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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State, Commercial Fisheries Entry Commission v. Carlson (04/11/2008) sp-6250
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| STATE OF ALASKA, | ) |
| COMMERCIAL FISHERIES ENTRY | ) Supreme Court No. S- 11677 |
| COMMISSION, | ) |
| ) Superior Court No. | |
| Appellant, | ) 3AN-84-5790 CI |
| ) | |
| v. | ) |
| ) O P I N I O N | |
| DONALD H. CARLSON, WARREN | ) |
| HART, GERARD HASKINS, | ) No. 6250 - April 11, 2008 |
| STEPHEN R. LIBBY, EARL WEESE, | ) |
| and LYLA C. WEESE, Individually | ) |
| and as Class Representatives on Behalf | ) |
| of All Persons Similarly Situated, | ) |
| ) | |
| Appellees. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Peter A. Michalski, Judge.
Appearances: Robert C. Nauheim, Assistant
Attorney General, Anchorage, and David W.
M rquez, Attorney General, Juneau, for
Appellant. Loren Domke, Juneau, for
Appellees.
Before: Matthews, Eastaugh, Fabe, and
Carpeneti, Justices. [Bryner, Chief Justice,
not participating.]
CARPENETI, Justice.
I. INTRODUCTION
To what extent may Alaska charge nonresident commercial
fishermen higher license and permit fees than it charges
residents? In order to comply with the Privileges and Immunities
Clause of the United States Constitution, the differential
between individual resident and nonresident permit fees must be
substantially equal but need not be precisely equal to the
contribution of each Alaska resident to fisheries management.
Because in ordering the state to pay refunds to nonresidents who
paid more than their fair contribution to Alaskas fisheries
budget the superior court held the state to a standard of
precise, rather than substantial, equality, we vacate the portion
of the superior courts order pertaining to refunds and remand the
case to the superior court to determine the legitimate variation
between actual nonresident fee differentials and those calculated
to reflect nonresidents fair burden of fisheries management
costs.
II. FACTS AND PROCEEDINGS
This is the fourth time this case has been before us.
In 1984 appellees sued the state and the Commercial Fisheries
Entry Commission (CFEC) on behalf of all nonresident Alaska
commercial fishermen. (The class includes all persons who
participated in one or more Alaska commercial fisheries at any
time who paid non-resident assessments to the State for
commercial or gear licenses or permits.1) The class argued that
the state unfairly charged nonresidents more than it charged
residents for commercial fishing permits and licenses, and the
class demanded a refund of the difference between what they paid
and what the residents paid. Between 1984 and 2002 nonresident
commercial fishermen paid three times as much as resident
fishermen for licenses and permits.2 A brief summary of our
previous rulings in this case follows.
In Carlson I,3 which involved a scheme under which a
nonresident paid three times as much as a resident for a
commercial fishing permit, we held that the Privileges and
Immunities Clause of the United States Constitution4 requires
substantial equality of treatment of residents of Alaska and
similarly situated nonresidents.5 Therefore, license fees which
discriminate against nonresidents are prima facie a violation of
the clause.6 However, when setting nonresident fees, the state
may take into account residents pro rata shares of state revenues
to which nonresidents make no contribution.7 Thus, the state may
legally charge nonresidents more than residents as long as the
fee differential bears a sufficiently close relationship to the
goal of equalizing the economic burden of fisheries management
between residents and nonresidents.8 On the relatively
undeveloped record before us in Carlson I we declined to
determine whether the higher fees were excessive and remanded the
case to the superior court for further proceedings; we indicated
that the class would be entitled to a refund unless the state
could carry its burden of showing that there was a fairly precise
fit between remedy and classification.9 On remand, the superior
court ruled that the fee differential did not violate either the
Commerce Clause10 or the Privileges and Immunities Clause, and the
class appealed.11
In Carlson II we determined the permissible
differential between fees paid by residents and nonresidents
under the Privileges and Immunities Clause.12 We found this
permissible differential to be the total of the state fisheries
budget divided by the number of Alaska residents, multiplied by
the percentage of the state budget funded by Alaska oil revenue.13
We remanded the case to the superior court to apply this formula
and to consider additional budget figures put forward by the
state.14 In the midst of the proceedings on remand from Carlson
II, the parties signed a stipulation on February 12, 2001
establishing terms for payment of any refunds and the method for
calculating nonresident fees in the future. The stipulation was
adopted by the superior court. The parties also agreed to adopt
a per-person approach to calculating the permissible
differential: only one differential would be charged or assessed
against a person, no matter how many permits the person held.
