Court Opinion

ID: 9788271
Source: CourtListenerOpinion
Date Created: 2023-08-31 00:34:50.091059+00
Date Added: 2024-06-11T07:36:45.957799
License: Public Domain

Justice EID
dissents,
and Justice HOBBS and Justice RICE join in the dissent.
The City of Pueblo's tax code allows "religious or charitable" organizations to obtain an exemption from sales and use taxes. Pueblo Mun.Code § 14-4-21(5) (2008) (emphasis added). The majority's first mistake is to require religious organizations, such as Villa Pueblo, to meet the tax code's definition of "charitable organizations," thereby rendering the code's reference to "religious" organizations superfluous. But more importantly, the majority holds that Villa Pueblo was properly denied an exemption in this case because, even though it provides some residents with services free of charge, it provides others with services "on a transactional or quid pro quo basis." Maj. op. at 825. Yet by the City's own admission, it does not require nonreligious charitable organizations to offer their services entirely for free to obtain an exemption; instead, it grants such exemptions as long as the organization in question operates at a loss, which Villa Pueblo does. The City has thus applied its tax code in such a way that discriminates against religious organizations in violation of the Free Exercise Clause of the United States Constitution. U.S. Const. amend. 1.1 By upholding the City's denial of an exemption in this case, the majority closes its eyes to this discriminatory treatment. I therefore respectfully dissent.
I.
Section 14-4-76 of the Pueblo tax code exempts "charitable organizations" from sales and use taxes incurred "in the conduct of their regular religious or charitable functions and activities." Pueblo Mun.Code § 14-4-76 (2008). Section 14-4-21(5) defines "charitable organizations" as follows:
Charitable organization means any entity which:
a. Has been certified as a not-for-profit organization under Section 501(c)(8) of the Internal Revenue Code; and
Is a religious or charitable organization.
As used in this definition, a charitable organization is an organization which exclusively, and in a manner consistent with existing laws and for the benefit of an indefinite number of persons, freely and voluntarily ministers to the physical, mental or spiritual needs of persons, and which thereby lessens the burdens of government.
(emphasis in original). The interpretive question in this case is whether the definition of "charitable organization" appearing after subsection (b) (the "third paragraph") applies to the use of the term "charitable organization" in the first line of section 14-4-21(5), as the City argues, or whether it only applies to that term's use in subsection (b), as Catholic Health argues.
The majority adopts the City's interpretation, holding that the definition of "charita*827ble organization" that appears in the third paragraph governs the first line of section 14-4-21(5). Maj. op. at 821. Thus, under the majority's interpretation, all organizations, either "charitable or religious" under subsection (b), must first satisfy the definition's requirements that they offer their services "exclusively, and in a manner consistent with existing laws and for the benefit of an indefinite number of persons, freely and voluntarily minister[ ] to the physical, mental or spiritual needs of persons, [and] thereby lessen[] the burdens of government." Id. The majority bases this interpretation on the fact that the term charitable organization is italicized in both the first line of section 14-4-21(5) and in the first line of the definition. Id. The majority also attaches significance to the use of the word "or" in subsection (b), and to the fact that section 14-4-76 exempts "charitable organizations" from sales and use tax, rather than "charitable or religious organizations." Id. at 821. Finally, the majority suggests that Catholic Health's interpretation "idly eliminate[s]" the third paragraph. Id. at 821.
I disagree with the majority's interpretation of the code's language, and would not read the third paragraph as defining the seope of a "religious organization" under the code. In my view, the more straightforward interpretation-and, indeed, the interpretation adopted by both courts below-confines application of the third paragraph to the term "charitable organization" within subsection (b).
In response to the majority's first ground, I note that italicization is a fairly slim reed on which to base an interpretation, especially since each of section 21's forty-five defined terms are italicized, yet only "charitable organization" is restricted by the third paragraph's "als used in this definition" language. The majority's second ground is similarly unpersuasive. I agree with the majority that the use of the. term "or" indicates that there are two different types of organizations that can qualify as a "charitable organization" under section 14-4-76 of the code, maj. op. at 821, and that a "religious organization" is one of them. Id. But the majority's observations simply restate the question in this case-namely, whether a religious organization must meet the requirements of the third paragraph to qualify as a "charitable organization"-without answering it.
