Sinclair Paint Co. v. State Board of Equalization
64 Cal. Rptr. 2d 447, 15 Cal. 4th 866, 937 P.2d 1350 (1997)
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Rule of Law:
A compulsory charge imposed by the legislature on an industry to fund the mitigation of adverse societal effects caused by that industry's products constitutes a regulatory fee, not a tax, provided the charge is used exclusively for the mitigation program and the amount assessed bears a reasonable relationship to the societal burdens created by the industry's operations.
Facts:
- In 1991, the California Legislature enacted the Childhood Lead Poisoning Prevention Act (the Act) by a simple majority vote.
- The Act established a program for the evaluation, screening, and medically necessary follow-up services for children at risk of lead poisoning.
- To fund the program, the Act imposed 'fees' on manufacturers and other persons, including Sinclair Paint Company, who were in the stream of commerce of lead or products containing lead.
- The fees were calculated based on a company's past or present responsibility for environmental lead contamination, such as its market share of lead-containing products.
- Sinclair Paint Company was assessed and paid $97,825.26 in fees under the Act for the year 1991.
Procedural Posture:
- Sinclair Paint Company paid the assessed fees and then filed an administrative claim for a refund with the Board of Equalization, which the Board denied.
- Sinclair filed a complaint in trial court against the Board of Equalization seeking a refund, alleging the fees were unconstitutional taxes.
- The Department of Health Services and representatives of a class of children with lead poisoning (Cochenour) were granted leave to intervene as defendants.
- The trial court granted Sinclair's motion for summary judgment, finding the Act imposed an unconstitutional tax.
- The Board of Equalization, the Department, and Cochenour (appellants) appealed to the California Court of Appeal.
- The Court of Appeal affirmed the trial court's judgment, agreeing that the Act was unconstitutional.
- The appellants sought and were granted review by the Supreme Court of California.
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Issue:
Does the Childhood Lead Poisoning Prevention Act, which imposes a charge on manufacturers of lead-containing products to fund a program for childhood lead poisoning screening and treatment, constitute a 'tax' that requires a two-thirds majority vote for enactment under Article XIII A, Section 3 of the California Constitution?
Opinions:
Majority - Chin, J.
No. The charge imposed by the Act is a bona fide regulatory fee, not a tax, and therefore was validly enacted by a simple majority vote. A fee is regulatory, rather than a tax, when its primary purpose is to regulate an activity or mitigate its effects under the state's police power, not to raise general revenue. The Act's fees are directly used to mitigate the adverse health effects of lead contamination, a problem created by the fee payers. The fees 'regulate' by deterring the sale of dangerous products and shifting the cost of the harm from the general public to the industries responsible. As long as the amount of the fees bears a reasonable relationship to the burdens generated by the fee payers' operations, the imposition is a valid regulatory fee, even if it is compulsory and does not confer a direct benefit or privilege upon the payer.
Analysis:
This decision significantly clarifies the distinction between a 'tax' subject to Proposition 13's supermajority requirement and a 'regulatory fee' that can be enacted by a simple majority. By establishing the 'mitigating effects' fee as a valid exercise of police power, the court empowers the legislature to fund public health and environmental cleanup programs by imposing costs on the industries responsible for the underlying harm. This precedent provides a crucial pathway for creating 'polluter pays' legislation without the high political barrier of a two-thirds vote, potentially influencing how future environmental and public health regulations are structured and funded in California.
