FILED: March 9, 2006
IN THE SUPREME COURT OF THE STATE OF OREGON
LINDA BURGIN
and CHRISTIANA COUGHLIN,
Petitioners,
v.
HARDY MYERS,
Attorney General,
State of Oregon,
Respondent.
(SC S52993)
HARVEY MATHEWS,
Petitioner,
v. 
HARDY MYERS,
Attorney General,
State of Oregon,
Respondent.
(SC S52996)
En Banc
On petitions to review ballot title.
Submitted on the record January 12, 2006.
Margaret S. Olney, Portland, filed the petition for
petitioners Linda Burgin and Christina Coughlin.  James M. Brown,
Salem, filed the petition for petitioner Harvey Mathews.
Anna M. Joyce, Assistant Attorney General, Salem, filed the
answering memorandum for respondent.  With her on the answering
memorandum were Hardy Myers, Attorney General, and Mary H.
Williams, Solicitor General.
CARSON, J.
Ballot title referred to Attorney General for modification. 
CARSON, J.
This ballot title review proceeding, brought under ORS
250.085(2), concerns the Attorney General's certified ballot
title for a proposed initiative measure that the Secretary of
State has denominated as Initiative Petition 83 (2006).  The
proposed measure, if adopted, would require Oregon corporations
to include in their calculation of Oregon taxable income certain
income that can be excluded when calculating federal taxable
income and would disallow certain deductions that are permitted
when calculating federal taxable income.  Petitioners are
electors who timely submitted written comments to the Secretary
of State concerning the Attorney General's draft ballot title and
who are entitled, therefore, to seek review of the resulting
certified ballot title in this court.  See ORS 250.085(2)
(stating that requirement).  We review the Attorney General's
certified ballot title to determine whether it substantially
complies with the requirements of ORS 250.035(2).  ORS
250.085(5).  For the reasons that follow, we conclude that it
does not, and we refer the ballot title to the Attorney General
for modification.
The proposed measure is set out in its entirety in the
Appendix, and we briefly describe its substantive provisions
here.  The proposed measure would require a corporation to
include in its calculation of Oregon taxable income certain
income that federal law authorizes to be excluded when
calculating federal taxable income.  Current Oregon corporate
taxation mirrors federal corporate income taxation, because the
legislature has chosen to adopt by reference "[t]hose portions of
the Internal Revenue Code, and any other laws of the United
States pertaining to the determination of taxable income of
corporate taxpayers[.]"  ORS 317.013(1).  In doing so, the
legislature intended "[t]o make the Oregon corporate excise tax
law, insofar as it relates to the measurement of taxable income,
identical to the provisions of the federal Internal Revenue Code
* * * to the end that taxable income of a corporation for Oregon
purposes is the same as it is for federal income tax purposes,
* * * subject to the additions, subtractions, adjustments and
modifications contained in * * * [ORS] chapter [317]."  ORS
317.018(1).  The proposed measure would add further modifications
to those already listed in chapter 317, such that certain
deductions or exclusions allowed in the Internal Revenue Code
could not be permitted when calculating Oregon corporate taxable
income.  
The Attorney General certified the following ballot
title: 

"STATE INCOME CALCULATION MUST INCLUDE
CERTAIN INCOME THAT WAS EXCLUDED AND DEDUCTED
UNDER FEDERAL LAW
"RESULT OF 'YES' VOTE: 'Yes' vote increases Oregon
taxable income by adding back amount of certain
deductions or exclusions from federal gross income
allowed under the Internal Revenue Code.
"RESULT OF 'NO' VOTE: 'No' vote rejects increasing
Oregon taxable income by adding back amounts of certain
deductions or exclusions from federal gross income
under the Internal Revenue Code.
"SUMMARY: Under current law, Oregon taxable income for
individuals and corporations is the federal taxable
income, subject to additions, subtractions, and
adjustments as provided in Oregon law.  Measure
increases Oregon taxable income by adding back the
amount of certain deductions from federal gross income
allowed under the Internal Revenue Code, including
amounts deducted from foreign based company income and
from income sourced within and without the United
States.  Measure requires adding back the amount earned
as foreign company income subject to high foreign tax,
earned as certain financing and banking income as
defined in the Internal Revenue Code section 954, and
earned on income sourced within and without the United
States.  Measure is effective for tax years beginning
on or after January 1, 2007.  Other provisions."

