Archive for the ‘Taxes & Fees’ Category

GenOn Versus Montgomery County Versus Carbon Dioxide Emissions

Photo by GuenterHH. Some rights reserved.

While the 4th Circuit Court of Appeals decision in GenOn Mid-Atlantic, LLC v. Montgomery County focused primarily on “whether a particular charge is a ‘fee’ or a ‘tax’ for purposes of the Tax Injunction Act,” it also told an interesting story about trying to implement GHG regulation at the state/local level. The opinion was handed down almost two months ago, but it was a recent Legal Alert from Sutherland that brought it to my attention.

Montgomery Country in Maryland passed Bill 29-10 in mid-2010, which levied a $5 charge for every ton of carbon dioxide emitted by large stationary sources – but only those emitters that exceeded a threshold of 1 million tons of carbon dioxide a year would have to pay. In the area, only the GenOn Mid-Atlantic electricity plant was expected to hit that target, and therefore would be the sole emitter subject to the charge.

GenOn = not happy.

Now, the Tax Injunction Act prevents taxpayers from ‘disrupting state government finances’ with excessive litigation in federal court. But if GenOn could just get the courts to recognize the charge as a regulatory fee rather than a tax, then it would be within the court’s jurisdiction to hear GenOn’s challenge. When a district court dismissed GenOn’s suit, holding that the carbon charge was a tax, GenOn appealed, and this time, the 4th Circuit took their side. (GenOn = happy)

Montgomery County’s goals for Bill 29-10 had been lofty: “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.” But it’s these regulatory goals precisely that called into question whether the levy was truly a “tax.” (You can read both the text of the opinion and Sutherland’s Legal Alert for the specific whys and hows!)

There’s a great paragraph in the opinion that describes the way the Bill was marketed by one of the backing Councilmembers:

Councilmember Berliner stated candidly that his “proposed carbon tax . . . will incentivize [GenOn] to reduce its emissions.” […] 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.” […] Again, greenhouse gas reduction may indeed be a commendable aim, but to say that it was not the goal of the County Council here blinks reality.

The judges sound almost sad to have come to the decision they did:

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.

Shortly after the most recent court decision, the Montgomery County Council passed Bill 24-11, which repealed the Emissions Levy and returned taxes previously collected under the levy.

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