Peterson v. Dept. of Rev.

554 	December 11, 2019 	No. 25
IN THE OREGON TAX COURT
REGULAR DIVISION
Ariel PETERSON,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
State of Oregon,
Defendant.
(TC 5329)
Plaintiff (taxpayer) made a motion to stay prelitigation payment of her
assessed personal income tax based on undue hardship pursuant to ORS
305.419(3). The court, after considering the text, context, and legislative history
of ORS 305.419(3), interpreted its ability to grant relief due to “undue hardship.”
The court found inconsistencies between taxpayer’s affidavits to the court and
documents she filed with the Internal Revenue Service regarding income or
money owed. The court held that taxpayer did not prove that immediate payment
of her assessed personal income tax would constitute undue hardship. This opin-
ion should be read together with the court’s opinion in Lamka v. Dept. of Rev., 23
OTR 566 (2019).
Submitted on Plaintiff’s Motion for Stay of Payment of
Income Tax, Penalties, and Interest.
John Stuart Jones, Attorney at Law, Salem, filed the
motion for Plaintiff.
James C. Wallace, Senior Assistant Attorney General,
Department of Justice, Salem, filed a response for Defen-
dant Department of Revenue.
Decision for Defendant rendered December 11, 2019.
ROBERT T. MANICKE, Judge.
I. 	INTRODUCTION
This matter is before the court on a motion by
Plaintiff Ariel Peterson (taxpayer) to stay payment of per-
sonal income tax pursuant to ORS 305.419(3).1 Taxpayer
filed a supporting affidavit concurrently with her com-
plaint appealing from an adverse decision in the Magistrate
Division, where taxpayer challenged assessed deficiencies
1 The court’s references to the Oregon Revised Statutes (ORS) are to 2017.

Cite as 23 OTR 554 (2019) 	555
in personal income tax for tax year 2013 that Defendant
Department of Revenue (the department) asserts totaled
somewhat more than $46,000 as of July 2018. The depart-
ment initially objected and, after substantial discovery and
supplemental filings by both parties, continues to object to a
finding of undue hardship.
This opinion should be read together with the court’s
opinion in Lamka v. Dept. of Rev., 23 OTR 566 (2019), issued
this day. Plaintiff in that case, Peter E. Lamka, had busi-
ness dealings with taxpayer that the department alleges
taxpayer must clarify before the court can determine the
credibility of taxpayer’s allegations supporting her claim of
undue hardship.
II. 	ISSUE
Has taxpayer carried her burden of proving that
immediate payment of the personal income tax, interest,
and penalties assessed would be an undue hardship?
III. 	BACKGROUND
ORS 305.419(1) generally requires payment of any
asserted deficiency of net income tax, along with any penal-
ties and interest, on or before the filing of a complaint in this
division of the court. However, ORS 305.419(3) provides:
“Where payment of the tax, penalty and interest would
be an undue hardship, plaintiff may file an affidavit alleg-
ing undue hardship within the time described in subsec-
tion (1) of this section. * * * If the tax court finds undue
hardship, the tax court judge may stay all or any part of
the payment of tax, penalty and interest required under
subsection (1) of this section. If the tax court judge finds no
undue hardship, the tax court judge may grant the plain-
tiff up to 30 days from the date of determination to pay the
tax, penalty and interest. Failure by the plaintiff to pay the
tax, penalty and interest or to establish undue hardship
will be cause for dismissing the complaint.”
ORS 305.419(3) (emphasis added). Neither this court nor
the Oregon Supreme Court has articulated a definition or
standards for the application of the statute. Accordingly,
this order first considers the meaning of the key phrase
“undue hardship,” then examines whether taxpayer’s initial

