Filed: November 23, 2011

IN THE SUPREME COURT OF THE STATE OF OREGON

GAIL RASMUSSEN

and BETHANNE DARBY,

Petitioners,

v.

JOHN R. KROGER,

Attorney General,

State of Oregon,

Respondent.

(SC S059448)

En Banc

On petition to review ballot title filed May 17, 2011; considered and under

advisement on June 22, 2011.

Aruna A. Masih, Bennett, Hartman, Morris & Kaplan, LLP, Portland, filed the

petition and reply memorandum for petitioners.

Samuel A. Kubernick, Assistant Attorney General, Salem, filed the answering

memorandum and memorandum of additional authorities for respondent. With him on the memoranda were John R. Kroger, Attorney General, and Mary H. Williams, Solicitor

General.

Kevin L. Mannix, Kevin L. Mannix, P.C., Salem, filed the memorandum of

amicus curiae Robert Zielinski, Jr.

DURHAM, J.

The ballot title is referred to the Attorney General for modification.1 DURHAM, J. 1

Petitioners seek review of the Attorney General ' s certified ballot title for 2

Initiative Petition 18 (2012). See ORS 250.085(2) (specifying requirements for seeking 3

rev iew of certified ballot title). This court reviews the certified ballot title to determine 4

whether it substantially complies with ORS 250.035(2) (stating requirements for ballot 5

titles). For the reasons explained below, we refer the ballot title to the Attorney General 6

for modification. 7

Initiative Petition 18, if approved by the voters, would enact a prohibition 8

on the imposition of any state or local estate tax, inheritance tax, tax on property 9

transferred in connection with a person ' s death, or tax on the transfer of property between 10

" family members " as the proposed measure defines that term. The proposed measure 11

would supersede current statutes that impose those taxes , and it excludes from its 12

prohibition certain statutes that impose fees related t o transa ctions that may follow a 13

person ' s death, such as fees for processing death certificates and for probate proceedings. 14

The Attorney General certified the following ballot title for Initiativ e 15

Petition 18: 16

" Prohibits estate and i nheritance taxes, and any tax on property 17

transfers between ' family members ' (d efined) 18

" Result of ' Yes ' Vote: ' Yes ' vot e prohibits estate and inheritance 19

tax, tax on death

- related property transfers, and tax on property transfers 20

between certain family members; reduces state revenue. 21

" Result of ' No ' Vote: ' No ' vote retains one

- time estate tax on 22

inherited property for est ates of certain value; tax on property transfers 23

between family members in certain circumstances. 242 " Summary: Current state law imposes one

- time tax on estate of 1

person dying on or after January 1, 2006, if estate ' s gross value

-- 2

determined by federal law as of December 31, 2000

-- is at least 3

$1,000,000. Current law taxes income

- producing property sales, regardless 4

of parties ' relationship. Effective January 1, 2013, measure prohibits estate 5

and inheritance tax, tax on property transfers between ' family members ' 6

(defined), and tax on property transferred in connection with person ' s death. 7

Measure allows state to cooperate with other states and federal government 8

in processing and collecting those entities ' estate and inheritance taxes; 9

permits fees on pr obate proceedings, for processing of death certificates, 10

and on other transactions that may occur following person ' s death. Measure 11

reduces state revenues; provides no replacement. Other provisions. " 12

(Boldface in original). 13

Petitioners are electors who timely submitted written comments to the 14

Secretary of State concerning the content of the Attorney General ' s draft ballot title and 15

who therefore are entitled to seek review of the resulting certified ballot title in this court. 16

See ORS 250.085 (2) (stating that requirement). Petitioners challenge the caption and the 17

" yes " and " no " vote result statements. 18

We first consider petitioners ' challenge to the caption. A certified ballot 19

title must contain a " caption of not more than 15 words that re asonably identifies the 20

subject matter of the * * * measure

. " ORS 250.035(2)(a). The " subject matter " of a 21

proposed measure is " the ' actual major effect ' of [the] measure or, if the measure has 22

more than one major effect, all such effects (to the limit o f the available words). " 23

