NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Wash ington, D.C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.


No. 94-1988


on writ of certiorari to the supreme judicial court of maine

[May 19, 1997]

Justice Stevens delivered the opinion of the Court.

The question presented is whether an otherwise generally applicable state property tax violates the Commerce Clause of the United States Constitution, Art. I, §8, cl. 3, because its exemption for property owned by charitable institutions excludes organizations operated principally for the benefit of nonresidents.

Petitioner is a Maine nonprofit corporation that operates a summer camp for the benefit of children of the Christian Science faith. The regimen at the camp includes supervised prayer, meditation, and church services designed to help the children grow spiritually and physically in accordance with the tenets of their religion. App. 40-41. About 95% of the campers are not residents of Maine. Id., at 44.

The camp is located in the town of Harrison; it occupies 180 acres on the shores of a lake about 40 miles northwest of Portland. Brief for Respondents 4, and n. 6. Petitioner's revenues include camper tuition averaging about $400 per week for each student, contributions from private donors, and income from a "modest endowment." App. 42, 51. In recent years, thecamp has had an annual operating deficit of approximately $175,000. Id., at 41. From 1989 to 1991, it paid over $20,000 in real estate and personal property taxes each year. [n.1] Id., at 42-43.

The Maine statute at issue, Me. Rev. Stat. Ann., Tit. 36, §652(1)(A) (Supp. 1996), provides a general exemption from real estate and personal property taxes for "benevolent and charitable institutions incorporated" in the State. With respect to institutions that are "in fact conducted or operated principally for the benefit of persons who are not residents of Maine," however, a charity may only qualify for a more limited tax benefit, and then only if the weekly charge for services provided does not exceed $30 per person. §652(1)(A)(1). [n.2] Because most of the campers come from out of State, petitioner could not qualify for a complete exemption. [n.3] And, since the weekly tuition was roughly $400, petitioner was ineligible for any charitable tax exemption at all.

In 1992 petitioner made a formal request to the Town for a refund of taxes paid from 1989 through 1991, and a continuing exemption from future property taxes, based principally on a claim that the tax exemption statute violated the Commerce Clause of the Federal Constitution. [n.4] The request was denied, and petitionerfiled suit in the Superior Court against the Town and its tax assessors and collectors. [n.5] After the parties agreed on the relevant facts, they filed cross motions for summary judgment. The Superior Court ruled for petitioner, explaining that under Maine's statute:

"Denial of a tax exemption is explicitly and primarily triggered by engaging in a certain level of interstate commerce. This denial makes operation of the institutions serving non residents more expensive. This increased cost results from an impermissible distinction between in state and out of state consumers. See Commonwealth Edison Co., 453 U. S., at 617-19. . . . Maine's charitable tax exemption is denied, not because there is a difference between the activities of charitable institutions serving residents and non residents, but because of the residency of the people whom the institutions serve." App. to Pet. for Cert. 14a-15a (footnote omitted).

The Town, but not the State, appealed and the Maine Supreme Judicial Court reversed. 655 A. 2d 876 (1995). Noting that a Maine statute [n.6] characterized tax exemptions as "tax expenditures," it viewed the exemption for charitable institutions as the equivalent of a purchase of their services. Id., at 878. Because the exemption statute "treats all Maine charities alike" — given the fact that "all have the opportunity to qualify for an exemption by choosing to dispense the majority of their charity locally" — it "regulates evenhandedly with only incidental effects on interstate commerce." Id., at 879. In the absence of evidence that petitioner's camp "competes with other summer camps outside of or within Maine," or that the statute "impedes interstate travel" or that it "provides services that are necessary for interstate travel," the Court concluded that petitioner had "not met its heavy burden of persuasion that the statute is unconstitutional." Ibid.

We granted certiorari. 516 U. S. ___. For the reasons that follow, we now reverse.

During the first years of our history as an independent confederation, the National Government lacked the power to regulate commerce among the States. Because each State was free to adopt measures fostering its own local interests without regard to possible prejudice to nonresidents, what Justice Johnson characterized as a "conflict of commercial regulations, destructive to the harmony of the States" ensued. See Gibbons v. Ogden, 9 Wheat. 1, 224 (1824) (opinion concurring in judgment). In his view, this "was the immediate cause that led to the forming of a [constitutional] convention." Ibid. "If there was any one object riding over every other in the adoption of the constitution, it was to keep the commercial intercourse among the States free from all invidious and partial restraints." Id., at 231. [n.7]

We have subsequently endorsed Justice Johnson's appraisal of the central importance of federal control over interstate and foreign commerce and, more narrowly, his conclusion that the Commerce Clause had not only granted Congress express authority to override restrictive and conflicting commercial regulations adopted by the States, but that it also had immediately effected a curtailment of state power. "In short, the Commerce Clause even without implementing legislation by Congress is a limitation upon the power of the States. Southern Pacific Co. v. Arizona ex rel. Sullivan, 325 U.S. 761 [(1945)]; Morgan v. Virginia, 328 U.S. 373 [(1946)]." Freeman v. Hewit, 329 U.S. 249, 252 (1946). Our decisions on this point reflect "upon fullest consideration, the course of adjudication unbroken through the Nation's history." Ibid. See also H. P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 534-535 (1949). Although Congress unquestionably has the power to repudiate or substantially modify that course of adjudication, [n.8] it has not done so.

This case involves an issue that we have not previously addressed — the disparate real estate tax treatment of a nonprofit service provider based on the residence of the consumers that it serves. The Town argues that our dormant Commerce Clause jurisprudence is wholly inapplicable to this case, because interstate commerce is not implicated here and Congress has no power to enact a tax on real estate. We first reject these arguments, andthen explain why we think our prior cases make it clear that if profit making enterprises were at issue, Maine could not tax petitioner more heavily than other camp operators simply because its campers come principally from other States. We next address the novel question whether a different rule should apply to a discriminatory tax exemption for charitable and benevolent institutions. Finally, we reject the Town's argument that the exemption should either be viewed as a permissible subsidy or as a purchase of services by the State acting as a "market participant."

We are unpersuaded by the Town's argument that the dormant Commerce Clause is inapplicable here, either because campers are not "articles of commerce," or more generally because the camp's "product is delivered and `consumed' entirely within Maine." Brief for Respondents 17-18. Even though petitioner's camp does not make a profit, it is unquestionably engaged in commerce, not only as a purchaser, see Katzenbach v. McClung, 379 U.S. 294, 300-301 (1964); United States v. Lopez, 514 U. S. ___, ___ (1995) (slip op., at 10), but also as a provider of goods and services. It markets those services, together with an opportunity to enjoy the natural beauty of an inland lake in Maine, to campers who are attracted to its facility from all parts of the Nation. The record reflects that petitioner "advertises for campers in [out of state] periodicals . . . and sends its Executive Director annually on camper recruiting trips across the country." App. 49-50. Petitioner's efforts are quite successful; 95 percent of its campers come from out of State. The attendance of these campers necessarily generates the transportation of persons across state lines that has long been recognized as a form of "commerce." Edwards v. California, 314 U.S. 160, 172 (1941); see also Caminetti v. United States, 242 U.S. 470, 491 (1917); Hoke v.United States, 227 U.S. 308, 320 (1913).