But most importantly, it is the majority's interpretation, not Catholic Health's, that "idly eliminates" statutory language. Under Catholie Health's interpretation, the third paragraph is not eliminated; it simply applies only to the use of the term "charitable organization" in subsection (b). In contrast, by requiring religious organizations to satisfy the third paragraph, the majority renders superfluous the term "religious organization" as used in subsection (b). In other words, there would be no reason to refer to "religious or charitable organizations" in subsection (b) if all organizations had to meet the requirements of "charitable organization" set forth in the third paragraph. Subsection (b) would merely refer to "charitable organization" and omit any reference to "religious organization." Yet subsection (b)-by separating the terms "charitable" and "religious" organizations with the connector "or"-plainly contemplates that the term "religious organization" be given a meaning separate and apart from a charitable organization. While the term "religious organization" is undefined in the tax code, it must have a meaning that is independent of the term "charitable organization," or it is rendered superfluous.
In this case, the parties stipulated that Villa Pueblo is a "religious organization" as that term is used in the tax code. Thus, Villa Pueblo is a "charitable organization" under section 14-4-21(5) because it is both a "religious organization" under subsection (b) and has 501(c)(8) status under subsection (a). It is therefore exempt from sales and use taxes incurred "in the conduct of [its] regular religious ... functions and activities" under seetion 14-4-76.
IL.
But setting aside my differences with the majority over the language of the code, a more troubling aspect of the majority's opinion is the fact that it rejects Catholic Health's interpretation of that language on the ground that it raises constitutional prob*828lems. Maj. op. at 822. More specifically, the majority concludes that, if religious organizations are not subjected to the third paragraph, Pueblo's tax exemption scheme would violate the Establishment Clause. Id. at 822. In my view, the majority is avoiding a constitutional infirmity that does not exist. In addition, I believe the majority's interpretation creates a constitutional infirmity of its own-a violation of the Free Exercise Clause.
A.
The majority concludes that Catholic Health's interpretation would run afoul of Texas Monthly, Inc. v. Bullock, 489 U.S. 1, 109 S.Ct. 890, 103 L.Ed.2d 1 (1989) (Brennan, J., plurality opinion), in which the Supreme Court struck down a sales tax exemption that applied only to religious periodicals. Maj. op. at 818, 822.2 In that case, the statute in question gave an exemption to religious periodicals-and religious periodicals only. Texas Monthly, 489 U.S. at 5, 109 S.Ct. 890 (Brennan, J., plurality opinion). That there was no opportunity for nonreligious periodicals to obtain a similar exemption was fatal to the statute. Id. at 17, 109 S.Ct. 890 (statute flawed because it failed to offer "similar benefits for nonreligious publications or groups"); see also id. at 28, 109 S.Ct. 890 (finding that "by confining the tax exemption exclusively to the sale of religious publications, Texas engaged in preferential support for the communication of religious messages") (Blackmun, J., concurring in judgment). But here, the Pueblo code provisions (and Catholic Health's interpretation of them) do not suffer from this fatal flaw. On the contrary, under Catholic Health's interpretation, an organization is eligible for an exemption if it is a "charitable organization," defined as 501(c)(8) organizations that are either charitable or religious.
Further, the majority seems to believe that the third paragraph must be applied to religious organizations because the third paragraph (and only the third paragraph) defines the "broad, secular purpose" for the exemption. Maj. op. at 822. What the majority overlooks, however, is the fact that religious organizations or activities may be treated as a distinct category for exemption purposes as long as "similar" benefits are available to nonreligious organizations. See Texas Monthly, 489 U.S. at 17, 109 S.Ct. 890 (Brennan, J., plurality opinion) (noting statute's failure to offer "similar benefits for nonreligious publications or groups"); see also Walz v. Tax Comm'n of City of N.Y., 397 U.S. 664, 666-67, 90 S.Ct. 1409, 25 L.Ed.2d 697 (1970) (upholding provision against an Establishment Clause challenge that exempted "real or personal property used exclusively for religious, educational or charitable purposes as defined by law and owned by any corporation or association organized or conducted exelu-sively for one or more of such purposes and not operating for profit") (internal quotation marks and citation omitted).
