Oregon Advisory Opinions July 31, 1981: OAG 81-64 (July 31, 1981)

OAG 81-64.

We are asked whether A-Engrossed Senate Bill 857,(fn1) now under consideration by the Oregon legislature, would violate the Oregon or United States Constitutions were it enacted into law.

ORS 316.102 now grants a tax credit against Oregon personal income taxes for political contributions. A credit is allowed for one half of the total contribution, but not more than $25 for a separate return or $50 for a joint return, and not more than the liability of the taxpayer. ORS 316.102(2)(a), (b).

A-Engrossed SB 857 would modify the eligibility requirements for the tax credit. Credits for political contributions would be available only if the recipient candidate or political committee (etc.) has filed a voluntary declaration of limitation on campaign expenditures with the Secretary of State. The declaration by a candidate must state that the candidate will not spend more than an amount specified in sec 3(2) of

the bill on his or her campaign, the amount depending on the office sought, and will not contribute to any other candidate or political committee (etc.) which has not filed a declaration. The declaration by political committees (including trusts, associations and organizations) must state that expenditures will be made only as contributions to candidates who have filed declarations or who are running for offices not covered by the law, or in support of or opposition to ballot measures.

If a declaration is filed and then breached, sec 6 of the bill requires payment to the state equal to the total amount of tax credits offered to contributors on the basis of receipts issued by the breaching party, and half of the amount of any contributions received from a candidate, committee or other organization that filed a declaration under the bill and complied with the declaration. Failure to pay the penalty would be punishable by fine of not more than $1,000. A-Eng SB 857, sec 8.

In 39 Op Atty Gen 754 (1979), we concluded that essentially the same legislation introduced in the 1979 session of the legislature probably would have been constitutional had it been enacted. Since the question presented is identical, this opinion is a re-examination of our earlier position.

Article II, sec 8 of the Oregon Constitution grants the legislature the power to protect the integrity of elections. It provides:

"The Legislative Assembly shall enact laws to support the privilege of free suffrage, prescribing the manner of regulating, and conducting elections, and prohibiting under adequate penalties, all undue influence therein, from power, bribery, tumult, and other improper conduct."

"No law shall be passed restraining the free expression of opinion, or restricting the right to speak, write, or print freely on any subject whatever; but every person shall be responsible for the abuse of this right."

"No law shall be passed restraining any of the inhabitants of the State from assembling together in a peaceable manner to consult for their common good; nor from instructing their Representatives; nor from applying to the Legislature for redress of greviances (sic)."

"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."

The major case construing the First Amendment, for our purposes, is Buckley v. Valeo, 424 US 1 (1976). The major case construing the Oregon Constitution as well as the First Amendment, for our purposes, is Deras v. Myers, 272 Or 47, 535 P2d 541 (1975). The provisions of A-Eng SB 857 differ substantial

ly from the provisions of the expenditure limit law held unconstitutional in the Deras case, but principles laid down by the Oregon court in Deras are of major significance to the issues raised by this opinion request. The federal election law provisions sustained in the Buckley case are in some respects quite similar to provisions of this law, but there are significant differences enough so that Buckley would be by no means controlling even if A-Eng SB 857 did not also present issues under the Oregon Constitution. Buckley also held other provisions of federal election laws unconstitutional, reaching the same conclusions with respect to direct limitations on expenditures by candidates, and by others on behalf of candidates, as the Oregon court did in Deras.

Comparing the laws upheld in Buckley v. Valeo, supra, with A-Eng SB 857 points up the similarities and the differences. Buckley sustained 18 USC sec 608(b)(1) which imposed a $1,000 limitation on direct or indirect contributions by an individual or a group to a single candidate, against First Amendment challenge. 422 US at 23-29. It also sustained the $25,000 limitation in sec 608(b)(3) on total contributions to all federal candidates. 422 US at 38. A-Engrossed SB 857 imposes no limitation on the amount of any contribution, but provides that contributions, to some candidates are not eligible for the 50 percent tax credit (up to $25 for an individual or $50 for a joint return) for which similar contributions to other candidates are eligible.

