440 August 26, 2026 No. 799
IN THE COURT OF APPEALS OF THE STATE OF OREGON
XCALIBER INTERNATIONAL LTD, LLC, an Oklahoma limited liability company, Plaintiff-Respondent,
v.
STATE OF OREGON
and Dan Rayfield, in his official capacity as Attorney General of the State of Oregon, Defendants-Appellants. Marion County Circuit Court 23CV52166; A184673
Lindsay R. Partridge, Judge. Argued and submitted February 19, 2026. Carson L. Whitehead, Assistant Attorney General, argued the cause for appellants. Also on the reply brief were Dan Rayfield, Attorney General, and Benjamin Gutman, Interim Deputy Attorney General. On the opening brief were Ellen F. Rosenblum, Attorney General, Benjamin Gutman, Solicitor General, and Dustin Buehler, Assistant Attorney General.
Edward A. Piper argued the cause for respondent. Also on the brief was Glenmorrie Law LLC.
Before Ortega, Presiding Judge, Joyce, Judge, and Hellman, Judge.
JOYCE, J. Reversed and remanded.
Cite as 352 Or App 440 (2026) 441 442 Xcaliber Int. LTD, LLC v. State of Oregon
JOYCE, J.
The state appeals from a judgment granting summary judgment in favor of plaintiff. Plaintiff, an Oklahomabased company that sells tobacco products in Oregon, sued Oregon’s Attorney General in his official capacity. Plaintiff sought, as relevant to this appeal, a declaratory judgment that House Bill (HB) 2128 (2023) violates Article IV, section 25(2)—the Supermajority Clause—of the Oregon Constitution because the bill is one for raising revenue for purposes of that provision, such that a supermajority was needed to pass it. The parties filed cross-motions for summary judgment. The trial court granted plaintiff’s motion and denied the state’s, concluding that HB 2128 violates the Supermajority Clause. We disagree. HB 2128 is not a bill for raising revenue and it therefore does not violate the Supermajority Clause; accordingly, we reverse and remand.
I. BACKGROUND
Although the legislature enacted HB 2128 in 2023, the contextual history of its origins began 30 years ago when the State of Oregon entered into the Master Settlement Agreement to settle litigation that it brought against major tobacco companies. We thus begin with that historical background.
In 1997, Oregon sued several major tobacco manufacturers , claiming that the tobacco companies’ alleged unlawful conduct—including engaging in unfair trade practices and committing Oregon Racketeer Influenced and Corrupt Organizations Act violations—had caused the state to incur hundreds of millions of dollars in increased Medicaid expenses and health insurance premiums. Williams v. RJ Reynolds Tobacco Company, 351 Or 368, 372, 271 P3d 103 (2011). In 1998, Oregon’s attorney general, along with the attorneys general of 45 other states, entered into the “Master Settlement Agreement” (MSA). Id. at 372-73. Under the MSA, a global settlement agreement, “the tobacco companies agreed, among other things, to make annual payments to the settling states to compensate the states for past and future health care expenses,” and the settling states agreed to release the companies from certain past and future claims.
Cite as 352 Or App 440 (2026) 443
Id. at 373. Tobacco companies that are parties to the MSA— both those that joined at its inception and those that chose to join later—are called “Participating Manufacturers” (PMs) under the MSA. Those companies that have not joined are called “Non-Participating Manufacturers” (NPMs).
The MSA incentivizes the settling states to enact laws that require NPMs to make payments in amounts similar to those paid by PMs, aiming to offset any disadvantages that PMs could otherwise suffer in the market due to the MSA. The MSA allows for the annual payment from a PM to be adjusted downward if the PM loses market share that year and the MSA was a significant factor in the loss. A state can avoid such a downward adjustment to the annual payment by enacting and enforcing a “Qualifying Statute.” A Qualifying Statute is a state law that neutralizes the cost disadvantages a PM would suffer due to the MSA within the settling state by requiring NPMs to make payments in amounts similar to those made by PMs.
Oregon enacted a Qualifying Statute when it enacted the Qualifying Escrow Act, ORS 323.800 to 323.806. See State v. Maybee, 235 Or App 292, 294, 232 P3d 970, rev den, 349 Or 56 (2010) (explaining that Oregon enacted the Qualifying Escrow Act, pursuant to the MSA, to neutralize any market advantage NPMs would have enjoyed due to not having to make payments under the MSA). Under that act, which mirrored the MSA’s Model Statute, NPMs were required to make payments into an escrow fund; those funds were to be used to “ensure payment of any future judgment in favor of the state against those companies.”1 Id. While the funds paid by the NPMs were in escrow, they remained the property of the NPM that paid, and any interest or appreciation of the funds were also the property of the NPM. After 25 years in escrow, funds that had not been used to satisfy a judgment or settlement regarding a smoking -related claim made by the state against the NPM was to be returned to the NPM. The state has not brought any claims against NPMs that would, if successful, have authorized disbursement of funds in escrow accounts.
