Court Opinion

ID: 9892432
Source: CourtListenerOpinion
Date Created: 2023-10-23 20:04:26.982459+00
Date Added: 2024-06-11T08:06:05.261838
License: Public Domain

Filed 10/23/23
                 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                 SECOND APPELLATE DISTRICT

                          DIVISION ONE

 ONE TECHNOLOGIES, LLC,                  B318787

        Plaintiff and Appellant,         (Los Angeles County
                                         Super. Ct. No. 21STCV21844)
        v.

 FRANCHISE TAX BOARD,

        Defendant and Respondent.

      APPEAL from a judgment of the Superior Court of
Los Angeles County, Teresa A. Beaudet, Judge. Affirmed.
      Dakessian Law, Mardiros H. Dakessian and Michael P.
Penza for Plaintiff and Appellant.
      Rob Bonta, Attorney General, Tamar Pachter, Assistant
Attorney General, Brian D. Wesley and Anna Barsegyan, Deputy
Attorneys General, for Defendant and Respondent.
                  ____________________________
       Proposition 39, enacted by voters in 2012, established a
program to promote the creation of clean energy jobs. To fund
this program, the proposition raised taxes on some multistate
businesses by eliminating the option to apportion California tax
based on a combination of a business’s California property,
payroll, and sales. Instead, under Proposition 39, a multistate
business must apportion its tax based on a single factor—in-state
sales. The proposition further provided for cable companies
spending $250 million or more in California on certain
expenditures to exclude half of their in-state sales when
apportioning, thus lowering their tax burden under the single-
factor tax regime.
       In 2017, plaintiff One Technologies, LLC, a Texas-based
provider of credit score and credit reporting services, paid tax to
California calculated under the single-factor method. Plaintiff
then filed a complaint for refund against defendant and
respondent Franchise Tax Board (the Board). Plaintiff alleged
Proposition 39 was invalid under the single-subject rule for ballot
initiatives, because the special tax treatment for cable companies
had no reasonable connection to the proposition’s purpose of
funding the creation of clean energy jobs, and therefore the
proposition impermissibly addressed two unrelated subjects. The
trial court disagreed and sustained the Board’s demurrer.
       We hold Proposition 39 did not violate the single-subject
rule. The purpose of the proposition was to fund a clean energy
job creation program by raising taxes on some multistate
businesses. The provisions of the proposition were both
reasonably germane and functionally related to that purpose,
because those provisions established a funding mechanism and
the means of directing that funding to clean energy job creation.

                                    2
The special rules for cable companies reflect a determination by
the proposition’s drafters that some businesses should bear the
funding burden more than others, but that is still within the
scope of the proposition’s purpose. We reject plaintiff’s
contentions that the ballot materials for Proposition 39 were
deceptive or that the proposition constituted “logrolling.”
      Accordingly, we affirm.

                        BACKGROUND

1.    Taxation of multistate businesses prior to
      Proposition 39
       “When a business earns income in multiple jurisdictions,
apportionment is necessary to avoid tax duplication or other
inequity.” (The Gillette Co. v. Franchise Tax Bd. (2015)
62 Cal.4th 468, 473.) In California, the Uniform Division of
Income for Tax Purposes Act (Rev. & Tax. Code,1 § 25120 et seq.)
governs the apportionment of taxable income earned by
multistate businesses, that is, businesses that earn a portion of
their income in the state and a portion outside the state. (Ibid.;
see §§ 25101, 25128, subd. (d)(6) [defining an “[a]pportioning
trade or business” as, inter alia, one whose income “is derived
from or attributable to sources both within and without the
state”].)
       Prior to the enactment of Proposition 39, multistate
businesses, with certain exceptions, could choose between two

      1Further unspecified statutory citations are to the
Revenue and Taxation Code.

                                   3
apportionment methods.2 The first method was based on three
factors: (1) the value of the business’s real and personal property
owned or rented in the state, (2) the amount of the business’s
payroll paid in the state, and (3) the business’s sales in the state.
(§§ 25128, subd. (a), 25129, 25132, 25134.) Under this three-
factor apportionment method, sales, except for sales of tangible
personal property,3 were deemed to be “in this state” if “[t]he
income-producing activity” was performed entirely in the state, or
more of “[t]he income-producing activity” was performed in the
state than in any other jurisdiction. (Former § 25136,
subds. (a)(1)–(2) (Stats. 2010, ch. 721, § 27).)
       The second apportionment method was based on a single
factor, the business’s sales in the state. (Former § 25128.5,
subds. (a)–(b) (Stats. 2009, ch. 544, § 8).) Under this method, in-
state sales were defined differently than under the three-factor
apportionment method. Rather than basing sales on where the
“income-producing activity” was “performed” (former § 25136,
subd. (a)), the single-factor apportionment method based sales on
the location of the purchaser or the purchased property.
Specifically, sales for services were considered in-state “to the
extent the purchaser of the service received the benefit of the

      2  Both before and after Proposition 39, multistate
agricultural, extractive, savings and loan, and banking and
financial businesses have had to apportion their tax liability
using a three-factor method specific to those industries. (§ 25128,
subds. (b), (c).) These businesses could not and cannot choose a
single-factor apportionment method.
      3  Sales of tangible personal property are governed by
section 25135, which was not affected by Proposition 39 and
is not at issue in this case.

