Clеar Channel Outdoor, Inc. v. Director, Department of Finance of Baltimore City
No. 2910
IN THE COURT OF SPECIAL APPEALS OF MARYLAND
January 29, 2020
Berger, Beachley, Wells, JJ.
REPORTED; September Term, 2018; Circuit Court for Baltimore City Case No. 117025007
EXCISE TAX – FIRST AMENDMENT
An excise tax, imposed on the privilege to charge others a fee to use billboard space, does not implicate the First Amendment.
EXCISE TAX – FIRST AMENDMENT – COMMUNICATIVE ELEMENTS – EXPRESSIVE ELEMENTS
Taxation of a billboard company‘s economic privilege does not possess sufficient communicative or expressive elements for the First Amendmеnt to come into play.
FIRST AMENDMENT – BILLBOARD DISPLAYS – FEES
Although the advertisements and messages placed on a billboard are entitled to First Amendment protection, a billboard company‘s privilege to charge fees to display them is not.
Opinion by
This appeal involves a constitutional challenge to Baltimore City Ordinance 13-139 (“the Ordinance“), which imposes an excise tax (“the Tax“) on outdoor advertising displays.
Clear Channel subsequently paid the Tax under protest. It then filed a refund request with the Director, Department of Finance of Baltimore City (“the City“), which was denied. Clear Channel sought review of the denial in the Maryland Tax Court, challenging the constitutionality of the tax on First and Fourteenth Amendment grounds, as well as
- Whether the operation of billboards is protected by the First Amendment and Article 40, thereby subjecting its taxation to heightened scrutiny.
- Whether the Ordinance targets a specific platform for speech and a small group of speakers, thereby subjecting it to heightened scrutiny.2
As we shall explain, we hold that the Ordinance does not implicate Clеar Channel‘s right to freedom of speech. Accordingly, we affirm.
FACTS AND PROCEEDINGS
In 2013, Ordinance 13-139 was signed into law, imposing an excise tax “on the privilege of exhibiting outdoor advertising displays in the City.”
an outdoor display of a 10 square foot or larger image or message that directs attention to a business, commodity, service, event, or other activity that is: (i) sold, offered, or conducted somewhere other than on the premises on which the display is made; and (ii) sold, offered, or conducted on the premises only incidentally if at all.
(a) In general.
The annual amount of the tax imposed is at the following rates per square foot of advertising imagery:
(1) $15 per square foot of advertising imagery for an electronic outdoor advertising display that changes images more than once a day; and
(2) $5 per square foot of advertising imagery for any other outdoоr advertising display.
(b) Tax for a single space.
If a single space is used for multiple outdoor advertising displays during the course of one reporting period, the advertising host who makes that space available:
(1) must pay the annual tax as if the display that would generate the highest tax liability had been in place for the entire year; and
(2) need not pay an additional tax for any other displays in that space.
Although there are three other groups that own or operate billboards in Baltimore, Clear Channel owns or operates the majority, and therefore, bears the majority of the Tax‘s burden. Clear Channel is assessed $1,500 annually when it charges third parties to use a billboard measuring 12 feet by 25 feet, and $3,360 annually when it charges third parties to use an electronic billboard, measuring 14 feet by 48 feet.3
The bill file that was introduced into evidence before the Tax Court explains the City‘s motive for enacting the Ordinance. The Ordinance, which was enacted as part of a ten-year financial plan for Baltimore, is purely a revenue raising measure. The
Clear Channel initially challenged the Ordinance in the United States District Court for the District of Maryland in 2013. See Clear Channel Outdoor, Inc. v. Mayor & City Council of Baltimore, 153 F. Supp. 3d 865 (D. Md. 2015). In its Complaint for Declaratory and Injunctive Relief, Clear Channel argued that Ordinance 13-139 violated its right to freedom of speech under the First and Fourteenth Amendments. Id. at 868. The City filed a motion to dismiss for failure to state a claim and lack of subject matter jurisdiction under
the Tax Injunction Act (“TIA“),
The TIA “provides that federal courts lack subject-matter jurisdiction to enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.” Id. at 870 (citing
Clеar Channel subsequently paid the Tax as owed for the 2014 and 2015 fiscal years, pursuant to the Ordinance. In February, 2016, Clear Channel demanded a refund of its 2014 and 2015 payments of the Tax and a suspension of the levy for subsequent years, citing its unconstitutionality under the First and Fourteenth Amendments. The City denied the request, explaining that the Tax was imposed to raise revenue and that it was subject to rational basis scrutiny. In July, 2016, Clear Channel paid its 2016 Tax Payment pursuant to the Ordinance and submitted a refund request that day. The City again denied the request. Clear Channel appealed the denial in the Maryland Tax Court, challenging the constitutionality of the Ordinance.
