PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
GENON MID-ATLANTIC, LLC,
Plaintiff-Appellant,
v. No. 10-1882
MONTGOMERY COUNTY, MARYLAND,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Peter J. Messitte, Senior District Judge.
(8:10-cv-01381-PJM)
Argued: May 12, 2011
Decided: June 20, 2011
Before WILKINSON, NIEMEYER, and KEENAN,
Circuit Judges.
Reversed and remanded by published opinion. Judge Wilkin-
son wrote the opinion, in which Judge Niemeyer and Judge
Keenan joined.
2 GENON MID-ATLANTIC v. MONTGOMERY COUNTY
COUNSEL
ARGUED: Lewis Steven Wiener, SUTHERLAND ASBILL
& BRENNAN, LLP, Washington, D.C., for Appellant. Karen
Louise Federman Henry, COUNTY ATTORNEY’S OFFICE,
Rockville, Maryland, for Appellee. ON BRIEF: Jeffrey A.
Friedman, A. Pilar Mata, G. Brendan Ballard, SUTHER-
LAND ASBILL & BRENNAN, LLP, Washington, D.C., for
Appellant. Marc P. Hansen, Acting County Attorney, Patricia
P. Via, Chief, Division of Litigation, Scott R. Foncannon,
Associate County Attorney, COUNTY ATTORNEY’S
OFFICE, Rockville, Maryland, for Appellee.
OPINION
WILKINSON, Circuit Judge:
The question in this case is whether a Montgomery County,
Maryland exaction on carbon dioxide emissions, levied only
upon GenOn Mid-Atlantic’s electricity-generating facility, is
a tax or a fee. After holding that the carbon charge was a tax,
the district court determined that the Tax Injunction Act
deprived it of jurisdiction to hear GenOn’s challenge. We
think, however, that because the charge was levied upon a sin-
gle "taxpayer" and formed part of a wide-ranging regulatory
program, the district court had jurisdiction over GenOn’s
claims. We accordingly reverse and remand for further pro-
ceedings.
I.
The Montgomery County Council enacted Expedited Bill
29-10 on May 19, 2010 to impose a levy on large stationary
emitters of carbon dioxide within the county. The County
Executive signed the bill on May 28. Bill 29-10 imposes what
it terms an "excise tax" of $5 per ton of carbon dioxide emit-
GENON MID-ATLANTIC v. MONTGOMERY COUNTY 3
ted, but only on emitters that end up exceeding 1 million tons
of carbon dioxide in a year. For those large emitters, the $5
per ton charge applies to every ton emitted. The revenue gen-
erated by the levy is to be deposited in the Montgomery
County general fund, with 50% earmarked for funding green-
house gas reduction programs such as mass transit and 50%
available for the County’s general use. The County projects
that the levy will raise annual revenue between $11.7 and
$17.6 million.
GenOn operates an electricity plant in Montgomery County
that emits carbon dioxide. As the only entity in Montgomery
County expected to exceed 1 million tons of carbon dioxide
emissions annually, GenOn is the only entity likely to be sub-
ject to the $5/ton levy on its entire volume of emissions. After
consulting with the County’s electricity service provider, the
Council determined that GenOn would not be able to pass the
cost of the carbon charge on to its Montgomery County cus-
tomers because its power is sold via competitive auction.
Four days after Bill 29-10 was signed into law, GenOn
sought to enjoin enforcement on the ground that it violates the
United States and Maryland Constitutions. The district court
noted that the charge had some indicia of a regulatory fee, but
ultimately concluded that it was more like a tax for purposes
of the Tax Injunction Act. The court then dismissed GenOn’s
suit without prejudice. GenOn now appeals.
II.
The Tax Injunction Act "is meant to prevent taxpayers from
‘disrupting state government finances’" with excessive litiga-
tion in federal court. Retail Indus. Leaders Ass’n v. Fielder,
475 F.3d 180, 189 (4th Cir. 2007) (quoting Hibbs v. Winn,
542 U.S. 88, 104 (2004)). The Act provides that 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
4 GENON MID-ATLANTIC v. MONTGOMERY COUNTY
State," 28 U.S.C. § 1341 (emphasis added). The only issue in
this case is whether Bill 29-10 imposes a tax that lies outside
our jurisdiction or whether it imposes a fee that lies within it.
When determining "whether a particular charge is a ‘fee’ or
a ‘tax’" for purposes of the Tax Injunction Act, we do not
focus on the superficial "nomenclature provided to the charge
at issue." Valero Terrestrial Corp. v. Caffrey, 205 F.3d 130,
134 (4th Cir. 2000). Instead, we must examine the "explicit
factual circumstances that transcend the literal meaning of the
terminology" and ask whether the charge is levied primarily
"for revenue raising purposes, making it a ‘tax,’" or whether
it is assessed primarily "for regulatory or punitive purposes,
making it a ‘fee.’" Id. To aid in this determination, this court
has looked to three factors for guidance: "(1) what entity
imposes the charge; (2) what population is subject to the
charge; and (3) what purposes are served by the use of the
monies obtained by the charge." Id. We review de novo the
district court’s decision to dismiss for lack of subject matter
jurisdiction. See Evans v. B.F. Perkins Co., 166 F.3d 642, 647
(4th Cir. 1999).