At bottom, the majority believes that, by not subjecting religious organizations to the third paragraph, such organizations might receive preferential treatment. Maj. op. at 822, More specifically, the majority concludes that, under Catholic Health's interpretation, "secular organizations, engaged in exceedingly similar activities, [would be put] at a marked competitive disadvantage." Id. This is simply not the case. Under section 14-4-76, the exemption applies only to sales and use taxes incurred "in the conduct of [a charitable organization's] regular religious or charitable functions and activities." (empha*829sis added). Thus, under Catholic Health's interpretation, activities that are not "religious" or "charitable" in nature fall outside the exemption. In other words, the majority's concern that a religious organization will be permitted to engage in "transactional" activities, maj. op. at 828, while nonreligious organizations will not be, is unfounded.
B.
But what is most problematic about the majority's constitutional analysis is the fact that, in attempting to avoid an Establishment Clause problem, it creates a Free Exercise one. The City of Pueblo's interpretation of the exemption, endorsed by the majority, presents a classic whipsaw: it argues that all organizations, both charitable and religious, must be subjected to the same standards, including the third paragraph, but then interprets the third paragraph in such a way that a religious organization could rarely meet its demands. In this way, the majority permits the City to discriminate against religious organizations in violation of the Free Exercise Clause.
The third paragraph provides that "a charitable organization is an organization which exclusively, and in a manner consistent with existing laws and for the benefit of an indefinite number of persons, freely and voluntarily ministers to the physical, mental or spiritual needs of persons, and which thereby lessens the burdens of government." The City of Pueblo argues that Villa Pueblo cannot meet this definition because it does not offer its services for free. To quote the City's brief, "[the concept of charging admission to church or otherwise receive spiritual ministry would be odd to any attendee or recipient if not abhorrent to the religious organization. This is in part what makes such activity unique and appropriate for inclusion within the exemption." Opening-Answer Brief of Respondent/Cross Petitioners City of Pueblo, Colo., et al. at 42; see also 1d. at 44 (stating that Villa Pueblo was properly denied an exemption because it does not offer its services for "free").
Yet at oral argument, counsel for the City candidly admitted that nonreligious charitable organizations may charge for their services and still obtain an exemption. The majority acknowledges the City's concession, but discounts it because it was made under the pressure of oral argument by appellate, rather than trial, counsel. Maj. op. at 825 n. 9. In contrast, I would not dismiss the City's concession. In my view, the position that the City took at oral argument is entirely consistent with its briefing before this court. More importantly, the majority's entire decision denying an exemption to Villa Pueblo is based on a presumption that charitable and religious groups are being treated equally by the City-a presumption the City's own attorney admitted is wrong.
To put it somewhat differently, the majority's constitutional analysis begins and ends with the fact that the tax code is facially neutral. See, eg., maj. op. at 819 n. 6 ("The City of Pueblo's charitable sales and use tax exemption is neutral on its face."). But the majority's analysis simply ignores the fact that the ordinance has been applied in a discriminatory manner-as the City's own counsel conceded. As the United States Supreme Court has squarely held:
Facial neutrality is not determinative. The Free Exercise Clause, like the Establishment Clause, extends beyond facial discrimination.... Official action that targets religious conduct for distinctive treatment cannot be shielded by mere compliance with the requirement of facial neutrality. The Free Exercise Clause protects against government hostility which is masked, as well as overt.
Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520, 534, 113 S.Ct. 2217, 124 L.Ed.2d 472 (1993). Under Supreme Court precedent, facial neutrality does not shield a discriminatory application from challenge under the Free Exercise Clause. By not considering the City's discriminatory application of its tax code, the majority simply closes its eyes to the fact that the "neutral" interpretation it adopts is not in fact neutral.
The sole justification offered by the City for its discriminatory treatment of religious organizations simply demonstrates the impermissible nature of the discrimination in *830this case. As noted above, the City argues that, under section 14-4-21(5)'s third paragraph, religious organizations cannot obtain an exemption unless they offer their services for free. This interpretation only applies to religious organizations, the City continues, because religious organizations, by definition, can never "lessen the burdens of government." According to the City, the only thing religious organizations can do is minister to the "spiritual needs of persons" under the third paragraph, and such ministering is not a burden of government that can be lessened. Nonreligious "charitable organizations," on the other hand, are permitted to charge fees for their activities because, as the City continues, their activities address the "physical and mental needs of persons," which can lessen the burden of government.
For example, counsel for the City stated at oral argument that:
The definition of "free" in the context of religious activities-the city does not believe there is any reasonable basis to construe "free" other than that it is strictly construed; "free" means free. Now, in the context of charitable activities, the court has allowed [nonreligious charitable organizations to charge] fees for service provided that what you take in is not more than what your costs are. And the reason for this-and this is significant-is that these [charitable] activities lessen the burden of government.
(emphasis added). Under the City's own test, if Villa Pueblo were a nonreligious organization, it would be awarded an exemption because it operates at a loss. Maj. op. at 823. Only its religious nature keeps Villa Pueblo from obtaining an exemption.
In sum, the City argues that religious organizations-because of their religious focus-must meet the definition of charitable organizations (Le., must offer their services for free), but charitable organizations-because of their nonreligious focus-do not (and may charge for their services). This is not a justification, it is simply a restatement of the discriminatory practice. The City's explanation for the discriminatory treatment is thus no justification at all, and falls far short of what the United States Constitution requires. See, e.g., Lukumi, 508 U.S. at 531-32, 113 S.Ct. 2217 (A law that is not neutral and of general applicability "must be justified by a compelling governmental interest and must be narrowly tailored to advance that interest.").3
The majority does not, in any way, expressly condemn the discriminatory position taken by the City. Instead, it simply states that religious and nonreligious organizations should be "treated the same," and remands the case "in order to provide the parties with an opportunity to raise issues and present additional evidence as may be appropriate given [the] new, clarified understanding" of the third paragraph it announces today. Id. at 825-39. In my view, this remand is a hollow one. The majority's opinion upholds the denial of the exemption to Villa Pueblo. More specifically, it finds that Villa Pueblo does not qualify as a "charitable organization" under the third paragraph because, while it provides some residents with services free of charge, it provides others with services "on a transactional or quid pro quo basis." Id. at 825.4 Thus, even if Catholic *831Health were to present "additional evidence" or "raise issues" on remand that the City has engaged in discriminatory treatment, such evidence would have no effect on the majority's interpretation of the tax code or on its application of that interpretation to Villa Pueblo's request for an exemption. Under today's ruling, Villa Pueblo is not entitled to an exemption-discriminatory treatment notwithstanding.
The majority repeatedly asserts that the record in this case contains no evidence that the City applied its code in a discriminatory fashion, and states that Catholic Health has not alleged that it has been subjected to discriminatory treatment. Maj. op. at 819 n. 6, 825 n. 9. Yet, as noted above, the City's own counsel conceded such discriminatory treatment at oral argument. More importantly, Catholic Health has not alleged discriminatory treatment in this case because until the majority's opinion today it had no reason to. Indeed, the district court, the court of appeals, Catholic Health, and the City (until its petition for certiorari to this court) treated Villa Pueblo as a charitable organization entitled to an exemption from sales and use taxes incurred "in the conduct of their regular religious or charitable fune-tions and activities" under section 14-4-76. It is the majority's opinion today-and only the majority's opinion-that permits the City to subject Villa Pueblo to an interpretation of the tax code that it has not applied to nonreligious charitable organizations.
