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Colorado High Court: Catholic Eldercare Facility Not Entitled To Tax Exemption

By Howard M. Friedman

In Catholic Health Initiatives Colorado v. City of Pueblo Department of Finance, (CO Sup. Ct., March 30, 2009), in a 4-3 decision, the Colorado Supreme Court held that the sales and use tax exemption in the City of Pueblo's tax code does not apply to Villa Pueblo, an elderly care community operated by the non-profit group Catholic Health. The court concluded that Villa Pueblo is not a "charitable organization" as that term is defined in the city's tax code. It rejected Catholic Health's contention that all religious organizations with 501(c)(3) status should be exempt, saying that this would put secular organizations engaged in similar activities at a competitive disadvantage. The court held that city's exemption is consistent with the Establishment Clause because it furthers a broad secular purpose. Finally it concluded that imposition of a sales or use tax on a religious organization does not violate the Free Exercise clause.

In an opinion by Justice Eid, three judges dissented. They argued that the majority interprets the exemption to apply to religious organizations only if they provide all services free of charge, while nonreligious charities are entitled to the exemption even if they charge some fees, so long as they operate at a loss. "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."

Full post as published by Religion Clause on April 16, 2009 (boomark / email).