Opinion ID: 2447883
Heading Depth: 1
Heading Rank: 3

Heading: The Associations' Challenge under the Dormant Commerce Clause

Text: The Supreme Court has long instructed that the Commerce Clause, which gives Congress the power to regulate Commerce . . . among the several States, U.S. Const. art. I, § 8, cl. 3, contains a further, negative command, known as the dormant Commerce Clause . . . [which]. . . prevents a State from jeopardizing the welfare of the Nation as a whole by placing burdens on the flow of commerce across its borders that commerce wholly within those borders would not bear. Am. Trucking Ass'ns v. Mich. Pub. Serv. Comm'n, 545 U.S. 429, 433, 125 S.Ct. 2419, 162 L.Ed.2d 407 (2005) (citations, internal quotation marks, and alterations omitted); see Beretta, 872 A.2d at 656 ([T]he Commerce Clause has long been understood to have a `negative' or dormant aspect that denies the States the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce.) (citation, internal quotation marks, and alteration omitted). [19] Harmonizing the guidance set out in the Supreme Court's many dormant Commerce Clause opinions is not a simple task. Indeed, the Court has acknowledged the uneven course of [its] decisions in this field, decisions that reflect[] the difficulties of reconciling unrestricted access to the national market with each State's authority to collect its fair share of revenues from interstate commercial activity. Am. Trucking Ass'ns v. Scheiner, 483 U.S. 266, 269, 280, 107 S.Ct. 2829, 97 L.Ed.2d 226 (1987) (describing the Court's dormant Commerce Clause decisions as a quagmire of judicial responses to specific state tax measures). The parties' briefs reflect the divergent and seemingly inconsistent decisions in this area. Focusing on the validity of $50 trip permits (the subsection (j)(3) option), the Associations emphasize the Court's reasoning in its 1987 opinion in Scheiner. In Scheiner, the Court invalidated a Pennsylvania axle tax and marker fee, deeming them to be unconstitutional flat taxes because they imposed a much heavier charge per mile of highway usage by out-of-state vehicles than they imposed on Pennsylvania-based vehicles, which travel about five times as many miles on Pennsylvania roads as do the out-of-state vehicles. 483 U.S. at 276, 297, 107 S.Ct. 2829. The Associations assert that, similar to the problem with Pennsylvania's taxes, [t]here is no direct correlation between the amount of the flat $50 trip permit fee and either the actual time spent or miles driven in the District (complaining that the trip permit fees apply whether the bus will operate in the District for six days or six hours). [20] The District, by contrast, draws an analogy between the (j)(3) trip permits and the flat annual fee that the Court upheld in its 2005 opinion in American Trucking, in which the Court rejected a dormant Commerce Clause challenge to the $100 fee that Michigan imposed on all trucks undertaking point-to-point hauls between Michigan cities. Id. at 438, 125 S.Ct. 2419. The Court did so notwithstanding the claim by interstate haulers, who incurred the $100 fee upon performing any intrastate hauling, that they engage[d] in intrastate business less than trucks that confine[d] their operations to Michigan. Id. at 431-32, 125 S.Ct. 2419. [21] While the Court's decisions are not entirely easy to reconcile, and while none of them has considered a fee program analogous to the three-option program in issue here, we nevertheless can derive from them, and from appellate court rulings applying them, several abiding principles that guide our analysis here. We begin with the principle that a state tax that favors in-state business over out-of-state business for no other reason than the location of its business is prohibited by the Commerce Clause. Scheiner, 483 U.S. at 286, 107 S.Ct. 2829; see also Beretta, 872 A.2d at 656 (explaining that State legislation that is for the purpose of economic protectionism, i.e., that favor[s] instate economic interests over out-of-state interests, may generally be struck down without further inquiry) (citations omitted). In this case, the record contains no suggestion that any such protectionist or discriminatory purpose underlies section 50-1501.02(j). Quite the contrary, the TBMI Report that was impetus for the legislation recognized that out-of-state charter buses, which bring into the District a large proportion of the tourists, perform a function crucial to the economic life of the city and its role as the nation's capital. [22] We cannot ascribe to the Council an intent to discourage or to disadvantage interstate commerce through the passage of section 50-1501.02(j). Another guiding principle is embodied in the Supreme Court's observation in Scheiner that [i]f each State imposed flat taxes for the privilege of making commercial entrances into its territory, there is no conceivable doubt that commerce among the States would be deterred. 