Summer camps are comparable to hotels that offer their guests goods and services that are consumed locally. In Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241 (1964), we recognized that interstate commerce is substantially affected by the activities of a hotel that "solicits patronage from outside the State of Georgia through various national advertising media, including magazines of national circulation." Id., at 243. In that case, we held that commerce was substantially affected by private race discrimination that limited access to the hotel and thereby impeded interstate commerce in the form of travel. Id., at 244, 258; see Lopez, 514 U. S., at ___ (slip op., at 10-11). Official discrimination that limits the access of nonresidents to summer camps creates a similar impediment. Even when business activities are purely local, if " `it is interstate commerce that feels the pinch, it does not matter how local the operation which applies the squeeze.' " Heart of Atlanta, 379 U. S., at 258 (quoting United States v. Women's Sportswear Mfrs. Assn., 336 U.S. 460, 464 (1949)).

Although Heart of Atlanta involved Congress' affirmative Commerce Clause powers, its reasoning is applicable here. As we stated in Hughes v. Oklahoma, 441 U.S. 322 (1979), "The definition of `commerce' is the same when relied on to strike down or restrict state legislation as when relied on to support some exertion of federal control or regulation." Id., at 326, n. 2. That case in turn rested upon our reasoning in Philadelphia v. New Jersey, 437 U.S. 617 (1978), in which we rejected a "two tiered definition of commerce." Id., at 622. "Just as Congress ha[d] power to regulate the interstate movement of [the] wastes" at issue in that case, so too we held were States "not free from constitutional scrutiny when they restrict that movement." Id., at 622-623. See also Sporhase v. Nebraska ex rel.Douglas, 458 U.S. 941, 953 (1982).

The Town's arguments that the dormant Commerce Clause is inapplicable to petitioner because the campers are not "articles of commerce," or more generally that interstate commerce is not at issue here, are therefore unpersuasive. The services that petitioner provides to its principally out of state campers clearly have a substantial effect on commerce, as do state restrictions on making those services available to nonresidents. Cf. C & A Carbone, Inc. v. Clarkstown, 511 U.S. 383, 391 (1994).

The Town also argues that the dormant Commerce Clause is inapplicable because a real estate tax is at issue. We disagree. A tax on real estate, like any other tax, may impermissibly burden interstate commerce. We may assume as the Town argues (though the question is not before us) that Congress could not impose a national real estate tax. It does not follow that the States may impose real estate taxes in a manner that discriminates against interstate commerce. A State's "power to lay and collect taxes, comprehensive and necessary as that power is, cannot be exerted in a way which involves a discrimination against [interstate] commerce." Pennsylvania v. West Virginia, 262 U.S. 553, 596 (1923).

To allow a State to avoid the strictures of the dormant Commerce Clause by the simple device of labeling its discriminatory tax a levy on real estate would destroy the barrier against protectionism that the Constitution provides. We noted in West Lynn Creamery Corp. v. Healy, 512 U.S. 186 (1994), that "[t]he paradigmatic . . . law discriminating against interstate commerce is the protective [import] tariff or customs duty, which taxes goods imported from other States, but does not tax similar products produced in State." Id., at 193. Such tariffs are "so patently unconstitutional that our cases reveal not a single attempt by a State to enact one." Ibid. Yet, were the Town's theory adopted, a Statecould create just such a tariff with ease. The State would need only to pass a statute imposing a special real estate tax on property used to store, process, or sell imported goods. By gearing the increased tax to the value of the imported goods at issue, the State could create the functional equivalent of an import tariff. As this example demonstrates, to accept the Town's theory would have radical and unacceptable results.

We therefore turn to the question whether our prior cases preclude a State from imposing a higher tax on a camp that serves principally nonresidents than on one that limits its services primarily to residents.

There is no question that were this statute targeted at profit making entities, it would violate the dormant Commerce Clause. "State laws discriminating against interstate commerce on their face are `virtually per se invalid.' " Fulton Corp. v. Faulkner, 516 U. S. ___, ___ (1996) (slip op., at 5) (quoting Oregon Waste Systems, Inc. v. Department of Environmental Quality of Ore., 511 U.S. 93 (1994)). It is not necessary to look beyond the text of this statute to determine that it discriminates against interstate commerce. The Maine law expressly distinguishes between entities that serve a principally interstate clientele and those that primarily serve an intrastate market, singling out camps that serve mostly in staters for beneficial tax treatment, and penalizing those camps that do a principally interstate business. As a practical matter, the statute encourages affected entities to limit their out of state clientele, and penalizes the principally nonresident customers of businesses catering to a primarily interstate market.

If such a policy were implemented by a statutory prohibition against providing camp services to nonresidents, the statute would almost certainly be invalid. We have "consistently . . . held that the CommerceClause . . . precludes a state from mandating that its residents be given a preferred right of access, over out of state consumers, to natural resources located within its borders or to the products derived therefrom." New England Power Co. v. New Hampshire, 455 U.S. 331, 338 (1982). Our authorities on this point date to the early part of the century. [n.9] Petitioner's "product" is in part the natural beauty of Maine itself, and in addition the special services that the camp provides. In this way, the Maine statute is like a law that burdens out of state access to domestically generated hydroelectric power, New England Power, or to local landfills, Philadelphia v. New Jersey, 437 U.S. 617 (1978). In those cases, as in this case, the burden fell on out of stateaccess both to a natural resource, and to related services provided by state residents. [n.10]

Avoiding this sort of "economic Balkanization," Hughes v. Oklahoma, 441 U.S. 322, 325 (1979), and the retaliatory acts of other States that may follow, is one of the central purposes of our negative Commerce Clause jurisprudence. See ibid.; West v. Kansas Natural Gas Co., 221 U.S. 229, 255 (1911) (expressing concern that "embargo may be retaliated by embargo, and commerce will be halted at state lines"). And, as we noted in Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573, 580 (1986): "Economic protectionism is not limited to attempts to convey advantages on local merchants; it may include attempts to give local consumers an advantage over consumers in other States." [n.11] By encouraging economic isolationism, prohibitions on out of state access to in state resources serve the very evil that the dormant Commerce Clause was designed to prevent.

