VAIL ASSOCIATES v. BD. OF COUNTY COM'RS, 97CA0265.

• Decision Date: 29 October 1998
• Docket Number: No. 97CA0265.,97CA0265.
• Citation: 983 P.2d 49
• Parties: VAIL ASSOCIATES, INC., Petitioner-Appellee, v. EAGLE COUNTY BOARD OF COUNTY COMMISSIONERS, acting as the Eagle County Board of Equalization, Respondent-Appellant, and Board of Assessment Appeals of the State of Colorado, Appellee.
• Court: Colorado Court of Appeals

983 P.2d 49

VAIL ASSOCIATES, INC., Petitioner-Appellee, v. EAGLE COUNTY BOARD OF COUNTY COMMISSIONERS, acting as the Eagle County Board of Equalization, Respondent-Appellant, and Board of Assessment Appeals of the State of Colorado, Appellee.

No. 97CA0265.

Colorado Court of Appeals, Div. I.

October 29, 1998.

Rehearing Denied November 27, 1998.

Certiorari Granted September 13, 1999.

Holme Roberts & Owen, LLP, Stephanie M. Tuthill, Denver, Colorado, for Petitioner-Appellee.

James R. Fritze, County Attorney, Eagle, Colorado, Bob D. Slough, Cortez, Colorado, for Respondent-Appellant.

Gale A. Norton, Attorney General, Martha Phillips Allbright, Chief Deputy Attorney General, Richard A. Westfall, Solicitor General, Mark W. Gerganoff, Assistant Attorney General, Denver, Colorado, for Appellee. Opinion by Judge DAVIDSON.

Eagle County Board of County Commissioners, acting as the Eagle County Board of Equalization (BOE), appeals from the order of the Board of Assessment Appeals (BAA), granting the protest of Vail Associates, Inc. (Vail), and removing its possessory interest in federally exempt land from the 1996 tax roll. We affirm.

In May 1996, the Eagle County assessor sent a notice of valuation assessing Vail's possessory interest in federal land which it used under non-exclusive special use permits. Vail appealed the notice of valuation to the BOE and asserted that §39-3-136, C.R.S. 1998, enacted in 1996, had repealed Colo. Sess. Laws 1989, ch. 325, § 39-3-135 at 1480, which, with certain exceptions, allowed the taxation of possessory interests. Vail argued that § 39-3-136 precluded the taxation of possessory interests in the absence of a specific statutory provision directing such tax. The BOE concluded that § 39-3-136 was unconstitutional and denied Vail's protest. Vail appealed the denial to the BAA.

Following a hearing, the BAA determined that it did not have the authority to determine the constitutionality of § 39-3-136. It also determined that that statute exempted possessory interests in exempt property from taxation. Recognizing that federally owned land is exempt from taxation by the state, the BAA granted Vail's protest and ordered the BOE to remove Vail's possessory interest from the tax rolls.

I.

As a threshold matter, Vail contends that the BOE lacks standing to dispute the constitutionality of § 39-3-136. We disagree.

Section 30-11-105.1, C.R.S.1998, provides that:

[A]ny county or county officer shall have standing in district court to defend any action brought against such county or county officer by contesting the constitutionality of a statute underlying such action....

Here, the BOE is seeking review of the BAA's order directing it to remove Vail's possessory interest from the tax rolls based on the language of § 39-3-136. The BOE, defending its decision to assess Vail's possessory interest before the BAA and now on appeal, challenges the constitutionality of § 39-3-136. Vail argues that, although § 30-11-105.1 confers standing on a county or county officer to challenge the constitutionality of a statute in order to defend an action brought in district court, it does not confer standing on the BOE because this action was directly appealed to this court. We disagree.

A political subdivision of the state possesses only those powers expressly conferred by the constitution and statutes and such incidental powers reasonably necessary to carry out its express powers. Board of County Commissioners v. Love, 172 Colo. 121, 470 P.2d 861 (1970).

Although, in general, a subordinate political subdivision of a state does not have standing to challenge the constitutionality of a statute directing the performance of its duties, an exception to this general rule exists if the political subdivision is granted the express or implied authority to do so. Romer v. Fountain Sanitation District, 898 P.2d 37 (Colo.1995).

In Mesa Verde Co. v. Montezuma County Board of Equalization, 831 P.2d 482 (Colo. 1992), the supreme court held that the BOE, as a political subdivision of the state, did not have standing to challenge the constitutionality of statutorily created tax exemptions.

In response to that decision, the General Assembly enacted § 30-11-105.1, to confer standing on the BOE to challenge the constitutionality of a statute. Although the statute refers only to actions in district court, it is apparent that the intent of § 30-11-105.1 is to allow the BOE to defend its actions based on the constitutionality of the statutes under which it operates. Thus, if the BOE must defend its actions in another forum, standing to challenge the constitutionality of a statute is necessarily implied in this grant of authority.

