Is the portion of Tennessee's $350 expungement filing fee that goes to the state general fund actually a tax?

Subject

Opinion No. 14-66, Fees for Expunging Criminal Convictions, July 1, 2014

Plain-English summary

Representative G.A. Hardaway asked whether the portion of the $350 expungement filing fee in Tenn. Code Ann. § 40-32-101(g)(10) that is allocated to the state general fund constitutes a tax. The AG said no.

§ 40-32-101(g) lets certain qualified nonviolent offenders petition to expunge and destroy their conviction records. The $350 filing fee is distributed: $50 to the TBI (for the costs of expunctions), $10 retained by the clerk, the remainder (290) to the trustee for allocation (5% to public defenders expunction fund, 45% to district attorneys expunction fund for fiscal years after 2012-13, and 50% to the general fund for fiscal years after 2012-13). So roughly $145 of the $350 currently goes to the general fund.

The fee/tax distinction turns on purpose, not label (State v. Nashville, C. & St. L. Ry.; Saturn Corp. v. Johnson; City of Tullahoma v. Bedford Cnty.). A tax raises general revenue for government debts and liabilities. A fee defrays the cost of providing a regulatory service or benefit. If the imposition is "paid into the public treasury as part of the state's general revenue and disbursed for general public need, it is a tax" (Memphis Natural Gas Co.).

The AG concluded the expungement fee is a fee. Nearly 65% of it is expressly designated for expungement costs. And § 40-32-101(g)(13) refers to the general-fund portion as "the amount allotted to the state under subdivision (g)(10)(C) to implement this subsection." That statutory framing ties the general-fund allocation to implementing the expungement program. Even if the legislature later directs some of the funds to "other criminal justice purposes" (as (g)(13) allows after a Department of Finance review), they would be funding criminal-justice administration, not "general public need."

The AG cited Crist v. Ervin, 56 So. 3d 745 (Fla. 2010) and Fox v. Hunt, 619 So. 2d 1364 (Ala. 1993). Both held that the portion of court fees allocated to the state general fund was not a tax where the state spent far more from the general fund on the judiciary than the fees generated. The Florida and Alabama Supreme Courts called that an "economic reality" point: when the state subsidizes the judiciary heavily from general revenue, the general-fund portion of court fees can fairly be viewed as offsetting that subsidy rather than generating general revenue.

The same arithmetic applied here. The Department of Finance and Administration reported $54,436 transmitted to the general fund from expungement fees in the first half of fiscal year 2014, against state criminal-justice spending of around $1 billion (including $125 million for the court system). The fee revenue was a fraction of the state's criminal-justice expenditure. Following Crist and Fox, the AG concluded the expungement fee was not operating as a tax.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Why does it matter whether the fee is a fee or a tax?

Tennessee has constitutional and statutory limits on taxes that do not apply to fees. Counties cannot impose taxes without legislative authority. Article XI, § 8 of the Tennessee Constitution limits special legislation imposing taxes. A challenge to the expungement fee as an unauthorized tax would have much greater traction than a challenge framed as a fee.

How is the $350 fee divided?

$50 to TBI for expunction costs. $10 retained by the clerk. Of the remaining $290: 5% to the public defenders expunction fund, 45% to the district attorneys expunction fund (after 2012-13), and 50% to the state general fund (after 2012-13). The general-fund share is roughly $145.

Why isn't the $145 general-fund portion a tax?

Because § 40-32-101(g)(13) earmarks it to "implement this subsection," and the state spends far more on criminal-justice administration than the fee generates. The general-fund allocation functions as a partial reimbursement of administrative costs rather than as a general revenue measure.

What is the economic-reality point from Crist and Fox?

When a state spends multiples of fee revenue on the underlying administrative function (here, courts and criminal-justice administration), it is "an accounting artifice" to say that fee revenue ends up funding programs other than the function for which the fee is collected. The general fund operates as a single accounting bucket, but real-world expenditures dwarf real-world fee revenue, so the fee is best understood as defraying costs.

What if the general-fund portion grows substantially?

§ 40-32-101(g)(13) requires the Department of Finance and Administration to review whether the general-fund allocation is adequate or whether some portion could be used for other criminal-justice purposes. The AG's analysis depends on the funds being used for criminal-justice administration. If they were redirected to truly unrelated programs, the fee-vs-tax line could be redrawn.

What is an expungement under § 40-32-101(g)?

A petition allowing certain qualified nonviolent offenders to have their conviction records expunged and destroyed. The criteria for eligibility are detailed in the statute. The fee finances the additional administrative costs (TBI processing, DA review, public-defender involvement, court review) of handling the expanded petition pool.

