300	                           March 7, 2013	                             No. 10
                                                                                                               March 353 Or 10
                                                                                   Crystal Comunications, Inc. v. Dept.7, 2013
                                                                                                                        of Rev.




               IN THE SUPREME COURT OF THE
                     STATE OF OREGON

              CRYSTAL COMMUNICATIONS, INC.,
                    an Oregon corporation;
                       C. G. McKeever;
                       Myra McKeever;
                      James E. Bryant;
                      Camella L. Ryan;
                         Terry Pinna;
                       and Erica Pinna,
                          Appellants,
                              v.
                DEPARTMENT OF REVENUE,
                       State of Oregon,
                         Respondent.
                    (TC 4769; SC S059271)

    En Banc
    On appeal from the Oregon Tax Court.
    Henry C. Breithaupt, Judge.
  Argued and submitted September 18, 2012; resubmitted
January 7, 2013.
   Scott G. Seidman, Tonkon Torp LLP, Portland, argued
the cause and filed the briefs for appellants. With him on
the brief were Mark F. LeRoux and Michael J. Millender.
   Darren Weirnick, Assistant Attorney General, Salem,
argued the cause and filed the brief for respondent. With
him on the brief was John R. Kroger, Attorney General.
    KISTLER, J.
    The judgment of the Tax Court is affirmed.
    Taxpayers reported the gain from the sale of its FCC license as “nonbusiness”
income allocable to Florida, its state of commercial domicile. The department, on
audit, reclassified the gain as apportionable “business income” under OAR 150-
314.280-(B), which incorporates by reference two potentially conflicting definitions
of “business income” from the Uniform Division of Income for Tax Purposes Act
(UDITPA) and the rules promulgated to implement UDITPA. The Tax Court agreed
with the department’s construction of those definitions of “business income” and
Cite as 353 Or 300 (2013)	301

granted summary judgment in its favor. Held: The department’s resolution of the
two potentially conflicting definitions of business income in OAR 150-314.280-(B)
is a reasonable one that is consistent with the text of ORS 314.280. So construed,
OAR 150-314.280-(B) is broad enough to reach the gain from the sale of taxpayer’s
FCC license.
    The judgment of the Tax Court is affirmed.
302	                  Crystal Comunications, Inc. v. Dept. of Rev.

	          KISTLER, J.
	         The primary question in this case is whether
the Oregon Department of Revenue (the department)
properly classified income resulting from the sale of Crystal
Communication’s assets as “business income.” Crystal
operated as a multistate business providing wireless cellular
telecommunications services and, in the relevant tax years,
sold its assets related to those services.1 It reported the gain
from the asset sale as “nonbusiness income” and allocated
that gain to Florida, its state of commercial domicile. See
OAR 150-314.280-(D). On audit, the department reclassified
the gain as apportionable “business income.” See OAR 150-
314.280-(B); OAR 150-314.610(1)-(B)(2). Crystal challenged
the reclassification, and the Tax Court granted summary
judgment in favor of the department and entered judgment
accordingly. Crystal has appealed to this court. We now
affirm the Tax Court’s judgment.
	         Before turning to the relevant facts, we discuss
briefly the statutory and regulatory context in which this
case arises. Under Oregon tax law, two separate statutory
mechanisms exist for the purpose of allocating income
earned by multistate businesses. The first is codified at
ORS 314.280 and applies only to financial organizations
and public utilities. See ORS 314.280(1). The second, the
Uniform Division of Income for Tax Purposes Act (UDITPA),
is codified at ORS 314.605 to 314.675 and applies generally
to all other businesses, subject to a third exclusion not
relevant here. Crystal is a public utility and is therefore
governed by ORS 314.280.2 That statute provides,

