Qwest Corp. v. Colorado Division of Property Taxation

Justice EID,

dissenting.

T 1 Today the majority affirms the dismissal of Qwest's equal protection claim without a single piece of evidence having been introduced, or a single fact having been found. Indeed, the majority is so certain that the disparate tax treatment of Qwest is supported by a rational basis that it needs no *226such facts or evidence, or even argument by the Department of Property Tax ("DPT"), which offered none of the rationales adopted by the majority for affirming the dismissal of the claim. The question here is not whether Qwest will prevail on its equal protection claim-admittedly a tough hill to elimb-but whether it might, if given the opportunity to develop a factual record supporting its claim. Because I would give Qwest that opportunity, I respectfully dissent from the majority's opinion affirming the dismissal of its complaint.

T2 Significantly, DPT does not challenge Qwest's assertion that its property tax burden is higher than that borne by its cable company competitors that provide the same services. The only question, then, is whether there is a rational basis to support that disparate treatment. Armour v. City of Indianapolis, - U.S. --, --, 132 S.Ct. 2073, 2079-80 (2012). The majority finds that there is-primarily based on the fact that Qwest enjoys certain "benefits" as a public utility. Maj. op. at 228. But the majority makes no connection between such "benefits" that Qwest may receive as a public utility and the higher property taxes it pays. And indeed it cannot, because there has been no factual development in the case. As the court of appeals properly observed, "[we agree that whether the overall economic impact of the regulatory structure favors Qwest . can be decided only by the trial court after creating an evidentiary record." Qwest Corp. v. Colo. Div. of Prop. Tax, - P.3d ---, --, 2011 WL 8882876 (2011). For example, as the court of appeals pointed out, Qwest alleges that "it derives no net benefit from the regulatory structure"-that is, from its guaranteed reasonable rate of return-because, as a public utility, it is obligated to provide service in "unprofitable areas." Id. n.10. The court of appeals thus "decline[d] to decide whether the definitional and regulatory differences between public utilities and non-utilities sufficiently implicate tax policy to satisfy the rational basis test." Id.

13 For its part, the majority, undeterred by the lack of factual development in this regard, simply makes the bare assumption that the benefits Qwest receives justify a higher tax burden. But this rationale proves too much, as it would justify placing any property tax burden on Qwest, no matter how high. In my view, it is hardly rational to give DPT limitless authority to tax Qwest's property without having any idea of whether the benefits it receives as a public utility, if any, could be tied to tax policy. Significantly, while DPT mentions in passing that Qwest receives benefits as a public utility, it does not offer this as a rationale for justifying the disparate treatment; this "benefits" justification is of the majority's own creation.

T4 The majority's other proffered rationales fare no better. It posits that "[the General Assembly may have sought to encourage local cable companies' competitive foray into the telecommunication market against public utilities," or perhaps it may have "determined that any inequity is on-balance insignificant" because cable companies' property that is related to telephone service is assessed in the same matter as Qwest's property. Maj. op. at 228. Significantly, however, these rationales-which again are not offered by DPT-suggest that the General Assembly considered how public utilities were treated for property tax purposes vis-a-vis cable companies and made a rational decision to subject cable companies to more favorable treatment. But as DPT appears to concede, this sort of rational decision did not happen, as the cable companies came into existence long after the General Assembly subjected public utilities to central assessment. There is no question that the General Assembly has wide latitude in making taxing choices. See Armour, - U.S. at ---, 182 S.Ct. at 2080 (noting that "legislatures have especially broad latitude in creating" tax distinctions). But it is difficult to ascribe to the legislature a rational policy choice it could not have made under the cireumstances. See id. at 2081 (describing "the nature of the line-drawing choices that confronted" a municipality in deciding to stop collecting a particular tax).3

*227T5 The majority correctly acknowledges that motions to dismiss are disfavored, and dismissal on this ground is proper only where "it appears beyond a doubt that a plaintiff can prove no set of facts in support of her claim which would entitle her to relief" Maj. op. at 221 (quoting Pub. Serv. Co. v. Van Wyk, 27 P.3d 377, 385-86 (Colo.2001}). Indeed, the U.S. Supreme Court has recognized the crucial importance of factual ree-ords when differentiating between two cases in which equal protection challenges to similar tax statutes came out differently. See Fitzgerald v. Racing Ass'n of Central Iowa, 539 U.S. 103, 109-10, 123 S.Ct. 2156, 156 L.Ed.2d 97 (2003) (comparing Allegheny Pittsburgh Coal Co. v. Comm'n of Webster Cty., 488 U.S. 336, 109 S.Ct. 633, 102 L.Ed.2d 688 (1989), and Nordlinger v. Hahn, 505 U.S. 1, 112 S.Ct. 2326, 120 L.Ed.2d 1 (1992)); see also Armour, - U.S. at --, 182 S.Ct. at 2081-82 (describing in detail the "facts" that led a municipality to stop collecting a particular tax). The difference between these two cases was that "Allegheny Pittsburgh was the rare case where the facts precluded any plausible inference that the reason for the unequal assessment practice was to achieve the benefits of [the desired] tax scheme." Fitzgerald, 539 U.S. at 110, 123 S.Ct. 2156 (quoting Nordlinger, 505 U.S. at 16-17, 112 S.Ct. 2326). I am not as confident as the majority that the disparate treatment in question here is so obviously rational that factual development should be precluded. Accordingly, I would reverse the court of appeals' decision and remand to the trial court with instructions to deny DP T's motion to dismiss. I therefore respectfully dissent.

I am authorized to state Justice BOAT-RIGHT joins in this dissent.

. Nor does the majority embrace the court of appeals' ultimate rationale-namely, that the doctrine of administrative convenience justifies subjecting Qwest to disparate tax treatment. *227Maj. op. at 223-24. I take from this that the majority did not find this rationale persuasive, and I agree. Significantly, DPT must have also found the rationale to be relatively unconvincing, as it barely mentions it in its submissions to us.