Woodmen of the World &/Or Assured Life Ass'n v. Colorado Department of Revenue

Opinion by

Judge TAUBMAN.

Defendant, the Department of Revenue (Department), appeals the trial court’s decision that plaintiff, Woodmen of the World and/or Assured Life Association (Woodmen), is exempt from paying Colorado sales and use taxes. The question presented is whether the exemption from the taxation for fraternal benefit societies enacted in 1911 extends to sales and use taxes which were first imposed in 1935. We conclude that fraternal benefit societies are exempt from sales and use taxes and, therefore, affirm.

I.

Woodmen is a fraternal benefit society, as defined by § 10-14-101, et seq., C.R.S. (1994 Repl.Vol. 4A), which provides for the payment of death and other benefits to its members and their beneficiaries. The Department issued letters to Woodmen in 1944 and 1978 stating that it was exempt from payment of sales and use tax and issued it Certificates of Exemption in 1979 and 1988.

However, in 1990, the Department advised Woodmen that it did not satisfy the “charitable” requirements of § 39-26-102(2.5), C.R.S. (1994 Repl.Vol. 16B), that its sales tax exemption had been revoked, and that future purchases would be subject to sales tax. The Department did not identify any changes in Woodmen’s organizational structure or operations, nor did it identify any change in the applicable statutes as justification for the revocation. Rather, the revocation was apparently based' on a change in the Department’s interpretation and application of existing statutes.

*1351Woodmen protested the revocation claiming that as a fraternal benefit society it was exempt from all taxation, except real estate and office equipment taxes, under the provision then codified as § 10-14-133, C.R.S. (see Colo.Sess.Laws 1993, ch. 167 amending and recodifying this provision as § 10-14-504, C.R.S. (1994 Repl.Vol. 4A)). Woodmen began paying sales taxes but later filed a claim for refund. The Department denied Woodmen’s claim for refund. Woodmen protested the denial and requested a final determination pursuant to §§ 39-21-103 and 39-21-104, C.R.S. (1994 RepLVol. 16B). In its final determination, the Department concluded that Woodmen was not a “charitable organization” and was not otherwise exempted from paying sales and use taxes.

On appeal to the district court pursuant to § 39-21-105, C.R.S. (1994 Repl.Vol. 16B), the parties filed cross-motions for summary judgment. The trial court ruled that Woodmen is not a “charitable organization” exempt from sales and use taxes under § 39-26-102(2.5), but that under § 10-14-133, then in effect, as a fraternal benefit society, it is exempt from all taxation, including sales and use taxes. Woodmen has not appealed the trial court’s determination that it is not exempt from sales and use taxes as a charitable organization.

II.

The only issue before us is the Department’s contention that the exemption from taxation for fraternal benefit societies under § 10-14-133 does not apply to sales and use taxes.

In 1911, the General Assembly enacted legislation exempting fraternal benefit societies from all state, municipal, and school taxes except those on real estate and office equipment.

This 1911 enactment, until its reeodification in 1993, read as follows:

Every fraternal benefit society organized or licensed under this article is hereby declared to be a charitable and benevolent institution, and all of its funds shall be exempt from all state, county, district, municipal and school taxes, other than taxes on real estate and office equipment, (emphasis added)

However, at that time certain taxes common today, including income, sales, and use taxes, were not in existence. The Department contends that the exemption should not be construed to apply to sales and use taxes. We are not persuaded.

A.

Despite the unequivocal language of this provision exempting fraternal benefit societies from all state taxes, except those on real estate and office equipment, the Department contends that the tax exemption granted to fraternal benefit societies in 1911 extended only to taxes then in existence.

In construing statutes, courts are to be guided by legislative intent. To ascertain legislative intent, courts must interpret words and phrases in statutes according to their plain and ordinary meanings. American Respiratory Care Services v. Manager of Revenue, 835 P.2d 623 (Colo.App.1992). In addition, a reviewing court should give deference to the construction of statutes by administrative officials charged with their enforcement.

