Children's Hospital Colorado v. Property Tax Administrator and Colorado Board of Assessment Appeals ( 2018 )

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
June 28, 2018
2018COA91
No. 17CA0341 Children’s Hospital Colorado v. Property Tax
Administrator and Colorado Board of Assessment Appeals —
Taxation — Property Tax — Exemptions — Child Care Centers
In this property tax exemption case, Children’s Hospital
Colorado appeals the denial of its property tax exemption
application for a day care center (Center) it operates. A division of
the court of appeals concludes that the Board of Assessment
Appeals properly interpreted section 39-3-110(1)(e), C.R.S. 2017,
which governs property tax exemptions for child care centers, to
conclude that the Center’s tuition discount policy did not qualify as
offering services “on the basis of ability to pay.” Because the tuition
breaks offered by the Center were static discounts as opposed to a
scale that “required the use of a graduated series of total cost for
each child based on the financial status of the recipient,” as
required by the Property Tax Administrator’s rules, the Center did
not charge “on the basis of ability to pay,” and consequently did not
qualify for tax exemption under section 39-3-110(1)(e). The division
also affirms the Board of Assessment Appeals’ decision that the
Center was not used for a strictly charitable purpose under section
39-3-108(1), C.R.S. 2017.
COLORADO COURT OF APPEALS 2018COA91
Court of Appeals No. 17CA0341
Colorado State Board of Assessment Appeals No. 68840
Children’s Hospital Colorado,
Petitioner-Appellant,
v.
Property Tax Administrator,
Respondent-Appellee,
and
Colorado State Board of Assessment Appeals,
Appellee.
ORDER AFFIRMED
Division I
Opinion by CHIEF JUDGE LOEB
Vogt* and Casebolt*, JJ., concur
Announced June 28, 2018
Spencer Fane, LLP, Ellen Elizabeth Stewart, Ann M. Schroeder, Denver,
Colorado, for Petitioner-Appellant
Cynthia H. Coffman, Attorney General, Robert H. Dodd, Russell D. Johnson,
Assistant Solicitors General, Denver, Colorado, for Respondent-Appellee
Cynthia H. Coffman, Attorney General, Emmy A. Langley, Assistant Solicitor
General, Denver, Colorado, for Appellee
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2017.
¶1 Children’s Hospital Colorado (Hospital) appeals the final order
of the Colorado State Board of Assessment Appeals (BAA) upholding
the order of the Property Tax Administrator (PTA) denying the
Hospital’s property tax exemption application for a child care center
(Center) it owns and operates. The Hospital argues on appeal that
the BAA exceeded its authority in interpreting section 39-3-
110(1)(e), C.R.S. 2017, to conclude that the Center’s tuition
discount policy did not qualify the Center for an exemption under
that section, and that the BAA improperly concluded that the
Center was not used for a strictly charitable purpose under section
39-3-108(1), C.R.S. 2017. We affirm the BAA’s order.
I. Background and Procedural History
A. The Center
¶2 The Hospital owns and operates the Center, a child care
facility on the University of Colorado Anschutz Medical School (CU
Anschutz) campus. The Center was developed by the Hospital with
assistance from the University of Colorado (the University). The
Hospital and the University entered into a contract for construction
and operation of the Center, under which the Hospital agreed to
operate the Center for the primary purpose of providing child care
1
services to the constituents of the Hospital and CU Anschutz. As
acknowledged by the Hospital, both in the administrative
proceedings and on appeal to this court, “[t]he purpose of the
Center is to provide child care to constituents of the Hospital and
[CU Anschutz] as an employee benefit to attract and retain quality
employees so that the hospitals can better serve their patients.”
Accordingly, the record shows that a vast majority of the Center’s
available enrollment slots are reserved for children of employees,
staff, and students at the Hospital and CU Anschutz; there are
additional slots allotted to children of employees of Fitzsimons
Redevelopment Authority (Fitzsimons) because the Center is located
on the site of the old Fitzsimons Army Medical Center. In addition,
remaining enrollment slots at the Center are prioritized for children
of employees who work at the Center and children from other
entities associated with the Hospital and CU Anschutz.
¶3 The Hospital contracted with Bright Horizons Children’s
Centers LLC (Bright Horizons) to run the day-to-day operations of
the Center. Bright Horizons is a for-profit entity and receives
compensation from the Hospital to operate the Center; the amount
2
Bright Horizons receives from the Hospital is determined by
contract. Parents pay tuition directly to Bright Horizons.
¶4 The Center has a written tuition assistance policy that
purportedly defines “how enrolled families may be eligible for
discounted tuition rates.” In this policy, families are informed that
“[t]uition assistance, based on a family’s income, size, and the
number of children in a family enrolled at the Center, is available.”
The tuition assistance policies at issue in this appeal are “Income
Assistance” and “Sibling Discount.” The income assistance policy
gives all families with an income below 150% of the federal poverty
level (federal poverty line) a flat 10% tuition discount. The sibling
discount is a flat 5% discount for siblings of enrolled children,
regardless of the family’s income.
B. Application Process and Appeal to the BAA
¶5 The Hospital filed an application for exemption from property
tax for the Center under section 39-3-108(1)(b), an exemption for
health care facilities. However, because the Center is not a licensed
health care facility, that exemption was facially not applicable to the
Center.
