source: Caselaw Access Project

author: Justice Marshall Justice Stevens,

license: Public Domain

text:
    UNITED STATES v. AMERICAN BAR ENDOWMENT et al.
    No. 85-599.
    Argued April 28, 1986
    Decided June 23, 1986

      Marshall, J., delivered the opinion of the Court, in which Burger, C. J., and Brennan, White, Blackmun, and Rehnquist, JJ., joined. Stevens, J., filed a dissenting opinion, post, p. 119. Powell and O’Con-nor, JJ., took no part in the consideration or decision of the ease.

      Albert G. Lauber, Jr., argued the cause for the United States. With him on the briefs were Solicitor General Fried, Acting Assistant Attorney General Olsen, Gary R. Allen, and Robert S. Pomerance.

      Francis M. Gregory, Jr., argued the cause for respondents. With him on the brief were Randolph W. Thrower, Mac Asbill, Jr., and Sheila J. Carpenter

         Thomas F. Olson and Carl G. Borden filed a brief for the California Farm Bureau Federation as amicus curiae urging affirmance.

   Justice Marshall

delivered the opinion of the Court.

The first issue in this case is whether income that a tax-exempt charitable organization derives from offering group insurance to its members constitutes “unrelated business income” subject to tax under §§511 through 513 of the Internal Revenue Code (Code), 26 U. S. C. §§511-513. The second issue is whether the organization’s members may claim a charitable deduction for the portion of their premium payments that exceeds the actual cost to the organization of providing insurance.

I

Respondent American Bar Endowment (ABE) is a corporation exempt from taxation under § 501(c)(3) of the Code, which, with certain exceptions not relevant here, exempts organizations “organized and operated exclusively for . . . charitable ... or educational purposes.” ABE’s primary purposes are to advance legal research and to promote the administration of justice, and it furthers these goals primarily through the distribution of grants to other charitable and educational groups. All members of the American Bar Association (ABA) are automatically members of ABE. The ABA is exempt from taxation as a “business league” under § 501(c)(6).

ABE raises money for its charitable work by providing group insurance policies, underwritten by major insurance companies, to its members. Approximately 20% of ABE’s members participate in the group insurance program, which offers life, health, accident, and disability policies. ABE negotiates premium rates with insurers and chooses which insurers shall provide the policies. It also compiles a list of its own members and solicits them, collects the premiums paid by its members, transmits those premiums to the insurer, maintains files on each policyholder, answers members’ questions concerning insurance policies, and screens claims for benefits.

There are two important benefits of purchasing insurance as a group rather than individually. The first is that ABE’s size gives it bargaining power that individuals lack. The second is that the group policy is experience rated. This means that the cost of insurance to the group is based on that group’s claims experience, rather than general actuarial tables. Because ABA members have favorable mortality and morbidity rates, experience rating results in a substantially lower insurance cost. When ABE purchases a group policy for its members, it pays a negotiated premium to the insurance company. If, as is uniformly true, the insurance company’s actual cost of providing insurance to the group is lower than the premium paid in a given year, the insurance company pays a refund of the excess, called a “dividend,” to ABE. Critical to ABE’s fundraising efforts is the fact that ABE requires its members to agree, as a condition of participating in the group insurance program, that they will permit ABE to keep all of the dividends rather than distributing them pro rata to the insured members.

It would be possible for ABE to negotiate lower premium rates for its members than the rates it has charged throughout the relevant period, and thus receive a lower dividend. However, ABE prices its policies competitively with other insurance policies offered to the public and to ABE members. 761 F. 2d 1573, 1575 (CAFC 1985). In this way ABE is able to generate large dividends to be used for its charitable purposes. In recent years the total amount of dividends has exceeded 40% of the members’ premium payments. Ibid. ABE advises its insured members that each member’s share of the dividends, less ABE’s administrative costs, constitutes a tax-deductible contribution from the member to ABE. Thus the after-tax cost of ABE’s insurance to its members is less than the cost of a commercial policy with identical coverage and premium rates.

In 1980 the Internal Revenue Service (IRS) advised ABE that it considered ABE’s insurance plan an “unrelated trade or business” and that the profits thereon were subject to tax under §§ 511-513. Subsequently IRS audited ABE’s tax returns for 1979 and 1980 and assessed a tax deficiency on ABE’s net revenues from the insurance program. ABE paid those taxes, as well as taxes on the 1981 revenues. After exhausting administrative remedies, it brought an action for a refund in the Claims Court, arguing that its revenues from the insurance program were not subject to tax. At approximately the same time, the individual respondents, who were participants in the ABE insurance program but who had not originally deducted any part of the insurance premiums as charitable contributions, brought suit for refunds in the Claims Court as well. The individual respondents argued that they were entitled to charitable deductions for a portion of those premium payments. The two suits were consolidated for trial in the Claims Court.

The Claims Court entered judgment for ABE in its suit, finding that ABE’s provision of insurance to its members did not constitute a “trade or business” subject to tax. 4 Cl. Ct. 404 (1984). It found for the Government, however, on the individual respondents’ claims. The court concluded that a taxpayer may claim a charitable contribution for a portion of a payment for goods or services only when he can show that “he bought goods or services for more than their economic value, with the intention that the excess be used to benefit a charitable enterprise,” id., at 415 (citation omitted), and that the individual respondents had not established these facts. The Court of Appeals for the Federal Circuit affirmed as to ABE’s taxes. 761 F. 2d, at 1577. As to the individual respondents, however the court reversed and remanded for further factfinding. We granted the Government’s petition for certiorari on both issues, 474 U. S. 1004 (1985), and we now reverse.

II

We recently discussed the history and structure of the unrelated business income provisions of the Code in United States v. American College of Physicians, 475 U. S. 834 (1986). The Code imposes a tax, at ordinary corporate rates, on the income that a tax-exempt organization obtains from an “unrelated trade or business . . . regularly carried on by it.” §§ 512(a)(1), 511(a)(1). An “unrelated trade or business” is “any trade or business the conduct of which is not substantially related ... to the exercise or performance by such organization of its charitable, educational, or other purpose,” § 513(a). The Code thus sets up a three-part test. ABE’s insurance program is taxable if it (1) constitutes a trade or business; (2) is regularly carried on; and (3) is not substantially related to ABE’s tax-exempt purposes. Treas. Reg. § 1.513 — 1(a), 26 CFR § 1.513-l(a) (1985); American College of Physicians, supra, at 838-839. ABE concedes that the latter two portions of this test are satisfied. 761 F. 2d, at 1576. Its defense is based solely on the proposition that its insurance program does not constitute a trade or business.

A

In the Tax Reform Act of 1969, Pub. L. 91-172, 83 Stat. 487, Congress defined a “trade or business” as “any activity which is carried on for the production of income from the sale of goods or the performance of services,” § 513(c). The Secretary of the Treasury has provided further clarification of that definition in Treas. Reg. § 1.513-1 (b) (1985), which provides: “in general, any activity of [an exempt] organization which is carried on for the production of income and which otherwise possesses the characteristics required to constitute ‘trade or business’ within the meaning of section 162” is a trade or business for purposes of 26 U. S. C. §§ 511-513.

ABE’s insurance program falls within the literal language of these definitions. ABE’s activity is both “the sale of goods” and “the performance of services,” and possesses the general characteristics of a trade or business. Certainly the assembling of a group of better-than-average insurance risks, negotiating on their behalf with insurance companies, and administering a group policy are activities that can be — and are — provided by private commercial entities in order to make a profit. ABE itself earns considerable income from its program. Nevertheless, the Claims Court and Court of Appeals concluded that ABE does not carry out its insurance program in order to make a profit. The Claims Court relied on the former Court of Claims holding, in Disabled American Veterans v. United States, 650 F. 2d 1178, 1187 (1981), that an activity is a trade or business only if “operated in a competitive, commercial manner.” See 4 Cl. Ct., at 409. Because ABE does not operate its insurance program in a competitive, commercial manner, the Claims Court decided, that program is not a trade or business. The Court of Appeals adopted this reasoning. 761 F. 2d, at 1577.

The Claims Court rested its conclusion on four factors. First, it found that “the program was devised as a means for fundraising and has been so presented and perceived from its inception.” 4 Cl. Ct., at 409. Second, the court found that the program’s phenomenal success in generating dividends for ABE was evidence of noncommercial behavior. The court noted that ABE’s insurance program has provided $81.9 million in dividends in its 28 years of operation, and concluded that such large profits could not be the result of commercial success, but must proceed from the generosity of ABE’s members. Third, and most important, in the court’s view, was the fact that ABE’s members collectively had the power to change ABE’s conduct of the insurance program so as to drastically reduce premiums. That the members had not done so was strong evidence that they sought to further ABE’s charitable purposes by paying higher insurance rates than necessary. Fourth, because ABE did not underwrite insurance or act as a broker, it was not competing with other commercial entities.

It appears, then, that the Claims Court viewed ABE as engaging in two separate activities — the provision of insurance and the acceptance of contributions in the form of dividends. If so, the unspoken premise of the Claims Court’s decision is that ABE’s income is not a result of the first activity, but of the second. There is some sense to this reasoning; should ABE sell a product to its members for more than that product’s fair market value, it could argue to the IRS that the members intended to pay excessive prices as a form of contribution, and that some formula should be adopted to separate the income received into taxable profits and nontaxable contributions. Even if we viewed it as appropriate for the federal courts to engage in such a quasi-legislative activity, however, there is no factual basis for the Claims Court’s attempt to do so in this case.

B

We cannot agree with the Claims Court that the enormous dividends generated by ABE’s insurance program demonstrate that those dividends cannot constitute “profits.” Were ABE’s insurance markedly more expensive than other insurance products available to its members, but ABE nevertheless kept the patronage of those members, we might plausibly conclude that generosity was the reason for the program’s success. The Claims Court did not find, however, that this was the case. ABE prices its insurance to remain competitive with the rest of the market. Id., at 406. Thus ABE’s members never squarely face the decision whether to support ABE or to reduce their own insurance costs.