1 When a state enacts the Model Statute provided in the MSA, that law automatically qualifies as a Qualifying Statute.
444 Xcaliber Int. LTD, LLC v. State of Oregon
In 2023, the Oregon legislature amended the state’s Qualifying Statute by enacting HB 2128.2 HB 2128 replaced the system of escrow payments with a system that required NPMs to make direct, annual payments—or “equity assessments ”—to the state.3 HB 2128, § 8 (1) (requiring tobacco product manufacturers that are not PMs to pay “an equity assessment for units sold within the State of Oregon after January 1, 2024”). Like the annual payments under the escrow system, the equity assessments are calculated based on units sold, should ultimately not exceed what would be paid under the MSA, and are credited against any judgment or settlement obtained by the state against the NPM. Id. at § 8 (2), (3). However, unlike the escrow payments, the equity assessments do not revert to NPMs if the state does not make claims against them. Id. at § 8 (3)(c). Once paid, the assessments belong to the state and are to be deposited in the Oregon Health Authority Fund (OHA Fund) to pay Oregon Health Plan (OHP) expenses. Id.
In urging the legislature to amend the Qualifying Statute, the Oregon Attorney General and Department of Justice argued that by requiring NPMs to make payments through direct payments, rather than through payments into escrow where the funds, the state argued, were essentially inaccessible to the state, the original intent of the Qualifying Statute would be better fulfilled. See, e.g., Testimony, House Committee on Judiciary, HB 2128, Feb 14, 2023 (statement of Attorney General Ellen F. Rosenblum and Deputy Attorney General Lisa Udland) (“HB 2128 will fulfill the original intent of [the Qualifying Statute] by requiring NPMs to compensate Oregon for the public health costs associated with their cigarettes.”). That purpose is captured in the text of HB 2128:
2 One of plaintiff’s claims below was that the changes made by HB 2128 deprive Oregon of a Qualifying Statute. Having held that HB 2128 violated the Supermajority Clause and granted plaintiff’s motion for summary judgment for that reason, the trial court dismissed plaintiff’s remaining claims, without prejudice , for lack of standing. Neither party contends that the trial court’s resolution of those claims is before us on appeal. Therefore, we do not address them.
3 Although a prior version of HB 2128 would have converted prior escrow payments into direct payments to the state, the version as enacted left the escrow system intact for payments made prior to 2023.
Cite as 352 Or App 440 (2026) 445
“The State of Oregon owes its public health obligations equally to all persons in this state who smoke, regardless of the brand of cigarette smoked or the status of the tobacco product manufacturer under the Master Settlement Agreement.
“It is consistent with the policy of the State of Oregon to require tobacco product manufacturers that have not entered into a settlement with the state to pay directly to this state an amount that is intended to:
“Prevent the manufacturers from deriving large, shortterm profits and then becoming judgment-proof;
“Require the manufacturers to assume the health care costs imposed on this state by cigarette smoking;
“Increase the retail prices of cigarettes sold by the manufacturers , thereby reducing smoking rates, particularly among youth, as consistent with this state’s policy of discouraging youth smoking; and “Serve as partial compensation for the financial burdens imposed on this state by cigarette smoking.”
HB 2128, § 1. HB 2128 passed by less than a three-fifths majority in both chambers of the Legislative Assembly.
After HB 2128 was enacted, plaintiff, an NPM, brought this action against Oregon’s Attorney General. As relevant to this appeal, plaintiff sought a declaratory judgment that HB 2128 is unconstitutional, void, and unenforceable because it violates the Supermajority Clause due to having been passed by fewer than a supermajority of votes in both legislative houses.
On cross-motions for summary judgment, the trial court, as relevant to this appeal, granted plaintiff’s motion and denied the state’s. The court determined that “HB 2128 violates Article IV, Section 25(2) of the Oregon Constitution, and is unconstitutional, void, and unenforceable for that reason.” The trial court stated that “the fact that the money goes to * * * the Oregon Healthcare Fund is somewhat persuasive that the legislature was attempting to address a public harm that they saw that they had every right to do. On the other hand, they stopped short of directing the funds to be used in that particular manner.” Ultimately, the court 446 Xcaliber Int. LTD, LLC v. State of Oregon
held that “[HB 2128] is a tax, and I’m going to grant the plaintiff’s motion for summary judgment because I don’t believe that the funds that are required to be paid by the NPM are simply incidental to the legislation.” The state appeals.