3
¶6 Under the rules and regulations of the Division of Property
Taxation (Division),1 when an application is submitted under a
particular statute and that statute is not applicable, an investigator
for the Division can consider whether the property qualifies for
exemption under a different statute. Div. of Prop. Taxation Rule
I.B.11, 8 Code Colo. Regs. 1304-2. Thus, the investigator assigned
to the Hospital’s application considered the Hospital’s application
under section 39-3-108(1)(a), an exemption for a nonresidential
property operated for strictly charitable purposes, and section 39-3-
110, an exemption for qualified child care centers.
¶7 In October 2014, the PTA issued a tentative determination
denying the Hospital’s application, finding that the Center was not
used for strictly charitable purposes because it did not benefit an
indefinite number of persons; the denial was also based on the
Hospital’s failure to show that the Center provided its services for
free or on the basis of ability to pay under section 39-3-110(1)(e). In
response to this tentative determination, the Hospital filed
supplemental financial information, including information on the
1These rules and regulations are promulgated by the PTA. § 39-2-
117(7), C.R.S. 2017; Div. of Prop. Taxation, Legal Authority, 8 Code
Colo. Regs. 1304-2.
4
Center’s tuition discount policy and demographics of the children
enrolled at the Center.
¶8 In April 2016, the PTA issued a final decision denying the
Hospital’s application for the Center. The PTA denied the
application because the Hospital’s “financial figures arising from the
usage of this property do not qualify it for exemption under
subsection (1)(e) of C.R.S. 39-3-110. Furthermore, its usage of the
property does not satisfy the requirements under Rule IV.B.1 and
C.R.S. 39-3-108(1)(a).”2
¶9 Pursuant to section 39-2-117(5)(b), C.R.S. 2017, the Hospital
exercised its right to appeal to the BAA. The BAA held a hearing on
the matter in November 2016. The Hospital presented several
witnesses at the hearing, including the Hospital’s Chief Financial
Officer, the Hospital’s Director of Human Resource Operations, the
Director of the Center, and CU Anschutz’s Director of Initiatives.
These witnesses testified as to the purposes of the Center, the
Center’s enrollment demographics, and details of the tuition
assistance policy. Relevant to the present appeal and the BAA’s
2 “Rule IV.B.1” refers to the Division’s rule concerning requirements
for a property’s use for strictly charitable purposes.
5
order, the Hospital presented the following information at the
hearing:
 In her opening statement, the Hospital’s counsel stated
that the Center “is a daycare center for the faculty and
students of the [CU Anschutz] campus. The evidence will
show that in order for [CU Anschutz] to recruit and
maintain exceptional faculty and students . . . it needs to
provide a benefit, such as the [Center].” (Emphasis
added.)
 There are 248 enrollment slots available at the Center.
 The majority of enrollment slots at the Center are
reserved for children of employees, students, and staff at
the Hospital and CU Anschutz.
 Enrollment slots are prioritized in the contract between
the Hospital and Bright Horizons as follows: (1) reserved
spaces for children of the Hospital’s employees, children
of CU Anschutz employees, and children of Fitzsimons
employees; (2) siblings of the Hospital’s employees’
children enrolled at the Center; (3) children of Bright
Horizons staff employed at the Center; (4) “other priorities
6
agreed to by” the Hospital and Bright Horizons; and (5)
children from the community.
 According to testimony from the Hospital’s Chief
Financial Officer, “children from the community” are
considered to be any enrolled children from “outside [CU
Anschutz] and then anyone outside of [the Hospital].”
This includes children of employees of Fitzsimons;
children of employees of the organization that provides
billing services for physicians at CU Anschutz (UPI);
children of employees of UC Health (UCH), the University
of Colorado Hospital Authority; children of Bright
Horizons staff; and children from the general community.
Thus, “children from the community” primarily includes
groups of children whose parents are associated with the
Hospital or CU Anschutz, several of which are already
included in prioritized categories for enrollment slots.
 An exhibit identifying the above groups as categories
showed the breakdown of children enrolled at the center
during 2014, the relevant period at issue here. Notably,
no children from the general community were enrolled
7
after children in all other prioritized categories (the
Hospital, CU Anschutz, Fitzsimons, Bright Horizons, UPI,
and UCH) were enrolled.
 As of November 2014, there were 305 children on the
waiting list for enrollment at the Center: 281 from the
Hospital and CU Anschutz, and only one from the general
community (the 23 others were from UCH and UPI).
 The Hospital pays Bright Horizons fees to maintain and
operate the Center. Bright Horizons receives a 3 to 5%
profit from these fees. However, the Hospital operates
the Center at a loss.
 The Hospital’s witnesses could not say how many
children, if any, received the written tuition assistance
discount based on the federal poverty line. However, four
children received a 50% tuition discount that was not
covered by the written policy and was based entirely on
the discretion of the Center’s Director. There were no set
criteria for this 50% discount, and it was not disclosed on
the Center’s website or in the enrollment paperwork. At
8
least two of the children who received the 50% discount
were children of Bright Horizons employees.
 There are child care centers available on at least two
other University campuses. These centers are “auxiliary”
programs, which means that they function only on their
ability to collect tuition from the parents. The Hospital
witnesses could not say if these child care centers were
available to the general community or limited to
University students and faculty; they also could not say if
the centers were run by the University or a third party
such as Bright Horizons, or if the centers were “part of”
the University.
¶ 10 Counsel for the PTA called one witness, Stan Gueldenzopf, the
Manager of the Division’s exemption section. Gueldenzopf testified
as to the Hospital’s application and why the investigators concluded
that the Center was not eligible for exemption under section 39-3-
110 or section 39-3-108(1)(a). As to section 39-3-110, Gueldenzopf
focused his testimony on subsection (1)(e), which requires that a
child care center offer its services at rates based on the recipient’s
9
ability to pay, because that was the basis for the PTA’s denial as
listed on the final determination.
