exemption.
     With respect to improvements, the repealed Article XI, section 11g(4)(a) provided in pertinent part:
     (4)(a) In the event a property is improved during or after the 1994-95 tax year, the ad valorem property
     taxes on that property may be increased, by reason of such improvements, in excess of the three percent
     (3%) limitation of subsection (2) of this section, except that the tax shall not exceed the lesser of (i) the
     average ad valorem property taxes paid on similar properties similarly valued and located in the same
     taxing code area, or (ii) the ad valorem property taxes on the property without regard to the new or
     additional improvements, plus the ad valorem property taxes on the improvements at the same dollar to
     value ratio as paid on the property without the improvements.
     Once the new improvements are added to a property and the ad valorem property tax attributable to the new
     or additional improvements is determined, the ad valorem property tax attributable to the improvements
     may be increased in subsequent tax years in the manner allowed under subsection (2) of this section.
     Now repealed section 11g(5) provided:
     (5) For the first year following disqualification for exemption or special assessment, or in the event a
     property is added to the assessment and tax rolls as omitted property, ad valorem property taxes on that
     property may be increased in excess of the three percent (3%) increase limitation set forth in subsection (2)
     of this section, except the tax shall not exceed the average ad valorem property taxes paid on similar
     property similarly valued in the same taxing code area.
     Thus, section 11g(5) did not include the alternative, more restrictive limitation found in section 11g(4)(a)(ii) that the tax
     not exceed the ad valorem property taxes on the property without regard to the new or additional improvements, plus the
     ad valorem property taxes on the improvements at the same dollar to value ratio as paid on the property without the
     improvements.
     Newly adopted Article XI, section 11(1)(c), treats both issues in a single provision, subject to the same standard, as
     follows:
     (c) Notwithstanding paragraph (a) or (b) [the three percent limitation on growth of "maximum assessed
     value"] of this subsection, property shall be valued at the ratio of average maximum assessed value to
     average real market value of property located in the area in which the property is located that is within the
     same property class [to be defined by legislation], if on or after July 1, 1995:
     (A) The property is new property or new improvements to property;

(E) The property becomes disqualified from exemption, partial exemption or special assessment;

(d) Property shall be valued under paragraph (c) of this subsection only for the first tax year in which the
changes described in paragraph (c) of this subsection are taken into account following the effective date of
this section. For each year thereafter, the limits described in paragraph (b) of this subsection apply.
Obviously, after completion of an enterprise zone or key industrial project, the corresponding exemption should end. At
that point, the maximum assessed value of the property could increase above the three percent limitation due to the
improvements, under section 11(c)(A), and as property becomes disqualified for exemption under section 11(c)(E).
Although the maximum assessed value may exceed the three percent limitation in the first year following these two events,
for each subsequent year the three percent limitation would apply to the property.
HARDY MYERS
Attorney General