WILLIAM THOMAS, et al., Plaintiffs, v. NETWORK SOLUTIONS, INC.and CIVIL ACTION NO NATIONAL SCIENCE FOUNDATION 1:97CV02412 (TFH) Defendants.
Ralph C. Nash, Jr. (000023249)
1140 23rd Street, N.W.
Washington, D.C. 20037-1439
William H. Bode (113308)
James M. Ludwig (427884)
Daniel E. Cohen (414985)
BODE & BECKMAN, L.L.P.
1150 Connecticut Avenue, N.W.
Washington, D.C. 20036
Dated: June 1, 1998
|SUMMARY OF ARGUMENT||9|
|I.||SECTION 8003, WHICH FAILS TO MENTION THE TAX IN QUESTION, DOES NOT AND CANNOT IMPLIEDLY RATIFY IT||13|
|A.||The Scope Of The Purported Ratification Is Confined To Its Plain Terms||13|
|1.||Section 8003 Defies This Court's Ruling Invalidating Any Purported Ratification That Fails To Specifically State That The Tax Is Ratified||16|
|2.||Section 8003's Generalized Reference To This Litigation Does Not Reflect Clear Congressional Awareness Of Anything||17|
|B.||In Passing The Emergency Appropriations Bill, Congress Did Not Know Of, Or Vote To Ratify, Any Tax||19|
|1.||Congress Was Not Notified Of The Disputed Tax||20|
|2.||Any Implied Ratification Of A Tax Must Fail Because Section 8003 Was Designed To Mislead Congress||21|
|C.||This Appropriations Measure Cannot Properly Be Construed To Retroactively Change Substantive Tax Law||23|
|1.||Section 8003 Does Not Enact A New Tax Policy||23|
|2.||As An Emergency Appropriations Measure, H.R. 3579 Cannot Be Construed To Pass Substantive Tax Legislation||25|
|II.||THE PURPORTED IMPLIED RATIFICATION OF AN UNCONSTITUTIONAL TAX VIA MISLEADING LANGUAGE TACKED ONTO AN APPROPRIATIONS BILL IS ITSELF CONSTITUTIONALLY INVALID||27|
|A.||Ratification Of Unconstitutional Conduct Must Be Unequivocal||28|
|B.||Congress Did Not Engage In The Careful and Purposeful Consideration Required For Ratification Of Unconstitutional Conduct||31|
|III.||THE PURPORTED DELEGATION OF TAXING AUTHORITY TO NSF IS INVALID, AND MERELY CONFIRMS THAT THERE WAS NO CONSTITUTIONALLY-ACCEPTABLE DELEGATION ACCOMPANIED BY INTELLIGIBLE GUIDELINES IN THE FIRST INSTANCE||32|
|A.||Congress May Not Delegate The Authority To Legislate||33|
|B.||Because Congress Alone May Enact Tax Laws The Unfettered Authority To Enact The Preservation Assessment Could Not Ha ve Been Delegated In the First Instance||35|
|C.||Any Purported Delegation Is Invalidated By The Lack Of Intelligible Standards And The Absence Of Express Congressional Intent To Delegate||37|
|D.||Congress Cannot Ratify Taxes Which It Could Not Have Empowered NSF To Impose In The First Instance||38|
|E.||There Can Be No Retroactive Delegation||41|
|IV.||SECTION 8003 VIOLATES THE ORIGINATION CLAUSE||41|
Defendant National Science Foundation's (NSF's) Motion to Vacate Preliminary Injunction and Motion to Dismiss Under Fed. R. Civ. P. 12(h) As Moot are based solely on the recent passage into law of H.R. 3579's section 8003, entitled "Ratification of Internet Intellectual Infrastructure Fee" ("section 8003"). NSF assumes that section 8003 operates to legitimize and ratify the 30 percent assessment (the "Preservation Assessment") imposed upon all domain name Registrants, and deposited in the so-called "Intellectual Infrastructure Fund," that this Court found to be an unconstitutional tax. This assumption is insupportable, however, and therefore NSF's motions must be denied.
Most fundamentally, section 8003 makes no mention of any tax, much less an unconstitutional tax; it merely references a "fee" that was "unauthorized." This was no accident. The preparers of this language knew full well that this Congress would not, under any circumstances, knowingly vote to ratify the first-ever tax on the Internet. Thus, not only was the language of the bill deliberately designed to mislead those who would be voting on it; the covert procedures used to obtain its passage -- which constituted an outright violation of House and Senate rules -- also reflected an effort to conceal the nature of what those responsible for section 8003 wanted to do (which was, of course, to obtain ratification of a tax). Thus section 8003 was not introduced in the House of Representatives, where revenue bills are required to originate; instead, it was covertly inserted into H.R. 3579 in conference. Moreover, neither of the congressional committees charged with jurisdiction over tax issues was even notified that section 8003 was being made part of the bill, or that NSF would characterize it as ratifying a tax. Now
that the House Commerce Committee has passed the Cox bill imposing a moratorium on taxing the Internet H.R. 3849), it is crystal clear that this sleight of hand was necessary to obtain congressional rubber-stamping of the emergency appropriations bill in which section 8003 was inserted, as this Congress would have refused to pass any legislation that it recognized to impose a tax on the Internet. But the tactics used to pass section 8003 now backfire on NSF as a matter of law.
As a straightforward issue of statutory construction, section 8003 says what it means and means what it says: it "ratifies and legalizes" a user "fee," and only a user fee. Congress, of course, is well aware of the distinction between a "fee" and a "tax," which has historically been clearly demarcated both in legislation and in a host of Supreme Court decisions. Having approved ratification of (at most) a user fee, and having been given no opportunity even to consider approval or ratification of anything beyond a user fee, Congress has done nothing to cure or ratify the infirmity inherent in what this Court properly found to be a tax. Thus NSF's motions can be disposed of without reference or resort to constitutional concerns.
Once the Rubicon into constitutional issues is crossed, however, the fatal deficiencies of section 8003 become even more pronounced. First, there can be no implied "ratification by appropriations" of unconstitutional conduct; for Congress to correct an infirmity of constitutional magnitude, it must do so clearly and unequivocally, which plainly did not happen here. Second, NSF never had the authority to impose the tax in the first instance, because Congress did not, and could not have, delegated to it the blanket authority to devise and levy the Preservation Assessment. Moreover, any claim of purported delegation of tax collection authority to NSF is independently undermined on constitutional grounds by the glaring absence of any intelligible
guidelines or principles that must accompany any such delegation. Third, NSF's assumption that section 8003 is a tax provision cannot be sustained under the Origination Clause of the Constitution, which requires that all such revenue-raising measures originate in the House of Representatives -- quite unlike section 8003, which was covertly hatched in conference, unbeknownst to the Congress at large.
On March 27, 1998, Representative Robert Livingston (R-LA) introduced in the House Appropriations Committee H.R. 3579, "A bill making emergency supplemental appropriations for the fiscal year ending September 30, 1998, and for other purposes." The bill addressed emergency aid to Bosnia, among other appropriations issues. Section 8003 was not in this bill and there was no language in this bill that mentioned, dealt with, or in any way related to the Intellectual Infrastructure Fund. See Ex. 1 (History of H.R. 3579).
On March 30, 1998, the House Rules Committee passed a rule providing for one hour of general debate on H.R. 3579. Furthermore, the rule provided that the bill shall be considered as read. On the following day, H.R. 3579 was reported from the House Appropriations Committee and considered and voted on in the House of Representatives. When the House of Representatives voted on H.R. 3579, it was wholly devoid of any language mentioning or relating to the Intellectual Infrastructure Fund.
The House passed H.R. 3579 by a razor-thin margin of 212 to 208 and sent it on to the Senate. On the same day, March 31, 1998, H.R. 3579 was received in the Senate and passed the Senate with an amendment ("S. 1768"). S. 1768, like H.R. 3579, also contained no language
referring or relating to the subject of the Intellectual Infrastructure Fund. The Senate insisted on its amendment and thus asked for a conference committee with the House to iron out the differences. The House refused to consent to the Senate amendment, however, and thereafter Congress adjourned for the Easter Recess.
Upon its return, on April 23, 1998, the House agreed to a conference committee with the Senate to iron out the differences in the House and Senate bills. Five days later, on the afternoon of April 28, 1998, the conference committee met for the first time. At approximately 6:30 p.m. on the following day -- the end of the day on which the committee completed most of its work -- a Senate staffer introduced the language of section 8003 for insertion into the conference report. At 9:30 on the following morning, April 30, 1998, the official record of the conference committee, the conference report, was prepared and ready for Representative Livingston (R-LA) to file with the House, and for Senator Stevens (R-AK) to file with the Senate.
In this conference report, section 8003 appears. (Ex. 2). The Joint Explanatory Statement of the Committee of Conference explicitly notes that section 8003 was added in conference:
The conferees have included a new section under 'General Provisions' which would serve to ratify and confirm Congressional intent with respect to the collection and use of funds by the National Science Foundation (NSF). The explosive growth of the commercial segment of the Internet resulted in the collection of program fees in excess of the amount projected. These were in turn held in an 'Intellectual Infrastructure Fund' until the Congress, as part of the fiscal year 1998 Appropriations Act, determined to use these funds for NSF's work on 'Next Generation Internet' activities. This action by the Congress has since been held up by proceedings in the federal court system, and the language included in this new section will statutorily correct the lack of authority perceived by the court. The conferees would not [sic] in this regard that the federal judge in this case literally invited this action by the Congress, which would do nothing more
than permit the NSF to proceed with the use of these funds as intended by Public Law 105-65.
