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A. 1. a.(1)(a) i) a) I A 1 a (1)(a) i) a)@@2x]HToTHIVXBQck QuoteSingle spaced indented quote - Circv C   (  Cd  ( ( ( FTNFormats for each footnote,  X` hp x (#%'0*,.8135@8: andwe disagree with Justice Scalia's characterization of this statute's effects. Accordingly, we reject his position on either of these theories.  9H1 d d7VI؃  2  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  J  market participants, see, e.g., Hughes v. Alexandria  J 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, we& "   have already rejected the Town's position in a prior case, and in any event respondents' openended exemption for charitable and benevolent institutions is not analogous to the industryspecific state actions that we reviewed in  J` 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  J 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  J of subsidies, id., at 199, n. 15, and we need not address  J 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  J exemption serving similar ends.& uBH ԍ FTN  &  XFrXFr  ddf < 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 exemp uB tion can be viewed as a form of government spending. See Regan  uBI 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.  J  In Walz v. Tax Comm'n of City of New York, 397 U.S. 664 (1970), notwithstanding our assumption that a direct  Jh subsidy of religious activity would be invalid,%nh uB ԍ FTN  &  XFrXFr  ddf < 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 administrad"##Ԯtive relationships for enforcement of statutory or administrative  uBG standards, but that is not this case. Walz, 397 U.S., at 675. we heldh"   that New York's tax exemption for church property did not violate the Establishment Clause of the First  J Amendment.X uB ԍ FTN  &  XFrXFr  ddf < 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  uB profit institutions. Id., at 673.X That holding rested, in part, on the premise that there is a constitutionally significant dif J` ference between subsidies and tax exemptions.` uB ԍ FTN  &  XFrXFr  ddf <  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 employ uB ees `on the public payroll.' !  Id., at 675. As Justice Brennan noted: Tax exemptions and general subsidies ... are qualitatively differ uB ent. Id., at 690 (concurring opinion). 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.  J  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 J ofstate 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 an "   advantage in the marketplace, but only action of that  J description in connection with the State's regulation of  J interstate commerce. Direct subsidization of domestic industry does not ordinarily run afoul of that prohibi J` tion; discriminatory taxation ... does. Ibid. (emphasis  J8 in original). See also West Lynn, 512 U.S., at 210  J (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.  JX Rev. 789, 846!848 (1996).X uB ԍ FTN  &  XFrXFr  ddf < 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 Stateowned universities. The Town's claim that its discriminatory tax scheme should be viewed as a  J permissible subsidy is therefore unpersuasive. l uBL ԍ FTN  &  XFrXFr  ddf < 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  uBq V, supra, we see no categorical reason to treat forprofit and nonprofit entities differently under the dormant Commerce Clause.  uB Justice Scalia's heavy reliance upon Board of Ed. of Ky. Annual  uB 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 outofstate corporations is not at issue. Moreover,  uB unlike the situation in Board of Ed. of Ky., in which none of the"## charitable activities of the legatee were performed in Illinois, all of the benefits of attending petitioner's camp in Maine are bestowed  uB within her borders. Id., at 563. While the dictum that Justice  uB 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.H"  Ԍ Finally, the Town argues that its discriminatory tax exemption scheme falls within the market participant  J 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  J White v. Massachusetts Council of Constr. Employers,  J Inc., 460 U.S. 204, 208 (1983); Reeves, Inc. v. Stake,  Jp 447 U.S., at 436!437; Hughes v. Alexandria Scrap  JH Corp., 426 U.S., at 810.  J  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  J from Maryland streets and junkyards. Id., at 809!810.  JX 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  J 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  J others. Alexandria Scrap, 426 U.S., at 810.H"  Ԍ Maine's tax exemption statute cannot be characterized as a proprietary activity falling within the marketpar J ticipant 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.  J 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.  J 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 mar J ket.   '    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 marketparticipation 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  J tax exemption upheld in Walz"which applied to librar Jh ies, art galleries, and hospitals as well as churches"h uB ԍ FTN  &  XFrXFr  ddf < See Walz, 397 U.S., at 666!667, and n. 1. the exemption that has been denied to petitioner is available to a broad category of charitable and benev J  olent institutions.JG uB ԍ FTN  &  XFrXFr ddf < See Me. Rev. Stat. Ann., Tit. 36, 652(1)(A) (Supp. 1996) ( For the purposes of this paragraph, `benevolent and charitable insti uB} tutions' 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). For that reason, nothing short ofa dramatic expansion of the market participant exception  J would support its application to this case. Alexandria"  Ԍ J  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 theState. 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  Jp 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). 7The 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  J@ 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  J will have a steady local supply of the product. Cf. West  Jx Lynn, 512 U.S., at 190 (striking down statute protecting instate 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 marketparticipant doctrine.  9H1 d`"  Ԍd\7VII؃  J  2  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: BQ C  , , (  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  J- union and not division. Baldwin v. G. A. F. Seelig,  J Inc., 294 U.S. 511, 523 (1935). \YvBQ d  ( , ,  The judgment of the Maine Supreme Judicial Court is reversed.  J ` BIt is so ordered.ă