Clear Channel Outdoor v. Dept. of Finance

Clear Channel Outdoor, Inc. v. Director, Department of Finance of Baltimore City No. 9, September Term 2020 Taxation – Freedom of Speech – Billboards – Advertising. Local excise tax on the business of selling advertising space on billboards did not violate the constitutional provisions that protect freedom of speech and of the press. United States Constitution, First Amendment; Maryland Declaration of Rights, Article 40. Circuit Court for Baltimore City Case No. 24-C-18-001778 Argument: November 6, 2020 IN THE COURT OF APPEALS OF MARYLAND No. 9 September Term, 2020 _____________________________________ CLEAR CHANNEL OUTDOOR, INC.

V. DIRECTOR, DEPARTMENT OF FINANCE OF BALTIMORE CITY _____________________________________ Barbera, C.J., McDonald Watts Hotten Getty Booth Biran, JJ. ______________________________________ Opinion by McDonald, J. Getty, J., dissents. ______________________________________ Pursuant to Maryland Uniform Electronic Legal Filed: March 15, 2021 Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic. 2021-06-09 14:24-04:00 Suzanne C. Johnson, Clerk The power to tax is a necessary and essential power of government. Freedom of speech is a necessary and essential element of a democracy. Under the constitutional provisions that protect freedom of speech and of the press, differential taxation of those who operate platforms for speech is “constitutionally suspect when it threatens to suppress the expression of particular ideas or viewpoints.”1 Those constitutional provisions require “heightened scrutiny” of tax laws that “single out the press,” that “target a small group of speakers,” or that “discriminate on the basis of the content of taxpayer speech.”2 This case requires us to apply that test to a local tax on billboard operators. A Baltimore City ordinance imposes a tax on the privilege of selling advertising on billboards that are not located on the premises where the goods or services being advertised are offered or sold.

Petitioner Clear Channel Outdoor, Inc. (“Clear Channel”), which is in the business of selling advertising on its billboards in the City, sought a refund from the Respondent City Director of Finance of the taxes that it has paid pursuant to that ordinance. Clear Channel asserted that the ordinance is unconstitutional because a tax related to the sale of advertising on its billboards cannot survive the heightened scrutiny that is applied under the constitutional provisions that protect freedom of speech and of the press. The City denied the request for a refund and Clear Channel initiated this litigation by pursuing an administrative appeal of that decision in the Maryland Tax Court. 1 Leathers v. Medlock, 499 U.S. 439, 447 (1991). 2 Leathers, 449 U.S. at 447. The Tax Court was not persuaded by Clear Channel’s constitutional arguments and upheld the City’s rejection of the refund request.

On judicial review of the Tax Court decision, the Circuit Court for Baltimore City and the Court of Special Appeals reached the same conclusion. So do we. I Background A. Baltimore City Enacts a Billboard Tax 1. The Ordinance In June 2013, the Baltimore City Council enacted an ordinance that imposed an excise tax “on the privilege of exhibiting outdoor advertising displays in the City.” Ordinance 13-139 (June 20, 2013), codified as amended at Baltimore City Code, Article 28 (Taxes), §29-1 et seq.

(2020) (“the Ordinance”).3 The Ordinance defined an “outdoor advertising display” as: [A]n 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. §29-1(d). The signs containing such displays are commonly referred to as billboards. However, as the definition indicates, the Ordinance does not encompass a sign that 3 Unless otherwise indicated, statutory references are to sections of Article 28 of the Baltimore City Code. 2 advertises a business or other activity on the premises where the sign is located – i.e., the Ordinance applies only to off-site billboards. The Ordinance levies the tax on the “advertising host” – defined as a person who owns or controls the billboard and charges for its use as an outdoor advertising display. §§29-1(b), 29-3.4 The tax is assessed annually based on the size and type of display: $15 per square foot for an electronic display that changes images more than once a day5 and $5 per square foot for any other display. §29-3.

The tax does not depend on the number of ads, the duration of an ad, or the subject matter of an ad. The advertiser who purchases an ad to be displayed on a billboard is not taxed under the Ordinance. According to the City, the sole purpose of the Ordinance is to generate revenue. At the time of its passage, the City’s Bureau of Budget and Management Research estimated that the Ordinance would generate $1 million in tax revenue for the 2014 fiscal year and $1.7 million for each fiscal year thereafter.