Ex. 3 (emphasis added). Section 8003 is thus added to H.R. 3579. Section 8003 itself provides, in pertinent part:
RATIFICATION OF INTERNET INTELLECTUAL INFRASTRUCTURE FEE. (a) The 30 percent portion of the fee charged by Network Solutions, Inc. between September 14, 1995 and March 31, 1998 for registration or renewal of an Internet second-level domain name, which portion was to be expended for the preservation and enhancement of the intellectual infrastructure of the Internet under a cooperative agreement with the National Science Foundation, and which portion was held to have been collected without authority in William Thomas et al. v. Network Solutions Inc. and National Science Foundation, Civ. No. 97-2412, is hereby legalized and ratified and confirmed as fully to all intents and purposes as if the same had, by prior Act of Congress, been specifically authorized and directed.
On April 30, 1998, Congressman Livingston filed the conference report with the House. The House then considered the revised H.R. 3579 that emerged from the conference committee, i.e., the new version containing section 8003 in the text of the bill. The conference report was never read in the House, as the House Committee on Rules passed a procedural motion that resulted in the conference report being considered as read. In addition, the House Committee on Rules passed rules that effectively precluded any meaningful debate on the revised H.R. 3579. For example, one rule passed expressly stated that "All points of order against the conference report and against its consideration are waived." Thus, although Members of the House were allowed to speak about the revised H.R. 3579, all speech about the revised H.R. 3579 was "for purposes of debate only." Consequently, no Member of the House could move to delete section 8003. Following a short debate that did not reflect House awareness of section 8003, the House
voted on and passed the revised H.R. 3579 by a vote of 242 to 163. A motion to reconsider was laid on the table.
The same day, April 30, 1998, the revised H.R.3579 was sent to the Senate. Senator Lott (R-Miss.) asked for, and received, unanimous consent that (1) the reading of the conference report be waived; (2) that debate be limited to one hour; and (3) that the "Senate proceed to a vote on the adoption of the conference report, with no intervening action or debate." Senator Stevens (R-AK) then filed the conference report with the Senate. Because of Senator Lott's unanimous consent, the conference report was never read in the Senate, nor was there any meaningful Senate debate of the revised H.R. 3579. The Senators, like the Representatives in the House, could not make a motion to delete section 8003. To this end, Senator Kerry (D-Neb.) expressed his dismay in the floor of the Senate that the Senate could not delete any sections of the revised 3579: "I am distressed that my colleagues and I are presented with an all-or-nothing vote ...." 144 Cong. Rec. S3912 (daily ed. April 30, 1998) (statement of Sen. Kerry). Following a short debate in the Senate, Senators voted on and passed the revised H.R. 3579 by an 88 to 11 vote. The next day, May 1, 1998, the President signed the revised H.R. 3579, and it became Public Law [Pub. L. No. 105-174, 112 Stat. 58].
Representative Bill Archer (R-TX), the Chairman of the House Committee On Ways and Means, first learned that Congress had purportedly passed tax legislation in H.R. 3579 when he saw NSF's press release of Saturday, May 2, 1998, boasting that the tax at issue had been ratified. See NSF Press Release (Ex. 4 hereto). After learning of NSF's proclamation, Chairman
Archer immediately sent a letter to Representative Livingston condemning section 8003. That letter began:
I write to you to register my strong objection to section 8003 of H.R. 3579, making emergency supplemental appropriations for the fiscal year ending September 30, 1998. This provision attempts to bless legislatively a tax imposed by the Executive Branch without any legislative authority. I object both to the substance of the provision and its inclusion on procedural grounds.
Chairman Archer went on to point out that this Court, in its April 6, 1998 Opinion and Order [Thomas v. Network Solutions Inc. and National Science Foundation, No. CIV. 97-2412(TFH), 1998 WL 191205 (D.D.C. April 6, 1998] ("April 6 Order") "noted that Congress had not provided NSF with the authority to impose this tax and stated that if Congress intended to authorize these actions, it must pass legislation that 'clearly recognizes the unauthorized tax and specificaly states that the tax is ratified."' Ex. 5 (quoting April 6 Order at 17 ) (emphasis added). The Chairman first took issue with the procedure by which section 8003 was covertly passed:
Section 8003 is an attempt to validate, retroactively, this unauthorized imposition and collection of a tax by a Federal agency. Such a provision was in neither the House bill nor Senate amendment. Thus, in addition to constituting legislating on an appropriations bill, the provision was outside the scope of conference. The inclusion of this attempted validation, with little debate and no consultation with the Committee on Ways and Means (which has exclusive jurisdiction over tax and tariff measures) is highly improper.
Ex. 5 (emphasis added). Chairman Archer then made clear that, had he known that section 8003 even purported to validate a tax, he would not have supported it:
I am committed to reducing taxes, not imposing them. I am especially opposed to a retroactive imposition of a tax. Moreover, I am very troubled about the message that this sends to Federal agencies. Several Federal agencies are in the process of imposing or designing "fees" or "contribution" mechanisms that appear to be, in fact, taxes. Actions such as this can only embolden them.
Id. (emphasis added).
On May 14, 1998, Ways and Means Committee Member Jon Christensen (R-Neb.) registered his objections to section 8003 in a letter to Chairman Archer (Ex. 6 hereto) ("I am very troubled by the improper inclusion of section 8003 in H.R. 3579"). Congressman Christensen specifically took note of the reason section 8003 bypassed Ways and Means, and he also confirmed that section 8003 cannot possibly ratify what this Court ruled to be an unconstitutional tax:
[This] Court held that the "Preservation Assessment" imposed by Network Solutions, Inc. was an unconstitutiorially imposed tax. Section 8003 of H.R. 3579, making emergency supplemental appropriations for the fiscal year ending September 30, 1998 does not in any way. ratify such a tax on domain name registrations on the Internet. Section 8003 addresses only "fees" which are properly distinguished from "taxes" in the Court's decisions. Neither I nor the Ways and Means Committee knew of or considered this provision. I assume we were not advised of its consideration because the provision concerned the authorization of user fees not taxes.
(Emphasis added). Congressman Christensen added:
Any taxes, whether on the Internet or otherwise, must be subject to a carefully considered deliberative process through the Ways and Means and Senate Finance Committees. This is particularly so in the context of all issues impacting Internet and electronic commerce taxation. Because Section 8003 of H.R. 3579 involves only a fee, not a tax, this Congressional process was not followed.
Id. (emphasis added).
Finally, it bears emphasizing that defendant NSI, which proposed the tax at issue to NSF, was well aware of the Preservation Assessment's true nature as a tax. See Ex. 7 (specifically acknowledging that, with respect to Intellectual Infrastructure Fund, "Domain Name Registrants Who Have Paid the Fee Might Complain About Being 'Taxed"').
At the same time section 8003 was secretly being inserted into the emergency appropriations bill in conference, the Internet Tax Freedom Act was already pending in Congress. That legislation proposed to ban the very kind of taxation -- namely, taxing of the Internet -- that section 8003 purported to ratify. On May 14, 1998, the Internet Tax Freedom Act H.R. 3849), was unanimously approved by the House Commerce Committee (by a 41-0 vote). 1/ This is clear confirmation that Congress would not have, and did not, knowingly vote to ratify any tax on the Internet when they voted on the emergency appropriations act in question.
By its express terms -- "RATIFICATION OF INTERNET INTELLECTUAL INFRASTRUCTURE FEE" -- section 8003 of H.R. 3579 ratified only an unauthorized fee, not an unconstitutional tax. As a straightforward matter of statutory construction, the plain language of section 8003 -- which nowhere mentions any tax -- must control. The distinction between "fee" and "tax" could not be more pronounced, and the one simply cannot be read for the other, as authorities ranging from common dictionaries to Supreme Court cases uniformly establish. In (carefully) avoiding use of the word "tax," moreover, the drafters of section 8003 merely ensured
1/ The original Internet Tax Freedom Act H.R. 1054) that gave rise to H.R. 3849 was originally introduced in the House by Congressman Cox (R-CA) on March 13, 1997. On July 11, 1997, the House Commerce Committee, Subcommittee on Telecommunications, Trade and Consumer Protection, held hearings on the bill. Subsequently, on October 9, 1997, this Subcommittee, by voice vote, reported this bill favorably to the full House. Shortly thereafter, on November 4, 1997, the Senate Commerce, Science and Transportation Committee, after holding hearings, passed the Senate version of this bill and reported it favorably to the full Senate.
that it could not be construed to ratify a tax. Indeed, this Court's April 6 Order cemented this point, in expressly requiring that, for any ratification of the tax in question to be effective, it must show that Congress "clearly recognized" the "tax" for what it is. That, quite obviously, did not happen here, and thus section 8003 ratifies only what it addresses -- a user "fee."
NSF's position is independently invalidated by the related principle that ratification by implication in appropriations bills -- I.e., that Congress here meant "tax" when it ratified a "fee" -cannot stand. This is particularly true where, as here, Congress was entirely unaware that any tax issues at all were (or could be) implicated in H.R. 3579. Case law rejecting "implied ratifications" such as that pressed by NSF here reflects the courts' recognition of the dangers of assuming congressional knowledge and understanding of last-minute insertions into appropriations bills that Congress is under great pressure to pass. Courts have thus held specifically that retroactive legislation like the purported ratification here can only correct "irregularities" or defects of an administrative or technical nature, and cannot be construed to create new legislative (tax) policy -- particularly if the bill is an appropriations measure.
Implied ratifications are even more disfavored where, as here, Congress was intentionally misled about the nature of the provision in question. It is indisputable that section 8003 nowhere mentions the dirtiest little three-lettered word that can be spoken by legislators -- TAX. This is not coincidental, of course; the Senate staffer(s) who drafted the provision were careful enough to research closely the language of ratification -- in fact, portions of section 8003 quote verbatim from the boilerplate ratifying language in the Heinszen decision. The obvious reason why the word "tax" is omitted from section 8003 is that any reference to a tax would have immediately doomed the measure. The 105th Congress is in the avowed business of lowering, not raising
taxes. This is particularly true with regard to the Internet, where Congress' concern about taxes is unusually heightened, as shown by the very-recent unanimous passage in the House Commerce Committee of the Internet Tax Freedom Act. Thus there was only one way section 8003 could be passed -- by slipping it into an emergency appropriations bill in conference, under the innocuous rubric of legitimizing nothing more than an unauthorized user "fee." Only afterwards did Congress learn of NSF's contention that section 8003 purportedly enacted the first-ever tax on the Internet. The House Ways and Means Committee responsible for tax legislation is justifiably outraged by this contention -- as this Court should be.
