Courts have oftentimes been asked to define the characteristics of a “tax,” and how they differ from other kinds of monetary exactions such as “fees.” The distinction is one that is not always observed with nicety in judicial decisions¹. Notwithstanding, and as elsewhere explained, just because staff and past Boards have labeled many of the District’s monetary exactions² “fees,” especially those which are involuntarily assessed, doesn’t necessarily make them so. Because

“The nature of (a)…charge…(the) law imposes is not determined by the label given…but (rather)…its operating incidence.”³

Therefore whenever the question is asked,

“Courts will determine and classify (monetary exactions) on the basis of realities”⁴ rather than labels, looking to their “operative effect.”⁵ Especially when as here, the RFF/BFF were “undoubtedly drafted with [NRS 318.197(1)’s reference to “standby service charges, for services or…the availability of service” permissive language firmly (and disingenuouusly) in mind.”⁶

In other words, courts will not allow local governments to do what our District regularly does. That is, let “the ends justify the means” by calling their monetary exactions something they are not!

So with this introduction in mind, we ask what are the “operating incidences”³ of the District’s various monetary exactions? What are their “operative effect?”⁵ What are their realities⁴?

Generally speaking, “the word ‘taxes’ is very comprehensive, and properly includes…all burdens, charges and impositions by virtue of the taxing power.”⁷ Typically they represent:

“Burdens or charges imposed by legislative authority on persons or property to raise money for public purposes (or, more briefly, an imposition for the supply of the public treasury”⁸). Or “enforced proportional contributions from persons and property, levied by the state…or its municipal subdivisions¹…by virtue of (their) sovereignty for the (financial) support of government, and for all public needs…where the special benefits derived from their performance is merged in(to) the general benefit.”⁸

According to the Nevada Supreme Court’s decision in Clean Water Coalition, supra, at 127 Nev. 314-15:

“A tax…is…an exaction of money for the purpose of generating revenue⁹…(It) is compulsory¹⁰ and…entitles the taxpayer to receive nothing except the governmental rights enjoyed by all citizens.” In contrast, “a user fee is optional and applies to a specific charge for the use of…a government-provided benefit.”¹¹

So the simple answer to the question of whether a monetary exaction is a tax, is that “if th(e)se criteria fit the charge…it…is…a” tax⁹. But there’s more.

Where a Monetary Exaction is The Product of a Nonexchange Transaction: it is a tax. Because payment entitles the payor to receive nothing of value in consideration of payment, except the governmental rights enjoyed by all citizens, according to International Public Sector Accounting Standard (“IPSAS“) No. 23, Revenue From Non-Exchange Transactions and our What Are Our RFF/BFF According to Us discussion, the proceeds of nonexchange transactions are taxes. For a more comprehensive discussion of this subject, the reader is referred to our Distinction Between Exchange/Exchange-Like And Nonexchange Transactions discussion.

Where The Financial Reporting of a Monetary Exaction Takes Place in a Special Revenue Fund: it is a tax. Because Special Revenue Funds are reserved for the financial reporting of the proceeds of restricted or committed revenue sources for specified purposes. For a more comprehensive discussion of this subject, the reader is referred to our Are The District’s RFF/BFF Taxes Because Their Financial Reporting Takes Place in Special Revenue Funds discussion.

Because of The Manner in Which a Monetary Exaction‘s Proceeds Are Expended: it may be a tax. According to Clean Water Coalition¹², a fee can be transformed into an impermissible special tax because of a change in the manner within which it is expended¹³.” In other words,

When a Monetary Exaction‘s “Purpose is Expressly to Raise Revenue:”¹⁴ for the financial support of government, and for all public needs⁸, it is a tax. Which explains why taxes typically “exceed…the value of the specific services for which (they are arguably) charged.”¹⁵