Whitsett v. Kroger , 348 Or 243, 247, 230 P3d 545 (2010). " When the major effect of a 24

proposed measure would be a substantive change in existing law, the ballot title should 25

inform the reader of the scope of the change. " Rasmusse n v. Kroger , 351 Or 195, 198, 26

___P3d ___ (2011) (citing Kain/Waller v. Myers , 337 Or 36 , 40, 93 P3d 62 (2004) )

. 273 Petitioners argue that the Attorney General ' s caption for Initiative Petition 1

18 violates the relevant statutory standard because it inaccurately describes the changes 2

that the measure would enact. According to petitioners , the certified caption erroneously 3

suggests to voters that the measure would prohibit tax es that presently apply to all estates, 4

when, in fact, the present statutory scheme taxes only estates with a gro ss value of $1 5

million or more. The Attorney General responds that the caption accurately informs 6

voters that the measure would prohibit the imposition of any estate or inheritance tax as 7

well as tax on property transf ers between certain family members without suggesting that 8

all voters currently are subject to such taxes. 9

This court has twice considered similar argument s

-- notably made by the 10

same parties appearing in the matter at hand

-- in the context of challeng e s to the 11

Attorney General ' s certified ballot title s for two other proposed measures. In Rasmussen 12

v. Kroger , 350 Or 533, 258 P3d 1224 (2011), the petitioners challenged the certified 13

ballot title for Initiative Petition 14. The certified caption for tha t proposed measure 14

stated: " Amends Constitution: Prohibits any inheritance or estate taxes on property 15

transferred in con nection with a person ' s death. " In challenging that caption, t he 16

petitioners raised the same objection that they now raise to the caption cert ified for 17

Initiative Petition 18: that the caption erroneously suggests that all estates in Oregon are 18

subject to estate and inheritance taxes, thus misle ading voters as to the scope of changes 19

that the proposed measure would effect. The cour t in Rasmussen , however, rejected that 20

argument and held that the certified caption substantially complied with ORS 21

250.035(2)(a). Id. at 536

- 37. In reaching that result, the court explained : 224

" Nothing in the certified caption suggests that all persons cu rrently are 1

subject to estate or inheritance taxes. Rather, the caption accurately 2

identifies the subject matter of the measure as a constitutional prohibition 3

on the imposition of an estate or inheritance tax on the transfer of a 4

decedent ' s property in c onnection with that person ' s death. Contrary to 5

petitioners ' assertion, the adoption of such a prohibition would have an 6

effect on Oregon residents, including those with estates of less than $1 7

million, because it would place in the constitution a bar on any law that 8

imposed such a tax. " 9

Id . at 536 (emphasis in original). 10

More recently, in Rasmussen

, 351 Or 195 , the petitioners challenged the 11

certified caption for Initiative Petition 15. In so doing, the petitioners reasserted the same 12

argument they ha d raised in challenging the certified cap tion for Initiative Petition 14, 13

i.e. , that the caption would mislead the reader by erroneously suggesting that all estates in 14

Oregon are subject to estate and inheritance taxes. The certified caption for Initiativ e 15

Petition 15 stated: " Phases out estate and inheritance taxes, and any tax on property 16

transfers between family members. " Despite the similarities in the subject matter of 17

Initiative Petitions 14 and 15 and the arguments raised by the parties, the court concluded 18

that the measures differed in a significant way that ultimately affected the accuracy of the 19

certified caption for Initiative Petition 15. 20

In distinguishing the proposed measures, the court first noted that Initiative 21

