“The city’s billboard tax infringes on the rights to free speech and a free press protected by the First Amendment to the United States Constitution.

Justice Kennedy, opinion of the Court

On September 16, 2021 the Supreme Court of Ohio handed down a merit decision in Lamar Advantage GP Co., L.L.C. v. Cincinnati, Slip Opinion No. 2021-Ohio-3155. In a unanimous opinion written by Justice Kennedy, in which Judge Anita Laster Mays sat for Justice Brunner and Justice Donnelly concurred in judgment only, the Court struck down as a First Amendment violation an excise tax imposed solely on a small number of billboard operators. The case was argued June 16, 2021.

Case Background

In June of 2018, in the face of a budget shortfall of about 2.5 million dollars, the Cincinnati City Council passed an ordinance which levied an excise tax “on the privilege of installing, placing, and maintaining outdoor advertising signs in the City of Cincinnati.” The city hoped to raise $709,000 to help balance its budget. The money was meant to fund special projects relating to human services and public health and to restore funding to city council and the administration.  On-site signs were exempted from the tax, as were signs displayed in the public right-of-way, signs approved by the city for special events, and signs erected or displayed on city property.

The ordinance involved here required the billboard operator (officially, advertising host) to pay a tax that is the greater of 7% of the gross receipts generated by the outdoor advertising sign or an annual minimum amount calculated based on the type, location and square footage of the sign. Additionally, the tax contained a gag provision that prohibited a billboard operator from informing an advertiser that the advertiser would absorb the cost of the tax. This provision was subsequently repealed and is not part of the decision in the case.

The appellants in the case are Lamar Advantage GP Company L.L.C. (“Lamar”) and Norton Outdoor Advertising, Inc. (“Norton”). They own 450 and 415 billboards respectively which is most of the billboard advertising in Cincinnati. They estimated that the tax might cause them to remove 70-80 billboards as unsustainable and that they could not pass the tax on to their customers due to competition with other advertising mediums.

About 70-75% of the messages on the billboards are paid advertisements. The rest of the space is donated for public-service announcements or the operators’ own speech. The paid advertisements include commercial speech, political ads, and the noncommercial speech of nonprofit organizations and charities. Both companies also donate space to display the noncommercial speech of charities, nonprofits, public-serve announcements, and other health and safety messages.

Both Lamar and Norton have been contacted by members of city council to request the donation of billboard space or to ask for the removal of messages with which they disagree. In short, Lamar and Norton exercise editorial control over the messages on their billboards. Both companies want to keep the city happy with their messaging.

Procedural Posture

Lamar and Norton brought separate actions in the Hamilton County Court of Common Pleas, seeking a declaration that the tax violated their constitutional rights to free speech and a free press and seeking an injunction against the enforcement of the tax. The trial court consolidated the actions and ultimately permanently enjoined the city from enforcing the billboard tax and the gag provision. The court of appeals upheld the tax but struck down the gag provision.

Read the oral argument preview of the case here and the analysis here.

Key Precedent

U.S. Constitution, Amendment I (Congress shall make no law … abridging the freedom of speech, or of the press …)

CMC 313-3 (ordinance creating an excise tax on billboards.)

CMC 313-7 (limiting communications between billboard operators and their customers, specifically prohibiting the billboard operators from indicating that their customers will absorb the cost of the tax.) (repealed).

Grosjean v. Am. Press Co., Inc., 297 U.S. 233 (1936) (First Amendment was “meant to preclude the national government, and by the Fourteenth Amendment to preclude the states, from adopting any form of previous restraint upon printed publications, or their circulation, including that which had theretofore been effected by [a newspaper stamp tax and a tax on advertisements].”)

Lovell v. City of Griffin, 303 U.S. 444 (1938) (invalidating ordinance that required municipal government permission to distribute literature and stating the historic connotation of the press “comprehends every sort of publication which affords a vehicle of information and opinion.”)   

New York Times Co. v. Sullivan, 376 U.S. 254 (1964) (statements “do not forfeit [First Amendment] protection because they were published in the form of a paid advertisement.”)