The Claims Court concluded that “such profit margins [as ABE’s] cannot be maintained year after year in a competitive market.” Id., at 410. The court apparently reasoned that ABE’s staggering success would inevitably induce other firms to offer similar programs to ABA members unless that success is the result of charitable intentions rather than price-sensitive purchasing decisions. It is possible, of course, that ABE’s members genuinely intend to support ABE by paying higher premiums than necessary, and would pay those high premiums even if a competing group insurance plan offered very low premiums. But that is by no means the only possible explanation for the market’s failure to provide competition for ABE. Lacking a factual basis for concluding that generosity is at the core of ABE’s success, we can easily view this case as a standard example of monopoly pricing. ABE has a unique asset — its access to the ABA’s members and their highly favorable mortality and morbidity rates — and it has chosen to appropriate for itself all of the profit possible from that asset, rather than sharing any with its members.

The argument that ABE’s members could change the insurance program and receive the bulk of the dividends themselves if they so desired is unconvincing. Were ABE to give each member a choice between retaining his pro rata share of dividends or assigning thenrto ABE, the organization would have a strong argument that those dividends constituted a voluntary donation. That, however, is not the case here. ABE requires its members to assign it all dividends as a condition for participating in the insurance program. It is simply incorrect to characterize the assignment of dividends by each member as “voluntary” simply because the members theoretically could band together and attempt to change the policy.

Again, the Claims Court put too much weight on an unsupported assumption. It found that the program was “operated with the approval and consent of the ABA membership,” ibid., observing that the program had met with “surprisingly little dissent,” id., at 411, even though there were “ample” opportunities for members to change policies with which they disagreed, ibid. We believe that those facts cannot carry the weight that the Claims Court put on them. Perhaps each member that purchases insurance would, given the option, pay excessive premiums in order to support ABE’s charitable purposes; however, that is not the only possible explanation for the members’ failure to change the program. Any given member might feel that the potential savings in insurance costs are not sufficient to justify the effort required to mount a challenge to ABE’s leadership. Many might not want to “make waves” and upset a program that generates tax-free income for ABE and charitable deductions for their fellow members. The members’ theoretical ability to change the program, therefore, is at best inconclusive.

The Claims Court also erred in concluding that ABE’s insurance program did not present the potential for unfair competition. The undisputed purpose of the unrelated business income tax was to prevent tax-exempt organizations from competing unfairly with businesses whose earnings were taxed. H. R. Rep. No. 2319, 81st Cong., 2d Sess., 36 (1950); see United States v. American College of Physicians, 475 U. S., at 838. This case presents an example of precisely the sort of unfair competition that Congress intended to prevent. If ABE’s members may deduct part of their premium payments as a charitable contribution, the effective cost of ABE’s insurance will be lower than the cost of competing policies that do not offer tax benefits. Similarly, if ABE may escape taxes on its earnings, it need not be as profitable as its commercial counterparts in order to receive the same return on its investment. Should a commercial company attempt to displace ABE as the group policyholder, therefore, it would be at a decided disadvantage.

The Claims Court failed to find any taxable entities that compete with ABE, and therefore found no danger of unfair competition. It is likely, however, that many of ABE’s members belong to other organizations that offer group insurance policies. Employers, trade associations, and financial services companies frequently offer group insurance policies. Presumably those entities are taxed on their profits, and their policyholders may not deduct any part of the premiums paid. Such entities may therefore find it difficult to compete for the business of any ABE members who are otherwise eligible to participate in these group insurance programs.

The only valid argument in ABE’s favor, therefore, is that the insurance program is billed as a fundraising effort. That fact, standing alone, cannot be determinative, or any exempt organization could engage in a tax-free business by “giving away” its product in return for a “contribution” equal to the market value of the product. ABE further contends that it must prevail because the Claims Court found that ABE’s profits represent contributions rather than business income; ABE argues that we may not upset that finding unless it is clearly erroneous. Cf. Carter v. Commissioner, 645 F. 2d 784, 786 (CA9 1981) (question of profit motive for purposes of § 162 is one of fact). The undisputed facts, however, simply will not support the inference that the dividends ABE receives are charitable contributions from its members rather than profits from its insurance program. Moreover, the Claims Court failed to articulate a legal rule that would permit it to split ABE’s activities into the gratuitous provision of a service and the acceptance of voluntary contributions, and we find no such rule in the Code or regulations. Even if we assumed, however, that the court’s failure to attach the label “trade or business” to ABE’s insurance program constitutes a finding of fact, we would be constrained to hold that finding clearly erroneous.

Ill

Section 170 of the Code provides that a taxpayer may deduct from taxable income any “charitable contribution,” defined as “a contribution or gift to or for the use of” qualifying entities, § 170(c). The individual respondents contend that the excess of their premium payments over the cost to ABE of providing insurance constitutes a contribution or gift to ABE.

Many of the considerations supporting our holding that ABE’s earnings from the insurance program are taxable also bear on the question whether ABE’s members may deduct part of their premium payments. The evidence demonstrates, and the Claims Court found, that ABE’s insurance is no more costly to its members than other policies — group or individual — available to them. Thus, as we have recognized, ABE’s members are never faced with the hard choice of supporting a worthwhile charitable endeavor or reducing their own insurance costs.

A payment of money generally cannot constitute a charitable contribution if the contributor expects a substantial benefit in return. S. Rep. No. 1622, 83d Cong., 2d Sess., 196 (1954); Singer Co. v. United States, 196 Ct. Cl. 90, 449 F. 2d 413 (1971). However, as the Claims Court recognized, a taxpayer may sometimes receive only a nominal benefit in return for his contribution. Where the size of the payment is clearly out of proportion to the benefit received, it would not serve the purposes of § 170 to deny a deduction altogether. A taxpayer may therefore claim a deduction for the difference between a payment to a charitable organization and the market value of the benefit received in return, on the theory that the payment has the “dual character” of a purchase and a contribution. See, e. g., Rev. Rul. 67-246, 1967-2 Cum. Bull. 104 (price of ticket to charity ball deductible to extent it exceeds market value of admission); Rev. Rul. 68-432, 1968-2 Cum. Bull. 104, 105 (noting possibility that payment to charitable organization may have “dual character”).

In Rev. Rul. 67-246, supra, the IRS set up a two-part test for determining when part of a “dual payment” is deductible. First, the payment is deductible only if and to the extent it exceeds the market value of the benefit received. Second, the excess payment must be “made with the intention of making a gift.” 1967-2 Cum. Bull., at 105. The Tax Court has adopted this test, see Murphy v. Commissioner, 54 T. C. 249, 254 (1970); Arceneaux v. Commissioner, 36 TCM 1461, 1464 (1977); but see Oppewal v. Commissioner, 468 F. 2d 1000, 1002 (CA1 1972) (expressing “dissatisfaction with such subjective tests as the taxpayer’s motives in making a purported charitable contribution” and relying solely on differential between amount of payment and value of benefit).

The Claims Court applied that test in this case, and held that respondents Broadfoot, Boynton, and Turner had not established that they could have purchased comparable insurance for less money. Therefore, the court held, they had failed to establish that the value of ABE’s insurance to them was less than the premiums paid. 4 Cl. Ct., at 415-417. Respondent Sherwood demonstrated that there did exist a group insurance program for which he was eligible and which offered lower premiums than ABE’s insurance. However, Sherwood failed to establish that he was aware of that competing program during the years at issue. Sherwood therefore had failed to demonstrate that he met the second part of the above test — that he had intentionally paid more than the market value for ABE’s insurance because he wished to make a gift.

The Court of Appeals, in reversing, held that the Claims Court had focused excessively on the taxpayers’ motivation. In the Court of Appeals’ view, the necessary inquiry was whether “the transaction was ... of a business and not a charitable nature,” considering all of the circumstances. 761 F. 2d, at 1582. The Court of Appeals therefore remanded for redetermination under that standard.

We hold that the Claims Court applied the proper standard. The sine qua non of a charitable contribution is a transfer of money or property without adequate consideration. The taxpayer, therefore, must at a minimum demonstrate that he purposely contributed money or property in excess of the value of any benefit he received in return. The most logical test of the value of the insurance respondents received is the cost of similar policies. Three of the four individual respondents failed to demonstrate that they could have purchased similar policies for a lower cost, and we must therefore assume that the value of ABE’s insurance to those taxpayers at least equals their premium payments. Had respondent Sherwood known that he could purchase comparable insurance for less money, ABE’s insurance would necessarily have declined in value to him. Because Sherwood did not have that knowledge, however, we again must assume that he valued ABE’s insurance equivalently to those competing policies of which he was aware. Because those policies cost as much as or more than ABE’s, Sherwood has failed to demonstrate that he intentionally gave away more than he received.

> l — l

We hold that ABE’s insurance program is a “trade or business” for purposes of the unrelated business income tax. We further hold that the individual taxpayers have not established that any portion of their premium payments to ABE constitutes a charitable contribution. Accordingly, we reverse the judgment of the Court of Appeals and remand to that court with instructions to reverse the judgment of the Claims Court with respect to ABE and to affirm the judgment of the Claims Court with respect to the individual taxpayers.

It is so ordered.

Justice Powell and Justice O’Connor took no part in the consideration or decision of this case.

Justice Stevens,

dissenting.

The charitable work of the American Bar Endowment is funded, in large part, through a procedure in which the Endowment provides insurance policies for participating American Bar Association members, and the members assign the dividends to the ABE. The primary question presented is whether that assignment of dividends is taxable as an unrelated “trade or business.”

“The problem at which the tax on unrelated business income is directed ... is primarily that of unfair competition.” The unrelated business tax was adopted in 1950, and substantially revised in 1969. It is useful to recall the kind of situation that gave rise to the unrelated business tax. Perhaps the best known case involved the C. F. Mueller Company. The Mueller Company was a longstanding macaroni concern. It was acquired and operated for the benefit of the New York University School of Law, and its profits were donated to the University. The Internal Revenue Service claimed that the macaroni company’s profits should be taxable, like any other competitive macaroni company, to avoid giving this competitor an unfair advantage. Although longstanding precedent seemed to be against the Commissioner, the Tax Court was sufficiently concerned about the implications that it agreed with the Commissioner. Ultimately, the Court of Appeals reversed, relying on precedent; by that time, however, Congress had acted and imposed a tax on unrelated business income. See C. F. Mueller Co. v. Commissioner, 190 F. 2d 120 (CA3 1951).