The interpretation of § 30-11-105.1 urged by Vail, that the BOE has standing only in district court but in no other proceeding, would lead to an absurd result. Such interpretation would preclude a political subdivision from challenging the constitutionality of a statute if a taxpayer chose to appeal an adverse decision to the BAA rather than in district court. The taxpayer would be able to avoid a constitutional challenge and would preclude the agency from asserting a defense based on such challenge merely by its choice of forum. See AviComm, Inc. v. Public Utilities Commission, 955 P.2d 1023 (Colo.1998) (intent of legislature will prevail over literal interpretation of statute that leads to absurd result).

II.

The BOE contends that § 39-3-136 creates an exemption from taxation for possessory interests without express authorization under the constitution and that, therefore, the statute is unconstitutional and the BAA order premised thereon is void. In support of this contention, the BOE argues that, under the Colorado constitution, the statutes enacting and implementing the taxation scheme, and the supreme court's decision in Mesa Verde Co. v. Montezuma County Board of Equalization, 898 P.2d 1 (Colo. 1995), possessory interests are real property subject to taxation. However, we conclude that the statute is constitutional under the General Assembly's plenary power of taxation and that, therefore, possessory interests are not considered real property under the statutes defining such and, thus, are not subject to taxation.

A.

Colo. Const. art. X, § 3, requires taxation of "all real and personal property" and empowers the General Assembly to determine the subjects of taxation and the mode and method of collecting taxes as long as its actions are within constitutional restraints. See City & County of Denver v. Security Life & Accident Co., 173 Colo. 248, 477 P.2d 369 (1970) (constitution is not self-executing but requires implementing legislation).

The constitution further provides that certain classes of property shall be exempt from taxation. Colo. Const. art. X, §§ 3(1)(c) & (d), 4, & 5. The General Assembly is prohibited from creating or eliminating exemptions. Colo. Const. art X, §6; Mesa Verde Co. v. Montezuma County Board of Equalization, supra.

Prior to 1975, most possessory interests were not taxed. In 1975, the General Assembly enacted legislation imposing a property tax on possessory interests, subject to certain enumerated exceptions. See Colo. Sess. Laws 1975, ch. 342, § 39-3-112 at 1462 (recodified at Colo. Sess. Laws 1989, ch. 325, § 39-3-135 at 1480).

The possessory interest statute was amended by the General Assembly several times to add other exemptions. See Colo. Sess. Laws 1976, ch. 155, § 39-3-112 at 766; Colo. Sess. Laws 1979, ch. 366, § 39-3-112 at 1407. The imposition of such tax generated substantial litigation. See United States v. Colorado, 627 F.2d 217 (10th Cir.1980) (tax imposed on private company was not tax on its possessory interest but on federal property and, therefore, illegal), aff'd sub nom. Jefferson County v. United States, 450 U.S. 901, 101 S.Ct. 1335, 67 L.Ed.2d 325 (1981); Mesa Verde Co. v. Board of County Commissioners, 178 Colo. 49, 495 P.2d 229 (1972) (upholding ad valorem tax on possessory interest in federal property); Southern Cafeteria, Inc. v. Property Tax Administrator, 677 P.2d 362 (Colo.App.1983) (tax on possessory interest in federal property illegal if no showing of indicia of ownership of such interest). As a result, the number of possessory interests taxed under the statute became fewer.

The supreme court, in Mesa Verde Co. v. Montezuma County Board of Equalization, supra, addressed the effect of the statutorily created exemptions to the taxation of possessory interests under § 39-3-135. The court determined that, subject to certain exceptions, under § 39-3-135, possessory interests were taxable property. It also acknowledged that Mesa Verde's interest was exempt under the exemptions created by the statute. However, the court concluded, because the exemptions created under § 39-3-135 were not expressly authorized by the constitution and, therefore, were unconstitutional, Mesa Verde's possessory interest in federally owned lands was taxable property. The court further noted that Mesa Verde's possessory interest also would be taxable under § 39-1-111, C.R.S.1998, which requires tax to be assessed on all real property according to the definition of real property found under §§ 39-1-102(14)(a) & (c) and § 39-1-102(16), C.R.S.1998.

In response to this decision, the General Assembly enacted § 39-3-136, repealing § 39-3-135, expressing its intent that possessory interests in exempt property were not real property subject to taxation, and attempting to clarify that the scope of the definition of real property under the statutes does not encompass possessory interests.

B.

The BOE first argues that, under the constitution, only certain, specifically enumerated properties may be exempted from taxation, and that any attempt by the General Assembly to enlarge that list is unconstitutional. We agree that this is so. However, we disagree that this prohibition precludes the General Assembly from establishing, by the exercise of its powers...