II. ANALYSIS
Where, as here, there are no disputed issues of material fact, we review a trial court’s ruling on cross-motions for summary judgment to determine whether either party was entitled to judgment as a matter of law. Anantha v. Clarno, 302 Or App 196, 200, 461 P3d 282 (2020). A. Framework The fundamental question is whether HB 2128 is a “bill for raising revenue.” To answer that question, we consider not just the Supermajority Clause but also the Origination Clause. That is because both clauses use identical phrasing, “bills for raising revenue.” Under the Origination Clause, which was adopted as part of the original Oregon Constitution, “bills for raising revenue shall originate in the House of Representatives.” Or Const, Article IV, § 18. The Supermajority Clause, which was added in 1996 when voters approved Measure 25, invokes similar language: “[t] hree-fifths of all members elected to each House shall be necessary to pass bills for raising revenue.” Or Const, Art IV, § 25(2). Given the identical phrasing, the Supreme Court has explained that the phrase “bills for raising revenue” has the same meaning in the Supermajority Clause as it does in the Origination Clause. Bobo v. Kulongoski, 338 Or 111, 123, 107 P3d 18 (2005) (“[N]othing in the text or context of [the Supermajority Clause] suggests that the phrase ‘bills for raising revenue’ in [the Supermajority Clause] has a different meaning than it has in [the Origination Clause].”).
Courts ask two questions to determine whether a bill is one for raising revenue:
“The first [question] is whether the bill collects or brings money into the treasury. If it does not, that is the end of the inquiry. If a bill does bring money into the treasury, the remaining question is whether the bill possesses the essential features of a bill levying a tax.”
Cite as 352 Or App 440 (2026) 447
Bobo, 338 Or at 122 (citing Northern Counties Trust v. Sears, 30 Or 388, 402, 41 P 931 (1895)). The parties agree, as do we, that HB 2128, by replacing the escrow system with the equity assessment system that deposits funds paid by NPMs into the OHA Fund, brings money into the treasury. Therefore, we answer the first question that Bobo poses in the affirmative . We move to the second—determining whether HB 2128 possesses the essential features of a bill levying a tax.
The answer to that question is more complicated, in part because no court has set forth a precise definition (beyond the two guiding questions in Bobo) of what a “bill for raising revenue” is. And, to the extent that courts have attempted to define what that phrase means, it has largely been by doing so in the negative, i.e., what is not a bill for raising revenue. That said, we are aided by a deep history of courts—both the Oregon Supreme Court and the United States Supreme Court—examining the historical meaning of that phrase, which is used not only in the Origination and Supermajority Clauses of the Oregon Constitution, but also in the Origination Clause of the United States Constitution. See US Const, Art I, § 7 (“All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.”).
We thus turn to that history. “The phrase ‘bills for raising revenue’ has been a part of the basic constitutional law of the State of Oregon for the [167] years since statehood, and a part of the basic constitutional law of this country for over [250] years since nationhood.” Dale v. Kulongoski, 322 Or 240, 242-43, 905 P2d 844 (1995). Requiring bills for raising revenue to originate in the House of Representatives has “roots in the practices of the British Parliament, and comparable provisions appeared in both the federal constitution and various state constitutions before Oregon adopted its constitution.” Bobo, 338 Or at 120. Thus, when Oregon adopted its constitution, “the phrase ‘bills for raising revenue ’ had acquired an accepted meaning.” Id. at 121. “[B] ills for raising revenue” encompassed “bills to levy taxes in the strict sense of the words” and did not “extend to bills for other purposes, which may incidentally create revenue.” Id. (quoting Joseph Story, Commentaries on the Constitution 448 Xcaliber Int. LTD, LLC v. State of Oregon
of the United States 343 (1883)); see also Bobo, 338 Or at 121 n 11 (“[T]he court has recognized that [the history of the federal Origination Clause] also informs the meaning of [Oregon’s Origination Clause].”). Thus, “a bill for raising revenue” was limited to a narrow subset of revenue measures : bills primarily aimed at levying taxes. City of Seattle v. Dept. of Rev., 357 Or 718, 733-34, 357 P3d 979 (2015) (citing Northern Counties Trust, 30 Or at 400-01).4 Consistent with that narrow construction, “bills for raising revenue” has been understood to mean “ ‘bills to levy taxes, in the strict sense of the words, and has not been understood to extend to bills for other purposes, which may incidentally create revenue.’ ” See Northern Counties Trust, 30 Or at 402 (quoting Story, Commentaries on the Constitution § 880) (emphases added)). If a bill’s “direct and principal object” is to raise revenue, it is a bill for raising revenue; however, bills “out of which money may incidentally go into the treasury, or revenue incidentally arise[s]” do not qualify. Id. (quoting The Nashville, 4 Biss 188, 17 F Cas 1176, 1178 (1868)).