	    1
         The tax years at issue are 1999 and 2000. Thus, the statutes and regulations
referred to in this opinion are the 1999 Oregon Revised Statutes and the 1999
Oregon Administrative Rules, unless otherwise noted.
	    2
         The terms “financial organization” and “public utility” are defined by ORS
314.610. That statute defines “public utility” as
     “any business entity whose principal business is ownership and operation
     for public use of any plant, equipment, property, franchise, or license for the
     transmission of communications, transportation of goods or persons, or the
     production, storage, transmission, sale, delivery, or furnishing of electricity,
     water, steam, oil, oil products or gas.”
ORS 314.610(6). Crystal does not dispute that it is a “public utility” under state
law.
Cite as 353 Or 300 (2013)	303

   	 “If a taxpayer has income from business activity as a
   financial organization or as a public utility (as defined
   respectively [under UDITPA]) which is taxable both within
   and without this state (as defined in ORS 314.610(8)
   and 314.615), the determination of net income shall be
   based upon the business activity within the state, and
   the Department of Revenue shall have power to permit
   or require either the segregated method of reporting or
   the apportionment method of reporting, under rules and
   regulations adopted by the department, so as fairly and
   accurately to reflect the net income of the business done
   within the state.”
ORS 314.280(1).
	        ORS 314.280 governs the allocation of income
earned by financial organizations and public utilities
engaged in business activities “both within and without this
state.” It gives the department discretion to apply either of
two methods of allocation—segregation or apportionment—
to “income from business activity” earned by those entities,
as long as the method it chooses “fairly and accurately
[reflects] the net income of the business done within the
state.” ORS 314.280(1). Under the segregated method of
allocation, business entities that are connected by common
ownership but that exist independently and in different
states—i.e., nonunitary businesses—may report and pay
separate taxes on the individual incomes earned by each
entity. See Fisher Broadcasting, Inc. v. Dept. of Rev., 321 Or
341, 348, 354, 898 P2d 1333 (1995). That method treats the
business entity or entities within the state as separate and
distinct from the business entities outside the state. Coca
Cola Co. v. Dept. of Rev., 271 Or 517, 521 n 1, 533 P2d 788
(1975).
	        The apportionment method of allocation, on the
other hand, generally has been understood to apply to
unitary businesses—that is, to businesses in which a
“portion of the business done within the state is dependent
upon or contributes to the operation of the business without
the state[.]” Id. at 524 (internal quotation marks omitted);
see also Allied-Signal, Inc. v. Div. of Taxation, 504 US 768,
778, 112 S Ct 2251, 119 L Ed 2d 533 (1992) (discussing
the unitary business principle and acknowledging that
304	             Crystal Comunications, Inc. v. Dept. of Rev.

the apportionment method derives from that principle).
Under that method, if an entity’s business conducted in a
particular state depends upon or contributes to its business
outside that state, the state may tax a portion of the entity’s
total net income. Generally, the state tax law mechanism
for apportioning income involves a three-factor formula
by which the state calculates the ratio of the taxpayer’s
property, payroll, and sales within that state to its total
property, payroll, and sales. See Jerome R. Hellerstein
& Walter Hellerstein, State Taxation ¶ 9.02, 9-16 (3d ed
2000 & Supp 2013). The income apportioned to the state is
calculated by multiplying that ratio by the taxpayer’s total
net income. Id. ¶ 9.02 at 9-17.
	        ORS 314.280 does not specify a formula for
apportionment, nor does it establish a method for allocating
“income from business activity” earned by the entities
that it governs. The department has promulgated rules to
provide further guidance. Those rules largely incorporate
by reference the methods of apportioning business income
established under UDITPA. Specifically, one of those rules
provides,
   	 “The provisions of ORS 314.650 [for apportioning
   business income] apply to all tax returns of financial
   organizations and public utilities for all tax years beginning
   on or after January 1, 1991.”
OAR 150-314.280-(A)(2). Another rule provides,
   	 “The definitions of ‘business income,’ ‘commercial domi-
   cile,’ ‘compensation,’ ‘financial organization,’ ‘nonbusiness
   income,’ ‘public utility,’ ‘sales,’ and ‘state’ contained [in
   UDITPA] and the related rules are by this reference incor-
   porated herein[.]”
OAR 150-314.280-(B) (emphasis added).
	        The issue in this case arises because OAR 150-
314.280-(B) incorporates by reference two potentially
conflicting definitions of business income from UDITPA and
makes those definitions applicable to utilities and financial
organizations, which are taxed under ORS 314.280. To put
the issue in context, we discuss UDITPA briefly. Under
UDITPA, whether income is allocated to a single state
Cite as 353 Or 300 (2013)	305