In considering the ABE insurance fundraising, then, it is appropriate to assume that, if the ABE were funded by operating a normal macaroni company and receiving an unfair competitive advantage from its tax exemption, it would be a “trade or business” within the Act and taxable. On the other hand, it is equally clear that, if the ABE simply provided insurance for ABA members at very low cost, and sent the insurance dividends with an urgent request that the dividends be assigned to the Endowment, the arrangement would not be a “trade or business,” and would not be taxable. The central issue in this case is thus whether the ABE’s insurance program should be viewed as akin to the macaroni company, and thus a “trade or business,” or as akin to the dividend assignment request, and thus not a “trade or business.”

I believe that the ABE’s activities are far closer to the latter than the former for two reasons. First, there is no danger of unfair competition, the problem that the unrelated business tax addresses. Second, the program has functioned as a charitable fundraising effort, rather than as a business.

HH

An understanding of the purpose of the unrelated business income tax exposes a basic error in the Court’s analysis. As noted, that purpose is to protect commercial enterprises from the unfair competition that may be generated by the operation of competing businesses by tax-free organizations. There is no evidence in the record, despite more than three weeks of trial and numerous witnesses, to support the notion that the Endowment’s provision of insurance to its members has had any competitive impact whatsoever. The Court relies on a parade of hypotheticals to justify its conclusion that there is some effect on competition. The Court is, however, unable to point to a single piece of evidence in the record to justify its conclusion about the effect on competition. “Speculation about hypothetical cases illuminates the discussion in a classroom, but it is evidence and historical fact that provide the most illumination in a courtroom.” Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U. S. 573, 586 (1986) (Stevens, J., dissenting). The trial judge scoured the record for evidence pointing to a harmful effect on competition, and found none. The absence of evidence in the record, rather than the Court’s ruminations about possibilities and likelihoods, should control our analysis.

The legislative history further underscores the fact that the ABE insurance operation poses none of the possible effects on competition that the unrelated business tax was intended to address. Congress has twice made clear that insurance programs by other nonprofit organizations are not subject to the unrelated business tax. When Congress substantially revised the unrelated business tax in 1969, the accompanying legislative history emphasized that the group insurance policies provided by fraternal organizations were not intended to be subject to the unrelated business tax. Similarly,' when a question arose concerning the taxability of income from insurance programs administered by veterans’ organizations, Congress enacted legislation to ensure that the insurance income would not be taxed. Indeed, Congress found the taxation of the veterans’ insurance operations so contrary to its intent that it took the unusual step of making the 1972 amendment fully retroactive to 1969.

The Government argues that these developments actually support its position because the need for congressional attention, and the emphasis on the “substantially related” prong for the fraternal societies, reveal that, without such attention, and without such a substantial relationship, the activity should be presumptively taxable. Particularly when the general legislative purpose of preventing unfair competition is considered, however, these legislative developments have a different significance. For they highlight the fact that the “market” in which the ABE is competing, even temporarily leaving aside the complete absence of evidence of harm to competitors, is itself already partially exempt from the unrelated business income tax provisions, and the possible threat to competition becomes all the more hypothetical and remote.

Ironically, moreover, the tax-exempt alternative suggested by the Government would have a far more obvious effect on competition than the ABE’s current fundraising process. For the ABE would then be offering insurance rates dramatically lower than those available elsewhere. If speculation of the kind indulged in by the majority is appropriate, that speculation surely should include the realization that the tax-exempt alternative — in which the ABE would merely recover its actual costs of managing the program and return all of the premium refunds to the individual policyholders — would attract more than the 20% of the ABA membership that currently hold ABE policies; it would appeal to those who simply want an insurance bargain rather than those who also want to make a charitable contribution.

It is not completely surprising that a consideration of the purpose of the unrelated business tax in light of the record developed at the extensive trial leads to a conclusion that the ABE’s program should not be taxed. For the Government itself initially held such a view. Furthermore, the ABE’s insurance program was initiated in 1955 as a pioneering, and widely publicized, effort in charitable fundraising. When Congress revamped the unrelated business tax in 1969, there was no suggestion that it was intended to apply to this venerable and successful program, and the IRS did not so interpret it until several years later.

In short, a proper consideration of the purpose of the unrelated business tax leads to a conclusion that the ABE’s insurance program is not a “trade or business.”

I — I I — I

Not only does the ABE program completely fail to raise the concerns against which the unrelated business tax is directed, but it is also operated as a charitable fundraising endeavor.

The learned trial judge expressly found, after hearing a good deal of evidence, that the assignment of the dividends was the result of charitable intentions, rather than a commercial transaction. First, he found that, since the program’s inception, for three decades, the ABE has trumpeted the insurance program as a charitable fundraising activity, and that it has been so understood. The trial court emphasized that even members who testified against the ABE viewed the insurance program as strictly a charitable fundraising effort. Second, the court specifically found that the reason for the Endowment’s enormous profits was the charitable intent of the members. Finally, the court emphasized that, all of the factors of the program, taken together, compel the conclusion that the ABE procedure was operated as, and understood to be, charitable fundraising rather than a business.

Notwithstanding the Court of Appeals’ explicit endorsement of the trial judge’s findings, this Court speculates that the members’ assignment of their premium refunds was not “voluntary” because the assignment was a condition to participating in the insurance program. This speculation rests on a remarkably unrealistic appraisal of the intelligence and independence of the lawyers who participate in the ABE program. Those who elected to buy the insurance and contribute the premium refunds to the Endowment clearly understood the legal consequences of the transaction, and were free to purchase insurance elsewhere if they did not want to make the requested charitable contribution.

The Court’s opinion also seems to rest on the notion that the ABE members who purchased insurance were somehow coerced by a monopolist. But this is absurd. There is nothing in the record to suggest that the insurance policy offered by the ABE to its members was so attractive that the ABE could foist some unwanted condition upon its members. After all, only 20% of the membership purchased the policies. This transaction has none of the earmarks of an improper tying arrangement.

Finally, the Court states that “there is no factual basis” for an assumption that the large revenues generated by the insurance program were the result of the members’ charitable motivation rather than the market value of the insurance package, see ante, at 112-113. But this is what the Claims Court found:

“I am persuaded that if the American Bar Association Plan were not viewed as a fundraising enterprise and were not viewed by the overwhelming majority of the membership as something to be tolerated as, to be sure, an economic expense but one for the good of the profession, and for the greater good of society, that it would not exist, it could not have existed, it could not have survived, it would not have survived to today. And at least on the basis of this record those are my findings on that point.” App. 505.

See also 4 Cl. Ct. 404, 405, n. 1 (1984) (incorporating oral findings of fact).

I believe that we are bound by that finding. The Court’s suggestion to the contrary notwithstanding, rejecting that finding would run afoul of the “two court rule,” would decide the case on a ground expressly disavowed by the Government,’ and would conflict with the record. That finding, combined with the other findings and with a proper analysis of the purpose and scope of the unrelated business tax, requires a conclusion that the ABE has been operated as a charitable fundraising effort, rather than as a commercial business.

Ill

The ABE’s program poses no harm to competitors and has been operated as a charitable fundraising activity. Depending on its members’ agreement to assign their dividends, it is far less like the operation of a competitive macaroni company than like the provision of insurance as a service with a request for the dividends. In my opinion, the Court of Appeals and the Chief Judge of the Claims Court were both quite correct in concluding that, on the basis of the record generated at the vigorously contested trial, the tax that the Government seeks to collect in this case was not the kind of tax that Congress intended to impose. Accordingly, I respectfully dissent.

       Section 162 permits a taxpayer to deduct “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” Undoubtedly due to the desirability of tax deductions, § 162 has spawned a rich and voluminous jurisprudence. The standard test for the existence of a trade or business for purposes of § 162 is whether the activity “was entered into with the dominant hope and intent of realizing a profit.” Brannen v. Commissioner, 722 F. 2d 695, 704 (CA11 1984) (citation omitted). Thus several Courts of Appeals have adopted the “profit motive” test to determine whether an activity constitutes a trade or business for purposes of the unrelated business income tax. See Professional Insurance Agents of Michigan v. Commissioner, 726 F. 2d 1097 (CA6 1984); Carolinas Farm & Power Equipment Dealers v. United States, 699 F. 2d 167 (CA4 1983); Louisiana Credit Union League v. United States, 693 F. 2d 525 (CA5 1982).

       One obvious consideration is that ABE’s tax-exempt status would make it difficult for private firms to compete, see infra, at 114-115. In addition, as the Claims Court recognized, 4 Cl. Ct. 404, 414 (1984), the provision of group insurance coverage to a particular group may have the characteristics of a natural monopoly. The potential savings in insurance costs might decrease rapidly as the group splits into competing components. Finally, if the cost of assembling information about a particular group and maintaining an accurate list of members is high, the provision of group insurance might be economically feasible only if that cost can be shared among a variety of services performed by the group policyholder. In that ease preexisting groups like the ABA or a trade association would obviously have a considerable advantage over new entrants. The record here is barren of facts concerning these hypotheses, and we express no opinion as to their accuracy. We present them, however, to demonstrate that it is incorrect to assume, as did the courts below, that ABE’s profitability must result from the generosity of its members.

       The unrelated business income cases cited in n. 1, supra, all concerned group insurance programs offered by trade associations to their members. In each case the Court of Appeals held that those programs constituted a taxable trade or business. The Claims Court distinguished those cases on the grounds that they involved organizations exempt as business leagues under § 501(c)(6) rather than as charities under § 501(c)(3). That distinction, however, is insubstantial. Business leagues engage in fundraising for exempt purposes just as charities do. The taxpayers in those cases could have claimed that the excess dividends constituted tax-exempt membership fees, just as ABE claims that they constitute tax-exempt charitable contributions. Both claims fail for the same reasons.

