Home Builders Ass'n of Mississippi, Inc. v. City of Madison, Miss.

• Decision Date: 01 July 1998
• Docket Number: No. 97-60285,97-60285
• Parties: HOME BUILDERS ASSOCIATION OF MISSISSIPPI, INC.; Mark S. Jordan; Good Earth Development, Inc.; Mark S. Jordan, Inc.; Highland Ridge Partners, LP; SMCDC, Inc.; Post Oak Place; Locust Lane Partners, L.P.; William J. Shanks; WJS & Associates, Inc.; South Madison County Development Company; Thomas M. Harkins, Sr; Thomas M. Harkins, Jr.; North Place Development, Inc.; North Ridge Development, Inc.; First Mark Homes, Inc.; Thomas M. Harkins, Builder, Inc.; THV, Inc.; J.F.P. & Co., Inc.; J. Parker Sartain; Brian H. Sartain; Habitat, Inc.; J.P.S. Building Supplies, Inc.; Sartain Associates, Inc.; Douglas Place Partnerships, Plaintiffs-Appellants, v. CITY OF MADISON, MISSISSIPPI; Mary Hawkins, Individually and in her official capacity as Mayor of Madison, Mississippi; Timothy L. Johnson, Individually and in his official capacity as Alderman and elected public official of the City of Madison, Mississippi; Lisa Clingan-Smith, Individually and in her official capacity as Alderman and elected public official of the city of Madison, Mississippi; Tommy E. Butler, Individually and in his official capacity as Alderman and elected public official of the City of Madison, Mississippi; Charles L. Dunn, Individually and in his official capacity as Alderman and elected public official of the City of Madison, Mississippi; Griffen C. Weaver, Individually and in his official capacity as Alderman and elected public official in his official capacity as Alderman and elected public official in his official capacity as Alderman and elected public official in his official capacity as Alderman and elected public official of the City of Madison, Mississippi, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1006

143 F.3d 1006

HOME BUILDERS ASSOCIATION OF MISSISSIPPI, INC.; Mark S Jordan; Good Earth Development, Inc.; Mark S. Jordan Inc.; Highland Ridge Partners, LP; SMCDC, Inc.; Post Oak Place; Locust Lane Partners, L.P.; William J. Shanks; WJS & Associates, Inc.; South Madison County Development Company; Thomas M. Harkins, Sr; Thomas M. Harkins, Jr. North Place Development, Inc.; North Ridge Development Inc.; First Mark Homes, Inc.; Thomas M. Harkins, Builder, Inc.; THV, Inc.; J.F.P. & Co., Inc.; J. Parker Sartain; Brian H. Sartain; Habitat, Inc.; J.P.S. Building Supplies, Inc.; Sartain Associates, Inc.; Douglas Place Partnerships, Plaintiffs-Appellants, v. CITY OF MADISON, MISSISSIPPI; Mary Hawkins, Individually and in her official capacity as Mayor of Madison, Mississippi; Timothy L. Johnson, Individually and in his official capacity as Alderman and elected public official of the City of Madison, Mississippi; Lisa Clingan-Smith, Individually and in her official capacity as Alderman and elected public official of the city of Madison, Mississippi; Tommy E. Butler, Individually and in his official capacity as Alderman and elected public official of the City of Madison, Mississippi; Charles L. Dunn, Individually and in his official capacity as Alderman and elected public official of the City of Madison, Mississippi; Griffen C. Weaver, Individually and in his official capacity as Alderman and elected public official in his official capacity as Alderman and elected public official in his official capacity as Alderman and elected public official in his official capacity as Alderman and elected public official of the City of Madison, Mississippi, Defendants-Appellees.

No. 97-60285.

United States Court of Appeals, Fifth Circuit.

July 1, 1998.

Steven H. Smith, Taylor, Covington & Smith, Joel W. Howell, III, Jackson, MS, for Plaintiffs-Appellants.

Terry R. Levy, Paul Vegas Ott, Daniel, Coker, Horton & Bell, Jackson, MS, for City of Madison, MS, Hawkins, Johnson and Clingan-Smith.

Charles G. Copeland, William Matthew Vines, Copeland, Cook, Taylor & Bush, Jackson, MS, for Butler, Dunn and Weaver.

Appeals from the United States District Court for the Southern District of Mississippi.

Before WISDOM, JOLLY and HIGGINBOTHAM, Circuit Judges.

WISDOM, Senior Circuit Judge:

I. Introduction

The sole question before us is whether the Tax Injunction Act of 1937 bars a federal district court from exercising jurisdiction over a plaintiff's complaint that a municipal impact fee ordinance violates the Fifth and Fourteenth Amendments to the United States Constitution. The district court held that it does, and therefore dismissed the complaint for want of subject matter jurisdiction. We affirm.

II. Background

In 1986, the city of Madison, Mississippi, adopted an impact fee ordinance that required developers and builders in new residential areas to pay a $700 impact fee for each planned residential dwelling unit as a necessary condition to obtaining a building permit. Madison passed the ordinance to alleviate the problems attendant to providing and maintaining essential municipal services and facilities in the rapidly-growing city. Under the terms of the ordinance, collected funds were to be appropriated in a manner consistent with a contemporaneously-adopted public improvement plan that was designed to guide the future development of public facilities. ¹

In 1995, Home Builders Association of Mississippi ("Home Builders") and an assortment of others filed a suit under 42 U.S.C. § 1983 against the City of Madison in which they sought (1) a declaration that the impact fee ordinance was unconstitutional, (2) an injunction prohibiting the assessment, collection and expenditure of impact fees, and (3) a refund of all impact fees collected in advance of the litigation. ² Home Builders's complaint specifically alleged that "the assessment, collection and expenditure of any and all impact fees by Madison ... represents and constitutes nothing more than an improper, unlawful and unconstitutional form of taxation or general tax."