¶ 11 Referring to the Division’s definition of “charges on the basis of
ability to pay” provided in its rules and regulations, Gueldenzopf
testified that in his experience, a “scale” that would consider a
family’s financial status and ability to pay the required tuition
would need to be based on multiple factors, such as income and
family size, and offer a range of several tuition rates. He concluded
that the Center’s federal poverty line discount was not “adequate”
because it only took into account one element — family income as
compared to the federal poverty line. In his testimony, he provided
examples of how the Center’s federal poverty line discount would
actually work, which highlighted the fact that the discount was not
“reflective of . . . [a] family’s ability to pay.” Gueldenzopf concluded
that the federal poverty line discount offered by the Center was not
a “scale,” as referred to in the applicable Division rules and
regulations.
¶ 12 Throughout the hearing, the Hospital argued that the Center
met the requirement of subsection (1)(e) because of its federal
poverty line and sibling discount policies. The Hospital focused its
10
argument on the poverty line discount and asserted that the
Division had not specified, through its rules and regulations or in
its correspondence with the Hospital, a definition of the term
“scale,” nor had it stated that a scale required a range of tuition
options. Thus, it argued, the federal poverty line discount was a
scale because it measured a family’s ability to pay through income.
The Hospital also argued that the Center was used for strictly
charitable purposes because it provided a “gift” to the public and
because it lessened the burdens of government.
C. BAA Final Order
¶ 13 In February 2017, the BAA issued an order upholding the
PTA’s determination that the Hospital was not entitled to exemption
from property taxes for the Center because it did not charge for its
services based on the recipient’s ability to pay as required by
section 39-3-110(1)(e), and because the Center was not used for
strictly charitable purposes as required by 39-3-108(1).
¶ 14 Regarding section 39-3-110(1)(e), the BAA found that the
Center did not charge families tuition based on their ability to pay.
It specifically credited Gueldenzopf’s testimony discussing scales
that charge on the basis of ability to pay, and it concluded that,
11
based on that testimony and the Division’s definition of “charges on
the basis of ability to pay” in Division of Property Taxation Rule
IV.E.5, 8 Code Colo. Regs. 1304-2, such scales “required the use of
a graduated series of total cost for each child based on the financial
status of the recipient.” The BAA found that the Center’s tuition
assistance based on the federal poverty line did not meet that
requirement because parents with a stronger financial status paid
the same as parents with a significantly weaker financial status,
and the BAA further provided examples of scenarios to illustrate
this point.
¶ 15 Under section 39-3-108 and Colorado’s constitutional
provision on property tax exemptions, the BAA found that, based on
the Hospital’s own statements, the Center was operated for the
business purposes of providing a recruitment tool and employee
benefit for the Hospital and CU Anschutz; that the Center’s services
were not provided to an indefinite number of persons, but were
largely, if not solely, dependent on the recipient’s voluntary
association with certain groups; that the minimal tuition assistance
provided indicated that the Center was not being operated for a
charitable purpose; that the Center was, at least in part, operated
12
for corporate profit because Bright Horizons made a 3 to 5% profit
from the fees paid to it by the Hospital; and that the Center did not
lessen the burdens of government because the evidence presented
at the hearing did not show that CU Anschutz (i.e., the State of
Colorado) would be required to provide a child care center at
taxpayer expense if the Hospital did not operate the Center.
¶ 16 The Hospital now appeals the BAA’s final order pursuant to
section 39-2-117(6).
II. Constitutional and Statutory Framework
¶ 17 We begin by summarizing the legal framework that governs
property tax exemptions in Colorado and the issues in this case.
¶ 18 “Each claim for tax exemption must be determined upon the
facts presented and in light of the applicable constitutional and
statutory provisions.” Bd. of Assessment Appeals v. AM/FM Int’l,
940 P.2d 338, 343 (Colo. 1997).
¶ 19 The state’s ability to exempt personal and real property from
taxes derives from the Colorado Constitution: “Property, real and
personal, that is used solely and exclusively for religious worship,
for schools or for strictly charitable purposes . . . shall be exempt
from taxation, unless otherwise provided by general law.” Colo.
13
Const. art. X, § 5 (emphasis added). Courts have consistently
concluded that the language “unless otherwise provided by general
law” gives the General Assembly the ability and power “to limit,
modify, or abolish” constitutional exemptions. McGlone v. First
Baptist Church of Denver, 97 Colo. 427, 431, 50 P.2d 547, 549
(1935); Anderson Ranch Arts Found. v. Prop. Tax Adm’r, 729 P.2d
992, 994 (Colo. App. 1986) (citing McGlone, 97 Colo. at 431, 50 P.2d
at 549).
¶ 20 The BAA concluded that the Center did not qualify for
exemption under section 39-3-110’s requirements for child care
centers. The BAA also determined that the Center was not used for
strictly charitable purposes as contemplated by the Colorado
Constitution and section 39-3-108(1)(a). Accordingly, both section
39-3-110 and section 39-3-108(1)(a) are relevant to this appeal.
