Court of Appeals Clears Baltimore City Excise Tax on Clear Channel’s Billboards

By Alan B. Sternstein

In Clear Channel Outdoor, Inc. v. Dep’t of Finance, No. 9, September Term, 2020 (decided Mar. 15, 2021), the Court of Appeals recently affirmed the January 2020 decision of the Court of Special Appeals, which had ruled that Baltimore’s excise tax on billboards did not violate the First Amendment or Article 40 of the Maryland Constitution. Clear Channel Outdoor, Inc. v. Dep’t of Finance, 244 Md. App. 304, 223 A.3d 1050 (2020). An April 15, 2020 post on this Blog previously discussed the decision of the Court of Special Appeals. The decision of the Court of Appeals, though affirming the Court of Special Appeals, provides important clarification with regard to assessing the constitutionality of speech constraints effected by regulation of the means, as opposed to the content, of speech.

Specifically, in reaching its decision, the Court of Special Appeals implied that regulation which limited or burdened only the means of communication was without First Amendment significance.  As will be reviewed in this post, the April 15, 2020 post argued otherwise, in principle and discussing relevant Supreme Court precedents.  In reaching its decision, the Court of Appeals was clear that such regulation, though impacting only the noncommunicative, means of speech, also required First Amendment attention.

Baltimore’s Billboard Tax

Baltimore imposed an excise tax on operators of outdoor advertising displays that were 10 square feet or larger, where the operators charged third parties to use their displays. Clear Channel Outdoor, Inc. operated billboards subject to the tax. The tax exempted displays involving images or messages related to the premises on which the displays were located but was otherwise content neutral in its application. Among the three operators of billboards in Baltimore, Clear Channel bore the majority of the tax’s burden annually, because, at least in part, the city banned the construction of new billboards in March 2000. The tax ordinance also required billboard operators each to file an annual report specifying the number of advertising spaces they operated and the location and size of their displays. It imposed no recordkeeping requirement as to the content of advertisements displayed or the identity of advertisers. At no point did any advertisers themselves participate in the action Clear Channel brought to challenge the constitutionality of the excise tax.

Content and Means Based Regulation of Speech

The April 15, 2020 post on this Blog discussed a scheme for analyzing governmental speech constraints that required first distinguishing between constraints that directly affected the communicative content of speech (“content based” constraints) and constraints that did so by limitations on the means of speech (“means based” constraints). Such means would include, for example, communicating by speaking in the public square, by printing, such as through newspapers, periodicals and pamphlets, by posting signs or erecting symbols, or by telecommunication distribution, such as cable television or internet platforms. Second, and with respect to means based constraints, the suggested analytical scheme required distinguishing between means based constraints imposed without regard to the content of the message communicated through the means (“means neutral-based” constraints) and constraints imposed with regard to the content of the message communicated (“means content-based” constraints).

In other words, government regulation can limit First Amendment protected speech (i) directly, by attempting to regulate the content of the speech, (ii) indirectly, by physical or economic burdens or constraints placed on means of communications, or (iii) by imposing such burdens or constraints not just with respect to the means used for speech but also with respect to the content of the speech that the means is used to communicate. An example of the latter manner of constraint would be a tax imposed and only imposed on periodicals carrying advertisements for birth control. In any case where it is alleged a regulation unlawfully constrains speech, the first question should be whether speech has, in fact and regardless of the degree, been constrained, either because the regulation limits or prohibits the content of the speech, because the regulation physically limits or economically burdens the means of communicating the speech or because both forms of constraint, content and means, are present. If there has been any such constraint, then the analysis may and should proceed to determining whether, under the applicable case law and its reasoning, the constraint constitutes an abridgement of speech that is unconstitutional.

The constitutionality of content based constraints is readily assessed, at least relative to assessing means based. Assessing the constitutionality of means based constraints is often more complicated, because the means used may allow regulation of message content that would be prohibited, were the manner of constraint only content based. See Buckley v. Valeo, 424 U.S. 1 (1976) (upholding means content-based regulation of political speech); FCC v. Pacifica Foundation, 438 U.S. 726 (1978) (upholding means content-based regulation of indecent speech). Likewise, although means neutral-based constraints are, on their face, not imposed with regard to message content, such constraints, as applied, may sometimes violate the First Amendment, particularly where the effect of the regulation is discriminatorily, excessively or intentionally to constrain speech. Assessing the existence of and First Amendment harm from such effects, in the absence of non-content directed regulation, is the source of the difficulty.

