Case Title: Livingston v. Kroger/Devlin

Citation: 

Docket Number: S057933

State: oregon

Court: Oregon Supreme Court

Date: 2009-11-13T00:00:00Z

Document:
FILED: November 13, 2009
IN THE SUPREME COURT OF THE STATE OF OREGON
SHARON LIVINGSTON
and PAT McCORMICK,
Petitioners,
v.
JOHN KROGER,
Attorney General of the State of Oregon,
Respondent.
SC S057933 (Control)
SHARON LIVINGSTON
and PAT McCORMICK,
Petitioners,
v.
SENATOR RICHARD DEVLIN,
SENATOR CHRIS TELFER,
SENATOR DIANE ROSENBAUM,
REPRESENTATIVE ARNIE ROBLAN,
REPRESENTATIVE VICKI BERGER,
REPRESENTATIVE CHRIS GARRETT,
and KATE BROWN,
Secretary of State of the State of Oregon,
Respondents.
S057934
(Consolidated for Opinion)
En Banc
On petitions to review ballot title and
explanatory statement filed October 28, 2009; considered and under advisement
on November 5, 2009.
Gregory A. Chaimov and John A. DiLorenzo, Jr.,
Davis Wright Tremaine LLP, Portland, filed the petitions and reply memoranda
for petitioners.
 