By way of example, the Oregon Supreme Court has concluded that bills for raising revenue do not include measures that impose a fee for government services. Id. at 402- 03 (measure exacting a charge from litigants for use of the courts was not a bill for raising revenue). It has likewise concluded that charges for a regulatory purpose—such as those primarily aimed at using the state’s police power to “regulate behavior or legal relationships outside the area of taxation” that impose “fines, penalties or other charges merely as an incident to regulation”—are not bills for raising revenue. Boquist v. Dept. of Rev., 23 OTR 263, 275 (2019) (citing State v. Wright, 14 Or 365, 374, 12 P 708 (1887), overruled on other grounds by Warren v. Crosby, 24 Or 558, 34 P 661 (1893) (bill increasing liquor license charge was not a bill to raise revenue because it was enacted for “the purpose
4 In Northern Counties Trust, the court referenced a “trend” in federal case law to interpret the federal Origination Clause narrowly and adopted the reasoning and conclusions of those cases for purposes of the Oregon Constitution’s Origination Clause. 30 Or at 402-03 (“Considering the similarity of the state and national constitutions touching bills for raising revenue, and the high and unbroken line of authority upon the proper construction of the latter, it is certainly a very persuasive and weighty argument for applying the same construction of the former.”).
Cite as 352 Or App 440 (2026) 449
of regulating a business that is detrimental to the public morals,” an exercise of the state’s police power)); see also The Nashville, 17 F Cas at 1178 (law requiring steamboat operators to place an inspector’s certificate where passengers would be most likely to see it was not one for raising revenue because, rather than being designed to raise revenue, its “sole design clearly was the protection of the persons and lives of steamboat and steamship passengers”).
By interpreting “bills for raising revenue” to encompass “bills to levy taxes in the strict sense of the words” and not extending it to cover “bills for other purposes, which may incidentally create revenue,” the Oregon Supreme Court “adopted the federal test for determining whether a bill raises revenue” for purposes of the Origination Clause. City of Seattle, 357 Or at 732-33 (internal quotation marks omitted ). Therefore, we also find cases interpreting the federal Origination Clause instructive. With respect to the federal Origination Clause, the United States Supreme Court has concluded that when general revenue generation is incidental to a bill’s primary purpose, the bill is not one for raising revenue . See, e.g., Twin City Bank v. Nebeker, 167 US 196, 202-03, 17 S Ct 766, 42 L Ed 134 (1897) (bill was “clearly not a revenue bill” for purposes of the Origination Clause because the “main purpose” of the bill was to provide a national currency, not to raise revenue for the government, and the imposition of the relevant tax was a means to that end); United States v. Munoz-Flores, 495 US 385, 397-401, 110 S Ct 1964, 109 L Ed 2d 384 (1990) (holding that a provision was not a bill for raising revenue for purposes of the Origination Clause where the provision’s primary purpose was to create and raise revenue for the Crime Victims Fund and the provision created revenue for the general Treasury only incidentally).
In short, “bills for raising revenue” does not cover all bills that generate revenue. Rather, courts have construed that phrase in its strictest sense to apply to a narrow set of bills, the purposes of which are principally to raise revenue. If a bill is enacted for purposes other than generating revenue but generates revenue incidentally, it is not a bill for raising revenue under the Origination and Supermajority clauses of the Oregon Constitution.
450 Xcaliber Int. LTD, LLC v. State of Oregon
Despite that long history of purpose-driven analysis, plaintiff, relying on City of Seattle, argues that Oregon courts no longer consider the purpose of a bill in determining whether it is a bill for raising revenue. In City of Seattle, in concluding that a bill that repealed a tax exemption did not run afoul of the Origination Clause, the court stated that although the legislature likely had more than one purpose in enacting the challenged bill, the court’s task was “not to determine the primarily legislative purpose for enacting” the bill. 357 Or at 735. Plaintiffs’ reliance on that sentence is understandable, inasmuch as City of Seattle is the only Oregon Supreme Court case addressing the second prong of the Bobo framework. Moreover, if read in isolation, it is difficult to understand that sentence, given that federal courts, and Oregon courts generally, have answered the question of whether a bill is one for raising revenue and possesses the essential features of a tax by reference to the bill’s purpose. Indeed, the explanatory statement in the voters’ pamphlet that circulated during Measure 25’s consideration told voters that “Ballot Measure 25 would apply only if a bill has a primary purpose of raising revenue” and would not extend to “[a] bill that only incidentally raises revenue and that has a primary purpose other than raising revenue.” Official Voters’ Pamphlet, Oregon Biennial Primary Election, May 21, 1996, 23.
