Camps Newfound/Owatonna v. Town of Harrison, 520 U.S. 564; 117 S. Ct. 1590; 137 L. Ed. 2d 852 (1997)

Facts—Owatonna is a nonprofit corporation that operates a summer camp in Harrison, Maine, for the benefit of children of the Christian Science faith; 95 percent of its campers, who pay tuition of about $400 a week, are from out of state. The camp paid over $20,000 in real estate taxes from 1989 to 1991, but Maine did not assess such taxes on operations of similar organizations designed to benefit state citizens. The Maine Superior Court ruled that the law drew an impermissible distinction between organizations that served individuals in-state as opposed to out-of-state, but the Maine Supreme Judi- cial Court had reversed on the basis that Maine was effectively purchasing services of those who served its citizens.

Question—Does a Maine tax that treats organizations differently according to whether they primarily serve in-state or out-of-state residents violate the dormant commerce clause?

Decision—Yes.

Reasons—J. Stevens (5–4). A primary impetus for the U.S. Constitution was the conflict of commercial regulations. Precedents have established that the commerce clause “even without implementing legislation by Congress is a limitation upon the power of the States” [this is the meaning of the term, the “dormant” commerce clause]. Just as Maine could not tax a camp more heavily because its campers came from out of state, so too, it cannot give special exemptions. The camp “is unquestionably engaged in commerce, not only as a purchaser . . . but also as a provider of goods and services.” In this respect, it is similar to hotels that serve out-of-state guests. The camp’s nonprofit status does not affect its relationship to commerce. A central purpose of the Court’s “negative Commerce Clause jurisprudence” is to prevent “this sort of ‘economic Balkanization’” and “economic isolationism.” Moreover, “That the tax discrimination comes in the form of a deprivation of a generally available tax benefit, rather than a specific penalty on the activity itself, is of no moment.” The tax results in increased fees for the individual served, serving as “an export tariff that targets out-of-state consumers by taxing the businesses that principally serve them.” The town’s argument that this exemption is “either a legitimate discriminatory subsidy of only those charities that choose to focus their activities on local concerns, or alternatively a governmental ‘purchase’ of charitable services falling within the narrow exception to the dormant Commerce Clause for States in the role as ‘market participants,’” is “unpersuasive” and contrary to precedents.

J. Scalia, dissenting, argued that “The Court’s negative-commerce-clause jurisprudence has drifted far from its moorings.” The desire to create a national market has needlessly usurped state police powers; “the provision at issue here is a narrow tax exemption, designed merely to compensate or subsidize those organizations that contribute to the public fisc by dispensing public benefits the State might otherwise provide.” Any effect on interstate commerce is indirect. “States have restricted public assistance to their own bona fide residents since colonial times.” While the results in this case “may well be in accord with the parable of the Good Samaritan, . . . they have nothing to do with the Commerce Clause.”

J. Thomas, dissenting. A real estate tax is “the quintessential asset that does not move in interstate commerce.” The Court’s negative commerce clause decisions had become overly broad. Attention should be directed away from the dormant commerce clause and toward the import-export clause in Article I, Section 10, which prohibits states from laying “Imposts or Duties” on the same. Instead of focusing on negative commerce clause decisions, the Court should be most concerned with cases, when state law conflicts with federal law or when Congress has preempted a field through extensive legislation. The import-export clause can be interpreted to apply to goods from other states as well as from other countries. The tax at issue does not violate the prohibition on imports and exports, and should accordingly remain in place.