Of course, this case does not involve a total prohibition. Rather, the statute provides a strong incentive for affected entities not to do business with nonresidents if they are able to so avoid the discriminatory tax. In this way, the statute is similar to the North Carolina "intangibles tax" that we struck down in Fulton Corp. v. Faulkner, 516 U. S. ___ (1996) (slip op., at 1). That case involved the constitutionality under the Commerce Clause of a State "regime that taxe[d] stock [held by in State shareholders] only to the degree its issuing corporation participates in interstate commerce." Id., at ___, (slip op., at 7). We held the statute facially discriminatory, in part because it tended "to discourage domestic corporations from plying their trades in interstate commerce." Ibid. Maine's statute has a like effect.

To the extent that affected Maine organizations are not deterred by the statute from doing a principally interstate business, it is clear that discriminatory burdens on interstate commerce imposed by regulation or taxation may also violate the Commerce Clause. We have held that special fees assessed on nonresidents directly by the State when they attempt to use local services impose an impermissible burden on interstate commerce. See, e.g., Chemical Waste, 504 U. S., at 342 (discriminatory tax imposed on disposal of out of state hazardous waste). That the tax discrimination comes in the form of a deprivation of a generally available tax benefit, rather than a specific penalty on the activity itself, is of no moment. Thus, in New Energy Co. ofInd. v. Limbach, 486 U.S. 269, 274 (1988), the Court invalidated an Ohio statute that provided a tax credit for sales of ethanol produced in State, but not ethanol produced in certain other States; the law "deprive[d] certain products of generally available beneficial tax treatment because they are made in certain other States, and thus on its face appear[ed] to violate the cardinal requirement of nondiscrimination." [n.12] Given the fact that the burden of Maine's facially discriminatory tax scheme falls by design in a predictably disproportionate way on out of staters, [n.13] the pernicious effect on interstate commerce is the same as in our cases involving taxes targeting out of staters alone.

Unlike in Chemical Waste, we recognize that here the discriminatory burden is imposed on the out of state customer indirectly by means of a tax on the entity transacting business with the non Maine customer. This distinction makes no analytic difference. As we noted in West Lynn Creamery discussing the general phenomenon of import tariffs: "For over 150 years, our cases have rightly concluded that the imposition of a differential burden on any part of the stream of commerce — from wholesaler to retailer to consumer — is invalid, because a burden placed at any point will result in a disadvantage to the out of state producer." 512 U. S., at 202 (citing cases). So too here, it matters little that it is the camp that is taxed rather than the campers. The record demonstrates that the economic incidence of the tax falls at least in part on the campers, the Town has not contested the point, and the courts below based their decision on this presumption. App. 49; 655 A. 2d, at 879; App. to Pet. for Cert. 14a, n. 2. [n.14]

With respect to those businesses — like petitioner's — that continue to engage in a primarily interstate trade, the Maine statute therefore functionally serves as an export tariff that targets out of state consumers by taxing the businesses that principally serve them. As our cases make clear, this sort of discrimination is at the very core of activities forbidden by the dormant commerce clause. " `[A] State may not tax a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the State.' " Chemical Waste, 504 U. S., at 342 (quoting Armco Inc. v. Hardesty, 467 U.S. 638, 642 (1984)); see West Lynn Creamery, Inc. v. Healy, 512 U. S., at 193 (tariffs forbidden by the dormant Commerce Clause).

Ninety five percent of petitioner's campers come from out of state. Insofar as Maine's discriminatory tax has increased tuition, that burden is felt almost entirely by out of staters, deterring them from enjoying the benefits of camping in Maine. [n.15] In sum, the Maine statute facially discriminates against interstate commerce, and is all but per se invalid. See, e.g., Oregon Waste, 511 U. S., at 100-101.

We recognize that the Town might have attempted todefend the Maine law under the per se rule by demonstrating that it " `advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives.' " Id., at 101 (quoting New Energy Co., 486 U. S., at 278). In assessing respondents' arguments, we would have applied our "strictest scrutiny." Hughes v. Oklahoma, 441 U.S. 322, 337 (1979). This is an extremely difficult burden, "so heavy that `facial discrimination by itself may be a fatal defect.' " Oregon Waste, 511 U. S., at 101 (quoting Hughes, 441 U. S., at 337); see Chemical Waste Management, Inc. v. Hunt, 504 U.S. 334, 342 (1992) ("Once a state tax is found to discriminate against out of state commerce, it is typically struck down without further inquiry"). Perhaps realizing the weight of its burden, the Town has made no effort to defend the statute under the per se rule, and so we do not address this question. See Fulton Corp. v. Faulkner, 516 U. S., at ___ (slip op., at 7-8). [n.16] We have no doubt that if petitioner's camp were a profit making entity, the discriminatory tax exemption would be impermissible.

The unresolved question presented by this case is whether a different rule should apply to tax exemptions for charitable and benevolent institutions. Though we have never had cause to address the issue directly, the applicability of the dormant Commerce Clause to the nonprofit sector of the economy follows from our prior decisions.

Our cases have frequently applied laws regulating commerce to not for profit institutions. In AssociatedPress v. NLRB, 301 U.S. 103 (1937), for example, we held the National Labor Relations Act as applied to the Associated Press' newsgathering activities to be an enactment entirely within Congress' Commerce Clause power, despite the fact that the A. P. "does not sell news and does not operate for a profit." Id., at 129. Noting that the A. P.'s activities "involve[d] the constant use of channels of interstate and foreign communication," we concluded that its operations "amount[ed] to commercial intercourse, and such intercourse is commerce within the meaning of the Constitution." Id., at 128. See also Polish National Alliance of United States v. NLRB, 322 U.S. 643 (1944).

We have similarly held that federal antitrust laws are applicable to the anticompetitive activities of nonprofit organizations. See National Collegiate Athletic Assn. v. Board of Regents of Univ. of Okla., 468 U.S. 85, 100, n. 22 (1984) (Sherman Act §1 applies to nonprofits); American Soc. of Mechanical Engineers, Inc. v. Hydrolevel Corp., 456 U.S. 556, 576 (1982) ("[I]t is beyond debate that nonprofit organizations can be held liable under the antitrust laws"); Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975). The nonprofit character of an enterprise does not place it beyond the purview of federal laws regulating commerce. See also NLRB v. Yeshiva Univ., 444 U.S. 672, 681, n. 11 (1980) (noting that in context of amendments to National Labor Relations Act "Congress appears to have agreed that nonprofit institutions `affect commerce' under modern economic conditions").

We have already held that the dormant Commerce Clause is applicable to activities undertaken without the intention of earning a profit. In Edwards v. California, 314 U.S. 160 (1941), we addressed the constitutionality of a California statute prohibiting the transport into that State of indigent persons. We struck the statute down as a violation of the dormant Commerce Clause, reasoning that "the transportation of persons is `commerce'," and that the California statute was an "unconstitutional barrier to [that] interstate commerce." Id., at 172-173. In determining whether the transportation of persons is "commerce," we noted that "[i]t is immaterial whether or not the transportation is commercial in character." Id., at 172, n. 1.

