Vail Associates, Inc. v. Eagle County Board of County Commissioners

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 Vail appealed the notice of valuation to the BOE and asserted that §39-3-136, C.R.S. 1998, enacted in 1996, had repealed Colo.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 posses-sory 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 pos-sessory 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(l)(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 posses-sory 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 pos-sessory 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 posses-sory 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 to define terms and classify property, those properties subject to taxation.

Under Colo. Const, art. X, § 6, the General Assembly is prohibited from both creating tax exemptions not authorized by the constitution or eliminating exemptions expressly enumerated by the constitution. See Mesa Verde Co. v. Montezuma County Board of Equalization, supra.

The constitution is not a grant of authority to the General Assembly, but is an instrument of limitation of authority. Therefore, in the absence of an express or necessarily implied constitutional prohibition, the General Assembly has plenary powers of civil government. Colorado State Civil Service Employees Ass’n v. Love, 167 Colo. 436, 448 P.2d 624 (1968). Accordingly, although the constitution sets forth the boundaries within which property taxes are to be imposed, it is the General Assembly which enacts and implements the constitutional mandate that all property is to be taxed.

Thus, the assessment, levy, and collection of taxes are exclusively a legislative function to be exercised according to the general laws subject only to the limitations of the United States and Colorado Constitutions. The General Assembly has the discretion to determine questions of time, method, nature, purpose, and extent in respect to the imposition of taxes, the subjects upon which the taxing power is to be exercised, and the proceedings concerning taxation. Its exercise of discretion within constitutional limitations is not subject to judicial control. Bartlett & Co. v. Board of County Commissioners, 152 Colo. 388, 382 P.2d 193 (1963); see also Carlile v. Pullman Palace Car Co., 8 Colo. 320, 7 P. 164 (1885) (imposition of tax is a legislative act subject to legislature’s control).

Here, because the constitution sets forth the limits within which the General Assembly is to operate in establishing the tax scheme, there is no constitutional restriction against the General Assembly taking actions which are within its limits and do not exceed them. Classifying property for and determining the method of taxation is subsumed within this construct. Indeed, the General Assembly, in the discretionary exercise of its power, may choose to establish different classes of property and a different method for valuing each class if necessary in order to secure a just valuation. Ames v. People ex rel. Temple, 26 Colo. 83, 56 P. 656 (1899) (upholding method of valuing and apportioning railroad property located in more than one county even though certain property was thereby left untaxed).

Specifically, to carry out the constitutional requirement that all real property be taxed, the General Assembly is empowered to enact legislation that effectuates and implements the constitutional mandate. Included in this authority is the power to define, by statute, what real property is and is not. Therefore, unless and until a category of real property is defined and the method for collecting taxes on such property is enacted by the General Assembly, it cannot be taxed. Thus, the constitution, of itself, does not allow or prohibit the General Assembly from defining real property as long as that body recognizes and acts within the limits set forth therein. See City & County of Denver v. Security Life & Accident Co., supra; Colo. Const, art. X, § 20 (taxpayers may amend, by initiative, constitutional scope of General Assembly’s authority to tax).

C.

We disagree with the BOE that § 39-3-136, which allows the taxation of pos-sessory interests only upon the enactment of specific legislation directing such taxation, exceeds the scope of the General Assembly’s authority to tax.

1.

First, insofar as the BOE implies that the General Assembly, by enacting § 39-3-136, overruled the Supreme court’s interpretation of the constitution in Mesa Verde Co. v. Board of Equalization, supra, we disagree. Contrary to the BOE’s contention, the court did not determine that the constitution mandated the taxation of possessory interests. Instead, although the supreme court relied on the general rule that the creation of a tax exemption not authorized expressly by the constitution is prohibited, its decision was based solely on its interpretation of the statutes concerning possessory interests and real property.

2.

The BOE argues that, regardless of the General Assembly’s expressed intent under § 39-3-136 that possessory interests in exempt property are to be subject to taxation only upon its express direction, the statute unconstitutionally creates an exemption for possessory interests.

Vail argues, to the contrary, that the General Assembly validly exercised its power to define the subjects of taxation and the method for collecting taxes. Therefore, Vail argues, the General Assembly, in enacting § 39-3-136, properly exercised its authority to define categories of property subject to taxation and effectively removed possessory interests from the definition of real property. We agree with Vail.

Section 39-1-102(16) mandates the taxation of “all property real and personal.” And, § 39-1-111 authorizes imposition of property taxes against “all taxable property” in a county. Real property subject to taxation is defined under §§ 39-1-102(14), C.R.S. 1998, as:

all lands or interests in lands to which title or the right of title has been acquired from the government of the United States or from sovereign authority ratified by treaties entered into by the United States, or from the state [and]

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improvements.

