Oregon Legislative Counsel Questions Delegation of Authority in Compact Bill

Legislation delegating legislative authority to insurance departments as part of laws allowing states to enter into unspecified tax sharing agreements or interstate compacts is unconstitutional, according to an opinion issued by the Oregon Legislative Counsel Committee.

In a written response to a state senator regarding a bill under consideration by the Oregon Legislature, the Legislative Counsel Committee stated that under Oregon’s constitution, the authorization in HB 2679 to allow the Director of the Department of Consumer and Business Services “to enter into a compact, or other tax sharing arrangement, constitutes an “unconstitutional delegation of authority.”

Oregon, along with other states, are considering, or have considered, legislation to enter into a compact or establish agreements with other states to allocate premium taxes paid to an insured’s home state.

some States have considered such legislation in connection with other legislation updating state laws to bring them into compliance with the Nonadmitted and Reinsurance Reform Act, which goes into effect on July 21.

The Oregon counsel’s office said that the “Legislative Assembly may delegate some portion of its authority to state agencies, as it deems appropriate”, however the authority to enter into an interstate compact has not been delegated by the Legislative Assembly in the past (with one exception), and the bill “does not contain sufficient standards and safeguards regarding the delegation of legislative authority and because the subject of the delegation, the power to tax, is a core legislative function.”