California Farm Bureau Federation v. State Water Resources Control Board

*428 Opinion

The California Constitution provides that any act to increase taxes must be passed by a two-thirds vote of the Legislature. 1 On the other hand, statutes that create or raise regulatory fees need only the assent of a simple majority. 2 In 2003, the Legislature passed amendments to the Water Code 3 by a 53 percent majority. Current section 1525 was enacted as part of these amendments. The threshold issue here is whether section 1525, subdivision (a) imposes a tax or a fee. We hold that the amendments and section 1525 do not explicitly impose a tax and, therefore, are not facially unconstitutional. However, because the record is unclear as to whether the fees were reasonably apportioned in terms of the regulatory activity’s costs and the fees assessed, we direct the Court of Appeal to remand the matter to the trial court to make these findings.

A second issue is whether the Water Code amendments, or their implementing regulations, violate the supremacy clause of the United States Constitution by overassessing the beneficial interests of those who hold contractual rights to delivery of water from the federally administered Central Valley Project (hereafter, the federal…

I concur in the majority opinion. I write separately to offer these additional reflections on the “as applied” challenge to the fee as a tax.

A charge that is labeled a regulatory fee may indeed be a tax in disguise if “the amount of fees assessed and paid exceeded the reasonable cost of providing the [regulatory] services for which the fees were charged, or [if] the fees were levied for unrelated revenue purposes.” (Sinclair Paint Co. v. State Bd. of Equalization (1997) 15 Cal.4th 866, 881 [ 64 Cal.Rptr.2d 447 , 937 P.2d 1350 ].) Here, there is no allegation that the fees in question are being used for unrelated revenue purposes. Rather, it is contended that only 40 percent of water rights holders are being charged a fee that by right should be charged to all water rights holders, and therefore the fee is not sufficiently linked to the regulatory costs generated by those on whom the fee is imposed and constitutes a tax.

Every government entity that imposes a regulatory fee must decide who should be subject to the fee and who should not. A number of factors may go into that decision, including assessments of the regulatory burdens imposed by the various actors and the…