Today, the U.S. Supreme Court handed down its decision in Federal Communications Commission v. Consumers Research. At the heart of the case was whether Congress could delegate its power to tax to the FCC, which then delegated the taxing power to a private corporation to set the tax rate. Today, the Court ruled that neither the Congressional delegation of tax rate to the FCC nor the FCC's spin-off delegation to a private corporation violated the nondelegation doctrine.
This case is about a telecommunications tax. Every American’s monthly phone bill includes a line item for the “Universal Service Fund” (USF), a tax set up by Congress and managed by the Federal Communications Commission (FCC) to subsidize telephone service and now broadband service. Everyone pays this tax on their cell phone bill (or, in the past, landlines). But neither Congress nor the FCC set the USF rate. Instead, that task has been delegated to a private entity, the Universal Service Administrative Company (USAC). USAC sets the fee, and, so long as the FCC does not object within 14 days, it is “deemed approved by the Commission.” In this way, no government official needs to actually assent to the rate—just inaction will allow it to take effect.
In a brief filed on February 18 with the Supreme Court, we at NTUF’s Taxpayer Defense Center argued that this double delegation is unconstitutional. This scheme is abhorrent to a country founded on the principle of “No Taxation Without Representation.” Indeed, keeping tax policy accountable to the people was a key legal argument made by the Founders in supporting the Revolution. The Stamp Act, Sugar Act, and other repressive tax policies animated the debate about why the original colonies needed independence from Great Britain.
Instead, Justice Elena Kagan, writing for a 6-3 majority, held onto a set of precedents that “whether or not a tax is at issue—so say our cases—the usual nondelegation standard applies.” Citing Skinner v. Mid-America Pipeline Co. from 1989, the Court rejected a two-tier system where tax delegations receive any greater inspection or analysis than any other delegation of authority from Congress. Nor would any distinction between “taxes” and “fees” help the challengers in this case, the majority holds, because the test would be the same since tax statutes do not generate special scrutiny under nondelegation doctrine. That test—called the “intelligible principle” test—asks whether Congress gave some sufficient set of instructions that curtail and direct the action of the executive agency. If so, there is an “intelligible principle” to follow, and therefore the law is constitutional.
Today, the Court held that the USF law satisfied the intelligible principle test when it “imposed ascertainable and meaningful guideposts for the FCC to follow when carrying out its delegated function of collecting and spending contributions from carriers.” The word “sufficient,” the Court ruled, “sets a floor and a ceiling alike” on how much the FCC can raise to support the USF because “Budgeting, to be sure, is not an exact science, so in one quarter the Commission may collect a bit more than it needs and in another a bit less.” And what the money is used to support, the Court ruled, is specific enough: “those in rural and other high-cost areas (with a special nod to rural hospitals), low-income consumers, and schools and libraries.”
Justice Neil Gorsuch, writing on behalf of himself and Justices Clarence Thomas and Samuel Alito, dissented. Justice Gorsuch contended that today’s ruling “defies the Constitution's command that Congress ‘may not transfer to another branch powers that are strictly and exclusively legislative.’” That is because “[t]axation ranks among the government’s greatest powers. Indeed, it is arguably the federal government’s ‘most important . . . authorit[y]’” (quoting The Federalist No. 33 (Hamilton)). The dissent would rather a rule that requires some sort of formula or a cap on how much the FCC could generate from the USF tax. And, for the dissenting justices, the distinction between “tax” and “fee” was important because “fees carry a built-in intelligible principle: The government cannot collect more money than it needs to offset a real-world cost or benefit.” As a tax, in contrast, the USF “takes money from some (carriers) and gives it to others (libraries, schools, and the like).”
In the end, the Court has not struck down a delegation of Congressional responsibility since 1935. As debates continue about the scope of Presidential authority to restructure government, this issue seems to not be a priority for at least two justices on the Court. Justice Brett Kavanaugh joined the majority in today’s decision and wrote a separate concurrence stressing the importance of flexibility for the executive branch to enforce the laws. Justice Ketanji Brown Jackson wrote separately to state her view that private nondelegation—here, the tax is set by a corporation, not the FCC or Congress— “is a viable and independent doctrine in the first place. Nothing in the text of the Constitution appears to support a per se rule barring private delegations.”
It appears, for now, that the Court is not interested in curtailing the intelligible principle test and holds that tax law is not special in that regard. This will make it more difficult for taxpayers to ensure that their taxes are set by those who are most accountable to the people: Congress.
The cases are Federal Communications Commission v. Consumers’ Research (US No. 24-354) and SHLB Coalition v. Consumers’ Research (US No. 24-422).