Additionally, the state waived any right to seek recapture of the
differential from any fisher who historically had paid less than
the permissible differential.
In Carlson III15 the parties disputed which components
of Alaskas fisheries budget would be factored into the
permissible fee differential. We determined that it was proper
to include direct and indirect fisheries costs, capital costs
directly supporting fisheries, and the hatchery loan fund
subsidy.16 We disallowed inclusion of general government
expenditures in calculating the permissible fee differential.17
We again remanded the case to the superior court, this time to
determine whether fee proportionality existed in any particular
instance and whether the state owed a refund to any members of
the class.18
On remand from Carlson III, the superior court directed
the state to calculate the annual permissible differential from
1984 to 2002. But the parties disputed the accounting method for
historical nonresident fees. The state moved for summary
judgment, arguing that nonresident fees should be averaged across
permit and license types to yield a collective class
differential; the class cross-moved for summary judgment, arguing
that each class members historical fee should be treated
individually. The superior court adopted the classs individual
accounting method and ordered the state to pay refunds to
nonresident commercial fishermen who paid cumulatively more than
the permissible differential. The state appeals.
III. STANDARD OF REVIEW
We review an award of damages for abuse of discretion
and independently review the law applied by the superior court.19
Whether the superior court correctly applied the law that is,
whether it complied with our mandate in Carlson III whether it
supported its order with findings sufficient to permit appellate
review, whether it incorrectly ruled that the states theory of
collective accounting was waived, and whether the historical 3:1
fee differential for nonresident fees is constitutional are all
questions of law, to which we apply our independent judgment.20
IV. DISCUSSION
A. Carlson II and III Require Individual Accounting of
Nonresident Fees.
The state first argues that the formula for complying
with the Privileges and Immunities Clause has not been completely
determined, and therefore, that it is entitled to argue for
collective accounting of nonresident fees. We reject this
argument.
Our previous Carlson decisions make clear that
nonresident fees should be compared individually to the
permissible differential. For instance, when we calculated the
individual Alaska residents annual contribution to the fisheries
budget in Carlson II, we anticipated that an individual
accounting of nonresident fees would determine the states
liability: [I]n 1982 the difference between a resident and
nonresident permit could not substantially exceed $48.14, while
in 1986 the difference could not substantially exceed $59.34.21
In Carlson III we further explained that a Privileges and
Immunities violation turns on individual accounting of
nonresident fees:
The formula [derived in Carlson II]
calculates the per capita resident
contribution to the cost of fisheries
management, regardless of whether this person
is a fisher . . . . The figure determined by
this formula for any given year is then
compared to the actual fee differential
charged. If the fee differential paid by the
nonresident commercial fishers, i.e., the
nonresident fee minus the resident fee for
the same access, exceeds the resident
contribution as calculated by the formula,
then the State will have failed to
demonstrate that the means employed by its
statute have a substantial enough
relationship to the legitimate interest of
the statute to survive Privileges and
Immunities Clause review.[22]
By comparing nonresident and resident fees for the same
access, we clearly indicated that the relevant comparisons are
between individual permit holders. The various permits grant
access to different fisheries, whose profitability, permit
prices, and hence permit fees, vary widely.23 When we remanded
the case to the superior court in Carlson III, we directed the
court to consider individual rather than collective differentials
paid by nonresidents: We leave to the superior court on remand to
determine whether proportionality exists in any particular
instance. . . .24 In order to compare fees paid by residents and
nonresidents, the superior court must differentiate among the
various fee classes.
In light of our previous holdings in this case, we
decline to consider the states arguments that the fees paid by
nonresidents should be averaged for comparison
to the per capita resident contribution to fisheries management.
In advancing this argument, the state is attempting to resucitate
an issue previously decided. Furthermore, if the state were
allowed to balance its books retrospectively by averaging the
nonresident differential across fee classes, this would not
necessarily bring the 3:1 scheme into compliance with the
Privileges and Immunities Clause. Under the states proffered
averaging method, nonresident permit holders in higher fee
classes would in effect pay the differential due from
nonresidents in lower fee classes, but similarly situated
resident permit holders would bear no such burden.25 Thus, the
fee schedule would continue unconstitutionally to favor residents
over nonresidents.
B. The Superior Court Correctly Determined that the State
Violated the Privileges and Immunities Clause.
The state next argues that the constitutional issue
(i.e., its liability) has not yet been determined, because the
superior court did not explicitly rule that nonresident fees
substantially exceed resident fees. The state here makes two
related arguments: First, it implies that there has been no
ruling yet on its liability. Second, it argues that it is
impossible to infer the superior courts reasoning supporting its
judgment that the state violated the Privileges and Immunities
Clause. We reject both arguments.