Section 39-3-136 provides, in pertinent part, that:

[T]his section is intended to clearly state that possessory interests in exempt property shall be subject to property taxation only upon enactment of specific statutory provisions directing such taxation.

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The provisions of section 39-l-102(14)(a) and (14)(c) and section 39-1-106 do not direct the taxation of possessory interests in real property.

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Possessory interests in real or personal property that is exempt from taxation under this article shall not be subject to property taxation unless specific statutory provisions have been enacted that direct the taxation of such possessory interests.

Here, the General Assembly’s intent that possessory interests are not considered real property subject to taxation clearly is expressed in § 39-3-136. However, the BOE notes that the General Assembly did not separately amend §§ 39-1-102(14) & 39 — 1— 111. Thus, the BOE argues, the General Assembly, through § 39-3-136, cannot do by implication that which it chose not to do expressly.

Specifically, the BOE asserts, because the supreme court, in Mesa Verde Co. v. Montezuma County Board of Equalization, supra, determined that Mesa Verde’s possessory interest met the definition of taxable property under §§ 39-1-102(14) & 39-1-111, and because the General Assembly failed to repeal or amend these statutes, they are still in effect. Therefore, the BOE argues, despite the enactment of § 39-3-136, §§ 39-1-102(14) & 39-1-111 still include pos-sessory interests in the definition of real property. Thus, the issue presented here is whether § 39-3-136 effectively amends the definition of real property under §§ 39-1-102(14) & 39-1-111. We conclude that it does.

We do agree, as the BOE points out, that the General Assembly could have repealed and amended § 39-1-102(14) or § 39-1-111 to change the definition of real property. However, it is not for a reviewing court to determine that the General Assembly could have addressed an issue in a different or “better” manner. Rather, the court’s function is to uphold the intent of the General Assembly and determine whether a statute is constitutional. See Kallenberger v. Buchanan, 649 P.2d 314 (Colo.1982) (fundamental tenet of constitutional law is that courts do not approve or disapprove the wisdom of legislative decisions).

The appropriate construction of a statute is a question of law. Wycon Construction Co. v. Wheat Ridge Sanitation District, 870 P.2d 496 (Colo.App.1993).

In statutory construction, legislative intent is the polestar. In re Estate of Hill, 713 P.2d 928 (Colo.App.1985). Accordingly, a statute must be construed to give effect to the legislative purpose underlying its enactment and to achieve a just and reasonable result consistent with that purpose. Snyder Oil Co. v. Embree, 862 P.2d 259 (Colo.1993). A statute also is to be interpreted, if possible, to harmonize with and give meaning to other potentially conflicting statutes. Gamble v. Levitz Furniture Co., 759 P.2d 761 (Colo.App.1988).

If a statute is ambiguous or if its intended effect is unclear, the reviewing court, in determining its meaning, may consider: 1) the object sought to be attained; 2) the circumstances in response to which the statute was enacted; 3) legislative history; 4) the common law or former statutes; 5) the consequences of a certain construction; 6) any administrative construction; and 7) the legislative declaration or purpose. See § 2-4-203, C.R.S.1998; Holme, Roberts & Owen v. Industrial Claim Appeals Office, 800 P.2d 1332 (Colo.App.1990).

In enacting § 39-3-136, the General Assembly properly recognized that the constitution does not allow the exemption of certain interests from a legislatively created classification of property. Additionally, the General Assembly recognized the constitutional limitation on its power to define the subjects of taxation, noting that it could not create a class of property to be taxed and then exempt certain members of that class. Because the General Assembly determined that the constitution requires that all or none of a class of property be subject to taxation, it decided that it simply would not create that class consisting of possessory interests. Hearings on S.B. 218, House Floor Debate, 60th General Assembly, Second Session (May 6, 1996); see Mesa Verde Co. v. Montezuma County Board of Equalization, supra.

In making this determination, the General Assembly noted the history underlying Colo. Const, árt. X in establishing the state taxation scheme. The authors of the original constitution considered but did not expressly include the phrase “possessory interests” in Colo. Const, art. X, § 3, requiring the taxation of “all property, real and personal.” See Proceedings of the Constitutional Convention 414, 483 (1875).

The General Assembly also determined that enacting § 39-3-136 and repealing § 39-3-135 would restore possessory interests to the status they historically had held of not being considered taxable real property. See Hearings on S.B. 218 before the Subcommittee of the Senate Agricultural Committee, 60th General Assembly, Second Session (March 28, 1996); Hearings on S.B. 218 before the Subcommittee of the Senate Appropriations Committee, 60th General Assembly, Second Session (April 23, 1996) (noting that constitutional provisions do not expressly authorize taxation of possessory interests and that, therefore, a statute authorizing such is needed before such interest may be taxed). See also Carlile v. Pullman Palace Car Co., supra (until method of assessing and collecting tax is imposed by legislative act, it does not exist).

