Level 3 Communications, LLC v. Dept. of Rev.

No. 47 	February 21, 2018 	533
IN THE OREGON TAX COURT
REGULAR DIVISION
LEVEL 3 COMMUNICATIONS, LLC,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
Defendant.
(TC 5315)
In advance of trial in consolidated cases related to this matter, Defendant
Department of Revenue (the department), moved to consolidate the case with
pending litigation regarding previous tax years, arguing that the similarities
between the case and the previously consolidated cases were such that the
resources of the parties and the court would be spared by trying all tax years
together. Plaintiff (taxpayer) argued that it would be disadvantaged by the lim-
ited time to prepare an additional tax year for trial. The department also moved
to amend its Answer to assert a real market value higher than that originally
assessed for property at issue. Denying the motion to consolidate and granting
the motion to amend its Answer, the court ruled that this case was in an earlier
procedural stage than the consolidated cases, and that the department as the
moving party had not shown that the facts and evidence as between the 2017-18
tax year and the years in consolidation were substantially the same.
Oral argument on Defendant’s Motion to Consolidate
and Defendant’s Motion to Amend Answer was held on
February 14, 2018, via telephone.
Marilyn J. Harbur, Senior Assistant Attorney General,
Department of Justice, Salem, filed the motions and argued
the 	cause 	for 	Defendant 	Department 	of 	Revenue 	(the
department).
Cynthia M. Fraser, Garvey Schubert Barer PC, Portland,
filed 	the 	response 	and 	argued 	the 	cause 	for 	Plaintiff
(taxpayer).
Decision rendered February 21, 2018.
ROBERT T. MANICKE, Judge.
I. 	INTRODUCTION
This matter is before the court on two motions of
Defendant Department of Revenue (the department). The
first motion is to consolidate this case, which concerns tax

534 	Level 3 Communications, LLC v. Dept. of Rev.
year 2017-18, with cases TC 5236 (Control), TC 5269, and
TC 5291 (the consolidated cases), which are already con-
solidated for trial and concern tax years 2014-15 through
2016-17. The second motion is to amend the department’s
Answer to assert a real market value higher than that
originally assessed for property owned by Plaintiff Level 3
Communications, LLC (taxpayer). The court will address
these motions in turn.
II. 	MOTION TO CONSOLIDATE
As stated, the department moves to consolidate this
case, which concerns tax year 2017-18, with the consolidated
cases, which concern tax years 2014-15 through 2016-17. The
department argues that the similarities between this case
and the consolidated cases are such that the resources of the
parties and the court will be spared by trying all tax years
together. Based on its declaration, taxpayer argues that its
experts and counsel lack the time necessary to prepare this
case for trial with the consolidated cases on April 5, 2018,
including preparation of an appraisal report.
The rule providing for consolidation is Tax Court
Rule (TCR) 53. TCR 53 A provides:
“Upon motion of any party, when more than one action
involving a common question of law or fact is pending before
the court, the court may order a joint hearing or trial of
any or all of the matters in issue in such actions; the court
may order all such actions consolidated; and it may make
such orders concerning proceedings therein as may tend to
avoid unnecessary costs or delay. In property tax cases, each
year constitutes a separate action. Cases involving more
than one year may be consolidated for trial if the facts and
evidence are substantially the same and can be separately
established as to each year without confusion.”
(Emphases added.)
Trial in the consolidated cases was originally sched-
uled for December 2017.1 It was then postponed to April 2018
to accommodate the transition of the court from (now Senior)
Judge Breithaupt to Judge Manicke on January 1, 2018. In
that postponement, the number of days of trial was reduced
1 The court takes judicial notice of the records in the consolidated cases.

Cite as 22 OTR 533 (2018) 	535
from eight to seven due to the limited availability of expert
witnesses and counsel. If this case were to be included in
the consolidated trial, the court finds, based upon taxpay-
er’s representations, that trial would need to be postponed
again, with additional days added to accommodate tax year
2017-18.
This case is at a much earlier procedural stage
than the consolidated cases. Taxpayer filed its Complaint
in the Magistrate Division on October 23, 2017, and only
on December 8, 2017, did the parties jointly request special
designation to this division. In contrast, as of that date the
consolidated cases were already substantially farther along
in the process, as evidenced by the original trial date of
December 4, 2017.
The facts to date on record in this case indicate that
the case is likely to involve complex determinations of fact.
The issues include quantifying taxpayer’s overall “system
value”2 (undisputedly in the billions of dollars), including
intangible property, and determining the proportion of that
system value assessable in Oregon. See ORS 308.550 (2017).
While the valuation of taxpayer’s property in this case might
rely on similar evidence as in prior tax years, 3 the depart-
ment has not effectively rebutted taxpayer’s assertion that
substantial effort is required to prepare an appraisal report
that will sustain taxpayer’s burden of proof as to each year.4
That effort includes conducting an independent analysis of
market conditions, assumptions, and facts specific to the
January 1, 2017, assessment date.
2 The department’s rules use the term “system value” to mean the value of
a centrally assessed taxpayer’s integrated group of assets functioning as an eco-
nomic unit within and without Oregon. See OAR 150-308-0695.
3 A June 14, 2017, letter from taxpayer to the department, attached to tax-
payers’ Complaint in this case, lists two pages of bullet points of specific items
that apparently were in dispute at that time. The communications between the
parties on the record in the consolidated cases contain no indication whether the
same specific issues are involved in the consolidated cases.
4 The court notes that its analysis focuses on the factual issues relating to
tax year 2017-18. In their Joint Petition for Special Designation, the parties indi-
cated that this case “involves legal issues currently before this court in other tax
appeals.” Even if the legal issues are a substantial part of this case, the court’s
analysis would still stand because the consolidated cases are set for trial on the
valuation issues.

