Clarifying Rational-Basis Review in Oregon Tax Classifications:
Delta Air Lines, Inc. v. Department of Revenue (374 Or 58 - 2025)

1. Introduction

Case Background. For decades, Oregon has taxed the intangible property (brand value, goodwill, patents, etc.) of businesses that the Department of Revenue centrally assesses—railroads, airlines, utilities, pipelines, telecoms, and similar multi-jurisdictional enterprises (see ORS 308.515(1)). Intangible property of locally assessed businesses is exempt.

Delta Air Lines and PacifiCorp each challenged their assessments for the 2019-20 and 2020-21 tax years. They argued that singling out centrally assessed businesses for intangible-property taxation violates:

• Oregon Constitution Art I §32 & Art IX §1 (uniformity of taxation);
• Art I §20 (Equal Privileges & Immunities); and
• U.S. Const. Amend. XIV (Equal Protection).

The Oregon Tax Court agreed in part: it struck down the tax as applied to airlines, but upheld it for regulated utilities. Competing appeals reached the Supreme Court, which issued the present decision.

Parties on Appeal.

• Appellant 1: Department of Revenue (challenging the Tax Court’s Delta holding).
• Appellant 2: PacifiCorp (challenging the Tax Court’s PacifiCorp holding).

2. Summary of the Judgment

The Supreme Court (Garrett, J.) reversed the Tax Court’s ruling for Delta and upheld the tax for PacifiCorp (a separate, shorter opinion follows for the utility case). Holding that:

1. The intangible-property tax on centrally assessed businesses is constitutionally valid.
2. Under both Oregon’s Equal Privileges & Immunities Clause and the federal Equal Protection Clause, the classification easily survives rational-basis review.
3. Oregon’s “uniformity” clauses add no substantive limit beyond ensuring statewide territorial uniformity.
4. The Tax Court misread Mathias v. Dept. of Rev. (312 Or 50 (1991))—“genuine differences” is not a preliminary hurdle that overrides rational-basis analysis, and property-tax classifications may rest on owner- or use-based distinctions.

The case is remanded to the Tax Court to finish valuation issues consistent with the high court’s constitutional holding.

3. Analysis

3.1 Precedents Cited & Their Influence

• Mathias v. Dept. of Rev., 312 Or 50 (1991)
  Previously read as demanding proof of “genuine differences” in the property itself before applying rational-basis review. The Court clarifies Mathias was confined to its facts and does not impose a two-step test.
• Jarvill v. City of Eugene, 289 Or 157 (1980)
  Source of “territorial uniformity” doctrine; used here to show Art I §32 & Art IX §1 principally forbid geographic discrimination.
• Huckaba v. Johnson, 281 Or 23 (1978) and Carmichael v. Southern Coal Co., 301 US 495 (1937)
  Illustrate wide legislative leeway in tax classification and acceptance of administrative convenience as a legitimate aim.
• Adams Express Co. cases, 165 US 194 & 166 US 185 (1897)
  19th-century precedents upholding unit-valuation taxes on intangible value of express companies, countering Delta’s uniformity/EP arguments.
• Alabama Dep’t of Revenue v. CSX Transportation, 575 US 21 (2015) and BNSF Ry. v. ODR, 965 F3d 681 (9th Cir 2020)
  Cited to distinguish federal statutory railroad protections from constitutional equal-protection standards.

3.2 Legal Reasoning

1. Step 1 – Identify the Classification. Two groups: (a) centrally assessed companies (taxed on intangibles); (b) locally assessed firms (not taxed).
2. Step 2 – Determine Applicable Scrutiny. No suspect class or fundamental right implicated → rational-basis review under both constitutions.
3. Step 3 – Articulate Conceivable Legitimate Purposes.
   • Raising revenue;
   • Administrative efficiency—centralised expertise in valuing complex, multi-state enterprises;
   • Fair apportionment among similar centrally assessed taxpayers;
   • Balancing compliance costs and departmental resources;
   • Harmonising with other industry-specific tax schemes (e.g., fuel & weight-mile taxes for motor carriers).
4. Step 4 – Show Rational Relationship.
   The Court provides multiple rational linkages: taxing intangibles of those businesses yields significant revenue; the listed industries are by nature multi-jurisdictional and rich in intangible value; focusing limited agency expertise on high-yield sectors is rational; maintaining existing local-assessment machinery for other sectors avoids undue complexity.
5. Uniformity Clauses. After 1917 amendments, Art I §32 and Art IX §1 primarily enforce territorial uniformity. They do not demand symmetry across every subclass of property.
6. Clarification of Mathias. “Genuine differences” language was never meant to precede or displace rational-basis review. Mathias merely found no rational tie between lot-owner headcount and valuation method in that particular statute.
7. True-Class Issue Reserved. Justice James’s concurrence notes the Court did not decide whether centrally assessed firms constitute a “true class” under Art I §20—inviting fuller future briefing on that threshold.

3.3 Impact of the Decision

• Immediate Effect. Delta’s refund hopes evaporate; other centrally assessed taxpayers’ pending refund cases based on the same theory will fail.
• Tax Administration. Confirms Oregon may continue to value intangibles via unit-valuation without re-designing its statutes. County assessors remain shielded from needing to learn intangible-valuation techniques.
• Court Doctrine.
  • Sets a definitive construction of Mathias, preventing lower courts from imposing a preliminary “genuine-difference” filter.
  • Re-affirms that Oregon’s uniformity clauses do little beyond policing geographic uniformity.
  • Signals that classes defined by industry/business type ordinarily survive Art I §20 rational-basis review.
• Legislative Guidance. Lawmakers gain clarity that they may distinguish between industries for tax purposes so long as any conceivable rational justification exists.
• Inter-State Influence. Other states wrestling with similar challenges (particularly post-BNSF) may cite Delta as persuasive authority for sustaining intangible-value taxes.

4. Complex Concepts Simplified

Intangible Property

Non-physical assets whose value lies in legal rights or reputation—e.g., trademarks, software, customer lists, goodwill.

Centrally vs. Locally Assessed

Centrally assessed businesses file valuation data with the state Department of Revenue, which allocates value to all counties.
Locally assessed businesses are appraised individually by county assessors.

Unit Valuation

A method that values the enterprise as an integrated, going-concern—tangible and intangible—then apportions the total to Oregon based on mileage, revenue, etc.

Rational-Basis Review

The most deferential constitutional test: a law is upheld if any plausible reason could have led the legislature to enact it.

Uniformity Clauses (Art I §32 & Art IX §1)

Require statewide geographic uniformity of a tax within the class the legislature selects; they do not forbid class-based distinctions.

True Class (Art I §20)

A group defined by inherent personal attributes (e.g., race, gender). Laws discriminating among “true classes” trigger heightened scrutiny; the Court reserved this issue here.

5. Conclusion

The Supreme Court’s decision in Delta Air Lines v. Department of Revenue secures Oregon’s longstanding practice of taxing the intangible value of centrally assessed businesses. By harmonising state and federal rational-basis doctrine, re-interpreting Mathias, and narrowing the reach of the uniformity clauses, the Court supplies a robust doctrinal roadmap for future tax classification disputes. Unless the legislature chooses to overhaul the system, centrally assessed entities—including airlines, utilities, telecoms, and railroads (subject to federal carve-outs)—will continue to shoulder an intangible-property tax burden that locally assessed businesses lawfully avoid.

Prepared by: [Your Name], Legal Commentator – August 2025