Sweet Home MC, LLC v. Linn County Assessor

DECISION TC-MD 240555G 	1
IN THE OREGON TAX COURT
MAGISTRATE DIVISION
Property Tax
SWEET HOME MC, LLC, 	)
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Plaintiff, 	TC-MD 240555G
v.
LINN COUNTY ASSESSOR,
DECISION	Defendant.
On cross-motions for summary judgment, this case concerns the application of the
exemption of ORS 307.330 to a residential care facility on property identified as Account
947170 (subject). The tax year at issue is 2024-25.
I. FACTS
The following facts are undisputed:
[1] 	“The property was constructed to function and earn income as a residential
care facility.
[2] 	“The City of Sweet Home Building Department issued plaintiff a
certificate of occupancy effective December 12, 2023.
[3] 	“Plaintiff’s staff began using the property for training, setup and
conducting administrative tasks prior to January 1, 2024, to prepare for
residential occupants.
[4] 	“Plaintiff could not have residents or earn income as a residential care
facility without the approval of the State of Oregon Department of Human
Services.
[5] 	“Plaintiff received its license to begin operating as a residential care
facility from the Oregon Department of Human Services on January 8,
2024.”
(Ptf’s Mot Summ J at 2; Def’s Cross-Mot Summ J at 2.)
/ / /

DECISION TC-MD 240555G 	2
Plaintiff timely applied to Defendant to exempt the subject from ad valorem property tax
for 2024-25 pursuant to ORS 307.330, and Defendant denied that request. Plaintiff asks the
court to overturn that denial and order the exemption; Defendant asks that its denial be upheld.
II. ANALYSIS
The ultimate issue is whether the subject qualified for the tax exemption under ORS
307.330 for the 2024-25 tax year.1 ORS 307.330(1) exempts from taxation commercial
buildings that are “in the process of construction” and have “not been in use or occupancy” as of
January 1.2 The exemption’s criteria are conjunctive; to qualify, a building must satisfy them all.
See ORS 307.330(1).
Defendant argues that the subject is ineligible for exemption for either of two reasons:
(1) its construction was completed on December 12, 2023, when the city issued a Certificate of
Occupancy; or (2) the training, setup, and administrative tasks occurring in December 2023 were
disqualifying “use or occupancy.” Plaintiff argues that the subject’s construction was not
1 The court’s references to the Oregon Revised Statutes (ORS) are to 2023.
2 ORS 307.330 states in full:
“(1) Except for property centrally assessed by the Department of Revenue, each new building or
structure or addition to an existing building or structure is exempt from taxation for each assessment year of
not more than two consecutive years if the building, structure or addition:
“(a) Is in the process of construction on January 1;
“(b) Is not in use or occupancy on January 1;
“(c) Has not been in use or occupancy at any time prior to such January 1 date;
“(d) Is being constructed in furtherance of the production of income; and
“(e) Is, in the case of nonmanufacturing facilities, to be first used or occupied not less than one
year from the time construction commences. Construction shall not be deemed to have commenced until
after demolition, if any, is completed.
“(2) If the property otherwise qualifies for exemption under this section and ORS 307.340, the
exemption shall likewise apply to any machinery or equipment located at the construction site which is or
will be installed in or affixed to such building, structure or addition.”

DECISION TC-MD 240555G 	3
complete until the state licensed it as a residential care facility and that the administrative use
preceding that license is not disqualifying commercial use.
The court proceeds to consider whether the subject’s construction was complete by
January 1 and whether it had been “in use or occupancy” under ORS 307.330.
A. 	Construction Completion
A building’s construction is complete when it is “ready for its intended use or
occupancy.” OAR 150-307-0430(1)(c).3 A building is ready for its intended use when it is
capable of producing at least some income in the way it was designed. See Collier Carbon v.
Dept. of Rev., 5 OTR 1, 7 (1972), aff’d, 263 Or 414, 502 P2d 595 (1972) (holding industrial plant
exempt even though 97 percent complete because it was “useless until the whole structure is
basically operable”). A building not yet capable of producing enough to be economically viable
may be complete if it is basically functional. Allen v. Dept. of Rev., 5 OTR 185, 191-92 (1973)
(holding sawmill producing salable boards at 25 percent capacity was complete, despite needing
further work to increase output). While the building’s operations as a whole need not be
economically viable, the building’s product must be commercially marketable, and the
construction period includes time for testing to ensure the marketability of that product.
Multnomah County v. Dept. of Rev., 5 OTR 437, 443 (1974) (holding iron pellet plant was not
complete even though it had generated and sold product because product “disastrous[ly]” failed
buyer’s tests).
Both the business operations and the “physical properties” of residential care facilities are
regulated by the state. See ORS 443.450(1). Thus, a new facility must obtain a license “before
admitting any resident.” OAR 411-054-0012(13). The licensure process requires that a newly
3 Oregon Administrative Rules (OAR)