1. Liability vs. damages
In the context of this case, the states distinction
between liability and damages is artificial. In three previous
decisions, as noted above, we have clearly
established that nonresident fees should be compared to resident
fees plus the permissible differential on an individualized
basis. It is past the time that the state may argue for a
collective approach to determining whether the amounts charged to
non-residents violate the Privileges and Immunities Clause.
2. Sufficiency of the superior courts findings
According to the state, [n]othing in the record
provides a sufficiently clear rationale supporting the conclusion
that the nonresident fees lack a reasonable relationship to the
allowable differentials, regardless of whether the allowable
differentials are applied individually or collectively to the
class. We disagree.
In Alaska Wildlife Alliance v. State26 we upheld a
superior court order dismissing Alaska Wildlifes complaint,
despite the lack of findings of fact and conclusions of law
accompanying the superior courts order, since the courts
rationale could be inferred from the record.27 We noted that [i]n
most cases involving dismissal or summary judgment, the grounds
for the superior courts ruling can be discerned from the parties
motion papers.28 Furthermore, Alaska Civil Rule 52(a) provides
that [f]indings of fact and conclusions of law are unnecessary
on decisions of motions [for summary judgment].
Applying these standards to the present case, we
conclude that the superior court found the state liable to those
class members who paid more than the permissible differential.
As indicated above, we have already determined in our earlier
decisions in this case that nonresident fees should be compared
individually rather than collectively to resident fees plus the
permissible differential. The superior court applied this rule
when it denied the states motion for summary judgment and granted
the classs cross-motion. In its order, which attempts to
implement our earlier Carlson decisions and to enforce the
stipulation between the parties,29 the court implicitly held the
state liable in every case where an individual nonresidents
cumulative payments exceeded the relevant resident fee plus
permissible differential. The superior court directed the state
to calculate and pay refunds for past overcharges in the
following way: The State shall . . . summariz[e] each class
members refund with interest, using the allowable fee
differential each year . . . The individual refund will be
calculated as provided in . . . the February 12, 2001 Stipulation
and Order. In the February 12, 2001 Stipulation and Order, which
the parties signed after Carlson II and before Carlson III, the
state agreed that it would set off an individuals refund by any
underpayment, but agreed that it would not otherwise attempt to
recapture previous underpayments by nonresident fishermen.30
Thus, it is clear that the superior court was both applying our
earlier Carlson decisions and holding the state to its earlier
stipulation when it held that the state had violated the
Privileges and Immunities Clause and for that reason granted
summary judgment to class members who had paid more than the
permissible differential.
C. The State Has Failed To Demonstrate Proportionality
Between Means and End.
1. The discriminatory measure must be rationally
related to a valid purpose.
The Supreme Court has held that states should be
granted considerable leeway in enacting taxes.31 However, when a
tax implicates a federal right, and in the case of discrimination
against nonresidents, implicates federalism itself, courts will
hold the taxing scheme to a higher standard. As Justice Marshall
wrote for the majority in Austin v. New Hampshire:32
In resolving constitutional challenges
to state tax measures this Court has made it
clear that in taxation, even more than in
other fields, legislatures possess the
greatest freedom in classification. Our
review of tax classifications has generally
been concomitantly narrow, therefore, to fit
the broad discretion vested in the state
legislatures. When a tax measure is
challenged as an undue burden on an activity
granted special constitutional recognition,
however, the appropriate degree of inquiry is
that necessary to protect the competing
constitutional value from erosion.
