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IN THE REGULAR DIVISION OF THE
OREGON TAX COURT

Jon EVERHART
and Joann Everhart

v.
DEPARTMENT OF REVENUE
and
WHEELER COUNTY ASSESSOR
(TC 4380)
Plaintiffs appealed the denial of special farm-use assessment for a parcel on which sheep were raised. The court

found that Plaintiffs were raising the sheep for the primary purpose of obtaining a profit in money and that the land qualified for special farm-use assessment. Property taxation-Special assessment-Farmland-EFU land
1.
In qualifying for special farm-use assessment, land that is zoned EFU has fewer requirements to meet than land zoned for other purposes.

Property taxation-Special assessment-Farmland-EFU land

2.
Land within an EFU zone, exclusively used for farm use, shall receive special assessment. Property taxation-Special assessment-Farmland-EFU land

3.
The definition of farm use has three basic elements: (1) the land must be currently employed; (2) the primary purpose of the employment must be the obtainment of a profit in money; and (3) the employment must be the type of activity that qualifies as "farming."

Property taxation-Special assessment-Farmland-Intent for profit

4.
Farm use is not required to result in a profit.
Property taxation-Special assessment-Farmland-Intent for profit


5.
Cost of or return on capital is not a consideration in determining profit.
Property taxation-Special assessment-Farmland-Intent for profit


6.
When determining profit, operating expenses are to be measured against operating income.
Trial was held August 3, 1999, in the courtroom of the Wheeler County Courthouse, Fossil.
Plaintiffs (taxpayers), specifically Jon Everhart, was present but did not argue the cause at trial.
Douglas M. Adair, Assistant Attorney General, Department of Justice, Salem, argued the cause for Defendant



(the department).
Thomas W. Cutsforth, Wheeler County Counsel, Fossil, argued the cause for Intervenor (the county).
Decision for Plaintiffs rendered November 17, 1999.

CARL N. BYERS, Judge
Plaintiffs (taxpayers) appeal the denial of special farm-use assessment for a 12.75 acre parcel in Wheeler County. Because the statutory Defendant, Department of Revenue (the department), agrees with taxpayers' position, the Wheeler County Assessor (the county) intervened and defended the appeal. Trial on the merits was held in Fossil.
FACTS
The subject property is located on the John Day River in the Clarno area. The lower, southern half of the property has been subject to historic flooding from the river and has fairly good soil. Taxpayers have certified water rights entitling them to draw water from the river to irrigate 3.8 acres of that southern half. The upper, northern half of the property is Type VII soil or "wasteland," which produces minimal animal feed. The land is improved with a small house, a storage shed, an irrigation pump, and a pond. In addition to perimeter fencing, there are three cross fences and some other interior pen fencing.
Taxpayers purchased the property in January 1997 for $150,000. For twenty years prior to that, the property was owned by a Mrs. Freedle who used it to raise sheep. The property is zoned Exclusive Farm Use (EFU) and qualified for special farm-use assessment during Mrs. Freedle's ownership.
There were no sheep on the property when taxpayers purchased it. On February 14, 1997, the county assessor sent taxpayers a letter indicating the property was being "scrutinized" for disqualification. (Def's Ex E.) The letter indicated that if taxpayers had evidence as to its farm use, they should notify the assessor. Taxpayers went to the assessor's office and asked what was required to maintain special farm-use assessment. On May 10, 1997, taxpayers purchased five "pair" of sheep, a "pair" being one ewe and a lamb, and placed them on the property. (Def's Ex F.) Taxpayers, who had 20 years of prior experience raising sheep in Clackamas County, personally cared for the sheep. Later in the same year, taxpayers sold the sheep through auction. (Def's Ex G.) On their federal income tax return Schedule F, taxpayers reported gross income of $414 and a net income of $389 from their farming activities. (Def's Ex H.)
ISSUE
Does the subject property qualify for special farm-use assessment for the 1997-98 tax year?
PRELIMINARY MATTER
At the beginning of trial, the department filed a Motion in Limine. The motion asserted that the county was raising a new issue: the subject parcel was illegally created, and therefore it could not qualify for special farm

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Oregon Law