Qwest Corp. v. Colo. Div. of Prop. Taxation

• Decision Date: 04 August 2011
• Citation: 310 P.3d 113
• Docket Number: 10CA1320
• Parties: QWEST CORPORATION, Plaintiff–Appellant, v. COLORADO DIVISION OF PROPERTY TAXATION, DEPARTMENT OF LOCAL AFFAIRS, State of Colorado, Defendant–Appellee.
• Court: Colorado Court of Appeals

310 P.3d 113

QWEST CORPORATION, Plaintiff–Appellant,

v.COLORADO DIVISION OF PROPERTY TAXATION, DEPARTMENT OF LOCAL AFFAIRS, State of Colorado, Defendant–Appellee.

No. 10CA1320.

Colorado Court of Appeals, Div. II.

Aug. 4, 2011.

Roy A. Adkins, Denver, Colorado; Garlin Driscoll Howard, LLC, David J. Driscoll, Sarah A. Croog, Louisville, Colorado; Hawley Troxell Ennis & Hawley, LLP, Richard G. Smith, Boise, Idaho, for Plaintiff–Appellant.

John W. Suthers, Attorney General, Robert H. Dodd, Jr., Senior Assistant Attorney General, Denver, Colorado, for Defendant–Appellee.

Opinion by Judge WEBB.

In this property tax dispute, plaintiff, Qwest Corporation (“Qwest”), appeals the trial court's judgment granting the motion to dismiss of defendant, Colorado Division of Property Taxation, Department of Local Affairs, State of Colorado (“DPT”). According to Qwest, because some of its property is similar to that of cable service providers (“cable companies”), the tax statutes applied to cable companies' property should be interpreted to permit DPT to assess such Qwest property under these statutes, although Qwest is a public utility. Alternatively, Qwest asserts that denying it the tax benefits enjoyed by similarly situated cable companies, which are not public utilities, violates the constitutional guarantees of uniform taxation and equal protection.

We conclude that DPT reasonably interpreted the tax statutes at issue in applying them only to cable companies. We further conclude that DPT applied these statutes constitutionally because it could have done so based on administrative convenience. Therefore, we affirm.

I. Background

DPT is responsible for determining “[t]he actual value for property tax purposes of the operating property and plant of all public utilities doing business in this state ....” § 39–1–103(3), C.R.S.2010. The definition of “public utility” includes telephone companies. § 39–4–101(3)(a), C.R.S.2010. Cable companies are not included in the definition of “public utility” and are specifically exempt from regulation under the “Intrastate Telecommunications Services” article and “the ‘Public Utilities Law’ of the state of Colorado.” § 40–15–401(1)(a), C.R.S.2010. Because cable companies are not public utilities, their property is valued and taxed locally in the “county wherein such property is located.” § 39–1–103(5)(a), C.R.S.2010.

DPT's valuation method for public utilities differs from that used by county assessors for property owned by non-utilities. Compare§§ 39–4–101 to –110, C.R. S.2010 (DPT's valuation method for public utilities), with§ 39–1–103(5)(a) (county assessor's valuation method for real and personal property). Qwest concedes that as a telephone company, it is a public utility, but asserts that this classification does not justify differential taxation of Qwest property which is similar to property of cable companies providing comparable telephone services.

A DPT report, “Analysis of Telecommunication Company Property Tax Procedures and Recommendations for Statutory or Procedures [ sic ] Changes” (DPT Report) ¹ , states that certain incremental equipment used by cable companies to provide telephone services is being reported to DPT and centrally assessed as telephone company property. However, the DPT Report explains, infrastructure used by cable companies to complete telephone services as well as to provide traditional cable services continues to be reported and valued locally by county assessors as non-utility property. According to the complaint, “less than 10% of cable company property is presently being centrally assessed.”

The DPT Report observed “profound and significant change” in the telecommunications industry, leading to traditional telephone companies and cable companies “providing generally the same services.” The report noted that the ability of both types of companies to provide similar services created “equity issues” in property taxation. Specifically, it described application of sections 39–1–103(13) and 39–3–118, C.R.S.2010, to cable companies, but not to telephone companies, as “an illustration of disparate treatment for similar property that is similarly situated.”

Qwest alleged that: it is similarly situated to cable companies which provide competing telephone services and use comparable property to that used by Qwest to provide such services; local assessment of cable company property is more favorable than central assessment of its property because local assessment includes an intangible property exemption, section 39–3–118, and caps the maximum taxable value of non-utility property based on the cost approach, section 39–1–103(13); and DPT's refusal to apply these provisions to utilities gives cable companies an unfair competitive advantage.