¶ 21 Section 39-3-110 provides a property tax exemption if such
property is used
as an integral part of a child care center:
(a) Which is licensed pursuant to article 6 of
title 26, C.R.S.;
14
(b) Which is maintained for the whole or part
of a day for the care of five or more children
who are not sixteen years of age or older;
(c) Which is not owned or operated for private
gain or corporate profit;
(d) The costs of operation of which, including
salaries, are reasonable based upon the
services and facilities provided and as
compared with the costs of operation of any
comparable public institution;
(e) Which provides its services to an indefinite
number of persons free of charge or at reduced
rates equal to five percent of the gross
revenues of such child care center or equal to
ten percent of the amount of tuition charged
by such child care center to the financially
needy or charges on the basis of ability to pay;
(f) The operation of which does not materially
enhance, directly or indirectly, the private gain
of any individual except as reasonable
compensation for services rendered or goods
furnished;
(g) The property of which is claimed for
exemption does not exceed the amount of
property reasonably necessary for the
accomplishment of the exempt purpose; and
(h) The property of which is irrevocably
dedicated to a charitable purpose.
§ 39-3-110(1) (emphasis added).
¶ 22 Both the PTA and the BAA based their decisions to deny the
Hospital’s application for property tax exemption for the Center
15
under section 39-3-110 entirely on the Center’s failure to meet the
requirement in subsection (1)(e) that it “charges on the basis of
ability to pay.”
¶ 23 Section 39-3-108 provides as follows:
(1) Property, real and personal, which is owned
and used solely and exclusively for strictly
charitable purposes and not for private gain or
corporate profit shall be exempt from the levy
and collection of property tax if:
(a) Such property is nonresidential . . . .
(Emphasis added.)
¶ 24 We thus consider the Hospital’s contentions challenging both
the BAA’s conclusion regarding the Center’s failure to satisfy
section 39-3-110(1)(e) because its tuition is not charged “on the
basis of ability to pay,” and its conclusion that under section 39-3-
108(1)(a), the Center is not used for strictly charitable purposes.
III. Standard of Review
¶ 25 The appropriate standard to be applied in reviewing the BAA’s
decision is set forth in section 24-4-106(7), C.R.S. 2017. AM/FM
Int’l, 940 P.2d at 342. Under that section, we may set aside a
decision of the BAA only if we determine that the BAA abused its
discretion, “or that the order was arbitrary and capricious, based
16
upon findings of fact that were clearly erroneous, unsupported by
substantial evidence, or otherwise contrary to law.” Boulder Cty.
Bd. of Comm’rs v. HealthSouth Corp., 246 P.3d 948, 951 (Colo.
2011).
¶ 26 This case involves interpretation of an agency rule. The
Division has interpreted the phrase in section 39-3-110(1)(e),
“charges on the basis of ability to pay,” by defining that phrase in
its Rule IV.E.5. The Hospital does not argue that the Division’s
Rule IV.E.5 is itself improper. Instead, it argues that the BAA’s
interpretation of Rule IV.E.5 exceeded its authority. Because the
BAA is essentially the appellate arm of the Division, we are, thus,
concerned with an agency’s interpretation of its own rule. Where an
administrative body is interpreting its own rules and applying them
to evidentiary facts, it is making an ultimate conclusion of fact.
Nixon v. City & Cty. of Denver, 2014 COA 172, ¶ 23.
¶ 27 Conclusions of ultimate fact and an agency’s interpretation
and application of its own rules are entitled to deference; the
agency’s interpretation is to be accepted if it has a reasonable basis
in the law. Id. Indeed, “an administrative agency’s interpretation of
its own regulations is generally entitled to great weight and should
17
not be disturbed on review unless plainly erroneous or inconsistent
with such regulations.” Jiminez v. Indus. Claim Appeals Office, 51
P.3d 1090, 1093 (Colo. App. 2002).
¶ 28 The determination of whether property is used for strictly
charitable purposes must be made on a case-by-case basis to
determine whether such use satisfies the statutory and
constitutional requirements. AM/FM Int’l, 940 P.2d at 347. “[O]nly
the judiciary may make a final decision as to whether or not any
given property is used for charitable purposes within the meaning
of the Colorado constitution.” Id. at 343 (quoting § 39-3-101, C.R.S.
2017). In examining how the property is used, the property’s
charitable purpose as an end will be strictly construed. E.g., W.
Brandt Found., Inc. v. Carper, 652 P.2d 564, 568 (Colo. 1982). The
determination of whether an organization is a charity for the
purposes of qualifying for a property tax exemption is a conclusion
of ultimate fact, involving a mixed question of law and fact. AM/FM
Int’l, 940 P.2d at 343.
IV. Child Care Centers under Section 39-3-110
¶ 29 The BAA and the PTA denied the Hospital’s application under
section 39-3-110 by analyzing whether the Center met the
18
requirement of “charges on the basis of ability to pay” under
subsection (1)(e). Thus, we now turn to an analysis of subsection
(1)(e), and whether the BAA erred with respect to that statutory
provision.
A. Applicable Law
¶ 30 To qualify for a property tax exemption under section 39-3-
110, a child care center must meet eight requirements. This appeal
concerns only one of those requirements, subsection (1)(e), which
mandates that the property is used as an integral part of a child
care center
[w]hich provides its services to an indefinite
number of persons free of charge or at reduced
rates equal to five percent of the gross
revenues of such child care center or equal to
ten percent of the amount of tuition charged
by such child care center to the financially
needy or charges on the basis of ability to pay[.]
§ 39-3-110(1)(e) (emphasis added). The Hospital concedes that it
does not provide its services to an indefinite number of persons free
of charge or at reduced rates equal to the percentages required in
the first part of subsection (1)(e). Rather, the Hospital’s central
argument is that its policy of providing a 10% discount to all
families with income below the federal poverty line and a 5%
19
discount for all siblings of enrolled children meets the requirement
of subsection (1)(e) of charging “on the basis of ability to pay.”