III.
Montgomery County claims that the carbon charge is a tax
under this three-part inquiry for two primary reasons. Its ini-
tial argument is that the process by which Bill 29-10 was
enacted was the process by which taxes are typically enacted.
See Collins Holding Corp. v. Jasper County, 123 F.3d 797,
800 (4th Cir. 1997). On this view, Bill 29-10 levies a tax
because the "entity [that] imposes the charge" is the Mont-
gomery County Council—the county’s general legislative
organ—rather than an administrative agency. Valero, 205
F.3d at 134. The County Council enacted Bill 29-10 pursuant
to the taxing authority granted to the Council by Maryland’s
General Assembly, see 1963 Md. Laws ch. 808 (codified at
Montgomery County Code, § 52-17), and called the charge an
excise tax while codifying it in the chapter of the County
GENON MID-ATLANTIC v. MONTGOMERY COUNTY 5
Code dedicated to taxation. See Montgomery County Code,
§ 52-96(a). The revenue created by the carbon charge is to be
collected by the Director of the Department of Finance, the
County’s tax collector. Id. § 52-96(e)(2).
The county also argues that the levy is a tax because it is
expected, at this point, to raise significant revenue. The fiscal
impact statement prepared by the County’s Office of Manage-
ment and Budget estimated that the charge would collect
annual revenue between $11.7 and $17.6 million from
GenOn. In addition, 50% "of the monies obtained by the
charge" are dedicated to the county’s general fund, see
Valero, 205 F.3d at 134, though the remainder is earmarked
for the County’s greenhouse gas reduction programs, Mont-
gomery County Code, § 52-100.
IV.
While Bill 29-10 does bear some of the indicia of a tax,
"we can readily conclude, without a seriatim analysis, that [it]
is not a tax provision." Retail Indus. Leaders Ass’n, 475 F.3d
at 189. The process of the bill’s enactment, as well as its
potential revenue-generating character, are of course relevant
factors in this inquiry. However, those features are, in this
case, mere masks that cannot be used to disguise what is in
substance a punitive and regulatory matter.
A.
The chief problem with Montgomery County’s carbon
charge is that the burden falls on GenOn alone. But the whole
idea of a tax is that it is, to some extent, a burden generally
borne. Thus, an "assessment imposed upon a narrow class" is
less likely to be a tax than an "assessment imposed upon a
broad class of parties." Bidart Bros. v. Cal. Apple Comm’n, 73
F.3d 925, 931 (9th Cir. 1996). The fact that this charge affects
the narrowest possible class is compelling evidence that it is
a punitive fee rather than a tax. The County acknowl-
6 GENON MID-ATLANTIC v. MONTGOMERY COUNTY
edges—as it must—that the "the universe of taxpayers under
Bill 29-10 does not represent a major segment of society."
Brief of Appellee at 7. But to speak of a "universe" of any-
thing with only one inhabitant rings odd upon the ear.
Montgomery County nevertheless contends that the bill’s
process of enactment and revenue-raising potential render it
a tax despite this singular focus on GenOn. We find this con-
tention unpersuasive. It would be an extraordinary tax that
applied only to one taxpayer—so extraordinary, in fact, that
Montgomery County has been unable to identify even one
exaction that applies only to a single entity that has been held
a tax for purposes of the Tax Injunction Act. For even when
the tax base encompasses less than a society in its entirety,
taxes generally apply to at least more than one entity. See,
e.g., Valero, 205 F.3d at 134 ("The ‘classic tax’ is imposed by
the legislature upon a large segment of society . . . .") (quoting
San Juan Cellular Tel. Co. v. Pub. Serv. Comm’n of Puerto
Rico, 967 F.2d 683, 685 (1st Cir. 1992)). Here, however, of
all the carbon dioxide emitters in Montgomery County, only
GenOn is expected to be subject to the levy.
Our conclusion that Bill 29-10 imposes a punitive fee is
strengthened by the fact that GenOn will likely be unable to
pass the cost of the charge on to its customers. As we recog-
nized in Valero, a charge is less likely to be a fee when the
payer can "spread the cost to a significantly wider proportion
of the population." 205 F.3d at 134. However, according to a
statement by Bill 29-10 sponsor Councilmember Roger Berli-
ner, GenOn sells the electricity it produces at auction and
lacks the market power to pass the $5-per-ton fee on to energy
consumers while remaining competitive. See Press Release,
Montgomery County Council, Councilmember Roger Berliner
to Introduce Tax on Major Carbon Dioxide Emitters (Apr. 22,
2010). The County Council was thus well aware that the inci-
dence of this charge would fall entirely on GenOn. Indeed,
Councilmember Berliner hailed this as a selling point. In sum,
GENON MID-ATLANTIC v. MONTGOMERY COUNTY 7
we have no difficulty concluding that such an exaction is a fee
that targets GenOn in punitive fashion.
B.