The Constitutional Hurdles Are Even Higher -- And Also Insurmountable
NSF's assumption that section 8003 ratifies a tax also fails to surmount the greater obstacles that arise when constitutional issues are implicated, for three fundamental reasons.
First, courts have consistently held that while an implied ratification may be effective in the ordinary case under certain circumstances (that are inapplicable here, in any event), any ratification implicating constitutional issues must be unequivocal. Because the only ratification here that is even arguably unequivocal is of a user fee, section 8003 can have no effect on the unconstitutional tax in question. Moreover, as the Supreme Court has made clear, a ratification purportedly involving constitutional issues requires Congress' careful and purposeful consideration. In light of section 8003's surreptitious insertion into the bill in conference, Congress never had an opportunity to engage in "careful and purposeful consideration" of anything other than a user fee (if even of that).
Second, because Congress never could have delegated to NSF the unfettered power to enact tax laws in the first instance, section 8003 cannot "ratify" such an unconstitutional
delegation now. There can be little question that NSF and NSI took it upon themselves to devise, enact, impose and collect the tax at issue -- entirely without any authorization, guidelines, or standards from Congress. While Congress may delegate to executive agencies the authority to enforce tax laws and collect taxes (which routinely occurs with the IRS), Congress may never delegate the authority to legislate new tax laws. For that fundamental reason alone, the purported ratification here must be struck down.
Moreover, to the extent the power to collect taxes may be delegated (to the IRS, for example), every such delegation of authority must be accompanied by intelligible guidelines. No guidelines or standards of any sort guided or constrained NSF's discretion here; NSF and NSI simply hatched this tax on their own. The requisite intelligible guidelines cannot be delegated retroactively, moreover, as such a procedure would effectively do away with the long-standing requirement that Congress provide such guidance for the agency's use at the time when it acts.
Third, NSF's assumption that section 8003 ratifies what this Court ruled to be an unconstitutional tax must fail under Article I, Section 7, clause 1 (the Origination Clause) of the U.S. Constitution. This provision, which was the result of thoughtful debate and careful compromise by our Founding Fathers, requires that every revenue-raising measure originate in the House of Representatives, the body constitutionally-recognized to be the guardian and steward of the taxing power. Thus, even if section 8003 were construed arguendo to be a revenue-raising tax ratification measure (and it is not), it would be invalidated by the fact that it originated not in the House of Representatives, but rather in the conference committee. As a matter of law, this conclusion is not undermined because the provision was added to a House Bill H.R. 3579) or because it was later passed by the House; the key issue is where the provision
itself originated. Accordingly, even it section 8003 were (improperly) construed as a revenue measure, it could not stand under the Origination Clause as a matter of constitutional law.
I. SECTION 8003, WHICH FAILS TO MENTION THE TAX IN QUESTION, DOES NOT AND CANNOT IMPLIEDLY RATIFY IT
This Court need not consider the many ways in which the purported ratification violated the Constitution (addressed in detail below), as section 8003 by its plain and precise terms fails even to address, much less cure, the infirmity that this Court recognized and identified -- NSF's levying of a tax. See Jean v. Nelson, 472 U.S. 846, 854 (1985) ("[p]rior to reaching any constitutional questions, federal courts must first consider nonconstitutional grounds for decision.").
A. The Scope Of The Purported Ratification Is Confined To Its Plain Terms
By its express terms, section 8003 addresses and ratifies a "fee," and nowhere mentions or refers to a tax. See section 8003 (Ex. 2) (entitled "RATIFICATION OF INTERNET INTELLECTUAL INFRASTRUCTURE FEE," and addressing "the 30 percent portion of the fee . . ."). NSF's assumption that section 8003 impliedly addresses and legalizes a tax that it carefully avoids mentioning runs afoul of the fundamental precept that statutes are to be construed in accordance with the plain meaning of their terms. See Escondido Mut. Water Co. v. La Jolla Band of Mission Indians, 466 U.S. 765, 772 (1984) ("it should generally be assumed that Congress expresses its purposes through the ordinary meaning" of the statute's words).
It can hardly be disputed that the word "fee" has a well-settled meaning that is altogether distinct from that of the word "tax." The American Heritage Dictionary defines "fee" as "a
charge fixed by an institution or by law," such as "a payment for professional or special service." American Heritage Dictionary, New College Edition (1979). "Tax," by contrast, is defined as "a contribution for the support of a government required of persons, groups or businesses within the domain of that government." Id. The Supreme Court and other courts have been careful to recognize and maintain the bright-line distinction between these two terms, which have become terms of art. See, e.g., United States v. United States Shoe Corp., 118 S. Ct. 1290, 1295-96 (1998) (notwithstanding Customs service's assertion that Harbor Maintenance Tax is statutorily mandated user fee and not an unconstitutional tax on exports, held that HMT bears the indicia of a tax and is thus unconstitutional, as "we are 'to guard against . . . the imposition of a [tax] under the pretext of fixing a fee."'); Federal Energy Admin. v. Algonquin SNG. Inc., 426 U.S. 548, 560-61 (1976) (license fees held not "taxes"); National Cable Television Ass'n~ Inc. v. United States, 415 U.S. 336, 340 (1974) (tax, as distinguished from "fee," is a payment imposed for public purpose); San Juan Cellular Tel. Co. v. Public Serv. Comm'n, 967 F.2d 683, 687 (1st Cir. 1992) (periodic charge imposed upon firm providing cellular telephone service by Public Service Commission held "regulatory fee" rather than a tax).
Moreover, as lawmakers, Members of Congress are deemed to be aware of the difference in law between a tax and a fee. See Evans v. United States, 504 U.S. 255, 259 (1991) ("where Congress borrows terms of art in which are accumulated .. . legal tradition and meaning . . . it presumably knows and adopts the cluster of idea that were attached to each borrowed word . . . and the meaning its use will convey to the judicial mind"); Blitz v. Donovan, 740 F.2d 1241, 1245 (D.C. Cir. 1984) ("Congress is deemed to know the . . . judicial gloss given to certain language").
The irony here is inescapable. Because the Senate staffers responsible for preparing section 8003 were so intent on concealing from the Congress at large that it would be voting on an assessment that was actually a tax, the staffers selected a term -- "fee" -- that unequivocally means something entirely different from "tax" as a matter of law. In being so careful to conceal their intentions, however, the drafters of section 8003 have simply outsmarted themselves on statutory construction grounds, by using a term (fee) that cannot be stretched to mean what Courts typically regard as its opposite (tax).
Where the provision in controversy is hidden within an appropriations bill and Congressional intent regarding the issue in question (here, the purported ratification of a "tax") is less than clear, the plain statutory language of the provision must control. See West River Elec. Ass'n. Inc. v. Black Hills Power & Light Co., 918 F.2d 713, 719 (8th Cir. 1990) (where claimed interpretation is not clearly specified, it "cannot negate plain statutory language," particularly if it is "only one small provision contained within an extensive appropriations law"). Section 8003 thus cannot properly be construed to encompass anything other than those claims of the Registrants challenging the Preservation Assessment in its capacity as a "fee." 2/
2/ Over and above their allegations that the Preservation Assessment is an unconstitutional tax, the Registrants also alleged that, even if it were regarded as a fee, it violated the IOAA [Independent Offices Appropriation Act, 31 U.S.C. § 9701] (for exceeding the cost of the services provided) and the APA [Administrative Procedure Act, 5 U.S.C. § 551 et seq.] (for, inter alia, being promulgated without affording the Registrants any opportunity for notice and comment). See Amended Complaint, at 64-76, 77-84.
1. Section 8003 Defies This Court's Ruling Invalidating Any Purported Ratification That Fails To Specifically State That The Tax Is Ratified
This Court's rulings reflect and confirm the key distinction between a fee and a tax, and confirm that the purported ratification does not encompass the tax at issue. In its April 6 Order, this Court stated that "Legislation can effect a ratification only if Congress clearly recognizes the unauthorized tax and specifically states that the tax is ratified." Id. at *8 (emphasis added). Similarly, this Court observed that the Act purportedly authorizing NSF's expenditure of up to $23 million on the Next Generation Internet project failed to ratify the Preservation Assessment, "because the Act does not contain the clear recognition of the tax and through specific ratification language, as required by Heinszen, it is not an effective ratification of the tax." 3/ Id. (emphasis added).
This Court thus made clear that any purported ratification that does not meet two requirements -- first, the "clear recognition [by Congress] of the tax;" and second, "specific ratification language, as required by Heinszen" -- cannot ratify the tax. While the drafters of section 8003 were careful to try to meet the second requirement by quoting boilerplate ratification language from Heinszen ("hereby legalized and ratified and confirmed," etc.), they were equally careful not to meet this Court's first requirement of expressly identifying the tax for what it was -because, quite obviously, the requisite congressional recognition of the tax would have killed the bill outright.
3/ At issue in United States v. Heinszen, 206 U.S. 370 (1907), was whether a ratification of a challenged tariff was effective. Unlike here, the ratifying language expressly stated that it was addressing the "tariff" in question, thus justifying the ratification. (Heinszen is distinguished further in section III, infra, which points out that ratification is not possible here because, inter alia, Congress cannot delegate the power to NSF to legislate taxes.)