We see no reason why the nonprofit character of an enterprise should exclude it from the coverage of either the affirmative or the negative aspect of the Commerce Clause. See Hughes, 441 U. S., at 326, n. 2; Philadelphia v. New Jersey, 437 U. S., at 621-623 (rejecting "two tiered definition of commerce"); Sporhase, 458 U. S., at 953; see also supra, at 8-9. There are a number of lines of commerce in which both for profit and nonprofit entities participate. Some educational institutions, some hospitals, some child care facilities, some research organizations, and some museums generate significant earnings; and some are operated by not for profit corporations. See Hansmann, The Role of Nonprofit Enterprise, 89 Yale L. J. 835, 835, and n. 1, 865 (1980).

A nonprofit entity is ordinarily understood to differ from a for profit corporation principally because it "is barred from distributing its net earnings, if any, to individuals who exercise control over it, such as members, officers, directors, or trustees." Id., at 838. [n.17] Nothing intrinsic to the nature of nonprofit entities prevents them from engaging in interstate commerce. Summer camps may be operated as for profit or nonprofit entities; nonprofits may depend — as here — in substantial part on fees charged for their services. Clotfelter, The Distributional Consequences of Nonprofit Activities, in Who Benefits from the Nonprofit Sector? 1, 6 (C. Clotfelter ed., 1992) (nonprofits in some sectors are "heavily dependent on fees by paying customers, with private payments accounting for at least half of total revenues"). Whether operated on a for profit or nonprofit basis, they purchase goods and services in competitive markets, offer their facilities to a variety of patrons, and derive revenues from a variety of sources, some of which are local and some out of State.

For purposes of Commerce Clause analysis, any categorical distinction between the activities of profit making enterprises and not for profit entities is therefore wholly illusory. Entities in both categories are major participants in interstate markets. And, although the summer camp involved in this case may have a relatively insignificant impact on the commerce of the entire Nation, the interstate commercial activities of nonprofit entities as a class are unquestionably significant. [n.18] See Wickard v. Filburn, 317 U.S. 111, 127-128 (1942); Lopez, 514 U. S., at ___ (slip op., at 6, 10).

From the State's standpoint it may well be reasonable to use tax exemptions as a means of encouraging nonprofit institutions to favor local citizens, notwithstanding any possible adverse impact on the larger markets in which those institutions participate. Indeed, if we view the issue solely from the State's perspective, it is equally reasonable to use discriminatory tax exemptions as a means of encouraging the growth of local trade. But as our cases clearly hold, such exemptions are impermissible. See, e.g., Bacchus, 468 U. S., at 273. Protectionism, whether targeted at for profit entities or serving, as here, to encourage nonprofits to keep their efforts close to home, is forbidden under the dormant Commerce Clause. [n.19] If there is need for a special exception fornonprofits, Congress not only has the power to create it, [n.20] but also is in a far better position than we to determine its dimensions. [n.21]

Rather than urging us to create a categorical exception for nonprofit entities, the Town argues that Maine's exemption statute should be viewed as an expenditure of government money designed to lessen its social service burden and to foster the societal benefits provided by charitable organizations. So characterized, the Town submits that its tax exemption scheme is either a legitimate discriminatory subsidy of only those charities that choose to focus their activities on local concerns, or alternatively a governmental "purchase" of charitable services falling within the narrow exception to the dormant Commerce Clause for States in their role as "market participants," see, e.g., Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976); Reeves, Inc. v. Stake, 447 U.S. 429 (1980). We find these arguments unpersuasive. Although tax exemptions and subsidies serve similar ends, they differ in important and relevant respects, and our cases have recognized these distinctions. As for the "market participant" argument, wehave already rejected the Town's position in a prior case, and in any event respondents' open ended exemption for charitable and benevolent institutions is not analogous to the industry specific state actions that we reviewed in Alexandria Scrap and Reeves.

The Town argues that its discriminatory tax exemption is, in economic reality, no different from a discriminatory subsidy of those charities that cater principally to local needs. Noting our statement in West Lynn Creamery that "[a] pure subsidy funded out of general revenue ordinarily imposes no burden on interstate commerce, but merely assists local business," 512 U. S., at 199, the Town submits that since a discriminatory subsidy may be permissible, a discriminatory exemption must be too. We have "never squarely confronted the constitutionality of subsidies," id., at 199, n. 15, and we need not address these questions today. Assuming, arguendo, that the Town is correct that a direct subsidy benefitting only those nonprofits serving principally Maine residents would be permissible, our cases do not sanction a tax exemption serving similar ends. [n.22]

In Walz v. Tax Comm'n of City of New York, 397 U.S. 664 (1970), notwithstanding our assumption that a direct subsidy of religious activity would be invalid, [n.23] we heldthat New York's tax exemption for church property did not violate the Establishment Clause of the First Amendment. [n.24] That holding rested, in part, on the premise that there is a constitutionally significant difference between subsidies and tax exemptions. [n.25] We have expressly recognized that this distinction is also applicable to claims that certain state action designed to give residents an advantage in the market place is prohibited by the Commerce Clause.

In New Energy Co. of Ind. v. Limbach, 486 U.S. 269 (1988), we found unconstitutional under the Commerce Clause an Ohio tax scheme that provided a sales tax credit for ethanol produced in State, or manufactured in another State to the extent that State gave similar tax advantages to ethanol produced in Ohio. We recognized that the party challenging the Ohio scheme was "eligible to receive a cash subsidy" from its home State, and was therefore "the potential beneficiary of a scheme no less discriminatory than the one that it attacks, and no less effective in conferring a commercial advantage over out of state competitors." Id., at 278. That was of no importance. We noted: "The Commerce Clause does not prohibit all state action designed to give its residents anadvantage in the marketplace, but only action of that description in connection with the State's regulation of interstate commerce. Direct subsidization of domestic industry does not ordinarily run afoul of that prohibition; discriminatory taxation . . . does." Ibid. (emphasis in original). See also West Lynn, 512 U. S., at 210 (Scalia, J., concurring in judgment) (drawing similar distinction between forbidden generally applicable tax with discriminatory "exemption" and permissible "subsidy . . . funded from the State's general revenues"). This distinction is supported by scholarly commentary as well as precedent, and we see no reason to depart from it. See Enrich, Saving the States from Themselves: Commerce Clause Constraints on State Tax Incentives for Business, 110 Harv. L. Rev. 377, 442-443 (1996); Hellerstein & Coenen, Commerce Clause Restraints on State Business Development Incentives, 81 Cornell L. Rev. 789, 846-848 (1996). [n.26] The Town's claim that its discriminatory tax scheme should be viewed as a permissible subsidy is therefore unpersuasive. [n.27]

Finally, the Town argues that its discriminatory tax exemption scheme falls within the "market participant" exception. As we explained in New Energy Co.: "That doctrine differentiates between a State's acting in its distinctive governmental capacity, and a State's acting in the more general capacity of a market participant; only the former is subject to the limitations of the negative Commerce Clause." 486 U. S., at 277. See White v. Massachusetts Council of Constr. Employers, Inc., 460 U.S. 204, 208 (1983); Reeves, Inc. v. Stake, 447 U. S., at 436-437; Hughes v. Alexandria Scrap Corp., 426 U. S., at 810.

