Huber v. Colo. Mining Ass'n

• Decision Date: 31 October 2011
• Docket Number: No. 10SC220.,10SC220.
• Citation: 264 P.3d 884
• Parties: Roxy HUBER, in her capacity as Executive Director of the Department of Revenue, State of Colorado; the Colorado Department of Revenue; and the State of Colorado, Petitionersv.COLORADO MINING ASSOCIATION; Twentymile Coal Company; Mountain Coal Company, LLC; Colowyo Coal Company, L.P.; Oxbow Mining, LLC; Trapper Mining, Inc.; and Bowie Resources, LLC., Respondents.
• Court: Colorado Supreme Court

264 P.3d 884

Roxy HUBER, in her capacity as Executive Director of the Department of Revenue, State of Colorado; the Colorado Department of Revenue; and the State of Colorado, Petitioners

v.COLORADO MINING ASSOCIATION; Twentymile Coal Company; Mountain Coal Company, LLC; Colowyo Coal Company, L.P.; Oxbow Mining, LLC; Trapper Mining, Inc.; and Bowie Resources, LLC., Respondents.

No. 10SC220.

Supreme Court of Colorado, En Banc.

Oct. 31, 2011.

John W. Suthers, Attorney General, Daniel D. Domenico, Solicitor General, Maurice G. Knaizer, Deputy Attorney General, Matthew D. Grove, Assistant Attorney General, Denver, Colorado, Attorneys for Petitioners.Moye White LLP, Paul M. Seby, Marian C. Larsen, Denver, Colorado, Attorneys for Respondents.Featherstone Petrie DeSisto LLP, Matthew A. Morr, Denver, Colorado, Attorneys for Amici Curiae Colorado Association of Commerce and Industry; Denver Metro Chamber of Commerce.Rothgerber Johnson & Lyons LLP, Thomas J. Dougherty, Denver, Colorado, Attorneys for Amicus Curiae Tri–State Generation and Transmission Association, Inc.Justice HOBBS delivered the Opinion of the Court.

We granted certiorari in this case to review the court of appeals' decision in Colorado Mining Ass'n v. Huber, 240 P.3d 453 (Colo.App.2010). ¹ The court of appeals ruled that Article X, Section 20 of the Colorado Constitution (“Amendment 1”) requires statewide voter approval each time the Colorado Department of Revenue (“Department”) calculates an increase in the amount of tax due per ton of coal extracted as directed by the tax rate formula contained in section 39–29–106, C.R.S. (2011). We disagree and reverse.

Adopted by the General Assembly in 1988, the statute establishes a tax with a tax rate that has two components to calculate the amount of tax owed: (1) a base rate of thirty-six cents per ton of coal extracted and (2) a quarterly one percent increase or decrease to the base rate based on changes to the index of producers' prices prepared by the United States Department of Labor.

Effective November 4, 1992, following its approval by voters in the 1992 general election, section (4)(a) of Amendment 1 requires governmental entities to obtain voter approval before imposing “any new tax, tax rate increase, mill levy above that for the prior year, valuation for assessment ratio increase for a property class, or extension of an expiring tax, or a tax policy change directly causing a net tax revenue gain to any district.” Accordingly, Amendment 1 places a check by the electorate on the exercise of legislative taxing power. See Barber v. Ritter, 196 P.3d 238, 247 (Colo.2008); Bickel v. City of Boulder, 885 P.2d 215, 226 (Colo.1994).

After Amendment 1 went into effect, the Department suspended employing the mechanism set forth in section 39–29–106(5) for calculating upward adjustments in the amount of coal severance tax owed based on inflation. Following a State Auditor's review in 2006, an Attorney General's opinion, and a rulemaking proceeding—all of which concluded that implementation of this pre–Amendment 1 statute is a non-discretionary administrative function required of the Department—the Department in 2008 recommenced applying the statute to calculate the amount of tax due. Implementation of the statute resulted in a tax of $0.76 per ton of coal extracted compared to $0.54 per ton, the amount collected at the time Amendment 1 passed sixteen years before.

The Colorado Mining Association and taxpayer coal companies (collectively, “Colorado Mining”) filed an action challenging collection of the $0.76 per ton amount. Colorado Mining asserts that, whenever the Department calculates an upward adjustment in the amount of tax due under the statute, it must obtain voter approval. The court of appeals agreed. We disagree.

We hold that section 39–29–106(1) and (5) establishes a tax rate that contains two components: a base rate of “thirty-six cents per ton of coal” plus the non-discretionary adjustment factor that is “based upon changes to the index of producers' prices.” The Department's implementation of section 39–29–106 is not a “tax rate increase,” but a non-discretionary duty required by a pre–Amendment 1 taxing statute which does not require voter approval. Accordingly, we reverse the judgment of the court of appeals and reinstate the judgment of the trial court, which held that the Department must implement section 39–29–106 as written.