       H. R. Rep. No. 2319, 81st Cong., 2d Sess., 36 (1950). See also United States v. American College of Physicians, 475 U. S. 834, 838 (1986) (“Congress perceived a need to restrain the unfair competition fostered by the tax laws”); ante, at 114 (“The undisputed purpose of the unrelated business income tax was to prevent tax-exempt organizations from competing unfairly with businesses whose earnings were taxed”); Treas. Reg. § 1.513-l(b), 26 CFR § 1.513-l(b) (1985) (Congress enacted the unrelated business tax “to eliminate a source of unfair competition by placing the unrelated business activities of certain exempt organizations upon the same tax basis as the nonexempt business endeavors with which they compete”).

       See Tr. of Oral Arg. 16 (Solicitor General’s argument) (“If the Endowment were to refund the dividends to the members and the members were then voluntarily and individually to donate the money back to the Endowment, it is clear, and the IRS has agreed that the members would then be entitled to a charitable contribution deduction and that that money would come into the hands of the Endowment as charitable receipts, not as business income”). See also Brief for United States 24-25 (“If the Endowment had instead consented to rebate the dividends to its members, coupling such rebates with a request that the members voluntarily contribute the dividends back to it, it would have a strong claim that funds thus contributed were derived ‘from’ charitable solicitations rather than ‘from’ its insurance business”); id., at 37 (“Had the Endowment requested its members individually to return their dividends as an act of generosity, it would have dealt with them as a charity”); ante, at 113 (“Were ABE to give each member a choice between retaining his pro rata share of dividends or assigning them to ABE, the organization would have a strong argument that those dividends constituted a voluntary donation”).

       See ante, at 115 (“It is likely . . . that many of ABE’s members belong to other organizations that offer group insurance policies”); ibid. (“Employers, trade associations, and financial services companies frequently offer group insurance policies”); ibid. (“Presumably those entities are taxed on their profits”); ibid. (“Such entities may therefore find it difficult to compete for the business of any ABE members who are otherwise eligible to participate in these group insurance programs”) (emphases added).

       In its oral opinion at the end of trial, the Claims Court emphasized the absence of a “Ronzoni” — the macaroni-selling competitor who had been harmed by New York University’s tax-free entry into the business:
      “The unrelated business income tax was passed to avoid a certain kind of evil. ... So you go back and look at what evil there is in the market. What was Congress trying to do. . . when the. . . tax was passed, and one comes to the frequently-asked question, Who is Ronzoni.’
      “Now, nobody has really satisfactorily pointed to Ronzoni for me. I have been listening for three weeks of trial and nobody came up and said, ‘Here, this is Ronzoni, this is the competitor that will be adversely affected in the manner in which Congress feared there would be adverse effects when it slapped Mueller Macaroni Company on the wrist, or basically said you cannot do that, you cannot use your . . . tax exempt status to make profits. [']
      “And I am still somewhat nebulous as to who Ronzoni is, as to who is hurt, who is damaged if members of the association on the one hand allow the association to use its group asset in order to raise funds.
      “And . . . perhaps other witnesses and other economists, on a different record, somebody will be able to point out to me Ronzoni in this . . . picture, but I have tried very hard, and looking at the policies of the tax, the policies of the unrelated business income tax, I have not been able to find the evils that Congress sought to alleviate by passing that tax.” App. 507-509.
      In the published opinion, the Claims Court incorporated its earlier oral opinion, 4 Cl. Ct. 404, 405, n. 1 (1984), and reiterated that the record did not support a finding of a harmful effect on competition:
      “The absence of any identifiable business over which the ABE is able to gain an unfair advantage supports the conclusion that its activities are not commercial and therefore not a business. At the very least, it suggests that nothing in the policies underlying the [unrelated business tax] requires that the Endowment’s activities be taxed. Indeed, it appears that the Endowment’s activities have an entirely proeompetitive effect, fully consistent with the policies of the [unrelated business tax]. The congressional purpose behind the statute would therefore not be served by holding that the Endowment was engaging in a business activity by operating the insurance program.” Id., at 414.

       See H. R. Rep. No. 91-413, p. 47 (1969) (“In extending the unrelated business income tax to virtually all exempt organizations . . . the bill continues to exclude from ‘unrelated business income,’ earnings from business related to an organization’s exempt function — such as an insurance business run by a fraternal beneficial association for its members”); S. Rep. No. 91-552, p. 68 (1969) (“[I]f the fraternal beneficiary society directly provides insurance for its members and their dependents, or arranges with an insurance company to make group insurance available to them, the amounts received by the society from its members for providing, or from the insurance company for arranging, for this exempt function will continue to be excluded from the unrelated business income tax”).

       See S. Rep. No. 92-1082, pp. 2-3 (1972) (The “1969 Act extended the application of the unrelated business income tax to virtually all exempt organizations, including social welfare organizations and social clubs. . . . As a result, questions have been raised as to whether the income derived by veterans’ organizations from their insurance activities is now subject to the unrelated business income tax. . . . [I]t was made clear in a 1969 Act committee report that income from insurance activities of fraternal beneficiary associations would be exempt from the unrelated business income tax. The committee agrees with the House that there was no reason not to provide similar treatment for exempt veterans’ organizations”).

      See id,., at 3 (“Since the committee believes that there was no specific intent to tax the insurance income of veterans’ organizations by the 1969 Act, it, therefore, believes it is appropriate to make the exemption of their insurance income from the unrelated business income tax effective as of the effective date of the Tax Reform Act”).

      Cf. 4 Cl. Ct., at 414 (“Had the program been operated entirely as a service, offering the lowest possible rates, many more members would have joined the program and there would have been greater concentration of business in the two insurance carriers”).

       See I. R. S. Letter Ruling 8042012 (July 3, 1980) (citing technical advice memorandum of January 31, 1973, which concluded that ABE’s insurance program was not a business); 4 Record 854. See also 4 Cl. Ct., at 414.

       Cf. Hope School v. United States, 612 F. 2d 298, 304 (CA7 1980) (Sprecher, J.) (“unfair competition is the key to whether the activities of the Hope School constitute an unrelated trade or business as a matter of law”).

      See 4 Cl. Ct., at 409 (“Advertising and other promotional materials consistently referred to the use of dividends for the Endowment’s charitable endeavors; the Endowment’s annual reports discussed the insurance program as a source of charitable contributions; communications to policyholders consistently referred to the Endowment’s retention of dividends as donations, not as profits. In short, both the ABE leadership and the insured members considered the insurance program a fundraising activity and treated it as such”).

      See id,., at 409, n. 5 (“Even those ABE members who testified for the defendant appeared to share this view. While these witnesses disagreed with the manner in which the program was operated and would have preferred to pay lower premiums by terminating the program’s fundraising function, they certainly never suggested that the Endowment was operating a business which was profiting at their expense”).

       See id., at 411-412 (“The amount of money ABE is permitted to retain far exceeds the value of any service it may be providing through the operation of the insurance programs. It is quite obvious, then, that this money was not earned ‘from the sale of goods or the performance of services,’ 26 U. S. C. § 513 (c) (1976), but for some other reason. That reason was the intent of the members to support the Endowment’s charitable activities”).

       The trial judge found:
      “When taken together, these factors make it impossible to conclude that the insurance programs were operated by ABE in a competitive, commercial manner. The Endowment raised huge sums of money by its activities, sums wholly unrelated to the value of any service it provided and which dwarfed the profit margins of insurance-related businesses. It disclosed the relevant facts to its members at every available opportunity, yet the members (who bore the economic cost of this program) allowed the practice to continue although they collectively had the power to change it. No business could operate in this fashion. . . . One would have to assume that ABA/ABE members have been subject to an epidemic of irrationality in permitting themselves to be bilked in this manner for almost three decades. The far more reasonable explanation is that the members are entirely rational and are permitting the ABE to collect such substantial revenues at their expense because they consider the Endowment to be engaged in fundraising, which they support. By any standard, an enterprise that depends on the consent of its customers for its profits is not operating in a commercial manner and is not a trade or business.” Id., at 411.

       “In this connection the Claims Court specifically and permissibly rejected the Government’s contention that the dividends represent a payment for the Endowment’s services. Because the Endowment’s accumulation of funds was not the result of a commercial exchange, we agree with the Claims Court’s view that the dividends do not constitute ‘profits’ which fall within the definition of section 513(e).” 761 F. 2d 1573, 1578 (CAFC 1985) (footnote omitted).

       See ante, at 113 (“It is simply incorrect to characterize the assignment of dividends by each member as ‘voluntary’ simply because the members theoretically could band together and attempt to change the policy”).

       The Court’s description of the insurance program is also somewhat misleading. For example, it states that “the after-tax cost of ABE’s insurance to its members is less than the cost of a commercial policy with identical coverage and premium rates.” Ante, at 108. This statement assumes, contrary to the Court’s holding, that the assignment of the member’s premium refund is a tax-deductible contribution by the member to the ABE. Even on this assumption, however, the statement is inaccurate. Assume an ABE annual premium of $100, a refund of $40, and a 50% tax bracket for the member: After-tax cost is then $80. Identical coverage and premium rates for a non-ABE member (with the $40 refund retained by the policyholder) would produce a net cost of only $60. Only if one assumes “identical coverage and premium rates” but a $40 refund in the ABE case and no refund in the non-ABE case would the Court’s statement be accurate. But then the disparity would be attributable to the differing refunds, not to the deductibility of the contribution. The Court seems to assume that a tax deduction is more valuable than cash. No wonder it is unable to recognize the charitable character of the assignments described in this record.

       Cf. ante, at 113 (suggesting that case presents “a standard example of monopoly pricing”).

       Nor does the ABA represent the kind of coerced membership situation that raises constitutional concerns and a need for judicial solicitude for a member who disagrees with the organization. Cf. Teachers v. Hudson, 475 U. S. 292 (1986) (First Amendment rights of nonunion worker when union seeks agency fee as the exclusive bargaining representative).

       See also ante, at 116 (“Even if we assumed . . . that the court’s failure to attach the label ‘trade or business’ to ABE’s insurance program constitutes a finding of fact, we would be constrained to hold that finding clearly erroneous”).