2. Section 8003's Generalized Reference To This Litigation Does Not Reflect Clear Congressional Awareness Of Anything
In its April 6 Order, this Court could not have stated more clearly that, for any ratification to be effective here, Congress must "clearly recognize" the tax for what it is. Id. at *8. There is simply no basis for inferring the requisite "clear recognition of the tax" on the part of Congress from section 8003's general reference to this litigation. See Ex. 2 (". . . and which portion [of the fee] was held to have been collected without authority in William Thomas et al. v. Network Solutions. Inc. and National Science Foundation, Civ. No. 97-2412, is hereby legalized and ratified . . ."). It is significant, in assessing what Congress was or was not aware of when it voted on H.R. 3579, that the general reference to this litigation in section 8003 contains neither a citation to any particular decision of this Court's, nor the date of any particular ruling, decision, or opinion. Far from informing Congress of anything specific at all, this general case reference seems deliberately designed to prevent any interested Member of Congress from being able to determine even what particular decision in the Thomas case is being referred to. In fact, because section 8003 was never read into the congressional record, as a practical matter no Members of Congress at large were aware that section 8003 contained even this generalized reference to this litigation. Thus that reference to this overall case in section 8003 falls far short of demonstrating clear Congressional knowledge of anything beyond the unauthorized "fee" that is described in the language of the bill.
Thus, in this irregular and improper circumstance in which the purported ratification language was inserted into the bill in conference, Congress' awareness of what it was voting was necessarily limited to, and derived from, what the language of section 8003 says on its face. See
Christensen Letter (Ex. 6) (expressing Ways and Means Committee Member's understanding that he was voting only to ratify a fee); Archer letter (Ex. 5) (strongly objecting to purported blessing of a "tax imposed . . . without any legislative authority").
NSF's position here boils down to the proposition that the general reference to this litigation in section 8003 justifies imputing to each Member of Congress, prior to voting on the bill, precise knowledge of the Registrants' allegations, the defendants' various defenses, and all of this Court's rulings and decisions in this matter. NSF's assumption, in other words, is that all of Congress had sifted through this Court's orders, and divined that the April 6 Order was apparently the one being referenced in section 8003, and had read that April 6 Order -- all of this in the matter of hours between section 8003's appearance in the conference report at 9:30 on April 30, and when the vote took place on the afternoon of the same date. Such an assumption is as preposterous as a factual matter as it is plainly unwarranted as a matter of law. See Conroy v. Aniskoff, 507 U.S. 511, 526 (1993) (Scalia, J., concurring) ("it is already an extension of the normal convention to assume that Congress was aware of the precise reasoning (as opposed to the holding) of earlier judicial opinions . . .").
Even accepting arguendo such an absurdity, imputing to Congress at large precise knowledge of this Court's April 6 Order would, far from clarifying or resolving any ambiguity, merely serve to deepen it. The April 6 Order expressly took note of the clear distinction between a tax and a fee that section 8003 now seeks to gloss over: "Plaintiffs [Registrants] argue that the Preservation Assessment is a tax; defendants argue that it is a fee, which may be collected without Congressional action, or that it is 'program income' . . ." Id. at *5. Indeed, in the ensuing subsection of that opinion -- entitled "Tax or Fee" -- the court held that "the Preservation
Assessment is not a regulatory fee, but is instead a tax on registration." Id. (emphasis added). Thus, even assuming congressional knowledge of the April 6 Order, one is left to wonder what Congress' awareness actually could have been, given section 8003's adherence to the term "fee," after this Court had decided that it was actually a "tax." Again, the deception of the drafters of section 8003 backfires on them; nothing in section 8003 demonstrates the requisite "clear recognition of a tax" by Congress that this Court correctly recognized to be essential. 4/
B. In Passing The Emergency Appropriations Bill, Congress
Did Not Know Of. Or Vote To Ratify Any Tax
Because section 8003 does not expressly address anything but a fee, any contention that it in any way affects or addresses a tax necessarily means that it does so only by implication. Any such "ratification by implication" that is inconsistent with plain statutory language is disfavored, and particularly so when the bill in question is, as here, an appropriations bill. See St. Martin Evangelical Lutheran Church v. South Dakota, 451 U.S. 772, 788 (1981). Indeed, the ratification-by-implication that NSF assumes took place in the emergency appropriations bill at issue is closely analogous to many cases in which passage of an appropriations bill was alleged to have effected an implied ratification. As these cases consistently show, however, any such implied "ratification by appropriation" must fail where, as here, Congress was not aware specifically of what it was purporting to ratify.
4/ As Congressman Christensen's letter (Ex. 6) confirms, the ratification encompasses, at most, merely a "user fee" -- thus addressing, and putting to rest, only the Registrants' subsidiary claims that, to the extent the Preservation Assessment could be considered to be a user fee, it violated the Independent Offices Appropriation Act. See Amended Complaint at 64-76.
1.Congress Was Not Notified Of The Disputed Tax
In D.C. Fed'n v. Airis,391 F.2d 478, 481-82 (D.C. Cir. 1968), the Court rejected the contention that appropriation of federal funds authorizing highway construction impliedly repealed Title 7 of the D.C. Code governing highways and streets. In specifically rejecting the "ratification by appropriation" argument, the Court pointedly observed that, as here, ratification must fail where Congress plainly had no knowledge of what it was purporting to ratify:
Obviously, Congress cannot intend to ratify illegal action of which it is unaware. Therefore, where the ratification by appropriation argument has been accepted, courts have been careful to demonstrate factors attesting to Congress' specific knowledge of the disputed administrative action. [Citations omitted.] In this case there is no evidence to suggest that the appropriations committee or Congress as a whole were aware of the intention of District officials to plan and construct the freeway projects in disregard of basic Title 7 procedures. General knowledge that the freeway projects were being planned or that there was a general intention to advance the freeway system as a whole is insufficient to support the ratification by appropriation argument.
Id. at 481-82 (citations omitted) (emphasis added); see also Thompson v. Clifford, 408 F.2d 154, 166 (D.C. Cir. 1968) ("ratification by appropriation, no less than ratification by acquiescence, requires affirmative evidence that Congress actually knew of the administrative policy" (emphasis added)). 5/
The threshold congressional knowledge that must be shown for a "ratification-by- appropriation" to be effective converges with this Court's putting NSF on notice, in the April 6
5/ See also Ramah Navajo Sch. Bd., Inc. v. Bureau of Revenue of New Mexico, 458 U.S. 832, 842 n.6 (1982) (rejecting contention that "would have us impute congressional awareness and approval of the state gross receipts tax from appropriations bills which earmarked funds for the construction of these facilities," as "there is absolutely no indication that Congress was even made aware of the existence of these taxes when it appropriated funds for the construction of the Ramah Navajo school"); Geophysical Corp. v. Andrus, 453 F. Supp. 361, 368 (D. Alaska 1978) (recognizing that "doctrine of ratification by appropriation is not favored," and declining to apply it where "the facts do not show sufficient knowledge on the part of Congress" of the specific right purportedly being ratified).
Order, that any purported ratification of the Preservation Assessment must show "clear knowledge" on Congress' part that it was addressing, and ratifying, a tax. Here, there is no evidence whatsoever that Congress had any specific knowledge that section 8003 purported to ratify anything other than a user fee, and thus cannot be read to have legitimized or ratified the tax at issue.
2. Any Implied Ratification Of A Tax Must Fail Because Section 8003 Was Designed To Mislead Congress
Chairman Archer's outrage that his vote to ratify a fee could be construed as a vote to ratify a tax is the outrage of a Congressional leader who has been deliberately misled. Indeed, it is undisputed that the staffers pushing section 8003 deliberately bypassed not only Chairman Archer's Ways and Means Committee, but both Congressional committees with exclusive jurisdiction over tax legislation.
Where Congress has been deceived into purportedly voting for one thing under the misimpression that it was actually voting for something else, however, no ratification premised on such misinformation can stand. In Libby Rod and Gun Club v. Poteat, 594 F.2d 742, 746 (9th Cir. 1979), the Court of Appeals for the Ninth Circuit rejected the Corps of Engineers' claim that Congressional appropriations for a "reregulating dam" constituted the Congressional authorization for such a project that was required by 33 U.S.C. § 401 (governing construction of a dam on a navigable river). Specifically, the Ninth Circuit found that there was "no evidence in the record . . . that Congress as a whole believed that the reregulating dam had been authorized." Id. In striking down the ratification, the Court specifically adverted to the "indication that
Congress may have mistakenly relied upon assertions by the Corps that the . . . project had been specifically authorized when it appropriated funds for the project." Id. (emphasis added).
Here, even more clearly than in Libby, Congress was not merely "mistaken;" it was deliberately deceived. The Joint Explanatory Statement of the Committee of Conference stated that the ratification covered "the collection of program fees in excess of the amount projected," and went on to note that these "program fees" were "in turn held in an 'Intellectual Infrastructure Fund' until the Congress, as part of the fiscal year 1998 Appropriations Act, determined to use these funds for NSF's work on 'Next Generation Internet' activities." Ex. 3 (emphasis added). Significantly, this Court held in its April 6 Order not only that Preservation Assessment was a tax as opposed to a fee, but also that it could not be termed "program income." April 6 Order at *8. The Joint Statement of the Committee of Conference is thus doubly disingenuous in referring to the Preservation Assessment as a "program fee," thereby using both terms ('program' and 'fee') that this Court expressly found inapplicable to the tax in question. As if that were not enough, the Joint Statement further compounds the deception by suggesting that the swollen Intellectual Infrastructure Fund resulted not from NSF's imposition of this tax, but by innocuous commercial factors beyond anyone's control: "The explosive growth of the commercial segment of the Internet resulted in the collection of program fees in excess of the amount projected ...." See Ex. 3. Section 8003 itself then continued the deception, of course, by referring to the assessment as a "fee" and not a "tax." Ex. 2.
Accordingly, just as in Libby, "there is no evidence in the record . . . that Congress as a whole believed" that it was authorizing anything but a user fee. Id. at 746. Because Congress
cannot be held to have ratified "illegal action of which it was unaware," see Airis, 391 F.2d at 482, section 8003 cannot properly be read to have ratified or approved the tax in question.