Minneapolis Star and Tribune Co. v. Minnesota Commr. of Revenue, 400 U.S. 575 (1983) (holding that a use tax on paper and ink products consumed in publication that applied to only 14 of 388 newspapers violated the First Amendment because the tax singled out the press and targeted only a small group of newspapers for differential treatment.)

Los Angeles v. Preferred Communications, Inc. 476 U.S. 488 (1986) (the press includes mediums with original programming or editorial control over the content of others.)

Arkansas Writers’ Project, Inc. v. Ragland, 481 U.S. 221 (1987) (holding that a tax’s differential treatment among magazines that depended upon the magazine’s content violated the First Amendment because the tax could not overcome strict scrutiny review.)

Leathers v. Medlock, 499 U.S. 439 (1991) (holding that a generally applicable sales tax, which exempted certain media segments, did not violate the First Amendment because the tax applied generally and did not single out the press, or a group within the press, for special treatment.)

*Lamar and Norton’s Propositions of Law Accepted for Review

*Lamar and Norton filed separate briefs, but their propositions of law accepted for review are the same.

Proposition of Law No. 1

Constitutionally mandated heightened First Amendment scrutiny applies to a discriminatory excise tax only on billboards that does not apply to businesses generally but instead singles out only the press or targets a small group of speakers.

Proposition of Law No. 2

Section 313-7(b), the Tax’s Gag Provision, prohibits political speech and is an unconstitutional infringement of noncommercial speech.

Does the Court Adopt Lamar and Norton’s Propositions of Law

The Court adopts the first proposition of law. The second was declared moot because the City repealed CMC 313-7.

Merit Decision

Analysis

Freedom of the Press

The press includes more than newspapers, books and magazines. It includes any kind of publication that provides a vehicle of information and opinion.  This includes billboards.

“As speakers and publishers of speech, both Lamar and Norton are protected by the rights to freedom of speech and of the press enshrined in the First Amendment to the United States Constitution,” Kennedy wrote.

U.S. Supreme Court Precedent

Justice Kennedy begins with a review of Grosjean v. Am. Press Co., Inc.,and its history of the free press clause, and notes that the Court in Grosjean concluded that the First Amendment was meant to preclude the national government and by incorporation, the states,  from adopting any form of prior restraint on printed publications or their circulation, and forbids the government from singling out the press for disparate treatment through selective taxation.

In the Grojean case, the state of Louisiana imposed a 2 percent tax on gross receipts from advertising, targeting publications with weekly circulation above 20,000. The tax fell exclusively on 13 newspapers leaving 4 other dailies and 120 weekly newspapers untaxed. The Court struck down the Louisiana tax because it penalized the publishers of a select group of newspapers.

In Minneapolis Star and Tribune Co. v. Minnesota Commr. of Revenue, the U.S. Supreme Court held that a use tax on paper and ink products consumed in publication that applied to only 14 of 388 newspapers violated the First Amendment because the tax singled out the press and targeted only a small group of newspapers for differential treatment. In such a case strict scrutiny applies and the government bears the burden of proving the tax survives that strict scrutiny.

In Arkansas Writers’ Project, Inc. v. Ragland ,the U.S. Supreme Court considered a tax that subjected general-interest magazines to a sales tax on tangible personal property but exempted newspapers and religious, trade, professional and sports magazines. The Court invalidated the tax because it targeted a small group within the press. Although the tax was viewpoint neutral, the content of the magazines had to be reviewed to decide it they fit into one of the exemptions and he Court found this unacceptable and incompatible with the First Amendment.

In Leathers v. Medlock, the U.S. Supreme Court held that a generally applicable sales tax, which exempted certain media segments, did not violate the First Amendment because the tax applied generally and did not single out the press, or a group within the press, for special treatment, nor did it require consideration of the speech’s content.