When an administrative interpretation is longstanding, administrative construction is entitled to even greater deference. Hewlett-Packard Co. v. State, 749 P.2d 400 (Colo.1988). And, if there is a contemporaneous interpretation of a statute by an administrative agency charged with the responsibility of applying that statute, the agency’s interpretation should be granted significant weight by the courts. This is not true of a subsequent contradictory interpretation. Adams v. Department of Social Services, 824 P.2d 83 (Colo.App.1991).

In this case, the General Assembly declared that, except for two specific listed taxes, fraternal benefit societies are exempt from “all” state taxes. Here, “all” is an unambiguous term and we interpret it in accordance with its commonly understood meaning. O’Brien v. Village Land Co., 780 P.2d 1 (Colo.App.1988).

*1352For more than 45 years the Department interpreted the statute as exempting Woodmen from paying sales and use taxes. From the inception of the sales tax in 1935 through 1990, the Department made no attempt to require Woodmen to pay sales or use taxes, and it issued formal documents in 1944,1978, 1979, and 1988 consistent with that exemp- - tion. Hence, that longstanding interpretation is entitled to significant weight in any determination of legislative intent.

Nonetheless, relying on Security Life & Accident Co. v. Heckers, 111 Colo. 455, 495 P.2d 225 (1972), and Southwest Catholic Credit Union v. Charnes, 665 P.2d 626 (Colo.App.1982), the Department contends that the ■ statutory exemption from all state taxes granted to fraternal benefit societies does not apply to sales and use taxes. However, we conclude those cases are distinguishable.

In Security Life & Accident Co. v. Heckers; supra, the supreme court held that a statute imposing a premium tax on insurance companies in lieu of all other taxes did not exempt insurance companies from the subsequently enacted sales tax. The tax exemption provided to the insurance companies was a substitute for the other taxes. The court determined that the General Assembly’s quid pro quo for the imposition of the premium tax was only an exemption from taxes then in existence and was not an exemption from all future taxes, particularly taxes not then known to the General Assembly. Furthermore, the Department’s own regulation was based entirely on the “in lieu of’ nature of the premium tax and the notion that the quid pro quo for the imposition of the premium tax could not be construed to include exemptions from all future taxes. In addition, the tax exemption relied on by the insurance companies did not specifically mention state taxes, such as sales taxes.

The Southwest Catholic Credit Union decision rested entirely on the rationale of Security Life & Accident Co. v. Heckers, supra.

By contrast, the fraternal benefit societies’ tax exemption statute does not impose a premium tax or other “in lieu of’ tax, and the tax exemption granted to fraternal benefit societies is not a quid pro quo for some other form of tax. Instead, the express reason underlying the tax exemption for the fraternal benefit societies is stated in § 10-14-133 as being because of their charitable and benevolent nature.

In Security Life the supreme court relied heavily on the Department’s longstanding regulation which provided that insurance companies were not exempt from sales tax. For nearly thirty years, the insurance companies had acquiesced in the Department’s interpretation.

The situation in this case is exactly opposite. Here, the trial court determined that both the Department and Woodmen acquiesced in an interpretation that fraternal benefit societies were exempt from sales tax for a period in excess of 45 years. As early as 1944, the Department advised Woodmen that it was exempt from sales tax. Since the initial recognition of Woodmen as an organization exempt from state sales tax, the Department repeatedly reaffirmed Woodmen’s exempt status. Thus, the trial court properly gave deference to the Department’s longstanding interpretation. See Hewlett-Packard Co. v. State, supra.

B.

The Department next contends there is no evidence in the record demonstrating that it considered Woodmen to be exempt from payment of sales taxes simply because it is a fraternal benefit society. The Department suggests that Woodmen’s exempt status may have been based on prior language in the sales tax statute exempting eleemosynary organizations from sales tax. However, that language was amended in 1978, a full year before the Department issued the 1979 Certificate of Exemption to Woodmen and ten years before it issued the last exemption certificate to Woodmen. See Colo.Sess.Laws 1978, ch. 113, § 39 — 26—114(l)(a)(II) at 506.

In addition, in both Security Life and Southwest Catholic Credit Union, the courts struggled with an apparent conflict between the statutes upon which the taxpayers relied and the sales tax statute, which did not specifically exempt insurance companies or credit unions. That apparent conflict does not exist here.

