520 U.S. 564 (1997)

CAMPS NEWFOUND/OWATONNA, INC.
v.
TOWN OF HARRISON et al.

No. 94-1988.

United States Supreme Court.

Argued October 9, 1996. Decided May 19, 1997. CERTIORARI TO THE SUPREME JUDICIAL COURT OF MAINE

*565 *566 Stevens, J., delivered the opinion of the Court, in which O'Connor, Kennedy, Souter, and Breyer, JJ., joined. Scalia, J., filed a dissenting opinion, in which Rehnquist, C. J., and Thomas and Ginsburg, JJ., joined, post, p. 595. Thomas, J., filed a dissenting opinion, in which Scalia, J., joined, and in which Rehnquist, C. J., joined as to Part I, post, p. 609.

William H. Dempsey argued the cause for petitioner. With him on the briefs were Robert B. Wasserman, William H. Dale, Emily A. Bloch, and Sally J. Daggett.

*567 William L. Plouffe argued the cause and filed a brief for respondents.^[*]

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.

I

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 percent of the campers are not residents of Maine. Id., at 44.

The camp is located in the town of Harrison (Town); 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, the camp 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.^[1]Id., at 42-43.

*568 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).^[2] Because most of the campers come from out *569 of State, petitioner could not qualify for a complete exemption.^[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.^[4] The request was denied, and petitioner filed suit in the Superior Court against the Town and its tax assessors and collectors.^[5] After the *570 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^[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 *571 "not met its heavy burden of persuasion that the statute is unconstitutional." Ibid.

We granted certiorari. 516 U. S. 1157. For the reasons that follow, we now reverse.

II

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.^[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. *572 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,^[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, and then 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."

III

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 *573 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. 549, 558 (1995), 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 558-559. 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 *574 (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-ofstate 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 *575 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, Inc. 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 State could 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.

IV

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. 325, 331 (1996) (quoting Oregon Waste Systems, Inc. v. Department of Environmental Quality of Ore., 511 U. S. 93, 99 (1994)). It is not necessary to look beyond the text of this statute to determine that it *576 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 instaters 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 Commerce Clause . . . 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.^[9] Petitioner's "product" is *577 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-state access both to a natural resource and to related services provided by state residents.^[10]

Avoiding this sort of "economic Balkanization," Hughes v. Oklahoma, 441 U. S., at 325, 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 *578 on local merchants; it may include attempts to give local consumers an advantage over consumers in other States."^[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., at 327. 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 that its issuing corporation participates in interstate commerce." Id., at 333. 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 Management, Inc. v. Hunt, 504 U. S. 334, 342 (1992) (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 *579 a specific penalty on the activity itself, is of no moment. Thus, in New Energy Co. of Ind. 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."^[12] Given the fact that the burden of Maine's facially discriminatory tax scheme falls by design in a predictably disproportionate way on outof-staters,^[13] the pernicious effect on interstate commerce is *580 the same as in our cases involving taxes targeting out-ofstaters 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.^[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 *581 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 outof-staters, deterring them from enjoying the benefits of camping in Maine.^[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 to defend 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 *582 U. S., at 337. 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., at 342 ("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 333-334.^[16] We have no doubt that if petitioner's camp were *583 a profit-making entity, the discriminatory tax exemption would be impermissible.

V

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 Associated Press v. NLRB, 301 U. S. 103 (1937), for example, we held the National Labor Relations Act as applied to the Associated Press' (A. P.'s) news gathering 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., *584 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 anti competitive 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 *585 572-574. 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.^[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 *586 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.^[18] See Wickard v. Filburn, 317 U. S. 111, 127— 128 (1942); Lopez, 514 U. S., at 556, 559-560.

*587 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 *588 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 Imports, Ltd. v. Dias, 468 U. S. 263, 273 (1984). 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.^[19] If there is need for a special exception for nonprofits, Congress not only has the power to create it,^[20] but also is in a far better position than we to determine its dimensions.^[21]

VI

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 *589 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, 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 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 benefiting only those nonprofits serving principally Maine residents would be permissible, our cases do not sanction a tax exemption serving similar ends.^[22]

*590 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,^[23] we held that New York's tax exemption for church property did not violate the Establishment Clause of the First Amendment.^[24] That holding rested, in part, on the premise that there is a constitutionally significant difference between subsidies and tax exemptions.^[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 marketplace is prohibited by the Commerce Clause.

In New Energy Co. of Ind. v. Limbach,