                                     4
service in this state,” and sales of intangible property were
considered in-state “to the extent the property is used in this
state.” (Former § 25136, subd. (b)(1)–(2).) Similarly, “[s]ales
from the sale, lease, rental, or licensing of real property” and
“[s]ales from the rental, lease, or licensing of tangible personal
property” were considered in-state if the property was located in
the state. (Id., subd. (b)(3)–(4).)

2.    Proposition 39
       Voters approved Proposition 39 in the November 6, 2012
general election. As expressed in the proposition’s findings and
declarations, its drafters were concerned that the state’s
apportionment scheme “discourages multistate companies from
locating jobs in California, and puts job-creating California
companies at a competitive disadvantage.” The drafters noted
that, “[t]o address this problem, most other states have changed
their laws to tax multistate companies on the percent of sales in
that state, a tax approach referred to as the ‘single sales factor.’ ”
The drafters declared that according to the Legislative Analyst’s
Office, adopting the single sales factor approach would increase
state revenues “by as much as $1.1 billion per year and create a
net gain of 40,000 California jobs.” Further, “by dedicating a
portion of increased revenue to job creation in the energy
efficiency and clean energy sectors, California can create tens of
thousands of additional jobs right away,” and “[a]dditional
revenue would be available to public schools consistent with
current California law.” (Prop. 39, § 1.)
       Accordingly, Proposition 39 amended the Revenue and
Taxation Code to remove three-factor apportionment as an
option, thus requiring multistate businesses that previously
could choose between three-factor and single-factor

                                      5
apportionment to calculate their California tax liability using
single-factor apportionment, with in-state sales determined based
on the location of the purchaser or the purchased property.
(§§ 25128.7, 25136; Prop. 39, §§ 6, 8.)4
       Proposition 39 did not impose the single-factor
apportionment method equally across all multistate businesses
that previously could choose to calculate their tax under the
three-factor method. The proposition placed a lower tax burden
on certain companies operating “cable systems” and meeting
other criteria. (§ 25136.1, subds. (a)(1), (b)(1)–(2); Prop. 39, § 9.)
Specifically, for purposes of determining their in-state sales,
qualified cable companies could treat 50 percent of their in-state
sales as out-of-state, thus reducing their California taxable
income. (§ 25136.1, subd. (a)(1).) To qualify for this reduced tax
burden, a cable company must make “expenditures attributable
to this state” of at least $250 million for “tangible property,
payroll, services, franchise fees, or any intangible property
distribution or other rights.” (§§ 25136.1, subds. (b)(2)(A), (C)(5)–
(6).)
       In addition to amending the Revenue and Taxation Code,
Proposition 39 added a new Division 16.3 to the Public Resources
Code. (Prop. 39, § 2.) This division created the Clean Energy Job
Creation Fund (Job Creation Fund), and directed that it be
funded with $550 million from the general fund for each of the
subsequent five fiscal years from 2013 to 2017. (Pub. Resources
Code, § 26205.) In the event the estimated annual increase in

      4 Proposition 39 repealed former sections 25128.5 and
25136 as of December 1, 2013, and expressly limited the three-
factor apportionment method under section 25128 to taxable
years prior to January 1, 2013. (Prop. 39, §§ 4–5, 7.)

                                     6
revenue from the tax changes enacted under Proposition 39 fell
short of $1.1 billion per year, as determined by the Department of
Finance and the Legislative Analyst, “the amount transferred to
the Job Creation Fund shall be decreased to an amount equal to
one-half of the estimated annual increase in revenues” generated
by Proposition 39. (Pub. Resources Code, § 26208.) Division 16.3
listed the types of projects to be funded by the Job Creation Fund,
outlined certain criteria for those projects, and created a Citizens
Oversight Board to monitor the fund’s expenditures. (Pub.
Resources Code, §§ 26205, subds. (a)–(c), 26206, 26210.)