Petition 14 proposed a c onstitutional amendment broadly prohibiting any estate or 22

inheritance taxation. The court further clarified why th at proposed measure ' s certified 23

caption was acceptable: 24

" Although the measure clearly would have the specific effect of nullifying 25

existing estate and inheritance tax laws, it ultimately would have the 26

broader and more lasting effect of prohibiting the legislature in the future 275

from enacting laws imposing such taxes. Thus, [Initiative Petition 14] had 1

the major effect of limiting the legislat ur e ' s power to levy estate and 2

inheritance taxes. In light of that effect, a caption that focused on that 3

broad constitutional change, without mentioning the specifics of the 4

existing laws that would be nullified, did not mislead readers about the 5

scope o f the proposed change. " 6

Id. at 200

- 01 (emphasis in original). 7

Conversely, the court noted that Initiative Petition 15 proposed a statutory 8

amendment that would phase out the existing statutory scheme for the taxation of estates 9

as well as property transfers between family members. The court stated that 10

" [w]hen a pro posed measure is explicitly directed at changing the existing 11

statutory scheme and its major effect will be to change that scheme, the 12

particulars of the existing scheme may be an essential element that must be 13

disclosed in the caption in order to inform t he reader of ' the scope of the 14

legal changes that the proposed measure would enact. '" 15

Id. at 200 (emphasis in original) (quoting Kain/Walle r , 337 Or at 40). Appl y ing that 16

principle, the court concluded that a shift away from the current taxation scheme, which 17

taxes only large estates valued at $1 million or more, to a scheme that would allow large 18

estates to avoid taxation, was a policy choice that was central to the proposed measure ' s 19

subject matter . Consequently, the court held that that information mu st be disclosed in 20

the certified caption. Id. at 201

. 21

The analysis applied in t hose prior cases inform s our decision here. As 22

noted, Initiative Petition 18, if enacted, would add a statutory provision prohibiting the 23

imposition of any estate tax, inher itance tax, tax on property transferred in connection 24

with a person ' s death, or tax on property transferred between certain family members. 25

Although th at prohibition is somewhat similar to the broad constitutional prohibition 266

proposed by Initiative Petition 14, it differs significantly because it constitutes a statutory 1

enactment with the specific effect of nullifying existing estate and inheritance tax 2

statutes . In that regard, Initiative Petition 18 closely resembles Initiat ive Petition 15, 3

which involved a similar proposed statutory measure. 4

Initiative Petition 15 proposed a gradual, not immediate, phase out of the 5

current estate and inheritance tax statutory scheme . However, the end result of Initiative 6

Petitions 15 and 18 is the same: the proposed measures would supersede statutory 7

provisions currently imposing taxes on large estates valued at $1 million or more. 8

Consequently, just as Initiative Petition 15 would result in a fundamental shift in 9

Oregon ' s estate taxatio n scheme, so too will Initiative Petition 18 if the voters adopt that 10

proposed measure. More specifically, in regard to Initiative Petition 18, prohibiting the 11

imposition of current tax measures would represent a significant policy choice that goes 12

to the heart of the proposed measure ' s effect

-- i.e.

, the choice to no longer impose estate 13

and inheritance taxes on estates valued at $1 million or more . Because that effect is part 14

of the subject matter of the proposed measure , it must be a cknowledged in the ballot 15

title ' s caption

-- if it is possible to do so within the word limit

-- in order to inform voters 16

of the scope of the proposed change. 17

Petitioners further argue that the certified caption is deficient because it 18

fails to inform voters that one eff ect of Initiative Petition 18 " would be to reduce revenue, 19

without replacing that revenue. " The Attorney General responds that it need not include 20

the proposed measure ' s potential effect on revenue in the caption because the " yes " vote 21

result statement su fficiently explains that adoption would result in the reduction of 227

revenue

. W e have recently addressed identical arguments in relation to Initiative Petition 1

15

. Rasmussen

, 351 Or at __ (slip op at 7). In that case, we rejected the petitioners ' 2

assertions and held that the reduction of revenue " is not so central to the proposed 3

measure ' s meaning and purpose that it must be mentioned in the caption " as well as the 4