¶ 31 Rule IV.E.5 states that, for purposes of section 39-3-110(1)(e),
the phrase “charges on the basis of ability to pay” means “that the
total cost for each child is determined by a scale based on the
recipient’s financial status.” The terms “scale” and “financial
status” are not further defined in the Division rules. Moreover,
there is no Colorado case law interpreting the language of
subsection (1)(e) or Rule IV.E.5.
B. Testimony at the Hearing and the BAA Final Order
¶ 32 At the BAA hearing, Gueldenzopf testified that generally
“based on the ability to pay tends to be some kind of scale which
takes into account both the income of a particular family and the
family size.” He further testified that the 10% discount provided by
the Center was not adequate because
[i]t only addresses one element, really. So, for
example, somebody who is $100 under that
limit gets a 10 percent discount. Somebody
whose income is a thousand dollars [under
that limit] gets a 10 percent discount.
Somebody whose income is $5,000 under that
limit gets a 10 percent discount.
20
We don’t – we don’t view that as really being
reflective of the three different family’s [sic]
ability to pay. Certainly somebody who makes
$5,000 less than the limit has a much tougher
time paying the tuition for the child care center
than somebody who is only $100 under the
limit, but still everybody gets the same
discount. So to our mind, that was not really
indicating or setting their fees based on the
ability to pay.
(Emphasis added.)
¶ 33 On cross-examination, counsel for the Hospital asked
Gueldenzopf about an exhibit that described the Center’s 10%
federal poverty line discount. Gueldenzopf testified that “we
wouldn’t really consider this a scale. I mean, one line does not
make a scale or one – being the poverty level line. Again, certainly
people at various spots between these numbers would likely have
different abilities to pay and that’s not really reflected here.”3
3 On appeal, the Hospital focuses on the fact that the Division rules
do not expressly define what a scale must include to determine a
recipient’s ability to pay. It further argues that, after Gueldenzopf’s
quoted testimony above regarding the exhibit, he admitted that the
federal poverty line discount used by the Center was a “scale.” We
do not interpret his testimony to make such an admission. But,
even if we agreed that Gueldenzopf testified that the federal poverty
line discount was a “scale,” that does not mean it was a scale based
on ability to pay or the recipient’s financial status.
21
¶ 34 Based on Gueldenzopf’s testimony and the express language of
Rule IV.E.5, the BAA concluded that the definition of “charges on
the basis of ability to pay”
requires the use of a graduated series of total
cost for each child based on the financial
status of the recipient. Under this definition,
the total cost for each child would be greater
for those with a stronger financial status. The
total cost for each child would be less for those
with a weaker financial status.
¶ 35 Using that definition and examples of families with different
income levels below the federal poverty line, the BAA agreed with
the PTA and found that “the Center’s written tuition discount policy
clearly fails to meet the standard of charging on the basis of ability
to pay as defined by the rule.” The BAA used the following
examples to illustrate its finding:
Under the Center’s tuition discount policy, a
single parent with one infant child who has
income of $23,000 per year (or $442 per week)
would qualify for a 10% tuition discount equal
to $31.90 per week and would pay $287.10 per
week for child care at the Center. This
amounts to 65% of the recipient’s income.
Another single parent with one infant child
who has income of $15,000 per year (or $288
per week) would qualify for the same 10%
tuition discount equal to $31.90 per week and
be required to pay the same $287.10 per week
22
for child care at the Center. However, this
amounts to nearly 100% of the recipient’s
income.
The BAA went on to elaborate that
[t]he parent in the second scenario above, who
has a much weaker financial status, pays the
same amount per child as the parent in the
first scenario above, who has a stronger
financial status. The second parent has less
ability to pay than the first parent, but the
total cost for child care is the same for both
parents. The Center’s written tuition discount
policy is not designed to charge on the basis of
ability to pay.
C. Analysis
¶ 36 The Hospital contends that the BAA exceeded its authority in
interpreting Rule IV.E.5 regarding the definition of “charges on the
basis of ability to pay.” We disagree.
¶ 37 We look to the plain language of Rule IV.E.5 to determine if
the BAA’s interpretation of the definition applied in its order is
plainly erroneous or lacks a reasonable basis in the law. Nixon,
¶ 23; Jiminez, 51 P.3d at 1093. We construe administrative rules
using the same rules of construction we use for construing a
statute. Gessler v. Colo. Common Cause, 2014 CO 44, ¶ 12 (citing
Regular Route Common Carrier Conference of Colo. Motor Carriers
23
Ass’n v. Pub. Util. Comm’n, 761 P.2d 737, 745 (Colo. 1988)).
Because the Hospital concedes, and we agree, that the language of
Rule IV.E.5 is unambiguous, we are limited to its plain language.
Id. Also, because the Division rules do not define “scale,” we are
mindful that “where, as here, the [rule] does not define a term, the
word at issue is a term of common usage, and people of ordinary
intelligence need not guess at its meaning, we may refer to
dictionary definitions in determining the plain and ordinary
meaning.” Roalstad v. City of Lafayette, 2015 COA 146, ¶ 34
(quoting Mendoza v. Pioneer Gen. Ins. Co., 2014 COA 29, ¶ 24).
¶ 38 First, the Center’s discount for tuition based on whether a
family’s income is above or below a single number, without taking
into account anything more about the family’s financial status, is
simply not a payment based on the recipient’s ability to pay, where
the term “ability to pay” is defined by Rule IV.E.5 to mean
“determined by a scale based on the recipient’s financial status.”