556 	Peterson v. Dept. of Rev.
affidavit supports a conclusion of undue hardship. Finally,
the court considers the department’s objections and taxpay-
er’s filings in response.
IV. 	ANALYSIS
A. 	Text
The court starts by reviewing the text of the law,
its context, and its relevant legislative history, to determine
the meaning of “undue hardship.” See State v. Gaines, 346
Or 160, 171-72, 206 P3d 1042 (2009). The tax statutes do not
define the phrase; accordingly, the court reviews dictionary
definitions as evidence of plain meaning. See, e.g., Hodges v.
Oak Tree Realtors, Inc., 363 Or 601, 608, 426 P3d 82 (2018).
The phrase was part of the original version of ORS 305.419,
enacted in 1982. See Or Laws 1982, ch 29, § 2 (HB 3314).
That version of subsection (3) provided:
“Upon a showing of undue hardship by the plaintiff, the
tax court may stay all or any part of the payment of tax,
penalty and interest required under subsection (1) of this
section.”
The legislature amended ORS 305.419 in 1985, replacing
the entire text of subsection (3) with the following:
“Where payment of the tax, penalties and interest
would be an undue hardship, plaintiff may file an affida-
vit alleging undue hardship with the complaint. If the tax
court finds undue hardship, it may stay all or any part of
the payment of tax, penalty and interest required under
subsection (1) of this section. If the tax court finds no undue
hardship, it may grant the plaintiff up to 30 days from the
date of determination to pay the taxes, penalties and inter-
est. Failure by the plaintiff to pay the taxes, penalties and
interest or to establish undue hardship will be cause for
dismissing the complaint.”
Or Laws 1985, ch 407, § 1. Neither the 1985 amendment
nor any later amendments have changed the phrase “undue
hardship,” nor has any version of the statute defined the
phrase. The court thus looks to dictionary definitions.
Webster’s Third New International Dictionary does not define
the phrase as a whole. It defines “hardship” as “something
that causes or entails suffering or privation.” Webster’s Third

Cite as 23 OTR 554 (2019) 	557
New Int’l Dictionary 1033 (unabridged ed 2002). “Suffering”
is defined as “1: the state or experience of one who suf-
fers: the endurance of or submission to affliction, pain, loss
2: a pain endured or a distress, loss, or injury incurred.”
Webster’s at 2284. “Privation” is defined as “a condition
characterized by the loss of something previously or nor-
mally possessed.” Id. at 1805. The word “undue” (apart from
its meaning in the context of a debt that is not yet “due”)
is defined as “unsuited to the time, place, or occasion” or
“exceeding or violating propriety or fitness,” with synonyms
for the latter definition given as “excessive, immoderate,
unwarranted.” Id. at 2492. Similarly, the contemporaneous
edition of Black’s Law Dictionary includes no definition of
“undue hardship” but defines “hardship” as “In general,
privation, suffering, adversity.” Black’s Law Dictionary 646
(5th ed 1979). Black’s adds: “As used in zoning statutes as
grounds for variance, [“hardship”] refers to the fact that
zoning ordinance or restriction as applied to a particular
property is unduly oppressive, arbitrary, or confiscatory.”
Id. Black’s defines “undue” as “More than necessary; not
proper; illegal. It denotes something wrong, according to the
standard of morals which the law enforces in relations of
men, and in fact illegal * * *.” Id. at 1370. From these defini-
tions, the court concludes that the plain meaning of “undue
hardship” is a loss that involves pain, distress, or injury that
is excessive, unwarranted, or arbitrary.
B. 	Context
The court turns to the context of the “undue hard-
ship” requirement. The court has found no Oregon statutes
or administrative rules in existence in 1982 or 1985 that
define the term.2 Nor has the court found contemporaneous
Oregon cases articulating specific factors or criteria for a
finding of undue hardship in settings involving individuals
and purely financial conditions; the limited case law at that
2 Cf., e.g., former ORS 10.050(1) (1985) (allowing excuse from jury service
“upon a showing of undue hardship or extreme inconvenience to the person, the
person’s family, the person’s employer or the public served by the person”); former
ORS 135.050(1)(d) (allowing court-appointed attorney if, among other criteria,
“defendant is financially unable to retain adequate representation without sub-
stantial hardship in providing necessities to the defendant or the defendant’s
family”).

558 	Peterson v. Dept. of Rev.
time involved substantial nonfinancial issues such as family
law or liberty interests. 3
Although Oregon income tax law does not generally
incorporate procedural provisions of federal income tax law,4
the court here considers for context any federal tax law defi-
nition of the term that might have existed in 1982 or 1985.
Section 6161(b)(1) of the Internal Revenue Code allows the
Secretary of the Treasury, “[u]nder regulations prescribed
by the Secretary,” to extend the time to pay an income tax
deficiency “only where it is shown to the satisfaction of the
Secretary * * * that the payment of a deficiency upon the date
fixed for the payment thereof will result in undue hardship
to the taxpayer * * *.” That language was in place in 1982
and 1985. See Internal Revenue Code of 1954, § 6161(b) (“An
extension under this subsection may be granted only where
it is shown to the satisfaction of the Secretary or his dele-
gate that the payment of a deficiency upon the date fixed for
the payment thereof will result in undue hardship * * *.”). A
corresponding federal Treasury regulation, also in place at
that time, states:
“The term ‘undue hardship’ means more than an incon-
venience to the taxpayer. It must appear that substantial
financial loss, for example, loss due to the sale of property
at a sacrifice price, will result to the taxpayer from mak-
ing payment on the due date of the amount with respect to
which the extension is desired. If a market exists, the sale
of property at the current market price is not ordinarily
considered as resulting in an undue hardship.”
Treas Reg § 1.6161-1(b); see Treasury Decision 6364 (Feb 13,
1959) (adopting quoted text). This context, though limited,
indicates that the Internal Revenue Service required a tax-
payer to show “substantial” financial loss in order to defer
payment of an income tax deficiency. Having to sell property
to pay the tax would not suffice, unless there was no market
3 Cf. Grove and Grove, 280 Or 341, 353, 571 P2d 477 (1977) (articulating
avoidance of “undue hardship” as one criterion to determine amount of spousal
support to award in divorce cases); State v. Gordon, 43 Or App 511, 603 P2d 1196
(1979) (applying former ORS 130.050(1) (1985)).
4 See Allison v. Dept. of Rev., 11 OTR 431, 434-35 (1990) (“Oregon has its own
administrative provisions * * *.”).

