Woodmen of the World &/Or Assured Life Ass'n v. Colorado Department of Revenue , 893 P.2d 1349 ( 1995 )

BRIGGS, Judge,

dissenting.

In my view, under controlling precedent and properly applied rales of statutory construction, the statutory exemption from taxation for fraternal benefit societies does not extend to sales and use taxes. I therefore respectfully dissent.

The supreme court addressed a similar claim of exemption in Security Life & Accident Co. v. Heckers, 177 Colo. 455, 495 P.2d 225 (1972). The issue there was whether a statute enacted in 1907 that exempted insurance companies from taxation, except for a tax on insurance premiums, applied so as to exempt insurance companies from sales and use taxes first imposed in 1935. The court concluded it did not.

The court in Security Life began with the basic proposition that taxation is the rule and exemption the exception. The burden is on the taxpayer to establish the right to an exemption.

In rejecting the claim for exemption, the supreme court noted that at the time the sales and use tax legislation was passed, the General Assembly was aware of the existence of the tax exemption for insurance companies. However, even though other exemptions from sales and use taxes were included in the legislation, none was included for insurance companies.

The enactment of an Income Tax Act in 1937 further suggested to the court an intent not to exempt insurance companies from sales and use taxes. In that act, the General Assembly had specifically exempted insurance companies from income taxes. The court in Security Life reasoned that, if the general exemption enacted in 1911 had been intended to apply to all future taxes, there would have been no need to include an exemption from income taxes:

From the foregoing it seems clear to us that in 1907 when the general assembly was enacting a law to regulate insurance companies and imposing a tax to finance that regulation and not for the purpose of raising money for general governmental purposes, it did not intend to exempt insurance companies from all future taxes needed to meet the general requirements of government, especially where the type of tax was unknown to them.

Security Life & Accident Co. v. Heckers, supra, 177 Colo. at 462, 495 P.2d at 225.

Ten years later, in Southwest Catholic Credit Union v. Charnes, 665 P.2d 626 (Colo.App.1982), a division of this court addressed a similar challenge to sales taxes by a credit union. The court followed the rationale of Security Life to conclude that a tax exemption for credit unions did not extend to the later-enacted sales tax.

The General Assembly has taken no action in response to the decisions in Security Life and Southwest Catholic Credit Union to exempt insurance companies or credit unions from sales and use taxes. We may therefore presume that the General Assembly has acquiesced in these interpretations. See 2A N.J. Singer, Sutherland Statutory Construction § 45.12 (5th ed. 1992); cf. Security Life & Accident Co. v. Heckers, supra.

As with insurance companies and credit unions, the General Assembly did not include an exemption in the sales and use tax legislation for fraternal benefit societies but did include an exemption from the income tax. See Colo.Sess.Laws 1937, ch. 175 at 683; § 39-22-112(1), C.R.S. (1994 Repl.Vol. 16B). The exemption from income taxes would have been unnecessary if fraternal benefit societies were already exempt. See Security Life and Accident Co. v. Heckers, supra.

The majority reasons that the statute exempting insurance companies from taxes contained an exception for taxes on premiums and that the “quid pro quo ” was an exemption only from taxes then in existence. However, the tax on premiums is not a general fund tax. As the supreme court recognized, “the general assembly was enacting a law to regulate insurance companies and imposing a" tax to finance that regulation and not for the purpose of raising money for general governmental purposes.” Security Life & Accident Co. v. Heckers, supra, 177 Colo. at 462, 495 P.2d at 229.

Furthermore, fraternal benefit societies are subject to taxes on real estate owned, the same exception from exemption provided for credit unions. See Southwest Catholic Credit Union v. Charnes, supra. The argument thus fails to suggest any meaningful distinction in the supposed “quid pro quo” for fraternal benefit societies from that for insurance companies and credit unions.

The argument also fails to take into account that Woodmen did not appeal the trial court’s determination that fraternal benefit societies are not exempt from sales and use taxes as “charitable organizations” under § 39-26-102(2.5), C.R.S. (1994 Repl.Vol. 6B). Indeed, the majority concludes that fraternal benefit societies, like insurance companies and credit unions, are not exempt from taxation as charitable organizations.

The majority then turns to rules of statutory construction. It begins by correctly recognizing the rule, also noted by the supreme court in Security Life, that an administrative interpretation is entitled to deference, with greater deference to be accorded to an interpretation that is longstanding. This is because the failure to repeal the administrative interpretation by statutory amendment is persuasive evidence that the interpretation was intended by the General Assembly. See Hewlett-Packard Co. v. State, 749 P.2d 400 (Colo.1988).

The circumstances here, however, differ from those present in Security Life. In that ease, the agency’s interpretation was in the form of a published bulletin. Here, however, the Department’s interpretation was expressed only in correspondence directly with Woodmen. It is not at all clear how the General Assembly can be presumed to have had knowledge of that correspondence, knowledge which is required if we are then to presume that legislative inaction amounted to deference to the interpretation contained in the correspondence.

