Kusuma v. Dept. of Rev.

25 OTR 426Ortc

Full text

426 	November 6, 2023 	No. 27
IN THE OREGON TAX COURT
REGULAR DIVISION
Hendra KUSUMA and
Megawati Hasan,
Plaintiffs,
v.
DEPARTMENT OF REVENUE,
State of Oregon,
Defendant,
and
WASHINGTON COUNTY ASSESSOR
Defendant-Intervenor.
(TC 5439)
In this residential property tax case, Plaintiffs appealed from a Magistrate
Division decision denying the three-percent discount under ORS 311.505(3) for
tax year 2020-21. Plaintiffs argued that they had paid timely using the coun-
ty’s online payment portal. The court looked to general law governing financial
transactions to conclude that “payment” of an order requires the intended pay-
ee’s bank to accept the payment order, meaning that payee’s bank must have
obtained control of the funds. Because it was undisputed that the facilitator of
the online payment portal did not receive Plaintiffs’ money, the court proceeded
to consider whether Plaintiffs had completed all the required steps to make a
payment online. The court concluded that Plaintiffs did not satisfy their burden
of proof that they made no error when entering their bank account information.
Therefore, Plaintiffs’ attempt to pay before the discount deadline failed and the
discount does not apply.
Trial was held remotely on November 29, 2022.
Hendra Kusuma, Plaintiff, argued the cause pro se.
Jason Bush, Washington County Counsel, Hillsboro,
argued the cause for Defendant-Intervenor.
Decision rendered November 6, 2023.
ROBERT T. MANICKE, Judge.
I. 	INTRODUCTION
Plaintiffs (taxpayer) appeals from a Magistrate
Division 	decision 	denying 	the 	three-percent 	discount
under 	ORS 	311.505(3) 	for 	timely 	payment 	of 	property
tax for tax year 2020-21 with respect to his personal
Cite as 25 OTR 426 (2023) 	427
residence. 1, 2 The court held a trial at which Defendant-
Intervenor 	Washington 	County 	Assessor 	(the 	assessor)
defended denial of the discount. 3
II. 	FACTS
In accordance with Tax Court Rule (TCR) 56 B, sev-
eral days before trial the parties exchanged documents to be
proffered as exhibits in their respective cases in chief. At the
start of trial, the parties agreed to waive objections to the
admission of all exchanged documents. taxpayer’s exhibits
are numbered 1 through 7 and the assessor’s exhibits are
numbered I-1 through I-9. Based on the exhibits and on tes-
timony at trial, the court finds that the facts recited in this
section are not in dispute.
For tax year 2020-21 and for all relevant prior tax
years, the assessor offered an online option to pay property
tax bills, using “e-checks, also known as ACH or * * * the
automated clearinghouse system.” The assessor used a ven-
dor known as FIS as part of the online payment process.4
One role FIS played was to “front the money” to the asses-
sor during the period of up to seven to ten days needed for
an e-check to clear the ACH process. FIS’s practice was to
provide payment to the assessor on the next business day
after the taxpayer completed the taxpayer’s portion of the
online process. If the taxpayer’s e-check eventually cleared,
FIS would retain that amount for its own account; if not,
FIS would notify the assessor and recover the amount of the
payment from the assessor. The assessor then would reverse
the record of having been paid and notify the taxpayer that
payment remained due and owing.
1 The court’s references to the Oregon Revised Statutes (ORS) are to the 2019
edition.
2 Plaintiff Kusuma appeared alone at all hearings and was Plaintiffs’ sole
witness at trial. For convenience, the court refers to him, and to Plaintiffs collec-
tively, as “taxpayer.”
3 Defendant Department of Revenue “tender[ed] the defense of the assess-
ment” to the assessor and did not appear at trial.
4 As will be discussed, taxpayer disputed substantial portions of testimony
and documents the assessor proffered relating to FIS. However, the court does
not understand taxpayer to dispute the overall function of FIS as described in
this paragraph.
428 	Kusuma v. Dept. of Rev.
For tax years before 2020-21, taxpayer paid the bill
for the subject property online and timely. The property tax
account number for the subject property is R2006907.