Gueldenzopf illustrated this in his testimony with scenarios of
parents with different income levels below the federal poverty line,
and the BAA pointed this out with the scenarios quoted above.
Instead, the discount provided by the Center is solely based on
24
whether a recipient’s income is below the federal poverty line. If the
General Assembly or the PTA intended to require that child care
centers provide services at a cost based solely on that static factor,
it could have said so. However, the statute reads “based on ability
to pay,” which, in our view and consistent with the language of Rule
IV.E.5, requires a child care center to employ a more nuanced and
less rigid approach to its tuition costs in order to qualify for an
exemption under subsection (1)(e).
¶ 39 Second, we reject the Hospital’s arguments that the Center’s
written discount policies qualify as a “scale” as required by Rule
IV.E.5. Black’s Law Dictionary defines a “scale” as “1. A progression
of degrees; esp., a range of wage rates. 2. A wage according to a
range of rates.” Black’s Law Dictionary 1545 (10th ed. 2014)
(emphasis added). Thus, the plain and ordinary meaning of “scale”
is a range or progression of options; it is not a single line that one
falls above or below, such as the federal poverty line.
¶ 40 In contrast, a discount is “[a] reduction from the full amount
or value of something, esp. a price.” Id. at 564. More specific to
the circumstances here, a discount is “a reduction from a price
made to a specific customer or class of customers.” Webster’s Third
25
New International Dictionary of the English Language, Unabridged
646 (2002).
¶ 41 By these plain and ordinary meanings, the tuition reduction
policy of the Center based solely on whether a family’s income falls
above or below the federal poverty line is a standard discount
provided equally to all recipients of a certain class; it is not a scale
that provides a range of tuition rates. The Center’s use of a single
number to draw a hard line for those families who can receive a set,
static discount, and those families who must pay full tuition, is not
a scale; it does not provide a range of tuition options, and it does
not take into account more than one factor in determining a
family’s ability to pay.
¶ 42 The same analysis applies as well to the sibling discount. This
tuition discount is provided to all parents with more than one child
enrolled at the Center, regardless of income or any other factor
indicating ability to pay. This tuition discount does not take into
account a family’s ability to pay in any way; rather, it appears to be
a discount for loyalty to the Center.
¶ 43 We also reject the Hospital’s argument that, essentially, the
BAA exceeded its authority by interpreting “scale” to mean “sliding
26
scale.” The Hospital argues that if the Division or the PTA meant to
require a “sliding scale” it would have expressly said so, citing other
agency regulations using that term. This argument fails for two
reasons.
¶ 44 First and foremost, the term “sliding scale” does not appear in
the record of the BAA hearing or in the BAA’s order. Instead, the
BAA refers to a scale that includes a “graduated series of total cost
for each child . . . .” In fact, the only time the term “sliding scale”
appears in the court file for this case is in the Hospital’s amended
notice of appeal and in its own briefs on appeal. Second, the rules
and regulations cited by the Hospital are from other agencies.
Whether, when, and how such other agencies may use the term
“sliding scale” in their regulations is, in our view, not instructive in
defining what a “scale” means in Rule IV.E.5 at issue here.
¶ 45 In sum, we cannot say that the BAA interpreted its own rule in
a way that was plainly erroneous or inconsistent with the law when
it concluded that, for purposes of subsection (1)(e), the required
scale must include graduated (i.e., a progression of) tuition rates.
We, therefore, affirm the BAA’s order denying the Center’s
27
application for property tax exemption based on section 39-3-
110(1)(e).
V. Strictly Charitable Purpose
¶ 46 The Hospital also contends that the BAA erred by finding that
the Center is not operated for strictly charitable purposes. Again,
we disagree.
¶ 47 The PTA denied the Hospital’s application for property tax
exemption for the Center, in part, because it did not satisfy the
requirements of 39-3-108(1)(a), specifically finding that the Center
did not provide a “gift.” The BAA affirmed this decision, and it
further found that the Center did not serve an indefinite number of
people and did not lessen the burdens of government, citing the
Colorado Constitution, section 39-3-108(1)(a), and several of the
Division’s rules.
¶ 48 Initially, we reject the BAA’s argument on appeal that the
Hospital has somehow abandoned the argument that the Center
qualifies for property tax exemption under section 39-3-108(1)(a).
The BAA argues that the Hospital abandoned this issue because it
does not cite to that statute in its opening brief. However, an entire
section of the Hospital’s brief, just like one section of the BAA order,
28
is dedicated to the issue of whether the Center is a charity and is
used for strictly charitable purposes. The BAA’s order refers to this
issue as a “Constitutional Analysis” and cites section 39-3-108(1)(a)
in that section of its order. The Hospital appears to have followed
that format and labeled its “strictly charitable purposes” argument
as a constitutional analysis. Accordingly, we see no basis for
concluding that the Hospital has abandoned this contention on
appeal.
¶ 49 We also reject the PTA’s argument on appeal that section 39-3-
108 cannot apply to the Center because section 39-3-110 is the
more specific statute that applies to child care centers. See City of
Colorado Springs v. Bd. of Cty. Comm’rs, 895 P.2d 1105, 1118 (Colo.