More importantly, the Department has changed its interpretation. The Department’s records do not indicate whether Woodmen’s prior sales tax exemption had been based on the exemption from taxation for fraternal benefit societies, on the charitable organization exemption within the sales tax statute, or on some other basis. Even if it could be assumed that the Department relied at least in part on the exemption for fraternal benefit societies, the Department changed its interpretation in 1990 and since then has consistently taken the position that fraternal benefit societies are not exempt from sales and use taxes. .

The majority correctly states its second rule of statutory construction: when administrative officials have construed a statute in a nonuniform manner, we need not extend deference to the current agency interpretation. However, contrary to the suggestion in the majority’s analysis, when, as here, the Department has changed its interpretation, we have no need to extend deference to the discarded interpretation, however long it may have stood. Rather, our task then is to conduct an independent analysis of the statutory scheme. Thiret v. Kautzky, 792 P.2d 801 (Colo.1990). That independent analysis leaves the precedent of Security Life and Southwest Catholic Credit Union still firmly controlling.

The majority next correctly observes that, to ascertain legislative intent, we must interpret words and phrases in statutes according to their plain and ordinary meanings. However, the statutory exemptions for insurance companies and credit unions, which were construed in Security Life and Southwest Catholic Credit Union not to extend to sales and use taxes, were no more ambiguous than the statutory exemption for fraternal benefit societies. Thus, reliance solely on the wording of the statute would require that we ignore precedent from our supreme court.

The majority finally relies on the 1993 amendment to the statute to conclude that the General Assembly intended to clarify that the exemption always did and still does apply to sales and use taxes. It reaches this conclusion because the statutory exemption for fraternal benefit societies, which had previously exempted “all state, county, district, municipal, and school taxes, other than taxes on real estate and office equipment,” was amended to exempt “all and every state, county district, municipal, and school tax other than taxes on real estate and office equipment.” Section 10-14-504, C.R.S. (1994 Repl.Vol. 4A) (emphasis added).

However, as the majority notes, “all” in the context here is an unambiguous term. It means “the whole of, the whole number or sum of, or every member or individual component of, and is synonymous with ‘every’ and ‘each.’ ” Hudgeons v. Tenneco Oil Co., 796 P.2d 21, 23 (Colo.App.1990). Likewise, “every” is defined as “being each individual or part of a class or group whether definite or indefinite in number without exception.” Webster’s Third New International Dictionary 788. Because the plain meanings of “all” and “every” are practically identical, the change in wording alone does not clarify the legislative intent as to the scope of the exemption.

Faced with the resulting ambiguity, the majority relies on rules of construction regarding statutory amendments to determine that the 1993 amendment was a clarification. It then concludes from this that the purpose was to clarify that fraternal benefit societies have always been exempt from sales taxes.

However, if a statute is ambiguous, the court may consider, among other things, the legislative history. Section 2-4-203(l)(c), C.R.S. (1980 Repl.Vol. IB); see Passamano v. Travelers Indemnity Co., 882 P.2d 1312, 1319 (Colo.1994) (“An examination of relevant legislative history frequently proves most beneficial in ascertaining the intent of the General Assembly.”). Likewise, in determining whether an amendment was intended as a change or a mere clarification, it is the legislative history which often provides the clearest expression of legislative intent. See Rickstrew v. People, 822 P.2d 505, 508 (Colo.1991) (“That the amendment was a clarification is indicated by the legislative history of a closely related statute.”); Darby v. All J Land & Rental Co., 821 P.2d 297 (Colo.1991) (because meaning of amendment not clear, supreme court looked to legislative history).

Here, the amendment was part of numerous amendments to the statutes regulating fraternal benefit societies. The legislative history indicates that these revisions were made merely to keep up with changes in the insurance industry, see Hearings on S.B. 93-72 before the House Committee on Business Affairs & Labor, 59th General Assembly, First Session (March 4, 1993) (comments of Rep. Michelle Lawrence), and to conform the statutory scheme to a model act proposed by a national organization of fraternal benefit societies. See Hearings on S.B. 93-72 before the Senate Committee on Business & Labor, 59th General Assembly, First Session (January 20,1993) (comments of Mr. Marck Cobb).

Thus, the history indicates that the revision in § 10-14-133 was part of a package of amendments enacted for the sake of interstate uniformity. As a result, while the majority may be correct that the intent was to clarify the law, not make a substantive change, see Amax, Inc. v. Grand County Board of Equalization, 892 P.2d 409 (Colo.App.1994), the clarification was unrelated to the scope of the exemption. This leaves us with the controlling precedent of Security Life and Southwest Catholic Credit Union still securely in place.

For these reasons I would reverse and remand the cause to the district court for reinstatement of the Department’s final determination.