. . . . The Privileges and Immunities
Clause, by making noncitizenship or
nonresidence an improper basis for locating a
special burden, implicates not only the
individuals right to nondiscriminatory
treatment but also, perhaps more so, the
structural balance essential to the concept
of federalism. Since nonresidents are not
represented in the taxing States legislative
halls . . . judicial acquiescence in taxation
schemes that burden them particularly would
remit them to such redress as they could
secure through their own State; but to
prevent (retaliation) was one of the chief
ends sought to be accomplished by the
adoption of the Constitution. Our prior
cases, therefore, reflect an appropriately
heightened concern for the integrity of the
Privileges and Immunities Clause by erecting
a standard of review substantially more
rigorous than that applied to state tax
distinctions among, say, forms of business
organizations or different trades and
professions.[33]
As we have stated previously in Carlson I and Carlson
II, the state may charge nonresidents more than residents in
order to equalize the burden of fisheries management between
them.34 However, the state must also demonstrate that the
discriminatory fee system bears a substantial relationship to its
goal.35 The state should meet this burden by calculating the
resident contribution to fisheries management and comparing it
with the challenged differentials charged to nonresidents.36 We
indicated that these two quantities must be equivalent in order
for the fee differential to be constitutional.37 That is, if the
fee differential substantially exceeds the resident contribution,
the state will have failed to demonstrate that the fees have a
substantial enough relationship to the goal of equalizing
economic burdens to comply with the Privileges and Immunities
Clause.38 Thus something less than strict equality is allowable;
the nonresident fees will comply with the clause if they are not
substantially in excess of the allowable differential. That is,
the discriminatory measure must bear a reasonable relationship to
a valid state objective.39 It is enough if the state achieves a a
reasonably[ ] fair distribution of burdens,40 since absolute
equality is impracticable in taxation.41
In examining the challenged statutory scheme, we may
consider the availability of less restrictive means to achieve
the states valid objective.
2. The 3:1 fee scheme is not rationally related to
the goal of equalizing the burden of fisheries
management between nonresidents and residents.
In Carlson III we stated: The record must support the
belief that a rational relationship exists between the [actual
nonresident] fee differential and the average cost of fisheries
management to the resident.42 The challenged 3:1 formula is not
rationally related to the goal of equalizing the fisheries
management burden. If in a given year the nonresident fee
differential for a particular fee class equals or falls below the
permissible differential, this is pure chance, since the
challenged differential is not tied to Alaskas fisheries budget.
Under former AS 16.43.160(b) and 20 AAC 05.240(a), fees are based
on permit price and fishing profits. Under this regime, the
ratio between actual nonresident differentials and the
permissible differential is a matter of fortuity and nothing
else. When fishing profits and permit values are on the decline,
nonresidents may pay less than the permissible differential; in
good years they may pay more.43
The Supreme Court has indicated that an arbitrary
taxing scheme may implicate the Privileges and Immunities Clause
even if it should accidentally have no more than a de minimis
effect in a given year. For instance, in Lunding v. New York Tax
Appeals Tribunal, the challenged New York tax law denied
nonresident taxpayers a state income tax deduction for alimony
payments.44 A Connecticut resident who worked in New York claimed
that the law violated the Privileges and Immunities Clause.45 On
behalf of the state, it was argued that the challenged law could
not have any more than a de minimis effect on the run-of-the-mill
taxpayer or comity among the States, since the nonresidents home
state would likely provide a deduction or credit for income taxes
paid to other states.46 The Court rejected this argument, noting
that such a credit was unavailable to the petitioner in the
relevant year since Connecticut did not impose an income tax on
the petitioners earned income.47 Additionally, the nonresidents
enjoyment of the privileges and immunities afforded to residents
could not depend upon mere chance.48 As noted previously, there
may be a legitimate justification for the discrimination, but the
degree must be proportional to the justification.49
D. Incidental Inequality Is Permissible Within a Rational
Scheme.
Where a tax or fee that differentiates between
residents and nonresidents is rationally related to a valid state
purpose, mere inequality in a given year will not necessarily
implicate the Privileges and Immunities Clause. In Travelers
Insurance Co. v. Connecticut,50 for instance, the Supreme Court
stated that the mere fact that in a given year the actual
workings of the system may result in a larger burden on the
nonresident [does not necessarily] vitiate the system, for a
different result might obtain in a succeeding year . . . .51 It
is in this sense, in terms of unavoidable anomalies within a
rational system, that the state is required to guarantee only
substantial, rather than precise, equality.52 As we made clear in
Carlson III, precise equality in taxation between residents and
non-residents is not required.53
This is clearly the case with the prospective method of
calculating the permissible differential to which the parties
agreed and which the superior court approved. Under this scheme,
the state determines the permissible differential to be charged
nonresidents over the next three years by averaging the resident
contribution to fisheries management over the previous five
years. Under this scheme, the nonresident differential is
directly related to the fisheries budget, although exact equality
is not guaranteed. Since the state is not required to guarantee
precise equality prospectively, we conclude that it should not be
required to provide it retrospectively, either. We see no reason
why the superior court may not apply a rational retrospective
scheme, similar to that stipulated by the parties going forward
in their February 2001 stipulation, in order to determine the
legitimate variation between actual nonresident fees and
permissible nonresident fees and the amount of any refunds. The
problem is to determine the extent to which fee differentials may
depart from perfect equality and still pass constitutional
muster.