483 U.S. at 284, 107 S.Ct. 2829. The Associations seize upon that statement to argue that section 50-1501.02(j) on its face violates the Commerce Clause because it makes entering into the District of Columbia (rather than activity within the District of Columbia) the basis for incurring fees. We reject this argument. The Supreme Court has moved toward a standard of permissibility of state taxation based upon its actual effect rather than its legal terminology. Scheiner, 483 U.S. at 294-95, 107 S.Ct. 2829. Accordingly, our analysis must focus not [on] the formal language of the . . . statute but rather [on] its practical effect. Id. at 295, 107 S.Ct. 2829. The relevant historythe TBMI and OIG Reportsmakes clear that the focus of the fees that section 50-1501.02(j) now imposes on interstate charter buses (as well as local charter buses) is the impact on the infrastructure and environment of buses that use the District's roadways, park, idle, and create traffic congestion and hazards within city limits. The focus is not on the buses' crossing jurisdictional lines into the city. Moreover, subsection (j)(1) and (j)(2) registration fees are annual fees that apply without regard to how many times a bus enters the District of Columbia, and each subsection (j)(3) trip permit is valid for six days, during which period a charter bus might enter and exit the District of Columbia repeatedly. [23] Thus, notwithstanding the statutory language, the fees associated with each of these options are not actually taxes on commercial entrances into this jurisdiction. We are satisfied that, instead, they tax intra-District of Columbia activity (making them similar to Michigan's flat $100 fee on intrastate hauling that the Supreme Court upheld in American Trucking ). The case law also requires us to consider whether the effect of the fee statute is to discriminate against charter buses that engage in interstate commerce or to tax interstate charter buses on their out-of-state operations (such that the fees are not fairly apportioned [24] ). The Associations contend that these are precisely the effects of the options described in section 50-15010.2(j). They argue that the subsection (j)(1) District-registration option discriminates against interstate carriers because it places burdens on charter operators domiciled outside the District of Columbia far beyond what their District-based competitors face, since the [o]ut-of-state operators would either pay two registration fees while DC operators would pay only one or be forced to move their business to the District of Columbia. The (j)(3) trip permit option discriminates against interstate carriers, they contend, because it is not fully apportionedi.e., [t]here is no direct correlation between the amount of the flat $50 trip permit fee and either the actual time spent or miles driven in the District. [25] The Associations' argument rests in large part on the proposition that each option under section 50-1501.02(j) must be analyzed separately rather than by reference to the statutory scheme as a whole. We can agree that, if analyzed in isolation, subsection (j)(1) might not pass constitutional muster. In response to subsection(j)(1) as a sole option, charter bus operators that are based outside the District of Columbia might be forced to bear the expense and disruption of moving their operations to the District and modifying their businesses so that they become local operators. [26] Otherwise, with subsection (j)(1) as the only option for out-of-state operators, such operators would have to pay full registration fees to the District as well as to their home jurisdictions (while, presumably, District-based operators would be subject to only one full registration fee). And if all other jurisdictions were to adopt a similar approach, interstate commerce might become prohibitively expensive. Stated differently, option (j)(1) as a sole option might violate the so-called internal consistency test, American Trucking, 545 U.S. at 437, 125 S.Ct. 2419, because [i]f each State imposed flat fees of these types for passing through its jurisdiction, an impermissible interference with free commerce would result. Am. Trucking Ass'ns v. Secretary of Admin., 415 Mass. 337, 613 N.E.2d 95, 101 (1993). If, instead, the subsection (j)(3) trip permit fee were the only option for non-District-based charter operators, it could require charter bus operators that run regular excursions into the District of Columbia to pay more in fees than they would be required to pay (and more than local operators are required to pay) under full District registration, disadvantaging them vis-à-vis locally-based operators. [27] But the case law does not support the Associations' contention that we must analyze each of the types of fees described in section 50-1501.02(j) in isolation, disregarding the other options. The Supreme Court eschewed such an approach in Scheiner, reasoning instead that, in order to determine the constitutional validity of the axle tax and marker fee that Pennsylvania imposed on out-of-state carriers, it was necessary to take into account the mechanics of . . . collection of the state's other vehicle registration fees and mileage and fuel taxes, and how they applied to non-Pennsylvania-based trucks. Scheiner, 483 U.S. at 271, 107 S.Ct. 2829 (noting that these other fees and taxes provide necessary background for our analysis of the economic significance and constitutional validity of the challenged flat taxes). [28] In addition, analyzing each of the section 50-1501.02(j) options in isolation