Theatre West of Lincoln City, Ltd. v. Department of Revenue

Citations: 873 P.2d 1083; 319 Or. 114; 1994 Ore. LEXIS 44Docket: OTC 3317; SC S40516

Court: Oregon Supreme Court; May 26, 1994; Oregon; State Supreme Court

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The Supreme Court of Oregon addressed the case of Theatre West of Lincoln City, Ltd. v. Department of Revenue regarding the eligibility of Theatre West for an exemption from ad valorem property taxation under ORS 307.130(1) as a "literary institution." The county assessor, the Department of Revenue, and the Oregon Tax Court all denied the exemption, prompting Theatre West to appeal. Upon de novo review, the court found that Theatre West qualifies for the exemption.

Key facts established that Theatre West is a local theater company with one paid employee and relies on volunteers for various roles, including performance, production, and administrative tasks. The organization provides significant community benefits through regular performances and approximately 10 annual benefit performances for local organizations, donating its facilities and productions. It also offers classes on acting and theater, supports local school drama groups, and provides free tickets to those in need.

To qualify for the tax exemption under ORS 307.130(1)(a), Theatre West must meet two criteria: it must be classified as a "literary institution" and demonstrate that a significant portion of its activities serve a charitable purpose. The court emphasized that both conditions must be satisfied for the exemption to apply, referencing prior case law to support this interpretation.

Taxpayer meets the second requirement for qualification, but the Tax Court determined that taxpayer does not qualify as a "literary institution." The term "literary" is defined to exclude movies, theatre, television, or opera, focusing instead on literature or written words. Taxpayer's activities, which involve speech or song in an artistic context, align more closely with theatre than with a literary society. The Department supports the Tax Court's view, differentiating between written works and spoken performances, arguing that verbalization strips the activity of its "literary" character.

This interpretation leads to potentially counterintuitive outcomes; for instance, an institution discussing Shakespeare could qualify for tax exemption, while one staging Shakespeare's plays would not. The analysis of the relevant statute, ORS 307.130(1)(a), aims to uncover legislative intent through the text and context, which do not define "literary institution." The common meaning of "literary" relates to literature, defined as writings of significant quality expressing enduring ideas. Scripts of plays are considered literature, supporting the notion that literary societies promote quality literature, as established in previous case law.

An organization dedicated to producing plays that engage both actors and audiences qualifies as a "literary institution." The Tax Court's ruling was incorrect, but an additional consideration arises from the historical context of ORS 307.130, a statute that predated Oregon statehood. Enacted in 1854, this law exempted the personal property of literary institutions from taxation. The historical meaning of "literary" may have been more limited at that time; however, research reveals that the term was used in a broad sense even in the mid-nineteenth century. Evidence indicates that "literary" encompassed a wide range of written materials, including plays, much like its contemporary usage. Consequently, the exemption from ad valorem property taxes for "literary institutions" under ORS 307.130 applies to the taxpayer involved. The Tax Court's judgment is therefore reversed.