DECISION TC-MD 240555G 	4
constructed facility undergo an onsite inspection by the Department of Human Services in
addition to obtaining a certificate of occupancy from the relevant building codes agency. See
OAR 411-054-0012(11),(12). Additional licensing is required for administrators of such
facilities, beyond the licensing of the facility itself. See OAR 411-054-0012(10)(a).
In the present case, the subject was intended as a residential care facility. Its commercial
use required admitting residents, which it could not do without a license from the state. See
OAR 411-054-0012(13). Thus, it appears the subject was not “ready for its intended use or
occupancy” until it received the state license. See OAR 150-307-0430(1)(c).
Defendant’s opposing argument—that the subject was completed when the city issued the
certificate of occupancy—presupposes a period of inspection and verification before completion
of the construction process. Defendant does not argue the subject was completed the moment the
last tool of the last subcontractor was laid down. The idea that inspection is part of construction
is consistent with factories not being completed until their ability to produce marketable products
has been tested. See Multnomah County, 5 OTR at 443. However, it is unclear why Defendant
extends that reasoning only to the city’s certificate and not to the state’s license.
The subject required multiple licenses to operate as a residential care facility, including a
certificate of occupancy from the city and a residential care facility license from the state.
Having only one required license is of little avail; the building is “useless” for its intended
purpose until it receives all the permissions required for it to function. See Collier Carbon, 5
OTR at 7.
The subject required inspection and licensure before being ready for its intended
commercial use. See OAR 150-307-0430(1)(c). The certificate of occupancy was necessary, but
not sufficient for that use. See OAR 411-054-0012(12),(13). Therefore, on January 1, the

DECISION TC-MD 240555G 	5
subject was like the plant in Collier Carbon: almost—but not quite—complete. Until its final
license was given on January 8, 2024, the subject was still “in the process of construction[.]” See
ORS 307.330(1)(a).
Even though a building remains under construction, it will not qualify for the exemption
if it has been “in use or occupancy” on or before January 1. See ORS 307.330(1).
B. 	Commercial Use or Occupancy
A building is “in use or occupancy” when it is used “in the manner for which the
completed building, structure or addition was intended”—that is, for its intended commercial
use. OAR 150-307-0430(1)(e). Because a building that has actually been used as designed is
generally “ready for its intended use,” there is considerable overlap between this criterion and
the “process of construction” criterion. See, e.g., Allen, 5 OTR at 192 (basing finding of
completed construction on sawmill’s “use or occupancy”). Nevertheless, a building only
partially completed is “in use or occupancy” if the portion completed is used as designed for
income production. Multnomah County., By & Through Druian v. Dept. of Rev., 13 OTR 223,
231 (1995) (use of parking garage disqualified whole mixed-use structure from exemption).
Commercial use does not necessarily require an income stream to the taxpayer, so long as the use
is according to the building’s overall commercial plan. Trendwest Resorts, Inc. v. Dept. of Rev.,
18 OTR 187, 196 (2005) (rent-free sublease of retail space was commercial use because it was
part of structure’s “overall intended use” and provided “substantial benefit to taxpayer” by
ending business interruption payments), aff’d, 340 Or 413, 134 P3d 932 (2006) (affirming rent-
free sublet was part of “overall intended commercial use”).
Commercial use of a building does not extend to independent use of administrative
offices meant to support the building’s intended profit-making purpose. Linn County v. Dept. of

DECISION TC-MD 240555G 	6
Rev., 14 OTR 257, 262-63 (1998). In Linn County, administrative portions of a Target
distribution center were used “for ordering supplies, hiring new employees, and conducting
management conferences” before the machinery needed to operate the building as a distribution
center was fully installed. Id. at 262. The court held that was not a disqualifying “use or
occupancy” under ORS 307.330(1) because the administrative use occurred absent the building’s
intended commercial use as a distribution center. Id.
Here, the subject was not used or occupied for its intended commercial purpose as a
residential care facility before it was licensed by the state. Plaintiff’s administrative use of the
facility before licensing is analogous to that of the taxpayer in Linn County. The subject is not
an office building; its administrative functions are meant to be concomitant to its operation as a
residential care facility. Administrative use before the subject is operable as a residential care
facility is therefore not commercial “use or occupancy.” See OAR 150-307-0430(1)(e); Linn
County, 14 OTR at 262.
Defendant argues that Plaintiff’s December 2023 use of the subject was in fact
concomitant to the subject’s future use as a residential care facility because certain
administrative tasks (e.g., training and orienting staff) must be completed before residents could
be admitted. However, the administrative tasks performed at the subject do not distinguish this
case from Linn County. There, too, employees had to be hired and trained before the distribution
center could begin operation. The point is not whether the December 2023 administrative tasks
were necessary, it is that they occurred when it was still impossible for the building to begin its
intended commercial use.
As of January 1, 2024, the subject had not been used or occupied within the
meaning of ORS 307.330(1) and OAR 150-307-0430.

DECISION TC-MD 240555G 	7
III. CONCLUSION
The undisputed facts show that the subject was still in the process of construction and had
not yet been commercially used or occupied on the assessment date. Plaintiff is entitled to
prevail as a matter of law. See TCR 47 C; TCR-MD 13 B.4 Now, therefore,
IT IS THE DECISION OF THIS COURT that Plaintiff’s Motion for Summary Judgment
be granted and Defendant’s Cross-Motion for Summary Judgment be denied. The property
identified as Account 947170 is entitled to exemption from ad valorem taxes for the 2024-25 tax
year.
POUL F. LUNDREN
MAGISTRATE
If you want to appeal this Decision, file a complaint in the Regular Division of
the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563;
or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.
Your complaint must be submitted within 60 days after the date of this Decision
or this Decision cannot be changed. TCR-MD 19 B.
This document was signed by Magistrate Poul F. Lundgren and entered on
February 13, 2026.
4 Tax Court Rules (TCR); Tax Court Rules-Magistrate Division (TCR–MD)