Background and statutory framework

Tennessee expanded its expungement framework in 2012 (the Tennessee Reentry Initiative) to allow certain nonviolent felons to seek expungement of their convictions. The $350 fee was set to defray the additional administrative load. The fee/tax distinction matters here because if the general-fund portion were a tax, the legislature would need to satisfy the procedural and substantive constraints applicable to taxes (under-color-of-law arguments, Article XI, § 8 considerations, federal precedent on excessive court fees, etc.). By tying the general-fund portion to administrative cost, the legislature kept the fee within the fee framework.

Crist (Florida) and Fox (Alabama) are the doctrinal anchors. Both responded to challenges that argued the diversion of court fees to the general fund converted them into taxes. Both rejected the argument by pointing to the much larger general-fund subsidy of the judiciary. The AG opinion uses the same arithmetic here.

Citations

• Tenn. Code Ann. § 40-32-101(g) (expungement of certain nonviolent convictions)
• Tenn. Code Ann. § 40-32-101(g)(10) ($350 filing fee and allocation formula)
• Tenn. Code Ann. § 40-32-101(g)(13) (Department of Finance and Administration review; general-fund portion "to implement this subsection")
• State v. Nashville, C. & St. L. Ry., 176 Tenn. 24, 137 S.W.2d 297 (1940) (Tennessee Supreme Court; nature of imposition is not determined by what legislature calls it)
• Saturn Corp. v. Johnson, 236 S.W.3d 156 (Tenn. Ct. App. 2007) (Tennessee Court of Appeals; nature of imposition determined by purpose)
• City of Tullahoma v. Bedford Cnty., 938 S.W.2d 408 (Tenn. 1997) (Tennessee Supreme Court; tax/fee definition)
• Memphis Natural Gas Co. v. McCanless, 183 Tenn. 635, 194 S.W.2d 476 (1946) (Tennessee Supreme Court; tax defined as general-revenue measure)
• Crist v. Ervin, 56 So. 3d 745 (Fla. 2010) (Florida Supreme Court; court fees to general fund not a tax)
• Fox v. Hunt, 619 So. 2d 1364 (Ala. 1993) (Alabama Supreme Court; jury fees to general fund not a tax)
• Tenn. Att'y Gen. Op. 13-50 (July 1, 2013) (fee/tax distinction)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2014/op14-066.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
July 1, 2014

Opinion No. 14-66

Fees for Expunging Criminal Convictions

QUESTION

Does the portion of the filing fee designated to be distributed under Tenn. Code Ann. § 40-32-101(g)(10) to the State general fund constitute a tax?

OPINION

No. Although a portion of the expunction filing fee is designated for allocation to the State's general fund, neither the fee nor this portion of it is a tax because the purpose of the fee is to defray the cost of the expunction process.

ANALYSIS

Tenn. Code Ann. § 40-32-101(g) allows certain qualified nonviolent offenders to petition to have the records relating to their criminal convictions expunged and destroyed. For this class of expunctions, the statute imposes a fee of $350 upon filing of the petition. Tenn. Code Ann. § 40-32-101(g)(10). The statute provides that the $350 will be distributed as follows:

Fifty dollars ($50.00) of the fee shall be transmitted to the Tennessee bureau of investigation for the purpose of defraying the costs incurred from the additional expunction petitions filed and granted as the result of this subsection. The clerk shall retain ten dollars ($10.00) of the fee and shall remit the remainder to the trustee to be allocated in the following manner:

(A) Five percent (5%) to the public defenders expunction fund;

(B) Forty percent (40%) to the district attorneys expunction fund for the fiscal year 2012-2013; provided, however, for all fiscal years following 2012-2013 this percent shall be forty-five percent (45%); and

(C) Fifty-five percent (55%) to the state general fund for fiscal year 2012-2013; provided, however, for all fiscal years following 2012-2013 this percent shall be fifty percent (50%).

Id. Thus, 50% of the remainder, or $145, is currently allocated to the State's general fund.

Whether this portion of the filing fee is actually a tax depends upon its purpose. It is well settled that "the nature of an imposition by government is not determined by what the legislature calls it." State v. Nashville, C. & St. L. Ry., 176 Tenn. 24, 137 S.W.2d 297, 299 (1940). Rather, "the nature of an imposition by government" is determined by "the purpose of the monetary imposition." Saturn Corp. v. Johnson, 236 S.W.3d 156, 160 (Tenn. Ct. App. 2007).

A tax is a revenue raising measure levied for the purpose of paying the government's general debts and liabilities. . . . A fee is imposed for the purpose of regulating a specific activity or defraying the cost of providing a service or benefit to the party paying the fee.