But when that sentence from City of Seattle is read in context, we do not understand the court to have meant that we are never to look to a bill’s purpose in considering whether it passes constitutional muster under the Origination Clause, particularly in cases such as this one, which do not involve the repeal of a tax exemption. Instead, we understand the court to have meant that it is not necessary to consider the purpose of a bill that removes a tax exemption, because such a bill categorically does not levy a tax. See City of Seattle, 357 Or at 736 (“In this case, [the senate bill under consideration] removes a tax exemption—it does not directly levy a tax].”). Indeed, rather than departing from the purpose-driven analysis that, as described above, has long been the law of the land, the court in City of Seatle emphasized that Oregon had adopted “the federal test for determining whether a bill raises revenue,” and accordingly,
Cite as 352 Or App 440 (2026) 451
the reach of the Origination Clause is “confined to bills to levy taxes in the strict sense of the words, and has not been understood to extend to bills for other purposes[.]” Id. at 732- 33 (second emphasis added). B. HB 2128 With the legal background so framed, we turn to HB 2128 and whether its purpose was to raise revenue, i.e., whether it possesses the essential features of a bill levying a tax. We begin with its text in context. See State v. Gaines, 346 Or 160, 171-72, 206 P3d 1042 (2009) (explaining that the appropriate methodology for interpreting a statute includes examining the statute’s text, context, and, if the court deems it useful, the statute’s legislative history). Because HB 2128 imposes charges for a regulatory purpose and only incidentally creates revenue, we conclude that it does not possess the essential features of a bill levying a tax.
As explained above, the changes that HB 2128 made to the Qualifying Statute centered on replacing the escrow system with the equity assessment system for NPMs. It did so to prevent NPMs from gaining unfair advantages in the market relative to PMs and from harming Oregonians without accountability:
“The State of Oregon owes its public health obligations equally to all persons in this state who smoke, regardless of the brand of cigarette smoked or the status of the tobacco product manufacturer under the Master Settlement Agreement.
“It is consistent with the policy of the State of Oregon to require tobacco product manufacturers that have not entered into a settlement with the state to pay directly to this state an amount that is intended to:
“Prevent the manufacturers from deriving large, shortterm profits and then becoming judgment-proof;
“Require the manufacturers to assume the health care costs imposed on this state by cigarette smoking;
“Increase the retail prices of cigarettes sold by the manufacturers , thereby reducing smoking rates, particularly among youth, as consistent with this state’s policy of discouraging youth smoking; and 452 Xcaliber Int. LTD, LLC v. State of Oregon
“Serve as partial compensation for the financial burdens imposed on this state by cigarette smoking.”
HB 2128, § 1.
So framed, we conclude that although HB 2128 certainly generates revenue, the revenue generated by the equity assessments is incidental to the bill’s regulatory purpose and is not a bill to raise revenue. See Wright, 14 Or at 374 (a bill that required a license for selling liquor was an exercise of the state’s police power “for the purpose of regulating a business that is detrimental to the public morals,” not a bill for raising revenue). As described above, HB 2128 is part of a broader regulatory scheme. Under the MSA, PMs are already required to make payments directly to the state to compensate Oregon for past and future health care expenses. The MSA incentivizes states to require similar payments from NPMs in order to neutralize the cost disadvantages PMs would otherwise suffer due to the MSA. Without comparable payments from NPMs, NPMs could gain an advantage in the market, making it possible for them to sell tobacco products at a lower price than PMs. Under the escrow payment system, payments were going to be returned to NPMs, with interest, such that NPMs would not be internalizing the same costs as PMs and would subsequently gain an advantage in the market. The direct and principal object of HB 2128 was to neutralize such cost advantages by changing from the escrow system to equity assessments. In other words, the purpose for passing HB 2128 was to protect public health, and the bill generates revenue incidentally such that legislating was an exercise of the state’s police power. Thus, HB 2128 does not possess the essential features of a bill levying a tax.
Because HB 2128 does not possess the essential features of a bill levying a tax, it is not a bill for raising revenue for purposes of the Supermajority Clause. Therefore, the Oregon legislature’s enactment of HB 2128 with less than a supermajority of votes in each house did not violate the Supermajority Clause. The trial court erred in holding otherwise and in its rulings on plaintiff’s and the state’s motions for summary judgment on that issue.
Reversed and remanded.