In determining whether the inequality between residents
and nonresidents exceeds substantial equality of treatment that
is, in determining whether the variation between nonresident fee
differentials and the nonresidents fair burden of fisheries
management costs is permissible the superior court should
determine whether the difference falls within a reasonable margin
of error. We have been unable to locate cases that analyze the
appropriate margin of error in the context of the substantial
equality of treatment standard. But in the parallel context of
tax apportionment, which examines the constitutionality, under
due process, of allowable margins of error for determining
taxation for corporations that conduct business across state
lines, there is helpful precedent.
In such cases the Supreme Court has held that in order
to show that a formula is unconstitutional, the taxpayer [must
prove] by clear and cogent evidence that the income attributed to
the State (analogous in this case to the permissible nonresident
fees), is out of all appropriate proportion to the business
transacted54 (analogous to the actual nonresident fees), or has
led to a grossly distorted result. 55 While the cases establish
no bright line for determining what qualifies as out of all
appropriate proportion, we consider it significant that the
Supreme Court has only twice found a variation to be
unconstitutional. In Hans Rees Sons, Inc. v. North Carolina ex
rel. Maxwell,56 the Court found the statutory formula
unconstitutional when there was more than a 250 percent
difference57 between the statutory formulas calculation of the
amount of in-state taxpayer income and the actual amount of in-
state taxpayer income. Likewise, in Norfolk & Western Railway v.
Missouri State Tax Commission,58 the Court held unconstitutional a
formula with a margin of error of approximately 163 percent. In
all other cases to come before it, the Court has upheld all
margins of error that fell below those at issue in Hans Rees Sons
and Norfolk & Western Railway. Thus, for example, in Container
Corporation of America v. Franchise Tax Board, the Court upheld a
fourteen percent difference between alternative tax formulas.59
In Moorman Manufacturing Company v. Bair, the Court held that a
forty-eight percent difference between the alternative formulas
was constitutional.60 State appellate courts, following these
cases, have consistently held differences under 100 percent to be
constitutional.61
These cases demonstrate that the search for precision
is illusory and that there are constitutionally acceptable
variations from mathematical equality in the structuring of tax
regimes. The same is true for the structuring of resident and
nonresident fishing fees. From this case law, we conclude that
an allowable margin of error may be found in the range up to
fifty percent.62
Because the superior court required precise equality
between the burdens shouldered by residents and nonresidents, we
vacate the superior courts order pertaining to calculation of
refunds. We remand for the superior court to determine whether
any inequality between residents and nonresidents was incidental
and therefore constitutionally tolerable or substantial and
thus unconstitutional.63
V. CONCLUSION
When historical commercial fishing fee differentials
are compared to permissible differentials, it is apparent that
the 3:1 fee schedule is not rationally related to the states goal
of equalizing the burden of fisheries management between
nonresidents and residents. A fee scheme substantially related
to the states goal will guarantee substantial, rather than
precise, equality. Because the state should be held to this
standard retrospectively as well as prospectively, we VACATE the
portion of the superior courts order requiring the state to pay
refunds based on strict equality and REMAND the case for further
proceedings consistent with this opinion.
_______________________________
1 Carlson v. State, Commercial Fisheries Entry Commn,
798 P.2d 1269, 1270 (Alaska 1990) (Carlson I).
2 From 1977 to 2001 AS 16.43.160(b) stated:
Annual fees established under this section
shall be no less than $10 and no more than
$750 and shall reasonably reflect the
different rates of economic return for
different fisheries. The amount of an annual
fee for a nonresident shall be three times
the amount of the annual fee for a resident.
(Emphasis added.)
The legislature repealed this section in 2001 and added
a new section on nonresident fees. Ch. 27, 5, 7, SLA 2001.
Effective 2002, nonresident fees were covered by AS 16.43.160(e):
For an entry permit or an interim-use permit
issued for calendar year 2002 and following
years, the annual base fee may not be less
than $10 or more than $300. The annual base
fee must reasonably reflect the different
rates of economic return for different
fisheries. The fee for a nonresident entry
permit or a nonresident interim-use permit
shall be higher than the annual base fee by
an amount, established by the commission by
regulation, that is as close as is
practicable to the maximum allowed by law.
The amount of the fee for a nonresident entry
permit or a nonresident interim-use permit
may reflect [various costs associated with
fisheries management].
Ch. 27, 5, SLA 2001 (emphasis added).
