2015 U.S. Dist. LEXIS 171989
D. Md.2015Background
- Baltimore City enacted Ordinance 13-139 (Billboard Ordinance) in June 2013 to "impose a tax on the privilege of exhibiting outdoor advertising displays." Clear Channel operates ~95% of the affected displays and estimates a $1.5 million annual cost.
- Clear Channel sued in federal court under § 1983 seeking declaratory and injunctive relief, arguing the Ordinance unconstitutionally regulates commercial speech.
- The City moved to dismiss under the Tax Injunction Act (TIA), which bars federal suits attacking state or local "taxes" where an adequate state-court remedy exists; the court denied dismissal at the pleading stage, treating the charge as a fee for TIA purposes.
- At summary judgment, the parties contested whether the Ordinance is a tax or a fee under the Fourth Circuit's three-prong test: (1) who imposes the charge, (2) who is charged, and (3) how revenues are used.
- The City acknowledged revenues are credited to the General Fund and enacted a separate ordinance allocating $250,000 of excess Billboard revenue to an arts-and-culture fund that funds public programming.
- The district court concluded the charge was a tax (despite primarily burdening Clear Channel) because revenue benefits the general public rather than defrays regulation costs; thus the TIA deprived the federal court of jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a plain, speedy, efficient state remedy exists | Not disputed | State courts provide adequate remedy | Court: undisputed — state remedy exists |
| Whether the Billboard Ordinance is a "tax" or a "fee" under the TIA | Ordinance is a fee: targets a narrow class (primarily Clear Channel); legislative recitals show regulatory purpose and earmarking for arts/culture | Ordinance is a tax: enacted by legislature, collected by general tax office, revenues go to General Fund and support public programs | Court: "tax" — first prong (legislature/collector) and third prong (use of revenue for general public) control; TIA bars federal jurisdiction |
| Significance of narrow incidence (who actually pays) | Narrow incidence demonstrates punitive regulatory fee (cites GenOn) | Narrow impact not dispositive when revenues benefit general public | Court: second prong indicates a fee but is outweighed by third prong; narrow incidence not dispositive here |
| Effect of earmarking/recitals indicating regulatory purpose | Recitals and budget statements show intended earmark to arts/culture and regulatory aims — supports fee characterization | Actual use of funds (General Fund + arts allocations that benefit public) shows funds are not used to defray regulation costs — supports tax characterization | Court: actual use controls; revenues benefit public (arts, schools, museums) so characterization is tax |
Key Cases Cited
- Collins Holding Corp. v. Jasper Cty., S.C., 123 F.3d 797 (4th Cir. 1997) (articulates two-part TIA inquiry and courts examine whether charge is tax or fee)
- Valero Terrestrial Corp. v. Caffrey, 205 F.3d 130 (4th Cir. 2000) (sets out three-prong test: who imposes charge, who is charged, and how revenue is used)
- GenOn Mid-Atl., LLC v. Montgomery Cty., Md., 650 F.3d 1021 (4th Cir. 2011) (narrow incidence where burden fell on a single entity supported fee characterization)
- DIRECTV, Inc. v. Tolson, 513 F.3d 119 (4th Cir. 2008) (when prongs conflict, the third prong concerning revenue use is most important)
- Club Ass'n. v. Wise, 293 F.3d 723 (4th Cir. 2002) (fees with regulatory statements can be taxes if revenue funds general public programs)
- Folio v. City of Clarksburg, W.Va., 134 F.3d 1211 (4th Cir. 1998) (TIA bars § 1983 challenges to state taxes)
- Hedgepeth v. Tennessee, 215 F.3d 608 (6th Cir. 2000) (charges are taxes under TIA where funds are not placed in special fund to benefit regulated parties)