536 	Level 3 Communications, LLC v. Dept. of Rev.
The department notes that tax year 2017-18 is the
last year in which taxpayer was assessed as an independent
business. This is because taxpayer has been the subject of
a transaction with CenturyLink, Inc. (CenturyLink) and
apparently will be part of a different centrally assessed unit
starting with tax year 2018-19. Commonality of the central
assessment unit, however, tells the court nothing about the
degree of similarity between this tax year and the prior,
consolidated years as to the factual issues to be analyzed,
including market conditions and appraisal assumptions.
In sum, the department as the moving party has not
shown that the “facts and evidence” as between the 2017-18
tax year and the years in consolidation are “substantially
the same.”
Nor has the department shown that consolidation
will tend to “avoid unnecessary costs or delay.” Taxpayer
argues strenuously that it would be disadvantaged by the
limited time to prepare an additional tax year for trial
by April 8, 2018, including exchanging within the coming
two to four weeks the appraisal work papers on which its
experts would rely at trial. 5 The parties apparently at one
point sought to schedule the trial for June 2018 but could
not find a block of time that fit the schedules of all involved;
otherwise, neither party has suggested pushing back trial
to accommodate the additional tax year. Accordingly, rather
than avoiding delay, the court finds that consolidation would
cause delay in the resolution of the existing consolidated
cases, prolonging the uncertainty for the parties—and for
the counties in which taxpayer’s property is located—for tax
years going back to 2014-15.
Ultimately, notwithstanding some obvious factual
similarities between the cases, the court concludes that any
cost savings resulting from consolidation are heavily out-
weighed by the additional delay that would result in post-
poning the April 2018 trial to accommodate the consolida-
tion. That postponement would be required to both add trial
days to accommodate the additional tax year, and to allow
5 The department offered to delay by up to two weeks the customary appraisal
exchange deadline of 30 days before trial, but taxpayer asserted that that delay
still would leave its experts insufficient time to prepare.

Cite as 22 OTR 533 (2018) 	537
taxpayer time to prepare an appraisal report for tax year
2017-18. The department’s motion to consolidate is denied.
III. 	MOTION TO AMEND ANSWER
The department moves to amend its Answer to add
a counterclaim. The counterclaim in this case is materially
identical to the counterclaims addressed by the court in Level
3 Communications, LLC v. Department of Revenue, TC 5236
(Control) (Order Granting Defendant’s Motions to Amend
Answers and Motion to Compel Production of Documents).
The counterclaim asserts a higher system value
(not exceeding $34 billion) than that which was ordered by
the Director after holding a conference ($25 billion in this
case). The department bases its new assertion at least in
part on its allegation that a transaction was completed on
or about November 1, 2017, in which taxpayer was merged
into a subsidiary of CenturyLink, with consideration paid
to the former shareholders of taxpayer including cash and
CenturyLink stock.
Taxpayer filed no written objection to this motion
but at the hearing advanced arguments against amend-
ment in the consolidated cases that the court understands
to apply to this case as well. Notwithstanding the failure to
file a written objection in this case, the court considers those
arguments and rejects them for the reasons stated in Level
3 Communications, LLC, TC 5236 (Control), and because of
the early procedural stage of this case.
The department is granted leave to amend its
Answer to assert its counterclaim.
IV. 	CONCLUSION
The department’s motion to consolidate is denied.
The department’s motion for leave to amend its Answer is
granted. Now, therefore,
IT IS ORDERED that Defendant’s motion to consol-
idate is denied.
IT 	IS 	FURTHER 	ORDERED 	that 	Defendant’s
motion to amend its Answer for tax year 2017-18, is granted;
and

538 	Level 3 Communications, LLC v. Dept. of Rev.
IT IS FURTHER ORDERED that the amended
Answer submitted by Defendant on or about January 19,
2018, is deemed filed and served on Plaintiff as of the date
of this order.