*1353The state tax exemption granted to fraternal benefit societies is based on the legislative declaration that such organizations are charitable and benevolent -institutions. We agree with the trial court’s analysis that, although Woodmen is not a “charitable organization” under § 39-26-102(2.5), it is a “charitable and benevolent institution” as designated by the General Assembly in § 10-14-133. Also, since its adoption, the state sales tax statute has contained a specific exemption for sales which the state is prohibited from taxing under other laws of the state. See § 39-26-114(l)(a)(III), C.R.S. (1994 Repl.Vol. 16B). The trial court reasoned that § 10-14-133, as a special provision concerning taxation, prevailed over the general sales tax enactment. Therefore, the adoption of the sales tax statute did not conflict with the fraternal benefit society tax exemption statute, as in Security Life and Southwest Catholic Credit Union. We agree with this analysis.

• C. '

Relying on Security Life, the Department next contends that the General Assembly’s enactment of Colorado’s Income Tax Act in 1937 suggested its intent not to exempt fraternal benefit societies from sales and use taxes. In 1937, the General Assembly expressly exempted fraternal benefit societies from income taxes. Colo.Sess.Laws 1937, eh. 175 at 683. Hence, the Department argues that there would have been no need to provide an exemption from income taxes if the general exemption enacted in 1911 had been intended to apply to all future taxes.

However, where separate clauses in the same statutory scheme may be reconciled by one construction, but would conflict under a different interpretation, the construction resulting in harmony rather than inconsistency should be adopted. Bitts v. Board of Adjustment, 765 P.2d 1077 (Colo.App.1988). Also, an appellate court should construe statutes related to the same subject matter in pari materia, in order to give consistent, harmonious, and sensible effect to all of their parts. Yuma County Board of Equalization v. Cabot Petroleum Corp., 856 P.2d 844 (Colo.1993). Courts must strictly construe taxing power and taxing acts in favor of the taxpayer and against the taxing authority. Tenney v. Board of Assessment Appeals, 856 P.2d 89 (Colo.App.1993).

Here, the general exemption enacted in 1911 and the subsequently enacted income tax both possess provisions regarding fraternal benefit societies, and they must be construed harmoniously in favor of the taxpayer. Accordingly, we conclude that the later enacted income tax act reaffirmed the General Assembly’s intent as to the broad sweep of the exemption.

Finally, any doubt existing about the General Assembly’s intent in granting an exemption from all state taxes to fraternal benefit societies was resolved in 1993 when the General Assembly amended the fraternal benefit society tax exemption statute. See Colo. Sess.Laws 1993, ch. 167, § 10-14-504 at 603. The statutory exemption (recodifying entire statute governing fraternal benefit societies) at issue was amended to read:

Every society organized or licensed under this article is hereby declared to be a charitable and benevolent institution, and all of its funds shall be exempt from 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).

Not only did the General Assembly reaffirm the exemption of fraternal benefit societies from “all” state taxes, it further strengthened the statutory language by providing the exemption applied to “all and every” state tax.

The General Assembly is presumed to be cognizant of prior judicial interpretation of the statute under inquiry. State Engineer v. Castle Meadows, Inc., 856 P.2d 496 (Colo.1993). Thus, when a statute is amended it is presumed that the General Assembly intended to change the law.

However, this presumption may be rebutted when more specific language is added, thereby indicating the General Assembly’s intention to clarify the statute. Robles v. People, 811 P.2d 804 (Colo.1991). We reject *1354the Department’s assertions at oral argument that the 1993 amendments did neither.

We must presume that the General Assembly was aware of the Security Life decision and the existence of sales taxes. Nevertheless, it amended the statute. Accordingly, we conclude that the 1993 amendment clarified the statute to overrule the Department’s 1990 interpretation of § 10-14-133.

Here, the General Assembly added the language “and every” to “all.” Thus, if the General Assembly knew of the Department’s 1990 change in its interpretation of § 10-14-133, the 1993 amendment repudiated it. Conversely, if the General Assembly did not have knowledge of the Department’s change in interpretation, the amendment was intended to clarify the former statute.

In summary, we conclude that Woodmen is exempt from sales and use taxes.

Judgment affirmed.

RULAND, J., concurs. BRIGGS, J., dissents.