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Archived: Limited and Ethical Government Legal Cases

Since its creation in 1977, MSLF has been one of the Nation's leading legal centers fighting to ensure that the federal government remains a limited government and a government of laws and not men and women. MSLF recognizes that the Constitution was written, not to protect the various units or levels of government, but to preserve the liberty of the American people. MSLF is committed to ensuring that they continue to have that freedom and opportunity.

TABOR Foundation v. Colorado Department of Health Care Policy And Financing

Why We Fight:

The Colorado General Assembly may not pass a statute that overturns the requirement in Colorado’s Constitution (Taxpayer’s Bill of Rights or TABOR) that voters must approve all new taxes.

Summary:

Colorado’s General Assembly passed a statute that imposed a new tax on hospitals, the proceeds to be divvied up between some rural hospitals and the state’s Medicaid expansion.  Later, to insulate the law from TABOR, the General Assembly labeled the tax program an “enterprise,” or state-run business, which makes it exempt from TABOR. 

Legal Question:

Whether the State of Colorado can circumvent the Taxpayer’s Bill of Rights (TABOR) by levying a tax on hospitals without voter approval?

Plaintiff:

TABOR Foundation, a Colorado nonprofit, public-interest foundation dedicated to protecting and enforcing TABOR, which requires a vote of the people before Colorado may create new debt, levy new taxes, increase tax rates, or institute tax policy changes directly causing a net tax revenue gain

Defendants:

Colorado Department of Health Care Policy and Financing; Susan E. Birch, Executive Director of the Colorado Department of Health Care Policy and Financing; Colorado Department of the Treasury; Walker Stapleton, Colorado State Treasurer

Court:

Colorado District Court for Denver County

A decision by the Colorado District Court for Denver County on Colorado's motion to dismiss.
Federal regulations provide that States may impose a “tax” (the only reference to “fees” in the regulations relate to those for licensing), 42 C.F.R. § 433.68, language that the General Assembly expressly incorporated in the bills.  C.R.S. § 25.5-4-402.3(3) (citing 42 C.F.R. § 433.68). The regulations prove the U.S. Department of Health and Human Services intended that the States impose taxes, not fees, on hospital services.  Plus, to stay eligible for federal Medicaid funds, State health care-related taxes must be broad based, uniform, generally redistributive, and cannot violate the “hold harmless” provision of the regulations, that is, a State cannot guarantee it will reimburse a hospital—either directly or indirectly—for taxes paid to the State.  42 C.F.R. § 433.68(f).

Although, under federal regulations, Colorado is legally barred from providing any service to a hospital in exchange for the taxes collected at that hospital, the provision of services in exchange for a fee is what causes a fee to differ from a tax.  Instead, Colorado, by federal regulation, charges all of the hospitals in the state uniformly, and then redistributes those funds in a way that guarantees some hospitals will not receive any funds in return.

Contrary to holdings of the Colorado Supreme Court and the Supreme Court of the United States that a fee is for services given, a Jefferson County hospital paid $2.1 million in taxes for no services.  Ten Colorado hospitals also paid more in taxes than they received in services from the state.

The TABOR Foundation, which defends the rights of taxpayers, alleges in Denver County Court that its members should have been allowed to vote on whether a “hospital provider fee” could be imposed on Colorado hospitals.  Since enactment in 2009, tens of millions of dollars and as much as a hundred million dollars have been collected by the Colorado Department of Health Care Policy and Financing.  Although federal law allows States to impose a healthcare assessment to pay for Medicaid services, regulations provide for “taxes” and not “fees” as Colorado calls them to avoid TABOR.  Also, although the 2009 act provided that the funds collected would be kept separate from the general fund, in fiscal years 2010, 2011, 2012, and 2013 some tax proceeds were put in the general fund.  The Foundation seeks declaratory and injunctive relief and the refund of revenues collected, along with the payment of interest, as required by TABOR.  On June 26, 2015, MSLF filed a complaint on behalf of the TABOR Foundation challenging the constitutionality of the imposition of a hospital provider's tax without a vote of the people of Colorado.  On September 2, 2015, the Department of Health Care Policy filed a motion to dismiss for standing and failure to state a claim for relief.  On October 9, 2015, MSLF filed a response to the motion to dismiss.  On October 16, 2015, the Department of Health Care Policy filed a reply brief.