or apportioned among several depends on whether that
income is classified under the statute as “business income”
or “nonbusiness income.” See Hellerstein & Hellerstein,
State Taxation ¶ 9.05[1][a] at 9-36. When a multistate
business subject to UDITPA earns “business income,” that
income is apportioned among the several states in which the
taxpayer conducts business.3 “Nonbusiness income” earned
by a multistate business subject to UDITPA is allocated to
a designated state, generally the taxpayer’s commercial
domicile or, if the nonbusiness income derives from property,
the property’s situs. See ORS 314.625 - 314.645.
	       The terms “business income” and “nonbusiness
income” are defined terms under UDITPA:
    “ ‘Business income’ means income arising from transactions
    and activity in the regular course of the taxpayer’s trade or
    business and includes income from tangible and intangible
    property if the acquisition, the management, use or rental,
    and the disposition of the property constitute integral parts
    of the taxpayer’s regular trade or business operations.”
ORS 314.610(1). “Nonbusiness income” is “all income
other than business income.” ORS 314.610(5). This court
previously has explained that each of the two verb phrases
within the statutory definition of “business income” reflects
a separate test defining business income in terms of the
source from which the income derives. Willamette Industries,
Inc. v. Dept. of Rev., 331 Or 311, 316, 15 P3d 18 (2000). The
first verb phrase defines what has been referred to as the
“transactional test.” Under that test, business income
“means income arising from transactions and activity in the
regular course of the taxpayer’s trade or business[.]” ORS
314.610(1). The second verb phrase defines what has been
referred to as the “functional test.” Under that test, business
income “includes income from tangible and intangible
property if the acquisition, the management, use or rental,
and the disposition of the property constitute integral parts
of the taxpayer’s regular trade or business operations.” Id.
	        The department has promulgated a rule that
further defines what constitutes “business income” for the
	   3
        Consistently with the general practice, UDITPA provides a three-factor
formula for apportioning the entity’s net business income based on the business’s
payroll, property, and sales. See ORS 314.650.
306	            Crystal Comunications, Inc. v. Dept. of Rev.

purposes of UDITPA. See OAR 150-314.610(1)-(B). Under
that rule, “business income” includes “[g]ain or loss from
the sale, exchange or other disposition of real or tangible
or intangible personal property *  * if the property while
                                  * 
owned by the taxpayer was used in the taxpayer’s trade or
business.” OAR 150-314.610(1)-(B)(2). Crystal refers to this
rule as “the Business Income Rule,” and so do we.

	        As noted, the department has promulgated rules to
implement ORS 314.280 (the statute governing taxation of
utilities and financial institutions) that adopt, practically
wholesale, UDITPA’s statutory provisions and related rules.
As pertinent to this case, OAR 150-314.280-(B) provides that
two definitions of “business income” drawn from UDITPA
apply under ORS 314.280. One is the statutory definition
of business income found in ORS 314.610(1). The other is
the definition of business income found in the Business
Income Rule, OAR 150-314.610(1)-(B)(2). The issue in this
case arises because Crystal contends that the definition
of “business income” found in the Business Income Rule
reaches more broadly than the statutory definition of that
term. Specifically, Crystal does not dispute that the gain that
it realized from the sale of its assets is “business income”
subject to allocation under the Business Income Rule, but
it argues that the gain is not “business income” within the
meaning of the statutory definition of that term in UDITPA,
and thus is not subject to allocation under ORS 314.280.