See Memorandum from the Bureau of Budget & Management Research to the President and Members of the Baltimore City Council (April 25, 2013), available at https://perma.cc/J7T9-KH6T. The Ordinance is part of the City’s Change to Grow Ten-Year Financial Plan and, according to the Bureau, was “included in the plan to help protect arts and culture funding from further cuts.” Id. 4 While individuals and various types of entities are included in the definition of “person” in the ordinance, governmental entities are excluded. §29-1(e). 5 A digital billboard may change images frequently during a day and thus serve multiple advertisers in the same location during that day. A different City law limits the frequency of the alteration of images on a digital billboard. Baltimore City Code, Article 32 (Zoning), §17-407(c). 3 2.

Billboards in Baltimore City It is undisputed that the Ordinance affects 760 signs operated by four entities, including Clear Channel. It also appears to be undisputed that Clear Channel owns the vast majority of the affected billboards, which account for approximately 90% of the tax revenue generated by the Ordinance. The highly concentrated billboard market in the City may be due, at least in part, to the fact that the City banned the construction of new billboards in March 2000.6 While Clear Channel primarily displays content supplied by third parties who pay for the use of its billboards, it also occasionally displays its own content. Although the billboards are largely devoted to commercial advertising, like other advertising platforms, some of the billboards also on occasion carry messages concerning sports and breaking news, as well as political messages and public service announcements, sometimes without charge.

Like other advertising platforms, Clear Channel decides what it will allow to appear on its billboards as it allocates the limited space available. Testimony and exhibits presented in the Tax Court hearing touched upon the editorial discretion exercised by Clear Channel. Clear Channel prohibits some messages outright, such as those related to sexually-oriented businesses and those it deems factually inaccurate. According to Clear 6 See Baltimore City Code, Article 32 (Zoning), §17-406(a)(1) (2020) (“Except as otherwise specifically provided in this Code, the erection, conversion, placement, or construction of new billboards, static or digital, is prohibited”); Jamie Stiehm, O’Malley Signs His First Bill into Law, Prohibits Construction of Billboards; Industry Has Threatened to Challenge Law in Court, The Baltimore Sun (Mar. 28, 2000), available at https://perma.cc/F8PB-3KYG. 4 Channel, it vets political messages for factual accuracy and ensures that no side of a political issue or electoral race receives favorable pricing.

B. Clear Channel Challenges the Tax Shortly after the City enacted the Ordinance, Clear Channel sought to have it struck down as unconstitutional. An initial foray in federal court failed on jurisdictional grounds. Clear Channel then pursued a refund of taxes paid to the City under the Ordinance, citing the same constitutional grounds. That effort resulted in litigation in State courts, including this appeal. 1.

Federal Declaratory Judgment Action Fails for Lack of Jurisdiction In August 2013, Clear Channel brought an action challenging the Ordinance in federal court, arguing that the Ordinance impermissibly regulated commercial speech in violation of the First and Fourteenth Amendments of the United States Constitution. The City responded that, because the Ordinance imposes a tax, the Tax Injunction Act deprived the federal court of subject matter jurisdiction.7 In December 2015, the federal district court agreed and granted summary judgment in favor of the City. Clear Channel Outdoor, Inc. v. Mayor and City Council of Baltimore, 153 F. Supp. 3d 865, 875 (D. Md. 2015). 7 The Tax Injunction Act prohibits federal district courts from enjoining, suspending, or restraining “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.” 28 U.S.C. §1341 (2020). 5 2. Clear Channel Pays Taxes and Requests a Refund Following the federal court decision, Clear Channel paid the tax due under the Ordinance for the 2014 and 2015 fiscal years under protest.

It requested a refund from the City, reiterating its argument that the tax is unconstitutional under the First and Fourteenth Amendments, and also invoking Article 40 of the Maryland Declaration of Rights. The City denied Clear Channel’s refund request. It responded to Clear Channel’s arguments, asserting that, because the Ordinance is a revenue-raising measure that satisfies rational basis review, it is constitutional. In July 2016, Clear Channel paid the tax due under the Ordinance for the 2016 fiscal year and again requested a refund – a request that was again rejected by the City. 3.

Maryland Tax Court Affirms Denial of Refund Clear Channel pursued an administrative appeal of the City’s denial of its refund requests in the Maryland Tax Court. Again invoking the First Amendment and Article 40, Clear Channel argued in the Tax Court that messages on billboards are constitutionally protected speech. It asserted that the tax imposed by the Ordinance targets a limited number of speakers, thereby chilling speech, and that the burden that the Ordinance places on such speech is not narrowly tailored and outweighs any governmental interest that the Ordinance advances. The Tax Court rejected Clear Channel’s arguments.

