NEW ORLEANS – The U.S. Court of Appeals for the Fifth Circuit has struck down the Federal Communication Commission’s “Universal Service Fund”, ruling that the measure is unconstitutional under the non-delegation doctrine and legislative vesting clause.
In a July 24 memorandum opinion written by Fifth Circuit Judge Andrew S. Oldham and joined by colleagues Edith H. Jones, Jerry E. Smith, Jennifer Walker Elrod, Don R. Willett, James C. Ho, Stuart Kyle Duncan, Kurt D. Englehardt and Cory T. Wilson, the federal appellate bench held that the Universal Service Fund violated Article I, Section 1 of the U.S. Constitution.
“In the Telecommunications Act of 1996, Congress delegated its taxing power to the Federal Communications Commission. FCC then sub-delegated the taxing power to a private corporation. That private corporation, in turn, relied on for-profit telecommunications companies to determine how much American citizens would be forced to pay for the ‘universal service’ tax that appears on cell phone bills across the Nation. We hold this misbegotten tax violates Article I, Section 1 of the Constitution,” Oldham stated.
Oldham further outlined the petitioners’ challenging claims.
“Petitioners contend the universal service contribution mechanism violates the Legislative Vesting Clause. We agree. We explain that the power to levy USF ‘contributions’ is the power to tax – a quintessentially legislative power. Then we explain that Congress through 47 U.S.C. Section 254 may have delegated legislative power to FCC because it purported to confer upon FCC the power to tax without supplying an intelligible principle to guide FCC’s discretion,” Oldham said.
“Next, we explain that FCC may have impermissibly delegated the taxing power to private entities. Finally, we explain that we need not definitively answer either delegation question because even if Section 254 contains an intelligible principle, and even if FCC was permitted to enlist private entities to determine how much universal service tax revenue it should raise, the combination of Congress’s broad delegation to FCC and FCC’s sub-delegation to private entities certainly amounts to a constitutional violation.”
Though Congress authorized the FCC to raise money for the Universal Service Fund, the petitioners and their counsel argued Congress “never set any limits on how much the FCC can collect, handing a blank check to an agency full of bureaucrats” – followed by the FCC “re-delegating this taxing power to a private entity full of self-interested telecom insiders, in effect allowing an unelected corporation to set the tax rates paid by millions of Americans.”
The majority opinion, authored by Oldham, concurred with the petitioners.
“American telecommunications consumers are subject to a multibillion-dollar tax nobody voted for. The size of that tax is de facto determined by a trade group staffed by industry insiders with no semblance of accountability to the public,” Oldham said.
“This ruling is a victory for American consumers and the rule of law. The FCC’s practice of allowing a private entity to tax citizens was an egregious overreach of governmental authority. Today’s decision reaffirms the fundamental principle that only Congress has the power to tax and that this power cannot be delegated away lightly,” Chance Weldon, Director of Litigation at the Texas Public Policy Foundation, said.
U.S. Court of Appeals for the Fifth Circuit case 22-cv-60008
From the Southeast Texas Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com