In Alexandria Scrap we concluded that the State of Maryland had, in effect, entered the market for abandoned automobile hulks as a purchaser because it was using state funds to provide bounties for their removal from Maryland streets and junkyards. Id., at 809-810. In Reeves, the State of South Dakota similarly participated in the market for cement as a seller of the output of the cement plant that it had owned and operated for many years. 447 U. S., at 431-432. And in White, the city of Boston had participated in the construction industry by funding certain projects. 460 U. S., at 205-206. These three cases stand for the proposition that, for purposes of analysis under the dormant Commerce Clause, a State acting in its proprietary capacity as a purchaser or seller may "favor its own citizens over others." Alexandria Scrap, 426 U. S., at 810.

Maine's tax exemption statute cannot be characterized as a proprietary activity falling within the market participant exception. In New Energy Co., Ohio argued similarly that a discriminatory tax credit program fell within the exception. We noted that the tax program had "the purpose and effect of subsidizing a particular industry, as do many dispositions of the tax laws." 486 U. S., at 277. "That," we explained, "does not transform it into a form of state participation in the free market." Ibid. "The Ohio action ultimately at issue is neither its purchase nor its sale of ethanol, but its assessment and computation of taxes — a primeval governmental activity." Ibid. As we indicated in White: "In this kind of case there is `a single inquiry: whether the challenged "program constituted direct state participation in the market." ' " 460 U. S., at 208 (quoting Reeves, 447 U. S., at 436, n. 7). A tax exemption is not the sort of direct state involvement in the market that falls within the market participation doctrine.

Even if we were prepared to expand the exception in the manner suggested by the Town, the Maine tax statute at issue here would be a poor candidate. Like the tax exemption upheld in Walz — which applied to libraries, art galleries, and hospitals as well as churches- [n.28] the exemption that has been denied to petitioner is available to a broad category of charitable and benevolent institutions. [n.29] For that reason, nothing short of a dramatic expansion of the "market participant" exception would support its application to this case. Alexandria

Scrap involved Maryland's entry into the market for automobile hulks, a discrete activity focused on a single industry. Similarly, South Dakota's participation in the market for cement was — in part because of its narrow scope — readily conceived as a proprietary action of the State. In contrast, Maine's tax exemption — which sweeps to cover broad swathes of the nonprofit sector — must be viewed as action taken in the State's sovereign capacity rather than a proprietary decision to make an entry into all of the markets in which the exempted charities function. See White, 460 U. S., at 211, n. 7 (noting that "there are some limits on a state or local government's ability to impose restrictions that reach beyond the immediate parties with which the government transacts business"). The Town's version of the "market participant" exception would swallow the rule against discriminatory tax schemes. Contrary to the Town's submission, the notion that whenever a State provides a discriminatory tax abatement it is "purchasing" some service in its proprietary capacity is not readily confined to the charitable context. A special tax concession for liquors indigenous to Hawaii, for example, might be conceived as a "purchase" of the jobs produced by local industry, or an investment in the unique local cultural value provided by these beverages. Cf. Bacchus, 468 U. S., at 270-271. Discriminatory schemes favoring local farmers might be seen as the "purchase" of agricultural services in order to ensure that the State's citizens will have a steady local supply of the product. Cf. West Lynn, 512 U. S., at 190 (striking down statute protecting in state milk producers designed to "preserve . . . local industry" "thereby ensur[ing] a continuous and adequate supply of fresh milk for our market" (internal quotation marks omitted)). Our cases provide no support for the Town's radical effort to expand the market participant doctrine.

As was true in Bacchus Imports, Ltd. v. Dias, the facts of this particular case, viewed in isolation, do not appear to pose any threat to the health of the national economy. Nevertheless, history, including the history of commercial conflict that preceded the constitutional convention as well as the uniform course of Commerce Clause jurisprudence animated and enlightened by that early history, provides the context in which each individual controversy must be judged. The history of our Commerce Clause jurisprudence has shown that even the smallest scale discrimination can interfere with the project of our federal Union. As Justice Cardozo recognized, to countenance discrimination of the sort that Maine's statute represents would invite significant inroads on our "national solidarity":

"The Constitution was framed under the dominion of a political philosophy less parochial in range. It was framed upon the theory that the peoples of the several states must sink or swim together, and that in the long run prosperity and salvation are in union and not division." Baldwin v. G. A. F. Seelig, Inc., 294 U.S. 511, 523 (1935).

The judgment of the Maine Supreme Judicial Court is reversed.

It is so ordered.


1 Most of petitioner's tax bill was for real estate taxes. See, e.g., App. 43 (petitioner paid 1991 real estate taxes of $20,770.71 and personal property taxes of $994.70).

2 The statute provides:

"The following property of institutions and organizations is exempt from taxation:

"1. Property of institutions and organizations.

"A. The real estate and personal property owned and occupied or used solely for their own purposes by benevolent and charitable institutions incorporated by this State, and none of these may be deprived of the right of exemption by reason of the source from which its funds are derived or by reason of limitation in the classes of persons for whose benefit such funds are applied.

"(1) Any such institution that is in fact conducted or operated principally for the benefit of persons who are not residents of Maine is entitled to an exemption not to exceed $50,000 of current just value only when the total amount of any stipends or charges that it makes or takes during any tax year, as defined by section 502, for its services, benefits or advantages divided by the total number of persons receiving such services, benefits or advantages during the same tax year does not result in an average rate in excess of $30 per week when said weekly rate is computed by dividing the average yearly charge per person by the total number of weeks in a tax year during which such institution is in fact conducted or operated principally for the benefit of persons who are not residents ofMaine. No such institution that is in fact conducted or operated principally for the benefit of persons who are not residents of Maine and makes charges that result in an average weekly rate per person, as computed under this subparagraph, in excess of $30 may be entitled to tax exemption. This subparagraph does not apply to institutions incorporated as nonprofit corporations for the sole purpose of conducting medical research.