3.    Proposition 39 ballot materials
       The Attorney General’s official title for Proposition 39 was
“Tax Treatment for Multistate Businesses. Clean Energy and
Energy Efficiency Funding. Initiative Statute.” (Voter
Information Pamp., Gen. Elec. (Nov. 6, 2012) Attorney General’s
Official Title and Summary for Prop. 39, p. 68 (Voter Guide),
boldface & some capitalization omitted.) Its drafters named it
“The California Clean Energy Jobs Act.” (Voter Guide, text of
Prop. 39, p. 125).)
       The Attorney General’s summary explained that the
proposition would (1) require multistate businesses to calculate
their tax liability based on their percentage of California sales,
(2) repeal existing law allowing businesses to “choose a tax
liability formula that provides favorable tax treatment for
businesses with property and payroll outside California” (i.e.,
three-factor apportionment), and (3) dedicate $550 million
annually for five years from the anticipated increase in revenue
to fund projects “that create energy efficiency and clean energy
jobs in California.” (Voter Guide, Attorney General’s Official
Title & Summary for Prop. 39, p. 68.) The Attorney General

                                    7
summarized the Legislative Analyst’s estimate of fiscal impact,
stating there would be an increase of approximately $1 billion in
annual revenues, “growing over time,” because the elimination of
the three-factor apportionment formula “would result in some
multistate businesses paying more state taxes.” (Ibid.) About
half of the increased revenue over the subsequent five years
“would be dedicated to energy efficiency and alternative energy
projects,” and “a significant portion” of remaining revenues
“likely would be spent on public schools and community colleges.”
(Ibid.)
       The Legislative Analyst’s analysis of Proposition 39 began
with a summary of then-current law, describing the three-factor
and single-factor apportionment methods and stating that
multistate businesses could “choose the method that is most
advantageous to them for tax purposes.” (Voter Guide,
Legislative Analyst’s analysis of Prop. 39, pp. 68–69.) The
Legislative Analyst briefly described existing state programs to
reduce energy consumption, and further explained how under
certain provisions of state law an increase in state tax revenues
could lead to the Legislature increasing the “minimum
guarantee” for public school funding. (Id. at p. 69.)
       The Legislative Analyst then explained that under
Proposition 39, multistate businesses would no longer be able to
choose the most advantageous apportionment method, and
instead would be subject to the single-factor method. (Voter
Guide, Legislative Analyst’s analysis of Prop. 39, p. 69.) The
Legislative Analyst stated, “This measure also includes rules
regarding how all multistate businesses calculate the portion of
some sales that are allocated to California for state tax purposes.

                                    8
These include a set of specific rules for certain large cable
companies.” (Ibid., italics added.)
       The Legislative Analyst described the Clean Energy Job
Creation Fund and how it would be funded for five years by half
of the revenues “raised by moving to a mandatory single sales
factor.” (Voter Guide, Legislative Analyst’s analysis of Prop. 39,
p. 70.) The Legislative Analyst provided a chart indicating the
estimated effects of Proposition 39 on state revenues and
spending. The Legislative Analyst also explained “[t]he increased
revenues would come from some multistate businesses paying
more taxes.” (Id. at pp. 70–71.) In addition to funding the Job
Creation Fund, the Legislative Analyst explained that the
increased revenue would be considered in calculating the annual
minimum guarantee for school funding, likely increasing that
guarantee by hundreds of millions of dollars. (Id. at p. 71.)
       The voter information guide contained the full text of
Proposition 39, which consisted of approximately four and a half
pages of double-column text. (Voter Guide, text of Prop. 39,
pp. 125–129.)

4.    Complaint and demurrer
      On June 11, 2021, plaintiff filed a complaint against the
Board challenging the validity of Proposition 39 and demanding a
tax refund for 2017.
      Plaintiff alleged the following: Plaintiff is a limited liability
company organized under the laws of Delaware, with its principal
place of business in Dallas, Texas. In 2017 it “sold credit-score
and credit-report services directly to consumers throughout the
United States, including in the State of California.” Using single-
factor apportionment, plaintiff paid $31,574 in California taxes
for that year, plus $7.05 in interest and $812.29 in penalties

                                      9
related to estimated tax payments. After paying its taxes,
plaintiff recalculated its tax liability using the three-factor
apportionment method repealed by Proposition 39. Under that
method, plaintiff owed nothing in California taxes apart from a
minimum franchise tax liability of $800. Plaintiff subsequently
claimed a tax refund, a claim the Board implicitly rejected by not
responding.
       Plaintiff alleged it was entitled to choose three-factor
apportionment because Proposition 39 violated the single-subject
rule for ballot initiatives and therefore was invalid. Specifically,
plaintiff alleged Proposition 39 consisted of three components—
the Clean Energy Job Creation Fund, the elimination of three-
factor apportionment, and the provision reducing tax liability for
cable companies, which plaintiff dubbed the “Cable Company Tax
Break.” Plaintiff claimed “no single subject, object, or purpose
unites” these three components. Assuming the purpose of the
proposition was to raise revenue to create clean energy jobs,
plaintiff contended the “Cable Company Tax Break” had no
relation to that purpose because it would reduce, not increase,
revenue. If instead the purpose of the proposition was to modify
the taxation scheme for multistate businesses, plaintiff claimed
the Job Creation Fund was unrelated to that purpose.
       The Board demurred to the complaint, arguing that “[e]ach
of [Proposition 39’s] provisions [is] clearly functionally related to,
and promote[s], the initiative’s purpose by changing the tax
treatment of multistate companies to generate increased revenue,
approximately 50% of which was used to fund additional jobs in
the energy efficiency and clean energy sectors for a period of five
years.” The Board contended the reduced tax burden on cable
companies spending $250 million or more in the state “was