In Minneapolis Star v. Comm’r of Revenue, 460 U.S. 575, 582-83 (1983), for example, the state imposed a tax on the use by, but not sales to, publications of paper and ink. The state, however, exempted from the tax the first $100,000 of paper and ink used by a publication. The Supreme Court invalidated the tax for two reasons, even without any evidence of illicit legislative intent to constrain speech. First, the tax unjustifiably burdened large newspaper publications. They paid taxes on the use of paper and ink above $100,000, while many smaller publications paid no use taxes at all on their use of paper and ink. In fact, only a small fraction of the newspapers circulating in the state – 14 of 388 newspapers – were subject to the use tax, and one newspaper accounted for two-thirds of the revenues from the tax. Id. at 578-79. Second, imposing a use tax, the justification for which was recovering in-state sales revenues lost to out-of-state purchases, was inexplicable, where the state had entirely exempted from its sales tax print and ink purchased in state. Id. at 585. These considerations “presumptively” warranted the conclusion that the use tax on in-state purchases was “not unrelated to suppression of expression.”[1]

The Clear Channel Appeals

It was a means neutral-based regulation that was at issue in the Clear Channel appeals. The Baltimore excise tax burdened communications through billboards, but, facially, the tax applied to billboards, regardless of the content of the messages they displayed or any particular characteristic of the advertisers using them. The Court of Special appeals reached a correct result, concluding that the tax did not violate First Amendment and Article 40 protections. As noted in the April 15, 2020 post, however, the opinion for the Court of Special Appeals does not, at least explicitly, recognize the means based constraint on speech that the Baltimore tax, in fact, effected. Although the real question before the court was whether the constraint on speech that the means neutral-based tax imposed violated the First Amendment, what the court’s opinion instead discussed was simply whether the tax involved any content based constraint. As a result, the opinion made two overly broad and potentially problematical statements of law. The opinion stated, “Clear Channel displays the message of [a] third party, and therefore, a tax on its business does not implicate the First Amendment.” Clear Channel, 244 Md. App. at 314, 223 A.3d at 1056. Similarly, it stated that “[t]he mere fact that billboards are a medium of communication does not transform a tax on the sale of billboard space into a regulation of speech.” Id. at 315, 223 A.3d at 1056-57 (emphasis in original). Taken together, however, the Supreme Court’s decisions involving means based constraints of speech are clear that even means neutral-based constraints, as well as means content-based constraints, may limit speech but, depending highly on the circumstances, may or may not be unconstitutional.[2]

The Court of Appeals, as did the Court of Special Appeals, concluded that the Baltimore tax did not violate the First Amendment or Article 40.[3] In addition to the Grosjean and Minneapolis Star decisions,[4] the Court of Appeals relied on Leathers v. Medlock, 499 U.S. 439, 451 (1991) (absent any content based discrimination, sales tax on cable television franchise, not particular cable channels, and other specified services and tangible merchandise, but not on newspapers, magazines, and satellite television – effecting means neutral-based constraint of speech – not unconstitutional for burdening some but not all forms of media), and Arkansas Writers’ Project, Inc. v. Ragland, 481 U.S. 221 (1987) (gross receipts tax on sales of tangible personal property, including any and all printed material, except, however, newspapers and limited types of periodicals, effected an unconstitutional means content-based constraint of speech with respect to non-exempted printed materials).

Unlike the Court of Specials Appeals, which opined that “[t]he mere fact that billboards are a medium of communication does not transform a tax on the sale of billboard space into a regulation of speech,” 244 Md. App. at 315, 223 A.3d at 1056-57 (emphasis in original), the Court of Appeals noted that “[t]here is no dispute that billboards are a platform for speech and that the text or images that appear on billboards are entitled to some First Amendment protection.” Slip Op. at 11.[5] Likewise, and more to the point, the court notes, “Because the regulation – or taxation – of the noncommunicative aspects of a medium may ‘impinge to some degree on the communicative aspects,’ it has fallen to the courts to reconcile the exercise of those governmental powers with the protection provided by the First Amendment.” Slip Op. at 12 (emphasis added), quoting Metromedia, Inc. v. San Diego, 453 U.S. 490, 502 (1981).

The court further allowed that “to demonstrate infringement of First Amendment rights, it is not essential that a party show, or that a court find, that a legislature had an illicit intent in enacting a law that has such an effect.” Slip Op. at 21. Likewise, the court noted that “[a] tax that targets a small group of speakers among the press is suspect.” Id. at 22. The Court of Appeals thus recognized that regulatory actions merely burdening or constraining means, even without reference to the content of the speech being distributed, could be unconstitutional, though the court was careful to note that regulatory actions applied with reference to the content of speech should be viewed with suspicion and, therefore, be given heightened judicial scrutiny. See id. at 21-23.

Having recognized that content neutral burdens or constraints on means alone may raise First Amendment concerns, the Court of Appeals, relying primarily on Leathers, inferred three factors to be considered for determining whether a facially content neutral regulation violated the First Amendment: “(1) whether the Ordinance ‘singles out the press’; (2) whether it ‘targets a small group of speakers’; and (3) whether it ‘discriminates on the basis of the content of taxpayer speech.’” Slip Op. at 24, citing Leathers, 499 U.S. at 447. The court quite reasonably found that none of these conditions existed.