I.

In 1977, the Colorado General Assembly enacted a severance tax on various minerals removed from lands in Colorado. Colorado's severance tax is intended to recapture a portion of the State's wealth that is irretrievably lost when nonrenewable natural resources are extracted from Colorado soils and sold for private profit. See § 39–29–101(1) (legislative declaration).

Section 39–29–106 does not tie the severance tax for coal directly to its market price, but expresses the tax as a formula that contains a base rate plus an adjustment mechanism designed to ensure the tax responds to changes in inflation and more fairly reflects the market value of the resource. The statute directs the Department to make quarterly adjustments based on increases or decreases in a broad economic index, the producer price index (“PPI”). ² § 39–29–106(5). Thus, under the statute, the Department must collect a tax of thirty-six cents per ton of coal extracted, plus or minus 1 percent every time the PPI changes by 1.5 percent.³ Id.

Subsections (1) and (5) function together to establish the coal severance tax rate, which the General Assembly enacted prior to the passage of Amendment 1:

(1) In addition to any other tax, there shall be levied, collected, and paid for each taxable year a tax upon the severance of all coal in this state. Such tax shall be levied against every person engaged in the severance of coal. Subject to the exemption and credits authorized in subsections (2), (3), and (4) of this section, the rate of the tax shall be thirty-six cents per ton of coal.

....

(5) For every full one and one-half percent change in the index of producers' prices for all commodities prepared by the bureau of labor statistics of the United States department of labor, the tax rate provided in subsection (1) of this section shall be increased or decreased one percent. The executive director shall determine such adjustments to the rate of tax based upon changes in the index of producers' prices from the level of such index as of January, 1978, to the level of such index as of the last month of the quarter immediately preceding the quarter for which any taxes are due.

§ 39–29–106 (emphasis added).

At the time Colorado voters adopted Amendment 1 in 1992, the Department was collecting a tax of $0.54 per ton of extracted coal pursuant to the statute. After passage of the amendment, the Department's then-Executive Director issued a memo halting “further increases or upward revisions” of the coal severance tax rate “until further notice.” The Department took no formal steps until 2006 to resolve the issue of how or whether Amendment 1 affected the implementation of section 39–29–106. The tax remained at $0.54 per ton for nearly fifteen years.

In 2006, the State Auditor's office conducted a review of the Department's activities related to determining and collecting all severance taxes owed to the State. The Auditor questioned the Department's failure to collect coal severance taxes as required by section 39–29–106, and the Department sought guidance on the matter from the Attorney General's office. In response, the Attorney General issued Formal Opinion No. 07–01 in July 2007. This opinion concluded that the tax rate set forth by section 39–29–106:(1) predated Amendment 1, (2) requires non-discretionary adjustments to the tax owed based on a pre-set statutory formula, and (3) is a mandatory directive to the Department from the General Assembly. The Attorney General opined that the statute necessarily contemplated fluctuations in the tax rate and did not constitute a “new tax, tax rate increase, or ... tax policy change directly causing a net tax revenue gain” requiring advance statewide voter approval. In the words of the Attorney General,

To require a vote each time the statutory formula requires an upward adjustment would be to render the statute a nullity.

....

... Going forward, the Department should apply the plain language of the statute and calculate the current coal tax rate using the increase or decrease in the index of producers' prices based on the level of the index as of January, 1978.

Following the Attorney General's opinion, the Department issued a notice of proposed rulemaking that resulted in a rule that tracks the language of the statute.⁴ The Department then calculated a tax of $0.76 per ton of coal extracted, and Colorado Mining filed its action to prohibit the adjustment in the absence of statewide voter approval.

Finding no issues of material fact to be tried, the trial court, on cross-motions for summary judgment, ruled that the Department had a non-discretionary pre–Amendment 1 duty to implement the statute. It determined that this pre-existing taxing mechanism does not conflict with Amendment 1, which applies only to the adoption or imposition of new taxes, tax rate increases, or tax policy changes that cause net tax revenue gains. The trial court said:

In sum, because the formula in § 39–29–106 continues to operate as established pre-[Amendment 1], and because any adjustments are triggered by external events and not discretionary government action, the operation of the statute (and Regulation 39–29–106) does not constitute a “tax rate increase” requiring voter approval under [Amendment 1].

The court of appeals reversed. It reasoned that because the implementation of the 1988 formula caused the amount of severance tax due to rise, voter approval must be obtained before the tax can be collected. Huber, 240 P.3d at 454–55. We disagree.

II.

We hold that section...