C. This Appropriations Measure Cannot Properly Be Construed To Retroactively Change Substantive Tax Law
NSF's assumption that the emergency appropriations bill in question effectively creates new tax law is independently undermined by two convergent principles of construction. The first is that retroactive legislation such as section 8003 cannot properly be construed to effect a substantive change in legislative policy, but rather can address only administrative or technical legislative deficiencies -- and thus cannot possibly be read to effectively pass the first-ever tax on the Internet. See Van Emmerik v. Janklow, 454 U.S. 1131, 1133 (1982) (mem.) (White, J. and Blackmun, J. dissenting) (construing Heinszen decision relied on by NSF), appeal from State ex ref. Van Emmerik v. Janklow, 304 N.W.2d 700 (S.D. 1981). Second, there is "a very strong presumption" that appropriations acts do not "substantively change existing law." Building & Constr. Trades Dep't. v. Martin, 961 F.2d 269, 273 (D.C. Cir.), cert. denied, 506 U.S. 915 (1992).
1. Section 8003 Does Not Enact A New Tax Policy
Retroactive legislation is properly limited to correcting technical or administrative defects, and thus cannot be construed to effectively create new substantive tax law as NSF tries to urge on the Court here. See Van Emmerik v. Janklow, 454 U.S. at 1133. In Van Emmerik, Justices White and Blackmun provided an illuminating analysis of the United States v. Heinszen decision, 206 U.S. 370 (1907), so heavily relied on by NSF in its motion (at 3 n. l).
Heinszen involved a tariff that was imposed by the President on the Phillippines beginning in 1898 (when the Phillippines came under the United States' military control). The Supreme Court struck down the continued imposition of the tariff during the 1899-1902 period, on the ground that the end of the Spanish-American War in 1899 had divested the President of the power he formerly had to impose such a tariff. Id. at 380. Congress then passed legislation ratifying the President's imposition of the tariff during the 1899-1902 period. Id. at 381.
As Justices White and Blackmun correctly observed in Van Emmerik, "We held the [ratifying] legislation [in Heinszen] valid, reasoning that the legislature may "cure irregularities . . ." 454 U.S. at 1133 (emphasis added). Accordingly, the Justices noted that:
Heinszen and Forbes 6/ appear to stand for the proposition that administrative procedural and technical defects unrelated to the underlying policy may be remedied by curative legislation, while legislative policy may not be changed retroactively.
454 U.S. at 1133 (emphasis added). While in Heinszen the President's continued imposition of the tariff after the Phillippines were no longer a foreign entity was an "administrative, procedural [or] technical defect" that could thus be cured by ratification, the purported retroactive imposition of the first-ever tax on the Internet cannot remotely be construed as such an "irregularity." It is tax policy-making, pure and simple -- and thus irreconcilable not only with Heinszen itself, but also with the clear principle of law set forth by Justices White and Blackmun in Van Emmerik.
6/ Forbes Pioneer Boat Line v. Board of Comm'rs, 258 U.S. 338 (1922).
2. As An Emergency Appropriations Measure, H.R. 3579
Cannot Be Construed To Pass Substantive Tax Legislation
There has long been a "careful distinction [that] Congress has maintained between substantive legislation and appropriation bills." See Andrus v. Sierra Club, 442 U.S. 347, 364 (1979). This distinction is not merely a formalistic one; Congress has enacted rules in both Houses prohibiting the use of appropriations measures to change substantive law. See TVA v. Hill, 437 U.S. 153, 189-93 (1978) (rejecting, on grounds that it would violate such rules, contention that appropriations measures funding construction of a dam in violation of Endangered Species Act did not impliedly exempt project from coverage of the Act).
Courts have repeatedly refused to construe appropriations bills to impliedly change or create substantive law. In Hill, 437 U.S. at 190-91, the Supreme Court observed that while "both substantive enactments and appropriations measures are 'Acts of Congress,' . . . the latter have the limited and specific purpose of providing funds for authorized programs." The Court thus emphasized that:
When voting on appropriations measures, legislators are entitled to operate under the assumption that the funds will be devoted to purposes which are lawful and not for any purpose forbidden. Without such an assurance, every appropriations measure would be pregnant with prospects of altering substantive legislation, repealing by implication any prior statute which might prohibit the expenditure. Not only would this lead to the absurd result of requiring Members to review exhaustively the background of every authorization before voting on an appropriation, but it would flout the very rules the Congress carefully adopted to avoid this need.
Id. (emphasis added).
In Planned Parenthood Affiliates v. Rhodes, 477 F. Supp.529, 538 (S.D. Ohio 1979), the court articulated why the implied repeal of substantive law by means of an appropriations rider is "strongly disfavored, and for good reason":
Appropriations bills must be passed continuously, and it would be an onerous burden for the members of Congress to have to scour such otherwise prefunctory measures for subtle repeals. They should be able to rely on the language of such bills. when that language is clear. In addition, such silent amendments are disfavored due to the coercive nature of appropriations bills with regard to passage.
(Citation omitted; emphasis added). There is nothing here -- beyond NSF's unsupported assumption that section 8003 somehow ratifies a "tax" -- to overcome that very strong presumption that the emergency appropriations measure in question does not enact substantive new tax law.
With the passage of section 8003 as NSF now reads it, the very concerns expressed by the Supreme Court and the D.C. Circuit Court of Appeals came vividly to life. Section 8003 was not even contained in the bill originally considered by either the House or the Senate, but rather was slipped into the conference report unbeknownst to the Congress at large. Moreover, Congressional staffers carefully and disingenuously omitted any use of the word "tax," thus permitting the final bill to escape the attention (not to mention jurisdiction and approval) of the Congressional Committees charged with responsibility for tax legislation, the House Ways and Means Committee and the Senate Finance Committee. See, e.g., William L. Norton, Jr., Norton Bankruptcy Law & Practice § 346 (2d ed. 1997) (stating, "Legislative Jurisdiction in the House over Federal tax matters lies with the Ways and Means Committee and is husbanded by it jealously"); Senator Dennis DeConcini, The Federal Courts Improvement Act of 1982: A
Legislative Overview, 14 Geo. Mason U. L. Rev. 529, 533 (1992) (noting "Senate Finance Committee . . . retains jurisdiction over tax matters"). As a result, at most, only a few Senators and Representatives had any idea that passage of H.R. 3579 contained the purported ratification of the first-ever tax on the Internet. Not surprisingly, as the May 4 letter from Ways and Means Chairman Archer makes crystal clear, Congressional tax leaders were outraged to find that the emergency appropriations bill had been improperly manipulated in this fashion. See Ex. 5.
Accordingly, because the tax issue remains unaffected by the bill, NSF's motion to dismiss this case as moot must be denied. See Foley v. Carter, 526 F. Supp. 977, 982-83 (D.D.C. 1981) (motion to dismiss case as moot based on Congress' authorization of transfer of funds in appropriations bill to pay judicial officials 12.9% increase -- thus purportedly repealing by implication statute allowing only 5.5% increase -- denied, as repeals by implication in appropriations bills are strongly disfavored, and "Congress' transferral of funds was an act of fiscal prudence during the pendency of this litigation, not a comment on its merits").
II. THE PURPORTED IMPLIED RATIFICATION OF AN UNCONSTITUTIONAL TAX VIA MISLEADING LANGUAGE TACKED ONTO AN aPPROPRIATIONS BILL IS ITSELF CONSTITUTIONALLY INVALID
As shown above, congressional unawareness that section 8003 purported to address anything beyond a user fee means, as a matter of law, that this provision did not and could not legalize or ratify the unconstitutional tax at issue. Having failed to meet the above-cited requirements for implied ratification that are applicable in the ordinary (nonconstitutional) case, section 8003 necessarily fails, a fortiori, to surmount the far-greater obstacles that must be overcome for implied ratification where constitutional issues are implicated.
A. Ratification of Unconstitutional Conduct Must Be Unequivocal
NSF's brief proceeds from the misguided assumption that passage of an appropriations bill purporting to approve an "unauthorized fee" serves to cure this Court's condemnation of the assessment as an unconstitutional tax. See NSF Mem. at 2-3. As the Supreme Court and other courts have made clear, however, the reluctance of courts to find an implied "ratification by appropriation" in the ordinary case is greatly intensified where constitutional issues are involved. See St. Martin, 451 U.S. at 788 ("long-established canon of construction [that indefinite congressional expressions cannot negate plain statutory language] carries special weight when . . . constitutional questions" are raised); Ex Parte Endo, 323 U.S. 283, 299 (1944) (where constitutional issues implicated, "[w]e must assume, when asked to find implied powers in a grant of legislative or executive authority, that the law makers intended to place no greater restraint on the citizen than was clearly and unmistakably indicated by the language they used"); 7/ EEOC v. Martin Indus., 581 F. Supp. 1029, 1035-36 (N.D. Ala.) (distinguishing between "improper and unauthorized" acts, which could be ratified by implication under certain circumstances, and acts implicating constitutional concerns, which could only be ratified by unequivocal Congressional action), appeal dismissed, 469 U.S. 806 (1984).
7/ In Endo, the Supreme Court confronted the question whether the appropriation of monies for the War Relocation Authority impliedly ratified the continuing detention of citizens of Japanese ancestry who were concededly loyal to the U.S. The Court held that it did not, and reasoned that "[n]either the Act [providing for Relocation] nor the [executive] orders use the language of detention," id. at 300, and that "the legislative history of the Act . . . is silent on detention." Significantly, the Court refused to construe as the "language of detention" the Act's provisions "that no one shall 'enter, remain in, leave, or commit any act' in . . . prescribed military areas." Id. Nor did the Court construe an Executive Order's providing for "relocation, maintenance, and supervision" of the evacuees as "language of detention." Id. at 301. Accordingly, because such language was held not to "plainly show" the "precise authority" to detain which the Government claimed, the petitioners writ of habeas corpus was granted.
