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Action Items for:
1) Adversely impacted homeowners who have completed a detached ADU:
Fill out this form ASAP if you wish to join forces in the appeal process. There is also guidance towards the bottom of this post about appealing this tax issue; it is best for all parties to streamline their appeals.
2) For those who are considering, or were previously considering building an ADU:
The most helpful action that those who are planning to build an ADU can take is to email County Commissioner Deborah Kafoury email@example.com and firstname.lastname@example.org. The County isn’t aware of how damaging these tax policy changes are to grassroots affordable housing options in Portland. Please take a minute to explain the impact of this tax policy change and your decision to build, or not to build, as a result of it. Feel free to blind copy me too (kolpeterson @ gmail.com) so I can track this issue.
You can also email City Commissioners to let them know about the impact of this issue–but bear in mind, this was not a City decision. They are as surprised by this major tax policy change for detached ADUs as the rest of us.
Calculating the Impacts of this ADU Tax Policy Change on Your Property
This issue is complicated for most lay ADU owners to understand. Bear in mind, 80-90% of ADUs are developed by amateur owner/developers. I spent weeks wrapping my head around this tax debacle, and 16 hours writing the last post. This time, to make it simpler, I’ve built this little calculator tool to help homeowners understand what the impacts of this tax policy change are for your property (again, Multnomah County hasn’t done the honors).
Using this calculator, once you enter four values from your recent tax bill, it will spit out the property tax calculations under the common, standard formula that Multnomah County was using until this year, as well as the property tax estimate using the new re-MAV formula. These are approximate estimates, and do not account for the 3%/year increase that the County already applies to properties. So, you should call Multnomah County to get a more authoritative estimate.
The values that you need to use this calculator are listed on your property tax bill, which you can find online by visiting http://www.multcoproptax.org and clicking on “guest”. Type in your address eg. “100 N. Example”. Leave off “St” or “Ave” from the address. Once in, click the “Tax Summary” tab, then click the hyperlink “click to view tax bill”. That’s where the new tax records can be viewed if you don’t have your paper copy handy. Type your values in the yellow boxes.
Or, you can download this Excel version of the spreadsheet to use on your own computer.
Now, on with the rest of this post….
The BIG Update: Statewide Rulemaking
Regarding the treatment of detached ADUs by the County, the State Department of Revenue has recognized that there is disparity occurring between how Multnomah is treating its citizens compared to how other counties in Oregon are treating theirs. Because of this disparity, they are very likely going to do a statewide rule making!
This process will be transparent and will involve public comment. What a concept! Under a rule-making, citizens can feel assured that they will not be blindsided by sneaky tax formula changes made without any public process or notification–changes that damage the lives of so many people. The Department of Revenue will be taking the correct course by stepping in at this point.
When this issue is looked at in the light of day, citizens can feel more confident that a just resolution will be offered. The decision to do a rule-making is not yet definitive, but appears very likely at this point.
But, predictably, rule making is a long process. Resolution will not come quickly. A rule would not be adopted till July, 2016. So, here’s my plea to Multnomah County:
Since Multnomah County appears to be the outlier county in Oregon in terms of how they are treating detached ADUs, it seems like a reasonable approach for Multnomah to forego the tax increases that they could accrue this tax year from the re-MAV approach.
In light of the forthcoming rule, they could simply defer to the State Department of Revenue to make the authoritative call about the appropriate methodology to use.
Multnomah’s tax collectors still have the authority until December 31st to revert to the “improvement” approach, send out corrected tax letters, and wait for the state to adopt a uniform rule.
Citizens across Portland are going to have to spend a lot of time and money appealing their taxes this year. Wouldn’t it make more sense for Multnomah County to use the “improvement” tax method this year and let the State make the call in July?
I have no faith that this perfectly reasonable plea will be granted by Multnomah County, but there it is.:)
Appealing the Property Tax Increase
Below, I’m providing guidance that the Department of Revenue sent to me, to convey to citizens in Multnomah County who were impacted by this issue:
You asked about the ability of the assessor to change tax roll values, and the process for appealing those values. Regardless of whether or not an appeal has been filed, the assessor has the discretionary authority to reduce any value on the tax roll prior to December 31, if he finds reason to do so.
Any property owner or person obligated to pay the tax on the property who believes the real market value or assessed value is overstated on the tax statement can file an appeal to the county’s Board of Property Tax Appeals. The board consists of the chair and two non-office-holding county residents. The chair may be a member of the county governing body, or the governing body may appoint another non-office-holding county resident.
The petition, available at https://multco.us/file/36464/download for Multnomah County, must be filed by December 31. Regarding the ADU question, the property owners can request a reduced real market value if they believe that value is overstated. However the real issue in these cases is the maximum assessed value, which the property owners can address by requesting a reduced assessed value. The property owners must request a specific real market value or assessed value. Although the petition must be filed by December 31, it may be amended anytime, even at the hearing, to change the requested value.
The petitions must be filed with the county clerk, not the county assessor. The clerk’s office will inform the property owners of their hearing dates five to 10 days in advance. Hearings begin the first Monday of February and continue through April 15. Each hearing is usually 15 to 20 minutes.
Either party may appeal the decision of the Board of Property Tax Appeals to the Magistrate Division of the Oregon Tax Court within 30 days of the date the board order is mailed or delivered. To appeal the board’s order, you must file a complaint with the court. The complaint form is available at http://courts.oregon.gov/Tax/docs/MagComplaintForm_Property.pdf. The other party will file an answer to the complaint, and then the court will schedule a case management conference. At the case management conference, the general issue is discussed, but this isn’t the trial. This conference is primarily for setting dates and deadlines for the process. The case management conference is typically held by phone.