                                    10
auxiliary to, and promoted the main purpose of Proposition 39 by
providing a comprehensive tax reform package for multistate
businesses which would generate sufficient revenue to fund the
[Job Creation Fund].” To the extent the special cable company
rules reduced the revenue that otherwise might be available, the
Board argued it was beyond the trial court’s purview to evaluate
the wisdom of a particular provision of an initiative, particularly
when the Legislative Analyst had determined Proposition 39 “as
a whole[ ] would increase state revenues.”
      Plaintiff opposed the demurrer, reasserting its contention
that Proposition 39 violated the single-subject rule, and further
arguing the inclusion of the special tax rules for cable companies
was “deceptive” and constituted “logrolling.”
      The trial court sustained the Board’s demurrer without
leave to amend, concluding Proposition 39 did not violate the
single-subject rule. The court found the changes to taxation of
multistate businesses under Proposition 39 were related to the
Job Creation Fund because the former funded the latter. The
special rules for cable companies spending $250 million or more
in the state were part of the overall tax reform, and the
requirement that those companies meet the $250 million
expenditure requirement to qualify for tax reduction “would
encourage, not discourage, them from locating jobs in California.”
The court found the efficacy of the cable company provision was
not a proper concern in evaluating a single-subject challenge, nor
was the inclusion of that provision deceptive.
      The trial court entered judgment in favor of the Board on
February 3, 2022. Plaintiff timely appealed.

                                   11
                   STANDARD OF REVIEW
      “ ‘We independently review [a] ruling on a demurrer and
determine de novo whether the pleading alleges facts sufficient to
state a cause of action.’ [Citation.] ‘[W]e accept as true the well-
pleaded allegations in [the] . . . complaint. “ ‘We treat the
demurrer as admitting all material facts properly pleaded, but
not contentions, deductions or conclusions of fact or law.
[Citation.]’ ” ’ [Citation.] ‘ “We are not bound by the trial court’s
reasoning and may affirm the judgment if correct on any
theory.” ’ [Citation.]” (Los Angeles Waterkeeper v. State Water
Resources Control Bd. (2023) 92 Cal.App.5th 230, 264.)
      We review the trial court’s decision not to grant leave to
amend for abuse of discretion. (See Childhelp, Inc. v. City of
Los Angeles (2023) 91 Cal.App.5th 224, 235.) “ ‘[W]e must decide
whether there is a reasonable possibility the plaintiff could cure
the defect with an amendment. [Citation.] If we find that an
amendment could cure the defect, we conclude that the trial court
abused its discretion and we reverse; if not, no abuse of discretion
has occurred. [Citation.] The plaintiff has the burden of proving
that an amendment would cure the defect.’ [Citations.]” (Ibid.)

                          DISCUSSION

A.    The Single-subject Rule
      The single-subject rule arises from article II, section 8,
subdivision (d) of the California Constitution, which provides,
“An initiative measure embracing more than one subject may not
be submitted to the electors or have any effect.” “Among other
purposes, the single-subject requirement was enacted to
minimize the risk of voter confusion and deception.” (Amador

                                    12
Valley Joint Union High Sch. Dist. v. State Bd. of Equalization
(1978) 22 Cal.3d 208, 231.)
       Because “the initiative process occupies an important and
favored status in the California constitutional scheme,” “the
single-subject requirement should not be interpreted in an
unduly narrow or restrictive fashion that would preclude the use
of the initiative process to accomplish comprehensive, broad-
based reform in a particular area of public concern.” (Briggs v.
Brown (2017) 3 Cal.5th 808, 828 (Briggs).) “ ‘ “[T]he
Constitution’s initiative and referendum provisions should be
liberally construed to maintain maximum power in the people.” ’
[Citations.]” (Id. at p. 827.) “We have declared it ‘our solemn
duty to jealously guard the precious initiative power, and to
resolve any reasonable doubts in favor of its exercise.’ [Citation.]”
(Ibid.) “ ‘ “[A]ll presumptions and intendments favor the validity
of a statute and mere doubt does not afford sufficient reason for a
judicial declaration of invalidity. Statutes must be upheld unless
their unconstitutionality clearly, positively, and unmistakably
appears.” [Citations.] If the validity of the measure is “fairly
debatable,” it must be sustained. [Citations.]’ [Citation.]” (Id. at
p. 828.)
       Applying the above principles, our Supreme Court has
identified two tests for compliance with the single-subject rule.
Under the first test, “ ‘ “ ‘[a]n initiative measure does not violate
the single-subject requirement if, despite its varied collateral
effects, all of its parts are “reasonably germane” to each other,’
and to the general purpose or object of the initiative.
[Citations.]” ’ [Citation.] The ‘reasonably germane’ standard is
applied ‘in an accommodating and lenient manner so as not to
unduly restrict . . . the people’s right to package provisions in a

