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FILED: September 08, 2011 IN THE COURT OF APPEALS OF THE STATE OF OREGON BETH A. PROCTOR, an individual; and DIANE E. RULIEN, P. C., an Oregon professional corporation, Plaintiffs-Appellants, v. CITY OF PORTLAND, an Oregon municipal corporation, Defendant-Respondent. Multnomah County Circuit Court 090405208 A144782 Jean Kerr Maurer, Judge. Argued and submitted on December 15, 2010. Michael T. Garone argued the cause for appellants. With him on the briefs were Steve C. Morasch, Jill S. Gelineau, and Schwabe, Williamson & Wyatt, P.C. Kenneth A. McGair argued the cause for respondent. On the brief was Shane E. Abma. Before Haselton, Presiding Judge, and Armstrong, Judge, and Duncan, Judge. HASELTON, P. J. Reversed and remanded.

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HASELTON, P. J. Plaintiffs, real estate brokers who sought damages and declaratory relief pertaining to the enforcement of defendant City of Portland's 2008-amended Business License Law, appeal. They challenge the trial court's allowance of the city's motion for partial summary judgment and its denial of their cross-motion for partial summary judgment. In so ruling, the trial court determined that, as amended, Chapter 7.02 of the Portland City Code (PCC) does not impose a "business license tax" within the meaning of ORS 701.015(6)(a) and, thus, can be applied to plaintiffs notwithstanding ORS 696.365. As explained below, we conclude that, notwithstanding the 2008 revisions, the city's Business License Law continues to retain the essential features of a "business license tax" as understood by the 1987 Legislature in enacting ORS 696.365 and ORS 701.015(6)(a). Accordingly, we reverse and remand. For purposes of our review, the operative circumstances are undisputed. Plaintiffs are licensed real estate brokers who, in 2008, worked under the supervision of principal real estate brokers. Between 1987 and 2008, the city did not impose its thenexisting income-based business "license fee" on persons in plaintiffs' positions. That was so because of the conjunction of two statutes, both enacted in 1987. First, ORS 696.365 provides: "(1) A city or county may not impose a business license tax on or collect a business license tax from an individual licensed as a real estate broker who engages in professional real estate activity only as an agent of a principal real estate broker.

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"(2) As used in this section, 'business license tax' has the meaning given that term in ORS 701.015." Second, ORS 701.015(6)(a) provides: "'Business license tax' means any fee paid by a person to a city or county for any form of license that is required by the city or county in order to conduct business in that city or county. The term does not include any franchise fee or privilege tax imposed by a city upon a public utility under ORS 221.420 or 221.450 or any provision of a city charter." Following the enactment of those statutes, the city understood that the business "license fee" imposed by its then-existing Business License Law was a "business license tax" within the meaning of ORS 701.015(6)(a) and, thus, under ORS 696.365, could not be imposed on real estate brokers who worked under the supervision of principal real estate brokers. In 1987--indeed, as we understand it, between 1975, when the modern iteration of the city's Business License Law became effective, and 2008,1 when the city adopted the revisions triggering this litigation--the city's Business License Law provided that "[n]o person shall do business within the City unless such person shall have first paid a license fee * * * and obtained a license under the Business License Law." PCC 7.02.300 (1993). In general terms, to apply for a license or renew a license, an applicant
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The appellate record does not contain the version of the city's Business License Law that was in existence in 1987. Rather, the record contains a copy of the 1975 law, enacted by City of Portland Ordinance No. 139106 (effective January 1, 1975), and a 1993 version, enacted by City of Portland Ordinance No. 166676 (effective June 24, 1993). However, in most respects, the general operation of the law appears to have remained constant between the 1975 and 1993 versions, and the parties treat the 1993 version as representative of the city's Business License Law prior to the 2008 amendments. We do the same.