	        With that statutory and regulatory background
in mind, we turn to the facts of this case, which we take
from the stipulated record. Crystal Communications is
an Oregon entity that was organized as an S corporation
under the Internal Revenue Code during the relevant tax
years. Taxpayers McKeever, Bryant, Ryan, and Pinna
(the individual taxpayers) are shareholders of Crystal and
nonresidents of Oregon. Until 1999, Crystal held a license
from the Federal Communications Commission (the FCC
license) to operate wireless telecommunications services in
a designated service area in Oregon. That area was known
as Oregon #1 Rural Service Area and included Columbia,
Clatsop, Tillamook, and Yamhill counties.
Cite as 353 Or 300 (2013)	307

	        Between 1990 and 1999, Crystal contracted with
McCaw Cellular Communications, Inc., and AT&T to
construct and operate cellular telecommunications sites
throughout Crystal’s four-county service area. Over that
time period, Crystal also contracted with AT&T to outfit
certain of the cellular sites with retail outlets and service
centers and entered into license agreements with Cellular
One to promote Crystal’s cellular telecommunications
services. The purpose of Crystal’s outfitting its system with
retail outlets and service centers was to enhance the value
of the system for ultimate sale.
	         In June 1999, with FCC approval, Crystal agreed
to sell its assets to AT&T for $51.5 million. Of that amount,
approximately $47.8 million was allocated to various
intangibles (including the FCC license), and the balance
was allocated to other assets (including cell towers and
equipment). The sale proceeds were distributed to Crystal’s
shareholders, and Crystal ceased operations. In 2000, the
corporation filed an Oregon excise tax return in which
it classified the gain on the sale of the FCC license as
“nonbusiness income” allocable to Florida. The individual
taxpayers also filed Oregon income tax returns for that year.
	        Crystal was later audited by the department. The
auditor issued a report that, among other adjustments,
reclassified the gain on the sale of the FCC license as
apportionable business income. Based on that report, the
department issued notices of deficiency to the individual
taxpayers. A conference officer subsequently upheld the
auditor’s adjustment, and in 2004, the individual taxpayers
and Crystal (collectively Crystal) appealed the department’s
conference decision to the Magistrate Division of the Tax
Court, which also upheld the treatment of the gain as
apportionable business income. In 2006, Crystal appealed
to the Regular Division of the Tax Court.
	       In the Tax Court, Crystal and the department filed
cross-motions for summary judgment. In the Tax Court and
this court, the parties’ primary arguments have proceeded
from two separate premises. Crystal has argued that the
gain from the sale of the FCC license is not “business
income” under ORS 314.610(1), which defines that term for
308	                 Crystal Comunications, Inc. v. Dept. of Rev.

the purposes of UDITPA. On that issue, Crystal has argued
(and the department has not disputed) that the gain does not
qualify as “business income” under the transactional test.
Crystal also has argued that the gain is not business income
under the functional test, as defined in ORS 314.610(1).4
Specifically, Crystal notes that income from tangible and
intangible property will qualify as business income under
the functional test only “if the acquisition, the management,
use or rental, and the disposition of the property constitute
integral parts of the taxpayer’s regular trade or business
operations.” See ORS 314.610(1) (stating that condition for
business income under the functional test).
	        On that point, Crystal reasons that the legislature’s
use of the word “and” in the functional test means that
(1) the acquisition; (2) the management, use, or rental;
and (3) the disposition of the property all must constitute
“integral parts of the taxpayer’s regular trade or business
operations.” Crystal further contends that, when the
disposition of property occurs as part of the liquidation
of a business, the disposition is not an “integral par[t]
of the taxpayer’s regular * * * business operations.” See
ORS 310.610(1) (emphasis added). Crystal thus reads a
“liquidation exception” into the functional test. Applied
to this case, Crystal’s interpretation of the functional test
means that, when Crystal sold its assets to AT&T and
liquidated its business, none of the gain realized from the
sale was “business income” within the meaning of UDITPA
and thus was not apportionable to Oregon.
	        Crystal does not dispute that the gain from the
sale of the FCC license qualifies as “business income” under
the Business Income Rule, the rule that the department
promulgated to implement UDITPA. See OAR 150-
314.610(1)-(B)(2). However, it argues that, to the extent
that the Business Income Rule reaches further than the
statutory definition of “business income” in UDITPA, the
	   4
       On appeal, Crystal recognizes that, even though some gains may qualify
as business income under both tests, the functional test captures gains that
the transactional test does not. See Willamette Industries, Inc., 331 Or at 316
(recognizing that the two tests do not always capture the same income). We note
that some courts and scholars have construed UDITPA’s text differently. See
Hellerstein & Hellerstein, State Taxation ¶ 9.05[2][e] at 9-72 - 9-74 (discussing
states’ differing resolution of that issue).
Cite as 353 Or 300 (2013)	309

