Arizonans in bankruptcy who received refundable tax credits can breathe a bit easier today, after a divided Arizona Supreme Court ruling on the unfortunate sequencing of a 2022 law and the citizens’ initiative restricting “predatory debt collection”. However, dissenting Justices fret that the result may usher in an era of the Legislature preemptively amending future citizens’ initiatives.

The 4-3 majority determined that Prop. 209 – the “Predatory Debt Collection Protection Act” that passed overwhelmingly – did NOT delete the portion of the exemptions statute that protected certain tax credits (e.g. earned income tax credits and child tax credits). Why the confusion? Because then-Gov. Doug Ducey signed the Legislature’s bill adding the tax credit exemption on the SAME DAY (July 6, 2022) that the Healthcare Rising group turned in hundreds of thousands of signatures to put Prop. 209 on the November ballot.

That initiative touched another subsection of the exemption statute (increasing the exempt funds in a bank account), but did not mention the not-yet-existing tax credit subsection. The bill became law in September; the initiative after the election was certified in November.

Once people filing bankruptcy began claiming the new tax credit exemption, a bankruptcy trustee objected, claiming that Prop. 209 effectively repealed it (and he could seize and distribute the money to creditors).

The Supreme Court majority opinion, written by Justice John Lopez, said it is easy to see that it not explicitly repeal it. “Although the Governor signed S.B. 1222 into law on July 6, it did not take effect until September 24 because the Arizona Constitution delays the effective date of non-emergency legislation to allow challenges via referendum. See Ariz. Const. art. 4, pt. 1, § 1(3). Thus, subsection (A)(11) did not legally exist at any point during Prop. 209’s qualification process, and it did not become operative until well after Prop. 209’s filing deadline.”

Writing for the three dissenting Justices, Justice Clint Bolick bemoans* the possible impact of this decision. “(I)f we green-light the legislature’s ability to preemptively amend ballot measures prior to an election, we may inadvertently turn a highly uncommon situation into a tool to blunt or frustrate the effect of prospective ballot measures. We will then be faced with deciding when to give full effect to the prior statute as amended, when we will seek to harmonize the statute and the ballot measure, and when we will hold that the ballot measure implicitly invalidates the statute.”

*Justice Bolick’s spouse is in the Legislature, and has recently spoken out against citizens’ initiatives. Although the abortion initiative currently circulating is a proposed Constitutional amendment, it is not hard to imagine legislative efforts to preemptively amend future statutory initiatives.

**Author works with amicus Arizonans Fed Up With Failing Healthcare

This article was reported by AZ Law founder Paul Weich. 

“AZ Law” includes articles, commentaries and updates about opinions from the Arizona Supreme Court, U.S. Supreme Court, as well as trial and appellate courts, etc. AZ Law is founded by Phoenix attorney Paul Weich, and joins Arizona’s Politics on the internet. 

AZ Law airs on non-profit Sun Sounds of Arizona, a statewide reading service that provides audio access to printed material for people who cannot hold or read print material due to a disability. If you know someone who could benefit from this 24/7 service, please let them know about member-supported Sun Sounds. And, YOU can donate or listen here. 
Previous episodes of AZ Law can be streamed or downloaded here, or wherever you get your podcasts.