       See Graver Tank & Mfg. Co. v. Linde Air Products Co., 336 U. S. 271, 275 (1949) (“A court of law, such as this Court is, rather than a court for correction of errors in fact finding, cannot undertake to review concurrent findings of fact by two courts below in the absence of a very obvious and exceptional showing of error”).

       In my opinion, moreover, the charitable character of the dividend assignment requires that the assignment be deductible for the individuals at the time the policy is purchased or renewed just as it would, in the Government’s example, at the time the dividend was received and assigned.


author: Justice Blackmun Justice Stevens,

text:
    MAINE v. TAYLOR et al.
    No. 85-62.
    Argued March 24, 1986
    Decided June 23, 1986

      Blackmun, J., delivered the opinion of the Court, in which BURGER, C. J., and BREnnan, White, MARSHALL, Powell, Rehnquist, and 0’ConnOR, JJ., joined. Stevens, J., filed a dissenting opinion, post, p. 152.

      Cabanne Howard, Deputy Attorney General of Maine, argued the cause for appellant. With him on the briefs was James E. Tierney, Attorney General.

      Jerrold J. Ganzfried argued the cause for the United States, as appellee under this Court’s Rule 10.4, in support of appellant. With him on the brief were Solicitor General Fried, Assistant Attorney General Habicht, Deputy Solicitor General Wallace, Donald A. Carr, Dirk D. Snel, and Margaret A. Hill.

      E. Paul Eggert argued the cause for appellee Taylor. With him on the brief was Robert Edmond Mittel.

   Justice Blackmun

delivered the opinion of the Court.

Once again, a little fish has caused a commotion. See Hughes v. Oklahoma, 441 U. S. 322 (1979); TVA v. Hill, 437 U. S. 153 (1978); Cappaert v. United States, 426 U. S. 128 (1976). The fish in this case is the golden shiner, a species of minnow commonly used as live bait in sport fishing.

Appellee Robert J. Taylor (hereafter Taylor or appellee) operates a bait business in Maine. Despite a Maine statute prohibiting the importation of live baitfish, he arranged to have 158,000 live golden shiners delivered to him from outside the State. The shipment was intercepted, and a federal grand jury in the District of Maine indicted Taylor for violating and conspiring to violate the Lacey Act Amendments of 1981, 95 Stat. 1073, 16 U. S. C. §§3371-3378. Section 3(a)(2)(A) of those Amendments, 16 U. S. C. § 3372(a)(2)(A), makes it a federal crime “to import, export, transport, sell, receive, acquire, or purchase in interstate or foreign commerce . . . any fish or wildlife taken, possessed, transported, or sold in violation of any law or regulation of any State or in violation of any foreign law.”

Taylor moved to dismiss the indictment on the ground that Maine’s import ban unconstitutionally burdens interstate commerce and therefore may not form the basis for a federal prosecution under the Lacey Act. Maine, pursuant to 28 U. S. C. § 2403(b), intervened to defend the validity of its statute, arguing that the ban legitimately protects the State’s fisheries from parasites and nonnative species that might be included in shipments of live baitfish. The District Court found the statute constitutional and denied the motion to dismiss. United States v. Taylor, 585 F. Supp. 393 (Me. 1984). Taylor then entered a conditional plea of guilty pursuant to Federal Rule of Criminal Procedure 11(a)(2), reserving the right to appeal the District Court’s ruling on the constitutional question. The Court of Appeals for the First Circuit reversed, agreeing with Taylor that the underlying state statute impermissibly restricts interstate trade. United States v. Taylor, 752 F. 2d 757 (1985). Maine appealed. We set the case for plenary review and postponed consideration of Taylor’s challenges to our appellate jurisdiction. 474 U. S. 943 (1985).

I

Maine invokes our jurisdiction under 28 U. S. C. §1254(2), which authorizes an appeal as of right to this Court “by a party relying on a State statute held by a court of appeals to be invalid as repugnant to the Constitution, treaties or laws of the United States.” Appellee, however, contends that this provision applies only to civil cases, and that, in any event, Maine lacks standing to appeal the reversal of a federal conviction. These contentions both relate to the unusual procedural posture of the case: an appeal by a State from the reversal of a federal conviction based on a violation of state law. We consider them in turn.

First, despite its procedural peculiarities, this case fits squarely within the plain terms of § 1254(2): Maine relies on a state statute that the Court of Appeals held to be unconstitutional. Although statutes authorizing appeals as of right to this Court are strictly construed, see, e. g., Silkwood v. Kerr-McGee Corp., 464 U. S. 238, 247 (1984), nothing in the language or legislative history of §1254(2) suggests that its scope is limited to civil litigation. In arguing for such a limitation, appellee relies principally on the fact that §§1254(1) and (3) — which authorize discretionary review of cases from the Courts of Appeals by writ of certiorari and certification, respectively — both apply explicitly to “any civil or criminal case.” Since this express language is absent from § 1254(2), appellee contends that Congress must have intended this Court’s appellate jurisdiction over cases from the courts of appeals to remain limited to civil cases, as indeed it was limited prior to the 1925 enactment of § 1254’s predecessor.

We find the argument unconvincing. While some statutes governing this Court’s jurisdiction, such as §§ 1254(1) and (3), expressly apply to both civil and criminal cases, others are explicitly limited to civil actions. See, e. g., 28 U. S. C. §§ 1252 and 1253. The absence of either sort of provision from § 1254(2) hardly demonstrates that Congress had only civil cases in mind, and we see no reason to read such a limitation into the straightforward and unambiguous terms of the statute. This is not a situation where “the sense of the statute and the literal language are at loggerheads,” or where adherence to the plain terms of the statute “ ‘would confer upon this Court a jurisdiction beyond what “naturally and properly belongs to it.’”” Heckler v. Edwards, 465 U. S. 870, 879 (1984), quoting Florida Lime & Avocado Growers, Inc. v. Jacobsen, 362 U. S. 73, 94 (1960) (Frankfurter, J., dissenting), in turn quoting American Security & Trust Co. v. District of Columbia, 224 U. S. 491, 495 (1912). Section 1254(2) serves to ensure that a state statute is struck down by the federal judiciary only when it is found invalid by this Court, or when the parties acquiesce in the decision of a lower federal court. Federal nullification of a state statute is a grave matter whether it occurs in civil litigation or in the course of a criminal prosecution, and review by this Court is particularly warranted in either event.

Appellee’s second jurisdictional argument is based on the fact that the only appellant before this Court is the State of Maine — only an intervenor in the District Court — not the United States, which brought the original prosecution. Since the United States and its attorneys have the sole power to prosecute criminal cases in the federal courts, appellee contends that Maine may not seek review of the Court of Appeals’ reversal of his conviction. By statute, however, Maine intervened with “all the rights of a party,” 28 U. S. C. § 2403(b), and appeals may be taken to this Court under §1254(2) by any “party relying on a State statute” held invalid under federal law by a Court of Appeals. We previously have recognized that intervenors in lower federal courts may seek review in this Court on their own, so long as they have “a sufficient stake in the outcome of the controversy” to satisfy the constitutional requirement of genuine adversity. Bryant v. Yellen, 447 U. S. 352, 368 (1980); see also, e. g., Diamond v. Charles, 476 U. S. 54, 68 (1986). Maine’s stake in the outcome of this litigation is substantial: if the judgment of the Court of Appeals is left undisturbed, the State will be bound by the conclusive adjudication that its import ban is unconstitutional. See, e. g., Stoll v. Gottlieb, 305 U. S. 165 (1938). And although private parties, and perhaps even separate sovereigns, have no legally cognizable interest in the prosecutorial decisions of the Federal Government, cf., e. g., Diamond v. Charles, supra, at 64-65; Linda R. S. v. Richard D., 410 U. S. 614, 619 (1973), a State clearly has a legitimate interest in the continued enforceability of its own statutes, see Diamond v. Charles, supra, at 65; Alfred L. Snapp & Son, Inc. v. Puerto Rico ex rel. Barez, 458 U. S. 592, 601 (1982). Furthermore, because reversal of the judgment of the Court of Appeals would result in the automatic reinstatement of appellee’s guilty plea, the controversy before us clearly remains live notwithstanding the Federal Government’s decision to abandon its own appeal. We turn to the merits.

II

The Commerce Clause of the Constitution grants Congress the power “[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Art. I, §8, cl. 3. “Although the Clause thus speaks in terms of powers bestowed upon Congress, the Court long has recognized that it also limits the power of the States to erect barriers against interstate trade.” Lewis v. BT Investment Managers, Inc., 447 U. S. 27, 35 (1980). Maine’s statute restricts interstate trade in the most direct manner possible, blocking all inward shipments of live baitfish at the State’s border. Still, as both the District Court and the Court of Appeals recognized, this fact alone does not render the law unconstitutional. The limitation imposed by the Commerce Clause on state regulatory power “is by no means absolute,” and “the States retain authority under their general police powers to regulate matters of ‘legitimate local concern,’ even though interstate commerce may be affected.” Id., at 36.

In determining whether a State has overstepped its role in regulating interstate commerce, this Court has distinguished between state statutes that burden interstate transactions only incidentally, and those that affirmatively discriminate against such transactions. While statutes in the first group violate the Commerce Clause only if the burdens they impose on interstate trade are “clearly excessive in relation to the putative local benefits,” Pike v. Bruce Church, Inc., 397 U. S. 137, 142 (1970), statutes in the second group are subject to more demanding scrutiny. The Court explained in Hughes v. Oklahoma, 441 U. S., at 336, that once a state law is shown to discriminate against interstate commerce “either on its face or in practical effect,” the burden falls on the State to demonstrate both that the statute “serves a legitimate local purpose,” and that this purpose could not be served as well by available nondiscriminatory means. See also, e. g., Sporhase v. Nebraska ex rel. Douglas, 458 U. S. 941, 957 (1982); Hunt v. Washington State Apple Advertising Comm’n, 432 U. S. 333, 353 (1977); Dean Milk Co. v. Madison, 340 U. S. 349, 354 (1951).