The Magistrate Division is intended to be less formal than the Regular Division of the Oregon Tax Court. At either division a person can represent themselves or be represented by an attorney. At the Magistrate Division, a taxpayer can also be represented by a family member; an Oregon real estate broker; an Oregon certified, licensed, or registered appraiser; an Oregon public accountant; or a person with a power of attorney from the party being represented. Either party can appeal the decision of the Magistrate to the Regular Division of the Oregon Tax Court within 60 days of the Magistrate’s final decision.
You also asked if there is an avenue for the correction of the roll for any party that misses a step in the appeals process. Under limited circumstances, a taxpayer may request a review from the Department of Revenue under our supervisory authority. An explanation of those circumstances and the process for requesting a review is available at http://www.oregon.gov/dor/PTD/Pages/IC_303_688.aspx.
In addition, you asked about our rule making process. Any consideration of an administrative rule to address the ADU situation would be part of our spring 2016 process. The process includes:
If a rule is adopted it would likely be effective in July, 2016.
So, that’s the guidance from the Department of Revenue on how to appeal this issue. If this seems confusing or overwhelming, that’s why I suggested joining in to a collective appeal effort rather than doing this by yourself.
Bear in mind that even if the Department of Revenue decides that detached ADUs must be treated as “improvements” moving forward, Multnomah’s effected homeowners from this tax year must still appeal in order to (hopefully) reverse Multnomah’s interpretation on their property taxes.
Let’s move on to the Measure 50 law in question for a moment.
Here’s a look at the Measure 50 regulatory language in question. The County tax directors are justifying their damaging tax policy re-MAV authority on these two sentences from Oregon Administrative Rule (OAR) and the Oregon Revised Statute (ORS) Oregon Adminstrative Rule OAR Section 150-308.156(5)-(B):
Rezoned Property — Calculating Maximum Assessed Value (MAV)
(1) For purposes of determining MAV under ORS 308.142 to 308.166:
(a) “Rezoned” means on or after July 1, 1995, the governmental body that regulates zoning:
(A) Made a change in the zone designation of the property on the zoning map;
(B) Made a change in one or more conditions or restrictions affecting the authorized uses of the property in the zone that is applicable to the property; or
(C) Made any other change in the authorized uses of the property.
As the State Department of Revenue researches the definitions of the word “use” and change in “zone designation” during a rule making process, they will likely come to the same conclusion that everyone else in the state has come to: here has been no change to “use” and there has been no “change in zone designation” that justified re-MAVing.
“REZONING” means when a property is “REZONED”
An example of rezoning is when a property is turned from “residential” (eg. R5) to Multifamily (R1) or, multifamily (R1) to commercial (CG). There has been no rezoning for properties that have added detached ADUs.
And, there has been NO CHANGE IN USE
There is explicit language from Portland’s ADU program guide about how properties with ADUs have no impact on the number of residents that are allowed on the property:
“The total number of residents that can live in both units (the ADU and the primary house) is limited to the total allowed for a household. Under the Zoning Code, a household is defined as follows: Household. One or more persons related by blood, marriage, legal adoption or guardianship, plus not more than 5 additional persons, who live together in one dwelling unit; or one or more handicapped persons as defined in the Fair Housing Amendments Act of 1988, plus not more than 5 additional persons, who live together in one dwelling unit.”
It is still totally unfathomable to me how and why the County tax directors have opted to interpret the law to the detriment of detached ADU owners. Did they talk to anyone about their new interpretation? I can’t imagine that they spent much time researching this issue.
At this point, anything is better than Multnomah’s backwards interpretation of the law. So, it is a victory that the State will step in, effectively rescuing Multnomah citizens from our tax directors’ poor political and regulatory calculations.
The Timing of the Rule Making Process Relative to the SDC Waiver
For many homeowners, this July 2016 rule adoption effectively puts an end to the prospect of taking advantage of Portland’s current ADU SDC waiver, which is set to lapse on July 31st, 2016.
Until there is Department of Revenue assurance around how their properties with detached ADUs will be taxed moving forward, many prospective detached ADU homeowner/developers will opt NOT to proceed with their ADU plans- 2/3rd of Portland’s ADUs are detached and most of those properties are adversely impacted by this change. Some homeowners have already invested $10,000 or more in ADU design plans and permits, and even so, they are putting everything on hold because these re-MAV tax impacts are so damaging to their economic future. And by the time the Department of Revenue rule is definitive (sometime in July, 2016), there won’t be adequate reasonable time remaining for them to take advantage of the current ADU SDC waiver.
For others, the benefit of the ADU SDC waiver is great enough to outweigh the negative repercussions of the tax re-MAV formula, regardless of how the rule making turns out. And to them, I say, proceed with your plans! It’s too early to fully understand what the full impacts of this tax change are on prospective homeowner/developers. I hope that many homeowners will find the ADU investment and return on investment are still compelling enough to proceed, even with with the assumption of re-MAVing still at play.
Alas, I stand disenchanted by those who did not think this decision through carefully enough before making it. But, there’s a glimmer of hope that come July, 2016, detached ADUs in Portland will see a resurgence.
Stay tuned to AccessoryDwellings.org for more thrilling updates about your property taxes.