"For the purposes of this paragraph, `benevolent and charitable institutions' include, but are not limited to, nonprofit nursing homes and nonprofit boarding homes and boarding care facilities licensed by the Department of Human Services pursuant to Title 22, chapter 1665 or its successor, nonprofit community mental health service facilities licensed by the Commissioner of Mental Health, Mental Retardation, and Substance Abuse Services, pursuant to Title 34-B, chapter 3 and nonprofit child care centers incorporated by this State as benevolent and charitable institutions. For the purposes of this paragraph, `nonprofit' means a facility exempt from taxation under Section 501(c)(3) of the Code . . . ." Me. Rev. Stat. Ann., Tit. 36, §652(1)(A) (Supp. 1996).

3 The statute's language reserving the property tax exemption for those entities operated "principally for the benefit" of Maine residents is not without ambiguity. The parties are in agreement, however, that because petitioner's camp is attended almost entirely by out of staters, it would not qualify for the exemption under any reading of the language. See Brief for Petitioner 2; Brief for Respondents 2, n. 3; Tr. of Oral Arg. 36. The courts below appear to have presumed the same, and we of course accept their interpretation of state law.

4 Petitioner also argued below that the Maine statute violated theEqual Protection Clauses of the United States and Maine Constitutions, and the Privileges and Immunities Clause, Art. IV, § 2, of the Federal Constitution. The Maine Supreme Judicial Court had already found the statute constitutional under an equal protection analysis in a prior decision, and adhered to its earlier view. See Green Acre Baha'i Institute v. Eliot, 159 Me. 395, 193 A. 2d 564 (1963); 655 A. 2d 876, 879-880 (1995). As for the privileges and immunities claim, the Supreme Judicial Court found petitioner's argument unavailing. Id., at 880. These claims are not before us.

5 The Superior Court referred to all of the original defendants as "Municipal Defendants" because the State of Maine intervened to defend the constitutionality of its statute. App. to Pet. for Cert. 9a. However, the State did not appeal the adverse decision of the Superior Court and, therefore, is not a respondent in this Court. We shall use the term "Town" to refer to the respondents collectively.

6 Me. Rev. Stat. Ann., Tit. 36, §196 (1990).

7 See also West Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 193, n. 9 (1994) (noting that "[t]he `negative' aspect of the CommerceClause was considered the more important by the `father of the Constitution,' James Madison"); Hughes v. Oklahoma, 441 U.S. 322, 325-326 (1979); Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 807, n. 16 (1976) (quoting W. Rutledge, A Declaration of Legal Faith 25-26 (1947)).

8 See New York v. United States, 505 U.S. 144, 171 (1992); Quill Corp. v. North Dakota, 504 U.S. 298, 318 (1992); Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 429-430, 434-435 (1946).

9 In West v. Kansas Natural Gas Co., 221 U.S. 229 (1911), we held invalid under the Commerce Clause an Oklahoma statute that had the effect of preventing out of state consumers from purchasing Oklahoma natural gas. We ruled similarly in Pennsylvania v. West Virginia, 262 U.S. 553 (1923), that a West Virginia statute limiting out of state users' access to West Virginia gas to that not "required to meet the local needs for all purposes," id., at 594, violated the Commerce Clause. We found those cases directly analogous in New England Power, ruling invalid a state law that reserved for state citizens domestically generated hydroelectric power. In Philadelphia v. New Jersey, 437 U.S. 617 (1978), we struck down a New Jersey statute prohibiting certain categories of out of state waste from flowing into the State's landfills, noting that "a State may not accord its own inhabitants a preferred right of access over consumers in other States to natural resources located within its borders." Id., at 627. And, in Hughes v. Oklahoma, 441 U.S. 322, 338 (1979), we ruled that a statute prohibiting the export of minnows for sale out of state violated the Commerce Clause. We held similarly in Sporhase v. Nebraska ex rel. Douglas, 458 U.S. 941, 958 (1982), that a provision preventing the export of ground water to States not allowing reciprocal export rights was an impermissible barrier to commerce. Insofar as Sporhase suggests certain narrow circumstances in which the reservation of natural resources for State citizens may be permissible, see id., at 956-957, these concerns are not implicated here.

10 We have long noted the applicability of our dormant Commerce Clause jurisprudence to service industries. See, e.g., C & A Carbone, Inc. v. Clarkstown, 511 U.S. 383, 391 (1994) ("[T]he article of commerce is not so much the solid waste itself, but rather the service of processing and disposing of it"); Fort Gratiot Sanitary Landfill, Inc. v. Michigan Dept. of Natural Resources, 504 U.S. 353, 359 (1992) (noting that "arrangements between out of state generators of waste and the . . . operator of a waste disposal site" may be "viewed as `sales' of garbage or `purchases' of transportation and disposal services"); Boston Stock Exchange v. State Tax Comm'n, 429 U.S. 318, 337 (1977) ("[N]o State may discriminatorily tax . . . the business operations performed in any other State"); Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 42 (1980) (striking down State statute under dormant Commerce Clause that favored in state over out of state entities in the investor services market). Given the substantial portion of the national economy now devoted to service industries, see Bureau of Census, Statistical Abstract of the United States 1995, p. 779 (Table 1288) (noting service industries constituted approximately 20 percent of gross domestic product in 1992), this is a natural development in our dormant Commerce Clause jurisprudence.

11 The Town argues that "the Commerce Clause protects out of state competitors but does not protect out of state consumers." Brieffor Respondents 16. As the discussion above indicates, our cases have rejected this view.

12 See Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 268 (1984) (discriminatory excise tax exemption); Maryland v. Louisiana, 451 U.S. 725, 756 (1981) (tax scheme "unquestionably discriminates against interstate commerce . . . as the necessary result of various tax credits and exclusions"); Westinghouse Elec. Corp. v. Tully, 466 U.S. 388, 399-400, and n. 9 (1984); see also West Lynn Creamery, Inc. v. Healy, 512 U. S., at 210 (Scalia, J., concurring in judgment).

13 Because the Maine tax is facially discriminatory, this case is unlike Commonwealth Edison Co. v. Montana, 453 U.S. 609 (1981). There, we held permissible under the Commerce Clause a generally applicable Montana severance tax on coal extracted from in state mines. Appellants challenged the tax arguing, inter alia, that it discriminated against interstate commerce because 90% of the coal happened to be shipped to out of state users, and the tax burden was therefore borne principally by nonresidents. We rejected this claim, noting that "there is no real discrimination in this case; the tax burden is borne according to the amount of coal consumed and not according to any distinction between in state and out of state consumers." Id., at 619. We recognized that an approach to the dormant Commerce Clause requiring an assessment of the likely demand for a particular good by nonresidents and a State's ability to shift its tax burden out of State "would require complex factual inquiries about such issues as elasticity of demand for the product and alternative sources of supply," id., at 619, n. 8, and declined to adopt such a difficult to police test. Here, in contrast, the tax scheme functions by design and on its face to burden out of stateusers disproportionately. Our analysis in Commonwealth Edison is therefore inapplicable.

CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69 (1987), isalso inapposite. In that case, we rejected the argument that a facially nondiscriminatory state law deterring hostile tender offers violated the dormant Commerce Clause because most such offers "are launched by offerors outside Indiana." Id., at 88. We explained that "nothing in the . . . Act imposes a greater burden on out of state offerors than it does on similarly situated Indiana offerors." Ibid. (emphasis added). Here, the discrimination appears on the face of the Maine statute. Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (1978), is similarly distinguishable. See id., at 126 ("The fact that the burden of a state regulation falls on some interstate companies does not, by itself, establish a claim of discrimination against interstate commerce").

14 We therefore have no need to consider these matters further. Cf. Fulton Corp. v. Faulkner, 516 U. S. ___ , ___ (1996) (slip op., at 16) (noting "complexity of economic incidence analysis").

15 The Town argues that these effects are entirely speculative, because the record does not reflect any decision by a potential camper not to attend petitioner's camp as a result of the burden imposed. Brief for Respondents 16. The Supreme Judicial Court appears to have adopted similar reasoning. 655 A. 2d, at 879. This misconstrues the proper analysis. As we made clear most recently in Fulton Corp. v. Faulkner, 516 U. S., at ___ (slip op., at 7, n. 3), there is no " `de minimis' defense to a charge of discriminatory taxation under the Commerce Clause." A particularized showing of the sort respondent seeks is not required. See Associated Industries of Mo. v. Lohman, 511 U.S. 641, 650 (1994) ("[A]ctual discrimination, wherever it is found, is impermissible, and the magnitude and scope of the discrimination have no bearing on the determinative question whether discrimination has occurred"); Maryland v. Louisiana, 451 U.S. 725, 756 (1981); see also Boston Stock Exchange v. State Tax Comm'n, 429 U.S. 318, 334, n. 13 (1977).

16 Justice Scalia submits that we err by following our precedent in Fulton and declining to address an argument that the Town itself did not think worthy of pressing. Post, at 8-9. But even if there were reason to consider the State's compliance with the per se rule, the Town would not prevail. In the single case Justice Scalia points to in which we found the per se standard to have been met, Maine v. Taylor, 477 U.S. 131 (1986), the State had no " `reasonable nondiscriminatory alternatives,' " Oregon Waste, 511 U. S., at 101 (quoting New Energy Co., 486 U. S., at 278), to the action it had taken. Absent a bar on the import of certain minnows, there was no way for Maine to protect its natural environment from the hazard of parasites and nonnative species that might have been accidentally introduced into the State's waters. Taylor, 477 U. S., at 141.

In contrast, here Maine has ample alternatives short of a facially discriminatory property tax exemption to achieve its apparent goal of subsidizing the attendance of the State's children at summer camp. Maine could, for example, achieve this end by offering direct financial support to parents of resident children. Cf. Shapiro v. Thompson, 394 U.S. 618 (1969). Though we have not had the occasion to address theissue, it might also be permissible for the State to subsidize Maine camps directly to the extent that they serve residents. See West Lynn Creamery, Inc. v. Healy, 512 U. S., at 199, n. 15; New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 278 (1988) (noting that "[d]irect subsidization of domestic industry does not ordinarily run afoul" of the Commerce Clause); Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 816 (1976) (Stevens, J., concurring).

While the Town does argue its case under the less exacting analysis set forth in, e.g., Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970), "this lesser scrutiny is only available `where other [nondiscriminatory] legislative objectives are credibly advanced and there is no patent discrimination against interstate trade.' " Chemical Waste, 504 U. S., at 343, n. 5 (quoting Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978) (emphasis added)). Because the Maine statute is facially discriminatory, the more deferential standard is inapplicable. Contrary to Justice Scalia's suggestion, this case is quite unlike General Motors Corp. v. Tracy, 519 U. S. ___ (1997). There, the Court premised its holding that the statute at issue was not facially discriminatory on the view that sellers of "bundled" and "unbundled" natural gas were principally competing in different markets. See id., at ___ (slip op., at 18, 21) ("dormant Commerce Clause protects markets and participants in markets, not taxpayers as such"). While it may be true that "[d]isparate treatment constitutes discrimination only if the objects of the disparate treatment are . . . similarly situated," post, at 7, there is no question that the statute at issue here is facially discriminatory because it disparately treats identically situated Maine nonprofit camps depending upon whether they favor in state, as opposed to out of state, campers.

17 Maine's law governing nonprofits embraces this conception, see Me. Rev. Stat. Ann., Tit. 13-B, §102(9) (1981), as does the tax exemption statute at issue here. The exemption applies to "benevolent and charitable institutions." Me. Rev. Stat. Ann., Tit. 36, §652(1)(A) (Supp. 1996). To qualify, the entity must devote "[a]ll profits derived from [its] operation . . . and the proceeds from the sale of its property . . . exclusively to the purposes for which it is organized." §652(1)(C)(3). "A director, trustee, officer or employee of an organization claiming exemption is not entitled to receive directly or indirectly any pecuniary profit from the operation of that organization, excepting reasonable compensation for services ineffecting its purposes." §652(1)(C)(2). The statute also expressly designates certain categories of entities (nonprofit nursing homes, boarding homes, community mental health service facilities, and child care centers) that qualify for tax exempt status under federal law, 26 U.S.C. § 501(c)(3), as falling within its ambit. See Me. Rev. Stat. Ann., Tit. 36, §652(1)(A) (Supp. 1996) (" `[B]enevolent and charitable institutions' include, but are not limited to, [the specified entities]").

18 We are informed by amici that "the nonprofit sector spends over $389 billion each year in operating expenses — approximately seven percent of the gross national product." Brief for American Council on Education et al. as Amici Curiae 19. In recent years, nonprofits have employed approximately seven percent of the Nation's paidworkers, roughly 9.3 million people in 1990. V. Hodgkinson, M. Weitzman, C. Toppe, & S. Noga, Nonprofit Almanac 1992-1993: Dimensions of the Independent Sector 29 (1992) (Table 1.5).

Justice Scalia wrongly suggests that Maine's law offers only a "narrow tax exemption," post, at 4, which he implies has no substantial effect on interstate commerce and serves only "to relieve the State of its burden of caring for its residents," post, at 1. This characterization is quite misleading. The statute expressly exempts from tax property used by such important nonprofit service industries as nursing homes and child care centers. See Me. Rev. Stat. Ann., Tit. 36, §652(1)(A)(1) (Supp. 1996). Nonprofit participation in these sectors is substantial. Nationally, nonprofit nursing homes had estimated revenues of $18 billion in 1994. U. S. Bureau of the Census, Service Annual Survey: 1994, Table 7.3 (1996). These entities compete with a sizeable for profit nursing home sector, which had revenues of approximately $40 billion in 1994. Id., at Table 7.1. Similarly, the $5 billion nonprofit market in child day care services competes with an $11 billion for profit industry. Id., at Tables 8.1, 8.3 (1994 data).

