Snohomish PUD: Washington Utility Excused from Oregon Property Tax

Overview

Oregon tax officials sent hefty property tax bills to three public utilities in the state of Washington for their contractual rights to ship electricity on a high voltage power line running through Oregon. The public utilities, which serve electric consumers in Seattle, Tacoma and Everett, went to court objecting to the property tax levy.

Before a judgment was reached in the court case, two of the public utilities went to the Oregon legislature asking for a remedy. Caught in a policy no man's land, the third utility – Snohomish Public Utility District – retained CFM to pursue its own legislative remedy.

Challenge

The Seattle and Tacoma utilities advanced a policy argument that they should be exempt from Oregon personal property tax because city-owned utilities in Oregon are exempt. That argument didn't work for Snohomish PUD because people’s utility districts (PUDs) in Oregon are subject to local property taxation.

Approach

Using its extensive background on revenue matters, CFM worked carefully with the Oregon Department of Revenue to hone the argument that a stronger policy basis for an exemption extended to all three public utilities – none of them possessed tangible assets in Oregon. Their contractual right to use a power line under federal control, itself exempt from Oregon property tax, did not constitute adequate nexus.

Result

Despite varying degrees of opposition from local government, Oregon PUDs and Oregon rural electric cooperatives, CFM prevailed with its argument in lobbying legislative leaders and the governor. A property tax exemption for all three utilities was placed into a late-session omnibus tax measure in the Senate, which subsequently was approved by the House and signed into law by the governor.