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Baltimore urges Supreme Court to reject billboard tax challenge

Baltimore’s tax on commercial billboard operators does not violate their constitutional right to free speech as the assessment applies regardless of the messages they post, the city argued last week in urging the U.S. Supreme Court to decline to hear an operator’s First Amendment challenge to the tax.

Baltimore’s filing with the justices followed Clear Channel Outdoor LLC’s request that they review and overturn the Maryland high court’s March decision that the tax is constitutional because it does not discriminate based on the viewpoint conveyed on the billboards and is rationally related to the city’s legitimate goal of raising revenue.

In its petition for review, Clear Channel stated last month that enabling a city to tax billboards – and, perhaps, other methods of speech — threatens the freedom of speech, particularly that which is disfavored by or critical of the city.

But Baltimore said Clear Channel’s concern about the tax chilling speech is unfounded.

“It (the tax) applies equally to any person who charges for billboard space in Baltimore, no matter what the billboard says or even if it says nothing,” wrote Michael Redmond, of the Baltimore Law Department and the city’s counsel of record before the high court.

“The economic transaction is what is taxed, not its subject,” Redmond added in the city’s request that the justices deny Clear Channel’s petition. “The ordinance that petitioner challenges is a content-neutral excise tax on a particular business that applies uniformly to a rationally defined class and does not invite censorship.”

The justices have not stated when they will vote on whether to grant Clear Channel’s request for their review. The case is docketed at the Supreme Court as Clear Channel Outdoor LLC v. Henry J. Raymond, Director, Department of Finance of Baltimore City, No. 21-219.

Clear Channel, which owned more than 95 percent of the city’s billboards as recently as 2017, challenged the constitutionality of the 2013 Baltimore ordinance that imposes an excise tax on billboard owners who charge fees for outdoor advertising displays of at least 10 square feet. The assessment is $15 per square foot for an electronic outdoor display that changes images at least twice a day and $5 per square foot for any other outdoor display.

The tax raises $1.5 million annually, according to the city

Clear Channel has paid its annual assessment each year since the ordinance’s enactment but has sought a refund based on its as-yet-unsuccessful First Amendment challenge.

The company initiated its constitutional fights against the assessment in U.S. District Court in Baltimore in 2013.

U.S. District Judge George L. Russell III dismissed the case two years later when he agreed with the city that the federal court lacked jurisdiction under the Tax Injunction Act. The U.S. law precludes federal courts from enjoining state taxes if state law provides a remedy through the state’s courts.

The Maryland Tax Court, Baltimore City Circuit Court, the Court of Special Appeals and the Court of Appeals subsequently ruled for the city.

The Court of Appeals, in its 6-1 decision, held that Baltimore’s tax does not violate free speech rights because the assessment “does not depend on what messages are displayed on a billboard, who a message is attributed to, or how long any particular message is displayed.”

“What matters is whether Clear Channel charges the person or entity responsible for the message to display it on the billboard,” Judge Robert N. McDonald wrote. “If Clear Channel devoted a billboard entirely to its own message or to a message of someone else without a charge, no tax would be levied under the ordinance, regardless of the substance of the message. It is the commercial transaction, not the content of the message, that triggers the tax.”

Judge Joseph M. Getty was the court’s sole dissenter.

Getty, whom Gov. Larry Hogan elevated to chief judge this month, called billboards “a constitutionally protected medium of communication and, thus, any legislation potentially affecting the ‘speech’ from this platform implicates free expression concerns.”

Clear Channel expanded upon Getty’s dissent in its pending request for Supreme Court review.

“Because of their lower barriers to entry, billboards and new media platforms provide unique opportunities for sharing unpopular or provocative messages outside the mainstream,” wrote Kannon K. Shanmugam, Clear Channel’s counsel of record at the high court.

“The decision below will permit municipalities to impose, at little political cost, crippling financial burdens on such speech platforms,” added Shanmugam, of Paul, Weiss, Rifkind, Wharton & Garrison LLP in Washington. “Municipalities could raise the tax levels to rates that would make it untenable to publish any speech at all. The decision places billboard operators and other non-traditional media that disseminate highly visible (and at times politically unpopular) speech at a significant risk of censorship.”

The Court of Appeals rendered its decision in Clear Channel Outdoor Inc. v. Director, Department of Finance of Baltimore City, No. 9 September Term 2020.