In 2005 the statute was amended to provide:
In addition to the annual base fee
established by the commission under this
subsection, a nonresident shall pay an annual
nonresident surcharge for the issuance or
renewal of one or more entry permits or
interim-use permits. The annual nonresident
surcharge shall be established by the
commission by regulation at an amount that is
as close as is practicable to the maximum
allowed by law.
AS 16.43.160(c) (Temporary and Special Acts and Resolves 2005);
Ch. 16, 3, SLA 2005.
3 798 P.2d at 1269.
4
All persons born or naturalized in the United
States, and subject to the jurisdiction
thereof, are citizens of the United States
and of the state wherein they reside. No
state shall make or enforce any law which
shall abridge the privileges or immunities of
citizens of the United States; nor shall any
state deprive any person of life, liberty, or
property, without due process of law; nor
deny to any person within its jurisdiction
the equal protection of the laws.
U.S. Const. amend. XIV, 1 (emphasis added).
5 Carlson I, 798 P.2d at 1278.
6 Id. at 1274 (citing Toomer v. Witsell, 334 U.S. 385,
397 (1948)).
7 Id. at 1278.
8 Id.
9 Id. (quoting Taylor v. Conta, 316 N.W.2d 814, 823 n.17
(Wis. 1982)).
10 U.S. Const. art. I, 8, cl. 3.
11 See Carlson v. State, Commercial Fisheries Entry Commn,
919 P.2d 1337, 1338 (Alaska 1996) (Carlson II).
12 Id. at 1343. We also upheld the superior courts
conclusion that the fee schedule did not violate the Commerce
Clause. Id. at 1340-41.
13 Id. at 1343. After Carlson II, the legislature amended
the permit schedule to reflect our decisions in Carlson I and
Carlson II.; see note 2 supra.
14 Id. at 1344-45.
15 State, Commercial Fisheries Entry Commn v. Carlson, 65
P.3d 851 (Alaska 2003) (Carlson III).
16 Id. at 865-66, 867-68.
17 Id. at 866-67.
18 Id. at 864.
19 Breck v. Moore, 910 P.2d 599, 606 (Alaska 1996).
20 Carlson III, 65 P.3d at 858.
21 Carlson II, 919 P.2d at 1345 (Appendix A) (emphasis
added). During this period, former 20 AAC 05.240(a) (repealed
12/21/2002, Register 164) provided in part:
(1) the resident annual fee for the issuance
or renewal of an entry permit or interim-use
permit in a limited fishery is .25 percent of
the estimated value of the entry permit,
rounded to the nearest fee class amount . . .
the non-resident annual fee is three times
this amount . . . .
(2) the resident annual
fee
for
the
issua
nce
or
renew
al of
an
inter
im-us
e
permi
t in
an
unlim
ited
fishe
ry is
.25
perce
nt of
the
estim
ated
avera
ge
gross
earni
ngs
per
permi
t in
the
most
recen
t
three
years
for
which
data
are
avail
able,
round
ed to
the
neare
st
fee
class
amoun
t . .
. the
non-r
eside
nt
fee
is
three
times
this
amoun
t . .
. .
. . . .
(4) the resident and non-resident annual fees
are:
FEE CLASS ANNUAL FEE
Resident
Non-Resident
I $250
$750
II 200
600
III 150
450
IV 100
300
V 50
150
22 Carlson III, 65 P.3d at 863 (citing Carlson II, 919
P.2d at 1344) (emphasis added).
23 See note 43 infra.
24 Carlson III, 65 P.3d at 864 (emphasis added).
25 We note that disparity of treatment based on fee class,
applying equally to residents and nonresidents, does not
implicate the Privileges and Immunities Clause. Any challenge to
this sort of disparity would likely fail, given the legislatures
broad taxing power and the considerably more lenient standards of
review under the Equal Protection and Due Process Clauses; see,
e.g., Baldwin v. Fish & Game Commn of Montana, 436 U.S. 371, 389-
90 (1978).
26 74 P.3d 201 (Alaska 2003).
27 Id. at 205-07 (superior court may be affirmed if
grounds for ruling discernible sufficiently from the record to
permit appellate review).
28 Id. at 206.
29 The parties had previously agreed on the method for
determining fees in the future, which the superior court included
in the same order:
Beginning with the 2005 licensing year, and
for the foreseeable future, the annual
nonresident [fee] will be calculated as
follows: Once every three years, the
Commercial Fisheries Entry Commission . . .
will calculate an average of the annual
differentials for the five most recent fiscal
years for which the Office of Management and
Budget . . . has provided the Commission with
differentials. The Commission will round the
calculated average to the nearest five
dollars. This rounded average will be the
differential that the Commission will impose
on a nonresident permit holder for each of
the next three years. It will also be the
differential that the Alaska Department of
Fish and Game will impose on a nonresident
crewmember license holder for each of the
next three years.
