Griswold v. National Federation of Independent Business

          Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 15CA2017

          Attorneys for Petitioners/Cross-Respondents: Phillip J. Weiser, Attorney General Grant T. Sullivan, Assistant Solicitor General Emily Buckley, Assistant Attorney General Denver, Colorado.

          Attorneys for Respondent/Cross-Petitioner: Brownstein Hyatt Farber Schreck, LLP Christopher O. Murray Van Aaron Hughes Emily R. Garnett Denver, Colorado.

          Attorneys for Amici Curiae City and County of Denver and the Colorado Municipal League: City and County of Denver Kristin M. Bronson, Denver City Attorney David W. Broadwell Denver, Colorado.

          Attorneys for Amici Curiae Pacific Legal Foundation, Goldwater Institute, TABOR Foundation, and Colorado Union of Taxpayers Foundation: Pacific Legal Foundation James M. Manley Phoenix, Arizona.

          Pacific Legal Foundation Jeffrey W. McCoy Sacramento, California.

          OPINION

          HOOD, JUSTICE.

         ¶1 This case provides us another opportunity to examine the implications of the Taxpayer's Bill of Rights ("TABOR"). At issue now is how Colorado's Department of State ("the Department") charges for some of its services-for example licensing businesses-to then fund its general operations, which include overseeing elections. It is this funding scheme that the National Federation of Independent Business ("NFIB") argues is unconstitutional under TABOR.

         ¶2 TABOR requires advance voter approval for any new tax, tax rate increase, or tax policy change directly causing a net tax revenue gain to any district. It applies prospectively. Therefore, to establish that a charge violates TABOR, NFIB must show: (1) that the charge is a tax; and (2) that the charge post-TABOR constituted a new tax, tax rate increase, or tax policy change.

         ¶3 Through this TABOR lens, we examine the statute in question. Section 24-21-104(3)(b), C.R.S. (2019), directs the Department to "adjust its fees so that the revenue generated from the fees approximates [the Department's] direct and indirect costs." This fluctuating scheme for self-funding has been in place for nearly thirty years. So, the scheme predates TABOR by nearly a decade, but there have been adjustments to charges since TABOR's enactment.

         ¶4 NFIB contends that these adjustments violate TABOR. First, NFIB argues that the charges are really taxes because there is no reasonable relationship between the Department's charges and the government functions funded by the charges. Second, NFIB asserts that any increase in the charges after TABOR's enactment in 1992 constitutes either a new tax, an increase in a tax rate, or a tax policy change-all requiring voter approval, which has never occurred.

         ¶5 Because we disagree with NFIB's second contention, we need not address its first. Based on the stipulated facts, we conclude that there was no evidence to establish that any post-TABOR adjustments resulted in a new tax, tax rate increase, or tax policy change directly causing a net revenue gain. Thus, the trial court properly granted summary judgment. Consequently, we need not, and therefore do not, reach the issue of whether the charges authorized by section 24-21-104 are taxes under TABOR.

         I. Facts and Procedural History

         A. The Department and Section 24-21-104

         ¶6 Almost since statehood, the Department has been responsible for many of the most vital administrative functions of the government, including registering and licensing businesses. For over fifty years, the Department has also been responsible for overseeing state elections. Ch. 334, sec. 2, § 49-1-11, 1967 Colo. Sess. Laws 687, 687.

         ¶7 Since the Department's inception, the Secretary of State ("the Secretary") has collected charges for its services. See Ch. 34, 1877 Colo. Gen. Laws 425, 427. In 1877, the General Assembly directed the Secretary to collect "fees" for military commissions, notary public commissions, foreign commissions, any other commission or appointment to which the state seal would be affixed, official certificates, filing and recording certificates of incorporation, and for any copies or transcripts of papers and records. Id. The General Assembly also set the amount the Secretary would charge and collect for these services. See id. ("For each military commission, two dollars and fifty cents; for each notary public's commission, five dollars . . . ."). The Secretary would then transfer the charges to the state treasurer on a monthly basis. Id.

         ¶8 In the 1980s, the General Assembly began tinkering with the Department's funding scheme. See, e.g., Ch. 76, sec. 7, § 24-21-104, 1981 Colo. Sess. Laws 429, 430–31. Though the General Assembly continued to set the amount of the Department's charges, it directed the Department to "propose, as part of its annual budget request, an adjustment in the amount of each fee which the secretary . . . is authorized . . . to collect." Id. at 431. The General Assembly also specified that the budget request should "reflect [the] direct and indirect costs" of the Department. Id.

         ¶9 In 1983, the General Assembly settled on a funding mechanism for the Department-the same mechanism in effect today. Ch. 256, sec. 1, § 24-21-104, 1983 Colo. Sess. Laws 861, 861–62; see also § 24-21-104(3). As part of the 1983 amendments, the General Assembly jettisoned the set list of charges and directed the Department to "adjust its fees . . . so that the revenue generated from said fees approximates its direct and indirect costs." See 1983 Colo. Sess. Laws at 861–62. The General Assembly also created the Department of State Cash Fund. Id. All collected charges must be credited to that fund and only used to finance the Department. See id.

         ¶10 So, as it stands now, the Secretary has the discretion to set, increase, decrease, or temporarily suspend the Department's charges without legislative oversight. See § 24-21-104(3)(b). That said, the Secretary cannot set these charges at whatever level she wishes-they must be adjusted "so that the revenue generated from the fees approximates [the Department's] direct and indirect costs." See id. But this is the only guiding principle included in the statute. There is no statutory formula, base rate, or adjustment factor to further constrain the Secretary.

         B. TABOR

         ¶11 In 1992, nine years after the legislature created the current funding scheme for the Department, Colorado voters adopted TABOR. See Colo. Const. art. X, § 20.

         ¶12 TABOR requires voter approval before the imposition of "any new tax, tax rate increase, . . . or . . . tax policy change directly causing a net tax revenue gain to any district." Colo. Const. art. X, § 20(4)(a). A charge is a "tax" if its "primary purpose is to raise revenue for general governmental use." Colo. Union of Taxpayers Found. v. City of Aspen, 2018 CO 36, ¶ 26, 418 P.3d 506, 513. It isn't a tax if it "is imposed as part of a comprehensive regulatory scheme, and if [its] primary purpose . . . is to defray the reasonable direct and indirect costs of providing a service or regulating an activity under that scheme." Id.

         ¶13 TABOR "also limits the growth of state revenues, usually met by tax increases, by restricting the increase . . . unless voter approval for an increase in spending is obtained." In re Submission of Interrogatories on Senate Bill 93-74, 852 P.2d 1, 4 (Colo. 1993) (citing Colo. Const. art. X, § 20(7)(a)). "Its purpose is to 'protect citizens from unwarranted tax increases' and to allow citizens to approve or disapprove the imposition of new tax burdens." Huber v. Colo. Mining Ass'n, 264 P.3d 884, 890 (Colo. 2011) (quoting Senate Bill 93-74, 852 P.2d at 4).

         ¶14 TABOR only applies prospectively to statutes imposing new taxes, tax rate increases, or tax policy changes enacted after November 4, 1992. See id. at 891. However, a pre-TABOR statute can still violate TABOR if the statute constitutes a new tax, tax ...