Qwest asked the trial court to interpret sections 39–3–118 and 39–1–103(13) as applying to its property or, in the alternative, to find DPT's refusal to do so unconstitutional under the uniform taxation provision of the Colorado Constitution, Colo. Const. art. X, § 3, and the Equal Protection Clause of the United States Constitution, U.S. Const. amend. XIV. The trial court found Qwest's statutory interpretation arguments to be precluded by United States Transmission Systems, Inc. v. Bd. of Assessment Appeals, 715 P.2d 1249 (Colo.1986) (specific statutory provisions governing public utilities control over more general provisions), and the deference owed to DPT's interpretation. It also rejected Qwest's constitutional claims, explaining that for tax purposes, “the Colorado legislature has classified telephone companies differently from cable companies ... [,] and that classification is not unreasonable or arbitrary ... because telephone companies are regulated differently from cable companies.” The court concluded that Qwest had “not stated a claim for which relief can be granted under any theory of law,” and granted DPT's motion to dismiss.

We begin with Qwest's statutory interpretation argument because if it is correct, Qwest's constitutional challenges would become moot. See, e.g., Adams County School Dist. No. 50 v. Heimer, 919 P.2d 786, 790 (Colo.1996) ( “when possible, statutes should be construed so as to avoid questions of their constitutional validity”).

II. Statutory Interpretation

Qwest contends DPT can and should interpret the intangible property exemption, section 39–3–118, and the “cost cap” limitation on value, section 39–1–103(13), as applying to its property. We reject Qwest's position on both statutes.

Initially, we address DPT's assertion that because Qwest did not plead a separate declaratory relief claim based on its statutory interpretation arguments, they are properly before us “only if the [DPT's] interpretation is unconstitutional.” While Qwest did not plead such a separate claim, we conclude that its allegations and prayer for relief sufficiently raised these issues. See Hemmann Management Services v. Mediacell, Inc., 176 P.3d 856, 859 (Colo.App.2007) (“in assessing a C.R.C.P. 12(b)(5) motion to dismiss, courts liberally construe the pleadings and resolve all doubts in favor of the pleader”). Thus, as did the trial court, we treat Qwest's statutory interpretation arguments as a separate claim.

We review questions of statutory interpretation de novo. Bd. of County Comm'rs v. ExxonMobil Oil Corp., 192 P.3d 582, 585 (Colo.App.2008), aff'd,222 P.3d 303 (Colo.2009). Our principal task is to determine and effectuate the legislature's intent. Jefferson County Bd. of Equalization v. Gerganoff, 241 P.3d 932, 935 (Colo.2010). “We begin by looking to the express language of the statute, construing words and phrases according to grammar and common usage.” Id. But here, we must strictly construe the statutory provisions at issue. § 39–1–101, C.R.S.2010 (“the provisions of said articles [1 through 13 of title 39] shall be strictly construed”).

If we conclude “that the statute is unambiguous and the intent appears with reasonable certainty, our analysis is complete.” Gerganoff, 241 P.3d at 935. If we determine that the statute is ambiguous, however, we use interpretive aids to select “among reasonable interpretations of the particular language chosen by the legislature.” Union Pac. R.R. Co. v. Martin, 209 P.3d 185, 188 (Colo.2009). And in property tax cases, while decisions of DPT “do not bind our construction of the applicable law, we consult and ordinarily defer to ... [its] guidance, rules, and determinations, if they accord with the constitutional and statutory provisions they implement.” Washington County Bd. of Equalization v. Petron Development Co., 109 P.3d 146, 150 (Colo.2005).

A. Intangible Property Exemption

Section 39–1–103(3) states that “[t]he actual value for property tax purposes of the operating property and plant of all public utilities doing business in this state shall be determined by the administrator, as provided in article 4 of this title.” Under article 4, “The administrator shall determine the actual value of the operating property and plant of each public utility as a unit, giving consideration to the following factors [including] ... [i]ts intangibles.” § 39–4–102(1)(b), C.R.S.2010.

Qwest first asserts that the reference in section 39–1–103(3) to article 4 establishes only who must assess public utility property, not how such assessments are to be conducted. This assertion assumes that the limiting clause “as provided in article 4” modifies only “by the administrator” and not also “shall be determined.” We reject this assumption for two reasons.

First, it ignores the more grammatically-correct reading that where, as here, a limiting clause “occurs at the end of the sentence and is set off by a comma, [it] thereby modif[ies] all the preceding language.” People v. Johnson, 167 P.3d 207, 209 (Colo.App.2007), abrogated on other grounds by Pellman v. People, 252 P.3d 1122, 1127 (Colo.2011); see also Pena v. Industrial Claim Appeals Office, 117 P.3d 84, 87 (Colo.App.2004) (...