Although the Leather’s opinion mentions these three characteristics of unconstitutional means regulation, the opinion itself does not explicitly set forth any three part test. Indeed, after finding that none of these conditions existed in Leathers, the Supreme Court’s opinion allowed that a First Amendment violation could still exist if there were “‘an additional basis’ for concluding that the State has violated petitioners’ First Amendment rights” but found none. Id. at 449-50.[6] The bottom line, as all of the Court’s decisions taken together show, is that in means based constraint cases, particularly in means neutral-based cases, there is no definitive test for constitutionality with respect to the First Amendment. What is required, instead, is a careful consideration of whether, notwithstanding facial appearances, the circumstances reasonably indicate that the effect of the regulation is a constraint of speech that is unjustifiably discriminatory or excessive when weighed against the interests that the First Amendment protects or unduly  risks, because of matters of intention or otherwise, suppression of particular ideas or viewpoints.[7] If so, there is at least a rebuttable presumption of invalidity. Moreover, and as urged here, required even before engaging in the necessary inquiry, is care to recognize the need for First Amendment vigilance, even in circumstances seemingly speech benign in their presentation.


[1] Accord Grosjean v. American Press Co., 297 U.S. 233 (1936) (tax on all forms of print media selling advertising and having a circulation of more than 20,000 invalidated, despite putative revenue raising justification, because the tax essentially singled out newspapers and magazines having a wide reach, in keeping with a legislative history indicating the tax’s censorial intent); but see Metromedia, Inc. v. San Diego, 453 U.S. 490 (1981) (city ordinance forbidding, with limited exception, all outside signs and displays upheld against First Amendment challenge, even though the ordinance precluded almost all noncommercial speech through signs and displays but made limited exceptions for commercial speech); Heffron v. Int’l Society for Krishna Consciousness, Inc., 452 U.S. 640 (1981) (state law prohibiting the sale or distribution of any printed material in parks upheld, where sale or distribution of all merchandise, not just printed, was prohibited, in order to reduce littering).

[2] See cases discussed text, supra, and n.1.

[3] For purposes of the case before it, the court ruled that the protections of Article 40 were coextensive with the First Amendment. Slip Op. at 9-10.

[4] See text & n.1, supra.

[5] In this regard, the Court of Appeals cited Metromedia, 453 U.S. at 501 (1981) (plurality opinion) (“Billboards are a well-established medium of communication, used to convey a broad range of different kinds of messages”); Donnelly Advertising Corp. v. Baltimore, 279 Md. 660, 667 (1977) (billboard advertisements are “entitled to some protection by the First Amendment, whether they be of a commercial, political, or charitable nature”).

[6] Any sense that a tax imposed only on one means of speech, in particular, billboards, but not any other means is both discriminatory toward the means and discriminatory toward speech likely reflects the narrowness of the class of means on which the tax is imposed and that the tax is imposed on a speech means. Even accepting that the decision of the Court of Appeals adequately explains why the Baltimore tax did not violate the First Amendment, one may still be left with the sense that taxing only billboards is invidiously discriminatory. Though this may suggest that Clear Channel also had an Equal Protection or substantive due process claim, Slip Op. at 11, equal protection and substantive due process precedents are clear that, where the suspect nature of a classification has been rejected, the Constitution requires only that the classification be rationally based to pass muster. See Slip Op. at 10-11, citing Regan v. Taxation with Representation, 461 U.S. 540, 546-51 (1983). Accordingly, an excise tax on one means of speech but not any others could be adequately justified by a desire to control the installation of billboards for aesthetic or safety reasons. Cf. Metromedia, 453 U.S. at 493, 507-12 (upholding municipal prohibition on signs imposed to eliminate hazards to pedestrians and motorists created by distracting displays and to improve and protect city’s appearance).

[7] As contemplated here, the approach to assessing whether a regulation constraining speech is unconstitutional differs from the approach, at least, as articulated by the Court of Appeals. Whether the approach is termed “heightened,” “strict” or “exacting” scrutiny, the approach to review of the regulation at issue should from the outset be one of care, for threats to speech, particularly intentional threats, often do not come announced but, instead, subtly and potently veiled. By contrast, the court states that the first step is to determine “whether the First Amendment’s heightened scrutiny standard is to be applied” to review of the regulation or some lesser standard. See Slip Op. at 11. It is evident from the court’s opinion, however, that, in practice, the first step itself reflects the careful scrutiny urged here in every instance in which the effect of a regulation is some constraint of speech, whether by controlling speech content, means or both.

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