On November 11 or 12, 2020, approximately five
days before the November 16 due date, taxpayer sought to
pay online the discounted amount due for his property for
tax year 2020-21. 5, 6 Taxpayer obtained a document entitled
“Tax Receipt,” bearing a “Payment Date” of “11/12/2020” and
an “Effective Date” of “11/11/2020,” and showing a “Levied
Tax” of $13,257.07, a “Discount” of $397.71, an “Amount Paid”
of $12,859.36, and a “Balance” of $0.00.7 On November 12,
2020, taxpayer transferred $13,501.32 to a bank account for
the purpose of paying the tax, and an amount in excess of
$12,859.36 remained in that account through the November
30, 2020, bank statement closing date; however, the bank
account statement shows no withdrawal or subtraction, or
combination of withdrawals or subtractions, that match, or
even roughly approximate, the amount of the levied or dis-
counted tax.
On or about November 19, 2020, taxpayer received
an email from the assessor notifying him that his bank
had rejected the payment. Taxpayer called the assessor’s
office that day, and an employee offered to try to find out
what had happened. On November 20, the employee called
back and informed taxpayer that the assessor’s payment
5 The time of taxpayer’s online session is not clear from the evidence.
Taxpayer testified that he started the session on the morning of November 11,
2020, did not attempt to make a payment at that time, and returned to the ses-
sion and completed the steps to make a payment shortly before midnight on
November 11 or shortly after midnight on November 12. The assessor presented
evidence that taxpayer started his online session at 11:45 a.m. on November 11.
The court does not find it necessary to resolve whether taxpayer attempted to pay
on November 11 or November 12.
6 The statutory due date to receive the maximum discount for full payment
is November 15, but in 2020 that date fell on a Sunday, causing the due date to be
November 16, 2020. See ORS 311.505(3) (discount and deadline); ORS 305.820(2)
(“Whenever any * * * remittance is required by law to be * * * made on a day which
falls on a Saturday, or on a Sunday or any legal holiday, the time specified shall
be extended to include the next business day.”).
7 Taxpayer testified that the “Tax Receipt” in his Exhibit 3, page 1, is a
screen shot he captured on November 11 or 12. The assessor’s witness Hubbard
did not describe it as a screen shot or identify when or how the document was pro-
vided to taxpayer, but he acknowledged that the assessor generated the receipt
for taxpayer’s November 11 or November 12 transaction.
Cite as 25 OTR 426 (2023) 	429
processor had said that the rejection was due to an incor-
rect bank account number having been entered during the
online payment process; specifically, the employee opined
that taxpayer had entered the property tax account number
on the line provided for his bank account number. Taxpayer
expressed disbelief that he had made that error and asked
the employee to reinstate his discounted bill so that he could
pay it. The employee stated that she was unable to do so, but
she offered to have her manager discuss the matter with
taxpayer upon the manager’s return from vacation.
Sometime before November 30, 2020, the manager
called taxpayer and stated that she, too, would not be able
to reinstate the discounted bill. On November 30, 2020,
taxpayer went through a new online session to pay the
undiscounted amount of tax and all other amounts owing
for tax year 2020-21 in order to avoid further charges. The
November 30 attempt was successful.
III. 	ISSUE
Is taxpayer entitled to the three percent discount
under ORS 311.505(3) for payment of all property tax on the
subject property on or before November 16, 2020?
IV. 	BURDEN OF PROOF
In the Tax Court, the “party seeking affirmative
relief” bears the burden of proving its case by a “preponder-
ance of the evidence.” ORS 305.427; Baisch v. Dept. of Rev.,
316 Or 203, 211, 850 P2d 1109 (1993). In this case, the party
seeking affirmative relief is taxpayer, who seeks relief from
the assessor’s determination that taxpayer is ineligible for
the discount he claimed. A “preponderance” of the evidence
means “the greater weight of evidence, the more convincing
evidence.” Feves v. Dept. of Revenue, 4 OTR 302, 312 (1971).