It noted the “strong presumption in favor of duly enacted taxation schemes.” Clear Channel Outdoor, Inc. v. Department of Finance of Baltimore City, Appeal No. 16-MI-BA-0571 (February 27, 2018), 2018 WL 1178952 at ²-3 (quoting Leathers v. Medlock, 499 U.S. 439, 451 (1991)). 6 The Tax Court concluded that an excise tax imposed on the privilege of exhibiting outdoor advertising displays is “a tax on the privilege of continuing in business, not on exercising free speech.” Id. Indeed, the Tax Court continued, Clear Channel’s conduct as a billboard operator was insufficiently communicative for the First Amendment to come “into play,” because Clear Channel “does not express or say anything; it only sells space to advertisers who say things.” Id. The Tax Court concluded that the Ordinance does not “impose[] a burden on free speech” and is rationally related to the legitimate governmental purpose of raising revenue. Id.

The Tax Court also concluded that, although the burden of the tax falls only on Clear Channel and a few other billboard operators, the Ordinance does not target a limited number of speakers. According to the Tax Court, the criteria used to determine the amount of tax (size and type of billboard) did not raise a constitutional issue because those criteria are unrelated to the extent of circulation and apply to all off-premises billboards. Id. The Tax Court stated that there was a rational basis for classifying large and immobile billboards separately from other signs for tax purposes.

Id. The Tax Court further noted that the tax applies to a small group of billboard operators at least in part because of “the City’s long-standing zoning regulation controlling billboards and the concentrated marketplace in the City,” not the Ordinance’s structure. Id. Based on this analysis, the Tax Court affirmed the City’s denial of Clear Channel’s refund requests. 7 4.

Judicial Review of the Tax Court Decision Clear Channel sought judicial review of the Tax Court’s decision in the Circuit Court for Baltimore City. That court affirmed the Tax Court’s decision, reiterating much of the Tax Court’s analysis and concluding that the decision was legally correct and supported by substantial evidence. Clear Channel Outdoor, Inc. v. Department of Finance of Baltimore City, Case No. 24-C-18-001778 (October 24, 2018), 2018 WL 7890750 . Clear Channel then appealed to the Court of Special Appeals, which also affirmed the Tax Court in a reported decision.

Clear Channel Outdoor, Inc. v. Director, Department of Finance of Baltimore City, 244 Md. App. 304 (2020). Clear Channel then filed a petition for a writ of certiorari, which we granted. II Discussion Clear Channel asks us to reverse the decisions of the courts below and ultimately that of the Tax Court. It argues that the Ordinance violates the constitutional provisions that protect freedom of speech.

It contends that a tax on a billboard advertising business is subject to “heightened scrutiny” under those constitutional provisions and that the Ordinance improperly targets a small group of speakers – billboard operators – in levying the tax. A. Standard of Appellate Review The Tax Court is an administrative agency, and its decisions are reviewed under the same appellate standards generally applied to agency decisions under the Maryland Administrative Procedure Act. Maryland Code, Tax-General Article, §13-532(a)(1). In 8 an appeal from judicial review of an agency decision, we directly review the agency’s decision rather than the decision of a circuit court or of the Court of Special Appeals.

Office of People’s Counsel v. Public Service Commission, 461 Md. 380, 391 (2018). Accordingly, we review directly the Tax Court’s decision and apply the same standard of review as those courts did. When the Tax Court interprets Maryland tax law, we accord that agency a degree of deference as the agency that administers and interprets those statutes. Comptroller v. Wynne, 431 Md. 147, 160-61 (2013).

In this case, the Tax Court decision turned on application and analysis of the First Amendment of the federal Constitution as well as Article 40 of the Maryland Declaration of Rights. Because our review concerns issues of constitutional law, we do not defer to the agency’s determination of those issues. Wynne v. Comptroller, 469 Md. 62, 80 (2020). B. Governing Principles under the State and Federal Constitutions 1.

The First Amendment and Article 40 The First Amendment to the federal Constitution is made applicable to the states by the Fourteenth Amendment and, in relevant part, enjoins the enactment of laws “abridging the freedom of speech, or of the press.” Its Maryland counterpart, Article 40 of the Maryland Declaration of Rights, provides “[t]hat the liberty of the press ought to be inviolably preserved; that every citizen of the State ought to be allowed to speak, write and publish his sentiments on all subjects, being responsible for the abuse of that privilege.” Although the two constitutional provisions are worded differently and this Court has sometimes held out the possibility that Article 40 could be construed differently from the 9 First Amendment in some circumstances, the Court has generally regarded the protections afforded by Article 40 as “coextensive” with those under the First Amendment. Newell v. Runnels, 407 Md. 578, 608 (2009); State v. Brookins, 380 Md. 345 , 350 n.2 (2004). Neither party has suggested that the circumstances of this case provide a reason for departing from that general rule, and we see none. Accordingly, our analysis of Clear Channel’s contentions under the First Amendment applies equally to the same issues under Article 40.