Buckley also sustained provisions of Subtitle H of the Internal Revenue Code of 1954 (26 USC secs 9001 et seq. ) which provided a federal contribution to the primary and general election campaigns of qualifying presidential candidates who voluntarily accept limitations on their expenditures. 424 US at 103-104, 107-108. The Court devoted most of its analysis to Fifth Amendment-Equal Protection arguments, hardly discussing the agreement to limit expenditures, and saying only:

Senate Bill 857 also requires a pledge by the candidate not to spend more than a specified amount. But failure to give the pledge does not result in loss of a campaign subsidy. Instead, contributors lose a tax credit for their contribution. If the candidate makes the pledge and breaks it, he or she must pay to the treasury the full amount of tax credits received by contributors, plus one-half the amount of any contribution received from a committee that filed a declaration. (fn2) This penalty is arguably not for spending too much money, but for violating the declaration or pledge.

Senate Bill 857 does not impose any direct limitation on campaign expenditures, nor could it constitutionally do so. In Buckley v. Valeo, supra, the Court invalidated limits on campaign spending by candidates for public office as an unconstitutional burden on the right to freedom of speech. It concluded it was plain that expenditure limitations infringed heavily upon First Amendment rights, grounding this conclusion on the indisputable fact that large sums of money are indispensible for the mass media communications that characterize contemporary political campaigns. Id., 424 US at 19, 52, 54-58. See Deras v. Myers, supra, 272 Or at 55, 57.

Nor does SB 857 impose any limit on campaign contributions. It is important to note that the primary "evil" justifying such a limit in Buckley was to avoid corruption in the electoral process:

Making a political contribution affiliates an individual with a candidate, and expending resources on behalf of a candidate enables associations effectively to amplify the voices of their adherents. Buckley v. Valeo, supra, 424 US 22. The Buckley Court, in upholding contribution limitations, held that the speech interests in campaign contributions are marginal, as they convey only an undifferentiated expression of support, rather than the specific values which motivate that support. Id. at 19-20. The Court further stated that such a tangential relationship to First Amendment values cannot be successfully balanced against the primary purpose of reducing the probability of corruption and appearance of corruption. Id. at 29. It was concluded the contribution limitations were within the power of the legislature to impose.(fn3)

We have noted above and now restate the distinctions which can be made between that part of the legislation upheld in Buckley, and A-Eng SB 857. First, the pertinent legislation addressed by the Buckley court placed a maximum on the amount which could be contributed to any single candidate. In contrast, A-Eng SB 857 limits the selection of candidate or party to whom a contribution may be made, if a tax

credit is desired. It has a chilling effect upon contributions to particular candidates.

Second, the Buckley case involved in pertinent part legislation which directly limited campaign contributions for the purpose of controlling the evils of unlimited contributions. The legislation was an attempt to prevent the appearance or reality of corruption stemming from real or imagined pressure imposed on political candidates by those who contribute heavily to their campaign. This is not the purpose, though, of A-Eng SB 857. The primary objective of the bill is to control campaign expenditures, rather than to control the possible evils which may ensue from unlimited contributions. Those who would make contributions large enough to constitute a real or imagined evil, or to exert an undue interest on the candidate, would not be concerned with a $25 or $50 tax credit. The infringement of the contributor's right of free speech and association is merely incidental to an attempt to regulate a different aspect of political campaigns. It must also be kept in mind that abridgements of political expression cannot be disguised by such euphemisms as "indirect" or "incidental." It is the effect of the legislation which must be scrutinized, not the method by which the effect is accomplished. The effect of this legislation is to deny a tax benefit for supporting the wrong candidate.

Third, and particularly in view of the downplaying in Buckley v. Valeo, supra, of the free speech interest in making campaign contributions, we must emphasize that A-Eng SB 857 is subject to the independent guarantee of the Oregon Constitution of the right to assemble to instruct representatives, and to apply for redress of grievances. A citizen's most effective way to affect governmental processes may be to support financially candidates who support the citizen's viewpoints. The right to support, which is equivalent to the right to elect, seems to be an integral part of the guaranteed rights of assembly.

