SALEM, Ore. (Legal Newsline) - The Oregon Supreme Court has referred a ballot measure asking residents to vote on a petition that would phase out taxes on higher-valued estates back to state Attorney General John Kroger for modification.
At issue is whether the attorney general's ballot measure for Initiative Petition 15 complies with Oregon law.
If enacted, the petition would add a provision to the Oregon Revised Statutes that would phase out all estate and inheritance taxes, and related tax on intra-family property transfers, that the state currently has statutory authority to collect. That is, estates worth $1 million or more.
Kroger certified the following ballot for the petition:
"Phases out estate and inheritance taxes, and any tax on property transfers between family members."
"Result of 'Yes' Vote: 'Yes' vote phases out estate/inheritance tax, tax on death-related property transfers, and tax on property transfers between certain family members; reduces state revenue."
"Result of 'No' Vote: 'No' vote retains one-time estate tax on inherited property for estates of certain value; tax on property transfers between family members in certain circumstances."
"Summary: Current state law imposes one-time tax on estate of person dying on/after Jan. 1, 2006, if estate's gross value -- determined by federal law as of Dec. 31, 2000 -- is at least $1,000,000. Current law taxes income-producing property sales, regardless of parties' relationship. Measure incrementally phases out estate/inheritance tax, tax on property transfers between 'family members' defined), and tax on property transferred in connection with person's death; prohibits imposition of such taxes on property of person dying on/after Jan. 1, 2016. Allows state to cooperate with other states and federal government in administering those entities' estate/inheritance taxes; permits fees on probate and other transactions that may occur following person's death. Measure reduces state revenues; provides no replacement. Other provisions."
The petitioners, Gail Rasmussen and Bethanne Darby, had submitted written comments to the Secretary of State concerning the content of the attorney general's draft ballot. They challenge the caption and "yes" and "no" vote result statements.
More specifically, they argue that the caption violates the relevant standards because it suggests that the measure's actual effect is far broader than it actually is.
They point out that the caption suggests the measure would phase out a tax that presently applies to all estates, when, in fact, the present estate tax applies only to estates with a gross value of $1 million or more.
The state's high court, in its Oct. 6 opinion, agreed.
"When a proposed measure is explicitly directed at changing the existing statutory scheme and its major effect will be to change that scheme, the particulars of the existing scheme may be an essential element that must be disclosed in the caption in order to inform the reader of 'the scope of the legal changes that the proposed measure would enact,'" Justice Virginia Linder wrote for the Court.
The adoption of the petition, the Court said, would represent a "fundamental shift" in the state's estate taxation scheme.
"That change represents a significant policy choice that goes to the crux of the proposed measure's effect," Linder wrote. "It is part of the subject matter of the proposed measure and must be acknowledged in the ballot title's caption, if it is possible to do so within the 15-word limit specified in ORS 250.035(2)(a)."
As for the "yes" and "no" vote results statements, the petitioners contend they fail to comply with the statutory standard because they don't inform the voter that the current estate tax is on $1 million-plus estates and that passage of the petition would eliminate that tax on those estates.
Kroger argues that the two statements, read together, will sufficiently inform any voter that the petition's phase out of estate taxes would affect only a limited number of people.
But the Court didn't buy the attorney general's argument.
"The 'yes' and 'no' statements must be modified so that, individually or together, they inform the voter that current law only taxes estates valued at $1 million or more, and that a 'no' vote will retain that scheme while a 'yes' vote will not," Linder wrote.
And while the petitioners did not challenge the petition's summary, Kroger notified the Court that recently enacted legislation may affect the accuracy of a portion of that section and should be amended.
"We acknowledge the problem that the attorney general identifies," the Court concluded. "We are remanding the certified ballot title to the attorney general for modifications to the caption and 'yes' and 'no' vote results statements (as discussed above), and we invite the attorney general to modify the summary as well."
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.