Petitioners challenge each part of the certified ballot
title.  
Petitioner Mathews argues that the Attorney General
erred by drafting a caption that "is dependent on [an]
inference[,]" by using confusing words and phrases in the result
statements, and by failing to list all the deductions that the
proposed measure would eliminate in the summary.  We have
considered those arguments, but do not deem them to require
discussion.  None is well taken.  
Petitioners Burgin and Coughlin argue primarily that
the Attorney General erred by failing to specify in the caption
that the proposed measure concerned taxes and that the Attorney
General erred by stating that the proposed measure would affect
the calculation of some individuals' taxable incomes.  For the
reasons that follow, we agree.     
ORS 250.035(2)(a) requires that the caption of a ballot
title contain a statement of not more than 15 words "that
reasonably identifies the subject matter of the state measure."
The caption is the "cornerstone for the other portions of the
ballot title" and must identify the subject matter of the
proposed measure in terms that will not "confuse or mislead
potential petition signers and voters."  Mabon v. Myers, 332 Or
633, 637, 33 P3d 988 (2001).  Additionally, the caption must not
"understate or overstate the scope of the legal changes that the
proposed measure would enact."  Kain/Waller v. Myers, 337 Or 36,
40, 93 P3d 62 (2004).  

"To determine the subject matter of a proposed
measure, we first examine its words and the changes, if
any, that the proposed measure would enact in the
context of existing law.  We then examine the words of
the caption to determine whether they reasonably
identify the proposed measure's subject matter." 