Cite as 23 OTR 554 (2019) 	559
for the property and the taxpayer had to sell the property at
a “sacrifice price.”
Federal bankruptcy law in place in 1982 and 1985
required courts to determine whether to discharge an indi-
vidual debtor from student loan debt based on an “undue
hardship on the debtor and the debtor’s dependents.” 11 USC
§ 523(a)(8)(B). Courts often looked for guidance to a 1973
Congressional report, which suggested that courts consider
whether, upon review of present and anticipated earnings
and unearned income or wealth, the debtor and dependents
could “maintain * * * a minimal standard of living within
their management capability, as well as * * * pay the educa-
tional debt.” Communication from the Executive Director,
Commission on the Bankruptcy Laws of the United States,
HR Doc No 93-137, 93d Cong, 1st Sess, Pt II at 140-41 (1973);
see also In re Bagley, 4 BR 248, 6 BCD 404, 405 (D Ariz
1980).
Based on this review of materials available to the
Oregon legislature in 1982 and 1985, the court concludes
that the Oregon legislature was aware of a range of cir-
cumstances that might constitute an undue hardship, from
inability to maintain a minimal standard of living, to the
excessive loss caused by having to sell property at a distress
sale price.
C. 	Legislative History
The court turns to a review of the legislative history
of the 1982 and 1985 statutes. The court has found nothing
from which it can infer any standards for the court to apply.
In fact, the department’s representative at the 1982 spe-
cial session House Revenue Committee hearings, Elizabeth
Stockdale, 5 testified that “there are no standards in the bill
to guide the court in determining whether there is an undue
hardship, so the court’s going to have freedom and discre-
tion to look at all the circumstances that affect that par-
ticular taxpayer and make a determination on those facts
* * *.” Tape Recording, House Committee on Revenue, HB
3314, Feb 18, 1982, Tape 46, Side B, (testimony of Elizabeth
5 Stockdale represented the department as an attorney for the Department
of Justice and later became the department’s director.

560 	Peterson v. Dept. of Rev.
Stockdale).6 The 1982 bill was one of a set of budgetary pro-
posals that Governor Atiyeh asked the legislature to con-
sider in a special session to address a projected state budget
shortfall of $99.8 million. Id., Tape 46, Side A (testimony of
Jon Yunker, State Budget Director). Much of the discussion
and testimony about the tax prepayment proposal involved
the amount of revenue that would be recovered on an accel-
erated basis by requiring taxpayers to pay the assessment
at the beginning of litigation in this court, as opposed to
only at the end of unsuccessful litigation, including appeal
to the Oregon Supreme Court. The accelerated revenue
amounted to about $8 million, or about eight percent of the
Governor’s total proposal. See id., Tape 46, Sides A & B. The
chair of the House Revenue Committee expressed concern
about the potential to chill a taxpayer’s appeal rights and
asked Stockdale whether a prepayment requirement would
be constitutional. Id., Tape 46, Side B. Stockdale responded
that a body of case law from other states supported the
validity of the requirement. Id. One senator inquired about
taxpayers’ ability to claim hardship relief solely to delay
payment or to manipulate the then-existing interest rate
difference as between tax refunds and tax assessments, and
asked whether a mechanism could be devised to reduce that
risk. Stockdale responded that devising such a mechanism
would be difficult. Id., Tape 31, Side A; Tape 30, Side B.
The 1985 replacement of ORS 305.419(3) apparently
arose because Tax Court Judge Carl Byers observed that
the 1982 provision arguably required the court to deter-
mine whether an undue hardship existed before a taxpay-
er’s complaint could be filed. Given the short deadlines to
file a tax complaint, Judge Byers was concerned that even a
brief time for court review could jeopardize the timeliness of
otherwise timely complaints. He therefore drafted new sug-
gested language for subsection (3), which ultimately became
the only surviving portion of a larger procedural bill. Tape
Recording, 	Senate 	Committee 	on 	Revenue 	and 	School
Finance, SB 186, May 1, 1985, Tape 163, Side A, (testimony
of Hon Carl Byers); see Or Laws 1985, ch 407, § 1; SB 186.
6 Stockdale was responding to a comment by the Chair of the House Revenue
Committee that “I don’t know what standards a court would apply” to determine
a hardship. Id. (statement of Rep Powell).

