From the Eugene Register Guard, September 19, 2013
Ruling against Lane County, a judge upholds the treatment center’s status as a charity
In a victory worth more than $200,000 for Eugene-based Serenity Lane, the Oregon Tax Court has ruled that the substance abuse treatment center’s properties should not be taxed.
Tax Court Judge Henry Breithaupt decided that Serenity Lane meets the definition of a charitable organization and is entitled to be exempt from property taxes.
Lane County officials, starting in 2009, had removed Serenity Lane’s tax exemptions for various properties, which cost the nonprofit corporation about $70,000 annually in each of the past three years.
Breithaupt’s Aug. 30 ruling means the county will restore the tax exemptions to Serenity Lane and provide the corporation with a total tax refund of about $217,000, plus interest payments of 12 percent, Lane County Assessor Mike Cowles said Wednesday.
The county will not appeal Breithaupt’s ruling, he said.
“Although we may not agree with the tax court’s decision, we respect the court and are abiding by the decision,” Cowles said.
Serenity Lane, which wants to build a multimillion-dollar treatment center in Coburg, is “certainly pleased with the tax court decision,” spokeswoman Marilyn Milne said.
But “it would be premature” to make further comment, she said, because Breithaupt has yet to decide Serenity Lane’s request for attorney fees and expenses associated with the case and for a property tax refund.
Cowles, however, said Serenity Lane should receive a full refund in about one or two months.
The county’s earlier decisions had required Serenity Lane to pay taxes on real and personal property, mainly equipment and furnishings, Cowles said.
The tax dispute involved five Serenity Lane properties in Eugene and their associated personal property, he said.
Serenity Lane’s main facility is a 65-bed residential treatment center on East 16th Ave.
The organization was founded in Eugene in 1973 as a private, not-for-profit corporation by the late Dr. Thomas Kerns, the father of Eugene Police Chief Pete Kerns.
In his ruling, Breithaupt wrote that the dispute with the county revolved around whether Serenity Lane’s operations met the “gift or giving” requirement that charitable entities must have to get property tax breaks.
In his ruling, Breithaupt wrote that the organization is composed of two different entities — Serenity Lane Inc. and Serenity Lane Health Services. Both are organized as 501(c)(3) nonprofit corporations.
Serenity Lane Health Services owns Serenity Lane’s buildings and provides administrative support for Serenity Lane, Breithaupt wrote. In return, Serenity Lane leases buildings from Serenity Lane Health Services and operates Serenity’s addiction programs, he wrote.
In the dispute with the county, Serenity argued that its operations met the tax exemption requirement by providing need-based scholarships to reduce treatment costs for some patients; providing treatment for the indigent and for those enrolled in the Oregon Health Plan at rates substantially below Serenity Lane’s already below-market rates; and providing community outreach education for employers.
The county sought to disprove those claims, including Serenity’s contention that it provides alcohol and drug detoxification services at below-market rates.
The dispute dated to 2009 when the county reviewed the exempt status of both Serenity Lane entities and asked for documents proving their charitable nature.
Serenity complied with the request, but its answers “failed to satisfy the county,” which removed the tax exemptions for both entities, Breithaupt wrote.
Serenity in 2011 filed a challenge to the county’s action. The next year, Dan Robinson, a magistrate in the Oregon Tax Court ruled in favor of the county. Serenity appealed, sending the dispute to Breithaupt.
In his ruling, Breithaupt disagreed with Robinson, writing that the county failed to “present any admissible evidence” rebutting Serenity’s claims.
“Serenity has carried the burden of proof on this issue,” Breithaupt wrote.
Cowles said county officials could have appealed Breithaupt’s ruling to the Oregon Court of Appeals.
But county officials declined to do so after considering different factors, such as the appeals court’s tendency to affirm a lower court ruling unless there is a major error, Cowles said.
Serenity Lane’s refund will come from the county’s general property tax distribution fund, he said.
The exact amount of Serenity Lane’s refund with interest won’t be known until the county determines whether Serenity Lane paid property taxes in full or in installments, a variable that affects the amount of taxes paid, Cowles said.
Serenity Lane has outgrown its East 16th Avenue center and wants to build a larger facility on a 15-acre parcel in Coburg that it purchased in 2008 for $2 million. That land has remained on the tax rolls and was not part of the tax dispute, Cowles said.