Clear Channel Outdoor v. Dir., Dept. of Finance Balt. City

Clear Channel Outdoor, Inc. v. Director, Department of Finance of Baltimore City, No. 2910, Sept. Term 2018. Opinion filed on January 29, 2020, by Berger, J. 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 Amendment 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.

Circuit Court for Baltimore City Case No. 117025007 REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 2910 September Term, 2018 ______________________________________ CLEAR CHANNEL OUTDOOR, INC. v. DIRECTOR, DEPARTMENT OF FINANCE OF BALTIMORE CITY ______________________________________ Berger, Beachley, Wells, JJ. ______________________________________ Opinion by Berger, J. ______________________________________ Filed: January 29, 2020 Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic. 2020-01-30 10:17-05:00 Suzanne C. Johnson, Clerk 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. Balt. City Code Art. 28, § 29. Clear Channel Outdoor, Inc. (“Clear Channel”) owns or operates hundreds of billboards subject to the Tax.

It initially challenged the Ordinance in the United States District Court for the District of Maryland, claiming that the Ordinance violated its First and Fourteenth Amendment rights. The District Court granted summary judgment in favor of Baltimore City, holding that the Ordinance was a tax, and therefore, it lacked subject matter jurisdiction to determine the merits of the claim. 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 Article 40 of the Maryland Constitution. The Tax Court affirmed the City’s denial of the refund request. Clear Channel filed a petition for judicial review in the Circuit Court for Baltimore City, which affirmed the Tax Court’s decision. On appeal, Clear Channel presents two questions for our review, which we rephrase as follows:1 1 Clear Channel’s questions, as presented are: 1.

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? 1. Whether the operation of billboards is protected by the First Amendment and Article 40, thereby subjecting its taxation to heightened scrutiny. 2. Whether the Ordinance targets a specific platform for speech and a small group of speakers, thereby subjecting it to heightened scrutiny. As we shall explain, we hold that the Ordinance does not implicate Clear 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.” Balt. City Code Art. 28, § 29-2. The tax is levied upon advertising hosts, which includes “a person who: (1) owns or controls a billboard, posterboard, or other sign; and (2) charges fees for its use as an outdoor advertising display.” Id.

An outdoor advertising display is defined as: 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. 2. Does a targeted tax on four entities engaged in protected speech violate the First Amendment and Article 40 where, as here, the government interest served by the tax is insufficient to justify the burden on speech as a matter of law and, in any event, the tax is not narrowly tailored to burden no more speech than necessary to advance that interest? 2 Id. at § 29-2(d). The Tax is assessed based upon the size of the display and whether it is an electronic display as follows: (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 outdoor 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. Id. at §29-3. Each advertising host must file an annual report with the Finance Director specifying the number of advertising spaces it made available for the exhibition of advertising displays, and the location and size of each display.2 Id. at §29-5. 2 Notably, the City imposes various other taxes and fees, including a telecommunications tax, a parking tax, a pole fee, and an energy tax.

See Balt. City Code Art. 28. 3 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 City sought to diversify its revenue portfolio in order to lower property tax rates, increase infrastructure investment, and better manage the City’s pension and retiree healthcare liabilities. The Tax on outdoor advertising displays was specifically enacted to help protect the arts and culture funding from further cuts. Further, the City’s budget director testified that the revenues generated from the tax are placed into the City’s General Fund. 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 3 Electronic billboards in Baltimore City are able to display up to six advertisements per minute. 4 the Tax Injunction Act (“TIA”), 28 U.S.C. § 1341 (2012), arguing that the Ordinance was a Tax, not a fee.

Id. 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 28 U.S.C. § 1341 ) (quotations omitted). The Court denied the motion to dismiss in 2014, explaining that at that stage of the litigation, “the ordinance [was] a fee, not a tax, for the purposes of the TIA.” Id. at 868 . The City filed a motion for reconsideration, which the court denied as well.

Id. Thereafter, Clear Channel filed a motion for summary judgment and the City filed a cross-motion for summary judgment. Id. at 868-69 . The Court granted summary judgment in favor of the City, holding that the Ordinance was a “tax” under the TIA, and therefore, it lacked subject matter jurisdiction to determine the merits of the claim.

Id. at 875 . Clear 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. 5 Before the Tax Court, Clear Channel argued that outdoor advertising is a constitutionally protected medium of speech under the First and Fourteenth Amendment and Article 40 of the Maryland Declaration of Rights. Clear Channel further contended that the Tax unconstitutionally restricts that speech.

It argued, therefore, that heightened scrutiny applied. Clear Channel also averred that the Tax targeted a small group of speakers on the basis of their participation in such speech, and therefore, strict scrutiny applied. The City maintained that as an excise tax, the Tax neither implicates nor burdens the First Amendment and that the Ordinance was simply a tax on the privilege to charge fees. 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 on the privilege of exhibiting outdoor advertising displays is a tax on the privilege of continuing in business, not on exercising free speech,” and that a tax on such a business, is “not violative of [Clear Channel’s] rights to free speech.” Finding that the First Amendment was not implicated, the Tax Court concluded that the City had a rational basis for enacting the Tax. 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. 6 STANDARD OF REVIEW “Because the Tax Court is an administrative agency, its decisions are 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). 7 DISCUSSION I. The Ordinance is a valid excise tax and does not implicate the First Amendment. Clear Channel first argues that the Ordinance unconstitutionally burdens billboard speech, which is protected by the First Amendment and Article 40 of the Maryland Constitution.4 The Ordinance, therefore, must be analyzed under strict scrutiny instead of review under a rational basis standard. The City does not disagree that the speech displayed on Clear Channel’s billboards is entitled to some level of First Amendment protection. It maintains, however, that the Ordinance is a validly enacted excise tax on Clear Channel’s privilege to continue in business in Baltimore City.

Clear Channel displays the message 4 The First Amendment of the United States Constitution provides that Congress shall make no law “abridging the freedom of speech, or of the press.” Article 40 of the Maryland Constitution provides that “[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.” 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 state 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. 8 of the third party, and therefore, a tax on its business does not implicate 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.” Balt.

City Charter, Art. II, § 40. Indeed, the taxing power of the City is broad. Am. Nat.

Bldg. & Loan Ass'n v. City of Baltimore, 245 Md. 23, 30 (1966). Moreover, “a strong presumption exists in favor of the constitutionality of legislative enactments,” including revenue raising measures such as the tax at issue here. Weaver v. Prince George's Cty., 281 Md. 349 , 355–56 (1977). The Supreme Court has recognized this presumption even in the First Amendment context.

See Leathers v. Medlock, 499 U.S. 439, 451 (1991). The Baltimore City Council classified the Outdoor Advertising Tax as an excise. Balt. City Code Art. 28, § 29-2.

An excise is “a tax imposed upon the performance of an act, the engaging in an occupation, or the enjoyment of a privilege.” Weaver, supra, 281 Md. at 357 . “Indeed, an excise is said to embrace every form of taxation that is not a burden directly imposed on persons or property.” Id. at 357 . “[A] tax on the use of property, as distinguished from a tax based on ownership exclusively, is