In Sheetz v. El Dorado County, decided today, the Supreme Court unanimously ruled that there is no “legislative exception” to the Takings Clause. In previous cases such as Nollan v. California Coastal Commission AND Dolan vs. Tigard City, the Court ruled that state and local governments sometimes violate the Takings Clause when they impose “exactions” as a condition of allowing property owners to develop their land. Some state courts, including in this case the California Court of Appeals, have held that there is no Takings Clause liability for land use exactions in cases where the requirement was imposed by legislation rather than enforcement agencies. regulation. In this case, El Dorado County barred a landowner from building a new home on his property unless he first paid a $23,420 “traffic impact mitigation” fee.
Oral arguments revealed that the justices were in “radical agreement” (as Justice Elena Kagan put it) in rejecting the idea that such a legislative exception exists. Indeed, even the County’s attorney seemed to abandon the argument that such an exception exists. Therefore, today’s unanimous decision in this regard is not at all surprising. Justice Amy Coney Barrett’s opinion for the Court effectively summarizes the reasons why the idea that a legislative exception exists makes little sense:
Nothing in the constitutional text, history, or precedent supports exempting legislative bodies from ordinary revenue rules.
The text of the Constitution does not limit the Takings Clause to a particular branch of government. The clause itself, which speaks in passive form, “focuses on (and prohibits) a certain ‘act’: the appropriation of private property without just compensation.” Knight against the Metropolitan Government. of Nashville and Davidson Cty., 67 F. 4° 816, 829 (CA6 2023). It does not give special treatment to legislative acts. Nor does the Fourteenth Amendment, which incorporates the Takings Against States Clause. Instead, the Amendment limits the power of each “State” as an undivided whole. §1 Thus, there is “no textual justification for saying that the existence or extent of a state’s power to expropriate private property without just compensation varies depending on the branch of government carrying out the expropriation.” Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection, 560 US 702, 714 (2010) (plurality opinion). Just as the takings clause “protects ‘private property’ without any distinction between types,” Horne v. Department of Agriculture576 US 351, 358 (2015), binds the government without any distinction between legislation and other official acts.
I believe this is clearly the correct outcome, for reasons well summarized in today’s ruling. See also my discussion here.
During oral argument, it appeared that the justices might be interested in moving beyond the issue of legislative exceptions, possibly addressing the underlying question of whether the fee imposed in this case was a levy or not. However, the Court chose not to address that issue, which will now be remanded to the California state courts for consideration.
In a concurring opinion joined by Justice Ketanji Brown Jackson, Justice Sotomayor points out that the Court has not resolved the question of whether the fee imposed on Sheetz would be a gain if imposed “outside of the permitting process.” You argue that withdrawal liability only applies if the answer to this question is yes. I am not convinced that you are right on this point. Tying the tax to a land use development permit implicates private property rights in a way that imposing a tax unrelated to development may not.
Justice Brett Kavanaugh wrote a concurring opinion in which Justice Kagan and Justice Jackson joined. He notes that “the Court has not previously decided – and today explicitly refuses to decide – whether ‘a permit condition imposed on a class of property must be tailored with the same degree of specificity as a permit condition targeting a particular development.'” He also emphasizes that “today’s decision does not address either
prohibit the government’s common practice of imposing permitting conditions, such as impact fees, on new developments through reasonable formulas or programs that evaluate the impact of classes of development rather than the impact of specific parcels of property.
Finally, Justice Neil Gorsuch has a concurring opinion in holding (correctly, in my view) that the standards of the Takings Clause should not vary depending on whether the challenged legislation applies to a narrow or broad class of property:
The Court notes but does not address a separate question: whether the Nollan/Dolan test works differently when a purported taking affects a “class of property” rather than “a particular development…” But how could it? To assess whether a government has engaged in a taking by imposing a condition on land development, the Nolan/Dolan The test asks whether the condition in question has an “essential nexus” to the government’s land use interest and has “approximate proportionality” to a property’s impact on that interest… Nothing in this test depends on on whether or not the government imposes the disputed condition on a broad class of property or on a single tract or something in between. Again, how the government acts may vary, but the constitutional standard for evaluating such actions does not change.
I think Gorsuch is right on this point. But, as Kavanaugh’s consensus suggests, there may be disagreement on this issue within the Court.
When and if the Court takes up another regulatory exactions case, there are likely to be disagreements among the justices, including some who divide them along standard left-right ideological lines. But it is noteworthy that the Court reached unanimous “radical agreement” on the issue of legislative exceptions. This is now the second consecutive high-grossing case in which the judges have reached a unanimous agreement in favor of the property rights side, following in the footsteps of last year’s landmark ruling in Tyler v. Hennepin County.
In summary, today’s decision is far from a definitive resolution of the outstanding questions about when regulatory requests and permitting requirements can be considered revenue. But the judges – all of them – got the issue of legislative exceptions right. This is good enough for government work.
NOTE: In this case the property owner is represented by the Pacific Legal Foundation, who is also my wife’s employer. However, she was not part of the litigation team working on the case. The PLF also sued Tyler v. Hennepin County. I’m clearly on a roll when it comes to winning property rights cases at SCOTUS!