OAR 150-308-0240: Real Property Valuation for Tax Purposes

(1) For purposes of this rule, these words and phrases have the following meanings: (a) “Unit of property” means the item, structure, plant, or integrated complex as it physically exists on the assessment date. (b) “Real property” means the real estate (physical land and appurtenances, including structures, and machinery and equipment, that comprise an integral part of the property or manufacturing operation) and all interests, benefits, and rights inherent in the ownership of the physical real estate. (c) “Rural lands” means those lands with property classification 400, 401, 500, 501, 600, 601, 800, and 801 as defined by OAR 150-308-0310. They are distinguished from platted land as acreages in varying sizes and are either improved or unimproved. (d) “Utility” means the quality or property of being useful, which may either add to or subtract from real market value. (e) “Highest and best use” means the reasonably probable use of vacant land or an improved property that is legally permissible, physically possible, financially feasible, and maximally productive, which results in the highest real market value. (f) “Just compensation to the owner” means the amount of compensation for a property that an owner would expect for the taking through condemnation of their property. Just compensation is the real market value of the property at its highest and best use. (2) Methods and Procedures for Determining Real Market Value: (a) For the valuation of real property all three approaches, sales comparison approach, cost approach, and income approach, must be considered. For a particular property, it may be that not all three approaches are applicable. However, each approach must be investigated for its merit in each appraisal. (b) The real market value of a unit of property may not be determined from the market price of its component parts, such as wood, glass, concrete, furnaces, elevators, etc., each priced separately as an item of property, without regard to its being integrated into the total unit. (c) In utilizing the sales comparison approach, only actual market transactions of property comparable to the subject, or adjusted to be comparable, may be used. All transactions utilized in the sales comparison approach must be verified to ensure they reflect arms-length market transactions. When non-typical market conditions of sale are involved in a transaction (duress, death, foreclosures, interrelated corporations or persons, etc.), the transaction may not be used in the sales comparison approach unless market-based adjustments can be made for the non-typical market condition. (d) If there are no market transactions of property comparable to the subject, then it is still appropriate to use market value indications derived by the cost and income approaches. (e) Sales on the basis of disposal at salvage or scrap levels are indicators of market value only when on the assessment date such disposal of the subject property is imminent, or has actually taken place. (f) The cost approach must use the reproduction, replacement or used equipment technique. However, original historical cost may be used when appraising property under ORS 308.505 to 308.730. The value estimate must include all costs required to assemble and construct the unit of property. (g) The income to be used in the income approach must be the economic rent that the property would most probably command in the open market as indicated by current rents being paid, and asked, for comparable space. Income from the operation of the property may be utilized for property types, such as industrial plants, that are not typically leased or rented. (h) The real market value for rural lands is based on an average price per acre for each size of parcel. Adjustments to the value must be made to those acres with more or less utility. For improved parcels, the value of the site developments as defined by OAR 150-307-0010 must be added. (i) Determining highest and best use for the unit of property is necessary for establishing real market value. This determination of highest and best use may include, among others, all possible uses that might result from retaining, altering, or ceasing the integrated nature of the unit of property. (3) Valuation of Special Purpose Property: (a) Special purpose property is property specially designed, equipped, and used for a specific operation or use. This may occur because the special purpose property is part of a larger total operation or because of the specific nature of the operation or use. (b) Some, but not all, special purpose property may be designed without concern for marketability. (c) Market sales data for the property at its highest and best use may not exist for a special purpose property, which is what is meant by the phrase “no immediate market value” in ORS 308.205(2)(c). Where there is no immediate market value, real market value is determined by estimating just compensation for loss to the owner of the unit of property through either the cost or income approaches, whichever is applicable, or a combination of both. (4) Real market value for all personal property must be determined as of the date of assessment and must take into account the location and place in the level of trade of items of property in the hands of manufacturers, producers, wholesalers, distributors, retailers, users, and others.