" yes " vote result statement. Id. For the same reason, we reject petitioner ' s argu ment 5

here. 1 6

We next consider petitioners challenge to the " yes " and " no " vote result 7

statements. To substantially comply with the relevant statutory standards, a " yes " vote 8

result statement must be a " simple and understandable statement of not more than 2 5 9

words that describes the result if the * * * measure is approved. " ORS 250.035(2)(b). 10

Similarly, a " no " vote result statement must be a c oncise " simple and understandable 11

statement of not more than 25 words that describes the result if the * * * meas ure is 12

rejected. " ORS 250.035(2)(c). The " yes " and " no " vote result stat ements should be read 13

together. Potter v. Kulongoski , 322 Or 575, 582, 910 P2d 377 (1996)

. 14

Petitioners argue that the certified " yes " and " no " vote result statements do 15

not comply with the applicable statutory standards. In petitioner ' s view, neither statement 16

accurately describes the result if the measure is approved or rejected because neither 17

informs voters that the current estate tax is i mposed only on estates wit h a gross value of 18

1 The petitioners in Rasmussen

, 351 Or at 202 n 3, also argued that the

caption for Initiative Petition 15 was inadequate because it did not mention a savings

clause found in the proposed measure which al lowed for the imposition of fees that may

be trig gered by a person's death. Petitioners here again raise that argument in regards to a

similar savings provision in Initiative Petition 18, and we once more find that that

arg ument lacks merit and reject it without further discussion.8

$1 million or more

. The Attorney General responds that the " no " vote result statement 1

informs voters that the current estate tax scheme imposes estate taxes only on " estates of 2

certain value. " The Attorney General contends that that st atement will sufficiently 3

inform any voter who reads both the " yes " and " no " result statements together that the 4

proposed measure ' s phase out of estate taxes would affect only a limited number of 5

persons. 6

The Attorney General raised th at argument twice b efore in defense of 7

similarly worded " yes " and " no " vote result statements in the certified ballot title s for 8

Initiative Petitions 14 and 15

. We rejected the Attorney General ' s argument in both 9

matters , concluding th at the indefinite reference to " estates of certain value " did not 10

inform voters which estates present ly are subject to estate taxes and, thus, would continue 11

to be subject to estate tax es if the measure were rejected

. See Rasmussen

, 350 Or at 538

- 12

39 (Initiative Petition 14); Rasmussen

, 351 Or at 203 (Initiative Petition 15). For the 13

reasons expressed in those decisions, the Attorney General must modify the " yes " and 14

" no " vote result statements in this matter so that, individually or together, they inform the 15

voter that current law only taxes e states valued at $1 million or more, that a " no " vote 16

w ill retain that scheme , and that a " yes " vote will repeal it

. 2 17

Rasmussen

, 351 Or at 204 , invited the Attorney General to address on 18

referral a problem concerning the accuracy of the certified summary in that case, 19

2 Petitioners also argue that the "yes" and "no" vote result statements fail to

address the fact that the proposed measure would allow certain fees associated with the

death of an individual. W e rejected that argument as not well taken in relation to

Initiative Petition 15 in Rasmussen

, 351 Or at 203 n 5 , and we also reject it here.9

specifically

, the reference to the Internal Revenue Code in effect on "December 31, 1

2000." The Attorney General pointed out that the legislature's enactment of House Bill 2

2541 (2011) , which the Governor signed on June 28, 2011, rendered that date reference 3

inaccurate, because the pertinent statute, ORS 118.007, now refers to the Internal 4

Revenue Code in effect on "December 31, 2010 ." The certified summary in this case 5

reflects the same inaccuracy and, as in Rasmussen , we invite the Attorney General to 6

address and correct that problem on referral. 7

We re fer the certified ballot ti tle to the Attorney General for modifications 8

to the caption and " yes " an d " no " vote result statements . We also invite the Attorney 9

G eneral on referral to modify the summary to correct the problem noted above resulting 10

from the enactment of HB 2541. 11

The b allot title is referred to the Attorney General fo r modification. 12