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IN THE OREGON TAX COURT MAGISTRATE DIVISION Income Tax VINCENT NIBLACK and ANNA LIZA L. NIBLACK, Plaintiffs, v. DEPARTMENT OF REVENUE, State of Oregon, Defendant. ) ) ) ) ) ) ) ) ) ) )

TC-MD 041021E

DECISION

Plaintiffs appeal Defendant's Notice of Tax Assessment for tax year 2003 and Notice of Refund Denial for tax years 2001 and 2002.1 A trial in the matter was held in the courtroom of the Oregon Tax Court on May 12, 2005. Phyllis Jackson, a licensed tax consultant, appeared on behalf of Plaintiffs. Jerry Bronner, Assistant Attorney General, appeared on behalf of Defendant. I. STATEMENT OF FACTS Plaintiffs were residents of the State of Washington in 2001, 2002, and 2003. During that time, Anna Liza earned income in Oregon as an aircraft dispatcher for Horizon Air at its Portland, Oregon operations center. In 2003, Vincent also earned income in Oregon as a dispatcher for Horizon Air at its Portland operations center. As dispatchers, Plaintiffs' primary tasks were to prevent and handle aircraft emergencies. Plaintiffs reported to work each day at the operations center in Portland. Their day-to-day duties consisted of planning and monitoring flights from the operations center. Flight planning included preflight analysis of runway ///

Although Plaintiffs' Complaint states that Plaintiffs are also appealing year tax 2000, neither party argued that year before the court. Plaintiffs' own briefs and testimony only related to tax years 2001, 2002, and 2003. As a result, the court does not consider tax year 2000 as being at issue.

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DECISION TC-MD 041021E

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conditions, weather, and navigation restrictions. Flight monitoring included communicating with the flight crew aboard a plane, air traffic control, and other flight agencies. Horizon Air requires all of its dispatchers to be trained in accordance with Federal Aviation Regulation (FAR) 121.463. Under that regulation, to maintain their dispatcher certificate, dispatchers must spend five hours per year observing operations on each type of aircraft they monitor. That observation may take place in flight or in a flight simulator. Horizon Air does not have a simulator available for training; as a result, Plaintiffs fulfilled the requirement by flying on Horizon Air airplanes twice a year. Those flights were placed on Plaintiffs' schedules by their flight control manager. Anna Liza flew twice per year in 2001, 2002, and 2003 for five hours per flight to maintain her certification on two types of aircraft. Vincent flew twice in 2003 for five hours per flight to maintain his certification on two types of aircraft. Defendant determined that, although nonresidents of Oregon, Plaintiffs earned their income in Oregon and, as a result, were subject to the Oregon income tax. Plaintiffs claim they are exempt under federal law from taxation by the State of Oregon because they performed regularly assigned duties on aircraft in two or more states during the subject years. II. ANALYSIS Oregon imposes an income tax on the taxable income of nonresidents that is "derived from sources within [Oregon]." ORS 316.037(3).2 Because Plaintiffs worked in Oregon, their income would normally be taxable by the State of Oregon. However, nonresident employees who are employed by air carriers and perform regularly assigned duties on aircraft in two or more ///

All references to the Oregon Revised Statutes (ORS) are to 2001. The statutory provisions are the same for all tax years in question.

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DECISION TC-MD 041021E

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states are subject to different taxing requirements. See 49 USC

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Oregon Law