Title: Vermont Society of Association Executives v. Milne

State: vermont

Issuer: Vermont Supreme Court

Document:

Vermont Society of Association Executives v. Milne (2000-032); 172 Vt. 375;
779 A.2d 20

[Filed 08-Jun-2001]

[Motion to Amend Denied 15-Aug-2001]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal  revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of  Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any  errors in order that corrections may be made before this opinion goes
  to press.

                                No. 2000-032

Vermont Society of Association 	                 Supreme Court
Executives, et al.

						 On Appeal from
     v.	                                         Washington Superior Court

James F. Milne, Secretary of State	         January Term, 2001

David A. Jenkins, J.

Robert B. Hemley of Gravel and Shea, Burlington, Nory Miller of Jenner & Block, 
  and Jerald A. Jacobs of Shaw Pittman Potts & Trowbridge (Of Counsel), 
  Washington, D.C., for Plaintiffs-Appellees.

William H. Sorrell, Attorney General, and Bridget C. Asay, Assistant Attorney 
  General, Montpelier, for Defendant-Appellant.

PRESENT:  Amestoy, C.J., Dooley, Morse and Skoglund, JJ., and Cheever, 
          Supr. J., Specially Assigned

       SKOGLUND, J.   In this appeal, the Secretary of State challenges the
  superior court's ruling  that Vermont's tax on lobbying expenditures is
  unconstitutional.  We conclude that, in singling out  and burdening
  interests protected by the First Amendment, the lobby tax violates the
  United States  Constitution under the heightened scrutiny required. 
  Accordingly, we affirm the superior court's  judgment.

       Effective January 1, 1998, the Legislature imposed a five-percent tax
  "on the expenditures of  lobbyists and employers of lobbyists. . . . in
  excess of $2,500.00."  2 V.S.A. § 264a(a). (FN1)  The  tax 

 

  is expressly restricted to expenditures connected with communications or
  activities aimed at  influencing legislation or administrative action.  See
  2 V.S.A. § 261(5), (9) (defining terms  "Expenditure" and "lobbying").  The
  lobby tax was enacted as part of a campaign finance reform  statute that
  established a fund to provide public grants to candidates running for the
  offices of  governor and lieutenant governor.  1997, No. 64, § 2.  The tax
  was earmarked as one of the primary  sources to fund these grants.  §
  264a(d) (all revenues collected from lobby tax "shall be submitted 

 

  to the state treasurer for deposit in the Vermont campaign fund established
  under section 2856 of  Title 17").

       Plaintiffs, a group of nonprofit organizations employing lobbyists,
  initially filed a declaratory  judgment action in the superior court
  alleging that the lobby tax unconstitutionally singled out and  burdened
  protected First Amendment activities and violated equal protection
  guarantees.  Plaintiffs  requested that the court declare § 264a
  unconstitutional and enjoin the Commissioner of Taxes from  enforcing the
  tax.  The Secretary of State (hereinafter "the State") moved to dismiss the
  suit on the  ground that plaintiffs had failed to exhaust administrative
  remedies established by statute for  challenging the imposition of a tax. 
  See 32 V.S.A. § 9777(a) (taxpayer may request hearing before  commissioner
  to challenge assessment of unpaid taxes); 32 V.S.A. § 9781(a) (taxpayer may
  request  tax  refund from commissioner).  The superior court denied the
  motion.  Later, pursuant to the  parties' agreement, one of the plaintiffs,
  Home Builders Association, requested a refund of taxes it  had paid under §
  264a.  The commissioner denied the request, and that denial was appealed to
  the  superior court, where it was consolidated with the declaratory
  judgment action.  The parties then  filed opposing motions for summary
  judgment.

       The superior court granted summary judgment in favor of plaintiffs. 
  Applying strict scrutiny,  the court ruled that the lobby tax violates the
  First Amendment under the analysis set forth in  Leathers v. Medlock,