rule is invalid under UDITPA. Crystal recognizes, as it
must, that the question in this case is not whether the gain
from the sale of its assets constitutes “business income”
under UDITPA. Rather, because Crystal is a public utility
subject to taxation under ORS 314.280, and not UDITPA, the
question under ORS 314.280 is whether the gain constitutes
“income from business activity,” which may be apportioned
among the various states in which the taxpayer engaged
in business. Crystal points out, however, that the depart-
ment has promulgated a rule—OAR 150-314.280-(B)—
that makes both the statutory definition of business income
found in UDITPA and the definition of business income
found in the Business Income Rule applicable under ORS
314.280. In Crystal’s view, the result of OAR 150-314.280-(B)
is that two conflicting definitions of “business income” apply
to public utilities under ORS 314.280.

	       Crystal resolves that conflict by interpreting
OAR 150-314.280-(B) to incorporate by reference only the
“UDITPA definitions and related rules validly enacted and
in force under UDITPA.” In Crystal’s view, because the
Business Income Rule was not validly enacted, the only
valid definition of business income that OAR 150-314.280-
(B) makes applicable to utilities is the statutory definition
from UDITPA. To interpret OAR 150-314.280-(B) differently,
Crystal argues, would be to give effect to the Business Income
Rule at the expense of UDITPA’s statutory definition of
business income. Moreover, Crystal contends, apportioning
income of businesses subject to UDITPA differently from
income of businesses subject to ORS 314.280 would violate
the Uniformity Clause of the Oregon Constitution. See Or
Const, Art I, § 32.

	        The department, for its part, primarily takes
issue with the premise of Crystal’s argument; that is, the
department argues that there is no “liquidation exception”
to the functional test for “business income,” as that phrase
is defined in UDITPA. In support of that argument, the
department urges us to interpret the functional test defined
in UDITPA the same way that the California Supreme
Court did in Hoechst Celanese Corp. v. Franchise Tax Board,
310	                 Crystal Comunications, Inc. v. Dept. of Rev.

25 Cal 4th 508, 22 P3d 324, cert den, 534 US 1040 (2001).5
Following Hoechst’s reasoning, the department contends
that what matters under the functional test is the business’s
power to dispose of an asset that was, until its disposition,
an integral part of the business’s regular operations. The
department contends that, if the statutory definition is
interpreted that way, then the Business Income Rule is not
broader than the functional test, as defined in UDITPA, and
the premise of Crystal’s argument fails.
	         Alternatively, the department argues that, even if
the Business Income Rule is broader than the definition of
“business income” in UDITPA, the Business Income Rule
is still valid under ORS 314.280. The department reasons
that it understood that the Business Income Rule would be
valid in its entirety when it promulgated OAR 150-314.280-
(B) and accordingly made both the Business Income Rule
and the statutory definition of business income applicable
to public utilities under ORS 314.280. The department
reasons that, because its construction of its own rule, OAR
150-314.280-(B), is reasonable, we should defer to it. It
also observes that nothing in the Business Income Rule is
inconsistent with the text of ORS 314.280.6
	        On appeal, the parties reiterate the arguments
described above. We conclude that we need not decide
whether the premise of Crystal’s argument is correct to
resolve this case; that is, we need not decide whether
the Business Income Rule is broader than the statutory
definition of “business income” in UDITPA and thus invalid

