Evergreen Airlines' Museum Owes $1 Million In Taxes

Feb. 10, 2014
Lawyer for the Evergreen Aviation & Space Museum asks Oregon legislators to support a bill that would expand property-tax exemptions for the McMinnville nonprofit.

Feb. 06--A lawyer for the Evergreen Aviation & Space Museum asked Oregon legislators Thursday to support a bill that would expand property-tax exemptions for the McMinnville nonprofit and end litigation over $1 million in delinquent taxes and interest.

Salem attorney Kevin Mannix, a former legislator and Republican gubernatorial candidate, told House Revenue Committee members that the bill would merely codify a longstanding legal interpretation exempting Oregon museums' cafes and gift shops from property taxes.

But Gil Riddell, Association of Oregon Counties policy director, spoke against the bill, which he said would exempt parts of Evergreen's operations that go far beyond the museum. Evergreen International Aviation Inc.'s nonprofit arms operate an Imax theater and the Evergreen Wings & Waves Waterpark, billed as America's only educational water park.

"They want to add an exemption for property used in conjunction with public displays," Riddell said. "Does this include a water park, I wonder?"

Managers of the Evergreen museums, which count Howard Hughes' famed Spruce Goose flying boat as their central attraction, have insisted the nonprofits remain viable even as Evergreen International Airlines Inc. has filed Chapter 7 bankruptcy. But figures released by a Yamhill County tax assessor who also spoke at Thursday's hearing showed the museums and water park owe $1,061,102 in back taxes and interest.

Jeff Ivie, Yamhill County deputy assessor, said Evergreen nonprofits applied for property-tax exemptions in multiple years that the county denied. Evergreen's appeals continue as nine cases in various stages of litigation wind their way through divisions of the Oregon Tax Court.

"They're saying roughly 100 percent of the museum space and land is exempt, and we disagree with that," Ivie said after the hearing. "Areas of contention would be primarily the gift shops and the cafes and the space associated with those."

"In 2011, when we did an inspection of the property ... we noticed that there were multiple items in the gift shop, for instance, that were logoed with the Evergreen for-profit enterprise," Ivie told legislators. The Evergreen International Airlines items for sale, he said, "had nothing to do with the items on display in the museum."

In a 2012 decision in one of the nine cases, Oregon Tax Court Presiding Magistrate Jill Tanner ruled in favor of the Yamhill County assessor. She found that certain personal property that managers of the space museum and The Capt. Michael King Smith Education Institute argued should be tax exempt was not exclusively used for the nonprofits' charitable and scientific work. Therefore the property was subject to taxation.

But sponsors of House Bill 4106 said Thursday the law should be changed because hundreds of Oregon nonprofit museums depend on income from their gift shops, cafes and educational films.

"Without such supplemental income, Oregon's museums are in danger of being shut down, to the degradation of our society and the state culture," said Rep. Jim Weidner, R-Yamhill. He said taxing nonprofits' gift shops, theaters and cafes could drive up entrance fees, reducing admissions and forcing closure of museums across the state.

But Riddell said the bill was tailored for one set of properties -- those of Evergreen's nonprofits. The moral most relevant to the bill, he said, is "legislation that is property-specific rarely is good public policy."

Riddell said the Legislature shouldn't preempt court rulings in the nine cases. After the rulings, he said, legislators could discuss what tax-law changes may be needed and fix the system in a comprehensive way.

Rep. Phil Barnhart, D-Eugene, the House Revenue Committee chairman, agreed that legislators should leave the courts alone to do their work. His statement suggested that the bill has dim prospects in the current legislative session.

Whatever the bill's fate, Evergreen's nonprofits face further uncertainties.

The Oregon Department of Justice continues to investigate alleged commingling of funds between Evergreen's nonprofit and commercial arms. Two planes in the aircraft museum are for sale because Evergreen founder Delford Smith lost ownership after posting them as collateral for a corporate jet. Owners of the Spruce Goose say they're still owed about $50,000 for the giant wooden plane.

And Evergreen's commercial entities, which at one point borrowed money from the museums, owe almost $242,600 in taxes and interest on their properties across the highway. Evergreen's bankruptcy filing Dec. 31 estimated total assets of its companies at up to $100 million and total debts up to $500 million, with as many as 5,000 creditors.

-- Richard Read

Christian Gaston, of The Oregonian staff, contributed to this report.

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