The fact that Oregon legislation is also subject to the independent guarantee of the Oregon Constitution in addition to those of the United States Constitution is perhaps the most important distinction between A-Eng SB 857 and the legislation upheld in Buckley v. Valeo. In fact, it is not entirely certain that the Oregon court would have upheld that legislation.

It is often unnecessary to decide whether the federal constitutional decisions can be distinguished from a case at hand. Cases tested under the federal constitution are not controlling where the Oregon court concludes that the state constitution provides a larger measure of protection to its citizens.

In Deras v. Myers, supra, 272 Or 47, the court held that the Oregon Constitution will control in cases where it is more restrictive of government. Id. at 64. Our state constitution, we believe, grants a more definite and inclusive guarantee of right of free speech and association. Article I, sec 8 refers not only to freedom of "speech" and "press" but beyond this to any form of "free expression of opinion," and to "the right to speak, write, or print freely on any subject whatsoever." Article I, sec 26 similarly refers not only to rights of assembly

and of petition; it goes beyond this to specify "assembling . . . to consult for their common good" and "instructing their Representatives," phrases that focus unmistakably on the citizen as political actor.

We now turn to more detailed analysis of Deras v. Myers, supra, in which the Oregon Supreme Court addressed the constitutionality of two statutes enacted by the 1973 Legislature. ORS 260.154 (1975-1976 Replacement Part) prohibited expenditures in support of or in opposition to candidates except by the candidates themselves or with their prior consent. The statute further provided that contributions and expenditures made with the consent of a candidate were to be deemed to be those of the candidate on whose behalf they were made. ORS 260.027 (1975-1976 Replacement Part) limited the total amount that could lawfully be spent in support or in opposition to a candidate.

The court held that these statutes violated Art I, secs 8 and 26 of the Oregon Constitution. Deras v. Myers, supra, 272 Or at 65. In reasoning to its decision, the court stated that since the very structure of our government rests upon freedom of expression, its infringement by statute can be justified, if at all, only by purposes rising to the level of importance of the preservation of the government itself. Id. at 55-56. After noting various arguments supporting the statutes, it said:

"Overarching all of the foregoing considerations is the inescapable fact that the limiting legislation closes or impedes important channels of communication on public issues and thus denies citizens freedom of expression where the protection of that constitutional right is the most necessary to preserve our system of government." Id. at 62.

An amicus brief was filed by the Oregon Newspaper Publishers' Association, written by Professor Hans A. Linde, now Justice Linde of the Oregon Supreme Court. The brief, which we quote because it was cited with approval by the Deras court ( see note 16, 272 Or at 63-64), stated:

The brief further asserted that it was unnecessary for the court to select among various tests for circumvention of constitutional guarantees. Linde declared that the issue was whether the Oregon legislature has passed a law restraining the free expression of opinion, or restricting the right to speak, write or print freely on any subject whatever, or restraining citizens from assembling together to consult for the common good, to instruct their capital representatives, or to petition for redress of grievances. He concluded that the statutes in question should not be weighed, bal

anced, or otherwise tested against "incidental" consequences for freedom of expression and association. The Deras court reflected the thrust of Linde's argument when it stated:

This approach is to be contrasted with the attitude taken by the Court in Buckley, supra, which approved contribution limitations as "a marginal restriction upon a contributor's ability to engage in free communication." Buckley v. Valeo, supra, 424 US at 20. Two pages later the Court characterized contribution limitations as a limit on "one important means of associating with a candidate or a committee," 424 US at 22 (emphasis added), but permissible because of other ways in which the contributor could assist a committee or candidate. But the Oregon court rejected arguments that notwithstanding an expenditure limit, candidates have other ways in which to put themselves before the voters and exercise their right of speech. Deras, supra, 272 Or at 57.

In Buckley, as we have noted, the Court approved a "voluntary" expenditure limitation in exchange for a campaign subsidy. In Deras the court stated in dicta that the evils sought to be reached by the unconstitutional expenditure limitations could be treated by providing some form of public subsidy for campaign expenditures. The court noted that such a system of subsidies "is likely to be at least as effective as direct restrictions and is less clearly subject to constitutional attack." Id. at 64, n 18. This does not mean, however, that a public subsidy which is contingent upon the surrendering of constitutionally protected rights would be upheld. The suggestion was offered as a method by which the objectives of campaign expenditure limitations might be achieved, rather than a way indirectly to achieve those impermissible limitations.