Madison moved to dismiss the case under Rule 12(b)(1) of the Federal Rules of Civil Procedure on the ground that the Tax Injunction Act removed it from the scope of the district court's subject matter jurisdiction. The district court denied the motion but stated that it "may reconsider [the matter] at a later date." Following additional discovery and oral arguments on the constitutionality of the impact fee ordinance, the district court dismissed Home Builders's complaint for want of subject matter jurisdiction. It held that the 1986 impact fee ordinance constituted a "tax" for purposes of the Tax Injunction Act, and that the plaintiffs would be forced to seek relief in Mississippi state court, which could provide them with a plain, speedy, and efficient remedy. Home Builders timely appealed from this final judgment.

III. Standard of Review

We review de novo the district court's grant of Madison's 12(b)(1) motion to dismiss for want of subject matter jurisdiction. ³ A motion under 12(b)(1) should be granted only if it appears certain that the plaintiff cannot prove any set of facts in support of his claim that would entitle him to relief. ⁴ "A case is properly dismissed for lack of subject matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the case." ⁵

IV. Discussion

The Tax Injunction Act provides:

The district courts shall not 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. ⁶

The act imposes drastic limitations on the federal judiciary's ability to meddle with a local concern as important and sensitive as the collection of taxes. ⁷ Embodied within the statute is "the duty of federal courts to withhold relief when a state legislature has provided an adequate scheme whereby a taxpayer may maintain a suit to challenge a state tax." ⁸ In short, the Tax Injunction Act is a "broad jurisdictional impediment to federal court interference with the administration of state tax systems." ⁹

We employ a bifurcated analysis to determine whether the Tax Injunction Act bars federal jurisdiction in a given case. First, because the act is implicated exclusively by matters of state and local taxation, we must decide whether the law in question imposes a tax or merely a regulatory fee. ¹⁰ Only if the law imposes a tax does the act preclude a federal district court from exercising jurisdiction. Second, even if the law imposes a tax for purposes of the Tax Injunction Act, a district court may decline to exercise jurisdiction only if the state court is equipped to furnish the plaintiffs with a plain, speedy, and efficient remedy. ¹¹ That is, the act does not divest district courts of jurisdiction if state court remedies are inadequate.

A. Tax v. Fee

Our initial inquiry, then, is whether Madison's impact fee ordinance qualifies as a tax for purposes of the Tax Injunction Act. Home Builders, of course, urges that the ordinance imposes a fee, in which event the act would not operate as a jurisdictional bar. For its part, Madison contends that the ordinance fits squarely within the meaning of a tax as contemplated by the act. For the reasons that follow, we hold that Madison's impact fee ordinance qualifies as a tax rather than a fee for purposes of the Tax Injunction Act. ¹²

Distinguishing a tax from a fee often is a difficult task. Indeed, "the line between a 'tax' and a 'fee' can be a blurry one." ¹³ Workable distinctions emerge from the relevant case law, however: the classic tax sustains the essential flow of revenue to the government, while the classic fee is linked to some regulatory scheme. ¹⁴ The classic tax is imposed by a state or municipal legislature, while the classic fee is imposed by an agency upon those it regulates. ¹⁵ The classic tax is designed to provide a benefit for the entire community, while the classic fee is designed to raise money to help defray an agency's regulatory expenses. ¹⁶

In Mississippi Power & Light Co. v. United States Nuclear Regulatory Commission, ¹⁷ we considered whether a Nuclear Regulatory Commission rule that mandated the payment of a charge as a precondition to obtaining a license to operate a nuclear facility qualified as a permissible fee or as an unconstitutional tax. ¹⁸ The rule was "designed to recover the costs for processing applications, permits and licenses as well as the costs arising from health and safety inspections and statutorily mandated environmental and antitrust reviews." ¹⁹ We held that the rule imposed a fee rather than a tax because (1) it was designed to defray the NRC's operating costs, and (2) it did not generate revenues that were intended to provide a benefit for the general public. ²⁰ That holding is consonant with the cases we cited above that define the paradigmatic fee as one imposed by an agency upon those it regulates for the purpose of defraying regulatory costs. ²¹

In Tramel v. Schrader, ²² we considered whether a special street improvements assessment imposed exclusively upon select businesses was a tax or a regulatory fee. Even though the assessment was not levied against the community at large, we concluded that the assessment constituted a tax for purposes of the Tax Injunction Act. ²³ We reasoned that a broad construction of "tax" was necessary to honor Congress's goals in promulgating the Tax Injunction Act, including that of preventing federally-based delays in the collection of public revenues by state and local governments. ²⁴

With these principles and precedents in mind, we turn to the question of whether Madison's impact fee ordinance imposes a fee, in which case the Tax Injunction Act would not be implicated, or a tax, in which case the act would divest the district court of subject matter jurisdiction. As a preliminary matter, it must be noted that we are...