U.S. District Court Rules City’s Impact Fees Are Taxes, Remands Case Under Tax Injunction Act

The U.S. District Court for the Southern District of Alabama held that the city’s impact fee program constituted a tax rather than a regulatory fee, requiring remand to the state court under the Tax Injunction Act. Taxpayer, a developer, challenged a city ordinance imposing “impact fees” on new construction projects. The city removed the case to federal court, but Taxpayer moved to remand, arguing the fees were taxes under the Tax Injunction Act. The court analyzed whether the charges were fees or taxes by considering who imposed them, who paid them, and their purpose. While the first two factors were ...