The preponderance standard requires the party bearing the
burden of proof to provide the court with facts supporting
its position and these facts must outweigh the other party’s
evidence. See Dept. of Rev. v. Bahr I, 20 OTR 434, 448 (2012)
(stating that “the court must find against the party bearing
the burden of proof” when the evidence in the record favors
neither side); Dickey v. Dept. of Revenue, 4 OTR 595, 602
(1971) (finding that taxpayer failed to prove his case “by a
430 	Kusuma v. Dept. of Rev.
preponderance of the evidence” when the “evidence of either
side” was “not compelling”).
V. 	ANALYSIS
At trial, the parties framed the dispute as whether,
in an online session on November 11 or 12, 2020, taxpayer
succeeded in accurately completing all necessary steps in
the assessor’s online payment processes to receive the dis-
count with respect to the bill for the subject property for
tax year 2020-21. Before addressing that factual issue, the
court reviews the governing law.
A. 	Legal Background
1. 	Discount statute: ORS 311.505(3)
The right to a discount is found in ORS 311.505(3),
which provides:
“(3) 	Discounts shall be allowed on partial or full payments
of [all taxes on property], made on or before November 15
as follows:
“(a) 	Two percent on two-thirds of such taxes so paid.
“(b) 	Three percent where all of such taxes are so paid.”
The statute does not define “paid” or “payment,” nor does it
state at what point, in an online transaction, the tax is con-
sidered paid. Cf. ORS 314.397 (applicable to income taxes;
“if [an uncertified] check * * * is not paid by the financial
institution on which it is drawn, the taxpayer by whom the
check is tendered remains liable for the payment of the tax
and for all legal penalties the same as if the check had not
been tendered”). The court looks to the general law govern-
ing financial transactions for any applicable provisions.
2. Other relevant law governing “payment” of a debt:
ORS chapter 74A
The Uniform Commercial Code—Funds Transfers
(UCC-FT) in ORS chapter 74A applies to automated clear-
ing house transactions. See ORS 74A.1050(1)(e) (definition
of “funds-transfer system” includes an automated clearing
house). The court is not aware of an exception or other rea-
son why the UCC-FT would not apply to payments of tax
Cite as 25 OTR 426 (2023) 	431
under ORS 311.505(3). ORS 74A.4060 provides, in relevant
part:
“(1) 	[T]he originator of a funds transfer pays the benefi-
ciary of the originator’s payment order:
“(a) 	At the time a payment order for the benefit of the ben-
eficiary is accepted by the beneficiary’s bank in the funds
transfer; and
“(b) 	In an amount equal to the amount of the order
accepted by the beneficiary’s bank * * *.
“(2) 	If payment * * * is made to satisfy an obligation, the
obligation is discharged to the same extent discharge would
result from payment to the beneficiary of the same amount
in money [.]”
ORS 74A.4060(1)(a) (emphases added). Under that provision,
the bank of the intended payee must “accept[ ]” a payment order
before payment can occur. See also ORS 74A.4020(2) (“accep-
tance” by payee’s bank of a payment order “obliges the sender
to pay the bank the amount of the order”). This requirement
that the payee’s bank actually obtain control of the funds is
consistent with the meaning of “pay” and “payment” at the
time the legislature enacted the discount law now codified as
ORS 311.505(3). 8
3. Initial conclusions based on governing law and undis-
puted facts
Under the assessor’s practice involving FIS, a tax-
payer or other person using the online payment process never
“pays” the assessor, within the meaning of the UCC-FT.
8 The UCC-FT did not exist in 1935, when the legislature enacted the pre-
decessor to ORS 311.505(3). See Or Laws 1991, ch 442; Or Laws 1935, ch 336,
§ 1. However, an analysis of the meaning of “pay” and “payment” under State
v. Gaines reveals a similar legislative intent that payment by means of a finan-
cial instrument not occur until the funds are delivered to the assessor. 346 Or
160, 171-72, 206 P3d 1042 (2009). General and legal dictionaries defined “pay” as
“to discharge” a debt. Webster’s Second New Int’l Dictionary 1796 (unabridged ed
1935). Black’s added: “to deliver to a creditor the value of a debt, either in money or
in goods, for his acceptance.” Black’s Law Dictionary 1339 (3rd ed 1933) (emphasis
added). Contemporaneous case law clearly established that the giving of a prom-
issory note or a check was presumed to be a “conditional, not absolute, payment”;
thus, a debtor’s liability to the creditor generally was restored if the debtor’s bank
did not actually release the funds. See Joppa v. Clark Com. Co., 132 Or 21, 28, 281
P 834 (1929); see Oregon Code, title LVII, ch 6, § 57-619 (1930) (defining “payment
in due course” of negotiable instrument); see also Oregon code, title LVII, ch 8,
§ 57-801 (1930) (listing methods of discharging negotiable instrument).