In 39 Op Atty Gen 754 (1979) it was suggested at 756 that "[i]t is possible that the proposed legislation may be held invalid because it does indirectly that which cannot be done directly." However, no basis was found in binding case law which would justify saying that the Oregon legislature cannot condition the availability of a tax credit for a political contribution upon the recipient's accepting a spending limitation. We still find no cases directly in point, but we find cases expressing principles which seem to be applicable, and which require us to reassess the previous conclusion.

Oregon is clearly under no obligation to grant the benefit of a tax credit for campaign contributions. For this reason it would seem that the withholding of the benefit, unless the recipient voluntarily agrees to comply and does comply with a particular condition, would be justified. This approach, however, fails to take into consideration the doctrine of unconstitutional conditions.

The basis of the doctrine of unconstitutional conditions is that a state is without power to impose an unconstitutional requirement as a condition for granting a benefit. As the Court stated in Harman v. Forssenius, 380 US 528, 540 (1965):

"It has long been established that a State may not impose a penalty upon those who exercise a right guaranteed by the Constitution. . . ."

The requirement that faculty members of a state university comply with a plan formulated to prevent the appointment or retention of "subversive" persons in state employment as a condition of their continued employment was struck down as unconstitutional in Keyishian v. Board of Regents, 385 US 589 (1967). The Court stated that the theory that public employment may be subjected to any conditions, whatever their nature, because employment may be denied altogether has been uniformly rejected. It said:

The required conditions might also be invalidated on the grounds that denying a benefit because of the exercise of a right in effect penalizes that exercise, making it tantamount to a crime. Steinberg v. United States, 163 F Supp 590, 592 (US CI Ct 1958). This would in effect punish constitutionally protected activities.

As applied to the provisions of A-Eng SB 857, since the state may not abridge a contributor's right of free speech and freedom of association directly, it appears to follow that it may not do so indirectly through conditioning the receipt of campaign contribution tax credits upon the individual contributing only to a candidate who has filed a declaration of limitation on expenditures. It also appears to follow that the state may not condition the candidate's receipt of the benefit of contributions induced by the availability of tax credits upon an agreement to limit campaign expenditures. The state appears to be attempting indirectly to exact the surrender of the free choice of which political candidate to support, and of the free exercise of campaign speech, in exchange for

the respective benefits of a tax credit.

In Monitor Patriot Co. v. Roy, 401 US 265 (1971), the Court emphasized that the constitutional guarantee of free speech has its fullest and most urgent application precisely to the conduct of campaigns for political office. Id. at 272. It would therefore seem incongruous to strike down an act of state legislation which, by words of express divestment, seeks to strip an individual of rights guaranteed by the United States and Oregon Constitutions, but to uphold an act which requires surrender of a right in exchange for a valuable benefit which the state will otherwise withhold. If the conditions to which the tax credit benefits are subject operate to inhibit or deter the exercise of constitutionally protected freedoms, A-Eng SB 857 will not pass constitutional muster.

The Senate measure imposes as a condition to receipt of a tax credit, a requirement that the contribution be made only to those candidates who have filed a declaration of limitations of expenditures. It conditions the receipt of the benefit of contributions induced by tax credits, upon the candidate's voluntary limitation of expenditures. May the state directly restrict a constituent to making contributions only to specified candidates? Clearly not. May the state directly limit the amount which may be expended in a political campaign? Again, no. May the state impose conditions upon a benefit for the express purpose of achieving restrictions which it cannot constitutionally impose? We very much doubt it.

It could be argued that the tax credit program taken as a whole actually enhances the contributor's ability to give and the candidate's ability to receive constituent support and that contributions may not be so readily made without the benefit of a tax credit. The argument is not applicable, however, to the question of abridgement of a contributor's right of free speech and association. Although the contributor may be more able financially to make contributions as a result of the tax credit, the benefit is available only upon surrendering the right to support particular candidates.