When a Monetary Exaction Generates More Revenue Than The Reasonable Cost Government Incurs to Furnish a Specific Special Service, Benefit, or Privilege: it is a tax. Since “a fee is not a revenue measure, but (rather) a means of compensating…government for the cost of offering and regulating the special service, benefit, or privilege¹⁶, [i]f the ‘fee’ unreasonably exceeds the value of the specific services for which it is charged¹⁷, as a contribution toward the cost of maintaining governmental functions, and where the special benefits derived from their performance is merged in(to) the general benefit,”⁸ “it will be held (to be) invalid” as “a tax.”⁹

Moreover, even where only a portion of a “fee” represents more than the reasonable cost government incurs to furnish an alleged special service, benefit, or privilege, the entire amount will be held invalid as a tax. Because “a court cannot apportion the charge (n)or ascertain and allow (only) such portion as it may find reasonable.”¹⁸ That’s a legislative function.

When a Monetary Exaction Pays For “a General Benefit to” Society As a Whole¹⁹: it is a tax. Because it is not “a (special) benefit (to) the (payor) not shared by other members of society.”²⁰ This principle was discussed by the Washington Supreme Court in Okeson v. City of Seattle, 150 Wash.2d 540, 78 P.3d 1279, 1285 (2003) where the question presented was whether a charge assessed on landowners to provide and maintain street lighting represented “a tax or a fee to pay for those costs.” Notwithstanding money was being raised pursuant to a city’s permissible municipal police power²¹ (i.e., lighting streets), the charge was declared to be an invalid tax because

“There was no relationship between the fee imposed on City Light customers and the streetlight service they received or the burden that they produced.” In other words, no “special benefit” was being furnished because those who were charged were not the only persons benefited thereby²².

Similarly, in Lane v. City of Seattle, 164 Wash.2d 875, 194 P.3d 977, 978-79 (2008) the Washington Supreme Court addressed a fee for “providing fire hydrants…a(nother) government responsibility…which a government (rather than its utility ratepayers) must pay.”

“Here, the purpose of charging ratepayers a hydrant charge (wa)s…to increase revenue for the city and not to regulate hydrants (n)or water usage, indicating a tax. (Although) the money goes to a hydrant fund, making it more like a fee…ratepayers pay the same fixed hydrant cost whether they use hydrants or not, indicating a tax. All benefit by having water available to put out fires²³…(And) for purposes of deciding a tax or fee, hydrants are very much like streetlights (see Okeson, supra, at 150 Wash.2d 552. Therefore,) as in Okeson, the charge here is a tax.”²⁴

Sometimes an otherwise legitimate “Fee” May Represent A “Tax:”²⁵ Some examples:

Because of The Manner in Which a Monetary Exaction is Adopted – a Local or Special Law or One of Non–Uniform Application Throughout The State: it is a tax. According to Clean Water Coalition²⁶ a fee can be transformed into an impermissible special tax where it is adopted in violation of the Constitution. The equivalent of a local or special law, or one of non-uniform application throughout the State, is in violation of the Nevada Constitution. For a more comprehensive discussion of this subject, the reader is referred to our Are The District’s RFF/BFF Taxes Because They’re The Product of a Local or Special Law discussion.

Because of The Manner in Which a Monetary Exaction is Adopted –Due Process of Law: it is a tax. As stated above, according to Clean Water Coalition²⁷ a fee can be transformed into an impermissible special tax where it is adopted in violation of the Constitution. The equivalent of a law which deprives those of property without due process is in violation of the Nevada and federal Constitutions. For a more comprehensive discussion of this subject, the reader is referred to our Are The District’s RFF/BFF Taxes Because Those Who Are Assessed Are Deprived of Due Process discussion.

So now you know what kinds of monetary exactions represent taxes.