The District Court and the Court of Appeals both reasoned correctly that, since Maine’s import ban discriminates on its face against interstate trade, it should be subject to the strict requirements of Hughes v. Oklahoma, notwithstanding Maine’s argument that those requirements were waived by the Lacey Act Amendments of 1981. It is well established that Congress may authorize the States to engage in regulation that the Commerce Clause would otherwise forbid. See, e. g., Southern Pacific Co. v. Arizona ex rel. Sullivan, 325 U. S. 761, 769 (1945). But because of the important role the Commerce Clause plays in protecting the free flow of interstate trade, this Court has exempted state statutes from the implied limitations of the Clause only when the congressional direction to do so has been “unmistakably clear.” South-Central Timber Development, Inc. v. Wunnicke, 467 U. S. 82, 91 (1984). The 1981 Amendments of the Lacey Act clearly provide for federal enforcement of valid state and foreign wildlife laws, but Maine identifies nothing in the text or legislative history of the Amendments that suggests Congress wished to validate state laws that would be unconstitutional without federal approval.

Before this Court, Maine concedes that the Lacey Act Amendments do not exempt state wildlife legislation from scrutiny under the Commerce Clause. See Reply Brief for Appellant 3, n. 2. The State insists, however, that the Amendments should lower the intensity of the scrutiny that would otherwise be applied. We do not agree. An unambiguous indication of congressional intent is required before a federal statute will be read to authorize otherwise invalid state legislation, regardless of whether the purported authorization takes the form of a flat exemption from Commerce Clause scrutiny or the less direct form of a reduction in the level of scrutiny. Absent “a clear expression of approval by Congress,” any relaxation in the restrictions on state power otherwise imposed by the Commerce Clause unacceptably increases “the risk that unrepresented interests will be adversely affected by restraints on commerce.” South-Central Timber, supra, at 92.

In this case, there simply is no unambiguous statement of any congressional intent whatsoever “to alter the limits of state power otherwise imposed by the Commerce Clause,” United States v. Public Utilities Comm’n of California, 345 U. S. 295, 304 (1953). In arguing to the contrary, Maine relies almost exclusively on the following findings in the Senate Report on the Lacey Act Amendments:

“It is desirable to extend protection to species of wildlife not now covered by the Lacey Act, and to plants which are presently not covered at all. States and foreign government are encouraged to protect a broad variety of species. Legal mechanisms should be supportive of those governments.” S. Rep. No. 97-123, pp. 3-4 (1981).

Maine reads this passage, particularly the last sentence, to direct federal courts to treat state wildlife laws more leniently. We find this interpretation not only less than obvious but positively strained; by far the more natural reading of the last sentence is that it refers only to the availability of federal investigative and prosecutorial resources to enforce valid state wildlife laws. The passage certainly does not make “unmistakably clear” that Congress intended in 1981 to alter in any way the level of Commerce Clause scrutiny applied to those laws. Maine’s ban on the importation of live baitfish thus is constitutional only if it satisfies the requirements ordinarily applied under Hughes v. Oklahoma to local regulation that discriminates against interstate trade: the statute must serve a legitimate local purpose, and the purpose must be one that cannot be served as well by available nondiscriminatory means.

Ill

The District Court found after an evidentiary hearing that both parts of the Hughes test were satisfied, but the Court of Appeals disagreed. We conclude that the Court of Appeals erred in setting aside the findings of the District Court. To explain why, we need to discuss the proceedings below in some detail.

A

The evidentiary hearing on which the District Court based its conclusions was one before a Magistrate. Three scientific experts testified for the prosecution and one for the defense. The prosecution experts testified that live baitfish imported into the State posed two significant threats to Maine’s unique and fragile fisheries. First, Maine’s population of wild fish — including its own indigenous golden shiners — would be placed at risk by three types of parasites prevalent in out-of-state baitfish, but not common to wild fish in Maine. See, e. g., App. 39-55. Second, nonnative species inadvertently included in shipments of live baitfish could disturb Maine’s aquatic ecology to an unpredictable extent by competing with native fish for food or habitat, by preying on native species, or by disrupting the environment in more subtle ways. See, e. g., id., at 59-70, 141-149.

The prosecution experts further testified that there was no satisfactory way to inspect shipments of live baitfish for parasites or commingled species. According to their testimony, the small size of baitfish and the large quantities in which they are shipped made inspection for commingled species “a physical impossibility.” Id., at 81. Parasite inspection posed a separate set of difficulties because the examination procedure required destruction of the fish. Id., at 81-82, 195. Although statistical sampling and inspection techniques had been developed for salmonids (i. e., salmon and trout), so that a shipment could be certified parasite-free based on a standardized examination of only some of the fish, no scientifically accepted procedures of this sort were available for baitfish. See, e. g., id., at 71, 184, 193-194.

Appellee’s expert denied that any scientific justification supported Maine’s total ban on the importation of baitfish. Id., at 241. He testified that none of the three parasites discussed by the prosecution witnesses posed any significant threat to fish in the wild, id., at 206-212, 228-232, and that sampling techniques had not been developed for baitfish precisely because there was no need for them. Id., at 265-266. He further testified that professional baitfish farmers raise their fish in ponds that have been freshly drained to ensure that no other species is inadvertently collected. Id., at 239-240.

Weighing all the testimony, the Magistrate concluded that both prongs of the Hughes test were satisfied, and accordingly that appellee’s motion to dismiss the indictment should be denied. Appellee filed objections, but the District Court, after an independent review of the evidence, reached the same conclusions. First, the court found that Maine “clearly has a legitimate and substantial purpose in prohibiting the importation of live bait fish,” because “substantial uncertainties” surrounded the effects that baitfish parasites would have on the State’s unique population of wild fish, and the consequences of introducing nonnative species were similarly unpredictable. 585 F. Supp., at 397. Second, the court concluded that less discriminatory means of protecting against these threats were currently unavailable, and that, in particular, testing procedures for baitfish parasites had not yet been devised. Id., at 398. Even if procedures of this sort could be effective, the court found that their development probably would take a considerable amount of time. Id., at 398, n. 11.

Although the Court of Appeals did not expressly set aside the District Court’s finding of a legitimate local purpose, it noted that several factors “cast doubt” on that finding. 752 F. 2d, at 762. First, Maine was apparently the only State to bar all importation of live baitfish. See id., at 761. Second, Maine accepted interstate shipments of other freshwater fish, subject to an inspection requirement. Third, “an aura of economic protectionism” surrounded statements made in 1981 by the Maine Department of Inland Fisheries and Wildlife in opposition to a proposal by appellee himself to repeal the ban. Ibid. Finally, the court noted that parasites and nonnative species could be transported into Maine in shipments of nonbaitfish, and that nothing prevented fish from simply swimming into the State from New Hampshire. Id., at 762, n. 12.

Despite these indications of protectionist intent, the Court of Appeals rested its invalidation of Maine’s import ban on a different basis, concluding that Maine had not demonstrated that any legitimate local purpose served by the ban could not be promoted equally well without discriminating so heavily against interstate commerce. Specifically, the court found it “difficult to reconcile” Maine’s claim that it could not rely on sampling and inspection with the State’s reliance on similar procedures in the case of other freshwater fish. Id., at 762.

Following the reversal of appellee’s conviction, Maine and the United States petitioned for rehearing on the ground that the Court of Appeals had improperly disregarded the District Court’s findings of fact. The court denied the petitions, concluding that, since the unavailability of a less discriminatory alternative “was a mixed finding of law and fact,” a reviewing court “was free to examine carefully the factual record and to draw its own conclusions.” Id., at 765.

B

Although the proffered justification for any local discrimination against interstate commerce must be subjected to “the strictest scrutiny,” Hughes v. Oklahoma, 441 U. S., at 337, the empirical component of that scrutiny, like any other form of factfinding, “ ‘is the basic responsibility of district courts, rather than appellate courts/” Pullman-Standard v. Swint, 456 U. S. 273, 291 (1982), quoting DeMarco v. United States, 415 U. S. 449, 450, n. (1974). As this Court frequently has emphasized, appellate courts are not to decide factual questions de novo, reversing any findings they would have made differently. See, e. g., Anderson v. Bessemer City, 470 U. S. 564, 573 (1985); Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U. S. 100, 123 (1969). The Federal Rules of Criminal Procedure contain no counterpart to Federal Rule of Civil Procedure 52(a), which expressly provides that findings of fact made by the trial judge “shall not be set aside unless clearly erroneous.” But the considerations underlying Rule 52(a) — the demands of judicial efficiency, the expertise developed by trial judges, and the importance of firsthand observation, see Anderson, supra, at 574-575 — all apply with full force in the criminal context, at least with respect to factual questions having nothing to do with guilt. Accordingly, the “clearly erroneous” standard of review long has been applied to nonguilt findings of fact by district courts in criminal cases. See Campbell v. United States, 373 U. S. 487, 493 (1963); 2 C. Wright, Federal Practice and Procedure § 374 (2d ed. 1982). We need not decide now whether all such findings should be reviewed under the “clearly erroneous” standard, because appellee concedes that the standard applies to the factual findings made by the District Court in this case. See Tr. of Oral Arg. 27. We note, however, that no broader review is authorized here simply because this is a constitutional case, or because the factual findings at issue may determine the outcome of the case. See Bose Corp. v. Consumers Union of United States, Inc., 466 U. S. 485, 501 (1984); Pullman-Standard v. Swint, 456 U. S., at 287.

No matter how one describes the abstract issue whether “alternative means could promote this local purpose as well without discriminating against interstate commerce,” Hughes v. Oklahoma, 441 U. S., at 336, the more specific question whether scientifically accepted techniques exist for the sampling and inspection of live baitfish is one of fact, and the District Court’s finding that such techniques have not been devised cannot be characterized as clearly erroneous. Indeed, the record probably could not support a contrary finding. Two prosecution witnesses testified to the lack of such procedures, and appellee’s expert conceded the point, although he disagreed about the need for such tests. See App. 74-75, 184, 265-266. That Maine has allowed the importation of other freshwater fish after inspection hardly demonstrates that the District Court clearly erred in crediting the corroborated and uncontradicted expert testimony that standardized inspection techniques had not yet been developed for baitfish. This is particularly so because the text of the permit statute suggests that it was designed specifically to regulate importation of salmonids, for which, the experts testified, testing procedures had been developed.