Paul S. Cosgrove, Lindsay, Hart, Neil &
Weigler LLP, Portland, filed the brief for respondents Senator Chris Telfer and
Representative Vicki Berger.
Erin C. Lagesen, Assistant Attorney General,
Salem, filed the answering memoranda for respondents John R. Kroger, Kate
Brown, Senator Richard Devlin, Senator Diane Rosenbaum, Representative Arnie
Roblan, and Representative Chris Garrett.  With her on the answering memoranda
were John R. Kroger, Attorney General, and Jerome Lidz, Solicitor General.
Steven C. Berman, Portland, filed the memorandum
for amici curiae Steve Novick and Defend Oregon -- Yes for Tax Fairness.
DURHAM, J.
The ballot title is referred to the Attorney
General for modification. The explanatory statement is certified to the
Secretary of State.
DURHAM, J.
Petitioners have filed separate petitions
in this court seeking review of the ballot title and of the explanatory
statement for Referendum No. 302 (2009), which the Secretary of State has
denominated as Ballot Measure 67.  We consolidate the petitions for purposes of
this opinion.
Ballot Measure 67 results from a
referendum of House Bill (HB) 3405 (2009),(1)
which raised the minimum tax for corporations and partnerships, the marginal
tax rate for corporate taxable income, and filing fees for certain business
documents.  Or Laws 2009, ch 745.  Because of the referendum, as we explain
below, HB 3405 (2009) did not take effect.  Ballot Measure 66, if approved by
the voters, would enact the increased corporate and partnership income taxes
and filing fees that the Legislative Assembly adopted in HB 3405 (2009).
I.  BALLOT TITLE
REVIEW
We begin with petitioners' challenges
to the ballot title.  We review the ballot title for "substantial
compliance with the requirements of ORS 250.035."  Or Laws 2009, ch 714, §
12(4).  Ballot Measure 67 has four primary components.  First, the measure
raises the minimum tax from $10 to $150 for C-corporations with revenues under
$500,000; C-corporations with revenues of $500,000 or more pay a minimum tax of
approximately 0.1 percent of their revenues.  Section 1(2)(a).  Second, the
measure requires S-corporations and partnerships to pay a $150 minimum tax, but
it does not require those entities to pay more tax than that.(2) 
Section 1(2)(b) (S-Corporations); Section 3 (partnerships).  Third, the measure
raises the marginal rate that corporations pay on taxable income in excess of
$250,000 for the period from 2009 to 2013 and on taxable income in excess of
$10,000,000 after 2013.  Sections 5-10.(3) 
Finally, the measure raises the fees for filing certain business documents and
notary applications.  Sections 11, 15, 17.
In McCormick v. Kroger/Devlin,
___ Or ___, ___ P3d ___ (2009) (decided this date), we observed that the
legislature had modified the statutory procedures relating to the ballot title
and explanatory statement for Referendum No. 301 (2009), which the Secretary of
State designated as Ballot Measure 66.  Those modifications also apply to the
ballot title and explanatory statement for Ballot Measure 67.  See Or
Laws 2009, ch 714, §§ 9, 12.  As we noted in McCormick, the modified
procedures (1) require preparation of the ballot title and explanatory
statement by a joint legislative committee, (2) render the word limits in ORS
250.035(2) inapplicable, and (3) require this court to refer an insufficient
ballot title to the Attorney General for modification.  We follow those modified
procedures in reviewing petitioners' challenges in this case.
A ballot title consists of a caption
that "reasonably identifies the subject matter of the measure,"
"yes" and "no" vote result statements that describe "the
result if the * * * measure" is approved or rejected, and a summary of the
"measure and its major effect."  ORS 250.035(2)(a) - (d).  The
purpose of those requirements is to ensure that voters have accurate
information about the subject and effect of a proposed measure.  Caruthers
v. Myers, 344 Or 596, 600, 189 P3d 1 (2008).  As noted above, we review the
ballot title to determine if its component parts substantially comply with ORS
250.035.  See Or Laws 2009, ch 714, § 12(4) (directing the court to
review ballot title for substantial compliance with ORS 250.035).
The ballot title for Ballot Measure
67 states: 
"RAISES $10 CORPORATE MINIMUM TAX, BUSINESS MINIMUM
TAX, CORPORATE PROFITS TAX.  MAINTAINS FUNDS CURRENTLY BUDGETED FOR EDUCATION,
HEALTH CARE, PUBLIC SAFETY, OTHER SERVICES.
"RESULT OF 'YES' VOTE:  'Yes' vote raises $10
corporate minimum tax, establishes $150 minimum tax for most businesses or
minimum tax of approximately 0.1% of total Oregon revenues for some
corporations with over $500,000 in Oregon revenues.  Raises tax rate some
corporations pay on profits by 1.3 percentage points.  Increases certain
business filing fees.  Raises estimated $255 million to maintain funds
currently budgeted for education, health care, public safety, other services.
"RESULT OF 'NO' VOTE:  'No' vote retains $10
corporate minimum tax, rejects $150 minimum tax, rejects raising corporate
profits tax, other changes.  Reduces funding currently budgeted for education,
health care, public safety, other services by estimated $255 million.
"SUMMARY:  Under current law, corporations
conducting business in Oregon pay $10 minimum tax; tax has not changed since