For convenience, we will refer solely to the First Amendment in discussing the applicable standards in this opinion, but that discussion also encompasses the application of Article 40. 2. Standard for Review of Legislation under the First Amendment In its decision in this case, the Tax Court considered whether it should apply strict scrutiny, also called “heightened scrutiny,” or rational basis scrutiny to the Ordinance, and concluded that rational basis was the appropriate test. The heightened scrutiny standard is well established in the case law for situations in which legislation infringes First Amendment rights. See, e.g., Elrod v. Burns, 427 U.S. 347, 362 (1976).

The source of a rational basis test in these circumstances is less clear as the judiciary does not have a freestanding general charge to review all legislation for rationality. A rational basis test does apply when a party challenges a classification in legislation under the Equal Protection Clause in circumstances where neither a fundamental right nor a suspect classification is involved. Regan v. Taxation with Representation, 461 U.S. 540, 546-51 (1983). Many cases involving challenges to legislation under the First Amendment have also relied on the Equal Protection Clause, and the courts have applied a rational basis test after 10 concluding that the heightened scrutiny test under the First Amendment was not applicable.

Id.; see also Arkansas Writers’ Project v. Ragland, 481 U.S. 221 , 227 n.3 (1987) (noting that a publication’s “First Amendment claims are obviously intertwined with interests arising under the Equal Protection Clause”). Although Clear Channel has not explicitly invoked the Equal Protection Clause in its complaint in this case, it is at least implicit in its argument that a tax triggered by the sale of advertising on off-site billboards treats it unequally. Thus, it was not inappropriate for the Tax Court to conclude that it should apply a rational basis test if heightened scrutiny under the First Amendment did not pertain to the matter at hand.8 In any event, there does not appear to be any dispute that, if a rational basis test is applied, the Ordinance passes that test as a revenue raising measure that is clearly within the taxing authority of the City. Thus, the resolution of this case depends on whether the First Amendment’s heightened scrutiny standard is to be applied here and, if so, whether the Ordinance survives that scrutiny. 3.

Billboards and Speech There is no dispute that billboards are a platform for speech and that the text or images that appear on billboards are entitled to some First Amendment protection. Metromedia, Inc. v. City of San Diego, 453 U.S. 490, 501 (1981) (plurality opinion) 8 Clear Channel has contended, without much elaboration, that, if heightened scrutiny does not apply, an intermediate scrutiny test should be applied. However, none of the cases concerning the taxation of speech platforms on which it relies applies such a test and, for the reasons stated later in this opinion, the cases it cites involving intermediate scrutiny do not apply in the circumstances of this case. See footnote 16 below. 11 (“Billboards are a well-established medium of communication, used to convey a broad range of different kinds of messages”); Donnelly Advertising Corp. of Maryland v. City of Baltimore, 279 Md. 660, 667 (1977) (ads on billboards are “entitled to some protection by the First Amendment, whether they be of a commercial, political, or charitable nature”).

However, it is also true that billboards “combine communicative and noncommunicative aspects,” the latter of which “the government has legitimate interest in controlling.” Metromedia, 453 U.S. at 502 . Because the regulation – or taxation – of the noncommunicative aspects of a medium may “impinge to some degree on the communicative aspects,” it has fallen to the courts to reconcile the exercise of those governmental powers with the protection provided by the First Amendment. Id. 4. Taxation and the First Amendment a.

Supreme Court Case Law Taxation is, of course, essential to the support of government – a certainty sometimes equated to mortality.9 Unsurprisingly, perhaps, the Supreme Court has reiterated that, even in the context of the First Amendment, there is a strong presumption in favor of the validity of tax legislation. Leathers v. Medlock, 499 U.S. 439, 451 (1991); Regan v. Taxation with Representation, 461 U.S. 540, 547-48 (1983). Nevertheless, the choices that a legislature makes in devising a tax scheme may be a means of penalizing or discouraging speech and thereby violate the First Amendment. The Supreme Court has 9 Benjamin Franklin is said to have coined the phrase “Nothing is certain except death and taxes.” National Constitution Center, Benjamin Franklin’s last great quote and the Constitution (November 13, 2019). 12 grappled in a series of cases with defining when a taxation scheme involving public media may infringe First Amendment rights.