30 According to the February 12, 2001 Stipulation and
Order:
The refunds will incorporate a setoff for fee
and license underpayments on an individual
basis. That is, if the permissible
differential exceeds the actual differential
for a permit held by an individual, the
difference will be deducted from the
cumulative overpayments that are due that
individual. Underpayments will include
interest at the same rate as overpayments.
If a member has cumulative underpayments that
exceed the members cumulative overpayments,
the State will not assess or attempt to
collect the difference from the member.
31 Lunding v. New York Tax Appeals Tribunal, 522 U.S. 287,
297 (1998).
32 420 U.S. 656, 662-63 (1975) (internal citations
omitted).
33 Id. at 661-63 (striking down nonresident commuter tax)
(citations omitted).
34 Carlson I, 798 P.2d 1269, 1278 (Alaska 1990); Carlson
II, 919 P.2d 1337, 1342 (Alaska 1996). Even more recently, in
State v. Dupier, 118 P.3d 1039, 1053-54 (Alaska 2005), we again
affirmed the states right to charge nonresidents more than
residents for access to commercial fisheries in Alaska, subject
to the limits enunciated in our Carlson decisions.
35 Supreme Court of New Hampshire v. Piper, 470 U.S. 274,
284 (1985).
36 Carlson II, 919 P.2d at 1342 ([T]he resident
contribution can be compared to the difference in fees paid by
nonresidents to determine if the fee differential is
constitutional.).
37 Id.
38 Id. at 1344.
39 Carlson III, 65 P.3d 851, 864 (Alaska 2003).
40 Travelers Ins. Co. v. Connecticut, 185 U.S. 364, 371
(1902).
41 Lunding v. New York Tax Appeals Tribunal, 522 U.S. 287,
297 (1998) ([A]s a practical matter, the Privileges and
Immunities Clause affords no assurance of precise equality in
taxation between residents and nonresidents of a particular
State.).
42 Carlson III, 65 P.3d at 864; see also Tangier Sound
Watermans Assn v. Pruitt, 4 F.3d 264, 267 (4th Cir. 1993).
43 In Carlson II we noted the large profit variation
between various fisheries and within the same fishery from year
to year:
The profitability of the different fisheries,
and hence the value of permits, varies
dramatically. For example, the average gross
earnings per permit for the Chignik salmon
seine fishery ranged from $88,709 to $265,525
for the years 1983 through 1993. The permit
fee for this fishery is $250 for residents
and $750 for nonresidents. During the same
time period the average gross earnings per
permit for the Bristol Bay herring spawn on
kelp fishery ranged from $847 to $1613. The
permit fee for this fishery is $50 for
residents and $150 for nonresidents.
919 P.2d at 1338 n.4. The state has not argued, nor does the
record indicate, that costs of fisheries management bear any
relation to fishing profits.
44 522 U.S. 287, 291-92 (1998).
45 Id. at 293.
46 Id. at 313.
47 Id. at 313-14.
48 Nor, we may add, can the constitutionality of one
States statutes affecting nonresidents depend upon the present
configuration of the statutes of another State. Id. at 314
(quoting Austin v. New Hampshire, 420 U.S. 656, 668 (1975)); see
also Travis v. Yale & Towne Mfg. Co., 252 U.S. 60, 81 (1920)
(striking down another New York tax law which denied tax
exemptions to nonresidents working in New York, and noting that
it would be rash to assume that nonresidents have untaxed income
from sources other than New York employment which compensate for
exemptions denied them in New York).
49 Under the Supreme Courts comparatively stricter
Commerce Clause jurisprudence, a tax which facially discriminates
against interstate commerce is almost per se a violation of the
Commerce Clause, regardless of the degree of discrimination.
Fulton Corp. v. Faulkner, 516 U.S. 325, 334 n.3 (1996) (There is
no de minimis defense to a charge of discriminatory taxation
under the Commerce Clause.); Wyoming v. Oklahoma, 502 U.S. 437,
455 (1992) (The degree of a differential burden on interstate
commerce measures only the extent of the discrimination and is of
no relevance to the determination whether a State has
discriminated against interstate commerce.); Maryland v.
Louisiana, 451 U.S. 725, 760 (1981) (We need not know how unequal
[a] [t]ax is before concluding that it unconstitutionally
discriminates.); see also Jerome R. Hellerstein & Walter
Hellerstein, State Taxation 4.13[1][a], at 4-71 & 4.13[1][d],
at 4-72 (3d ed. 2005).