In Buckley v. Valeo, supra, as noted above, the Court held that the public subsidy of presidential campaigns "furthers, not abridges, pertinent First Amendment values," 424 US at 93, notwithstanding the required pledge by candidates to limit their speech. It seems clear that there is in fact a limitation of speech, and accordingly a First Amendment limitation, if candidates spend less than they otherwise would have.

There is an accompanying limit on individual contributions - held to be valid - which may make it difficult or impossible to raise enough money to exceed the pledged limitation anyway. However, an election candidate has a free choice between a guaranteed subsidy, and rejecting the pledge, raising as much as possible and spending all that can be raised without any limitation. Nothing in the law would directly inhibit contributions to such a pledge-rejecting candidate.

Under SB 857, in contrast, a candidate does not receive a subsidy

in exchange for accepting the "voluntary" expenditure limit. And the law does directly inhibit contributions to candidates who decline to pledge to limit expenditures. The distinction is significant - the federal law says, in effect, we will give you money if you promise to limit expenditures, while the state law says, in effect, we will make it more difficult for you to raise money unless you promise to limit expenditures.

Whether those conditions would restrict candidates to the extent of limiting their political speech is difficult to assess in any particular case. But it is clear if the candidate does not limit his or her speech, the candidate will not be able to take advantage of the funding which is created by the tax credit allowances. The measure will strongly inhibit a candidate from exercising his or her right to campaign without accepting the limitations, since potential supporters might not contribute, and might impute fault to the candidate for unavailability of the tax credit. If a candidate has filed a declaration but later finds that needs of the campaign require larger expenditures than permitted, the candidate will be subject to much stronger pressures nevertheless to adhere to the limitation, rather than face charges of reneging on a promise. In the face of these pressures resulting from the proposed law, it is unrealistic to say that a commitment to limit expenditures, or compliance with that commitment, would be "voluntary."

Had we considered the unconstitutional conditions doctrine in 39 Op Atty Gen 754, supra, that opinion could well have had a different conclusion. We now conclude that the doctrine is applicable, and that it is sufficient to tip the scales to our present answer.

It is also possible that granting a tax credit to those who contribute to particular candidates, and withholding that credit from those who choose to support other candidates who have not filed a declaration of limitation on expenditures, would be an unreasonable classification violating the Equal Protection Clause of the Fourteenth Amendment. This approach might also be used in the second aspect, the receiving of tax credit induced funding conditioned upon limitation of expenditures by the candidate. It is now axiomatic that the Equal Protection Clause is as fully applicable to public benefits as to other actions of the state. See, e.g., Levy v. Parker, 346 F Supp 897 (ED La 1972), aff'd sub nom Parker v. Levy, 411 US 978 (1972). The state may argue that it does not withhold the benefit from defined individuals, but that the individual decides him or herself whether or not to accept it. However, even though the tax credit is offered without discrimination, the conditions serve as a significant restriction only on those who desire to support particular candidates. In essence, the classification used is based on a political viewpoint. Classification on this basis seems clearly in conflict with protected First Amendment rights.

In summary, our views are as follows. It appears that under Deras v. Myers, the Oregon court will find somewhat greater protections to rights of assembly and speech under Or Const Art I, secs 8 and 26 than the United States Supreme Court found in Buckley v. Valeo under the First Amendment.

We conclude that the free speech and right to associate interests in making political contributions will be found to be important and substantial. Even if the Oregon court recedes from the implication in Deras, supra, 272 Or at 65, that no balancing whatsoever may be permitted between a constitutional provision and a statute which directly impinges upon it, it seems clear that only a compelling state interest will justify restrictions upon those constitutional interests.

The purpose of the federal statutes found constitutional in Buckley, though they imposed some limitations upon First Amendment rights, was to reduce the probability and appearance of corruption arising out of unlimited campaign contributions. The purpose of A-Eng SB 857 is not to limit campaign contributions, but to limit campaign expenditures. Both the Oregon and United States Supreme Courts rejected this purpose as a justification for limitations on free speech and associational rights. Deras v. Myers, supra, 272 Or at 61; Buckley v. Valeo, supra, 424 US at 55.