See Leathers, supra.; Arkansas Writers’ Project, Inc. v. Ragland, 481 U.S. 221 (1987); Minneapolis Star & Tribune Co. v. Minnesota Commissioner of Revenue, 460 U.S. 575 (1983); Grosjean v. American Press Co., 297 U.S. 233 (1936). Grosjean In Grosjean, Louisiana imposed a 2% gross receipts tax on the sale of advertising in newspapers, magazines and other publications with a circulation of more than 20,000 copies per week. 297 U.S. at 240 . Only 13 of the 137 newspapers circulating in Louisiana at that time were subject to the tax. Id. at 241 .

The publishers of the newspapers subject to the tax brought an action to enjoin it, invoking the First Amendment. In discerning the purpose of the First Amendment, the Supreme Court recounted a brief history of British taxes on newspapers that were effectively “taxes on knowledge” and that acted as a prior restraint on the free press, which the Court lauded as “one of the great interpreters between the government and the people.” Id. at 246-50 . The Court observed that the opposition to such laws was not so much an effort to avoid taxation as to “preserve the right of the English people to full information in respect of the doings and misdoings of their government.” Id. at 247 . On the other hand, the Court stated that the concern that a particular tax might be motivated to suppress criticism did not relieve newspapers from “ordinary forms of taxation for support of the government.” Id. at 250 .

In the case before it, the Court found the Louisiana tax to be “suspicious” as the tax was measured, not by the volume of advertising, but solely by the extent of the newspaper’s 13 circulation, with the “plain purpose of penalizing the publishers and curtailing the circulation of a selected group of newspapers.” Id. at 251 . Although not explicitly mentioned in the Court’s opinion, it was apparently well known at the time that the proponents of the measure had a retaliatory motive similar to that underlying the English tax legislation described in the Court’s opinion as part of the Framers’ inspiration for the First Amendment.10 Minneapolis Star The Minneapolis Star decision concerned certain amendments to the Minnesota sales and use taxes. Prior to the amendments, periodic publications such as newspapers had been exempt from those taxes. 460 U.S. at 577 . As a result of the amendments, the newspapers remained exempt from the sales tax, but ink and paper used in the publications were made subject to the use tax; a provision exempted the first $100,000 of those items consumed by a publication.

Id. at 577-78 . The end result was that only a small fraction of the newspapers circulating in Minnesota – 14 of 388 newspapers – were subject to the use tax and one publisher accounted for two-thirds of the revenues from the tax. Id. at 578-79 . 10 See City of Baltimore v. A.S. Abell Co., 218 Md. 273, 284-85 (1958) (noting that the tax under review in Grosjean was supported by Senator Huey Long as a form of retaliation against publications that had opposed his political agenda); Minneapolis Star & Tribune Co. v. Minnesota Comm’r of Revenue, 460 U.S. 575, 579-80 (1983) (quoting a circular distributed by the Louisiana governor and Senator Long characterizing the publications subject to the tax as “lying newspapers” and the Louisiana tax as a “tax on lying”); see also Edward J. Gerald, The Press and the Constitution 1931-1947 at 100-01 (1948). 14 The Supreme Court found that, although newspapers are appropriately subject to general economic regulation, including taxes, this application of the Minnesota sales and use taxes singled out the press for special treatment. 460 U.S. at 582 . The Court observed that the use tax on paper and ink did not serve the normal function of a use tax – offsetting the incentive a sales tax creates for purchasing taxable items out-of-state – because the Minnesota tax applied to items (ink and paper) that were exempt from the sales tax.

Id. at 582 . In addition, and contrary to the “ordinary rule” in Minnesota that only the ultimate retail sale and not intermediate transactions were taxed, this use tax applied to intermediate components even though they would ultimately become part of a publication sold at retail. Id. Moreover, the tax not only singled out the press, but targeted a small subset of the press – those using paper and ink costing in excess of $100,000.

The Court rejected Minnesota’s justification for this disparity – that it was favoring smaller businesses – because the state’s tax “resemble[d] more a penalty for a few of the largest newspapers than an attempt to favor struggling smaller enterprises.” Id. at 592 . The Court stated that, even if the legislature had no “illicit” intent, “a tax that singles out the press, or that targets individual publications within the press, places a heavy burden on the State to justify its action.” Id. at 592-93 . Arkansas Writers’ Project The Arkansas Writers’ Project decision concerned application of a gross receipts tax on the sale of tangible personal property in Arkansas. There were numerous exemptions from the tax, including for: “[g]ross receipts or gross proceeds derived from the sale of newspapers” and “religious, professional, trade and sports journals and/or 15 publications printed and published within this State ... when sold through regular subscriptions.” 481 U.S. at 224 .