Before the Tax Court, Clear Channel argued that outdoor advertising is a constitutionally protected medium of speech under the First and Fourteenth Amendment and
On February 27, 2018, the Tax Court issued a Memorandum and Order affirming the City‘s denial of Clear Channel‘s refund requests for the fiscal years 2014, 2015, and 2016. In rejecting Clear Channel‘s constitutional contentions, the Tax Court focused on the taxing power of the City. It found that “[a]n excise tax imposed
Clear Channel sought judicial review of the Tax Court‘s decision in the Circuit Court for Baltimore City. The circuit court found that the Tax Court‘s decision was correct as a matter of law and that it was supported by the substantial evidence from the record. It, therefore, affirmed the Tax Court‘s decision. This appeal follows.
STANDARD OF REVIEW
“Because the Tax Court is an administrative agency, its decisions аre reviewed under the same appellate standards generally applied to agency decisions.” Comptroller of Treasury v. Johns Hopkins Univ., 186 Md. App. 169, 181(2009). “[W]e look through the decision of the Circuit Court and evaluate directly the conclusions reached by the Tax Court.” Green v. Church of Jesus Christ of Latter-Day Saints, 430 Md. 119, 132 (2013). This Court gives “great deference to the Tax Court‘s fact-finding.” Zorzit v. Comptroller, 225 Md. App. 158, 169 (2015). “[W]here the Tax Court‘s decision is based on a factual determination, and there is no error of law, the reviewing court may not reverse the Tax Court‘s order if substantial evidence of record supports the agency‘s decision.” Supervisor of Assessments of Anne Arundel Cty. v. Hartge Yacht Yard, Inc., 379 Md. 452, 461 (2004). We review the Tax Court‘s decisions of law de novo. Johns Hopkins Univ., supra, 186 Md. App. at 181–82. Even so, “an administrative agency‘s interpretation and application of the statute which the agency administers should ordinarily be given considerable weight by reviewing courts.” Id. at 182 (quoting Md. Aviation Admin. v. Noland, 386 Md. 556, 571 (2005)). Moreover, “recognizing that the agency‘s decision is prima facie correct and presumed valid, we must review the agency‘s decision in the light most favorable to it.” Comptroller of the Treasury v. Citicorp Int‘l Commc‘ns, Inc., 389 Md. 156, 163 (2005) (citations and quotations omitted). As this case involves the constitutionality of an ordinance, we review the Tax Court‘s decision de novo. See, e.g., Schisler v. State, 394 Md. 519, 536 (2006).
DISCUSSION
I. The Ordinance is a valid excise tax and does not implicate the First Amendment.
Clear Channel first arguеs that the Ordinance unconstitutionally burdens billboard speech, which is protected by the First Amendment and
of the third party, and therefore, a tax on its business does not impliсate the First Amendment. We agree with the City and explain.
The City has the “power to tax to the same extent as the State of Maryland has or could exercise said power within the limits of Baltimore City as a part of its general taxing power.”
The Baltimore City Council classified the Outdoor Advertising Tax as an excise.
Here, the City has imposed an excise tax on the privilege to charge others a fee to use billboard space. The Tax Court correctly cоncluded that the taxation of Clear Channel‘s business privileges lacks “sufficient communicative elements” for the First
Amendment to come “into play.”5 Clear Channel charges third parties a fee to use their property and then displays the third party‘s message. Although the advertisements and messages placed on the billboards may be entitled to First Amendment protection, Clear Channel‘s privilege to receive financial compensation for displaying those messages is not. See Virginia v. Black, 538 U.S. 343, 358 (2003) (“The First Amendment affords protection to symbolic or expressive conduct as well as to actual speech.“). Clear Channel‘s economic activity is not expressive or communicative. We, therefore, agree with the City that “[t]he mere fact that billboards are a medium of communication does not transform a tax
In support of its argument that billboard speech is protected by the First Amendment, Clear Channel relies on Metromedia, Inc. v. City of San Diego, 453 U.S. 490 (1981). Metromedia, however, involved an ordinance which prohibited outdoor advertising displays. Id. at 503. The ordinance banned commercial advertising on billboards, unless within a specified exception, and certain noncommercial advertisements. Id. at 503. The ordinance in Metromedia was a content-based regulation of the speech and expression placed on billboards. The Court, therefore, focused its analysis on the levels of First Amendment protection afforded to commercial speech and noncommercial speech. Id. at 504-21. The Baltimore City Ordinance at issue here, however, does not regulate the
content placed on Clear Channel‘s billboards. Certainly, as was the case in Metromedia, it does not seek to completely eliminate billboards and certain content placed on them.
