Colorado Property Tax Administrator v. CO 2
2023 CO 8
Colo.2023Background
- CO2 Committee (CO[2]) members are nonoperating fractional working-interest owners holding ~11.224% of the McElmo Dome unit; Kinder Morgan is the unit operator and files the Annual Statement, collects and remits unit taxes, and bills fractional owners for their shares.
- Montezuma County audited Kinder Morgan’s 2008 Annual Statement, concluded Kinder Morgan impermissibly deducted certain costs, raised unit value by ~$57 million, and imposed a retroactive tax assessment exceeding $2 million; Kinder Morgan paid and unsuccessfully challenged the assessment in a prior Colorado Supreme Court decision.
- After Kinder Morgan’s loss, CO[2] sued under 42 U.S.C. § 1983, alleging the county violated its members’ due process rights by failing to provide individual notice and an opportunity to separately challenge the retroactive assessment and tax.
- The trial court dismissed CO[2] for lack of standing; a division of the court of appeals reversed, holding nonoperating fractional interest owners had standing to challenge the assessment.
- The Colorado Supreme Court granted certiorari and reversed the court of appeals, holding nonoperating fractional interest owners lack standing because Colorado’s statutory scheme and the Administrator’s ARL create a representative system in which the unit operator is the sole taxpayer/point of contact for notice, audit, protest, abatement, and appeal.
- The General Assembly later enacted S.B. 22-026 clarifying that fractional interests are not separately valued and that the operator is the sole point of contact for all notice and review procedures, which the Court treated as confirming legislative intent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether nonoperating fractional interest owners in a unit have standing to independently challenge a county’s retroactive assessment and tax | COare taxpayers with a protected property interest entitled to individual notice and opportunity to protest/abate; they suffered an injury when assessed/charged for taxes | Administrator/County: article 7 and ARL create a representative system; the unit operator is the statutory taxpayer and sole point of contact for valuation, audit, protest, abatement, and appeal; fractional owners lack a legally protected interest | Court: fractional interest owners lack standing; unit operator is the sole representative/taxpayer under the statutory and administrative scheme; S.B.22-026 confirms this structure |
Key Cases Cited
- Kinder Morgan CO2 Co. v. Montezuma Cnty. Bd. of Comm’rs, 396 P.3d 657 (Colo. 2017) (explains valuation and taxation principles for unitized oil and gas leaseholds)
- Ainscough v. Owens, 90 P.3d 851 (Colo. 2004) (articulates Colorado standing framework requiring injury in fact and injury to a legally protected interest)
- El Paso Cnty. Bd. of Equalization v. Craddock, 850 P.2d 702 (Colo. 1993) (supports deference to agency interpretations in technical valuation contexts)
- Huddleston v. Grand Cnty. Bd. of Equalization, 913 P.2d 15 (Colo. 1996) (holds Assessor’s Reference Library manuals are binding on county assessors)
- McCoy v. People, 442 P.3d 379 (Colo. 2019) (sets out principles of statutory interpretation applied to the tax scheme)