Before this Court, appellee does not argue that sampling and inspection procedures already exist for baitfish; he contends only that such procedures “could be easily developed.” Brief for Appellee 25. Perhaps this is also what the Court of Appeals meant to suggest. Unlike the proposition that the techniques already exist, the contention that they could readily be devised enjoys some support in the record. Ap-pellee’s expert testified that developing the techniques “would just require that those experts in the field . . . get together and do it.” App. 271. He gave no estimate of the time and expense that would be involved, however, and one of the prosecution experts testified that development of the testing procedures for salmonids had required years of heavily financed research. See id., at 74. In light of this testimony, we cannot say that the District Court clearly erred in concluding, 585 F. Supp., at 398, n. 11, that the development of sampling and inspection techniques for baitfish could be expected to take a significant amount of time.

More importantly, we agree with the District Court that the “abstract possibility,” id., at 398, of developing acceptable testing procedures, particularly when there is no assurance as to their effectiveness, does not make those procedures an “[a]vailabl[e] . . . nondiscriminatory alternativ[e],” Hunt, 432 U. S., at 353, for purposes of the Commerce Clause. A State must make reasonable efforts to avoid restraining the free flow of commerce across its borders, but it is not required to develop new and unproven means of protection at an uncertain cost. Appellee, of course, is free to work on his own or in conjunction with other bait dealers to develop scientifically acceptable sampling and inspection procedures for golden shiners; if and when such procedures are developed, Maine no longer may be able to justify its import ban. The State need not join in those efforts, however, and it need not pretend they already have succeeded.

c

Although the Court of Appeals did not expressly overturn the District Court’s finding that Maine’s import ban serves a legitimate local purpose, appellee argues as an alternative ground for affirmance that this finding should be rejected. After reviewing the expert testimony presented to the Magistrate, however, we cannot say that the District Court clearly erred in finding that substantial scientific uncertainty surrounds the effect that baitfish parasites and nonnative species could have on Maine’s fisheries. Moreover, we agree with the District Court that Maine has a legitimate interest in guarding against imperfectly understood environmental risks, despite the possibility that they may ultimately prove to be negligible. “[T]he constitutional principles underlying the commerce clause cannot be read as requiring the State of Maine to sit idly by and wait until potentially irreversible environmental damage has occurred or until the scientific community agrees on what disease organisms are or are not dangerous before it acts to avoid such consequences.” 585 F. Supp., at 397.

Nor do we think that much doubt is cast on the legitimacy of Maine’s purposes by what the Court of Appeals took to be signs of protectionist intent. Shielding in-state industries from out-of-state competition is almost never a legitimate local purpose, and state laws that amount to “simple economic protectionism” consequently have been subject to a “virtually per se rule of invalidity.” Philadelphia v. New Jersey, 437 U. S. 617, 624 (1978); accord, e. g., Minnesota v. Clover Leaf Creamery Co., 449 U. S. 456, 471 (1981). But there is little reason in this case to believe that the legitimate justifications the State has put forward for its statute are merely a sham or a “post hoc rationalization.” Hughes, 441 U. S., at 338, n. 20. In suggesting to the contrary, the Court of Appeals relied heavily on a 3-sentence passage near the end of a 2,000-word statement submitted in 1981 by the Maine Department of Inland Fisheries and Wildlife in opposition to appellee’s proposed repeal of the State’s ban on the importation of live baitfish:

“ ‘[W]e can’t help asking why we should spend our money in Arkansas when it is far better spent at home? It is very clear that much more can be done here in Maine to provide our sportsmen with safe, home-grown bait. There is also the possibility that such an industry could develop a lucrative export market in neighboring states.’” 752 F. 2d, at 760, quoting Baitfish Importation: The Position of the Maine Department of Inland Fisheries and Wildlife, App. 294, 309-310.

We fully agree with the Magistrate that “[t]hese three sentences do not convert the Maine statute into an economic protectionism measure.” App. to Juris. Statement E-6, n. 4. As the Magistrate pointed out, the context of the statements cited by appellee “reveals [they] are advanced not in direct support of the statute, but to counter the argument that inadequate bait supplies in Maine require acceptance of the environmental risks of imports. Instead, the Department argues, Maine’s own bait supplies can be increased.” Ibid. Furthermore, the comments were made by a state administrative agency long after the statute’s enactment, and thus constitute weak evidence of legislative intent in any event. See ibid.

The other evidence of protectionism identified by the Court of Appeals is no more persuasive. The fact that Maine allows importation of salmonids, for which standardized sampling and inspection procedures are available, hardly demonstrates that Maine has no legitimate interest in prohibiting the importation of baitfish, for which such procedures have not yet been devised. Nor is this demonstrated by the fact that other States may not have enacted similar bans, espe-dally given the testimony that Maine’s fisheries are unique and unusually fragile. Finally, it is of little relevance that fish can swim directly into Maine from New Hampshire. As the Magistrate explained: “The impediments to complete success . . . cannot be a ground for preventing a state from using its best efforts to limit [an environmental] risk.” Id., at E-10, n. 8.

IV

The Commerce Clause significantly limits the ability of States and localities to regulate or otherwise burden the flow of interstate commerce, but it does not elevate free trade above all other values. As long as a State does not needlessly obstruct interstate trade or attempt to “place itself in a position of economic isolation,” Baldwin v. G. A. F. Seelig, Inc., 294 U. S. 511, 527 (1935), it retains broad regulatory authority to protect the health and safety of its citizens and the integrity of its natural resources. The evidence in this case amply supports the District Court’s findings that Maine’s ban on the importation of live baitfish serves legitimate local purposes that could not adequately be served by available nondiscriminatory alternatives. This is not a case of arbitrary discrimination against interstate commerce; the record suggests that Maine has legitimate reasons, “apart from their origin, to treat [out-of-state baitfish] differently,” Philadelphia v. New Jersey, 437 U. S., at 627. The judgment of the Court of Appeals setting aside appellee’s conviction is therefore reversed.

It is so ordered.

Justice Stevens,

dissenting.

There is something fishy about this case. Maine is the only State in the Union that blatantly discriminates against out-of-state baitfish by flatly prohibiting their importation. Although golden shiners are already present and thriving in Maine (and, perhaps not coincidentally, the subject of a flourishing domestic industry), Maine excludes golden shiners grown and harvested (and, perhaps not coincidentally, sold) in other States. This kind of stark discrimination against out-of-state articles of commerce requires rigorous justification by the discriminating State. “When discrimination against commerce of the type we have found is demonstrated, the burden falls on the State to justify it both in terms of the local benefits flowing from the statute and the unavailability of nondiscriminatory alternatives adequate to preserve the local interests at stake.” Hunt v. Washington State Apple Advertising Comm’n, 432 U. S. 333, 353 (1977).

Like the District Court, the Court concludes that uncertainty about possible ecological effects from the possible presence of parasites and nonnative species in shipments of out-of-state shiners suffices to carry the State’s burden of proving a legitimate public purpose. Ante, at 142-143, 148. The Court similarly concludes that the State has no obligation to develop feasible inspection procedures that would make a total ban unnecessary. Ante, at 147. It seems clear, however, that the presumption should run the other way. Since the State engages in obvious discrimination against out-of-state commerce, it should be put to its proof. Ambiguity about dangers and alternatives should actually defeat, rather than sustain, the discriminatory measure.

This is not to derogate the State’s interest in ecological purity. But the invocation of environmental protection or public health has never been thought to confer some kind of special dispensation from the general principle of nondiscrimination in interstate commerce. “A different view, that the ordinance is valid simply because it professes to be a health measure, would mean that the Commerce Clause of itself imposes no restraints on state action other than those laid down by the Due Process Clause, save for the rare instance where a state artlessly discloses an avowed purpose to discriminate against interstate goods.” Dean Milk Co. v. Madison, 340 U. S. 349, 354 (1951). If Maine wishes to rely on its interest in ecological preservation, it must show that interest, and the infeasibility of other alternatives, with far greater specificity. Otherwise, it must further that asserted interest in a manner far less offensive to the notions of comity and cooperation that underlie the Commerce Clause.

Significantly, the Court of Appeals, which is more familiar with Maine’s natural resources and with its legislation than we are, was concerned by the uniqueness of Maine’s ban. That court felt, as I do, that Maine’s unquestionable natural splendor notwithstanding, the State has not carried its substantial burden of proving why it cannot meet its environmental concerns in the same manner as other States with the same interest in the health of their fish and ecology. Cf. ante, at 151, n. 22 (describing less restrictive procedures in other States).

I respectfully dissent;

       “A person is guilty of importing live bait if he imports into this State any live fish, including smelts, which are commonly used for bait fishing in inland waters.” Me. Rev. Stat. Ann., Tit. 12, §7613 (1981).

       Section 1254 reads in full:
      “Cases in the courts of appeals may be reviewed by the Supreme Court by the following methods:
      “(1) By writ of certiorari granted upon the petition of any party to any civil or criminal ease, before or after rendition of judgment or decree;
      “(2) By appeal by a party relying on a State statute held by a court of appeals to be invalid as repugnant to the Constitution, treaties or laws of the United States, but such appeal shall preclude review by writ of certio-rari at the instance of such appellant, and the review on appeal shall be restricted to the Federal questions presented;
      “(3) By certification at any time by a court of appeals of any question of law in any civil or criminal case as to which instructions are desired, and upon such certification the Supreme Court may give binding instructions or require the entire record to be sent up for decision of the entire matter in controversy.”

