Realtors Sue City Over Change in Business Tax

On a day when millions of Americans are reluctantly paying their taxes, two Portland real estate brokers filed a lawsuit (PDF) against the City of Portland, claiming that a 2008 City ordinance illegally imposed a business license tax on them — and by extension, the 3,000 or so other brokers who do business in Portland.

The two, Beth Proctor (who works for Windermere Cronin & Caplan) and Diane Rulien (who works for RE/MAX) say they are independent contractors who work under the supervision of what are known as "principal real estate brokers."

Last November, after then-City Commissioner Sam Adams pushed an ordinance through council that extended the city's business license tax to non-principal brokers such as Proctor and Rulien, the Oregon Association of REALTORS notified the city that it believed the city lacked the legal authority to do so.

In a Dec. 8, 2008 letter, Deputy City Attorney Shane Abma disagreed with the real estate agents group. "Brokers are subject to the City's business license tax, and the City will not voluntarily suspend enforcement of these new code changes," Abma wrote.

The lawsuit filed today in Multnomah County Circuit Court takes issue with that position. The lawsuit asks the court to return unspecified taxes the two women paid for 2008 and for "a Declaration from the Court that the City's revised business tax is unlawful and may not legally be imposed on plaintiffs Proctor and Rulien."

The stakes are considerable at a time the City faces hefty budget cuts. In 2007, when Adams first proposed taxing brokers, city officials reckoned the tax change would yield $250,000 or more annually.

Abma was not immediately available for comment.