The General Assembly further determined, properly, that because the constitution does not require the taxation of possessory interests, and because the General Assembly is vested with the authority to define and classify property to be taxed, the decision whether to include such interests in defining real property is left to its discretion. See § 39-3-136(l)(a), C.R.S.1998; Ames v. People ex rel. Temple, supra (General Assembly has discretion to determine classes of property to be taxed).

Here, the language of § 39-3-136 reflects the General Assembly’s plenary power under the constitution to establish and define the subjects of taxation and the method for collecting taxes on such property. The General Assembly did not act to exempt possessory interests from taxation. Instead, § 39-3-136 sets forth that, because neither the constitution nor the definition of real property under §§ 39-1-102(14) and 39-1-111 directs the taxation of possessory interests in exempt property, such taxation may be done only when the General Assembly exercises its power to do so. Because the power to define classes of property and to establish the method by which taxes are collected rests with the General Assembly, it did not exceed the scope of its authority in enacting § 39-3-136.

Moreover, the fact that § 39-3-136 may change the supreme court’s interpretation of an existing statute, alone, does not demonstrate that the General Assembly has overstepped its authority. If a court misinterprets or misconstrues the intent of a legislature concerning a statute, there is nothing to prevent that body from correcting the error and making its intent clear. See People ex rel. Juhan v. District Court, 165 Colo. 253, 439 P.2d 741 (1968); Commercial Federal Savings & Loan Ass’n v. Douglas County Board of Equalization, 867 P.2d 17 (Colo.App.1993) (an explicit subsequent legislative declaration for the purpose of clarifying the intent of an earlier statute is entitled to considerable weight).

Therefore, the General Assembly, in a valid exercise of its authority, has declared that, in the absence of an express legislative directive to do so, possessory interests, including those in exempt property, are not encompassed by the statutory definition of real property under §§ 39-1-102(14) & 39-1-111. And, because possessory interests are not considered real property under this definition, they are not subject to taxation.

In reaching this determination on the facts before us, we do not consider whether the General Assembly, under § 39-3-136, may direct the taxation of selected possessory interests or expressly exempt others.

D.

Alternatively, the BOE argues that, even if the General Assembly may define real property so that it does not include possesso-ry interests in exempt property, nevertheless, § 39-3-136 does not include the interest at issue here, a possessory interest in federally owned land exempt from state taxation under the Supremacy Clause. It argues that the language of § 39-3-136(2), C.R.S.1998, that “possessory interests in real or personal property that is exempt from taxation under this article” includes only property specifically exempted from taxation under article 3 of Title 39. We disagree.

Under the Supremacy Clause, federally owned lands are not subject to taxation by a state. U.S. Const, art. YI; Mesa Verde Co. v. Montezuma County Board of Equalization, supra (property owned by the United States is immune from state taxation). This exemption was not created by state statute and cannot be altered or exempted by the state.

To adopt the interpretation urged by the BOE of this phrase to exclude possessory interests in exempt lands simply because the lands are owned by the United States would lead to unequal treatment and defeat the constitutional mandate that taxes are to be imposed uniformly. See Colo. Const, art. X, § 3; Denver Urban Renewal Authority v. Byrne, 618 P.2d 1374 (Colo.1980) (tax burden must be uniform on same class of property).

The better interpretation of this language, in harmony with other statutes and to promote uniformity, is to view it in the context of the whole taxation scheme as set forth under the constitution and implemented through the statutes. Thus, because federally owned lands are exempt property under the Supremacy Clause, we conclude that under § 39-3-136, such lands also are considered exempt.

E.

Reading the statutory provisions as a whole, we conclude that real property is defined as all lands and interests in lands that are not possessory interests in exempt property under the taxation scheme. And, applying that definition to the case before us, we further conclude that the BAA correctly ordered the BOE to remove Vail’s possessory interest from the tax rolls.

Here, because Vail’s interest in federal forest lands resulted from a lease with the United States, it is a possessory interest. As discussed, federal forest lands are exempt from taxation by the state under the Supremacy Clause. This exemption is recognized under § 39-3-136. Therefore, because Vail’s possessory interest in exempt property is not considered real property, under § 39-3-136, it is not subject to taxation.

In light of this disposition, we need not address the other issues raised by the parties.

The order is affirmed.

Judge METZGER concurs. Judge ROY concurs in part and dissents in part.