The Court struck down the tax on two grounds. First, as with the sales and use tax in Minneapolis Star, the exemptions from the Arkansas tax meant that the tax effectively targeted a small group of speakers – those magazines not encompassed in the exemptions. Id. at 229 . Second, the tax discriminated based on content of a taxpayer’s speech because application of the magazine exemption depended on a review of the subject matter of the publication.

Id. As to the latter rationale, the Court stated that it did not matter that the tax was based on the general subject matter of the publication, as opposed to the expression of a particular viewpoint on that subject matter. Id. at 230 . Leathers In the Leathers decision, the Supreme Court reprised its prior discussions of the First Amendment in the context of tax laws affecting the media, but distinguished the operation of the tax in question from those that the Court had found to violate the First Amendment in Grosjean, Minneapolis Star, and Arkansas Writers’ Project.

The Leathers case arose from an amendment that extended an Arkansas sales tax on sales of personal property and specified services to include the services of cable television operators. Sales of newspapers and magazines remained exempt from the tax, and the amendment did not extend the tax to satellite broadcast television services. 499 U.S. at 441-43 . The tax was challenged as violative of the First Amendment. The Court thus addressed the question “whether the First Amendment prevents a State from imposing its sales tax on only selected segments of the media.” Id. at 444 . 16 The Court summarized the principles it distilled from its prior decisions: [D]ifferential 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 suspect 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. 499 U.S. at 447 (citations omitted).11 The Court also stressed that the inevitable classifications and distinctions made by legislatures in designing a tax statute are entitled to a strong presumption of constitutionality. Id. at 451-52 . As to the case before it, the Court observed that the Arkansas tax was generally applicable and did not single out the press; nor was it structured so as to raise suspicions that it was intended to interfere with a cable operator’s First Amendment activities. 449 U.S. at 447-48. In contrast to the operation of the tax and exemption in Arkansas Writers’ Project – which effectively targeted a small group of magazines for the tax and exempted others – the tax at issue in Leathers applied uniformly to all cable systems in the state.

Id. Finally, the Supreme Court concluded that the tax did not discriminate on the basis of the content of taxpayer speech. Id. at 449. The Court stressed that the underlying concern of the First Amendment is the potential for censorship of ideas.

Thus, “differential taxation 11 Although the Leathers opinion referred to the standard of review in such cases with the phrase “heightened scrutiny,” the Supreme Court later indicated that the standard was equivalent to that meant by the more familiar phrase “strict scrutiny.” See Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 661 (1994). 17 of speakers, even members of the press, does not implicate the First Amendment unless the tax is directed at, or presents the danger of suppressing, particular ideas.” Id. at 453.12 b. Maryland Case Law This Court has considered the constraints that the free speech provisions of the State and federal constitutions place on taxation of media on two occasions. Prior to most of the Supreme Court cases described in the previous section of this opinion, this Court considered a challenge to a Baltimore City ordinance that imposed a sales tax on the sale of advertising in various media, including billboards. City of Baltimore v. A.S. Abell Co., 218 Md. 273 (1958).

Several decades later, following all of the Supreme Court decisions described above, this Court applied the principles set forth in those cases to decide whether the exclusion of an advertising circular from the “newspaper exemption” to the State sales tax violated the First Amendment. Maryland Pennysaver Group, Inc. v. Comptroller, 323 Md. 697 (1991). A.S. Abell Co. In A.S. Abell Co., two Baltimore City ordinances imposed a tax on the gross sales of advertising space and time in newspapers, radio and television broadcasts, and billboards. 218 Md. at 278 . A regulation under those ordinances exempted most broadcast 12 In the Arkansas state courts, the cable television operators had also contended that the tax, which did not apply to satellite television services, violated the Equal Protection Clause of the Fourteenth Amendment.

The Supreme Court left it to the Arkansas Supreme Court to address that issue on remand. 499 U.S. at 453 . The state supreme court later held that the different treatment accorded to cable television and satellite television operators under the Arkansas law satisfied the rational basis test and did not violate the Equal Protection Clause. Medlock v. Leathers, 842 S.W.2d 428, 431 (Ark. 1992). 18 advertising from the tax – which this Court noted as a possible indication of “discrimination in a constitutional sense against the newspapers.” Id. at 280. The Court engaged in an extended discussion of the Grosjean decision, the leading Supreme Court precedent at that time.