1931.  Some corporations pay a profits tax of 6.6%.  All other businesses pay
no minimum or profits tax.  Beginning in tax year 2009, the Measure increases
$10 minimum corporate tax to $150; some corporations with over $500,000 in
Oregon revenues will pay minimum tax of approximately 0.1% of Oregon revenues. 
Limits tax to $150 for S corporations and partnerships.  Sole proprietors are
not impacted by this measure.  Raises tax rate some corporations pay on profits
by 1.3 percentage points until 2011; increase then drops to 1 percentage point
and as of 2013, applies only to profits over $10 million.  Corporations pay
minimum tax or profits tax, not both.  Increases filing fees by $50 for Oregon
businesses, by $225 for out of state businesses.  Raises estimated $255 million
to maintain funds currently budgeted for education, health care, public safety,
other services.  Because some state money brings in federal matching funds,
Oregon will likely receive more federal money if measure passes than if the
Measure fails.  Other provisions."
Petitioners raise a variety of
challenges to the caption, the "yes" vote result statement, the
"no" vote result statement, and the summary.  Four of petitioners'
challenges arise out of two related phrases.  Petitioners argue that the phrase
"[m]aintains funds currently budgeted for education, health care, public
safety, other services," which appears in the caption, "yes" vote
result statement ("maintain"), and the summary (maintain), is not
accurate.  They reason that, because HB 3405 did not become law as a result of
the referendum, the measure does not "maintain" any current funds. 
They raise a similar challenge to the "no" vote result statement,
which states that a "no" vote "[r]educes funding currently
budgeted for education, health care, public safety, other services by estimated
$255 million."  They reason that, because HB 3405 did not become law as a
result of the referendum, there are no funds to "reduce."
This court in McCormick
sustained virtually identical challenges to the ballot title for Ballot Measure
66.  Following the rationale adopted in McCormick, we sustain
petitioners' challenges, set out above, to the ballot title for Ballot Measure
67 and conclude that, in the respects identified by petitioners, the ballot
title for Ballot Measure 67 does not comply substantially with statutory
requirements.
We conclude that the same ballot
title modifications required in McCormick also are required here. 
Specifically, the term "maintains" in the caption must be replaced by
the term "provides," the word "maintain" in the
"yes" vote result statement and summary must be replaced by the term "provide,"
and the "no" vote result statement must be revised to state:
"Leaves amount currently budgeted for education, health
care, public safety, other services underfunded by estimated $255
million."
The Attorney General must effect those modifications on
referral.
Petitioners assert a number of
additional challenges to the ballot title.  We have considered each challenge,
but, in applying the substantial compliance standard of review, we conclude
that no further changes to the ballot title are necessary.  We will refer the
ballot title to the Attorney General for modification for the reasons discussed
above.
II.  EXPLANATORY
STATEMENT REVIEW
A joint legislative committee
prepared and filed with the Secretary of State the following explanatory
statement for Ballot Measure 67:
"EXPLANATORY STATEMENT:  Measure 67 raises the
corporate minimum tax for the first time since 1931.  Beginning in tax year
2009, S corporations and partnerships will pay $150.  The Measure increases the
tax C corporations will pay on profits.  Some filing fees with the Secretary of
State also will be increased.  Sole proprietors are not subject to the minimum
tax.  The Measure will raise an estimated $255 million to maintain funds
currently budgeted for education, health care, public safety and other services. 
Approximately 90% of the state general fund budget goes to education, health
care and public safety.  Because some state money brings in federal matching
funds, Oregon will likely receive more federal money if the measure passes than
if the Measure fails.
"Beginning in tax year 2009, the Measure raises the
corporate minimum tax from $10 to $150.  C corporations with over $500,000 in
Oregon revenues will pay a minimum tax of approximately 0.1% of Oregon
revenues.  The tax rate for profits over $250,000 paid by C corporations will
increase by 1.3 percentage points for 2009 and 2010.  The rate increase is
reduced to 1.0 percentage points for 2011 and 2012.  For tax years after 2012,
the profits tax rate returns to 6.6% for all C corporation profits below $10
million, and the marginal tax rate of 7.6% will apply to C corporations'
profits over $10 million.  C corporations pay minimum tax or profits tax, not
both.
"For business entities other than C corporations, such
as S corporations and partnerships, the Measure sets the taxes those businesses
will pay at $150.
"The Measure also increases the filing fees that
businesses will pay to the Secretary of State.  Filing fees will increase from
$50 to $100 for Oregon businesses, and from $50 to $275 for out of state
businesses.  Fees for filing uniform commercial code financing statements will
increase by $5 and the application fee to be a notary public will increase from
