North Clackamas sues school contractors over new Oregon tax
As big businesses cough up bucks for Oregon's 700-day-old Corporate Activity Tax, the bill is also coming due for school districts statewide — and spurring lawsuits.
The CAT was touted as a billion-dollar-a-year moneymaker for the state's schools when signed into law as part of the Student Success Act by Gov. Kate Brown in May 2019. But now the CAT is biting back, as the North Clackamas School District discovered when two construction contractors allegedly invoiced their tax liabilities back to the district.
General contractor Lease Crutcher Lewis tacked on $483,000 in CAT costs for the work of converting an existing middle school into the Adrienne C. Nelson High School, per court filings. P&C Construction sought $70,000 for the renovation of Milwaukie's El Puente Elementary School and $150,000 for improvements made to the Sabin-Schellenberg Professional Technical Center.
North Clackamas says covering their contractors' CAT tab was never part of the deal — and filed suit against both companies in Multnomah County Circuit Court on April 9.
"According to the Oregon Department of Revenue, the CAT 'is imposed on taxpayers for the privilege of doing business in this state,' and 'is not a transactional tax, such as a retail sales tax, nor is it an income tax,'" according to the 13-page lawsuit. "The District takes very seriously its responsibilities as a steward of Bond funds."
North Clackamas wrote it engaged in nonbinding negotiations with both firms before heading to court, but neither side were able to hash out an agreement. The suit seeks an injunction from a judge ordering the two companies to swallow the CAT costs as well as to recoup the district's expenses for the litigation.
North Clackamas — the state's seventh largest public school district, with 31 schools spread across Milwaukie, Happy Valley and the northwest stretch of the county — passed their $433 million school bond in November 2016.
Of that, roughly $53.8 million was set aside to construct new science classrooms, a gym and a black box theater at Nelson High School, as well as upgrade the parking lot, softball and baseball fields, health office and clinic, kitchen, cafeteria and make other improvements to the classrooms and the heating, ventilation, electrical, and technology infrastructure.
The budget for improvements at El Puente was $8 million, while the Sabin-Schellenberg price tag came in at $22.4 million.
The CAT operates as a 0.57% tax on any commercial activity in Oregon above the first million, minus certain deductions. Brown issued an executive order last year delaying collection of smaller amounts owed to the Department of Revenue, but went no farther even as some business sought to delay collecting the CAT during the pandemic.
The construction firms involved in the litigation did not respond to requests for comment, while the district declined to comment.
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