Applying that decision to the situation before it, the Court observed that the Baltimore City tax was imposed on only a segment of the advertising industry – primarily newspapers and broadcasters – and “singled out” entities subject to the protection of the First Amendment. Id. at 287-88. The Court held that such a tax violated the free speech rights of the newspapers and broadcasters and effected just as serious a restraint upon First Amendment rights as one with an ulterior retaliatory motive, as apparently had been the case with the tax in Grosjean. Id. at 289.

The Court did not classify billboards as equivalent to newspapers and broadcast media and did not reach the question whether a tax on billboard advertising revenue would violate the First Amendment. It assumed, without deciding, that the tax was constitutional as it related to billboard operators. Id. at 289. However, the Court concluded that the City would not have adopted the tax if the tax had applied only to billboard advertising and that therefore the provision concerning billboards was not severable.

Id. at 289-90.13 Accordingly, the Court struck down the tax as it related to billboard advertising as well. 13 The Court made a similar assumption as to the constitutionality of the tax as it applied to out-of-state purchasers of advertising and came to a similar conclusion as to severability of that application of the tax. 19 Maryland Pennysaver Several decades later and a few months after the Supreme Court’s decision in Leathers, this Court had occasion to apply that decision in Maryland Pennysaver. That case involved a publication printed on newsprint and referred to as an advertising circular or “pennysaver.” The publication consisted largely of commercial ads purchased by businesses and classified ads purchased by individuals, but also included content labeled “Community News” consisting primarily of announcements of activities such as meetings, fundraisers and social events, as well as some columns on topics of local interest authored by public officials. 323 Md. at 699-700 . The publisher sought to have the publication declared exempt from the State sales tax under a regulation known as the “newspaper exemption.” Alternatively, the publisher argued that exclusion of the pennysaver from that exemption would violate the First Amendment. Id. at 701 .

This Court first determined that the pennysaver did not fall within the newspaper exemption as a matter of statutory and regulatory construction. 323 Md. at 701-11 . It then assessed the constitutional question by reviewing the four Supreme Court decisions outlined in the previous section of this opinion and quoting extensively from Leathers. In concluding that application of the sales tax to the pennysaver was constitutional, the Court noted that the sales tax was broad-based, that other publishers with advertising targeted to localities were subject to the tax, and that it was not inappropriate to treat the pennysaver differently from a newspaper in light of the pennysaver’s “overwhelming commercial speech content.” Id. at 714-15 . It concluded that there was “no threat to the dissemination of ideas” in treating a pennysaver differently from a newspaper and that there was no 20 infringement of First Amendment rights.14 The Court also held that the exclusion of shopping advertisers from the definition of newspaper in the sales tax regulations was not unconstitutionally vague, at least as applied to the publication before the Court.

Id. at 716- 17. c. Summary We discern the following principles from the decisions of the Supreme Court and this Court outlined above: ● The potential for censorship or prior restraint by the government was the animating concern of the First Amendment, particularly with respect to “the press” as the interpreter of the activities of the government to its citizens and with respect to a law that was effectively a “tax on knowledge.” However, to demonstrate infringement of First Amendment rights, it is not essential that a party show, or that a court find, that a legislature had an illicit intent in enacting a law that has such an effect. Grosjean; Minneapolis Star; A.S. Abell Co. ● Tax laws are presumed to be valid and constitutional, even in the context of a First Amendment challenge. The First Amendment does not exempt the press, or other speakers, from broad-based taxes.

Grosjean; Leathers. ● A tax may not “single out the press” unless there is a compelling reason for doing so. Grosjean; Minneapolis Star; Leathers. 14 Even if the law was considered a restriction on speech in the pennysaver, the Court held that the tax was not a “restriction of constitutional dimension.” 323 Md. at 715 . 21 ● A tax that targets a small group of speakers among the press is suspect, particularly when that small group is defined by the content of its publication, even if not by the expression of a particular viewpoint. Grosjean; Minneapolis Star; Arkansas Writers’ Project; Leathers. ● Differential taxation of speakers is particularly suspect under the First Amendment when it discriminates on the basis of the content of speech and targets the expression of particular ideas or viewpoints. Grosjean; Arkansas Writers’ Project; Leathers.

C. Whether the Ordinance is Constitutional Applying the principles outlined in the previous section of this opinion, we conclude that the First Amendment does not require heightened scrutiny of the Ordinance and that the Tax Court correctly concluded that the Ordinance is constitutional. First, there is no dispute that the Ordinance is within the taxing power of the City,15 was properly enacted by the Mayor and City Council, and is entitled to the strong presumption of validity accorded to such enactments. As this Court did in Maryland Pennysaver, we look to the framework provided by Leathers. Leathers makes clear that a tax on selected segments of the media, like the tax 15 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.” Baltimore City Charter, Article II, §40; Maryland Constitution, Article XI-A; see generally Department of Legislative Services, Maryland Handbook Series, Vol.