50 185 U.S. 364 (1902); see also Maxwell v. Bugbee, 250
U.S. 525, 543 (1919) ([I]nequalities that result not from hostile
discrimination, but occasionally and incidentally in the
application of a system that is not arbitrary in its
classification, are not sufficient to defeat the law.).
51 Travelers Ins. Co., 185 U.S. at 369.
52 See id. at 371 (It is enough that the State has secured
a reasonably fair distribution of burdens. . . .).
53 65 P.3d at 864 n.96 (quoting Lunding, 522 U.S. at 293).
54 Moorman Mfg. Co. v. Bair, 437 U.S. 267, 274 (1978)
(quoting Hans Rees Sons, Inc. v. North Carolina ex rel. Maxwell,
283 U.S. 123, 135 (1931)).
55 Id. (quoting Norfolk & W. Ry. v. Missouri State Tax
Commn, 390 U.S. 317, 326 (1968)).
56 283 U.S. at 132-36.
57 A leading treatise on taxation has noted that bare
percentages without explanation are not helpful to a
determination of the issues at hand. 1 Jerome R. Hellerstein &
Walter Hellerstein, State Taxation 8.15 (3d ed. 1998) (quoting
Citizens Utils. Co. v. Department of Revenue, 488 N.E.2d 984, 993
(Ill. 1986)). Our review of the tax apportionment cases shows
that courts do not use universally accepted terminology to
describe variations (or disparities) between the result obtained
by applying the states assessment formula and the result obtained
by the taxpayers approach (or between the states and the
taxpayers valuation of property). Some courts simply compare the
states tax assessment to the taxpayers assessment under its own
desired formula and express the difference as a percentage; e.g.,
Stonebridge Life Ins. Co. v. Department of Revenue, 2006 WL
448682, 1, 5 n.16 (Or. T.C. 2006). Thus, if the states formula
yields a tax of $200 and the taxpayers formula yields a tax of
$100, there is said to be a 200% variance. As a pure mathematical
proposition, this seems clearly wrong to us. (If the governments
assessment yielded a tax of $100 and the taxpayers methodology
yielded a tax of $100, it would make no sense to speak of a 100%
variance.) Accordingly, we use the methodology used by other
courts: we determine the dollar differences in the results
obtained by each methodology and then express the relationship
between that difference and the taxpayers result as a percentage
variance; e.g., Container Corporation of America v. Franchise Tax
Board, 463 U.S. 159, 181 (1983). Thus, if the governments
assessment is $150 and the taxpayers is $100, we would say that
there is a 50% variance.
In this opinion we have cited only to cases that use
the methodology we believe to be correct.
58 390 U.S. at 326.
59 463 U.S. at 184
60 437 U.S. at 275.
61 See, e.g., Unisys Corp. v. Pennsylvania., 726 A.2d 1096
(Pa. 1999) (holding that forty-five percent disparity in states
apportionment taxation formula was not outside constitutional
margin of error); General Dynamics Corp. v. Sharp, 919 S.W.2d
861, 869 (Tex. App. 1996) (holding that a twenty-eight percent
difference between formulas was constitutional because the
Supreme Court has upheld percentage disparities ranging between
14-93%.).
62 Even though greater margins of error have been upheld
in some of the taxation allocation cases discussed above, the
constitutional analysis is not resolved by mere reference to a
universally applicable maximum margin of error. While we do not
require mathematical precision, an acceptable margin of error
should be based on the accuracy that is reasonably attainable in
individual cases. In this case, the state seems capable of
relatively greater accuracy in its measurements than in many of
the tax allocation cases cited above. Importantly, the state
possesses much of the data relevant to assessing the extra costs
associated with non-resident commercial fishing licenses.
Bearing in mind that the state should set the added cost
associated with a non-resident commercial fishing license fee at
a rate that is substantially equal to the amount that residents
pay (and non-residents do not pay) in support of Alaskas
fisheries, we recognize nonetheless that there is no single
correct method of allocation and that uncertainties exist with
respect to any formula. We therefore accord the state
considerable leeway in its calculations. The fifty percent
margin of error is intended to reflect this leeway.
63 The class argues that the years 2003 and 2004 merit
refunds as well, since the parties agreed that each nonresident
would pay only one differential, regardless of how many permits
that nonresident held, but, they allege, the CFEC did not adopt
this one differential per person approach until 2005. The
superior court should determine this factual question on remand.
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