Id. at 41.  If a proposed measure contains more than one subject,
"the caption must identify each subject or, alternatively, use
other terms that more accurately convey the scope of the proposed
measure."  Greenberg v. Myers, 340 Or 65, 69, 127 P3d 1192
(2006). 
Petitioners Burgin and Coughlin argue that the caption
fails to "reasonably identif[y] the subject matter" of the
proposed measure both because the caption makes no mention of
taxes at all and, more specifically, because it fails to state
that the proposed measure would alter only corporate tax
calculations.  The Attorney General responds that the proposed
measure, in generally referring to five sections of the Internal
Revenue Code, was drafted broadly enough that it might affect
some individual taxpayers; thus, it would not be accurate to
state that the proposed measure alters only corporate tax
calculations.  
The proposed measure seeks to eliminate certain tax
deductions and exclusions; therefore, the general subject of the
proposed measure is taxes.  Failure to mention the general
subject of the proposed measure shows that the caption does not
"reasonably identif[y] the subject matter" of the proposed
measure as required under ORS 250.035(2)(a).  
Furthermore, the proposed measure would amend only ORS
chapter 317, which is known as "the Corporation Excise Tax Law of
1929."  ORS 317.005.  This court previously has stated that "it
is abundantly clear that the Excise Tax [imposed by chapter 317]
is a franchise tax that taxes corporations for the privilege of
pursuing business activities in the pursuit of gain within the
state."  Pacific First Federal v. Dept. of Rev., 308 Or 332, 336,
779 P2d 1033 (1989) (emphasis added).  Therefore, the proposed
measure will not, as the Attorney General asserts, affect
personal income taxpayers.  Failure to specify that the proposed
measure will alter only corporate tax calculations thus
overstates the scope of the legal changes that the proposed
measure would enact and could "confuse or mislead potential
petition signers and voters."  Mabon, 332 Or at 637.  In short,
the caption does not "reasonably identif[y] the subject matter"
of the proposed measure as required under ORS 250.035(2)(a).
ORS 250.035(2)(b) and (c) provide that the "yes" and
"no" vote result statements of a ballot title must describe, in
"simple and understandable" terms, the "result" if the proposed
measure is accepted or rejected.  The Attorney General's "yes"
and "no" vote result statements, like the Attorney General's
caption, fail to specify that the proposed measure would alter
only corporate tax calculations and suffer from the same defects
that we identified in the caption.  Furthermore, as petitioners
note, the "no" vote result statement simply attaches the word
"rejects" to the same summary of the proposed measure that
appears in the "yes" vote result statement.  Merely amending the
"yes" vote result statement in this case with the word "rejects" 
to create the "no" result statement does not "advance any voter's
understanding of the choice that [the] proposed measure
represents."  Nesbitt v. Myers, 335 Or 424, 432, 71 P3d 530
(2003).  Such a practice is acceptable, however, if the Attorney
General is "reasonably satisfied that he cannot compose other
possible formulations of the 'no' vote result statement that will
provide the voter with a greater amount of information."  Id. 
The Attorney General asserts that such is the case here, but we
are of the view that something further needs to be said, perhaps
focusing on the nature of the present legal regime that a "no"
vote would retain, to meet the minimal requirements of ORS
250.035(2)(c).  Something should be said about corporations
continuing to be liable for taxes in a manner consistent with
present federal law. 
ORS 250.035(2)(d) requires that a ballot title summary
be a "concise and impartial statement of not more than 125 words
summarizing the state measure and its major effect."  The purpose
of the summary is to "help voters understand what will happen if
the measure is approved."  Fred Meyer, Inc. v. Roberts, 308 Or
169, 175, 777 P2d 406 (1989).  Petitioners Burgin and Coughlin
argue that the Attorney General's summary fails to summarize the
proposed measure and its major effects because it does not
specify that the proposed measure concerns only corporate taxable
income and because "the description of how the measure works is
* * * unnecessarily complex[.]"  We agree that the Attorney
General's summary fails to specify that the proposed measure
would alter only corporate tax calculations; it therefore suffers
from the same defects that we identified in the caption and in
the result statements.  However, we do not agree with petitioners
argument that the summary is unnecessarily complex.  The proposed
measure deals with amendments to Oregon tax law, a subject that,
by its very nature, is complex.  The summary gives several
examples of how the proposed measure would operate, if approved;
those examples, although somewhat complex, "help voters
understand what will happen if the measure is approved."  Fred
Meyer, Inc., 308 Or at 175.
In conclusion, we hold that the caption, the "yes" and
"no" vote result statements, and the summary of the Attorney
General's certified ballot title do not substantially comply with
the requirements set out in ORS 250.035(2)(a), (b), (c), and (d). 
The ballot title must be referred to the Attorney General for
modification.  See ORS 250.085(8) (authorizing that disposition).
Ballot title referred to Attorney General for
modification.  

APPENDIX

SECTION 1.  Section 2 of this 2006 Act is added to
and made a part of ORS chapter 317.
Ends Tax Break for Inventory Property Sales Source
- Rule Exception ($27.0 million)
SECTION 2.  To derive Oregon taxable income, there
shall be added to federal taxable income the amount
excluded from federal taxable income for federal tax
purposes under sections 861 to 863 and 865 of the
federal Internal Revenue Code.
SECTION 3.  Section 2 of this 2006 Act applies to
tax years beginning on or after January 1, 2007.
SECTION 4.  Section 5 of this 2006 Act is added to
and made a part of ORS chapter 317.
Ends Tax Break for Deferral of Certain Financing
Income of Foreign Corporations ($9.1 million)
SECTION 5.  To derive Oregon taxable income, there
shall be added to federal taxable income the amount
excluded from federal taxable income for federal tax
purposes under section 954 of the federal Internal
Revenue Code.
SECTION 6.  Section 5 of this 2006 Act applies to
tax years beginning on or after January 1, 2007.  

