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Colorado Property Tax Administrator v. CO2 Committee, Inc.
The Colorado Supreme Court en banc unanimously reversed a judgment involving fractional owners and property taxes.
CO2 Committee, Inc. is a nonprofit corporation whose membership consists of non-operating owners of fractional interests in the McElmo Dome unit, a consolidation of working interests in a major deposit of pure carbon dioxide in Montezuma and Dolores counties. Kinder Morgan CO2 Company, L.P. operates the unit.
According to court records, after an audit for the 2008 tax year, Montezuma County determined Kinder Morgan underreported the value of gas produced at the unit’s leaseholds by improperly deducting certain costs the unit operator wasn’t entitled to deduct. The county increased its valuation of the entire unit by about $57 million.
The Montezuma County assessor imposed a retroactive tax assessment on the unit totaling more than $2 million based on the increase in value. Kinder Morgan challenged the county’s authority to impose the retroactive tax, but it failed, as the Colorado Supreme Court concluded the statutory scheme authorized the retroactive tax.
After the high court decided that case, the CO2 Committee challenged the same retroactive property tax increases and argued Montezuma County violated its members’ due process rights by failing to provide individual notice of and an opportunity to separately challenge the retroactive assessment and increase in property tax. The trial court dismissed the CO2 Committee’s case for a lack of standing. The CO2 Committee appealed and that court reversed, concluding CO2 Committee members were taxpayers with standing to pursue the claims asserted in the complaint.
The Colorado Supreme Court reversed the Court of Appeals’ judgment. The high court held non-operating fractional interest owners lack standing to independently challenge a retroactive assessment and the property tax increase assessed against a unitized oil and gas operation.
The Colorado Supreme Court reached the conclusion after following the statutory scheme and administrative guidance related to the taxation of oil and gas leaseholds. The high court held the Colorado General Assembly’s article 7 of title 39, which governs the valuation of oil and gas leaseholds and lands, created a unique representative system in which a unit operator is the sole entity with the standing to protest a retroactive assessment of tax on the unit it operates.
The Colorado Supreme court reversed the Court of Appeals judgment and affirmed the trial court’s order granting Montezuma County’s motion to dismiss.