Martin highlights clearly the stringency of the standards for explicit legislative action where constitutional issues are implicated. Martin was an action brought by the Equal Employment Opportunity Commission against an employer for alleged violations of the Equal Pay Act. The employer argued that the Reorganization Act of 1977, which purported to transfer the authority to administer the Equal Pay Act from the Department of Labor to the EEOC, was invalid due to the "one-House legislative veto" provision it contained, thus depriving the Court of jurisdiction. Id. at 1030. The Court agreed, holding that the 1977 Reorganization Act and its successor, the 1978 Reorganization Act (which contained the provision allowing the EEOC to enforce the Equal Pay Act) were unconstitutional. Id. at 1037. The Court expressly held, moreover, that subsequent congressional appropriation of funds earmarked for EEOC's enforcement of the Equal Pay Act did not serve to ratify by implication the unconstitutional transfer of authority to enforce the Equal Pay Act. Id. In expressly distinguishing two Supreme Court cases involving merely "improper and unauthorized" acts which were held to have been ratified by implication, 8/ the Court pointedly observed that "neither case held that Congress could impliedly ratify unconstitutional executive actions." Id. at 1036 (emphasis added). Rather, the Court adverted with approval to the principle that "explicit action [is] required in areas of 'doubtful constitutionality," taken from Greene v. McElroy, 360 U.S. 474, 507 (1959). See Martin,581F.Supp.at l035.
8/ Isbrandtsten-Moller Co. v. United States., 300 U.S. 139 (1937); Swayne & Hoyt v. United States., 300 U.S. 297 (1937).
Similarly, In EEOC v. CBS Inc., 743 F.2d 969, 974 (2d Cir. 1984), the Second Circuit struck down as unconstitutional a purported ratification of a transfer of authority to the EEOC by means of an appropriations bill. The Court properly recognized that:
Since the substantive aspects of appropriations bills are subject to much less scrutiny than the substantive programs themselves, . . . [citations omitted], an appropriations bill is a particularly unsuitable vehicle for an implied ratification of unauthorized actions funded therein. [citation omitted] This is especially true where. as here. the unauthorized action is an unconstitutional one, rather than merely a technically improper one.
743 F.2d at 974-75 (emphasis added). The Second Circuit thus held that references to the Age Discrimination in Employment Act "that are buried in lengthy and detailed appropriations acts [citations omitted], do not suffice under these principles to ratify a specific transfer of enforcement authority from the Secretary of Labor to the EEOC." Id. at 974.
Here, the purported ratification was even more egregious than that struck down in CBS; not only was it tacked onto an Emergency Appropriations bill in conference (thus ensuring that virtually no Members would be aware of it), but it also avoided any mention of the fact that it purported to address, and bless, an unconstitutional tax. Moreover, the constitutionality of the Preservation Assessment is not merely "doubtful," which triggered the need for unequivocal ratification in Martin; the assessment is plainly an unconstitutional tax -- and ratification of a "fee" cannot impliedly correct that constitutional problem. After all, the gulf between "tax" and "fee" here is at least as great as the distinction in Endo between "detention," on the one hand, and the explicit powers to "relocate" evacuees, or to restrain them from entering or leaving certain military areas, on the other. In sum, as these decisions make resoundingly clear, the fact that the
Preservation Assessment is an unconstitutional tax means that, as a matter of law, it is entirely unaffected by Congress' approval of an unauthorized fee.
B. Congress Did Not Engage In The Careful and Purposeful Consideration Required For Ratification Of Unconstitutional Conduct
The Supreme Court's decision in Greene v. McElroy, 360 U.S. 474 (1959), articulates an additional requirement for ratification of a constitutional infirmity that was plainly not met here: the Congressional obligation to engage in "careful and purposeful consideration" of the constitutional issue in question. Where, as here, a bill does not even mention, much less alert Congress to, the unconstitutional nature of the conduct purportedly being ratified, Congress deprived of any opportunity for meaningful consideration that constitutional issues particularly deserve and require. Indeed, this alone undermines the purported ratification as a matter of law.
In Greene, a government contractor's security clearance had been revoked in an administrative proceeding in which he was not afforded the safeguards of confrontation or cross-examination. Greene, 360 U.S. at 474. The loss of security clearance resulted in the contractor's losing his job. Id. at 508. The Court rejected the Secretary of Defense's argument that the security clearance procedures in question had been impliedly ratified by Congress' continued appropriation of funds to finance the program:
Before we are asked to judge whether, in the context of security clearance cases, a person may be deprived of the right to follow his chosen profession without full hearings where accusers may be confronted, it must be made clear that the President or Congress, within their respective constitutional powers, specifically has decided that the imposed procedures are necessary and warranted and has authorized their use. [Citations omitted.] Such decisions cannot be assumed by acquiescence or nonaction. [Citations omitted.] They must be made explicitly not only to assure that individuals are not deprived of cherished rights under procedures not actually authorized, [citation omitted], but also because explicit action, especially in areas of doubtful constitutionality, requires careful and purposeful consideration by those responsible for enacting and implementing our
laws. Without explicit action by lawmakers, decisions of great constitutional import and effect would be relegated by default to administrators who, under our system of government, are not endowed with authority to decide them.
Id. at 507 (emphasis added).
Here, of course, there was no "careful and purposeful consideration" by Congress of this serious constitutional issue; to the contrary, in light of the Bill's avoiding any mention of the word 'tax,' there is no indication that Members of Congress were even aware that their votes on this appropriations measure had anything to do with any tax, much less an unconstitutional one. See Demby v. Schweiker, 671 F.2d 507, 511 (D.C. Cir. 1981) ("[i]t is difficult to imagine that any member of Congress . . . would consider that he was voting for the repeal . -. . in assenting to the reduction as it was presented in the conference report"). The result here, as Greene foreshadowed, is that a decision of "great constitutional import and effect"-- the decision whether to tax -: has effectively been "relegated by default" to NSF, which, entirely on its own, has devised, levied, and imposed (and arranged for collection of) a tax on all domain name Registrants.
III. THE PURPORTED DELEGATION OF TAXING AUTHORITY TO NSF IS INVALID, AND MERELY CONFIRMS THAT THERE WAS NO CONSTITUTIONALLY-ACCEPTABLE DELEGATION ACCOMPANIED BY INTELLIGIBLE GUIDELINES IN THE FIRST INSTANCE
It is well-settled that Congress may not ratify anything that it was not empowered to perform itself, or to authorize an agency to perform, in the first instance. It cannot be disputed here that NSF and NSI, acting wholly on their own, and without any guidelines or standards from Congress, devised, imposed and collected the tax at issue from the Registrants. The question then becomes, of course, whether Congress could ever have delegated the authority to NSF/NSI
to devise and enact -- to legislate -- such a tax law. To ask this question is to answer it; Congress can never delegate the unfettered power to legislate. 9/ Moreover, to the extent any taxing authority can be delegated (such as, for example, the authority to collect taxes), it must be accompanied by guidelines that are sufficiently intelligible to permit a determination as to whether the will of Congress has been obeyed. Section 8003 is ineffective, precisely because Congress cannot ratify either a nondelegable transfer of taxing power to NSF, or a delegation that was devoid of the requisite intelligible standards at the time NSF took it upon itself to devise and levy the tax.
A. Congress May Not Delegate The Authority To Legislate
As this Court so recently confirmed: "Congress can delegate authority only if that authority is in fact delegable . . ." City of New York v. Clinton, 985 F. Supp. 168, 181 (D.D.C. 1998). It is a bedrock principle of Constitutional law that "Congress may not . . . delegate its
inherent lawmaking authority" to either of the other two branches of government. See generally Clinton, 985 F. Supp. at 179 (citing Loving v. United States. 517 U.S. 748 (1996) ("[t]he lawmaking function belongs to Congress . . . and may not be conveyed to another branch or entity") and citing Field v. Clark, 143 U.S. 649, 692 (1892) ("That Congress cannot delegate legislative power to the president is a principle universally recognized as vital to the integrity and maintenance of the system of government ordained by the Constitution.")).
9/ Under separate cover, the Registrants are filing (concurrently with this Opposition) a motion for summary judgment and/or declaratory judgment to the effect that, inter alia, NSF's exercise of the power to legislate taxes cannot be delegated in the first instance, and thus cannot be ratified -- an issue on which this Court has not yet ruled.
The courts have not shrunk from their duty to strike down attempts by Congress to abdicate its legislative powers. Most recently, in Clint_, supra. this Court struck down the Line Item Veto Act, and reasoned that:
The Line Item Veto Act impermissibly crosses the line between acceptable delegations of rulemaking authority and unauthorized surrender to the President of an inherently legislative function. namely. the authority to permanently shape laws and package legislation.
Id. at 181 (emphasis added). Thus the Court expressly rejected as irrelevant the contention that the Line Item Veto Act provided sufficiently intelligible guidelines to sustain the delegation:
It is irrelevant whether the Line Item Veto Act provides intelligible principles in its delegation of authority to the President because, as discussed above, the Act impemissibly attempts to transfer non-delegable legislative authority to the Executive Branch.
Id. at 1 8 1.
Similarly, in Panama Ref. Co. v. Ryan, 293 U.S. 388, 430 (1935), the Supreme Court struck down Congress' attempt to delegate to the president the power to prohibit interstate commerce of petroleum:
[T]here are limits of delegation which there is no constitutional authority to transcend. We think that Sec. 9 (c) goes beyond those limits. As to the transportation of oil production . . . the Congress has declared no policy, has established no standard, has laid down no rule. There is no requirement, no definition of circumstances and conditions in which the transportation is to be allowed or prohibited. If Sec 9 (c) were held valid, it would be idle to pretend that anything would be left of limitations upon the power of the Congress to delegate its lawmaking function. The reasoning of the many decisions we have reviewed would be made vacuous and their distinctions nugatory. Instead of performing its law-making function the Congress could at will and as to such subjects as it chooses transfer that function to the President or other officer or to an administrative body. The question is not of the intrinsic importance of the particular statute before us, but of the constitutional processes of legislation which are an essential part of our system of government.