                                    13
single bill or initiative.’ [Citations.]” (Briggs, supra, 3 Cal.5th at
pp. 828–829, italics omitted.) Our high court has clarified that
the requirement that an initiative’s parts be germane to one
another as well as the overall purpose of the initiative is not in
fact a distinct requirement—rather, “a measure’s separate
provisions have been considered to be reasonably germane to
each other within the meaning of the standard so long as all of
the provisions are reasonably germane to a single common
theme, purpose, or subject.” (Californians for an Open Primary v.
McPherson (2006) 38 Cal.4th 735, 764, fn. 29.)
       Under the second test, an initiative complies with the
single-subject rule if its provisions are “functionally related.”
(Harbor v. Deukmejian (1987) 43 Cal.3d 1078, 1100 (Harbor) [“a
measure complies with the [single-subject] rule if its provisions
are either functionally related to one another or are reasonably
germane to one another or the objects of the enactment”];5 see
Brosnahan v. Brown (1982) 32 Cal.3d 236, 249 (Brosnahan)
[interdependent provisions are “one type of multifaceted
legislation which would meet the single subject test,” italics
omitted].)
       In applying the single-subject rule, “ ‘ “We do not consider
or weigh the economic or social wisdom or general propriety of

      5  Harbor concerned the single-subject rule applicable to
legislative enactments, but it derived the “functionally related”
test from case law concerning the single-subject rule for ballot
initiatives. (See Harbor, supra, 43 Cal.3d at pp. 1095, 1098–
1100.) Harbor cited authority that “the same principles apply to
the single subject rule relating to initiatives as to legislative
enactments.” (Id. at p. 1098, citing Perry v. Jordan (1949)
34 Cal.2d 97, 92–93.)

                                    14
the initiative. Rather, our sole function is to evaluate [it] legally
in the light of established constitutional standards.” ’
[Citations.]” (Briggs, supra, 3 Cal.5th at p. 828.)

B.    Proposition 39 Does Not Violate the Single-subject
      Rule
       The purpose of Proposition 39 was to fund a clean energy
job creation program by raising taxes on some multistate
businesses. This purpose was reflected in the Attorney General’s
official title, “Tax Treatment for Multistate Businesses. Clean
Energy and Energy Efficiency Funding. Initiative Statute.”
(Boldface & some capitalization omitted.) The provisions of
Proposition 39 were “ ‘reasonably germane’ ” to this purpose
(Briggs, supra, 3 Cal.5th at p. 829), because they provided the
mechanisms to raise tax revenues and direct them to clean
energy job creation. Similarly, those provisions were
“functionally related,” because the changes to multistate business
taxation funded the clean energy jobs program. (Harbor, supra,
43 Cal.3d at p. 1100.)
       In its opening brief on appeal, plaintiff concedes that “[i]f
the subject of Proposition 39 were the creation of clean energy
jobs,” then “[t]he Clean Energy Fund is germane to the creation
of clean energy jobs; so too is the elimination of three-factor
apportionment, as this generates the revenue that supports the
Clean Energy Fund.” Plaintiff argues, however, that the special
tax treatment for cable companies under section 25136.1 is not
reasonably germane to the creation of clean energy jobs, because
that provision reduces revenue that otherwise would be available
for the clean energy jobs program.
       Given “ ‘our solemn duty to jealously guard the precious
initiative power, and to resolve any reasonable doubts in favor of

                                     15
its exercise[,]’ [citation]” (Briggs, supra, 3 Cal.5th at p. 827), we
reject plaintiff’s parsing of Proposition 39. As set forth in our
Background, ante, Proposition 39 enacted a funding method for
clean energy job creation through what is effectively a tax
increase. In devising that funding method, Proposition 39’s
drafters chose to place the burden of that tax increase on
particular taxpayers, specifically multistate businesses that
previously had chosen three-factor apportionment to calculate
their California tax. The drafters further decided not to impose
that burden evenly across all multistate businesses that
previously could elect three-factor apportionment; the drafters
allowed cable companies expending $250 million or more in the
state to reduce their in-state sales figure by half for taxation
purposes. Why the drafters chose this approach, and the wisdom
of it, are beyond the scope of a single-subject challenge. (Briggs,
supra, at p. 828 [“ ‘ “We do not consider or weigh the economic or
social wisdom or general propriety of the initiative” ’ ”].) One
reasonably may speculate, however, that the drafters were
concerned the change in the tax scheme would have unintended,
collateral consequences for cable companies, and section 25136.1
was their solution to mitigate those consequences. What plaintiff
characterizes as a tax break is just one of many decisions the
drafters made when determining who should pay for the clean
energy jobs program, and how much each should contribute.6