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1. See Dickson, Sheriff v. Jeff. Co. Bd. of Education, 311 Ky. 781, 786, 225 S.W.2d 672 (1949).
2. Such as its Recreation (“RFF”) and Beach (“BFF”) Facility Fees, its defensible space fee, its solid waste “franchise fee,” etc.
3. See Clean Water Coalition v. The M Resort, LLC, 127 Nev. 301, 255 P. 3d 247, 256 (2011) citing State v. Medeiros, 89 Haw. 361, 973 P.2d 736, 741 (1999).
4. See Hukle v. City of Huntington, 134 W.Va. 249, 58 S.E.2d 780, 783 (1950); Clean Water Coalition,supra, at 127 Nev. 315.
5. See Emerson College v. City of Boston, 39 Mass. 415, 462 N.E.2d 1098, 1105 (1984).
6. See Rider v. County of San Diego, 1 Cal.4th 1, 15, 820 P.2d 10 (1991).
7. See McCandless v. Campbell, 20 Haw. 411, 420 (1911).
8. See Hawaii Insurers Council v. Lingle, 120 Haw. 51, 59-60, 201 P.3d 564 (2008).
9. See Douglas Co. Contractors v. Douglas Co., 112 Nev. 1452, 929 P.2d 253, 256 (1996); State ex. rel. City of Reno v. Boyd, 27 Nev. 249, 256, 74 P. 654 (1903); also see Hawaii Insurers Council, Id.; 71 Am. Jur. 2d §13, State and Local Taxation (2001).
10. An “enforced contribution for the support of government” [quoting United States v. La Franca, 282 U.S. 568, 572, 51 S.Ct. 278 (1931); City of Gary, Ind. v. Indiana Bell Tel., 732 N.E.2d 149, 156 (Ind. 2000)].
11. See U.S. v. City of Huntington, W.Va., 999 F.2d 71, 74 (4th Cir. 1993).
12. Supra, at 127 Nev. 316-18.
13. Therein the court found that “user fees collected for capital improvement projects and sewer services…from business(es) and residents…(we)re transformed into a tax (because they were)…transfer(red) into the State’s General Fund…for unrestricted general use…(and thus) no longer b(ore) any relationship to the purpose(s) for which they were (initially) assessed.”
14. See Clean Water Coalition, supra, at 127 Nev. 315.
15. See Executive Aircraft Consulting, supra, at 845 P.2d 62 quoting National Cable Television Ass’n, supra, at 554 F.2d 1106.
16. See Executive Aircraft Consulting, supra, at 252 Kan. 427.
17. Id., at 252 Kan. 426 (quoting National Cable Television, supra, at 554 F.2d 1106).
18. See City of Madera v. Black, 181 Cal. 306, 315, 184 P. 397 (1919).
19. Rather than just those who are assessed [see Hawaii Insurers Council, supra, at 120 Haw. 60, 201 P.3d 582; Clean Water Coalition, supra, at 127 Nev. 318].
20. See National Cable Television, supra, at 415 U.S. 340-41.
21. The health, safety and general welfare of Seattle’s residents [see Berman v. Parker, 348 U.S. 26, 32, 75 S.Ct. 98 (1954)].
22. Although a “few specially benefited should not be subsidized by the general public” [see Silicon Valley Taxpayers’ Ass’n. v. Santa Clara County Open Space Authority, 44 Cal.4th 431, 455, 187 P.3d 37 (2008)], those few should not be required to pay for benefits to society as a whole. Or as stated a bit differently, “[i]f everything is special, then nothing is special” [Ventura Group Ventures, Inc. v. Ventura Port Dist., 24 Cal.4th 1089, 1107, 16 P.3d 717 (2001)].
23. In other words, no “special benefit” was furnished because those who were charged were not the only persons benefited thereby.
24. Lane, supra, at 194 P.3d 980.
25. See Southern Nevada Life v. City of Las Vegas, 74 Nev. 163, 166, 325 P.2d 757, 758 (1958); Eastern Diversified v. Montgomery County, 319 Md. 45, 570 A.2d 850, 854 (1990); Hillis Homes, Inc. v. Snohomish County, 97 Wash. 2d 804, 650 P.2d 193, 195 (1982).
26. Supra, at 127 Nev. 318.
27. Supra, at 127 Nev. 318.