VI (Maryland Local Government) at 108 (2018) (taxing authority of Baltimore City under State law established in Baltimore City Charter). 22 on billboards here, does not necessarily trigger heightened scrutiny 16 or violate the First Amendment. Instead, differential taxation triggers heightened scrutiny “when it threatens to suppress the expression of particular ideas or viewpoints.” 499 U.S. at 447 . The Tax Court made no finding of a retaliatory motive or potential for censorship such as that which inspired the tax law in Grosjean and the record would not support such a finding, if one had been made.17 There is no evidence that the Ordinance, in intent or effect, is designed to censor or exert a prior restraint on the press. Nothing in the legislative history of the 16 Clear Channel argues that even if the Ordinance is not subject to strict scrutiny, it should be subject to intermediate scrutiny, citing Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622 (1994).

Turner concerned a “must carry” regulation of the Federal Communications Commission (“FCC”) that required cable television systems to devote a portion of their channels to local broadcast television stations. In upholding the regulation, the Supreme Court applied an intermediate scrutiny test rather than heightened or strict scrutiny. Although the FCC regulation was content-neutral, it directly concerned what speech would appear on the cable stations, unlike the excise tax at issue in this case. Likewise, the intermediate scrutiny applicable to commercial speech under Central Hudson Gas & Electric Corp. v. Public Service Comm’n, 447 U.S. 557 (1980) has no application here.

Central Hudson concerned a state regulation that directly regulated commercial speech – it prohibited advertising by utilities that promoted the use of electricity. Accordingly, the four-part test created by that decision was addressed to how a regulation restricts content. Even if an intermediate standard were to be applied, the Ordinance would satisfy that standard. Cf.

Donnelly Advertising Corp. of Maryland v. City of Baltimore, 279 Md. 660, 668-70 (1977) (applying intermediate scrutiny and rational basis tests in holding that ordinance requiring removal of all off-premises signs in urban renewal district did not violate First or Fourteenth Amendments). 17 Clear Channel suggests that an owner of a site leased for a billboard may be wary of messages critical of local officials and that, some years ago, City officials might have been unhappy about a billboard advertisement purchased by a public employees’ union that was critical of the City government at that time. Neither conjecture was linked to the Ordinance. 23 Ordinance suggests such an intent and, as outlined below, the tax imposed by the Ordinance has no relation to the content of the ads that might be displayed on Clear Channel’s billboards. The Ordinance does not regulate the size of a billboard, where it can be located, what it can say or who can say whatever it says. In the absence of a finding that the Ordinance was designed to suppress the expression of ideas or viewpoints, we consider the criteria identified in Leathers that may require heightened scrutiny: (1) whether the Ordinance “singles out the press”; (2) whether it “targets a small group of speakers”; and (3) whether it “discriminates on the basis of the content of taxpayer speech.” 499 U.S. at 447 .

Although Clear Channel primarily focused on the second Leathers criterion in the Tax Court and in its petition for certiorari in this case,18 it has asserted in brief and argument that all three apply. Accordingly, we shall address all three. 1. Whether the Ordinance Singles Out the Press Although Clear Channel does not primarily urge a heightened scrutiny standard based on a theory that the Ordinance singles out the press, it does assert that off-site billboards are part of “the press.” This seems a bit of a stretch. The First Amendment 18 In its petition for a writ of certiorari, Clear Channel posed the following two questions: 1 – Is the operation of billboards protected by the First Amendment, thereby subjecting its taxation to heightened scrutiny? 2 – Does the Tax single out a single platform for speech or a small group of speakers, thereby subjecting it to heightened scrutiny? 24 decisions invalidating taxes on which Clear Channel relies – Grosjean, Minneapolis Star, Arkansas Writers’ Project, and A.S. Abell Co. – all singled out newspapers, broadcasters, magazines, and other topical periodicals for special treatment – the sort of media that, in the words of the Grosjean decision, act as “interpreters of the government” to its citizens and that report on the “doings and misdoings” of government.

Nevertheless, as methods of expression change, the First Amendment principles that protect speech adapt. For example, the Supreme Court noted that, upon the rise of cable television during the latter half of the 20th century, a cable television operator “partakes of some of the aspects of speech and the communication of ideas as do the traditional