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was required to pay a minimum "fee" and an additional amount, which was calculated based on a percentage of net income. PCC 7.02.500 - 7.02.545 (1993). The license term would then extend from the first day of the month in which the license was "issued or was required to have been obtained" until the end of the licensee's applicable tax year. PCC 7.02.350 (1993). If the person failed to apply for a license or failed to pay their license fee when due, the person would be assessed interest and penalties, based on the amount of the fee owing and the length of time the fee remained overdue. PCC 7.02.700 (1993); PCC 7.02.710 (1993). In 2008, as noted, the city revised its Business License Law. See City of Portland Ordinance No. 182137 (effective September 19, 2008).2 Among other things, the city made changes to the terminology used in the law, e.g., substituting the term "tax" for "fee" and the term "Certificate of Compliance" for "license," see PCC 7.02.100 (2008), and more substantive changes, such as adding a new requirement that a business "register" with the city within 60 days of starting business, see PCC 7.02.300 (2008). For purposes of this case, the most significant change was the elimination of the requirement in the preexisting code that a person pay a fee and obtain a license before that person was permitted to "do business within the City." See PCC 7.02.300 (2008). After the city adopted the 2008 amendments, it sent plaintiffs notice that
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The city amended various provisions of its Business License Law after it adopted City of Portland Ordinance No. 182137 and after plaintiffs filed their complaint in this case. See City of Portland Ordinance Nos. 183330 (effective Dec 12, 2009), 183727 (effective May 28, 2010), and 184597 (effective June 17, 2011). Those amendments have no effect on our analysis.

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their 2008 income was subject to taxation under the revised Business License Law. Plaintiffs then brought this action, seeking declaratory relief and damages. As noted, the parties filed cross-motions for partial summary judgment. Plaintiffs asserted, inter alia, that, notwithstanding the 2008 revisions to the Business License Law, the city's incomebased "business tax" remains, in substance and effect, a "business license tax" within the meaning of ORS 701.015(6)(a), to which, under ORS 696.365, they cannot be subject. The city remonstrated that the elimination of the requirement that a business obtain a license before conducting business in the city constitutes a substantive change, removing the code, as revised, from the purview of ORS 701.015(6)(a)--and, by extension, from the proscription of ORS 696.365. In particular, the city argued that, as a result of that change, the Business License Law imposes a "pure business income tax," as opposed to a "business license tax" within the meaning of ORS 701.015(6)(a). The trial court concluded that "the City's Business License Law, Portland City Code 7.02 et seq., is not a 'business license tax' as that term is defined in ORS 701.015(6)(a)." Accordingly, the trial court denied plaintiffs' motion for partial summary judgment and granted the city's cross-motion. On appeal, the parties essentially reprise their arguments before the trial court. Thus, resolution of this dispute, as framed by the parties, ultimately depends on the meaning of the term "business license tax" in ORS 701.015(6)(a). That is so because, given that it is undisputed that the pre-2008 PCC provision did impose a

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"business license tax" that could not be imposed on brokers in plaintiffs' position, the purported materiality of the 2008 PCC revisions must be assessed in relation to the 1987 Legislature's intent in codifying and defining that term. That inquiry, in turn, implicates the now-familiar template for statutory construction set out in PGE v. Bureau of Labor and Industries, 317 Or 606, 610-12, 859 P2d 1143 (1993), and State v. Gaines, 346 Or 160, 206 P3d 1042 (2009). We turn, thus, to the text, context, and relevant legislative history of that statute, with the goal of discerning what the legislature intended by that term. Relevant context includes other provisions in ORS 701.015 as well as other provisions of the bill enacting ORS 701.015. See State v. Ortiz, 202 Or App 695, 698, 124 P3d 611 (2005). As previously noted, ORS 701.015(6)(a) defines "business license tax" as follows: "'Business license tax' means any fee paid by a person to a city or county for any form of license that is required by the city or county in order to conduct business in that city or county. The term does not include any franchise fee or privilege tax imposed by a city upon a public utility under ORS 221.420 or 221.450 or any provision of a city charter." The meaning of "business license tax" in ORS 701.015(6)(a) is inextricably intertwined with the use of that term not only in other provisions of ORS 701.015, but also in two other statutes that, with ORS 701.015, were concurrently enacted in 1987 as part of House Bill 2218: ORS 696.365 and ORS 701.020. The content and function of each informs the others. In overarching terms, HB 2218 encompassed the legislature's efforts to (a)