The following principles are distilled from these press tax cases:

  • The press may be subjected to a generally applicable tax.
  • A tax is unconstitutional if an official must examine the content of the speech to decide whether the tax applies to it.
  • A tax that selectively singles out the press or targets a small group of speakers creates the danger the tax will be used to censor speech
  • In order to establish that the tax violates the First Amendment, it is unnecessary to prove that the purpose of the tax is to suppress or punish speech. In other words, evidence of “an improper censorial motive” is unnecessary

The City’s Billboard Tax is Unconstitutional

The Court rejected the city’s argument that the billboard tax was a tax on the noncommunicative aspects of billboards.

“The ordinance taxes advertising revenue in the same way that the tax invalidated by the Supreme Court in Grosjean did, and it taxes the means of communication like the ink-and-paper use tax that was struck down by the court in Minneapolis Star & Tribune Co.,” wrote Kennedy.

The Court also found that the tax, like the one at issue in Leathers was not generally applicable. Many types of signs were exempted, such as those in the public right of way, signs approved by the city for special events, signs on city-owned property, and all signs under 36 square feet (none of which were Lamar or Norton’s). By enacting these exceptions, the city has targeted a small group of speakers as the source of most of the funds to be raised to balance the city’s budget.

“Because that tax burden is not spread across city council’s constituency but is instead imposed predominantly on two companies (Lamar and Norton), the political process may not alleviate the potential that the tax might be used to suppress, control, or punish speech,” Kennedy wrote. “Even if the city passed the tax ordinance without a motive to censor billboard operators, the threat of overt censorship, self-censorship, or undetectable censorship created by the tax impermissibly infringes on rights protected by the First Amendment.”

While the city enacted the billboard-tax ordinance to raise revenue, that reason alone cannot justify singling out certain members of the press to do so, when, as Minneapolis Star held, “alternative means of achieving the same interest without raising [First Amendment concerns]is clearly available: the [city] could raise the revenue by taxing businesses generally.”

Clear Channel Outdoor, Inc. v. Dir., Dept. of Fin. of Baltimore City

The Ohio high Court acknowledges that Maryland’s highest court recently upheld Baltimore’s excise tax applicable only to billboard operators and rejected a First Amendment challenge to that tax. The Baltimore tax applied to only four billboard operators with Clear Channel paying about 90% of the revenue. Justice Kennedy, for the Court rejects the reasoning of the Maryland high court attributing this disparity to market conditions and declines to follow this case.

 Case Holding

“The city of Cincinnati has imposed such a discriminatory tax, singling out members of the press and placing the tax’s burden on a small group of speakers and publishers in a way that both directly limits the circulation of protected speech and creates the danger that speech will be added or removed based on a desire to please, or avoid the wrath of, city council. That the tax involves billboards rather than the institutional press is of no consequence, and strict scrutiny applies. And because the city’s need to raise revenue does not justify its selective tax on speech and the press, the tax does not survive strict scrutiny and therefore impermissibly infringes on the rights to free speech and a free press enshrined in the First Amendment to the United States Constitution,” wrote Justice Kennedy.

Justice Donnelly concurred in judgment only.

Case Disposition

Judgment Reversed and injunction reinstated.

Trial Court Judge (affirmed)

Hamilton County Court of Common Pleas Judge Curt Hartman

First District Court of Appeals (reversed on the First Amendment Issue)

Opinion authored by Judge Robert Winkler and joined by Judges Beth Myers and Pierre Bergeron

Concluding Observations

Since Professor Emerita Bettman was a paid consultant to the city on the case, she made no prediction as to the outcome.  Here is what student contributor Max Londberg wrote after the argument:

“I predict the Court holds the tax unconstitutional. Guy Taft, representing Lamar, analogized the invalidated tax on ink and paper in Minneapolis Star to the wooden billboard structures that bear messages, calling both instruments for producing speech. Taft closed by stating that freedom of the press is not confined to newspapers, and even though the tax at issue here involves billboards, it could be selectively applied to newspapers and serve as a starting point for the erosion of free speech protections. I predict the Gag Provision will be deemed a moot issue as the appellate court has already held it unconstitutional, despite the billboard operators’ argument that a damages claim still exists.”