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 District’s RFF/BFF for instance, 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 disingenuously) 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 is their “operative effect?”⁵ What are their realities⁴?

As elsewhere discussed, Emerson College v. City of Boston⁵ instructs that the “fees imposed by a governmental entity tend to fall into one of two principal categories:

User fees, based on the rights of the entity as proprietor of the instrumentalities used…or regulatory fees (including licensing and inspection fees) founded on the (municipal) police power⁶.”

Given GIDs are limited purpose special districts⁷, unlike true municipalities such as counties⁸, cities⁹ and unincorporated towns¹⁰, they have not expressly been granted¹¹ the power to provide for the “public health, safety…welfare” and morality¹² of their inhabitants. Nor to regulate, tax and license businesses¹³.

Because GIDs possess no municipal police powers¹⁴, they have no power to charge “regulatory fees (including licensing and inspection fees).” Therefore, when we speak of a GID’s power to charge fees, we’re talking “user fees based on the rights of the entity as proprietor of the instrumentalities used” exclusively.

State of Hawaii v. Medeiros¹⁵ instructs that in order “to distinguish between a ‘fee’ and” some other form of monetary exaction,

“We analyze whether the charge:

(1) Applies to the direct beneficiary of a particular service¹⁶;

(2) Is allocated directly to defraying the costs of providing the service¹⁷; and,

(3) Is reasonably proportionate to the benefit received.”¹⁸

There is a fourth (4th) pillar to the above “modified Emerson College test.”¹⁹ “Subsequent to its opinion in Emerson College, the Massachusetts Supreme Judicial Court…weakened its adherence to the second identifying factor described in Emerson College—voluntary receipt of the ‘service’—holding that ‘the element of choice is not a compelling consideration which can be used to invalidate an otherwise legitimate charge.’”²⁰ However, in our Special And Limited Circumstances Under Which The “Paid by Choice” Factor Applicable to All Fees Based on “The Right of a Governmental Entity as Proprietor of The Instrumentalities Used” Can Be Disregarded discussion, we have demonstrated this pillar continues as an identifying factor except only when it comes to fees for municipal public health and sanitation services²¹. Since here IVGID charges no fees for such services²², all of the District’s fees require payment “by choice, in that the party paying the fee has the option of not utilizing the governmental service and thereby avoiding the charge.”²³

Notwithstanding the above, a fee can be transformed into an impermissible special tax²⁴ given “the Legislature’s law-making authority is…not unlimited..(Because) courts are obligated to enforce the limitations that the constitution imposes upon legislative acts,” what might otherwise be legitimate fees, can be declared invalid²⁵ under the following circumstances:

The Manner Within Which The Fee is Expended: “Fees assessed as legitimate fees can be transformed into impermissible taxes if they” are unrestricted and used for purposes other than those represented. In other words, when it comes to the RFF/BFF, although they are allegedly collected to defray the costs of making particular the District’s beaches and public recreation facilities available to be used by those whose local parcels/dwelling units are assessed, they’re used for completely different purposes. That would be to cover the financial shortfall between budgeted revenues and intentional overspending systemwide²⁶. Meaning they would no longer bear any relationship to the purpose for which they were assessed transforming them into an impermissible special tax²⁷.

The Manner Within Which The Fee is Adopted: Where funds are collected in violation of the Constitution, such as where they’re the product of a Local or Special Law²⁸ or One of Non-Uniform Application Throughout The State²⁹, again²⁷ they are transformed into an impermissible special tax³⁰.

The Deprivation of Due Process: ¶1 of the Fourteenth Amendment to the United States Constitution and Art. I, ¶8(2) of the Nevada Constitution guarantee that no state shall deprive a “person…of life, liberty, or property³¹, without due process of law.” Thus where funds are collected without providing due process³² This is another example²⁷ they have been transformed into an impermissible special tax. For a more comprehensive discussion of this subject, the reader is referred to our Are The District’s RFF/BFF Valid Because Those Whose Properties Are Assessed Are Deprived of Due Process discussion.[/efn_note].

