The Colorado Court of Appeals has reversed its January ruling favoring Kinder Morgan in a Montezuma County tax case dating to 2008.
At the request of tax officials, three judges agreed to hold a rehearing of the case, and on June 4 they changed their earlier decision.
The court has upheld a county tax bill to Kinder Morgan that resulted in a $2 million windfall for local special districts.
“They reversed it completely, and affirmed the original ruling by the Board of Assessment Appeals,” said assessor Scott Davis. “It’s a huge relief. Now we wait to see if Kinder Morgan tries to take the case to the state Supreme Court.”
After a 2008 audit, the county assessor disallowed a deduction by Kinder Morgan for a transportation tariff through the Cortez Pipeline.
County auditors argued that because the company was a 51 percent owner in the pipeline they are “related” and therefore did not quality for the deduction. The result was a higher assessed production value for Kinder Morgan, and an increased tax bill totaling $2 million.
Kinder Morgan challenged the assessment and higher tax bill to the Board of Assessment Appeals, which ruled in favor of the county and the disallowed deduction.
The company then took the case to the Colorado Court of Appeals, which at first ruled to overturn the BAA decision, but has since decided to uphold it.
“We conclude the BAA’s decision was supported by competent evidence that Kinder Morgan and the Cortez Pipeline Company were related parties for the purpose of calculating the allowable transportation deduction,” the ruling states. “Accordingly we affirm the BAA’s ruling regarding the transportation deduction.”
Davis said that since 2008, Kinder Morgan has continued to claim the transportation tariff deduction.
If the decision stands, the assessor’s office plans to conduct audits for the years after 2008 to recalculate the company’s tax assessment without the tariff deduction.
Davis said Kinder Morgan’s CO2 production values have skyrocketed in recent years, going from $142 million in 2008 to $370 million in 2014.
Higher assessed values from future audits could result in millions of dollars in back taxes being owed by the company to the county.
“The audits are very time-consuming, but well worth it,” Davis said.
He said special districts and the county need to continue to hold in reserve the additional tax revenues from 2008 pending the final outcome of the case. The Re-1 school district received the largest share of the 2008 tax windfall at $942,000. As it stands now, they do not have to pay it back.