Opinion ID: 402430
Heading Depth: 2
Heading Rank: 1

Heading: Characteristics of User Fees Imposed

Text: 14 In general, these charges can be classified as a tax only if they constitute a pecuniary burden laid upon individuals or property for the purpose of supporting the Government or to support some special purpose authorized by it. New Jersey v. Anderson, 203 U.S. at 492. Taxes are not equivalent to debts, which are voluntary obligations based on express or implied contracts. Taxes are levied without the consent or voluntary action of the taxpayer. Id. See also National Cable Television Association v. United States, 415 U.S. 336, 340-41, 94 S.Ct. 1146, 1148-49, 39 L.Ed.2d 370 (1974). 15 This court considered the distinction between taxes and non-tax charges in Dungan v. Department of Agriculture, State of California, 332 F.2d 793 (9th Cir. 1964), aff'g In re Farmers Frozen Food Company, 221 F.Supp. 385 (N.D.Cal.1963). We approved the analysis developed by the district court in that case: 16 (T)he elements which characterize an exaction of a tax within the meaning of said Section 64, sub. a(4) are as follows: 17 (a) An involuntary pecuniary burden, regardless of name, laid upon individuals or property; 18 (b) Imposed by, or under authority of the legislature; 19 (c) For public purposes, including the purposes of defraying expenses of government or undertakings authorized by it; 20 (d) Under the police or taxing power of the state. 21 221 F.Supp. at 387 (footnotes omitted). That court defined an involuntary pecuniary burden as a non-contractual obligation imposed by state statute upon taxpayers who had not consented to its imposition. Id. 22 In the instant case, both the bankruptcy court and the district court applied the analysis used in In re Farmers. Although they concurred as to the incidents of the charges, these courts placed different interpretations upon the involuntary pecuniary burden requirement, so that the application of the test to the charges' characteristics yielded opposite results. We agree with the conclusion of the bankruptcy judge that involuntary burden must be read in a manner consistent with the requirements imposed in New Jersey v. Anderson. In determining if Lorber's use of the system was voluntary, and if it therefore consented to imposition of the fees, we are not free to consider the practical and economic factors which constrained Lorber to make the choices it did. The focus is not upon Lorber's motivation, but on the inherent characteristics of the charges. 23 The difficulty of classifying these charges is a product of the duality of the District's revenue system. Both residential and industrial users are assessed ad valorem taxes, based on the value of real property within the District. The parties agree that the revenue collected on an ad valorem basis constitutes taxation. The surcharge for excess industrial use is assessed under the same state statutory authority as the ad valorem taxes. Those statutes allow the District to finance its operation in either manner. It is also empowered to collect and enforce charges in the same manner as general taxes. The calculation of the surcharge takes into account the amount paid in ad valorem taxes, so that the service charge obligation is functionally related to the tax obligation. 24 These similarities between the charges and taxes assessed by the District, and the contrasting conclusions reached by the two lower courts in their well-reasoned opinions, clearly indicate that the classification of these charges is a close question. On balance, however, we conclude that because of the characteristics of the charges, they are better classified as non-tax fees than as taxes. 25 The Ordinance allows the District to assess surcharges only when District services are used by industrial customers and only in an amount proportionate to their use. The imposition of these charges thus was triggered by Lorber's decision to discharge into the system large amounts of industrial wastewater. Because the assessment resulted from Lorber's acts, it falls within the non-tax fee classification defined by the Supreme Court in National Cable Television Association v. United States, 415 U.S. 336, 340-41, 94 S.Ct. 1146, 1148-49, 39 L.Ed.2d 370 (1974): 26 Taxation is a legislative function, and Congress, which is the sole organ for levying taxes, may act arbitrarily and disregard the benefits bestowed by the Government on a taxpayer and go solely on ability to pay, based on property or income. A fee, however, is incident to a voluntary act, e.g., a request that a public agency permit an applicant to practice law or medicine or construct a house or run a broadcast station. The public agency performing those services normally may exact a fee for a grant which, presumably, bestows a benefit on the applicant, not shared by other members of society. 27 These charges are fees for services provided to the industrial users of the system. The specific services, processing and disposal of excess wastewater, are provided to industrial users, rather than to the general local population. Amounts specifically charged for those services are by nature a debt obligation, based on a contractual agreement, the application for and issuance of a permit. The source of the obligation is not the authorizing legislation, but Lorber's decisions to acquire a permit and to engage in a high level of system use. We therefore hold that the incidents of these charges do not allow their classification as taxes under federal law. 4 28