The Independent Offices Appropriation Act, 1952 (hereafter the Act), authorizes each federal agency to prescribe by regulation such fee for the agency's services as is determined to be fair and equitable, taking into consideration the direct and indirect "cost to the Government, value to the recipient, public policy or interest served, and other pertinent facts . . . ." Pursuant to the Act, the Federal Communications Commission (FCC), in revising fees imposed upon community antenna television (CATV) systems, first estimated its direct and indirect costs for CATV regulations, and then, while retaining filing fees, added an annual fee for each CATV system at the rate of 30 per subscriber, concluding that this fee would approximate the "value to the recipient" used in the Act. The Court of Appeals, on a review obtained by petitioner, a CATV trade association, approved the FCC's action.
DOUGLAS, J., delivered the opinion of the Court, in which BURGER, C. J., and STEWART, WHITE, and REHNQUIST, JJ., joined. MARSHALL, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 352. BLACKMUN and POWELL, JJ., took no part in the decision of the case.
Stuart F. Feldstein argued the cause for petitioner. With him on the briefs was Stephen A. Gold.
Edward R. Korman argued the cause for the United States et al. With him on the brief were Solicitor General Bork, Assistant Attorney General Kauper, John W. Pettit, and Joseph A. Marino. *
[ Footnote * ] Briefs of amici curiae urging reversal were filed by Harold J. Cohen, F. Mark Garlinghouse, and Lloyd D. Young for the American Telephone & Telegraph Co., and by John B. Summers for the National Association of Broadcasters.
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
The Independent Offices Appropriation Act, 1952, Tit. 5, 65 Stat. 290, 31 U.S.C. 483a, provides in relevant part: "It is the sense of the Congress that any work, service . . . benefit, . . . license, . . . or similar thing of value or utility performed, furnished, provided, granted . . . by any Federal agency . . . to or for any person (including . . . corporations . . .). . . shall be self-sustaining to the full extent possible, and the head of each Federal agency is authorized by regulation . . . to prescribe therefor . . . such fee, charge, or price, if any, as he shall determine . . . to be fair and equitable taking into consideration direct and indirect cost to the Government, value to the recipient, public policy or interest served, and other pertinent facts . . . ." 1 Petitioner is a trade association representing [415 U.S. 336, 338] community antenna television (CATV) systems which transmit TV programs by cable. The Federal Communications Commission is authorized to regulate these CATV outlets, as the Court held in United States v. Southwestern Cable Co., 392 U.S. 157 . The power to regulate, though not in the form of granting licenses, [415 U.S. 336, 339] extends to the promulgation of regulations requiring the compulsory origination of programs by CATV. United States v. Midwest Video Corp., 406 U.S. 649 . These CATV's, however, are not under the exclusive oversight of the Commission. Local governments and even some States provide permits or franchises to CATV's, including rights of way for the cables used. Some communities in return for their permits require the CATV to pay an annual percentage fee as a gross receipts tax. 2
The Commission in 1964 established only nominal filing fees that produced revenues which approximated 25% of the Commission's annual appropriation. See 21 F. C. C. 2d 502, 503. See also Aeronautical Radio, Inc. v. United States, 335 F.2d 304. The Bureau of the Budget urged higher fee schedules; and so did the committees of the Congress. See H. R. Rep. No. 91-316, pp. 7-8, and H. R. Conf. Rep. No. 91-649, p. 6, where it was stated:
Petitioner obtained review of the decision in the Court of Appeals, which approved the Commission's action, 464 F.2d 1313. The case is here on a petition for certiorari which we granted, 411 U.S. 981 , because of an apparent conflict between the decision in this case and the decision in New England Power Co. v. FPC, 151 U.S. App. D.C. 371, 467 F.2d 425, of the Court of Appeals for the District of Columbia Circuit.