In the closing hours of the 2017 Colorado legislative session, the General Assembly passed SB17-267, which created the Colorado Healthcare Affordability and Sustainability Enterprise within the Department of Health Care Policy and Financing, effective July 1, 2017.  The “enterprise” will be responsible for the collecting and administering the hospital provider “fee,” which is now called the “Healthcare Affordability and Sustainability Fee.”  Because an “enterprise” is not subject to TABOR, passage of SB17-267 was a ploy to moot MSLF’s lawsuit on behalf of its client and circumvent the voter-approval requirements in TABOR.  On June 30, 2017, MSLF filed a motion to amend and supplement its 2015 complaint in light of this legislative change.  On July 27, 2017, the Colorado district court granted the TABOR Foundation’s motion to amend the complaint and ordered the Department of Health Care Policy to both file an amended answer and supplement its motion to dismiss.  On September 5, 2017, the Department of Health Care Policy filed its amended answer.  On September 7, 2017, the Department of Health Care Policy filed a supplement to its motion to dismiss.  On September 28, 2017, the TABOR Foundation filed its opposition to the Department of Health Care Policy’s supplement to its motion to dismiss.  Meanwhile, on September 25, 2017, the Colorado Hospital Association filed a motion to intervene in the lawsuit as a defendant.  On October 25, 2017, the TABOR Foundation filed an opposition to the motion to intervene, and the Colorado Hospital Association filed a reply seven days later.  On December 11, 2017, the district court granted the Colorado Hospital Association intervention.  On December 18, 2017, the TABOR Foundation began its discovery.  The next day, the TABOR Foundation moved to amend the complaint to add Rebecca Sopkin and Scott Rankin, individual taxpayers, and the Colorado Union of Taxpayers Foundation (CUT) as additional plaintiffs.  On December 29, 2017, Defendants filed an opposition to the motion to amend.  On January 3, 2018, the TABOR Foundation filed a reply.  On February 8, 2018, the district court granted the motion to amend.

 


No Status Updates
  • Coloradoans Win Right to Fight New Taxes

    Feb 8, 2018
    Two individual taxpayers and a fellow taxpayer group today applauded the ruling of a Colorado district court that they may join in a lawsuit seeking to enforce the Taxpayer’s Bill of Rights (TABOR). The TABOR Foundation, also represented by Mountain States Legal Foundation, initiated this lawsuit in 2015.
  • Coloradoans Defend Right To Fight New Taxes

    Jan 3, 2018
    Two individual taxpayers and a fellow taxpayer group today joined with the TABOR Foundation in responding to assertions by Colorado officials that they may not join in the TABOR Foundation’s lawsuit seeking to enforce the Taxpayer’s Bill of Rights (TABOR).
  • Taxpayers and Taxpayer Group Seek to Join Lawsuit

    Dec 19, 2017
    The TABOR Foundation today filed a motion requesting to add two individual taxpayers and a fellow taxpayer group as plaintiffs in its lawsuit seeking to enforce the Taxpayer’s Bill of Rights (TABOR) and defend the rights of taxpayers throughout Colorado.
  • Taxpayer Group Opposes Intervention In Healthcare Case

    Oct 16, 2017
    A Colorado group that defends the rights of taxpayers today filed its opposition to a motion by the Colorado Hospital Association to intervene in the group’s lawsuit alleging a state statute violates the Colorado Constitution’s Taxpayer’s Bill of Rights (TABOR).
  • Taxpayer Group Opposes Motion to Dismiss in Healthcare Case

    Sep 28, 2017
    A Colorado group that defends the rights of taxpayers today responded to a motion to dismiss filed by two Colorado entities and their officials that the group alleges violated the Colorado Constitution’s Taxpayer’s Bill of Rights (TABOR).
  • Colorado Court Grants Taxpayers’ Motion as to Healthcare Tax

    Jul 27, 2017
    A Colorado group that defends the rights of taxpayers today celebrated the ruling by a Denver District Court accepting its amended and supplemental complaint against Colorado agencies and their officials for violating the Colorado Constitution’s Taxpayer’s Bill of Rights (TABOR).
  • Healthcare “Enterprise” is Unconstitutional, says Taxpayer Group

    Jun 30, 2017
    A Colorado group that defends the rights of taxpayers today filed a motion to amend and supplement its complaint against two Colorado entities and their officials for violation of the Colorado Constitution’s Taxpayer’s Bill of Rights (TABOR).
  • Colorado Hospital Tax Is Unconstitutional Says Lawsuit

    Jun 29, 2015
    A Colorado group that defends the rights of taxpayers today served two Colorado entities and their officials for violation of the Colorado Constitution’s Taxpayer’s Bill of Rights (TABOR).


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