makes no practical sense, because the Associations do not seriously claim that any of their members is somehow forced, or is likely, to choose the (j)(1) District-registration option over the less expensive (j)(2) apportioned-registration option, or to choose the (j)(3) trip permit option if it is more costly than a different option. [29] We think the better reading of the large body of dormant Commerce Clause jurisprudence is that where a fee statute provides the same options to out-of-state domiciliaries as to in-state domiciliaries and allows each to choose the option most economically practical for its own needs thus regulating evenhandedly [30] there is no basis for holding that it accords differential treatment to in-state and out-of-state operators and thus discriminates against interstate commerce in violation of the dormant Commerce Clause. Cf. Lebanon Farms Disposal, Inc. v. County of Lebanon, 538 F.3d 241, 245 n. 11 (3d Cir. 2008) (stating that, on remand, in assessing the burden on interstate commerce imposed by ordinance requiring waste haulers to haul to a specified in-county waste disposal facility, the district court may want to make relevant findings of fact as to the ability of waste haulers to apply for and receive exceptions authorizing them to haul waste to [alternative] landfills, because such an option, if it affords a realistic opportunity for success, reduces the burden on interstate commerce); Doran v. Mass. Tpk. Auth., 348 F.3d 315, 317, 319, 321 (1st Cir.2003) (rejecting Commerce Clause claim that Massachusetts Turnpike Authority (MTA) program that allowed drivers of vehicles equipped with a transponder sold by MTA to pass through certain toll plazas for a discounted toll discriminates against nonresidents of Massachusetts, because the right to purchase a transponder for $27.50 was open to all, not just residents, even though the decision whether to do so turns on one's anticipated frequency of use, and even though plaintiffs asserted that the purchase option was a hollow option that few non-residents will choose); see also Family Winemakers of Cal. v. Jenkins, 592 F.3d 1, 4, 11-12 (1st Cir.2010) (reasoning that Massachusetts law whose effect was to allow in-state wineries to sell their wines through any combination of direct shipments to consumers, wholesaler distribution and retail distribution, but to restrict most out-of-state winery competitors to a single distribution method, was unconstitutionally discriminatory, because the law allowed in-state wineries to choose which method or combination of methods will be most cost-effective, but left out-of-state competitors unable to distribute their wines through the most cost-effective method). The fact that the Associations' charter-operator members have fee-payment options, including most significantly the (j)(2) option of apportioned registration (which the Associations acknowledge passes muster under the dormant Commerce Clause), completely undercuts their argument that section 50-1501.02(j) discriminates against interstate operators or subjects them to fees that are not fully apportioned. [31] A state tax regulation may also be constitutionally impermissible if it impose[s] burdens on interstate trade that are clearly excessive in relation to the putative local benefits. [32] American Trucking, 545 U.S. at 433, 125 S.Ct. 2419; see also id. at 434, 125 S.Ct. 2419 (upholding Michigan intrastate hauling tax where the record contain[ed] little, if any, evidence that the $100 fee imposes any significant practical burden upon interstate trade). Therefore, we must also consider the practical effect of section 50-1501.02(j) on interstate commerce, including what the Associations argue is the excessive burden posed by the District's switch from a charter bus reciprocity system (under which buses were allowed to enter the District, at whatever regularity, without payment of any fees to the District) to the fees mandated by section 50-1501.02(j). The statute, the Associations assert, has the inevitable effect of driving up costs for out-of-District carriers. But the fact that a participant in interstate commerce realizes an adverse economic impact in dollars and cents . . . for crossing a state boundary and thus becoming subject to another State's taxing jurisdiction is not by itself sufficient to establish a Commerce Clause violation. Scheiner, 483 U.S. at 283 n. 15, 107 S.Ct. 2829. [N]ot all burdens upon commerce, but only undue or discriminatory ones, are forbidden. Id. at 281 n. 12, 107 S.Ct. 2829. A state may impose, even on motor vehicles engaged exclusively in interstate commerce, a reasonable charge as their fair contribution to the cost of constructing and maintaining the public highways. Id. at 286 n. 21, 107 S.Ct. 2829; see also id. at 292, 107 S.Ct. 2829 ([U]sers of a State's highways, although engaged exclusively in interstate commerce, may be required to contribute to their cost and upkeep.) (citations and internal quotation marks omitted); Maryland, 451 U.S. at 754, 101 S.Ct. 2114 ([I]nterstate commerce may constitutionally be made to pay its way.); Complete Auto Transit, 430 U.S. at 289, 97 S.Ct. 1076 (There being no objection to Mississippi's tax on appellant except that it was imposed on nothing other