432 	Kusuma v. Dept. of Rev.
Rather, FIS pays the assessor, and the taxpayer pays FIS,
as a reimbursement, when the taxpayer’s e-check clears. The
assessor’s practice appears to be to treat the taxpayer’s suc-
cessful completion of all steps required of the taxpayer in
the online payment process as a prerequisite to payment of
the assessor under ORS 311.505(3), and to treat the date the
taxpayer completes those steps as the date the tax is paid for
purposes of the discount. The parties have not identified a
specific legal basis for this practice, but the court concludes
that it need not further examine, or express any view about,
the practice if the court determines that taxpayer failed to
complete the necessary steps in the online payment process.
That is because a taxpayer’s correct and timely data entry
would be required even if the assessor’s online payment pro-
cess caused payments to flow directly and immediately from
the taxpayer to the assessor, without the use of FIS or any
other processor. It is undisputed here that taxpayer’s online
session of November 11 or 12 failed to result in FIS being
paid, as taxpayer’s bank statement for November 2020 shows
no debit entry or combination of entries corresponding to the
taxes due. The issue, then, is whether taxpayer completed all
required steps during his November 11 or 12 online session.
The court thus proceeds to the case as presented by
the parties.
B. 	Factual Analysis
The assessor presented two witnesses who testified
about the online payment process by reference to exhibits
that included screen shots showing the information and
instructions presented to taxpayers using the assessor’s
portal. Taxpayer testified that the assessor’s evidence is
inaccurate; therefore, the court reviews the testimony and
makes factual findings.
1. 	Was the six-step process in Intervenor’s Exhibit I-3
in place during taxpayer’s online session November
11-12?
a. 	Assessor’s evidence
The Washington County Tax Division Manager,
Gary Hubbard, testified that the online process in place on
Cite as 25 OTR 426 (2023) 	433
November 11 and 12, 2020, for payment by means of a per-
sonal “E-Check” required a user to proceed through a series
of six screens, labeled as Steps 1 through 6.
The first screen (Step 1) described the options of
payment by credit card (subject to a 2.45% surcharge) or by
“E-check ACH Transactions” (subject to a $.95 surcharge).
Included on this screen was a notification stating: “Please
ensure your bank routing & account number are
entered correctly. If an entry error occurs, loss of discount
and interest may apply.”
The second screen (Step 2) required the user to enter
the applicable property tax account number. Taxpayer’s
property tax account number starts with the letter “R.”
The third screen (Step 3) required the user to ver-
ify the property tax account number, enter the amount to
be paid, and select whether to pay by “Visa/MC/Discover/
American Express” or by “e-Check (ACH).” Immediately
beneath the selection box appeared the following notice, pre-
ceded by the word “IMPORTANT,” in red capital letters: “If
paying by E-Check/ACH, please allow 7-10 business days to
process. Please ensure your bank routing and account
number 	are 	entered 	correctly. 	If 	an 	entry 	error
occurs, loss of discount and interest may apply.”
The fourth screen (Step 4) required the user to:
(1) 	Enter the user’s bank routing number;
(2) 	Re-enter the user’s bank routing number;
(3) 	Enter the user’s bank account number;
(4) 	Re-enter the user’s bank account number;
(5) 	Enter the user’s billing information (name, address,
phone, email address); and
(6) 	Click “Continue” to advance to the next screen.
The routing and account numbers were required to be
entered manually; the portal did not allow them to be cut
and pasted.