(Emphasis added). See also Schechter Poultry Corp. v. United States, infra, 295 U.S. 495, 53738, 541-42 (1935) (striking down Congress' attempt to delegate broad authority to approve "codes of fair competition," as "Congress is not permitted to abdicate or to transfer to others the essential legislative functions with which it is thus vested," and thus "Congress cannot delegate legislative power to the President to make whatever laws he thinks may be needed or advisable for the rehabilitation and expansion of trade or industry."). Here, NSF and NSI effectively enacted a tax law that they felt to be "needed or advisable." They did not have that authority, and Congress could not have given them that authority.
B. Because Congress Alone May Enact Tax Laws The
Unfettered Authority To Enact The Preservation Assessment
Could Not Have Been Delegated In The First Instance
Congress alone has the authority to legislate taxes -- which is, of course, the power to make tax laws. See Clinton, 985 F.Supp. 168, 180 (D.D.C. 1998) ("Legislative power is the authority to make laws"). As the Supreme Court stated in National Cable Television, 415 U.S. at 340, "taxation is a legislative function" and Congress is the "sole organ for levying taxes."
The Constitutional proscription against delegation of Congress' taxing power resonates over perhaps any other because, as Chief Justice Marshall put it, "an unlimited power to tax involves, necessarily, a power to destroy." M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 327 (1819). Thus, while under certain carefully-prescribed conditions (discussed in the following subsection) Congress may delegate the power to collect taxes, or to enforce the tax laws, Clinton, Schechter, and Panama Refining show that Congress may never delegate the authority to an agency to devise and levy -- to legislate -- taxes as it sees fit.
It is indisputable, however, that the enacting of a tax law is precisely what NSF and NSI took it upon themselves to do here; they simply devised and "enacted" a tax that they regarded as necessary and advisable. Moreover, NSF and NSI not only invented this tax on their own; they also decided between themselves upon whom the tax would be imposed (the Registrants), for what purpose (furtherance of the Intellectual Infrastructure of the Internet), and how much to charge, and how often ($30 initially, and $15 every two years thereafter). NSF and NSI became, in short, a mini-legislature enacting their own tax law -quite unlike the IRS, for example, which merely enforces and collects the taxes that Congress enacts. Congress did not delegate (and could not have delegated) that power. See 42 U.S.C. § 1861 et seq. (enabling legislation for National Science Foundation).
Compounding the absurdity of NSF's position is the indisputable fact that it was actually NSI -- a private contractor -- that proposed the passage, and the amount, of the Internet tax in the
first instance. See Ex. 7. Indeed, by NSF's reading, there would be nothing to prevent or limit an agency's enlistment of a private entity to devise and impose such laws, subject to agency approval. Schechter properly rejects this notion as manifestly unconstitutional:
[W]ould it be seriously contended that Congress could delegate its legislative authority to trade or industrial associations or groups so as to empower them to enact the laws they deem to be wise and beneficent for the rehabilitation and expansion of their trade or industries? Could trade or industrial associations or groups be constituted legislative bodies for that purpose because such associations or groups are familiar with the problems of their enterprises? And could an effort of that sort be made valid by such a preface of generalities as to permissible aims as we find in section 1 of title I? The answer is obvious. Such a delegation of legislative power is unknown to our law. and is utterly inconsistent with the constitutional prerogatives and duties of Congress.
295 U.S. at 537 (emphasis added).
C. Any Purported Delegation Is Invalidated By The Lack of Intelligible Standards And The Absence Of Express Congressional Intent To Delegate
It is well established that "Congress may provide discretionary authority to a coordinate branch of government so long as Congress lays down by legislative act intelligible principles to which the person or body authorized to exercise the delegated authority is directed to conform." Milk Industry Found. v. Glickman, 132 F.3d 1467, 1475 (D.C. Cir. 1998). In a particularly apposite decision, the court in Larabee Flour Mills Co. v. Nee, 12 F. Supp. 395 (W.D. Mo. 1935) declared certain rates established by the Secretary of Agriculture on agricultural commodities to be unconstitutional for want of appropriate congressional guidelines. The court succinctly provided a rationale demonstrating not only why NSF could not properly be authorized to levy taxes in the first instance, but also why any such purported delegation must fail for lack of intelligible standards:
What Congress cannot do is to delegate to an administrative official not only the power to fix a rate of taxation according to a standard. but also the power to prescribe the standard. Congress must prescribe the standard! and it must be a real standard an intelligible standard a definite standard. It must be like a yardstick which is three feet long by whomsoever it is used, not one which in the hands of one man is three feet long, in the hands of another two feet long and in the hands of a third four feet long, elastic at the will of the individual applying it.
(Emphasis added). See also Franklin TP. v. Tugwell, 85 F.2d 208, 219 (D.C. Cir. 1936) (striking down, as "a clearly unconstitutional delegation of legislative power," Emergency Relief Appropriation Act authorizing the President to spend money on housing projects without requisite guidelines).
NSF imposed the tax at issue in a delegation "vacuum" wholly devoid of intelligible standards (or any standards at all, for that matter). The 30% tax was not formulated pursuant to
any intelligible guidelines; to this date, in fact, NSF and NSI have not even attempted to provide any rational basis for the 30% tax they decided to impose. 10/ Because Congress could not, under any circumstances, delegate taxing authority to NSF without any guidelines whatsoever -- any more than Congress could delegate unfettered taxing powers to the IRS -- NSF's imposition of the Preservation Assessment was an unconstitutional exercise of improperly-delegated authority. 11/ And an unconstitutional delegation cannot under any circumstances be ratified.
D. Congress Cannot Ratify Taxes which it Could Not Have Empowered NSF To Impose In The First Instance
Any purported ratification of the tax in question must fail because Congress cannot ratify a delegation of power today which it could not constitutionally have delegated in the first instance yesterday. The validity of any ratification requires a careful examination into the nature of the improper conduct purportedly ratified. Because NSF here was found to have acted without constitutional authorization when it imposed the tax at issue on the Registrants, the issue, then, is
10/ In fact, because of their monopoly over domain name registration, the sky was the proverbial limit on the amount of fees and taxes defendants could impose -- as this Court recognized in putting the following questions to NSF counsel:
Is there any restraint at all on this Cooperative Agreement ability to do this, NSF? Because they said this is a real great market, we want to charge a thousand dollars for registration, and you have got 500 million dollars in the bank at this point. Is there any restraint at all that they pay $10,000 for registration?***
March 17, 1998 Tr. at 28. NSF's counsel was constrained to admit that there were no limits at law on the assessments it decided to charge. Id.
11/ The purpose of the intelligible-standards requirement is not merely to guide the agency; it is also the yardstick for the courts to use in assessing the constitutionality of Congressional action. See Skinner v. Mid-America Pipeline Co., 490 U.S. 212, 218 (1989) (Congress must provide standards "such that a court could 'ascertain whether the will of Congress has been obeyed'"(citation omitted)).
whether Congress could have given NSF the power to "enact" such a tax in the first place. Plainly, as shown above, it could not. Accordingly, any purported ratification must also fail. As this Court has pointedly observed: "Congress' 'indirect attempt to accomplish what the Constitution prohibits . . . accomplishing directly cannot stand."' Clinton (quoting U.S. Term Limits. Inc. v. Thornton, 514 U.S. 779, 829 (1995) (Arkansas term limits Amendment struck down because it is unlawful "effort to dress eligibility [to run for Congress] to stand for Congress in ballot access clothing") (citation omitted); see also Harman v. Forssenius, 380 U.S. 528, 540 (1965) ("constitutional rights would be of little value if they could be . . . indirectly denied" (citation omitted)).
Not surprisingly, the courts have held that if Congress cannot constitutionally delegate to an agency the unbridled power to impose taxes in the first instance, Congress clearly has no separately-endowed power to ratify such taxes after the fact. In Larabee, supra the court ruled that Congress could not ratify certain rates implemented by the Secretary of Agriculture where, as here, such rates had been implemented in the absence of constitutionally-required guidelines or standards. Id. at 404-05. As here, Congress purported (after-the-fact) to ratify the tax. Id. Also as here, the government argued that the illegal taxes were legitimated by the ratification on the basis of the Supreme Court's ruling in United States v. Heinszen, 206 U.S. 370 (1907). The Court made quick work of this plainly-counterintuitive argument, however:
Thus is presented the question whether Congress can 'legalize' the rates which the Secretary had fixed and which were not legal when and after they were fixed by him.
In United States v. Heinszen & Co . . . it was ruled by the Supreme Court that Congress would ratify and so legalize tariff duties for the Philippine Islands theretofore established by the President without authority. In the opinion in that case it was said: 'That where an agent, without precedent authority, has exercised, in the name of a principal, a power
which the principal had the capacity to bestow, the principal may ratify and affirm the unauthorized act, and thus retroactively give it validity when rights of third persons have not intervened, is so elementary as to need but statement.'
Learned counsel for plaintiffs of course do not question the force of this decision, but they contend it is inapplicable. Congress had the power, they say, in the first instance, to authorize the President to fix tariff duties for the Philippines, and therefore, under the principle stated by the Supreme Court, to ratify what he did. But Congress did not have the power, they argue. to authorize the Secretary to fix processing tax rates and therefore cannot ratify the rates he fixed: the principal cannot ratify what in the first instance it could not have authorized.
The argument is sound. It cannot be answered. Congress lawfully could have delegated to the President the power to legislate as to tariff rates for the insular possession of the United States (and that was the ground upon which the decision in the Heinszen Case was based), but it could not lawfully delegate to the Secretary of Agriculture the power to legislate (including the power to fix taxing rates! for the United States. Therefore, since the power of ratification by Congress is governed by the law of agency it cannot legalize taxing rates which in the first instance. it could not have authorized the Secretary to fix.