than the `privilege of doing business' that is interstate, the judgment of the Supreme Court of Mississippi [upholding the tax] is affirmed). There is no dispute that out-of-state charter buses now must pay something to the District for infrastructure use whereas before they paid nothing, but nothing in the record before us establishes that the Associations' members are thereby faced with any undue burden. The record is likewise bereft of any evidence that section 50-1501.02(j) will have a practical effect on interstate commerce generally. The only evidence in the record of any purported burden on interstate commerce is the lone charter-operator affidavit that the Associations submitted in support of their motion for summary judgment. That affidavit, from an officer of New Jersey-based Starr Tours, Inc., states that the company has 46 buses, each of which seats between 49 and 56 passengers, for which the company estimates that District of Columbia trip permits will cost $15,000 annually. The affidavit does not state how many of the company's buses actually make trips into the District, but, spread over 46 buses and roughly 50 passengers per bus, the $15,000 in annual estimated expenditures for trip permits amounts to about $326 per year per busi.e., less than $1 per day per bus, [33] and possibly less than two cents per day per passenger, amounts that do not strike us as clearly excessive. [34] The Starr Tours affidavit further states that the company's buses drove a total of 16,655 miles in the District of Columbia in 2006, but does not state the buses' non-District mileage. Thus, although the company has given us an estimate of what annual trip permit fees might be (should it choose the subsection (j)(3) trip permit option), the record gives us no information about how much the company would pay to the District in apportioned registration fees should the company choose option (j)(2). We have no information about whether the apportioned-registration-fee amount would be more or less than the estimated trip permit fee amount, and, most important, no indication that the apportioned-registration-fee amount would be burdensome. Moreover, the Associations have not asserted that the fees in issue will cause their members to stop operating here or to cut back on interstate trips or to go out of business altogether. [35] In sum, the record before us lack[s] convincing evidence showing that the tax deters. . . interstate activities. American Trucking, 545 U.S. at 437, 125 S.Ct. 2419. Further, the Associations make no claim that section 50-1501.02(j) fails prongs one and four of the Complete Auto test ( see supra note 24), and thus they appear to concede that the fees are applied to an activity with a substantial nexus with the taxing State and are fairly related to the services provided by the State. Complete Auto Transit, 430 U.S. at 279, 97 S.Ct. 1076. Finally, contrary to the argument that the Associations press most forcefully in reliance on Scheiner, the fact that the District now requires fees to be paid by charter operators who have already paid full registration fees in their home states, does not suffice to prove a Commerce Clause violation. In Scheiner, the Supreme Court did rely on the fact that some operators of vehicles based in other States . . . have paid registration fees to their own jurisdictions and still face Pennsylvania's axle taxes. 483 U.S. at 282, 107 S.Ct. 2829. But, as the Court recognized, the real nub of the problem in Pennsylvania was that non-Pennsylvania trucks based in IRP States are required to pay not only their share of Pennsylvania's registration fees, but [Pennsylvania's] $25 marker fee and the axle tax as well,  id. at 288 n. 22, 107 S.Ct. 2829 (italics added), while, by law, each Pennsylvania-based truck was deemed to have paid the $25 marker fee through its registration fee, id. at 281, 107 S.Ct. 2829, and the State had reduced its registration fees with the intent of exactly offset[ing] the impact of the Axle Tax upon motor carrier vehicles registered in Pennsylvania. Id. at 275 n. 8, 107 S.Ct. 2829. In effect, Pennsylvania trucks paid Pennsylvania only a registration fee, while out-of-state trucks paid Pennsylvania a registration fee, a marker fee (while that fee remained in effect), and the axle tax. Here, the situation is quite different. Out-of-state charter bus operators paying the District of Columbia trip permit fee do not also pay District of Columbia registration fees, either in full or in an apportioned amount (and, conversely, operators paying registration fees are not required to pay the trip permit fee). [36] In moving for summary judgment and in opposing the District's motion for summary judgment, the Associations represented that there are no material facts in dispute and effectively stipulated that no discovery of additional facts was needed to enable the trial court, and this court, to rule. On the record presented, we have no basis for concluding that section 50-1501.02(j), on its face or because of its intent or its practical effect on interstate charter bus operators, discriminates against or burdens interstate commerce. We therefore affirm the judgment in favor of the District as to the Association's dormant Commerce Clause claims.