A legal memo obtained by WW shows business groups are weighing a court challenge to the Portland Clean Energy Fund.

The Aug. 6 memo from the Washington, D.C., law firm McDermott Will & Emery says businesses could challenge the 1 percent increase in the city's business license tax for companies that have a half-million dollars in sales in Portland and a billion nationally. The revenues are earmarked to fund green energy projects in minority and low-income communities.

The memo was paid for by the National Retail Federation, according to a source with knowledge of its funding. No such lawsuit has yet been filed, and suing could present a customer relations problem for any retailer who challenges popular support for the fund. (The measure won the approval of 65 percent of voters last November, after all.)

But the legal case shows pressure growing in the ongoing debate about who should be required to pay the tax. After the election, the tax proved to be more expansive than its backers told voters. And several businesses now subject to the tax—such as construction contractors, insurance firms and even the city's garbage haulers—might be less sensitive to popular opinion and freer to pursue legal action.

The memo says businesses could challenge the Portland Clean Energy Fund in federal or state court. On what grounds? The commerce clause of the U.S. Constitution, which limits states' authority to regulate business conducted across state lines.

The lawyers argue the Clean Energy Fund might violate that clause: "Its practical effect would result in differential treatment between local entities and out-of-state entities that have comparable revenue from business conducted in Portland, but where the out-of-state entity generates substantial revenue in interstate commerce."

The Portland Business Alliance, a key opponent of the Clean Energy Fund measure, says it's staying out of any legal action—in part because it's still negotiating with City Hall for exemptions from the tax. But the memo does provide the PBA with valuable leverage.

"This legal view has been a topic of discussion, but frankly not where the business community wants to go right now," says Andrew Hoan, president and CEO of the alliance. "We still feel confident that working with advocates, City Council and the mayor, we can find agreement on a retail tax that implements what the voters understood they were endorsing last fall."

The coalition that successfully campaigned for the measure last November rejected any suggestion that a possible lawsuit should sway whether the city should exempt some businesses.

"We're focused on making sound public policy by implementing [the fund] as passed by the voters," says Jenny Lee, advocacy director at the Asian Pacific American Network of Oregon and a spokeswoman for the coalition.