Critically, the Tax Court noted that when Clear Channel charges a fee to third parties, “[p]etitioner does not express or say anything; it only sells space to advertisers who say things.” We agree with the reasoning of the Tax Court. We acknowledge, however, that Clear Channel occasionally displays its own message. The Tax, however, is only assessed when Clear Channel charges fees to another.
We further recognize that this Ordinance is content neutral.6 The Tax is applicable whenever an outdoor advertiser charges a third party to use its space, regardless of thе
content that is displayed or who paid Clear Channel to display it. Indeed, the tax applies, regardless of whether the advertising promotes coffee from Starbucks, charity for eleemosynary institutions, or other similar types of advertising. Moreover, the tax is only triggered when an advertising host charges third parties a fee. If an advertising host
Inasmuch as the Ordinance does not infringe on Clear Channel‘s First Amendment rights, it must only survive under a rational basis review. See Ysursa v. Pocatello Educ. Ass‘n, 555 U.S. 353, 359 (2009). Under this review, “a legislative classification will pass constitutional muster so long as it is rationally related to a legitimate governmental interest.” Tyler v. City of Coll. Park, 415 Md. 475, 501 (2010). Moreover, “a statute reviewed under the rational basis test enjoys a strong presumption of constitutionality.” State v. Phillips, 210 Md. App. 239, 274 (2013) (quoting Whiting-Turner Contracting Co. v. Coupard, 304 Md. 340, 352 (1985)). Clearly, Baltimore City has a legitimate governmental interest in raising revenue, particularly for the purpose of alleviating the burden on Baltimore City taxpayers. Moreovеr, the Ordinance is rationally related to that
interest because the Tax imposed by the Ordinance actually raises revenue, which is placed directly into the City‘s General Fund. We hold, therefore, that the Ordinance satisfies the rational basis test.
II. The Ordinance is unlike those that the Supreme Court has held unconstitutional under the First Amendment.
Even, assuming arguendo, that the tax implicates the First Amendment, it is vastly different from the other taxes the Supreme Court has struck down on First Amendment grounds. See Leathers, supra, 499 U.S. 439; Arkansas Writers’ Project, Inc. v. Ragland, 481 U.S. 221 (1987); Minneapolis Star & Tribune Co. v. Minnesota Comm‘r of Revenue, 460 U.S. 575 (1983); Grosjean v. American Press Co., 297 U.S. 233 (1936). Critically, each of the taxes that have been stricken involved freedom of the press and a conсern that the taxes would serve as a way for the government to censor “critical information and opinion[s],” published by the press. Leathers, supra, 499 U.S. at 447. The Ordinance here presents no such concern of censoring particular viewpoints or ideas.8 It does not target a particular speaker or message; it merely taxes the privilege of doing business in the City.
Grosjean, the earliest Supreme Court case on which Clear Channel relies, involved a Louisiana law that targeted newspapers with weekly circulations above 20,000 copies per
week and subjected thе papers to a 2% tax on gross receipts from advertising. Grosjean, supra, 297 U.S. at 240. Thus, only newspapers
Notably, the circulation of a newspaper is quite different than а billboard. As billboards are non-moveable property, the extent of the circulation of the information it displays is based on its location. The billboard Tax, however, is levied upon all off-premise billboard owners, no matter where the signs are located or the size of the population who view the displays. It does not limit the volume of information displayed, nor does it limit the audience that the information may reach.
Clear Channel‘s second argument as to why the Ordinance should be analyzed under strict scrutiny is that it targets a platform for speech and a small group of speakers within that platform. In support of its argument, Clear Channel relies on Minneapolis Star, supra, 460 U.S. 575. Minneapolis Star involved a special use tax on the paper and ink used in publications. Id. at 578. The tax provided an exemption for the first $100,000, thus, providing exemptions only for smaller newspapers with less wide-spread circulation. Id. The Court found the tax unconstitutional because it singled out the press and further, that it targeted only a small group of newspapers due to the exemption provision. Id. at 591.
Minneapolis Star is distinguishable for several reasons. First, Clear Channel is not akin to a newspaper, which publishes its own thoughts and ideas. Second, Clear Channel sells space that it owns to third parties that may display their own message.
Critically, as the Tax Court readily observed, the tax here is not measured based on the extent of the circulation of the message that is displayed, only on the size and technology of the billboard. Further, the ordinance does not target a small group of individuals within a particular group. All off-premise billboard owners and operators are assessed the tax based on the dimensions of their billboards. The tax singles out no particular group оf billboard owners while exempting others.9
Following Minneapolis Star, the Supreme Court addressed a challenge to a sales tax in Arkansas Writers’ Project, 481 U.S. 221. Arkansas imposed a sales tax on receipts from sales of tangible personal property. Id. at 244. Exemptions were provided for newspapers and religious, professional, trade, and sports magazines. Id. Arkansas Writer‘s Project published a general interest monthly magazine, which included a variety of subjects, including sports and religion, however, was required to pay the sales tax. Id. The Court held that the tax was unconstitutional for two reasons. First, it targeted a small group within the press, as in Minneapolis Star, because it was not evenly applied to all magazines. Id. at 229. Second, the Court held that the tax includеd an even “more disturbing use of selective taxation than Minneapolis Star, because the basis
differentiates between magazines is particularly repugnant to First Amendment principles: a magazine‘s tax status depends entirely on its content.” Id. (emphasis in original).