Taxation is a legislative function, and Congress, which is the sole organ for levying taxes, 3 may act arbitrarily and disregard benefits bestowed by the Government on a taxpayer and go solely on ability to pay, based on property or income. A fee, however, is incident to a voluntary act, e. g., a request that a public agency permit an applicant to practice law or medicine or construct a house or run a broadcast station. The public agency performing those services normally may exact a fee for [415 U.S. 336, 341] a grant which, presumably, bestows a benefit on the applicant, not shared by other members of society. It would be such a sharp break with our traditions to conclude that Congress had bestowed on a federal agency the taxing power that we read 31 U.S.C. 483a narrowly as authorizing not a "tax" but a "fee." A "fee" connotes a "benefit" and the Act by its use of the standard "value to the recipient" carries that connotation. The addition of "public policy or interest served, and other pertinent facts," if read literally, carries an agency far from its customary orbit and puts it in search of revenue in the manner of an Appropriations Committee of the House.
The lawmaker may, in light of the "public policy or interest served," make the assessment heavy if the lawmaker wants to discourage the activity; 4 or it may make the levy slight if a bounty is to be bestowed; or the lawmaker may make a substantial levy to keep entrepreneurs from exploiting a semipublic cause for their own personal aggrandizement. Such assessments are in the nature of "taxes" which under our constitutional regime are traditionally levied by Congress.
There is no doubt that the main function of the Commission is to safeguard the public interest in the broadcasting activities of members of the industry. If assessments are made by the Commission against members of the industry which are sufficient to recoup costs to the Commission for its oversight, the CATV's and other broadcasters would be paying not only for benefits they received but for the protective services rendered the public by the Commission. The fixing of such assessments, [415 U.S. 336, 342] it is argued, is the levying of taxes. The Court, speaking through Mr. Chief Justice Hughes said in Schechter Corp. v. United States, 295 U.S. 495, 529 :
Whether the present Act meets the requirement of Schechter and Hampton is a question we do not reach. But the hurdles revealed in those decisions lead us to read the Act narrowly to avoid constitutional problems.
The phrase "value to the recipient" is, we believe, [415 U.S. 336, 343] the measure of the authorized fee. The words "public policy or interest served, and other pertinent facts" would not seem relevant to the present case, whatever may be their ultimate reach. The backbone of CATV is individual enterprise and ingenuity, not governmental largesse. The regulatory regime placed by Congress and the courts over CATV was not designed to make entrepreneurs rich but to serve the public interest by "mak[ing] available . . . to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communications service." 48 Stat. 1064, as amended, 47 U.S.C. 151.
While those who operate CATV's may receive special benefits, we cannot be sure that the Commission used the correct standard in setting the fee. It is not enough to figure the total cost (direct and indirect) to the Commission for operating a CATV unit of supervision and then to contrive a formula that reimburses the Commission for that amount. Certainly some of the costs inured to the benefit of the public, unless the entire regulatory scheme is a failure, which we refuse to assume. The philosophy of 483a was stated by Congressman Sidney Yates of the House Committee on Appropriations. While he spoke of TV and radio broadcasters, what he said is germane to the CATV problem:
The result is that we reverse the Court of Appeals so that the case can be remanded to the Federal Communications Commission for further proceedings consistent with this opinion.
[For dissenting opinion of MR. JUSTICE MARSHALL, see post, p. 352.]
[ Footnote 2 ] The most recent CATV rules adopted by the Commission (37 Fed. Reg. 3280) require a CATV to receive a certificate of compliance from the Commission, 47 CFR 76.11 (b), and require it to obtain from the appropriate local government authority a certificate containing prescribed recitations and provisions. 47 CFR 76.31. The new rules also limit the franchise fees that may be imposed on CATV's by the localities where they operate. 47 CFR 76.31. Included in the new rules are restrictions on telephone companies on whose poles the CATV cable is usually strung. See 47 CFR 63.54-63.57, 64.601-64.602. And see General Telephone Co. v. United States, 449 F.2d 846, 851; Report of Jan. 14, 1974, Cabinet Committee on Cable Communications (known as the Whitehead Report).
[ Footnote 3 ] By Art. I, 8, cl. 1, of the Constitution it is the Congress that has the "Power to lay and collect Taxes."
[ Footnote 4 ] Mr. Chief Justice Marshall is credited with the statement that "the power to tax is the power to destroy," to which Mr. Justice Holmes replied, "The power to tax is not the power to destroy while this Court sits." Panhandle Oil Co. v. Knox, 277 U.S. 218, 223 (dissenting opinion). [415 U.S. 336, 345]