      6  Arguably, the purpose of Proposition 39 could be
characterized more broadly as “job creation,” not just clean
energy job creation, in which case section 25136.1, which rewards
cable companies with payroll in California, might be consistent
with this purpose. Plaintiff argues, however, that Proposition 39
and its ballot materials did not “fairly disclose” general job

                                    16
      Plaintiff argues section 25136.1 cannot be viewed simply as
a component of the elimination of three-factor apportionment
enacted under Proposition 39 because section 25136.1 “was not
intertwined with or a necessary result of eliminating three-factor
apportionment . . . .” This is simply a rearticulation of plaintiff’s
argument that because section 25136.1 reduces tax revenue that
might otherwise be available for the clean energy jobs program, it
violates the single-subject rule, an argument we have rejected.
      Citing Kennedy Wholesale, Inc. v. State Bd. of Equalization
(1991) 53 Cal.3d 245, 253–254 (Kennedy Wholesale), plaintiff
argues that “revenue-raising and revenue-spending provisions, if
included in the same initiative, must relate to the same subject.”
Under this principle, plaintiff contends, “An initiative cannot
contain taxing provisions addressing one subject (e.g., multistate
taxation), and then use the revenue generated by the tax
provisions to address a second, unrelated subject (e.g., clean
energy jobs).”7 Plaintiff misreads Kennedy Wholesale.
      Kennedy Wholesale concerned a single-subject challenge to
Proposition 99, the Tobacco Tax and Health Protection Act of
1988, which “increases the tax on cigarettes and other tobacco

creation as its purpose. Plaintiff further contends “job creation”
is too broad a subject to satisfy the single-subject rule. Given our
conclusion that Proposition 39 satisfies the single-subject rule
even if its purpose is limited to the creation of clean energy jobs,
we need not reach plaintiff’s contentions.
      7  We observe that this argument, which plaintiff asserts in
its reply brief, would appear to contradict plaintiff’s concession in
its opening brief that elimination of three-factor apportionment is
germane to the creation of clean energy jobs under Proposition
39.

                                    17
products and allocates the resulting revenue to various tobacco-
related problems.” (Supra, 53 Cal.3d at pp. 248, 253.) Briefly
summarized, the proposition specified that the revenues from
this tax “be appropriated” for a spectrum of causes, including
school and community health education programs, tobacco-
related medical research, medical care for those who could not
afford that care and did not have coverage from private or
government sources, fire prevention, environmental conservation,
protection of wildlife habitat areas, and enhancement of “ ‘state
and local park and recreation purposes.’ [Citation.]” (Id. at
p. 254.)
       The challenger “argue[d] that Proposition 99 violates the
single-subject rule because the measure does not guarantee
that every expenditure from the fund will be related to tobacco
use. To illustrate, moneys from the fund may in some cases be
spent to assist indigent medical patients whose health problems
are not due to smoking and to improve state parks that have not
been damaged by fire.” (Kennedy Wholesale, supra, 53 Cal.3d at
p. 254.)
       Our high court rejected this argument. “Obviously, it is
possible to imagine expenditures that would fall within
Proposition 99’s spending categories without addressing tobacco-
related problems. However, the measure’s spending provisions
direct new revenues more precisely to tobacco-related problems
than if the electorate had simply omitted any such provisions.
We do not believe the voters’ failure to require even greater
precision invalidates the measure, since it is well established that
an initiative may have ‘collateral effects’ without violating the
single-subject rule.” (Kennedy Wholesale, supra, 53 Cal.3d at
p. 254.)

                                   18
       Kennedy Wholesale stands for the principle that an
initiative survives a single-subject challenge even if it does not
ensure that all revenue raised is directed at expenditures related
to the initiative’s overall purpose. The case does not hold, or even
address, whether the funding mechanism itself must relate to the
initiative’s purpose. True, the funding mechanism of the
initiative at issue in Kennedy Wholesale—an increase in tax on
tobacco products—related to the overall purpose of the
initiative—mitigating tobacco-related problems. The Supreme
Court, however, at no point suggested such concordance is
constitutionally required. Indeed, it rejected the challenger’s
single-subject attack even though the funds raised by the tobacco
product tax could be used for causes arguably not related to
tobacco products, for example, protection of wildlife habitat and
enhancement of state and local recreational parks. Kennedy
Wholesale therefore does not undercut our conclusion that
increasing taxes on multistate businesses is reasonably germane
and functionally related to the creation of clean energy jobs when
the former is used to fund the latter.
       Plaintiff argues the inclusion of special tax treatment for
cable companies in Proposition 39 was “deceptive.” Plaintiff
notes the “Cable Company Tax Break,” as plaintiff refers to it,
was not mentioned in the proposition’s findings and declarations,
the proposition’s official or proposed titles, the Attorney General’s
summary, or the arguments for or against the proposition in the
voter information guide. Although the Legislative Analyst’s
analysis mentioned the “set of specific rules for certain large
cable companies,” plaintiff argues this was insufficient to apprise
voters of the significance or content of those rules. Further,
plaintiff argues the Legislative Analyst did not calculate the