In addition to its punitive scope, Montgomery County’s
carbon charge falls outside the ambit of the Tax Injunction
Act because of its plainly regulatory purpose. We have noted
that the Tax Injunction Act turns on the difference "between
broader-based taxes that sustain the essential flow of revenue
to state (or local) government and fees that are connected to
some regulatory scheme." Collins Holding Corp., 123 F.3d at
800. This charge sounds in such a regulatory scheme. As the
district court noted of the County Council, "it’s clear that they
had in mind that this would have regulatory effects." It is
clear, in other words, that the county adopted Bill 29-10 in
order to advance its program of reducing greenhouse gas
emissions.
The County Council has made little effort to hide its regula-
tory intent in the text of Bill 29-10. After noting EPA findings
that greenhouse gases pose a threat to public health and the
environment, the preamble states: "Montgomery County has
embraced an 80% reduction in greenhouse gas emissions by
2050 and has begun to engage in programmatic efforts to
reduce these emissions." Montgomery County Code, § 52-
95(b); see also id. §§ 18A-13(h), 18A-14(b). The bill then
declares that "[i]t is appropriate that the largest emitters of
carbon dioxide in the County contribute to paying for these
greenhouse gas reduction programs." Id. § 52-95(c). And the
revenue raised from the carbon charge is an integral part of
the County’s greenhouse gas regulatory agenda, for "50%
must be reserved for and allocated in the annual operating
budget to funding for County greenhouse gas reduction pro-
grams." Id. § 52-100.
Bill 29-10’s place in Montgomery County’s "programmatic
efforts" is thus two-fold: it creates disincentives for GenOn to
8 GENON MID-ATLANTIC v. MONTGOMERY COUNTY
continue polluting and provides funds for others to reduce
their carbon dioxide emissions. These may be good and laud-
able goals. But where an assessment of this type forms such
a significant "part of a regulatory program," it is not the sort
of mere revenue-raising measure that the Tax Injunction Act
leaves solely to the jurisdiction of state courts. Bidart Bros.,
73 F.3d at 933.
Nothing in Bill 29-10’s legislative history calls into ques-
tion the notion that the purpose of this carbon charge is
largely regulatory. Councilmember Berliner stated candidly
that his "proposed carbon tax . . . will incentivize [GenOn] to
reduce its emissions." Memorandum from Roger Berliner
(Apr. 27, 2010). He further noted that the bill is a way of say-
ing to emitters "I’m going to induce you to do more." Michael
Laris, Montgomery official proposes carbon tax on major
emitters, Wash. Post, Apr. 22, 2010, at B5. And regarding the
ultimate aim of the legislation, the councilman explained that
it is "the threat of local government action like this that will
drive the industry crazy to the point they are more willing to
accept a national regime." Id. Again, greenhouse gas reduc-
tion may indeed be a commendable aim, but to say that it was
not the goal of the County Council here blinks reality.
Montgomery County nevertheless disavows this character-
ization and instead contends that Bill 29-10 "is utterly devoid
of any attempt to regulate [GenOn], or any other emitter of
carbon dioxide." Brief of Appellee at 8. In the County’s view,
the bill is not regulatory because it "does not compel any stan-
dard of conduct by those who emit carbon dioxide, nor does
it mandate that [GenOn] limit the amount of carbon dioxide
it emits." Id. at 16-17.
The regulatory toolbox is not so limited. Courts have recog-
nized that "[t]he classic regulatory fee . . . may serve regula-
tory purposes directly by, for example, deliberately
discouraging particular conduct by making it more expen-
sive." San Juan Cellular Tel. Co., 967 F.2d at 685. Some
GENON MID-ATLANTIC v. MONTGOMERY COUNTY 9
charges that make particular conduct more expensive without
mandating particular standards of conduct may still be taxes
for purposes of the Tax Injunction Act. See, e.g., Md. Code
Ann., Tax-Gen. § 12-101 et seq. (tax on cigarettes). But this
carbon charge, which targets a single emitter and is located
squarely within the County’s own "programmatic efforts to
reduce" greenhouse gas emissions, Montgomery County
Code, § 52-95(b), is a punitive and regulatory fee over which
the federal courts retain jurisdiction.
V.
We cannot overlook the fact that the absence of federal
jurisdiction in this case would turn what are truly interstate
issues over to local authorities. Applying the Tax Injunction
Act might encourage punitive financial strikes against single
entities with national connections, for the federal courts
would be unavailable to protect companies against local dis-
crimination, preempted state laws, and other federal constitu-
tional violations. The implications of allowing localities to
impose financial exactions exclusively upon single entities of
national reach with no accountability in federal court are pro-
found, and we decline to foreclose these federal claims with
a jurisdictional bar.
Of course we do not resolve this case on the merits, nor do
we suggest that one party or the other should prevail on
remand. We do not at all begrudge Montgomery County its
regulatory purpose here, and there is much to be said for the
worthy office of environmental stewardship. All we hold is
that the Tax Injunction Act is no bar to federal jurisdiction in
this case. We accordingly reverse the judgment of the district
court and remand for consideration of GenOn’s claims.
REVERSED AND REMANDED