This lawsuit, now pending appeal to Washington’s intermediate appellate court, seeks to enforce a constitutional limit on legislative power. Article II § 37 of the state constitution requires that “No act shall ever be revised or amended by mere reference to its title, but the act revised or the section amended shall be set forth at full length.” Plaintiffs are challenging a 2015 act that purported to allow a local government (Sound Transit, a regional transportation district) to levy a motor vehicle excise tax (“MVET”). A 2006 statute was already in place that specified how vehicles would be valued. The 2015 act didn’t use the current valuation schedule, but instead directed the use of a repealed 1996 act in lieu of the 2006 statute as the basis for calculating a motor vehicle excise tax. Instead of setting forth “at full length” the 2006 statute and showing how it was being amended, the 2015 act simply said “Notwithstanding any other provision . . . .” Article II § 37 of the state constitution provision has repeatedly been invoked, successfully, by Sound Transit, to invalidate legislation obliging it to reduce taxes. Plaintiffs intend to see it applied to require the same level of strict compliance with the state constitution when legislation raises taxes.
An MVET is an annual tax levy, paid together with vehicle registration. The tax is calculated by multiplying the tax rate times a vehicle’s starting value (often MSRP), times a valuation schedule or depreciation schedule that establishes by statute the decrease in value of a vehicle by age. MVETs have had a rocky and contentious history in Washington state, leading to the current litigation. CPSRTA, or Sound Transit, first received authority to levy an MVET at 0.3% of vehicle value starting in 1999. It issued bonds secured by that MVET revenue. The measure met with substantial opposition after imposition, in part due to the perception that the valuation schedule taxed vehicles based on gross overstatements of value. A statewide initiative repealed the authorization, and in ensuing litigation the state supreme court held that the repeal substantially impaired those bond contracts. Further, it held, it could not require Sound Transit to exercise its contractual authority to retire the bonds immediately, and therefore, Sound Transit could continue to levy the MVET for so long as the bonds remained outstanding.
In 2006, the legislature enacted a new valuation schedule, codified at RCW 82.44.035. The schedule lowered taxable value of vehicles by about 25% as compared to the repealed schedule. The schedule applies to “any locally imposed motor vehicle excise tax,” but Sound Transit took the position that it was not required to use the new schedule for its existing MVET. Legislative history documents confirm that the 2006 legislature discussed the cost to Sound Transit of paying the Department of Licensing to use two valuation schedules in parallel only if and when it instituted a new MVET while its old MVET remained in force, and in 2010 the legislature confirmed that Sound Transit could continue to use the repealed schedule for the 1999 MVET.
In 2015 the legislature passed a bill that, among other things, authorized a new Sound Transit MVET. In doing so, it rendered the 2006 valuation schedule inapplicable for so long as the 1999 bonds remained outstanding. It did so by broad reference to the chapter in which the valuation schedule is codified, stating that the existing contents of that chapter should be disregarded in favor of the chapter as it existed in 1996 until such time as the old bonds have been retired.
Plaintiffs sued on behalf of the class of aggrieved taxpayers, and moved for summary judgment of the constitutional question prior to addressing class issues. The challenged act reads, in pertinent part, “Notwithstanding any other provision of this subsection or chapter 82.44 RCW . . . [a new MVET] must comply with chapter 82.44 RCW as it existed on January 1, 1996 . . .” According to plaintiffs, this amends existing RCW 82.44.035, which on its face provides the valuation schedule “For the purpose of determining any locally imposed motor vehicle excise tax.” However, the amended section is not set out at full length in the new, amendatory act, triggering review under Article II § 37 of the constitution. While the state supreme court has identified a few exceptions to the requirement, this act does not fall into any of them. Relevant to the arguments presented to the trial court, it is not a complete act that incorporates existing law by reference, because it instead renders existing law inapplicable. It is also not an incidental amendment, because the act establishes an MVET, and the valuation schedule is key to the calculation of the MVET.
The state deferred any defense of constitutionality to Sound Transit, which argued that the first question was not whether the new act amended the old, but whether it was a “complete act.” If so, amendatory or not, Art. II § 37 did not apply. Reading the entire five sentences as though everything referred to in them were actually reproduced in full, a person would understand his tax liability, rendering it a complete act. If it amended an existing act, it did so only incidentally, because the main purpose of the act was to authorize a tax, not establish a valuation schedule. Other statutes had similarly used the word “notwithstanding” to avoid application of existing law, including by suspending application of a law, and yet avoided the Supreme Court evaluating them under Art. II § 37. Therefore, they claimed, Art. II § 37 also did not govern this statute.
In the words of local news coverage, the trial court “provided little rationale for her choice” in adopting Sound Transit’s position. The plaintiffs have noted their appeal to the state’s intermediate appellate court.