Id. (emphasis added). Likewise here, Congress did not have the power to authorize NSF and NSI to fix Internet taxes "and therefore cannot ratify the rates [they] fixed; the principal cannot ratify what in the first instance it could not have authorized." Id. at 404. "The argument is sound. It cannot be answered." Id. at 405.
NSF's "ratification" argument, when taken to its logical conclusion, implies that Congress could have passed legislation expressly granting NSF and its private contractor NSI the unfettered power to secretly devise, impose, and enforce whatever Internet tax they deemed fit - whether it be $30 or $500 or $5000 per registration, or $15 or $1500 per renewal. Because Congress manifestly could not have delegated that authority prior to NSF's enacting of such a tax, it also cannot bootstrap such a delegation after the fact by means of a purported ratification.
E. There Can Be No Retroactive Delegation
NSF is now in the untenable position of claiming that section 8003 accomplishes a "retroactive delegation" -- an oxymoron that not only defies common sense, but also effectively concedes that no intelligible guidelines were in place when NSF acted. In Timberland Paving & Constr. Co. v. United States, 8 Cl. Ct. 653, 660 (19853, the Court of Claims made these very points in rejecting the contention that a contracting officer, who "had no authority to serve as contracting officer on plaintiff's contract" at the time when he acted on it, could somehow be provided that authority retroactively:
. . . Indeed, defendant seems tacitly to concede that Mr. Powers lacked actual authority, on April 23, 1980, to act as contracting officer on plaintiff's contract. It urges, rather, that a "retroactive delegation of authority," or a "ratification" of Mr. Powers' "assertion of authority," occurred, and that the termination for default should accordingly be upheld on one of these grounds. The notion is unsound.
Contracting officers are authorized to act within the limits of the authority delegated to them . . . They are not to be designated retroactively, and after the fact . . The court cannot accept the government's retroactive delegation (or designation) argument.
The Court added, moreover, that "Defendant's assertion that it knows nothing that 'would prohibit a retroactive delegation of authority' turns the question on its head." Id. at 660. There is no getting around the fact that a so-called "retroactive delegation" necessarily concedes that no lawful delegation of authority had taken place at the time when it was constitutionally required to be in place -- when the agent acted. For that reason alone, the purported ratification here is ineffective as a matter of law.
IV. SECTION 8003 VIOLATES THE ORIGINATION CLAUSE
The Origination Clause of the Constitution provides that:
All Bills for raising Revenue shall originate in the House of Representatives, but the Senate may propose or concur with Amendments as on other bills.
U.S. Constitution, Article I, Section 7, cl. 1. "While the Origination Clause is perhaps a more obscure constitutional provision than those in the Bill of Rights, it nonetheless remains an important part of our constitutional scheme of government by checks and balances and separation of powers." Thomas L. Jipping, Comment, TEFRA and the Origination Clause: Taking The Oath Seriously, 35 Buff. L. Rev. 633, 636-37 (1986). "The dual purpose of the clause -- to balance the powers exercised by the Senate and to keep the power of extracting money from the people in the branch most responsive to them -remains as important today as ever." Id. at 691. Because "an essential reason" for the Origination Clause is to prevent "taxation without representation," the consequences of evading its requirements are "enormous" for taxpayers, "not only because their representatives have violated the Constitution, . . . [but also] because they cannot directly challenge it in court." Id.
To the extent that section 8003 is considered to have tax implications at all (which it does not, as it merely addresses a fee), it is independently invalidated by the clear requirements of the Origination Clause of the Constitution. This Court has already established that the Preservation Assessment is not a fee, but a revenue-raising tax, thus bringing it squarely within the purview of the Origination Clause. See April 6 Order at 6; see also United States v. Munoz-Flores, 863 F.2d 654 (9th Cir. 1988), rev'd on other grounds, 495 U.S. 385 (1990) 12/ (holding that a special
12/ The Supreme Court's reversal of Munoz-Flores was on other grounds, and thus leaves intact the above-cited reasoning of the Ninth Circuit. Specifically, the Supreme Court held that "a statute that creates a particular governmental program and that raises revenue to support that program, as opposed to a statute that raises revenue to support Governrnent generally, is not a 'Bill for raising Revenue' within the meaning of the Origination Clause."' United States v. Munoz-Flores, 495 U.S. 385, 398 (1990) (emphasis added). Because the
assessment imposed upon criminals by the Victims of Crime Act is revenue bill that violates the Origination Clause); United States v. Moncini, 882 F.2d 401, 406(9th Cir. 1989) (same); Shah v. United States, 878 F.2d 1156, 1163 (9th Cir. 1989) (same), cert. denied, 493 U.S. 869 (1989); United States v. Nolasco, 881 F.2d 678, 679 (9th Cir. 1989) (same), cert. denied, 502 U.S. 833 (1991).
It is beyond dispute, moreover, that section 8003 originated not in tile House of Representatives, but in the Conference Comrnittee. See Ex. 1. In United States v. Hagen, 711 F. Supp. 879, 882 (S.D. Tex. 1989), the Court struck down a tax on Origination Clause grounds under strikingly similar circumstances. The assessment in Hagen -- a so-called "crook tax" on a misdemeanant -- was first introduced in the Senate Judiciary Committee. Id. Thus, "[t]he House first considered the assessment when the conference committee reported the compromise bill containing it to both houses." Id. In holding that the tax violated the Origination Clause, the Court also ruled out application of the "origination clause's amendment exception," which permitted the Senate to generate tax amendments only in response to a "House-generated tax proposal." Id. In language that is remarkably apposite here, the Court observed that:
The House bill had nothing to do with a revenue raising mechanism, but only-- concerned other aspects of crime control; there was no revenue provision of the House resolution for the Senate to expand or contract by amendment. The
United States v. Munoz-Flores, 495 U.S. 385, 398 (1990) (emphasis added). Because the government program in Munoz-Flores was established (as well as funded) by the statute in question, the Supreme Court held that the statute was not a revenue bill. See 495 U.S. at 398. Here, by obvious contrast, the Internet ostensibly funded by section 8003 can hardly be said to have been created by this legislation; the Internet has indisputably existed for approximately twenty-five years. Accordingly, the Supreme Court's reasoning is inapplicable here, and does not have any effect on section 8003's violation of the Origination Clause.
Senate's addition of a revenue amendment to the House resolution was not a change to a House-generated tax proposal, and therefore, it was outside of the origination clause's amendment exception.
Id. 13/ Here, similarly, the emergency appropriations bill that originated in the House "had nothing to do with a revenue raising mechanism;" it merely concerned "other aspects" of appropriations. Thus, just as the "amendment exception" to the Origination Clause was rejected in Hagen, it must be rejected here. To the extent section 8003 is construed as a tax-ratification measure (and it should not be), under the Origination Clause there can be no justification for section 8003's origination in conference, as the bill that arrived in conference had no revenue- raising measures in it at all, and thus was not a "House-generated tax proposal" in the first instance. Hagen also made clear, moreover, that the mere formalistic fact that H.R. 3579 itself originated in the House does not control the Origination Clause analysis. The court first noted that courts are fully empowered to look closely into the origination of legislation to determine "whether the legislative branch followed the Constitution." Id. "When [Congress] fails to heed the limits of its own power, . . . it must be checked, for there is no discretion in the legislature to suspend the Constitution ...." Id. Thus the court rejected the notion that an erroneous certificate by the House clerk claiming origination in the House would pass constitutional muster:
13/ In explaining the underpinnings of the Origination Clause, the Court noted that "it gave the House a power particular to it to balance that given the Senate over treaties and appointments." Id. at 881 (citing Federalist No. 66 (A. Hamilton)). Quoting James Madison's observation that "[t]axation and representation are strongly associated in the minds of the people," the Court also noted that the House appeared to be more directly and immediately representative of the people. Id. at 881.
. . . that reduces a constitutional mandate to an obligatory acceptance of demonstrably erroneous paperwork. An alternative was to permit Congress to define for itself which bills that extract money from people are revenue bills under the Constitution. To permit Congress to define "revenue" to exclude deliberate taxes is not deference; it is abdication.
Id. As the Hagen Court also sagely added, "Courts do Congress no honor when they blink before its errors." Id. at 883. Accordingly, to the extent section 8003 may be regarded as ratifying an unconstitutional tax (and it should not be), it would have been required, like all revenue-raising measures, to originate in the House of Representatives, the only congressional body constitutionally authorized to develop and introduce tax laws. Because it was covertly inserted into H.R. 3579 in conference, after both the House and the Senate had considered and voted on the bill, section 8003 - as NSF construes it, to ratify a tax - thus violated the Origination Clause, and cannot stand for that reason alone.
For the foregoing reasons, the motions of NSF to dismiss the case as moot, and to vacate the preliminary injunction, should be denied in their entirety.
(signed William Bode)
William H. Bode (113308)
James M. Ludwig (427884)
Daniel E. Cohen (414985)
BODE & BECKMAN, L.L.P.
1150 Connecticut Avenue, N.W.
Washington, D.C. 20036
Ralph C. Nash, Jr. (000023249)
1140 23rd Street, N.W.
Washington, D.C. 20037-1439
Dated: June 1, 1998
I hereby certify that on this 1 st day of June 1998 I have served upon the party listed below, by Federal Express (per agreement between counsel for Plaintiffs and NSF on this date), the foregoing Plaintiffs' Memorandum Of Law In Opposition To Defendant's Motion To Vacate Preliminary Injunction, And Motion To Dismiss Under Fed. R. Civ. P. 12(h) As Moot.
Wilma A. Lewis, United States Attorney
Lisa S. Goldfluss, Assistant United States Attorney
Department of Justice
United States Attorney's Office
District of Columbia
555 Fourth Street, N.W.
Washington, DC 20001
Counsel for Defendant NSF
Gary D. Wilson
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, DC 20037
Counsel for Defendant NSI, Inc.
(signed Judy Caruthers)