Court Opinions: Colorado Court of Appeals Opinions for Nov. 17

Editor’s Note: Law Week Colorado edits court opinion summaries for style and, when necessary, length.

Anschutz v. Colorado Department of Revenue et al.

The Colorado Court of Appeals unanimously reversed and remanded a judgment involving the state income tax code.

The Colorado Constitution allows the Colorado General Assembly to define what is taxable income for state income tax purposes, referring to federal taxable income via federal tax law. The General Assembly did this under the Colorado Income Tax Act of 1987.

The question before the appeals court was whether a legislative amendment to federal income tax laws, which lowers a taxpayer’s federal taxable income for prior tax years, allows a Colorado taxpayer to file a timely amendment to their state income tax return for those prior years to claim a refund.

Philip and Nancy Anschutz argued it did and filed an amended 2018 state income tax return to take advantage of the federal law change. The Colorado Department of Revenue argued it doesn’t and denied the refund.

In March 2020, Congress enacted the Coronavirus Aid, Relief and Economic Security Act. The coronavirus relief bill modified many items in the revenue code including suspending excess business loss deduction limits for the 2018-2020 tax years, which allows taxpayers with losses exceeding the threshold to claim the entirety of the loss. It meant that for taxpayers who had these losses, the coronavirus relief bill retroactively reduced their federal income tax for 2018 and 2019.

In June 2020, the CDR adopted emergency rule 39-22-103(5.3). That emergency rule was replaced with a permanent rule in September 2020. The appeals court said since the most pertinent language of the rules are identical, they referenced the emergency rule because that’s what was in effect when the CDR denied Anschutzes’ refund claim.

That rule states: “‘Internal revenue code’ does not, for any taxable year, incorporate federal statutory changes that are enacted after the last day of that taxable year. As a result, federal statutory changes enacted after the end of a taxable year do not impact a taxpayer’s Colorado tax liability for that taxable year. Changes to federal statutes are incorporated into the term ‘internal revenue code’ only to the extent they are in effect in the taxable year in which they were enacted and further taxable years.”

About this time, the Colorado General Assembly enacted legislation preventing taxpayers from using certain coronavirus relief bill provisions when calculating their Colorado taxable income for tax years beginning after the enactment of the bill and before Jan. 1, 2021. That amendment required taxpayers, when calculating Colorado taxable income, to include the amount that their federal taxable income was reduced by due to the coronavirus relief bill provisions. 

The appeals court wrote that when someone calculates their income for state tax, those taxpayers now add back to their taxable income, the amount by which their federal taxable income was reduced by any excess business loss. The appeals court added that provision only applies to table income for tax years ending after the enactment of the coronavirus relief bill, but before Jan. 1, 2021.

In April 2020, in wake of the passing of the coronavirus relief bill, but before the Colorado General Assembly amended the state income tax code, the Anschutzes filed an amended federal and Colorado income tax return for 2018, where they claimed the entirety of their excess business loss, as they sought income tax refunds.

The CDR rejected the Anschutzes’ state income tax refund claim, citing the emergency rule. The Anschutzes appealed the denial to the district court, asserting a claim for allowance of their 2018 tax refund and a claim for declaratory judgment, arguing when Congress passed the coronavirus relief bill, the tax provisions included were immediately incorporated into Colorado tax law pursuant to Colorado statute. The district court granted the CDR’s motion to dismiss. The district court argued 39-22-103(5.3) is ambiguous and the CDR’s interpretation was reasonable and was consistent with the General Assembly’s later amendments to the statute and entitled to deference.

The appeals courts reversed the judgment and remanded the case for further proceedings, stating the state income tax code incorporates retrospective changes to federal tax law in the calculation of taxable income.

In the Interest of S.Z.S.

The Court of Appeals unanimously affirmed a judgment in a case involving the termination of parental rights and the Americans with Disabilities Act.

T.Z.D.M. and T.G. appealed the judgment terminating their parent-child legal relationship between them and S.Z.S. In April 2020, the Boulder County Department of Housing and Human Services began an action in dependency and neglect and assumed temporary legal custody of S.Z.S. The department alleged S.Z.S. had been born at home without correct medical care and tested positive for marijuana after T.Z.D.M. took S.Z.S. to the hospital. When the department filed a petition, it didn’t have any information about S.Z.S.’s father.

About a month later the department asked to amend the petition adding T.G. as the child’s alleged father. The juvenile court granted the department’s request, serving T.G. by publication. T.G. didn’t appear and the juvenile court adjudicated S.Z.S. dependent and neglected as to T.G. by default judgment. The court also adopted a treatment plan for T.G.

T.Z.D.M. denied the allegations in the petition and asked for a jury trial. The jury found in favor of the department and the juvenile court adjudicated S.Z.S. dependent and neglected as to T.Z.D.M. The court also adopted a treatment plan for T.Z.D.M.

In spring 2021, a psychologist performed an evaluation on T.Z.D.M. which was forwarded to the department. That report included several recommendations for treatment and further consultation. The psychologist didn’t diagnose T.Z.D.M. as suffering from any mental impairment getting to the level of a disorder under the fifth edition of the Diagnostic and Statistical Manual of Mental Disorders, also known as the DSM-V.

In September 2021, the department moved to terminate T.Z.D.M.’s and T.G.’s parental rights. Shortly after that, T.G. contacted a caseworker and requested genetic testing, which confirmed T.G.’s paternity. The court adopted an amended treatment plan for T.G. in January 2022. Eventually, the juvenile court terminated T.Z.D.M.’s and T.G.’s parental rights.

On appeal, T.Z.D.M. contended the juvenile court erred by finding the department made a reasonable effort to rehabilitate her and reunify her with the child when she had a disability the department didn’t reasonably accommodate and she couldn’t become fit in a reasonable amount of time.

The appeals court disagreed with both arguments. The appeals court found T.Z.D.M. didn’t preserve her ADA claim and declined to review it. As for the reasonable amount of time argument, the appeals court said there is a record of support T.Z.D.M. complied with parts of her treatment plan, but it can’t reweigh the evidence or substitute their judgment for the juvenile court.

T.G. contended on appeal the juvenile court erred when it terminated his parental rights because he didn’t have a reasonable amount of time to comply with the treatment plan and the department didn’t make reasonable efforts. The appeals court agreed with the department, which contended because the juvenile court terminated T.G.’s parent rights under 19-3-604(1)(a), the court didn’t need to consider whether T.G. had a reasonable amount of time to comply with the treatment plan or if the department made reasonable efforts. 

The judgment was affirmed.

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