Cite as 23 OTR 554 (2019) 	561
The legislative history of the 1985 bill restating the phrase
“undue hardship” gives no indication that the legislature
intended to change the meaning of the phrase or to add any
standards. In fact, Judge Byers testified that taxpayers gen-
erally do not know what constitutes an undue hardship. See
Senate Committee on Revenue and School Finance, SB 186,
May 1, 1985, Tape 163, Side A. A business lobbyist urged
the committee to reverse course and eliminate the prepay-
ment requirement altogether, noting that the immediate fis-
cal crisis that prompted the 1982 requirement had passed.
There was minimal discussion of the consequences of thus
“re-deferring” revenue, and no legislator proposed an amend-
ment to do so. Id. (statement of Gary Carlson, Associated
Oregon Industries).
Based on its review of the text, context, and legis-
lative history of ORS 305.419(3), the court concludes that
the legislature in 1982 and 1985 viewed the prepayment
requirement as an important source of immediate revenue,
any undoing of which would incur at least a short-term cost.
The legislature decided to create only one basis for relief
from the prepayment requirement, and to vest the court
with discretion to administer that relief. Although the leg-
islature adopted the undue hardship criterion without any
stated standard, the court infers from the text and context
of the law that the legislature certainly intended the court
to grant hardship relief where immediate payment of the
tax would prevent a taxpayer from maintaining a minimal
standard of living. Furthermore, the legislature authorized
the court to consider other potential factors, such as an
excessive, permanent loss that would be caused when a tax-
payer would have to sell off property at a distress sale price.
Implicitly, by using the word “undue,” the legislature also
authorized the court to weigh the public policy of ensuring
public access to an appeal against the public benefit of an
immediate collection (and elimination of the corresponding
risk of abuse by taxpayers seeking primarily to delay).
D. 	Taxpayer’s Affidavit and Supplemental Sworn Statements
The court turns to taxpayer’s first affidavit, which
she signed on June 8, 2018, by answering questions on a
form provided by the court (“June 8 Statement”). Under

562 	Peterson v. Dept. of Rev.
penalty of perjury, taxpayer declared net monthly wages in
a modest amount and no other source of income. She had
minimal cash on hand and an older vehicle on which she
owed more than the value. She had no other property. In
response to the question “Money Owed to You by Others,”
taxpayer wrote “N/A.” Her living expenses, including rent
or mortgage payments and vehicle payments added up to
almost exactly the amount of her wages, after taxes. Solely
based on a review of the June 8 Statement, the court likely
would conclude that enforcing the prepayment requirement
would work an undue hardship on taxpayer. However, the
department has objected to taxpayer’s motion and has taken
extensive discovery, prompting taxpayer to file supplemen-
tal declarations or affidavits supporting her motions.
On June 25, 2018, taxpayer signed a Supplemental
Affidavit (“June 25 Statement”). She reiterated the same
monthly wage income and monthly expense, savings, and
vehicle information. She stated that she lacked “substan-
tial property or assets” to pay the tax assessments. She also
stated:
“This matter concerns my appeal of an adjustment to my
taxes by defendant for the tax year 2013. During the period
in question, my income was derived from the ownership
and operation of tanning salons (‘stores’) through Lioness
Holdings LLC. Between the final quarter of 2016 and the
second quarter of 2017, all of the stores were closed or sold.
At this time I do not receive any income from Lioness.
Instead, I work for a third party.”
On 	July 	23, 	2018,7 	taxpayer 	filed 	a 	Second
Supplemental Affidavit (“July 23 Statement”). She attached
copies of pay stubs and evidence of car payments, as well as
a rental agreement for a dwelling.
On 	April 	23, 	2019, 	taxpayer 	filed 	a 	Third
Supplemental 	Affidavit 	(“April 	2019 	Statement”). 	She
reported a decline in financial condition: she had sold her
vehicle at a loss after it became nondrivable, and she was
7 The court assumes that the June 23, 2018, date indicated by the notary
public who witnessed taxpayer’s signing is a typographical error and that tax-
payer signed the document on July 23, 2018. (The document refers to the June 26
Statement.)

