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IN THE OREGON TAX COURT
REGULAR DIVISION

Jack C. UTTERBACK
and Dixie A. Utterback,

Plaintiffs,
v.
DEPARTMENT OF REVENUE,
Defendant.
(TC 4634)


Plaintiffs claimed their real property was exempt from taxation either because their title ultimately traces to the federal government or because the State of Oregon has no power to levy a direct tax on property. Granting Defendant's motion to dismiss, the court found Plaintiffs' arguments lacked an objectively reasonable basis in the law and awarded Defendant $500 in frivolous appeal damages pursuant to ORS
305.437.


Taxation - Governmental Immunity
1. It is well-settled law that although the federal government is immune from direct taxation by the states, those who take title from the federal government share no such immunity.
Property Taxation - Governmental Immunity
2. With respect to patents issued under the Homestead Act of 1862, the United States Supreme Court specifically affirmed the principle that once a patent is issued, the land is subject to taxation by a state.
Property Taxation - Power to Tax
3. The State of Oregon unquestionably has authority to impose a property tax, subject only to limitations contained in the Oregon Constitution (for example those resulting from the adoption of Measure 50) or restrictions contained in valid federal statutes or the United States Constitution.

Property Taxation - Power to Tax
4. The power of the State of Oregon to tax property derives from the status of the state as a sovereign and not from any provision of the United States Constitution, including the Sixteenth Amendment thereto.
Property Taxation - Frivolous Argument
5. Where taxpayers ignore the language of the cases they cite, and their position is without an objectively reasonable basis, the court orders taxpayers to pay $500 as frivolous appeals damages under ORS 305.437.
Submitted on various motions.
Jack C. Utterback and Dixie A. Utterback, Plaintiffs (taxpayers), filed the Motion for Waiver or Deferral of Filing fee and Motion for Stay of Payment of Income tax pro se.
Rochelle Nedeau, Assistant Attorney General, Department of Justice, Salem, filed the Motion to Dismiss for Defendant (the department).
Decision for Defendant rendered December 22, 2003.

HENRY C. BREITHAUPT, Judge.
I. INTRODUCTION
This matter is before the court on a motion for waiver or deferral of filing fee and motion for stay of payment of income tax (1) filed by Plaintiffs (taxpayers) as well as a Motion to Dismiss filed by Defendant Department of Revenue (the department).
II. FACTS
Taking all facts presented by taxpayers as true and giving them the benefit of all factual inferences, it appears that the real property in question was acquired by a distant predecessor in title to taxpayers, under a patent from the federal government issued under the Homestead Act of 1862.
III. ANALYSIS
In this court, taxpayers claim that either their property is exempt because their title ultimately traces to the federal government or that the State of Oregon has no power to levy a direct tax on property.
A. Immunity Claim
1. It is well-settled law that, although the federal government is immune from direct taxation by the states, those who take title from the federal government share no such immunity. It has been clear for over 150 years that a party who receives land, by patent or other instrument of conveyance from the United States is taxable on the land received and any immunity that the land enjoyed while in the hands of the United States ends. Carroll v. Safford , 44 US 440 (1845); Witherspoon v. Duncan, 71 US 210 (1866). The immunity claim by taxpayers is without merit.
The cases cited by taxpayers do not, in fact, stand for a contrary proposition. Instead, those cases dealt with whether land was subject to tax at various points during the homestead or grant process before a claim was perfected or a patent issued, or in cases where the federal government retained some rights in
the property in question. (2)
2. The same principles have been recognized with respect to patents issued under the Homestead Act of 1862, pursuant to which taxpayers predecessor in title acquired the land in question here. In Irwin v. Wright, 258 US 219, 42 S Ct 293, 66 L Ed 573 (1922), in an opinion by Chief Justice William Howard Taft, the United States Supreme Court specifically affirmed the principle that once a patent is issued, the
land is subject to taxation by a state. (3)
B. Authority of the State of Oregon
3. The State of Oregon unquestionably has authority to impose a property tax, subject only to limitations contained in the Oregon Constitution (for example those resulting from the adoption of Measure 50) or restrictions contained in valid federal statutes or the United States Constitution. The plenary power of the state to impose taxes, subject only to constitutional limitations, has long been recognized. See, e.g., King
v. City of Portland, 2 Or 146 (1865). Taxpayers have not cited, and the court is not aware of, any authority that calls into question the power of the State of Oregon to impose a property tax. Indeed, Oregon has imposed such a tax from the time of its existence as a state. General Laws of Oregon, Civ Code, ch LIII, title I,

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Oregon Law