Carson District Judge James Wilson on Monday blocked the teachers' union from circulating its initiative petition to impose a new tax on businesses to help fund K-12 education.
Wilson said that because the statutory initiative both proposes a business margins tax and mandates that what each business pays be made public, it violates the requirement that any initiative petition presented to voters contain just a single subject.
But Jim Penrose, lawyer for the Nevada State Education Association, said that because Wilson upheld all other parts of the proposed petition as meeting statutory requirements, the judge actually did supporters a favor.
Penrose and NSEA Executive Director Gary Peck said they would remove from the petition the section making taxpayer records public and refile it by the end of the week.
The petition calls for a 2 percent business margins tax on all businesses in the state except casinos, which already pay more than that. Businesses making less than $1 million a year also would be exempt, as would nonprofits and individuals.
The petition was challenged by a group of businesses calling themselves the Committee to Protect Nevada Jobs, which charged that not only did the petition contain more than one subject, but that its description of effect - a 200-word synopsis designed to tell voters the effect of what they are deciding - was flawed, misleading and incomplete.
"The description of effect is not the best possible statement of the petition's intent, but the court concludes it meets the 200-word limitation and is straightforward, succinct and non-argumentative," Wilson said in his nine-page ruling. "It is not the court's role to judge the merits, wisdom or fairness of the petition or whether the petition will achieve its purpose if successful."
But he affirmed the challengers' contention that the petition violates state law.
"The petition embraces two different subjects: imposing a tax to raise revenue for education, and making certain taxpayer information public," he wrote. "Therefore the petition violates the single-subject rule."
"He gave the committee everything we asked for," said Josh Hicks representing the committee.
Penrose pointed out that Wilson ruled there is no violation in the petition's temporary increase in the Modified Business Tax to generate $5 million to jump-start collecting the new business margins tax. The judge wrote that the two are "functionally related and germane to each other."
He said the committee failed to demonstrate that the petition moves the Department of Taxation budget outside of legislative control. He rejected the argument that the petition doesn't cover the cost of administering the new tax, saying those costs are all estimates. He rejected the argument that the description of effect is deficient because it doesn't say how much money the new tax will generate.
He also rejected the argument that the new petition doesn't say it could force businesses to pay even if they suffer a net loss, saying that it clearly spells out what businesses must pay and how the tax is calculated.
The committee made several other arguments against the petition as well, but Wilson concluded that "the committee's remaining arguments lack merit."
"To the extent the new initiative is the same as the quote old initiative, Judge Wilson has ruled on the challenges to that language and the committee would be precluded from attempting to relitigate the same contentions Judge Wilson has already rejected," said Penrose. "Frankly, the committee did us a service by basically pointing out all the errors that were subject to attack."
Penrose said that will enable them to clarify any ambiguities in the new version they plan to file this week.
"We are confident that when the dust settles, the initiative will withstand any further legal challenges," said Peck.
He said he believes that they will collect enough signatures to present the proposed business tax to the Legislature and, if that body refuses to enact it, that Nevada voters will impose the tax in the 2014 election.
Hicks said that when the petition is filed with the Secretary of State's Office, they will take a close look to see what's in it. He said if it has the same problems, "I don't see why we wouldn't be right back filing another challenge."
In order to present the petition to the 2013 Legislature, supporters must collect at least 72,352 signatures of registered voters - at least 18,088 in each of Nevada's four congressional districts.
They have until Nov. 13 to submit the signatures to the Secretary of State's Office.
If lawmakers refuse to pass the proposed statute, the issue goes on the November 2014 general election ballot and, if voters approve, the statute would take effect Jan. 1, 2015.
In that case, lawmakers would be barred from amending the statute for three years.