415 P.3d 1034
Or.2018Background
- In 1967 Oregon enacted the Multistate Tax Compact (MTC) as ORS 305.655, incorporating apportionment rules (Article IV) and an election to choose those rules (Article III); Oregon had adopted UDITPA in 1965, which initially used the same apportionment formula.
- Over time Oregon amended its UDITPA apportionment (shifting weight to sales), culminating in statutes favoring single-sales-factor apportionment by 2005.
- In 1993 the legislature enacted ORS 314.606 (Or. Laws 1993, ch. 726, § 20) providing that, where UDITPA conflicts with ORS 305.655, UDITPA controls—effectively eliminating the Article III election.
- Health Net filed refund claims for tax years 2005–2007, arguing ORS 305.655 created contractual rights (an interstate compact) and that the 1993 statute impaired those contract rights in violation of state and federal contract clauses.
- The Tax Court granted summary judgment for the Department, holding ORS 305.655 created statutory, not contractual, obligations (and that any purported contract would be illusory because states can withdraw).
- The Oregon Supreme Court affirmed, concluding the MTC provisions at issue did not clearly and unmistakably create enforceable contractual obligations and that the 1993 act did not violate Art IV § 22 of the Oregon Constitution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ORS 305.655 (the MTC) created enforceable contractual obligations (an interstate compact) binding Oregon against later legislative modification | The 1967 statute enacted a "compact" and thus created contract rights (Article III election) that the legislature could not impair without violating contract clauses | Statutes give rise to contracts only if the legislature clearly and unmistakably intended to create contractual obligations; functionally the MTC resembles a uniform law and is mutable | Held: ORS 305.655 created statutory, not contractual, obligations; no clear and unmistakable legislative intent to create enforceable contract rights |
| Whether 1993 enactment (ORS 314.606) that made UDITPA control in conflicts with ORS 305.655 violated state and federal Contract Clauses by impairing a contract | Taxpayer: 1993 law impaired contractual rights created by ORS 305.655 and thus violated state and federal contract clauses | Department: No contract existed; even if compact, parties retained sovereign authority to amend or withdraw; taxpayer not entitled as third‑party beneficiary | Held: Contract-clause claims fail because no contractual obligation was formed enforceable against the State |
| Whether the 1993 act violated Oregon Const. Art. IV, § 22 by failing to set out the full text of ORS 305.655 when it altered the effect of that statute | Taxpayer: The 1993 act revised/amended ORS 305.655 without reproducing its text, violating § 22 | Department: The 1993 law impliedly repealed conflicting parts and is a complete legislative choice not subject to § 22's text‑inclusion requirement | Held: No violation of Art. IV, § 22; the 1993 act was a "complete and perfect" legislative expression and need not set out the repealed statute text |
| Whether taxpayer qualified as an intended third‑party beneficiary of any compact term enforceable against Oregon | Taxpayer: As the beneficiary of Article III election and Article IV apportionment, it may enforce the compact/apportionment | Department: Taxpayer is at most an incidental beneficiary and cannot enforce state legislative commitments; compact (if any) does not unmistakably grant taxpayers enforceable rights | Held: Taxpayer is not an intended third‑party beneficiary entitled to enforce the apportionment provisions |
Key Cases Cited
- U.S. Steel Corp. v. Multistate Tax Comm'n, 434 U.S. 452 (1978) (Compact Clause analysis; MTC functions like uniform model law rather than a Compact requiring congressional consent)
- Gillette Co. v. Franchise Tax Bd., 62 Cal.4th 468 (2015) (state high court: MTC created statutory rights, not immutable contractual obligations)
- Kimberly‑Clark Corp. v. Commissioner of Revenue, 880 N.W.2d 844 (Minn. 2016) (statute gives rise to contract only in "unmistakable terms"; MTC did not create immutable contract rights)
- Moro v. State of Oregon, 357 Or. 167 (2015) (Oregon standard: statutes are contractual only if legislature "clearly and unmistakably" expressed intent)
- General Motors Corp. v. Romein, 503 U.S. 181 (1992) (federal courts give deference to state courts on existence/terms of state‑law contracts)
- Warren v. Crosby, 24 Or. 558 (1893) (Art. IV § 22 does not apply to acts that implicitly repeal prior statutes; an act may be "complete and perfect" without reproducing text it repeals)