	   5
        The department argues that California’s interpretation of its statute
is persuasive because UDITPA is a uniform law developed by the National
Conference of Commissioners on Uniform State Laws. Of the 45 states that have a
corporate income tax, at least 17 have adopted UDITPA while others have adopted
a modified version of UDITPA. Hellerstein & Hellerstein, State Taxation ¶ 9.01 at
9-12. California adopted UDITPA in 1967. Oregon adopted a modified version of
UDITPA in 1965, but the modifications under Oregon’s version do not affect the
outcome of this case.
	   6
        The Tax Court concluded that the Business Income Rule, which OAR 150-
314.280-(B) incorporates by reference, is valid in its entirety under ORS 314.280.
The Tax Court reasoned initially that the validity of the Business Income Rule, as
applied by OAR 150-314.280-(B) to businesses subject to ORS 314.280, must be
measured against the text of ORS 314.280, not the text of UDITPA. Alternatively,
the Tax Court reasoned that the Business Income Rule is consistent with the
functional test for “business income,” as that phrase is defined in UDITPA.
Cite as 353 Or 300 (2013)	311

under that statute. Even if it is, this case presents a
different question. The question in this case is what OAR
150-314.280-(B), the rule promulgated to implement ORS
314.280, means. More specifically, the department has
interpreted the two definitions of business income in OAR
150-314.280-(B) consistently with each other, and it argues
that its interpretation of its own rule is a reasonable one
to which we should defer. In evaluating the department’s
argument, the initial question is whether the two definitions
of business income reasonably can be read together, as the
department has done, in a way that gives effect to both. If
they can, then the remaining question is whether OAR 150-
314.280-(B), so interpreted, is consistent with the terms of
ORS 314.280, the statute that that rule was intended to
implement. We turn to the first question.
	        As a general rule, we construe a statute in a manner
that gives effect, if possible, to all its provisions. See ORS
174.010 (“[W]here there are several provisions or particulars
such construction is, if possible, to be adopted as will give
effect to all.”); Northwest Natural Gas Co. v. Dept. of Rev.,
347 Or 536, 556, 226 P3d 28 (2010) (same). That principle
applies by analogy to the construction of an agency’s
administrative rules when those rules deal with the same
subject. City of Klamath Falls v. Environ. Quality Comm.,
318 Or 532, 543, 870 P2d 825 (1994) (citing Columbia Steel
Castings Co. v. City of Portland, 314 Or 424, 430, 840 P2d
71 (1992)). Additionally, when an agency interprets its own
rules, this court defers to the agency’s interpretation as long
as its interpretation is a plausible one and not inconsistent
with the rule, its context, or any other source of law. Coffey
v. Board of Geologist Examiners, 348 Or 494, 509, 235 P3d
678 (2010).
	       One plausible way to read the two definitions of
business income in OAR 150-314.280-(B) together,7 as

	   7
        As discussed above, OAR 150-314.280-(B) incorporates two definitions of
business income. One is the definition found in UDITPA:
    “ ‘Business income’ means income arising from transactions and activity in
    the regular course of the taxpayer’s trade or business and includes income
    from tangible and intangible property if the acquisition, the management, use
    or rental, and the disposition of the property constitute integral parts of the
    taxpayer’s regular trade or business operations.”
312	                  Crystal Comunications, Inc. v. Dept. of Rev.