       Congress in 1925 amended § 240(b) of the Judicial Code to read as follows:
      “Any ease in a circuit court of appeals where is drawn in question the validity of a statute of any State, on the ground of its being repugnant to the Constitution, treaties, or laws of the United States, and the decision is against its validity, may, at the election of the party relying on such State statute, be taken to the Supreme Court for review on writ of error or appeal; but in that event a review on certiorari shall not be allowed at the instance of such party, and the review on such writ of error or appeal shall be restricted to an examination and decision of the Federal questions presented in the ease.” Act of Feb. 13, 1925, § 1, 43 Stat. 939.
      Until then, appeals were allowed as of right from decisions of the courts of appeals only in civil cases involving more than $1,000, and not arising under the diversity, admiralty, patent, or revenue jurisdiction of the federal courts. See Act of Mar. 3, 1891, § 6, 26 Stat. 828.
      The relevant portion of the 1925 Act was added on the floor of the Senate, and the debates surrounding the amendment contain no suggestion that it was intended to apply only in civil cases. See 66 Cong. Rec. 2753-2754, 2757, 2919-2925 (1925).

       Even if this case fell outside the scope of 28 U. S. C. § 1254(2), we would still have discretion under 28 U. S. C. § 2103 to grant review by writ of certiorari. See Doran v. Salem Inn, Inc., 422 U. S. 922, 927 (1975); El Paso v. Simmons, 379 U. S. 497, 502-503 (1965).

       The United States filed a timely notice of appeal to this Court, App. 311, but later moved in the Court of Appeals to dismiss its appeal. Id., at 313. This was “[blecause the Acting Solicitor General determined that other cases were entitled to priority in selecting the limited number of cases the government would ask this Court to review.” Brief for United States 14-15. The Court of Appeals granted the Government’s motion. App. 315.

      Title 28 U. S. C. § 2403(b) provides:
      “In any action, suit, or proceeding in a court of the United States to which a State or any agency, officer, or employee thereof is not a party, wherein the constitutionality of any statute of that State affecting the public interest is drawn in question, the court shall certify such fact to the attorney general of the State, and shall permit the State to intervene for presentation of evidence, if evidence is otherwise admissible in the case, and for argument on the question of constitutionality. The State shall, subject to the applicable provisions of law, have all the rights of a party and be subject to all liabilities of a party as to court costs to the extent necessary for a proper presentation of the facts and law relating to the question of constitutionality.”

       The United States advises us that it does not intend to seek dismissal of the indictment if Maine prevails in this Court. See Brief for United States 17, n. 17.

       One prosecution witness testified that Maine’s lakes contain unusually clean water and originally supported “a rather delicate community of just a few species of fish.” App. 57. Another stressed that “no other state . . . has any real landlocked salmon fishing. You come to Maine for that or you live in Maine for that.” Id., at 137.

       Two of these types of parasites were found in appellee’s confiscated shipment of golden shiners. See United States v. Taylor, 585 F. Supp. 393, 395-396 (Me. 1984).

       Although appellee’s shipment was not found to contain any fish other than golden shiners, it did contain “some polliwogs and . . . some crustacean crawfish.” App. 69. There was testimony suggesting that these could pose the same ecological risks as nonnative fish. See id., at 70.

       The expert who examined appellee’s shipment testified that, although his inspection of the shipment revealed only two of the three parasites he described as prevalent in baitfish outside Maine, “I certainly could not put my signature on a certificate to say that [none of the third parasite] was present in that lot.” Id., at 85.

       The shipment intercepted in this ease contained approximately 158,000 fish, with about 70 specimens to the pound. Id., at 80.

       According to the prosecution testimony, the design of sampling and inspection techniques must take into account the particular parasites of concern, and baitfish parasites differ from salmonid parasites. See, e. g., id., at 184, 193-194. Appellee’s expert agreed. Id., at 237, 265-267. There was also testimony that the physical layout of bait farms makes inspection at the source of shipment particularly difficult, and that border inspections are not feasible because the fish would die in the time it takes to complete the tests. Id., at 75-79.

       For several reasons, the District Court discounted the testimony of appellee’s expert that baitfish parasites did not pose so serious a threat as disease organisms found in salmonids. The court noted that “considerable scientific debate” surrounded even the threat posed by salmonid diseases, that appellee’s expert testified largely about the effects that baitfish parasites had in commercial hatcheries rather than in the wild, and that he was unfamiliar with northeast fisheries. 585 F. Supp., at 397.

       While the District Court approved the Magistrate’s general finding that “there are no obviously workable alternatives to the outright prohibition of importation,” id., at 398, neither the court nor the Magistrate made any specific finding as to whether Maine could adequately protect against the inadvertent introduction of nonnative species by allowing baitfish to be imported only from professional bait farmers using freshly drained ponds. There was conflicting evidence on this point. Appellee’s expert suggested that such methods largely eliminated the problem of commingled species, App. 239-240, but a prosecution witness testified that complete success was “unlikely.” Id., at 170. See also id., at 150 (prosecution testimony that shipments cannot be screened reliably for commingled species because “[t]his is a business. You have living material that you have to move; you can’t hold them in tanks and this kind of thing for any length of time”). We are in no position to resolve this factual dispute, and we conclude in any event that the District Court’s findings regarding parasites adequately support the constitutionality of the challenged statute.

       The court also noted that “a restriction on the number and size of importations would be less restrictive than a total ban,” 752 F. 2d, at 762, but it identified no reason to believe that such a restriction would protect against parasites and commingled species as effectively as a ban.

       In support of its conclusion that it “was free to examine carefully the factual record and to draw its own conclusions,” id., at 765, the Court of Appeals cited Bacchus Imports, Ltd. v. Dias, 468 U. S. 263 (1984), and Boston Stock Exchange v. State Tax Comm’n, 429 U. S. 318 (1977). The question in each of these eases was whether a given set of facts amounted to discrimination forbidden by the Commerce Clause; in neither case did this Court reject underlying factual findings made by the trial court. Indeed, there were no such findings to reject — the facts were stipulated in Bacchus, see 468 U. S., at 269, and Boston Stock Exchange was decided on a motion to dismiss, see 429 U. S., at 320.

       The statute provides: “The commissioner may grant permits” for the importation of freshwater fish upon an application that describes the fish and their source and includes “[a] statement from a recognized fish pathologist, from a college or university, from a state conservation department or from the United States Fish and Wildlife Service, certifying that the fish . . . are from sources which show no evidence of viral hemorrhagic septicemia, infectious pancreatic necrosis, infectious hematopoietic necrosis, Myxosomo cerebralis or other diseases which may threaten fish stocks within the State.” Me. Rev. Stat. Ann., Tit. 12, § 7202 (1981) (emphasis added). The listed diseases all were identified at the hearing before the Magistrate as salmonid disorders. See App. 193.

      This rule has been applied not only to laws motivated solely by a desire to protect local industries from out-of-state competition, but also to laws that respond to legitimate local concerns by discriminating arbitrarily against interstate trade, for “the evil of protectionism can reside in legislative means as well as legislative ends.” Philadelphia v. New Jersey, 437 U. S., at 626. The Court has held, for example, that New Jersey may not conserve the disposal capacity of its landfill sites by banning importation of wastes, see ibid., and that Oklahoma may not fight depletion of its population of natural minnows by prohibiting their commercial exportation, see Hughes v. Oklahoma, 441 U. S. 322 (1979). In each case, out-of-state residents were forced to bear the brunt of the conservation program for no apparent reason other than that they lived and voted in other States. See Philadelphia v. New Jersey, 437 U. S., at 629; Hughes, 441 U. S., at 337-338, and n. 20. Not all intentional barriers to interstate trade are protectionist, however, and the Commerce Clause “is not a guaranty of the right to import into a state whatever one may please, absent a prohibition by Congress, regardless of the effects of the importation upon the local community.” Robertson v. California, 328 U. S. 440, 458 (1946). Even overt discrimination against interstate trade may be justified where, as in this case, out-of-state goods or services are particularly likely for some reason to threaten the health and safety of a State’s citizens or the integrity of its natural resources, and where “outright prohibition of entry, rather than some intermediate form of regulation, is the only effective method of pro-tecti[on].” Lewis v. BT Investment Managers, Inc., 447 U. S. 27, 43 (1980).

       The District Court did not address appellee’s argument that the import ban was protectionist, because it did not believe that appellee had objected to the Magistrate’s rejection of that argument. See 585 F. Supp., at 395, n. 5. The Court of Appeals disagreed, concluding that appellee’s objections to the Magistrate’s recommended decision incorporated all the arguments included in his motion to dismiss. See 752 F. 2d, at 760, n. 7. In the objections he filed with the District Court, appellee did not specifically contend that the statute was protectionist, but he concluded by asking that the indictment be dismissed “[f ]or the reasons stated herein and also for those reasons stated in Defendant’s Memorandum of Law in Support of Motion to Dismiss.” Defendant’s Objection to the Magistrate’s Recommended Decision on Defendant’s Motion to Dismiss Indictment 4 (Mar. 12, 1984) (emphasis added). Because we think the Magistrate was clearly right to reject the argument that Maine’s bait statute constitutes economic protectionism, we need not decide whether this catchall language sufficed to preserve the argument for later review. Cf. Thomas v. Arn, 474 U. S. 140, 148-149 (1985).

       The import ban was originally enacted in 1959. See 1959 Me. Acts, ch. 112.

       Although Maine’s flat statutory ban on the importation of all live baitfish is apparently unique, Minnesota prohibits the use of imported minnows for bait purposes “[e]xcept as otherwise specifically permitted,” Minn. Stat. § 101.42, subd. 6 (1984), and several other States require administrative approval for the importation and introduction of any live fish, see, e. g., Utah Code Ann. § 23-15-12 (1984); Va. Code § 28.1-183.2 (1985); Wis. Stat. §29.535 (Supp. 1985); cf. S. D. Codified Laws § 41-14-30 (1977) (minnows may be transported “into or through South Dakota” only pursuant to a 12-hour permit). Other States have granted authority to their wildlife agencies to prohibit the importation of particular species. See, e. g., Ala. Code § 9-2-13 (1980); N. C. Gen. Stat. § 113-160 (1983); cf. Nev. Rev. Stat. § 503.310(1) (1985) (“The [state wildlife] commission is empowered to regulate or prohibit the use of live bait in fishing to the end that no undesirable species of fish intentionally or unintentionally may be introduced into the public waters of this state”).