The fifth screen (Step 5) asked the user to review
the information just entered on lines 1 through 5 in the
434 	Kusuma v. Dept. of Rev.
prior screen, with all but the last four digits of the rout-
ing and account numbers obscured, before clicking “Process
Payment.”
Finally, after the user clicked “Process Payment,”
a sixth screen appeared, bearing the label: “(Step 6 of 6)
Thank you for your payment. Please print this receipt and
keep it for your records.” The screen displayed the property
account number, the amount paid, the date and time, the
payment type (such as “eCheck”), and the bank account
number (or a portion thereof) entered earlier. A paragraph
in the middle of the screen stated:
“By consenting with the processing of this transaction, you
are authorizing to debit your account for a one-time pay-
ment that may be processed as early as today. If you need
to stop payment on this transaction you may contact your
financial institution. If stop payment is not received in a
timely manner, it may not be stopped. If you have any ques-
tions, you may contact our Customer Support.”
b. 	Taxpayer’s evidence
Taxpayer testified that the process he went through
on November 11 or 12, 2020, was “quite different” from the
process that Hubbard described. Taxpayer’s evidence for this
assertion consists of one document; otherwise, he bases his
position on logic. The document on which taxpayer relies is
the “Tax Receipt” showing a “Payment Date” of 11/12/2020
and an “Effective Date” of 11/11/2020. Taxpayer testified
that he captured an image of this document as a screen
shot during his online session on November 11 or 12, 2020,
implying that the six-step process could not have been in
place because the Tax Receipt he received is not part of that
process pursuant to the assessor’s testimony. As a matter
of logic, taxpayer argues that it is highly unlikely that he
could have entered the wrong account number in Step 4 of
the six-step process shown on Intervenor’s Exhibit I-3, pages
5 and 6. The screen at Step 4 has a heading “Bank Account
Information,” followed by four fields that require the user to
enter numbers. The first field is labeled “Routing Number.”
The second field is labeled “Re-enter Routing Number.” The
third field is labeled “Account Number.” The fourth field
is labeled “Re-enter Account Number.” Taxpayer did not
Cite as 25 OTR 426 (2023) 	435
dispute that the screen does not permit a user to copy a
number from elsewhere and paste it into the field. Taxpayer
argues that it is logically implausible that he made the same
mistake twice, namely, by entering his property account
number in the field for his bank account number, each time
without copying and pasting. He argues that such a dou-
ble mistake is even more unlikely because, as he testified,
he has long since memorized his bank account number, but
he has never memorized his property tax account number;
therefore, he would have had to be looking at his property
tax bill while entering that number on a screen that called
for him to enter “Bank Account Information.”
c. 	Assessor’s rebuttal evidence
The assessor’s witness Hubbard testified that the
same six-step process was in place on both November 30,
2020, when taxpayer made his successful payment and on
November 11 and 12, stating, “Did we have two systems in
place at that time? No, we didn’t. We had one payment sys-
tem in place.” He based his testimony on his 20-year ten-
ure as the assessor’s Tax Division Manager, and on his par-
ticipation in preparing the screen shot exhibits. Hubbard
did not directly address taxpayer’s assertion that the “Tax
Receipt” in Plaintiffs’ Exhibit 3 at 1 and Intervenor’s Exhibit
I-4 proves that a different process was in place. However,
Hubbard testified that the assessor’s practice was to pro-
vide such a receipt “if requested,” which allows for a fact
scenario consistent with both parties’ positions: Taxpayer
could have both gone through the six-step process and also
obtained the Tax Receipt through a separate process at or
around the same time. Most importantly, the assessor also
presented direct evidence that taxpayer entered his prop-
erty tax account number in the space provided for his bank
account number. Nathan Friedman, Director of Operations
at the assessor’s payment processing company FIS, testified
that he researched whether taxpayer had correctly entered
his account data on November 11 or 12, 2020. According to
Friedman, FIS maintains “Transaction Details” reports that
reflect a user’s entries in Steps 4 through 6 above. Friedman
presented screenshots of those reports for November 11,
2020, and November 30, 2020, as well as November 14, 2017,
436 	Kusuma v. Dept. of Rev.
November 9, 2018, and November 12, 2019. On every such
Transaction Details report, the entry for “Account Last 4”
shows numbers corresponding to the last four digits of the
bank account into which taxpayer deposited $13,503.32 on
November 12, 2020, except that on the Transaction Details
report for November 11, 2020, the entry for “Account Last 4”
is 6907, a different set of numbers that corresponds to the
last four digits of taxpayer’s property tax account.