the department does, is informed by the opinion of the
California Supreme Court in Hoechst. In Hoechst, the
California Supreme Court first decided that the definition
of “business income” under UDITPA consists of two tests:
the transactional test and the functional test. See 25 Cal 4th
at 526. Under the functional test, according to that court,
the taxpayer’s “acquisition, management, and disposition
of the property” is based not only on the taxpayer’s actual
acquisition, management, and disposition of property, but
also on the taxpayer’s power to control the acquisition,
management, and disposition of that property. See id. at
528-29 (citing dictionary definitions of those terms). As
we understand the California Supreme Court’s reasoning,
it concluded that, read together, the terms “acquisition,”
“management,” and “disposition” describe a business’s
use of property. Id. at 529 (quoting a comment to UDITPA
“that ‘[i]ncome from the disposition of property’ is business
income if the property is ‘used in a trade or business of
the taxpayer’ “ (emphasis and modification added by the
California Supreme Court)).
	        The court also contrasted the use of the word
“regular” in the transactional and functional tests. The court
reasoned that the transactional test requires proof that the
transactions or activity giving rise to the income occur “in
the regular course of the taxpayer’s trade or business.” Id. at
530. The court reasoned that, by contrast, in “the functional
test—which focuses on the income-producing property—
‘regular’ modifies ‘trade or business operations’ and follows
the phrase ‘an integral part of.’ ” Id. The court concluded:
    “Consequently, ‘regular,’ as used in the functional test,
    does not refer to the nature of the transaction, and the
    extraordinary nature or infrequency of the income-
    producing transaction is irrelevant.”
Id. In addition to requiring that the property that produces
the income be used in the regular course of the business’s
ORS 314.610(1). The other is the definition found in the Business Income Rule,
which the department promulgated to implement ORS 314.610(1):
   “Gain or loss from the sale, exchange or other disposition of real or tangible or
   intangible personal property constitutes business income if the property while
   owned by the taxpayer was used in the taxpayer’s trade or business.”
OAR 150-314.610(1)-(B)(2).
Cite as 353 Or 300 (2013)	313

operations, the functional test, according to the California
Supreme Court, also requires that the property be an
“integral” part of the business. Id.; see also id. at 531-
32 (defining when property used in a business will be an
“integral part” of the regular business operations).8
	        We conclude that the decision in Hoechst is a plausible
interpretation of the statutory definition of the functional
test in UDITPA. We note that the California Supreme Court
did not decide in Hoechst whether there is a liquidation
exception to the functional test. However, its reasoning is
inconsistent with recognizing a liquidation exception. See
Jim Beam Brands Co. v. Franchise Tax Board, 133 Cal App
4th 514, 525-26, 34 Cal Rptr 874 (1st Dist 2005) (so holding);
Hellerstein & Hellerstein, State Taxation ¶ 9.05[2][c] at
9-69 - 9-70 (agreeing with Hoechst’s interpretation of the
functional test and reasoning that Hoechst’s interpretation
of the functional test is inconsistent with a liquidation
exception). Although that conclusion is not uniform, see
Hellerstein & Hellerstein, State Taxation ¶ 9.05[2][c] at
9-69 - 9-70, we cannot say that it is unreasonable.
	        By interpreting the UDITPA definition of business
income included in OAR 150-314.280-(B) consistently with
Hoechst, the department reasonably gave effect to both
definitions of business income included in that rule. So
construed, both definitions of business income included in
OAR 150-314.280-(B) are broad enough to reach the gain
from the sale of Crystal’s FCC license.9 In holding that the
department’s interpretation of its own rule is reasonable,
we need not and do not decide whether ORS 314.610(1), the
statute that defines “business income” for the purposes of
UDITPA, includes gain realized from the sale of an asset
during the course of liquidating a business. The question
before us is not what ORS 314.610(1) means in a case arising
under UDITPA. Rather, the question before us is whether,
in a case arising ORS 314.280, the department reasonably
interpreted the two definitions of “business income” in OAR
	   8
        In reaching that conclusion, the California Supreme Court noted that the
definition of “business income” in UDITPA derived from California decisional law,
and it relied on those decisions. See Hoechst, 25 Cal 4th at 531-32.
	   9
        There is no dispute that the FCC license was integral to Crystal’s business
operations.
314	                 Crystal Comunications, Inc. v. Dept. of Rev.