$20 to $40."
We review the explanatory statement
to determine if it is "insufficient or unclear."  See Or Laws,
ch 714, § 13(1) (providing that electors may challenge the explanatory
statement on those grounds).  Petitioners raise essentially the same challenges
to the explanatory statement that they raised to the ballot title.  As with our
review of the ballot title, we conclude that none of their challenges requires
modification except for the challenge to the sentence, "The Measure will
raise an estimated $255 million to maintain funds currently budgeted for
education, health care, public safety and other services."  In order to
ensure that the explanatory statement is a sufficient and clear description of
the measure, we modify that sentence by substituting the word
"provide" for "maintain."  See Or Laws 2009, ch 714,
§ 13(2) (providing that, if a timely petition is filed, the Supreme Court
"shall review the statement and certify an explanatory statement to the
Secretary of State"); McCormick, ___ Or at ___ (slip op at 11-12)
(requiring same modification to explanatory statement for Ballot Measure 66).
Pursuant to Or Laws 2009, ch 714, § 13(2),
we certify the following explanatory statement to the Secretary of State:
"EXPLANATORY STATEMENT:  Measure 67 raises the
corporate minimum tax for the first time since 1931.  Beginning in tax year
2009, S corporations and partnerships will pay $150.  The Measure increases the
tax C corporations will pay on profits.  Some filing fees with the Secretary of
State also will be increased.  Sole proprietors are not subject to the minimum
tax.  The Measure will raise an estimated $255 million to provide funds
currently budgeted for education, health care, public safety and other
services.  Approximately 90% of the state general fund budget goes to
education, health care and public safety.  Because some state money brings in
federal matching funds, Oregon will likely receive more federal money if the
measure passes than if the Measure fails.
"Beginning in tax year 2009, the Measure raises the
corporate minimum tax from $10 to $150.  C corporations with over $500,000 in
Oregon revenues will pay a minimum tax of approximately 0.1% of Oregon
revenues.  The tax rate for profits over $250,000 paid by C corporations will
increase by 1.3 percentage points for 2009 and 2010.  The rate increase is
reduced to 1.0 percentage points for 2011 and 2012.  For tax years after 2012,
the profits tax rate returns to 6.6% for all C corporation profits below $10 million,
and the marginal tax rate of 7.6% will apply to C corporations' profits over
$10 million.  C corporations pay minimum tax or profits tax, not both.
"For business entities other than C corporations, such
as S corporations and partnerships, the Measure sets the taxes those businesses
will pay at $150.
"The Measure also increases the filing fees that
businesses will pay to the Secretary of State.  Filing fees will increase from
$50 to $100 for Oregon businesses, and from $50 to $275 for out of state businesses. 
Fees for filing uniform commercial code financing statements will increase by
$5 and the application fee to be a notary public will increase from $20 to
$40."
The ballot title is referred to the
Attorney General for modification.
The explanatory statement is certified
to the Secretary of State.(4)
1. Article
IV, section 1(3)(a), of the Oregon Constitution, reserves to the people the
referendum power, "which is [the power] to approve or reject at any
election any Act, or part thereof, of the Legislative Assembly that does not
become effective earlier than 90 days after the end of the session at which the
Act is passed."
2. S-corporations
and partnerships pass through any taxable income or loss to their shareholders
and partners respectively.  As for the business entities themselves,
S-corporations currently pay a $10 corporate minimum tax while partnerships pay
no tax on partnership income.  See ORS 314.732(1) ("Except as otherwise
provided in ORS 314.740, 314.742 and 317.090 [the corporate minimum tax], an S
corporation "shall not be subject to the taxes imposed by ORS chapter 316,
317 or 318.").  The measure thus raises the minimum tax for S-corporations
from $10 to $150 and extends the $150 minimum tax to partnerships.
3. Currently,
corporations pay a rate of 6.6 percent on their taxable income.  ORS 317.061. 
For tax years beginning on or after January 1, 2009, and before January 1,
2011, the measure raises the rate for taxable income in excess of $250,000 from
6.6 to 7.9 percent.  Sections 5, 6.  For tax years beginning on or after
January 1, 2011, and before January 1, 2013, the measure reduces the rate for
taxable income in excess of $250,000 from 7.9 to 7.6 percent.  Sections 7, 8. 
For tax years beginning on or after January 1, 2013, the measure taxes the
first $10 million in taxable income at a rate of 6.6 percent and taxes any
taxable income in excess of $10 million at a rate of 7.6 percent.  Sections 9, 10.
4. Chief
Justice Order No. 09-061 (Oct. 29, 2009) provides as follows in regard to these
proceedings:
"Notwithstanding ORAP 11.30(12), any
petitions for reconsideration must be filed and physically received by the
Office of the Appellate Court Administrator no later than 12:00 noon on the day
following issuance of the Court's decision."