App. 1994) (“Statutes upon the same subject must be construed
together and any conflicts reconciled if possible to give effect to the
legislative purposes behind each section; particular statutes will
prevail over general, and later provisions over former.”). Here, the
statutes are not in conflict; they merely cover different uses of
property. On the one hand, a properly licensed child care center
operating out of a private home may be able to qualify for exemption
under section 39-3-110(1), but it would not be able to qualify under
29
39-3-108 because the property is residential. On the other hand, a
nonresidential child care center could qualify under 39-3-108(1)(a)
because it operates as a charity with a strictly charitable purpose,
but might not qualify under 39-3-110 because it does not meet one
or more of the requirements under subsections (1)(a)-(h). We will
not interpret these statutes to be mutually exclusive without a clear
expression of intent from the General Assembly to do so. See Div.
of Prop. Taxation Rule I.B.11, 8 Code Colo. Regs. 1304-2 (“The
particular requirements for exemption under each statute will be
applied independently.”) (emphasis added).
A. Applicable Law
¶ 50 Colorado courts have consistently applied the following
definition of a strictly charitable purpose:
A charity, in the legal sense, may be more fully
defined as a gift, to be applied consistently
with the existing laws, for the benefit of an
indefinite number of persons, either by
bringing their minds or hearts under the
influence of education or religion, by relieving
their bodies from disease, suffering or
constraint, by assisting them to establish
themselves in life, or by erecting or
maintaining public buildings or works or
otherwise lessening the burdens of
government.
30
AM/FM Int’l, 940 P.2d at 344 (quoting Jackson v. Phillips, 96 Mass.
(14 Allen) 539, 556 (1867)).
¶ 51 Thus, for a property to be used for strictly charitable purposes,
it must provide a gift for the benefit of an indefinite number of
persons. Id. The gift must lessen the burdens of government.4 Id.
It is the burden of the applicant to demonstrate that the use of the
property relieves a governmental function and inures to the benefit
of the public. Id. at 345.
¶ 52 In its rules, the Division has defined “charity” using the
definition cited above and has further defined the terms “gift,”
“indefinite number of persons,” and “lessening the burdens of
government.” Div. of Prop. Taxation Rules IV.A.1, IV.B.1, .2, .4, 8
Code Colo. Regs. 1304-2.
¶ 53 In determining whether an entity provides a gift, the Division’s
rule provides that such determination will be made “by analyzing
4 There seems to be a debate in the case law regarding whether
“lessening the burdens of government” is a separate pathway to
proving a charitable purpose or if it modifies “all of the previously
mentioned kinds of gifts” in the definition. Bd. of Assessment
Appeals v. AM/FM Int’l, 940 P.2d 338, 344 (Colo. 1997). Because,
as we conclude below, the Hospital has not established that the
Center lessens the burdens of government, we need not decide this
issue.
31
both the beneficent objects, goals or purposes of the entity and the
organization’s actual conduct.” Id. Rule IV.B.1. The rule then lists
numerous factors to be considered in evaluating the entity’s objects,
goals, and purposes. Id.
¶ 54 Another of the Division’s rules provides that
[w]hether an “indefinite number of persons” is
served by an organization shall be determined
by whether the beneficiaries of the
organization’s activities are involuntarily parts
of the benefitted class. When the right to
benefit depends on a voluntary association with
a particular society then that organization does
not benefit an indefinite number of persons.
Id. Rule IV.B.2 (emphasis added).
¶ 55 Lastly, the PTA determines whether an entity’s work lessens
the burdens of government by considering whether the entity’s
charitable work, if not being done by the entity, must be
undertaken by the government at public expense. Id. Rule IV.B.4.
This definition is also ensconced in Colorado case law: the activities
undertaken by the entity must be “activities for which the
government is responsible or which the government would be forced
to assume in the absence of [the entity]’s activities” in order to
32
lessen the burdens of the government. AM/FM Int’l, 940 P.2d at
346.
B. Analysis
¶ 56 Based on the testimony at the hearing and the exhibits
admitted into evidence, the BAA determined that the Center was
operating for a business purpose — namely, providing an employee
benefit and recruitment tool — and not for a charitable purpose. It
also found that the Center did not benefit an indefinite number of
persons and did not lessen the burdens of government. We discern
no error in the BAA’s findings and conclusions.
¶ 57 First, contrary to the Hospital’s arguments, the record shows
that the Center in no way provides a “gift” within the meaning of the
Division’s rules. As the BAA found, relying in part on the Hospital’s
own statements, the clear purpose in providing child care at the
Center was to provide an employee benefit and recruitment tool for
employees of the Hospital and CU Anschutz. At the BAA hearing,
the Hospital conceded that the Center serves “the faculty and
students of the University of Colorado and the Anschutz campus.
The evidence will show that in order for the University to recruit
and maintain exceptional faculty and students at [CU] Anschutz
33
. . . , it needs to provide a benefit, such as the [Center].” Counsel
went on to state that the Center is specifically designed for parents
who work in the medical field. And, in its opening brief on appeal,
the Hospital again makes clear that “[t]he purpose of the Center is
to provide child care to constituents of [the Hospital] and [CU
Anschutz] as an employee benefit to attract and retain quality
employees so that the hospitals can better serve their patients.”
(Emphasis added.)
¶ 58 These statements show that the overarching purpose and goal
of the Center are to provide a benefit to employees of the Hospital
and CU Anschutz, and for the Center to be used as a recruitment
tool in its hiring process. As the BAA concluded, this demonstrates
a pure business purpose.
¶ 59 Evidence of the actions of the Hospital and the Center further
supports this conclusion. See Div. Prop. Taxation Rule IV.B.1, 8
Code Colo. Regs 1304-2 (in determining whether the entity bestows
a “gift” we consider the organization’s conduct as well as its stated
goals and purpose). The record shows that the Center has
dedicated the majority of enrollment spots to children of employees
at the Hospital, CU Anschutz, and Fitzsimons. It has further
34
prioritized remaining slots for children of Bright Horizons, UPI, and
UCH employees.