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fiscal impact of section 25136.1, which would have alerted voters
that the special tax treatment for cable companies would lead to
a loss in revenue. Plaintiff also objects that the argument in
favor of Proposition 39 characterized three-factor apportionment
as a “loophole,” without disclosing the proposition would enact a
new “loophole” for cable companies.
       As an initial matter, we note plaintiff does not argue that
the Attorney General’s title and summary, the Legislative
Analyst’s analysis, or the voter guide arguments in favor of
Proposition 39 were legally improper or deficient, and to the
extent plaintiff so implies, it cites no supporting authority. We
therefore have no basis to question the legal validity of those
materials.
       Our Supreme Court has not looked favorably on arguments
that in approving an initiative, “the voters must have been
misled or confused”—arguments which are “based upon the
improbable assumption that the people did not know what they
were doing.” (Brosnahan, supra, 32 Cal.3d at p. 252.) Rather,
courts “ ‘ordinarily should assume that the voters who approved a
[ballot proposition] “. . . have voted intelligently upon an
amendment to their organic law, the whole text of which was
supplied each of them prior to the election and which they must
be assumed to have duly considered.” ’ [Citations.]” (Ibid., italics
omitted.) “Our society being complex, the rules governing it
whether adopted by legislation or initiative will necessarily be
complex,” and voters “may not be limited to brief general
statements but may deal comprehensively and in detail with an
area of law.” (Fair Political Practices Com. v. Superior Court
(1979) 25 Cal.3d 33, 41–42 (Fair Political Practices.) “Unless we

                                   20
are to repudiate or cripple use of the initiative, risk of confusion
must be borne.” (Id. at p. 42.)
       Here, the whole of Proposition 39 was laid out in four and a
half pages in the voter information guide, a reasonable length to
expect voters to read. Like many laws, the language could be
described as technical or complex and might not be easy for a
layperson to comprehend, but as our high court has stated, we
may expect voters to “deal comprehensively and in detail with an
area of law,” lest we “repudiate or cripple use of the initiative.”
(Fair Political Practices, supra, 25 Cal.3d at pp. 41–42.) The
Legislative Analyst, moreover, expressly flagged the “specific
rules for certain large cable companies,” thus alerting voters to
review the proposition’s language for those provisions.
Proposition 39 was neither deceptive nor confusing and thus
does not raise a constitutional concern.
       Plaintiff relies on California Trial Lawyers Assn. v. Eu
(1988) 200 Cal.App.3d 351 (California Trial Lawyers), abrogated
on other grounds by Lewis v. Superior Court (1999) 19 Cal.4th
1232 to argue “Proposition 39’s inclusion of the Cable Company
Tax Break was deceptive.” (Boldface omitted.) California Trial
Lawyers does not assist plaintiff’s challenge to Proposition 39.
       California Trial Lawyers addressed a single-subject
challenge to a proposed initiative entitled the “ ‘Insurance Cost
Control Initiative of 1988.’ ” (California Trial Lawyers, supra,
200 Cal.App.3d at p. 354.) The appellate court issued a writ of
mandate prohibiting placing the initiative on the ballot because
the initiative’s section 8, regarding campaign contributions and
conflicts of interest, rendered the initiative invalid under the
single-subject rule.

                                    21
       The initiative was “lengthy, covering 120 typewritten pages
and consisting of 67 sections.” (California Trial Lawyers, supra,
200 Cal.App.3d at p. 355.) “[T]he general object and purpose of
the initiative, as stated in its title and [a provision of the
initiative entitled “Purpose”] [was] to rein in the constantly
increasing premiums charged to California purchasers of liability
insurance.” (Id. at pp. 356, 358.) To achieve this purpose, the
initiative proposed, inter alia, to establish a “no fault” system of
automobile insurance, control attorney contingency fees, require
arbitration of disputed claims, and roll back premiums for a
two-year period. (Id. at pp. 358–359.)
       Section 8 of the initiative would have added a section to the
Insurance Code providing, “ ‘Any consumer protection
organization, insurer, licensee, or trade association shall have no
greater or lesser right to make any campaign contributions to any
public official than is enjoyed by any other citizen of this state.’ ”
(California Trial Lawyers, supra, 200 Cal.App.3d at p. 356.) The
proposed new section would also have provided, “ ‘Any elected
state official who receives any lawful campaign contribution from
or the benefit of any expenditure made by any consumer
protection organization, insurer, licensee, or trade association
shall not be disqualified thereby from participating in any
decision affecting any interest of the donor.’ ” (Ibid.)
       The Court of Appeal agreed with the proposition’s
challengers that section 8 of the initiative, “which relates
exclusively to the subject of campaign contributions and conflicts
of interest of elected officials who receive such contributions,” was
not reasonably germane to the proposition’s stated purpose of
controlling insurance costs. (California Trial Lawyers, supra,
200 Cal.App.3d at p. 359.) The court reasoned that section 8