So there you have it. Only if the above criteria fit the charge, is it a fee³³. Otherwise it “is a tax and not a fee,”³⁴ and “it will be held invalid.”¹⁹

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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, defensible space fee, 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 391 Mass. 415, 424-425, 462 N.E.2d 1098, 1105 (1984).
6. Those incredibly broad regulatory powers related generally to “[p]ublic safety…health, morality, peace and quiet, (and) law and order” [see Berman v. Parker, 348 U.S. 26, 32, 75 S.Ct. 98 (1954)]. These powers flow from the Tenth Amendment  to the U.S. Constitution which states that “powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.”
7. See ourWhat Are GIDs discussion.
8. See NRS 244.143(2)(a).
9. See NRS 268.003(2)(a).
10. See NRS 269.128, and 269.185, et seq.
11. A requirement under NRS 244.137(2) and 268.001(2).
12. See NRS 244.150, et seq., 268.409, et sq and 269.190, et seq.
13. See NRS 244.335, et seq., 268.0035(1) and 269.170, et seq. as long as those businesses are not “subject to substantial regulation by a federal or state agency” [see NRS 268.0035(4)(b)].
14. Art. VIII, §8 of the Nevada Constitution instructs that “the Legislature shall provide for the organization of cities and towns by general laws, and shall restrict their power of taxation, assessment, borrowing money, contracting debts and loaning their credit, except for procuring supplies of water.”
15. See 89 Haw. 361, 973 P.2d 736, 741-42 (1999).
16. See Medeiros, supra, at 973 P.2d 743.
17. See Rizzo v. City of Philadelphia, 668 A.2d 236, 238 (Pa. Commw. Ct. 1995).
18. See Clean Water Coalition, supra, at 255 P.3d 256; City of Madera v. Black, 181 Cal. 306, 313, 184 P. 397 (1919). Where the ordinance or resolution adopting the fee does not require that the funds generated from the fee be used for the service represented by payment, “leaving open the possibility that the charge could be used for general revenue raising purposes,” it must be held to be invalid [see Executive Aircraft Consulting, Inc. v. City of Newton, 252 Kan. 421, 426, 845 P.2d 57 (1993) citing National Cable Television Ass’n, Inc. v. F.C.C., 554 F.2d 1094, 1106 (D.C.Cir. 1976)].
19. See Medeiros, supra, at 973 P.2d 742.
20. See Nuclear Metals, Inc. v. Radioactive Waste Management Bd., 421 Mass. 196, 656 N.E.2d 563, 570 (1995).
21. Examples include standby service charges for the availability of municipal water [see Jones v. Water Commission of Detroit, 34 Mich 273, 275 (1876)] and sewer [see Ripperger v. Grand Rapids, 338 Mich. 682, 62 N.W.2d 585 (1954)] services.
22. Other than water and sewer service fees. And with respect to both, only actual customers of those services, in other words those voluntarily choosing to become customers, are assessed rates and charges.
23. See Medeiros, supra, at 973 P.2d 741 citing Vanceburg v. Federal Energy Regulatory Comm’n, 571 F.2d 630, 644 n. 48 (D.C.Cir. 1977), cert. denied, at 439 U.S. 818, 99 S.Ct. 79 (1978).
24. See Clean Water Coalition, supra, at 127 Nev. 316-18.
25. See Clean Water Coalition, supra, at 127 Nev. 309.
26. See our What Are The District’s RFF/BFF According to Us discussion.
27. See Clean Water Coalition, supra, at 127 Nev. 318.
28. See Art. IV, §20 of the Nevada Constitution.
29. See Art. IV, §21 of the Nevada Constitution.
30. 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.
31. In Sniadach v. Family Finance Corp., 395 U.S. 337, 339-42, 89 S.Ct. 1820 (1969) the U.S. Supreme Court ruled that money (i.e., wages) is property for purposes of the Fourteenth Amendment. There the Court ruled that “Wisconsin(‘s) garnishment procedure violated that due process…in that notice and an opportunity to be heard (we)re not given before the in rem seizure of…wages.”
32. “Following fair legal procedures…includ(ing the) giving (of) notice, a chance to respond, and a neutral decision-maker (usually a judge)” (go to https://act.represent.us/sign/due-process-explained/?source=go-ad-gen-20241212&utm_source=go&utm_medium=ad&utm_campaign=gen&utm_content=20241212&utm_term=&gad_source=1&gad_campaignid=22025691781&gbraid=0AAAAADhg-cCp6SxpQL4gtfdMZfHF69MoC&gclid=CjwKCAjwhqfPBhBWEiwAZo196pGIKrbcUT0mAEqRHWsZGTApnSDraTomttY7rfKbK0Vz8hsFmNjHghoCMeoQAvD_BwE).
33. See Clean Water Coalition, supra, at 127 Nev. 315.
34. Id., at 973 P.2d 745.