The City Ordinance at issue in this case clearly does not single out a small group within the press. Nevertheless, even if the business of advertising displays qualifies as a press activity, the tax does not discriminate within a class as did the invalidated taxes in Grosjean, Minneapolis Star, and Arkansas Writers’ Project. Indeed, the tax applies evenly to all display owners who charge for the use of their outdoor displays. Further, the Ordinance cleаrly does not differentiate based on the content of the billboard display.
In Leathers, supra, 499 U.S. at 447, the Supreme Court addressed each of its prior holdings involving First Amendment challenges to taxes.10 The Court upheld the tax in Leathers, which exempted or excluded newspapers, magazines, and satellite broadcast services. Cable television services, however, were subject to the tax. Id. at 442. The Court made clear that differential taxation of certain media “does not by itself, however, raise First Amendment concerns,” and is suspect only in certain circumstances. Id. at 444. Based
on its previous holdings, the Court articulated thrеe ways that a tax will be invalidated under the First Amendment:
These cases demonstrate that differential taxation of First Amendment speakers is constitutionally suspect when it threatens to suppress the expression of particular ideas or viewpoints. Absent a compelling justification, the government may not exercise its taxing power to single out the press. The press plays a unique role as a check on government abuse, and a tax limited to the press raises concerns about censorship of critical information and opinion. A tax is also suspеct if it targets a small group of speakers. Again, the fear is censorship of particular ideas or viewpoints. Finally, for reasons that are obvious, a tax will trigger heightened scrutiny under the First Amendment if it discriminates on the basis of the content of taxpayer speech.
Id. at 447 (citations omitted). To be struck down on First Amendment grounds, a tax must, therefore, threaten “to suppress the expression of particular ideas or viewpoints,” target “a small group of speakers,” or discriminate “on the basis of the content of taxpayer speech.” As we have explained, the excise tax in Baltimore City Ordinance 13-139 on outdoor advertising displays falls into none of these three categories.
The Ordinance at issue here enacts a valid excise tax on outdoor advertising displays in Baltimore City and does not impermissibly burden Clear Channel‘s right to freedom of speech. We, therefore, hold that the Ordinance is constitutional, and that the Tax Court did not err in affirming the City‘s denial of Clear Channel‘s request
JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE CITY AFFIRMED. COSTS TO BE PAID BY APPELLANT.
Notes
- Is the operation of billboards that carry the commercial and non-commercial messages of third parties and the billboards’ owner protected under the First Amendment and Article 40, subjecting its taxation to heightened scrutiny?
The First Amendment and Article 40 were written in response to similar concerns and to provide similar protections, but are capable of divergent interpretations. See, e.g., Pack Shack, Inc. v. Howard County, 377 Md. 55, 64 n.3 (2003). See also Matthew S. Fuchs, Free Exercise of Speech in Shopping Malls: Bases That Support an Independent Interpretation of Article 40 of the Maryland Declaration of Rights, 69 Alb. L. Rev. 449, 471–72 (2006) (“Maryland courts have indeed interpreted Article 40 more broadly than the federal counterpart.“); Anthony W. Kraus, Beyond the First Amendment: What the Evolution of Maryland‘s Constitutional Free-Speech Guarantee Shows About Its Intended Breadth, 47 U. Balt. L.F. 83, 84 (2017) (“Many Maryland cases … not[e] that stаte and federal free-speech rights are viewed as equivalents “in general” or “ordinarily,” but leav[e] open the implicit possibility that it may not always be so.“). Here, however, Clear Channel has not offered us any basis to interpret Article 40 differently or more broadly than the First Amendment.
In Thomas, Tennessee exempted on-premise signs from an outdoor signage permit requirement. Thomas, supra, 937 F.3d at 730. The regulation required that exempted signs “be located on the same premises as the activity” and “have as its purposе the identification of the activity, products, or services offered on that same premises.” Id. (quotations and alterations omitted). The Court held that the regulation was content-based because of the “purpose” component of the regulation. Id. A State official was required to “assess the meaning and purpose of the sign‘s message” to determine if the on-premise exception applied. Id. The Court determined that there was no way to do so without “understanding the content of the message.” Id. Here, the Ordinance imposes no such “purpose” requirement in the definition of an outdoor advertising display, and no City official assesses the meaning or purpose of a billboard.