Nonprofit hospitals and health maintenance organizations also receive an exemption from Maine's property tax. See Me. Rev. Stat. Ann., Tit. 36, §652(1)(A), (K) (Supp. 1996). While operating as nonprofit entities, their activities are serious business. In Maine Medical Center v. Lucci, 317 A. 2d 1 (1974), the Supreme Judicial Court presumed that a "large hospital" employing 2,000 people qualified as a "benevolent and charitable institution" for purposes of the §651(1)(A) exemption, and held that a newly constructed $3.3 million parking facility — which patients, visitors, and staff were charged a fee to use — was also exempt from the tax. Though the garage was being operated at an immediate loss "projected estimates of income and expense indicated a possible recovery of the capital investment over a period of twenty years." Id., at 2. Nonprofit hospitals had national revenues of roughly $305 billion in 1994, considerably more than the $34 billion in revenues collected by hospitals operated on a for profit basis. U. S. Bureau of the Census, Service Annual Survey: 1994, Tables 7.1, 7.3 (1996).

Maine law further permits qualifying nonprofits to rent out their property on a commercial basis at market rates in order to support other activities, so long as that use of the property is only incidental to their own purposes. See Maine Medical Center, 317 A. 2d, at 2 (citing with approval Curtis v. Androscoggin Lodge, No. 24, Independent Order of Odd Fellows, 99 Me. 356, 360, 59 A. 518, 520(1904)); State Young Men's Christian Assn. v. Winthrop, 295 A. 2d 440, 442 (Me. 1972). Although Maine's tax exemption statute was amended in 1953 to specify that the property need not be occupied by the charity to qualify for the exemption, but may also be "used solely" for its own purposes, see id., at 442, this extension did not alter the "well defined rul[e] of exemption" permitting "occasional or purely incidental" renting. Green Acre Baha'i Institute, 150 Me., at 354, 110 A. 2d, at 584; see also Alpha Rho Zeta of Lambda Chi Alpha, Inc. v. Waterville, 477 A. 2d 1131, 1141 (Me. 1984). But cf. Nature Conservancy of the Pine Tree State, Inc. v. Bristol, 385 A. 2d 39, 43 (Me. 1978) (holding that requirement property be used "solely" for institution's own purposes prohibits tax exemption where grantor of property to charity maintains private rights of use). Maine's statute expressly contemplates that entities receiving the benefit of the tax exemption may well earn profits, though of course these must be plowed back into the enterprise or otherwise appropriately used. See Me. Rev. Stat. Ann., Tit. 36, §652(1)(C)(3) (Supp. 1996).

19 Contrary to Justice Scalia's suggestion, nothing in our holding today "prevent[s] a State from giving a tax break to charities that benefit the State's inhabitants." Post, at 1. The States are, of course, free to provide generally applicable nondiscriminatory tax exemptions without running afoul of the dormant Commerce Clause.

20 See n. 8, supra.

21 We must admit to some puzzlement as to the force of the argument underlying Justice Scalia's dissent. On the one hand, he suggests that a categorical exemption of nonprofit activities from dormant Commerce Clause scrutiny would be proper. Post, at 13-14. Yet at the same time, he makes a great effort to characterize this statute as being so narrow that, whatever the appropriate generally applicable rule, the dormant Commerce Clause ought not to apply here. Post, at 4. As we have explained, the argument in favor of a categorical exemption for nonprofits is unpersuasive, and we disagree with Justice Scalia's characterization of this statute's effects. Accordingly, we reject his position on either of these theories.

22 As the Supreme Judicial Court made clear, 655 A. 2d, at 878, under Maine law an exemption is categorized as a "tax expenditure." Me. Rev. Stat. Ann., Tit. 36, §196 (1990). The Town's effort to argue that this state statutory categorization allows it to elide the Federal constitutional distinction between tax exemptions and subsidies is unavailing. We recognized long ago that a tax exemption can be viewed as a form of government spending. See Regan v. Taxation with Representation of Wash., 461 U.S. 540, 544 (1983). The distinction we have drawn for dormant Commerce Clause purposes does not turn on this point.

23 We noted, "[o]bviously a direct money subsidy would be a relationship pregnant with involvement and, as with most governmental grant programs, could encompass sustained and detailed administrative relationships for enforcement of statutory or administrative standards, but that is not this case." Walz, 397 U. S., at 675.

24 We reasoned that "New York's statute [cannot be read] as attempting to establish religion; it . . . simply spar[es] the exercise of religion from the burden of property taxation levied on private profit institutions." Id., at 673.

25 "The grant of a tax exemption is not sponsorship since the government does not transfer part of its revenue to churches but simply abstains from demanding that the church support the state. No one has ever suggested that tax exemption has converted libraries, art galleries, or hospitals into arms of the state or put employees `on the public payroll.' " Id., at 675. As Justice Brennan noted: "Tax exemptions and general subsidies . . . are qualitatively different." Id., at 690 (concurring opinion).

26 The distinction provides a sufficient response to the Town's argument that our ruling today would invalidate a State's subsidization of all or part of its residents' tuition at State owned universities.

27 Justice Scalia, post, at 11-12, and n. 4, would distinguish this line of authority by holding that it should not apply where a State is giving tax relief to charitable enterprises. As explained in Part V, supra, we see no categorical reason to treat for profit and nonprofit entities differently under the dormant Commerce Clause. Justice Scalia's heavy reliance upon Board of Ed. of Ky. Annual Conference of Methodist Episcopal Church v. Illinois, 203 U.S. 553 (1906), is misplaced. In that case, a bequest to a Kentucky charitable corporation did not qualify for an exemption from the Illinois inheritance tax because the corporate legatee was not incorporated in Illinois. In this case, the petitioner is a Maine corporation, and the validity of the portion of the Maine statute that denies the exemption to out of state corporations is not at issue. Moreover, unlike the situation in Board of Ed. of Ky., in which none of thecharitable activities of the legatee were performed in Illinois, all of the benefits of attending petitioner's camp in Maine are "bestowed within her borders." Id., at 563. While the dictum that Justice Scalia quotes, post, at 12, is consistent with his analysis, it does not purport to address the applicability of the dormant Commerce Clause to charities in general, to resident charities, or to non resident charities that provide benefits for both residents and nonresidents.

28 See Walz, 397 U. S., at 666-667, and n. 1.

29 See Me. Rev. Stat. Ann., Tit. 36, §652(1)(A) (Supp. 1996) ("For the purposes of this paragraph, `benevolent and charitable institutions' include, but are not limited to, nonprofit nursing homes and nonprofit boarding homes and boarding care facilities . . . , nonprofit community mental health service facilities . . . [,] and nonprofit child care centers") (emphasis added).

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