Opinion ID: 2592913
Heading Depth: 4
Heading Rank: 2

Heading: Constitutional considerations in interpretation

Text: Although our interpretation of the code stems from its plain meaning, our view is also supported by our obligation to avoid interpretations that invoke constitutional deficiencies. Adams County Sch. Dist. No. 50 v. Heimer, 919 P.2d 786, 792 (Colo.1996). By adopting this plain language interpretation of the charitable organization definition, we avoid a potential constitutional conflict created by Catholic Health's interpretation. Catholic Health contends all religious organizations with 501(c)(3) status should be entitled to a sales and use tax exemption. However, the United States Supreme Court has held such a subsidy, directed exclusively to religious organizations, which either burdens non-beneficiaries markedly or cannot reasonably be seen as removing a significant state-imposed deterrent to the free exercise of religion ... provide[s] unjustifiable awards of assistance to religious organizations and cannot but conve[y] a message of endorsement of religion, in violation of the Establishment Clause. Texas Monthly, 489 U.S. at 14-15, 109 S.Ct. 890 (Brennan, J., plurality opinion) (internal citations omitted). Catholic Health's interpretation would carve out a tax exemption for religious organizations solely as a result of their religious nature, rather than the work of the organization. Such an exemption would put other secular organizations, engaged in exceedingly similar activities, at a marked competitive disadvantage. Many of the constitutional arguments involved in this case arise from an interpretation of the code we reject. In contrast, the interpretation we adopt today complies with constitutional requirements. In order for a sales tax exemption to comply with the Establishment Clause, it must serve a broad secular purpose. If the work of a religious organization falls within that secular purpose, it may properly enjoy the tax exemption. The tax code's definition of charitable organization has the properly broad, secular purpose of lessening the burdens of government. See Bob Jones Univ. v. U.S., 461 U.S. 574, 591, 103 S.Ct. 2017, 76 L.Ed.2d 157 (1983) (explaining that charitable exemptions are justified where they benefit society by, for example, supplementing and advancing the work of public institutions already supported by tax revenue). The tax code extends the tax exemption to religious organizations that satisfy this secular purpose, rather than bestowing tax exemptions upon religious organizations simply by virtue of their religious nature. We have held tax exemptions comply with the Establishment Clause where the scope of the exemption is instrumental in facilitating fair administration of the system and where the exemption makes distinctions based on real differences related to the purposes of the system. Young Life, 650 P.2d at 521. Here, the City of Pueblo created a tax exemption to benefit those organizations engaged in charitable work. It sets forth concrete, secular standards by which it will evaluate whether organizations, including religious organizations, are eligible for the tax exemption. These standards are necessary, in that they provide the City with an objective measure by which to determine eligibility for the tax exemption. The criteria are based on real differences, such as the type of work undertaken by the organization, as well as whether that work is transactional or charitable. Thus, we hold the City of Pueblo tax code, applied as written, complies with the Establishment Clause. However, Catholic Health argues the application of the City of Pueblo's tax code nonetheless violates the Establishment Clause by creating an improper entanglement between government and religion. A statute or ordinance violates the Establishment Clause when it fosters `an excessive government entanglement with religion.' Lemon v. Kurtzman, 403 U.S. 602, 613, 91 S.Ct. 2105, 29 L.Ed.2d 745 (1971) (quoting Walz v. Tax Comm'n of City of N.Y., 397 U.S. 664, 674, 90 S.Ct. 1409, 25 L.Ed.2d 697 (1970)). Catholic Health alleges excessive entanglement has occurred here because the City of Pueblo will be forced to examine Villa Pueblo's operation in order to determine which aspects of the organization qualify for the tax exemption. The trial judge's order would have created this type of entanglement because it held religious exemptions will apply to regularly [related] religious functions, and other than that, for all secular functions like refrigerators and stoves, Villa Pueblo must pay sales and use tax to the City of Pueblo when applicable. Trial Ct. Order, 2-3. While this holding was replaced by the contrary, yet similarly incorrect, holding of the court of appeals, we find the trial judge's reasoning to be representative of an order that would violate the Establishment Clause. See Amos, 483 U.S. at 336, 107 S.Ct. 2862. The interpretation of the code we adopt today also complies with the Free Exercise Clause. The City of Pueblo's imposition of a sales and use tax upon a religious organization does not, in and of itself, violate the Free Exercise Clause by placing an untenable burden on the practice of religion. Catholic Health has not argued the payment of sales tax, in and of itself, violates its sincerely held religious beliefs. Rather, it argues the imposition of a sales and use tax incidentally burdens Catholic Health's ability to practice an unrelated tenet of its religious belief. However, such arguments have been roundly rejected by the United States Supreme Court as failing to constitute a violation of the Free Exercise Clause. See Hernandez, 490 U.S. at 700, 109 S.Ct. 2136 (rejecting the argument that an incrementally larger tax burden interferes with religious activities and further stating such an argument knows no limitations). However, even if the payment of sales and use tax violates some aspect of a religious organization's sincerely held religious belief, this would still not violate the Free Exercise Clause. A state or local government is not required by the Free Exercise Clause to exempt religious organizations from sales and use taxes. Texas Monthly, 489 U.S. at 19, 109 S.Ct. 890 (Brennan, J., plurality opinion) (recognizing a state is under no obligation to make individualized exemptions from sales taxes, even if a religious group is capable of successfully demonstrating payment of that sales tax would violate their religious tenets); see also Hernandez, 490 U.S. at 699-700, 109 S.Ct. 2136 ([E]ven a substantial burden [on religion] would be justified by the `broad public interest in maintaining a sound tax system,' free of `myriad exceptions flowing from a wide variety of religious beliefs.' (quoting Lee, 455 U.S. at 260, 102 S.Ct. 1051)).