150-314.280-(B) in a way that gives effect to both. Our
decision is limited to the latter question.
	        As noted, Crystal raises two objections to that
interpretation of OAR 150-314.280-(B). First, it contends
that that interpretation of the rule does not give full effect
to the definition of business income set out in UDITPA.
However, Crystal’s reading of the rule does not give full
effect to the Business Income Rule, which OAR 150-
314.280-(B) also incorporates. As between the two readings,
the department’s reading gives greater effect to both
definitions than Crystal’s does. Second, Crystal argues that,
if the department’s interpretation of OAR 150-314.280-(B)
is correct, then the functional test will apply differently
depending on whether a business is subject to ORS 314.280
or UDITPA and, in doing so, violate the Uniformity Clause
of the Oregon Constitution. Crystal contends that we should
interpret OAR 150-314.280-(B) to avoid that result.
	        In some respects, Crystal’s constitutional argument
is premature. We have not yet determined whether, for
businesses subject to UDITPA, the functional test does
or does not reach income realized during the course of
liquidating a business. Until we decide that issue, we have
no occasion to decide whether any difference in treatment
would run afoul of the Uniformity Clause of the Oregon
Constitution. Beyond that, the court has recognized that
government “may lay an excise on the operations of a
particular kind of business, and exempt some other kind
of business closely akin thereto.” See Garbade and Boynton
v. City of Portland, 188 Or 158, 192, 214 P2d 1000 (1950)
(upholding ordinances taxing different types of businesses
differently) (internal quotation marks omitted), overruled
on other grounds by Multnomah County v. Mittleman, 275
Or 545, 556-57, 552 P2d 242 (1976). In our view, the prospect
that taxing utilities and financial institutions differently
from other types of businesses would violate the Uniformity
Clauses is remote. Without more persuasive authority, we
cannot say that the interest in avoiding an unconstitutional
construction of OAR 150-314.280-(B) requires us to interpret
that rule differently than we have.10
	   10
        Crystal relies on a statement from Jarvill v. City of Eugene, 289 Or 157,
613 P2d 1, cert den, 449 US 1013 (1980), to support its constitutional argument.
Cite as 353 Or 300 (2013)	315

	        Having reached that conclusion, we turn to the
question whether our interpretation of OAR 150-314.280-(B)
is consistent with the text of ORS 314.280. We conclude
that it is. ORS 314.280 grants the department authority
either to segregate or to apportion “income from business
activity” earned by multistate public utilities as long as its
method “fairly and accurately [reflects] the net income of the
business done within the state.” As explained earlier, the
dichotomy that ORS 314.280 establishes, by permitting the
department to apply either segregation or apportionment, is
the dichotomy between unitary and nonunitary businesses,
not that between business and nonbusiness income
established under UDITPA. Thus, the wording of ORS
314.280 is broad enough to reach the department’s reading
of OAR 150-314.280-(B), which, as we also explained, would
allow the department to apportion income derived from
property used in Crystal’s unitary business. Nothing in the
wording of ORS 314.280 precludes the apportionment of
gain from assets sold in the course of liquidation. The Tax
Court correctly granted summary judgment in favor of the
department.
	           The judgment of the Tax Court is affirmed.




It notes that Jarvill states that “a tax classification is constitutionally valid if it
rests upon genuine differences.” See id. at 180 (so stating). The issue in Jarvill,
however, concerned the government’s ability to draw tax classifications based
on geographical distinctions within the taxing authority. Both linguistically
and historically, such tax classifications have been more difficult to justify.
See Or Const, Art I, § 32 (providing that “all taxation shall be uniform on the
same class of subjects within the territorial limits of the authority levying the
tax”); United States v. Ptasynski, 462 US 74, 80-81, 84, 103 S Ct 2239, 76 L Ed
2d 427 (1983) (discussing the purposes and limitations of the similarly worded
federal Uniformity Clause). In our view, Jarvill does little to advance Crystal’s
constitutional argument.