d. 	Court’s findings as to six-step process
Weighing the evidence discussed above, the court
finds that taxpayer has failed to carry his burden of proof
that he completed all necessary steps as instructed in his
online session on November 11 or 12, 2020. First, the court
finds persuasive the assessor’s documentary evidence and
the testimony of Hubbard and Friedman that the six-step
process was in place on November 11 and 12, 2020 and
that it functioned as those witnesses described. Taxpayer’s
direct evidence that a different process was in place consists
only of his own testimony of his personal recollection and
one document: the Tax Receipt in Plaintiffs’ Exhibit 3 and
Intervenor’s Exhibit I-4. However, the issuance of the Tax
Receipt, which the assessor does not dispute, does not prove
that the six-step process was not in place. The assessor’s
witness Hubbard testified that the assessor’s practice was to
issue a receipt in the form of the Tax Receipt “if requested.”
The court finds that this testimony implies that the asses-
sor could have issued the Tax Receipt to taxpayer after tax-
payer went through the six-step process. 9 Taxpayer did not
prove otherwise.
2. 	Did 	taxpayer 	successfully 	complete 	the 	six-step
process?
Having found that the six-step process was in place,
the court turns to whether taxpayer successfully completed
9 The court notes that, standing alone, the Tax Receipt could be interpreted
as a statement that taxpayer had delivered payment and discharged his tax debt.
In contrast to the boldface disclamatory reference to the “7-10 day” waiting period
in the third of six online screens, nothing in the Tax Receipt refers to a waiting
period for the taxpayer’s e-check to clear. However, because the court finds that
the six-step process was in place, the court concludes that taxpayer was required
to read the Tax Receipt together with that disclaimer; he thus had notice that the
Tax Receipt was subject to the ACH clearing period.
Cite as 25 OTR 426 (2023) 	437
the steps. The “Transaction Details” reports and Friedman’s
testimony are consistent with taxpayer’s memory that he
successfully provided his bank account information in prior
years. Each Transaction Details report for a prior year
shows the last four digits of taxpayer’s bank account in the
field for “Account Last 4.” However, the Transaction Details
report for tax year 2020-21 shows the last four digits of tax-
payer’s property tax account number in the field intended
for his bank account. While the court agrees with taxpayer
that the safeguards in the input process for Step 4 logically
raise questions about whether taxpayer could have made a
data entry error with those safeguards in place, those ques-
tions do not rise to the level of evidence sufficient to carry
taxpayer’s burden of proof that he made no error.
3. 	Taxpayer’s statistical arguments
Finally, taxpayer also alleged that statistical data
he obtained from the assessor indicate that a system failure
occurred, during or after his November 11 or 12 online ses-
sion, that caused his payment to be rejected. Much of tax-
payer’s argument is based on his view that an anomalous
number of payment failures occurred at or near taxpayer’s
November 11 or 12 online session. The assessor presented
testimony and documentary evidence that rebuts that view,
including evidence that apparent clusters of transaction fail-
ures may be attributed to lags in reporting due to the occur-
rence of weekends, the Veterans’ Day holiday (November 11,
2020), and the possible absence of input staff on November
12, 2020. The court finds that the weight of the evidence
supports the assessor’s position that no systemic failure
affected taxpayer’s attempt to pay his bill on November 11
or 12, 2020.
VI. 	CONCLUSION
Now, therefore,
IT 	IS 	THE 	OPINION 	OF 	THIS 	COURT 	that
Plaintiffs’ appeal must be denied, and the three percent
discount described in ORS 311.505(3) does not apply to
Plaintiffs’ tax year 2020-21 property tax payment.

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