City of Tullahoma v. Bedford Cnty., 938 S.W.2d 408, 412 (Tenn. 1997) (citations omitted). If the imposition is "paid into the public treasury as part of the state's general revenue and disbursed for general public need, it is a tax." Saturn Corp., 236 S.W.3d at 160; see Memphis Natural Gas Co. v. McCanless, 183 Tenn. 635, 194 S.W.2d 476, 483 (1946). "If, however, the [imposition] 'is imposed for the purpose of regulating a specific activity or defraying the cost of providing a service or benefit to the party paying the [imposition],' it is a fee." Saturn Corp., 236 S.W.3d at 160 (quoting City of Tullahoma, 938 S.W.2d at 412).1

The purpose of the expunction fee imposed by § 40-32-101(g) is to defray the cost of the expunction process. Much of the fee, nearly 65%, is expressly designated for that purpose. Although the remaining amount is paid into the State's general fund, it too is intended to fund the expunction process; the statute itself refers to this portion of the fee as "the amount allotted to the state under subdivision (g)(10)(C) to implement this subsection." Tenn. Code Ann. § 40-32-101(g)(13) (emphasis added). Therefore, neither the expunction fee nor the portion of the fee allocated to the general fund is a tax.

Beginning July 1, 2013, the statute does require the Department of Finance and Administration to review the expunction process to determine if the amount allocated to the general fund "is adequate and if some portion of such funds could be used for other criminal justice purposes." Id. But even if some of the funds are ultimately used for other purposes, this does not make this portion of the fee a tax; the funds would not be "disbursed for general public need" but for criminal-justice purposes. Saturn Corp., 236 S.W.3d at 160. Two decisions from other states support this conclusion; both courts held that the portion of an imposition allocated to the state's general fund was not a tax, and in so holding, both courts acknowledged the economic realities often faced by the legislature in funding programs with the use of court fees. See Crist v. Ervin, 56 So. 3d 745, 749-50 (Fla. 2010); Fox v. Hunt, 619 So. 2d 1364, 1367 (Ala. 1993).

In Crist and in Hunt, the Supreme Courts of Florida and Alabama focused their discussion on the fact that while a portion of the court fee imposed was paid into the state's general fund, significant monies from the general fund had been appropriated to support the state's judiciary system and fund the administration of justice. In explaining its reasons for determining that the portion of a jury fee transmitted to the general fund was not a tax, the Alabama Supreme Court stated:

The State's evidence in support of its motion for summary judgment showed that in fiscal year 1989-90 the State, to run the judicial system, spent over $59 million more than the $500,000 collected in jury fees. This Court would have to deny the economic reality of the Legislature's funding of the judiciary in favor of an accounting artifice in order to hold that any portion of the jury trial fees collected by the circuit court clerks actually went to programs, other than the judiciary, funded through the state's general fund. Therefore, we hold that neither the jury trial fee, nor that portion of it that is paid directly into the general fund, is an unconstitutional tax.

Fox, 619 So. 2d at 1367; see also Crist, 56 So. 3d at 749-50 ("Because the Legislature funded the costs of the administration of justice with far more than the amount of filing fees deposited into the general revenue fund, the filing fee statutes are not operating as an unconstitutional tax.").

A similar situation exists with respect to the expunction filing fee under Tenn. Code Ann. § 40-32-101(g). Pursuant to the review required by subdivision (g)(13), the Department of Finance and Administration has reported that from July through December 2013, $54,436 was transmitted to the general fund under subdivision (g)(10)(C).2 In contrast, the Governor's Budget for Fiscal Year 2013-2014 recommended amounts totaling well over $1 billion in State funds for law, safety, and correction, including nearly $125 million for the court system. Tenn. Annual Budget, Fiscal Year 2013-2014, B-229.3 See also 2013 Tenn. Pub. Acts, ch. 453 (FY 2013-14 appropriations act reflects authorization for judicial-department expenditure of $124,951,000). Even if less than half of that amount funded the criminal-court system, the amount the State collected from expunction fees during the second half of 2013 represents only a small fraction of the amount the State likely spent during that period on administering criminal justice. "Because the [General Assembly] funded the costs of the administration of [criminal] justice with far more than the amount of filing fees deposited into the general revenue fund, the filing fee statute [is] not operating as a . . . tax." Crist, 56 So. 3d at 750.

ROBERT E. COOPER, JR.
Attorney General and Reporter

JOSEPH F. WHALEN
Acting Solicitor General

BRIAN J. RAMMING
Assistant Attorney General

Requested by:
The Honorable G.A. Hardaway
State Representative
37 Legislative Plaza
Nashville, Tennessee 37243

Footnotes:

1 Other jurisdictions have likewise recognized that an important distinction between fees and taxes is that fees, unlike taxes, are charged in exchange for a particular government service and confer a special benefit on fee payers. See Tenn. Att'y Gen. Op. 13-50, at 4-5 (July 1, 2013).

2 Jan. 23, 2014 Memorandum from the Commissioner of Finance and Administration to the Speakers of the House and Senate (copy attached).

3 Available at http://www.tn.gov/finance/bud/documents/2014BudgetDocumentVol1.pdf.

The official PDF appends the January 23, 2014 Department of Finance and Administration memorandum and its expunction-fee apportionment report as an attachment. That exhibit is reproduced as a table in the source and is not transcribed here; see the linked PDF for it.