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THE DAILY ASTORIAN • MONDAY, JUNE 26, 2017
Oregon House advances controversial revenue bill
By CLAIRE
WITHYCOMBE
Capital Bureau
SALEM — The state House
of Representatives Friday nar-
rowly passed legislation that
would make it harder for busi-
nesses to qualify for tax breaks
passed in 2013 as part of the
so-called “grand bargain.”
The bill, which now heads
to the Senate, puts new lim-
its on a tax cut for certain busi-
ness owners, and should it pass,
is expected to raise nearly $196
million in the next two years.
It’s a far cry from the major
tax overhaul many Oregon
Democrats called for this ses-
sion, but after a stalemate over
proposals to switch the basis for
taxing businesses from income
to sales two weeks before leg-
islators must close the books, it
now appears to be the session’s
big tax vote.
After a nearly three-hour
debate the measure passed with
31 Democrats voting in favor.
All House Republicans and
three Democrats voted against
it: state Rep. Brad Witt, of
Clatskanie; Rep. Teresa Alonso
Leon, of Woodburn; and Rep.
Caddy McKeown, of Coos
Bay. A fourth Democrat, Rep.
Deborah Boone, of Cannon
Beach, was excused.
Under current law, own-
ers of S-corporations, limited
liability companies or part-
nerships can choose to have
income “passed through” to
them from the business taxed
at a lower rate, as long as the
income they earn from the
business is “nonpassive,” the
business employs at least one
nonowner, and the nonowner
employee or employees do
at least 1,200 hours of work
in a year. By taking the lower
rate, owners give up other
deductions.
The bill the House approved
Friday would limit eligibility
for the lower income rate to
seven sectors, including agri-
culture, mining and manufac-
turing. To qualify under the
new bill, businesses would also
need to have at least 10 non-
owner employees, instead of
one.
In short, the bill means
fewer owners would be eligi-
ble to pay the lower rate, and
so some of those removed from
eligibility under the bill would
pay higher income taxes.
By tweaking the cut as the
By MATEUSZ
PERKOWSKI
Capital Bureau
A judge has ruled that
counties can’t sue the state
for financial damages, poten-
tially undermining a $1.4
billion class action lawsuit
over state logging practices.
Linn County Circuit
Court Judge Daniel Murphy
has reversed an earlier ruling
in the case, which held that
Oregon’s sovereign immu-
nity doesn’t bar counties
from seeking such damages.
In his most recent deci-
sion Tuesday, Murphy has
agreed with Oregon’s attor-
neys that counties — as sub-
divisions of the state — can-
not sue the state government
for money.
Murphy said he’s “well
aware this interpretation
contradicts” his earlier opin-
ion, but he will provide the
plaintiff counties with “the
opportunity to re-plead their
case in such a manner that is
supported by the law if they
can.”
“Like peeling a very
large onion this case con-
tains complex layers of legal
issues and theory that can
take time to unravel,” he
said.
The judge has left open
the possibility for the plain-
tiffs to seek an “equitable”
remedy, such as an injunc-
tion or order that requires
the state government to take
certain actions without pay-
ing financial damages.
However, the counties
ing
A dog so strapp
Some in favor
Many Democrats who
spoke in favor of the bill Friday
portrayed the 4-year-old policy
as hastily compiled and fail-
ing to meet its policy objective,
which was to help the state’s
small businesses create jobs.
Instead, they argued, the
break benefited “scrubs and
suits” — doctors and lawyers.
“We created yet another
giveaway to the very wealthy,”
said the bill’s carrier, Rep. Phil
Barnhart, a Democrat from
Eugene.
Democrats point to fig-
ures from the Legislative Rev-
enue Office, which found that
have repeatedly said they’re
not aiming for Oregon to
change its logging practices,
but instead seek compensa-
tion for insufficient timber
revenues.
The class action lawsuit
was filed on behalf of 14
counties that donated forest-
land to the state government
in exchange for a portion of
logging proceeds.
The counties argue that
a 1998 rule change empha-
sizes environmental and rec-
reational values over timber
harvest, thereby violating a
contract that required log-
ging to be maximized.
John DiLorenzo, attorney
for the counties, said his cli-
ents may decide to rechar-
acterize their complaint or
seek clarification from an
appellate court regarding
sovereign immunity and
other issues.
In the long term, such
an opinion would provide a
“road map” for the litigation,
DiLorenzo said.
“Maybe we’re better off
having clear declarations
from the appellate courts on
what the law is,” he said.
The EO Media Group/
Pamplin Media Group Cap-
ital Bureau was unable to
reach an attorney represent-
ing Oregon in the case.
Ralph Bloemers, an envi-
ronment attorney with the
Crag Law Center, said that
Murphy’s latest ruling has
effectively “torpedoed” the
counties’ lawsuit.
“In essence, he’s grant-
ing the motion to dismiss
for sovereign immunity,”
Bloemers said, adding that
he expected the state’s attor-
neys to refile a motion for
the complaint to be thrown
out.
Comments
accepted about
parking lot
expansion plans
By KATIE
FRANKOWICZ
The Daily Astorian
The Warrenton Kia car
dealership has applied for a
fish passage exemption in a
project to expand its park-
ing lot.
The Oregon Department
of Fish and Wildlife says the
unnamed tributary this proj-
ect effects eventually drains
into the Columbia River
via Youngs Bay, but is not
important to fish passage. No
fish appear to use the site, a
department analysis states.
Fish and Wildlife is seek-
ing public comment on the
proposed exemption. Unless
the department receives new
information that would give
them pause, the exemption
request will be approved and
Warrenton Kia’s plans to
expand the parking lot will
proceed, state officials say.