¶ 60 According to testimony at the hearing, at the beginning of an
enrollment period, the number of spots available for children in the
general community is limited to those spaces remaining after
parents employed at the Hospital and CU Anschutz fill the
contractually allotted slots. Only if the number of enrolled children
of the Hospital and CU Anschutz employees falls short of those
allotments would additional spaces be available to other children.
And, as reflected in the contract between the Hospital and the
University, the Hospital and the University have priority for any
unused allotted spaces: “[The Hospital] and the University have
priority for unused child care spaces prior to spaces being
transferred to the common pool and made available to either Bright
Horizons’ staff or the community.”
¶ 61 Moreover, the witnesses for the Hospital testified that, as a
result of the Center’s prioritization policy, only 11 of the 248
children enrolled in 2014 were children of parents employed by
Fitzsimons, UPI, and UCH, all of which are themselves associated
with the Hospital or the University. And, the record shows that this
35
prioritization policy resulted in an enrollment in 2014 of no children
from the general community (i.e. children whose parents were not
affiliated with the Hospital, CU Anschutz, Fitzsimons, Bright
Horizons, UPI, or UCH).
¶ 62 The Center’s allotment of spaces to the Hospital, CU Anschutz,
and Fitzsimons and the written prioritization policy for children of
the Hospital, CU Anschutz, Fitzsimons, and Bright Horizons staff
are consistent with the Hospital’s own acknowledgments that the
Center is a recruitment tool and employment benefit, not a gift.
¶ 63 Second, the prioritization policy also shows that the child care
services provided by the Center are not provided to an indefinite
number of persons, because voluntary association with the
Hospital, CU Anschutz, Bright Horizons, Fitzsimons, UPI, or UCH is
effectively a de facto requirement for acquiring an enrollment spot
at the Center. We cannot say that the BAA abused its discretion in
relying on the part of Rule IV.B.2 that excludes organizations with a
voluntary association requirement and in concluding that “the
Center is not provided for the benefit of an indefinite number of
persons.”
36
¶ 64 Third, the Hospital argues that the Center is used for strictly
charitable purposes because it lessens the burden on the
government by providing a child care center for a government
entity, CU Anschutz, that would otherwise be providing such
services at taxpayer expense. The Hospital asserts that, because
child care is available at the University’s Boulder and Colorado
Springs campuses, the Center is providing a service that the state
government would otherwise be required to provide on the CU
Anschutz campus as well. This argument is not supported by the
record.
¶ 65 Witnesses for the Hospital testified that the child care facilities
on the Boulder and Colorado Springs campuses were “auxiliary
services,” meaning that they were open and operating based only on
the tuition collected from parents; those centers’ “ability to function
. . . is dependent on the revenue [they] bring[] in.” There was no
evidence that the child care centers on those campuses received
money from the state to operate. Moreover, when questioned by the
BAA, witnesses could not say if the child care facilities on those
campuses were owned and operated by the University or if they
were owned and operated by a third party like Bright Horizons.
37
¶ 66 Thus, the evidence presented at the hearing shows that the
funding of the child care centers on those campuses comes through
revenue from tuition, not money from the University. There was
simply no evidence presented at the hearing that the government
would be paying for a child care center on the CU Anschutz campus
absent the Center’s existence.
¶ 67 What is more, no evidence was presented that showed the
state government is required to provide child care on its state
university campuses at the state’s expense. See AM/FM Int’l, 940
P.2d at 346. The sine qua non of lessening the burdens of
government is that the charitable work being done by the entity, if
not being done by the entity, must be undertaken at public expense.
Div. of Prop. Taxation Rule IV.B.4, 8 Code Colo. Regs. 1304-2.
Similar to the entity in AM/FM International, nothing in the
evidence adduced at the hearing in this case suggests that a child
care center on a state university campus, such as the Center, is a
“primary responsibility of government” or that the Center “directly
performs any activities for which the government is responsible or
38
which the government would be forced to assume in the absence” of
the Center’s activities.5 AM/FM Int’l, 940 P.2d at 346.
¶ 68 Therefore, we cannot conclude that the BAA abused its
discretion in concluding that,
[a]lthough having access to child care for [CU
Anschutz] faculty, staff and students is a
legitimate policy concern for the University
from the perspective of employee retention, the
Board was not convinced that providing a child
care facility for the [CU Anschutz] faculty, staff
and students is a primary responsibility of the
University such that it would have to be
carried on by the University at taxpayer
expense . . . in the absence of [the Hospital]
providing a child care center at the campus.
¶ 69 For the reasons discussed above, the Center does not provide
its services as a gift to an indefinite number of persons and it does
not lessen the burdens of government. Therefore, the BAA did not
err in denying the Hospital’s tax exemption application on the basis
that the Center does not operate for strictly charitable purposes
under section 39-3-108(1)(a).
5 On appeal, the Hospital argues for the first time that the Center
also lessens the burdens of government by providing early
childhood education. We do not address arguments made for the
first time on appeal. E.g., Minshall v. Johnston, 2018 COA 44, ¶ 21.
Moreover, nothing in the record shows that the State of Colorado is
required to provide pre-school child care for all children in the state
or for the faculty, staff, and students at the University.
39
VI. Conclusion
¶ 70 The BAA’s order denying the Hospital’s application for property
tax exemption for the Center is affirmed.
JUDGE VOGT and JUDGE CASEBOLT concur.
40