201 Cal. App. 4th 737
Cal. Ct. App.2011Background
- Regulation Cal. Code Regs., tit. 22, § 66269.1 interprets Health & Saf. Code § 25205.6 to identify hazardous-material-related business types for an annual charge.
- Section 25205.6 requires an annual charge for organizations with 50+ employees that use, generate, store, or conduct activities related to hazardous materials, with revenues deposited to the Toxic Substances Control Account.
- Morning Star Co. v. State Bd. of Equalization (2006) 38 Cal.4th 324 held the Department’s broad interpretation triggered APA rulemaking, and the Legislature later amended § 25205.6 accordingly.
- This case (third review) reconsiders the Regulation in light of California Farm Bureau Federation v. State Water Resources Control Bd. (2011) 51 Cal.4th 421 and yields the same three conclusions as the prior opinion: Regulation consistent with § 25205.6, the charge is a tax, and the tax does not violate equal protection or substantive due process.
- The trial court denied relief to Morning Star; the appellate court affirms the judgment, upholding the regulation and the tax.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Regulation is consistent with § 25205.6. | Morning Star contends all-inclusive regulation exceeds the statute. | Department maintains Regulation only implements the statute’s scope. | Regulation consistent with § 25205.6. |
| Whether § 25205.6 imposes a tax rather than a regulatory fee. | Company argues it is a regulatory fee. | Regulation funds broader hazardous-material programs, not regulation of specific activity. | § 25205.6 imposes a tax. |
| Whether the § 25205.6 tax violates equal protection or substantive due process. | Tax treatment irrationally targets corporations with 50+ employees. | Rational basis supports classification and purpose. | Tax does not violate equal protection or due process. |
| Whether the tax is reasonably necessary to effectuate § 25205.6's purpose. | (Not explicitly stated beyond broader challenges.) | Regulation is reasonably necessary to fund hazardous-material programs. | Regulation reasonably necessary to effectuate § 25205.6. |
Key Cases Cited
- Morning Star Co. v. State Bd. of Equalization, 38 Cal.4th 324 (Cal. 2006) (APA rulemaking and interpretation of § 25205.6; all-inclusive view questioned)
- California Farm Bureau Federation v. State Water Resources Control Bd., 51 Cal.4th 421 (Cal. 2011) (fee vs. tax analysis; regulatory-fee framework)
- Sinclair Paint Co. v. State Bd. of Equalization, 15 Cal.4th 866 (Cal. 1997) (fees and taxes; cost-based regulation)
- Water Code § 1525 (California Farm Bureau context), (not a case) () (referenced for regulatory-fee vs. tax distinction)
- Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356 (U.S. 1973) (rational basis review in tax-like challenges)
- Ehrlich v. City of Culver City, 12 Cal.4th 854 (Cal. 1996) (substantive due process standards in taxation context)
- Warden v. State Bar, 21 Cal.4th 628 (Cal. 1999) (legislative classifications must be rationally related to purpose)
- Communities for a Better Environment v. California Resources Agency, 103 Cal.App.4th 98 (Cal. Ct. App. 2002) (reasonableness and rational basis for agency regulation)