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address two related, but distinct, issues pertaining to the imposition of local business license taxes and (b) ameliorate the City of Portland's unique concerns about the fiscal/revenue implications of such legislation. The first substantive issue--which was addressed in the provisions ultimately enacted as ORS 701.015--related to the imposition of business license taxes on building contractors. The second issue--which was ultimately addressed in ORS 696.365--related to the imposition of business license taxes on real estate broker-agents. Finally, those portions of HB 2218 that were ultimately enacted as ORS 701.020 embodied the legislature's efforts to address Portland's concerns regarding the potential implications of ORS 701.015 with respect to the city's revenues. With that general framework as a backdrop, we recount, in some detail, the evolution of each of those provisions, which, collectively, illuminate the 1987 Legislature's understanding of "business license tax." The first and primary focus of HB 2218 was to alleviate the burden experienced by small building contractors and subcontractors who worked in multiple municipalities, each of which imposed a separate business license tax on people who conducted business within its jurisdiction. The principal complaint of the contractors and subcontractors was that the cumulative burden of those business license taxes made the cost of doing small jobs in separate jurisdictions prohibitive. That concern was especially acute for building contractors who worked in the Portland metropolitan/tri-county area, where it was common to have projects in a number of individual cities and counties, each of which imposed separate business licensing taxes. See, e.g., Testimony, House

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Committee on Intergovernmental Affairs, HB 2218, Feb 10, 1987, Ex B (statement of Charles Hales, Director of Governmental Affairs for Home Builders Association of Metropolitan Portland). Ultimately, in those provisions enacted and codified as ORS 701.015 (1987), the legislature settled on creating a "passport" system whereby contractors working in the Portland metropolitan area could obtain a business license from a "metropolitan service district," that is, Metro. The Metro business license entitled its holder to a waiver from the business license taxes imposed by cities within Metro unless the particular city imposing the business license taxes was the contractor's principal place of business or the contractor earned a certain amount of income from work in that city in a given license year. ORS 701.015(1) - (3) (1987). Thus, ORS 701.015 (1987), in relevant part, provided: "(1) When an office of a builder who is registered under ORS 701.055 is located in a city within the boundaries of a metropolitan service district organized under ORS chapter 268 or when the builder derives gross receipts of $100,000 or more from business conducted within the boundaries of a city during the calendar year for which the business license tax is owed, the builder is required to pay the business license tax, if any, imposed by the city. "(2) If a builder described in subsection (1) of this section conducts business during any year in any city or jurisdiction within the boundaries of the metropolitan service district other than a city to which the builder has paid a business license tax for that year, the builder may apply for a business license from the metropolitan service district. "(3) When a builder obtains a business license from the metropolitan service district under subsection (2) of this section, if a city within the boundaries of the metropolitan service district and in which the builder does not have an office demands payment of a business license tax by the

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builder, the city shall waive such payment upon presentation of proof by the builder that the builder has a business license issued by the metropolitan service district. Possession by the builder of a current business license issued by the metropolitan service district under subsection (2) of this section shall be proof sufficient to obtain the waiver described in this subsection. "* * * * * "(6)(a) [Defining business license tax]." The operative definition of "business license tax," set out above, see 245 Or App at ___ (slip op at 5), has not changed since 1987.3 As noted, the second substantive focus of HB 2218 pertained to complaints by real estate brokers who worked as agents of principal real estate brokers. Although real estate brokers, like building contractors, regularly conducted business in multiple municipalities, their principal objection to the business license tax was different. The crux of their complaint was that the imposition of business license taxes on agents was unfair because, although they were classified as independent contractors for state and federal income tax purposes, they were treated as employees of principal real estate brokers under the state's governing statutory scheme. Testimony, House Committee on Intergovernmental Affairs, HB 2218, Feb 10, 1987, Ex D (written testimony of Brad Morris, Governmental Affairs Director, Oregon Association of Realtors). The real estate brokers argued that, because Oregon statutes required them

The legislature has subsequently amended other aspects of ORS 701.015 numerous times. See Or Laws 1989, ch 1064,

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