The state issues few
such exemptions, said Greg
Apke, the Fish and Wildlife’s
fish-passage program coor-
dinator. And when the state
does issue them, the exemp-
tions are rarely popular.
“Nobody likes these
exemptions and I get that
completely,” Apke said. But,
he added, they are completely
legal and viable when site
conditions are appropriate.
The state rules are clear,
he said. To qualify for the
exemption, Warrenton Kia
has to show that native fish
wouldn’t benefit even if
the stream was open to fish
passage.
“The proposed project
at the Warrenton Kia site
undoubtedly meets this cri-
y
e
w
e
D
you’ve got a lot of constituents
that are going to be damaged
by this.”
For a period, the debate over
the bill took a detour as legisla-
tors debated whether it required
a simple majority or a three-
fifths majority.
The distinction, trivial at
first glance, is actually essential
when it comes to the Legisla-
ture’s efforts to raise new taxes
this session.
Under the Oregon Constitu-
tion, measures raising revenue
require a three-fifths majority
approval in both the House and
Senate.
Democrats have a simple
majority in both chambers, but
are one seat shy of that three-
fifths majority in both. So,
assuming all Democrats vote
for a revenue-raising policy, in
order to pass, it needs at least
one Republican signing on.
At issue Friday was whether
the partial repeal of the tax cut
qualified as “raising revenue.”
The debate over that
question
quickly
turned
philosophical.
“They call a tax rate cut
an expenditure,” said House
Minority
Leader
Mike
McLane, R-Powell Butte, “As
if somehow the premise is that
the government owns your
money.”
But a legislative coun-
sel opinion Thursday says
otherwise.
“ … We view (the bill) as
adjusting the parameters of a
tax benefit rather than enacting
a new tax,” Legislative Counsel
Dexter Johnson wrote in a let-
ter addressed to House Speaker
Tina Kotek of Portland.
And some Democrats sug-
gested it was fiscally irre-
sponsible to maintain what a
spokesman for the House Dem-
ocratic Caucus called a “run-
away tax break,” or money that
would otherwise be taxed and
an amount that is projected to
continue growing.
Kotek, in a speech toward
the end of Friday’s floor ses-
sion, said the policy did not
have the “targeted effect” of
incentivizing small businesses
to hire more people.
“We’re not eliminating this
break,” Kotek said. “We’re try-
ing to fix it and make it more
targeted.”
The Capital Bureau is a col-
laboration between EO Media
Group and Pamplin Media
Group.
terion,” an analysis by Fish
and Wildlife concludes, “due
to the developed nature of the
area, poor habitat and lack of
fish at the project site, and no
habitat available upstream.”
The stream affected by
Warrenton Kia’s plans may
have once been a tidal stream
or channel, years before the
area was developed. Now
it is essentially a drainage
ditch, choked with weeds
and algae, that dips under
roads and eventually hits a
tide gate. If fish were inter-
ested in the stream, that tide
gate completely blocks entry
90 percent of the time any-
way, Apke said. The water in
it now comes from runoff; it
is not fed by stream channels.
“Habitat conditions are
very poor, especially in the
summer with very little or
no flow,” the analysis states.
“… Winter conditions would
offer slightly better water
quality, but habitat condi-
tions overall would still be
poor.”
Any proposed exemption
must also pass muster with
the state’s Fish Passage Task
Force, which makes recom-
mendations on whether the
department should or should
not approve a request for
exemption.
For more information and
for the department’s bene-
fit analysis, visit www.dfw.
state.or.us/fish/passage.
People will have until
July 14 to submit written
comments on the proposed
plan. Comments or requests
for additional information
can be sent to Greg Apke,
ODFW Fish Passage Pro-
gram leader, 4034 Fairview
Industrial Drive SE, Salem,
OR 97303; or by email to
Greg.D.Apke@state.or.us; or
by calling (503) 947-6228.
Oregon Department of Fish and Wildlife
The culvert exit and ditch to be filled adjacent to Warren-
ton Kia was found to have poor water quality and habitat
conditions.
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in 2015, over 90 percent of
beneficiaries made more than
$200,000 per year, and that
more than 70 percent made at
least $500,000.
Rep. Janelle Bynum,
D-Happy Valley, said Oregon’s
economy was thriving before
the tax break was passed in
2013.
“Why is small business
thriving?” Bynum said. “It’s
not because of this tax break.”
Conversely, many Repub-
licans cast the legislation as a
broken promise to the state’s
small businesspeople.
Rep. Sherrie Sprenger, a
Republican from Scio, said the
law could advance the state’s
“urban-rural divide,” and said
the state would be hard-pressed
to find a small agricultural busi-
ness that employed at least 10
people year-round.
Rep. Carl Wilson, R-Grants
Pass, appealed to legislators’
self-interest and said the tax
would not be popular among
voters.
“This is not going to play
well in your district, you know
it won’t,” Wilson said. “ … I’m
talking from Brooks to Port-
land, and from Grants Pass to
Roseburg and Cottage Grove,
Warrenton Kia applies for pass on fish passage
Judge reverses key
ruling in $1.4 billion
timber class action
Counties can’t
seek financial
damages
bill outlines, the state would
collect about $196 million
more in taxes in the next two-
year budget.
That’s a significant figure in
light of a projected gap of about
$1.4 billion between revenues
and expenses in the upcoming
state budget.
That figure was partially
closed by an assessment on
health care providers passed
by the legislature Wednesday,
which is projected to narrow
the gap by at least $600 million,
according to impact estimates.
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