By Nicole Montesano • Staff Writer • 

Court issues partial ruling in museum tax case

About $120,000 a year in property taxes is at issue in the case of the main museum campus, which includes the theater, and about $315,000 a year in the water park case. Evergreen has been witholding payment of the disputed taxes, pending definitive resolution, thus accruing interest on obligations upheld by the court.

In the main museum case, the court has asked the parties to see if they can’t resolve the rest through direct negotiation, which is now underway. Maytubby said the county is attempting to reach a meeting of the minds in talks with the museum’s legal counsel.

The museum argues it should be exempt from property taxes because it qualifies as an educational venue.

With backing from the state Department of Revenue, the county argues the museum operates partly as an educational venue and partly as a commercial venue, and the latter is subject to taxation. Accordingly, it has established percentages for various elements of the museum’s Highway 18 campus.

The dispute ended up in the Oregon Tax Court, with the state Department of Revenue arguing the county’s side.

The court did not come down cleanly on either side. Though it did rule on some issues, it left others unresolved for now. It agreed to rule on them as well, but only if the parties mounted another attempt to reach mutually agreeable terms first.

The museum’s big-screen theater, which the court notes airs movies that are directly related to aeronautics as well as movies “that can more correctly be described as having an entertainment function,” is one of the key areas of disagreement. It raises some of the same issues as the water park, which mixes scientific exhibits on the function of water in the environment with slides and pools the county considers commercial in nature.

Noting the Department of Revenue “questions whether science includes history and suggests that a film about Lewis and Clark should not be considered related to science,” the court said it considered the department’s view in that regard “too grudging” in the theater’s case.

But it also said, “There is no question that films having no connection, even indirect, with the purposes of the museum, are shown in the theater.” And it noted the theater is sometimes rented out to for-profit businesses.

“Neither party had the benefit of the court’s view on the proper approach to the allocation of space in the theater as between exempt and nonexempt uses,” it concluded. “Accordingly, the court will continue the case for the purpose of allowing the parties to consider whether they can agree on a conclusion as to partial exemption. If they cannot, the matter will be addressed in a further evidentiary hearing.”

The court sided with the museum on the complex’s cafes, kitchen and concession stand, ruling them exempt adjuncts of the museum’s main function. But it said, “As to the concession stand for the theater, no part of the stand space used for sale of concessions is exempt.”

The court sided with the county on the gift shop, noting, “The legislature has specifically disallowed exemption in the case of gift shops in art museums.” It found that, unlike food service venues, “gift shop space does not meet the substantial factor test.”

The court also issued a split ruling on classroom and mezzanine space.

The Department of Revenue asked that all personal property offered for rental to outside groups be declared taxable, and the court agreed. “The court concludes the taxpayer has borne its burden of proof as to the building space usage,” it said in its ruling.

The court rejected a state bid to have some of the land under the museum complex declared taxable, but also rejected a bid by the museum to have some adjacent portions of the site declared exempt. It explained its thinking on the latter by saying, “The court is of the view that while a campus atmosphere may be desirable, that alone is not sufficient to support exemption.”

It also rejected a museum request to have a berm exempted because it is required to maintain the berm under local land use regulations.

“Other land not covered by stipulations in this division of the court and extending beyond the footprint of the generally exempt improvements is taxable,” it found, “except for such a border portion as may be agreed upon by the parties and absent such agreement, by further trial proceedings as to what a typical border for such a building is.”

The parties also argued about the tax status of the museum parking lot. The court ruled that the portion used by employees and theater rental customers taxable and the rest exempt.

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