The voluntary limitation on campaign expenditures in the federal law can be distinguished from that in the proposed state law, since the former offers a substantial direct subsidy in exchange, and the latter imposes a significant inhibition on fund-raising ability in retaliation. The two provisions may also be distinguished on grounds that a significant purpose of the federal provision is to reduce the necessity for solicitation of large campaign contributions, Buckley, supra, 424 US at 96, but the sole purpose of the state law is to limit expenditures. A candidate who rejects the pledge will find more necessity to seek the presumably undesirable large contributions.

The doctrine of unconstitutional conditions, we think, is clearly applicable to the impact of SB 857 upon contributors, and we believe also, if not quite so obviously, to the impact of SB 857 upon candidates.

For these reasons it is apparent that the Buckley case would not be controlling as to validity of SB 857, even if the Oregon Constitution did not (as it apparently does) afford greater protection to rights of assembly and free speech than does the United States Constitution.

Our only doubts as to the conclusion we reach arise from the Buckley characterization of free speech and associational rights in campaign contributions as "marginal" (although they are also characterized as "important"), 424 US at 20, 22, and the possibility that a court would emphasize the similarities and see less importance in the differences between the effect of the federal subsidy provisions and SB 857 upon candidates.

But ultimately we conclude that SB 857 imposes significant restrictions upon free speech and associational rights of contributors, as a condition to the receipt of a tax credit; that it imposes significant restrictions upon free speech rights of candidates; and that it does so to further a state purpose, limitation of campaign expenditures, which has been held to be insufficient justification for other limitations on those constitutional interests. We accordingly conclude that A-Eng SB 857 will probably be held to be un

constitutional if it is passed.

"SECTION 3. (1) A taxpayer qualifies for a tax credit as provided in ORS 316.102(1)(b) or (c) for a voluntary contribution to a candidate for an office specified in subsection (2) of this section or a trust, committee, association or organization if:

"(a) The candidate or the trust, [etc.] . . . files with the Secretary of State a declaration. . . and

"(b) The taxpayer files with the taxpayer's tax return a receipt. . . .

"(2) A candidate for an office specified in this subsection may file a declaration of limitation on expenditures. The declaration . . .shall state that:

"(a) The candidate will not contribute to or make an expenditure in support of a candidate, trust, committee, association or organization which has not filed a declaration under this section; and

"(b) With respect to a single election held during the year of or the year following the contribution of the taxpayer, the total expenditures made by the candidate and any political committee over which the candidate exercises control shall not exceed:

"(A) For the office of Governor, $400,000;

"(B) For the office of Secretary of State, State Treasurer, Superintendent of Public Instruction, Attorney General or Commissioner of the Bureau of Labor and Industries, $150,000;

"(C) For the office of State Senator, $30,000; and

"(D) For the office of State Representative, $15,000.

"(3) A trust, [etc.] . . . may file a declaration of limitation on expenditures. The declaration . . . shall state that the trust, [etc.] . . . will make expenditures only in the form of contributions to candidates who have filed a declaration as provided in this section, to candidates for offices not specified in subsection (2) of this section, or in support of or opposition to ballot measures.

"(4) A declaration under this section:

"(a) In the case of a candidate, must be filed before the candidate accepts the first contribution and may not be withdrawn after it is filed with the Secretary of State.

"(b) In the case of a trust, [etc.] . . . must be filed at the time [it] . . . files the statement of organization required under ORS 260.042, and may not be withdrawn after it is filed with the Secretary of State.

". . . .

"SECTION 6. (1) If a candidate or a treasurer . . . fails to comply with the declaration, the candidate or treasurer shall pay to the Department of Revenue, . . . an amount equal to:

"(a) The total amount of tax credits offered to contributors to the candidate or the trust, committee, association or organization . . .; and

"(b) One-half of the total amount of any contributions received from a candidate, committee or other organization that filed a declaration under section 3 of this 1981 Act and that complied with the declaration.

". . . .

"SECTION 8. Violation of section 6 of this 1981 Act is punishable by a fine of not more than $1,000."