Clear Channel Outdoor, Inc. v. Dir., Dep't of Fin. of Balt. City

• Decision Date: 29 January 2020
• Docket Number: No. 2910, Sept. Term, 2018,2910, Sept. Term, 2018
• Citation: 244 Md.App. 304,223 A.3d 1050
• Parties: CLEAR CHANNEL OUTDOOR, INC. v. DIRECTOR, DEPARTMENT OF FINANCE OF BALTIMORE CITY
• Court: Court of Special Appeals of Maryland

244 Md.App. 304

223 A.3d 1050

CLEAR CHANNEL OUTDOOR, INC.

v.DIRECTOR, DEPARTMENT OF FINANCE OF BALTIMORE CITY

No. 2910, Sept. Term, 2018

Court of Special Appeals of Maryland.

January 29, 2020

Argued by: Virginia A. Seitz (Gordon D. Todd, Jacquelyn E. Fradette, Sidley Austin LLP, Washington, D.C. and Benjamin Rosenberg, Jamar R. Brown, Rosenberg Martin Greenberg, LLP, Baltimore, MD), all on the brief, for Appellant.

Argued by: Rachel Simmonsen (Michael Redmond, Andre M. Davis, City Solicitor, Matthew W. Nayden, Chief, Litigation Division, Steven J. Potter, Chief Solicitor, Baltimore City Department of Law, on the brief), Baltimore, MD, for Appellee.

Panel: Berger, Beachley, Wells, JJ.

Berger, J.

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. 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.

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.

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 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.

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.

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, 973 A.2d 256 (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, 59...