Cite as 23 OTR 554 (2019) 	563
driving a borrowed vehicle. Her monthly wage income had
dropped substantially because her “employment was sig-
nificantly reduced in January, 2019.” She reported receiv-
ing weekly unemployment insurance benefits. Her monthly
expenses continued at approximately the same level.
E. 	The Department’s Objections
The department does not now question taxpayer’s
income from wages or unemployment insurance benefits, or
any of her living expenses. The department’s main, continu-
ing objection is that taxpayer has failed to explain what hap-
pened to net proceeds in the amount of $610,000 that Lamka
allegedly paid or owed to her after she sold him her interest
in Lioness Holdings, LLC (“Lioness”) in 2015. Taxpayer’s
2015 federal income tax return shows clearly that she sold
or disposed of Lioness on January 1, 2015, for gross proceeds
of $800,000. She reported a basis of $190,000, resulting in
gain to taxpayer of $610,000 (which her tax return indicates
was more than offset by net operating losses). Taxpayer’s
tax return preparer, Matthew Green-Hite, testified in a
deposition that he prepared documents effecting the sale
to Lamka, including a promissory note from Lamka to tax-
payer in the amount of $610,000, and that he witnessed
Lamka and taxpayer sign the sale documents, except that he
did not see whether they signed the note. Taxpayer testified
in a deposition that she recalled signing documents trans-
ferring her interest in Lioness to Lamka, but she stated: “I
mean, I didn’t receive any money, per se. You know, there
wasn’t like a cash transaction.” Taxpayer’s testimony in the
record does not mention a promissory note from Lamka. She
testified that her goal in transferring ownership of Lioness
was to terminate her authority to sign checks on behalf of
the company because there had been “some employee check
fraud things going on,” and she did not want to be accused
of involvement in that. The record does not include any evi-
dence that taxpayer forgave any debt that Lamka owed tax-
payer or any evidence that taxpayer treated the debt as a
deductible bad or worthless debt. See IRC § 166.
There is evidence in the record that Lioness, under
Lamka’s ownership, was continuing to pursue sources of
revenue at the time of taxpayer’s various Statements. An

564 	Peterson v. Dept. of Rev.
Opinion and Order shows that, as of June 20, 2018, Lioness
was the plaintiff in an insurance action in the United States
District Court for the District of Oregon, having filed var-
ious claims in connection with coverage of employee theft
losses. Some of Lioness’s claims had survived the defendant’s
motions and defenses as of that date. In March 2019, Lioness
joined with another entity owned by Lamka, Gibraltar
Holdings, LLC, in filing a complaint in Multnomah County
Circuit Court against Bruce Edwin, LLC and an individual
named Lyndsy Nysetvold. The complaint acknowledges that
Lioness had “regular and sustained business activities” as
late as April 5, 2018, and that Lioness received payments
from the defendants through the end of 2018 pursuant to
an asset sale agreement. The complaint seeks $400,000 in
damages, as well as other relief, based on allegations that
the defendants defaulted on the agreement.
Based on taxpayer’s federal income tax return
for 2015, the court finds that taxpayer sold her interest
in Lioness to Lamka in 2015 and realized gross proceeds
of $800,000. If for no other reason, this transaction is rel-
evant because these proceeds are many times the annual
wage income that taxpayer reported to the court as her sole
source of support three and four years later. Based on the
testimony of taxpayer’s tax return preparer, however, the
court finds that taxpayer likely did not receive the proceeds
in cash, but instead likely received the bulk of the proceeds
in the form of a promissory note from Lamka in the amount
of $610,000. The court finds no evidence that taxpayer has
since forgiven or written off any debt from Lamka. The court
finds further that Lamka was attempting to collect revenue
on Lioness’s behalf during the period June 2018 through
March 2019. From this the court concludes that there was
at least some possibility that taxpayer might have been able
to collect some amount on the note. This evidence renders
not credible taxpayer’s representations to this court that no
one owes her money.
V. 	CONCLUSION
The court concludes that taxpayer has failed to
carry her burden of proving that immediate payment of
the assessed tax, interest and penalties would constitute

Cite as 23 OTR 554 (2019) 	565
an undue hardship. The court denies taxpayer’s motion
and grants taxpayer 30 days from this order to satisfy the
assessed tax, interest, and penalties. Now, therefore,
IT IS ORDERED that Plaintiff satisfy the assessed
tax, interest, and penalties within 30 days from the date of
this order.