                                    22
could not be harmonized with the other provisions on the
asserted justification that they all related to the subject of “the
regulation of insurance industry practices.” (Id. at pp. 359–360.)
That “approach would permit the joining of enactments so
disparate as to render the constitutional single-subject limitation
nugatory.” (Id. at p. 360.)
       The court further held that section 8 “is a paradigm of the
potentially deceptive combinations of unrelated provisions at
which the constitutional limitation on the scope of initiatives is
aimed.” (California Trial Lawyers, supra, 200 Cal.App.3d at
p. 360.) Section 8 “is located . . . near the middle of a 120 page
document, and consists of two brief paragraphs which bear no
connection to what precedes or follows.” (Ibid.) “We believe it
extremely unlikely that the average voter or signer of a
sponsoring petition, or even one more conscientious and
sophisticated, would take the time to study the initiative in such
detail as to discover this obscure campaign funding provision.”
(Id. at p. 361.) “The significant threat that voters will be misled
as to the breadth of the initiative is heightened by the absence of
any reference to section 8 in the Attorney General’s title and
summary, or in the introductory statement of findings and
purpose in the initiative itself, set forth in full above. In the
present case, not only is there a lack of any reasonably
discernible nexus between the stated object of the initiative and
the campaign spending and conflict of interest provisions
of section 8, but the title and various descriptions of the
initiative’s contents give no clue that any such provisions are
buried within. These flaws are fatal.” (Ibid.)
       California Trial Lawyers is distinguishable in that section
8 had no discernable relationship to the other provisions of an

                                   23
initiative aimed at controlling insurance costs. In contrast, the
special tax treatment for cable companies under Proposition 39 is
part of the overall funding mechanism for the clean energy job
creation program. There also can be no comparison between the
voter materials the voters on Proposition 39 received and those
before voters in California Trial Lawyers. In that case, the
offending provision was buried in the middle of a 120-page
document, with no reference to it in the ballot materials or the
initiative’s prefatory language. In contrast, the challenged
provision in Proposition 39 was located at the end of a four-and-a-
half page document, and was specifically flagged in the
Legislative Analyst’s analysis.
       Plaintiff argues, “Proposition 39 is a classic example of
logrolling.” Logrolling occurs when “certain groupings of voters,
each constituting numerically a minority, but in aggregate a
majority, may approve a measure which lacks genuine popular
support in order to secure the benefit of one favored but isolated
and severable provision.” (Brosnahan, supra, 32 Cal.3d at
p. 250.) Plaintiff contends Proposition 39 constitutes logrolling
because it combined the special tax treatment for cable
companies, a provision it theorizes was unlikely to garner
popular support, with a more popular provision supporting clean
energy job creation. Plaintiff argues, “The goal was to change the
tax law; the [Job Creation Fund] w[as] merely [an] expedient[ ] to
that end.” Plaintiff’s argument is not consistent with our high
court’s precedent.
       Kennedy Wholesale expressly held that logrolling is not a
separate basis to invalidate an initiative—rather, “[t]he single-
subject rule is the method by which the state Constitution guards
against that hazard.” (Kennedy Wholesale, supra, 53 Cal.3d at

                                   24
p. 255.)8 We have already explained that Proposition 39 does not
violate the single-subject rule. Thus, calling inclusion of the
lower tax rate for cable companies with $250 million in California
expenditures “logrolling” does not alter what we have already
concluded, that Proposition 39 passes constitutional muster
under the single-subject rule.
      Further, our Supreme Court has “rejected the contention
that the single-subject rule requires a showing that each one of a
measure’s several provisions was capable of gaining voter
approval independently of the other provisions.” (Brosnahan,
supra, 32 Cal.3d at p. 251.) As Kennedy Wholesale observed, “The
possibility that some voters objected to some parts of a
measure . . . ‘is inherent in any initiative containing more than
one sentence . . . . .’ [Citation].” (Kennedy Wholesale, supra,
53 Cal.3d at p. 255.)
      We can conceive of no amendment that would cure the
defects in plaintiff’s complaint, nor does plaintiff propose any. In
sum, the trial court did not err in sustaining the demurrer
without leave to amend.

      8  As noted above, in Kennedy Wholesale, the Supreme
Court rejected the challenger’s single-subject attack on an
initiative that taxed tobacco products to fund a disparate range of
causes even though some of the funds could be used to ameliorate
conditions not caused by tobacco products. It did so even in the
face of arguments that the breadth of causes qualifying for
monies from the tobacco product tax was necessary to bring
together “ ‘disparate interest groups’ ” presumably to support the
initiative. (Kennedy Wholesale, supra, 53 Cal.3d at p. 255.)

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                          DISPOSITION
     The judgment is affirmed. Respondent is awarded its costs
on appeal.
     CERTIFIED FOR PUBLICATION.

                                        BENDIX, Acting P. J.

We concur:

             CHANEY, J.

             WEINGART, J.

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