Ultimately, this case does not involve a neutral and generally applicable law that incidentally burdens religion. See, e.g., Employment Div., Dep't of Human Res. of Ore. v. Smith, 494 U.S. 872, 110 S.Ct. 1595, 108 L.Ed.2d 876 (1990); see also Jimmy Swaggart Ministries v. Bd. of Equalization of Cal., 493 U.S. 378, 398, 110 S.Ct. 688, 107 L.Ed.2d 796 (1990) (describing California's sales and use tax as "generally applicable" that "applies neutrally" to all retail sales of tangible personal property) (cited at maj. op. at 819). Instead, this case involves the application of a facially neutral law in a manner that discriminates against religion. See, e.g., Lukumi, 508 U.S. at 532-32, 113 S.Ct. 2217; see also Good News Club v. Milford Cent. Sch., 533 U.S. 98, 102, 121 S.Ct. 2093, 150 L.Ed.2d 151 (2001) (holding that public elementary school that operated a limited public forum for community groups to meet after school could not exclude religious group from meeting at school). The majority should not be permitted to sweep the Free Exercise problem presented by Pueblo's discriminatory application of its tax code under the rug of facial neutrality.
HL
The majority upholds the City's denial of a tax exemption to Villa Pueblo on the ground that it does not offer its services for free. Yet the City does not require nonreligious charitable organizations to offer their services for free to obtain an exemption. Because the majority upholds the denial of Villa Pueblo's exemption despite the City's discriminatory treatment, I respectfully dissent from its opinion.
I am authorized to state that Justice HOBBS and Justice RICE join in this dissent.

. The majority interprets only the federal First Amendment in its opinion. Maj. op. at 818.

. The majority relies on Justice Brennan's plurality opinion in Texas Monthly, Inc. v. Bullock, 489 U.S. 1, 109 S.Ct. 890, 103 L.Ed.2d 1 (1989). Maj. op. at 818, 819, 822, 823. Importantly, however, Justice Blackmun's concurrence provides the rationale for the Court in Texas Monthly, as it presents the narrowest grounds on which the decision is based. See Marks v. United States, 430 U.S. 188, 193, 97 S.Ct. 990, 51 L.Ed.2d 260 (1977) ("When a fragmented Court decides a case and no single rationale explaining the result enjoys the assent of five Justices, the holding of the Court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds .. ..") (internal quotation omitted). Accordingly, we must strive to construe "a tax-exemption statute [as being] consistent with both [Free Exercise and Establishment Clause] values." Texas Monthly, 489 U.S. at 27, 109 S.Ct. 890 (Blackmun, J., concurring). Catholic Health's interpretation of the tax code is consistent with both values; in my view, the majority's is not.

. In addition, the City's justification is flatly inconsistent with the language of the third paragraph. As noted above, the third paragraph of section 14-4-21(5) provides that a "charitable organization" is an "organization which exclusively, and in a manner consistent with existing laws and for the benefit of an indefinite number of persons, freely and voluntarily ministers to the physical, mental or spiritual needs of persons, and which thereby lessens the burdens of government." (emphasis added). The third paragraph applies the requirement that services be "free[ ]" to all "minister[ing]"-whether to the "physical, mental or spiritual needs of persons." Certainly there is nothing in the language to suggest that "spiritual" needs must be freely ministered to, but "physical" or "mental" needs can be ministered to at a price.

. The majority also notes that, to satisfy the dictates of the third paragraph, services do not have to be offered entirely for free, but rather be "general{ly] charitabl[e]." Maj. op. at 825. Yet the test that the majority does in fact apply amounts to an "entirely free" test. For example, the majority notes that, although "Villa Pueblo does 'freely and voluntarily' [i.e., entirely free] minister to some residents," it charges others. Maj. op. at 825. According to the majority, "(als long as Villa Pueblo provides housing or nursing services to residents on a transactional or quid pro quo basis, despite its charity to some residents, it will fail to satisfy" the third paragraph. Id.