F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                                   PUBLISH
                                                                         APR 9 1998
                   UNITED STATES COURT OF APPEALS
                                                                   PATRICK FISHER
                                                                             Clerk
                          FOR THE TENTH CIRCUIT



 CLIFFORD V. STANLEY, JR.;
 NANETTE J. STANLEY; JAMES
 LACEFIELD; FLORENCE L.
 LACEFIELD; ROBERT L.
 JEVNAGER; MARJORIE C.
 JEVNAGER; JACK O. KING; and
 MARJORIE J. KING,
       Plaintiffs - Appellants,                         No. 96-1191
 v.
 UNITED STATES OF AMERICA,
       Defendant - Appellee.


        APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF COLORADO
                     (D.C. CIV. No. 93-S-2340)



Michael J. Abramovitz of Abramovitz & Merriam, Denver, Colorado, for
Plaintiffs-Appellants.

Annette M. Wietecha (Richard Farber, Attorney, Tax Division, and Henry L.
Solano, United States Attorney for the District of Colorado, Of Counsel, with her
on the brief), Tax Division, Department of Justice, Washington, D. C., for
Defendant-Appellee.

                          _________________________

Before BRORBY, McKAY, and HENRY, Circuit Judges.

                          _________________________
McKAY, Circuit Judge.

                            _________________________



      Plaintiffs, four former Denver firefighters and police officers and their

spouses, seek recovery of federal income taxes paid to the United States. They

contend that their income from pensions awarded under Colorado Revised

Statutes [C.R.S.] § 31-30-508 and § 31-30-608 1 should have been exempt from

federal income taxation pursuant to Internal Revenue Code § 104(a)(1). See 26

U.S.C. § 104(a)(1). After their refund claims were denied by the Internal

Revenue Service, all of the plaintiffs filed refund suits which were consolidated

by the district court. Almost a year after the district court denied Plaintiffs’

Motion for Summary Judgment, it granted Defendant’s Motion for Summary

Judgment and dismissed Plaintiffs’ complaint. Plaintiffs appeal the district

court’s order granting Defendant summary judgment.

      Orders granting summary judgment are reviewed de novo by the appellate

court. See Kaul v. Stephan, 

, 1212 (10th Cir. 1996). Summary



      1
          C.R.S. § 31-30-508 and § 31-30-608 were superseded by C.R.S. § 31-30-1007.
However, only the benefits received under the earlier statutes are in dispute. As the
district court explained in its Order which rejected Defendant’s argument that the new
statute should apply, Plaintiffs “have chosen, as allowed by statute, to be covered by the
local plans, [C.R.S.] § 31-30-508 or § 31-30-608." Attach. to Appellant’s Br. (Order filed
March 28, 1996, at 2).

                                           -2-
judgment is only appropriate if there is no genuine issue as to any material fact

and the moving party is entitled to judgment as a matter of law. See Wolf v.

Prudential Ins. Co., 

, 796 (10th Cir. 1995). In conducting our review,

“‘we examine the factual record and reasonable inferences therefrom in the light

most favorable to the party opposing summary judgment.’” 

(quoting 

).

      Title 26 U.S.C. § 104(a)(1) provides that “amounts received under

workmen’s compensation acts as compensation for personal injuries or sickness”

shall not be included in the determination of gross income. This statute is

clarified by its implementing regulation, 26 C.F.R. § 1.104-1(b), which states that

§ 104(a)(1) excludes from gross income amounts which are received under a

statute “in the nature of a workmen’s compensation act which provides

compensation to employees for personal injuries or sickness incurred in the

course of employment.” 26 C.F.R. § 1.104-1(b); see Kane v. United States, 

, 1449 (Fed. Cir. 1995). The regulation goes on to state that § 104(a)(1)

does not apply to a retirement pension determined by reference to the employee’s

age or length of service “even though the employee’s retirement is occasioned by

an occupational injury or sickness.” A taxpayer has the burden of proving

entitlement to the § 104(a) exclusion. See, e.g., Welch v. Helvering, 

, 115 (1933); Estate of Wycoff v. Commissioner, 

, 1149 (10th


                                         -3-
Cir. 1974) (“the taxpayer must prove the applicability of the deduction or

exception claimed”), cert. denied, 

(1975).

      A disciplined inquiry under § 104(a)(1) requires that we first analyze

C.R.S. § 31-30-508 and § 31-30-608 to determine whether they are workmen’s

compensation acts 2 or “statute[s] in the nature of a workmen’s compensation act.”

C.F.R. § 1.104-1(b); see 

(endorsing a “face of the

statute” test to determine if a disability retirement statute is in the nature of a

workmen’s compensation statute); Craft v. United States, 

, 931

(S.D. Ind. 1995) (refusing to investigate the operation of the pension plan without

proof that it had been incorporated into the statute by reference because “[t]he

focus should be on the purpose and function, as revealed on its face, of the

statute”). “[I]t is the statute, not the nature of the injury, that must be analyzed to

determine whether [the statute] is in the nature of a workmen’s compensation

act.” 

; see also Take v. Commissioner, 

, 558

(9th Cir. 1986) (“Courts are required . . . to examine the statute under which a

taxpayer receives benefits to determine whether the law qualifies for section 104

treatment. If the statute does not qualify, then whether the injury was in fact

work-related is irrelevant.”) (citing Gallagher v. Commissioner, 

, 316



      2
        Rather than use the gender-neutral term “worker’s compensation,” we use the
term “workmen’s compensation” because it is used in § 1.104-1(b).

                                          -4-
(1980)); Rutter v. Commissioner, 

, 468 (2d Cir.) (exemption denied

to a police officer who had sustained an injury in the line of duty because his

benefits were not received under a statute “in the nature of a workmen’s

compensation act”), cert. denied, 

(1985).

      “The most distinctive feature of workmen’s compensation plans is their

limited scope--such laws are meant to apply only to injuries or sickness incurred

by virtue of employment.” 

. In order to qualify as statutes

in the nature of workmen’s compensation acts, C.R.S. § 31-30-508 and § 31-30-

608 must limit the payment of benefits to work-related injuries. See 

(holding that “statutes that do not limit compensation to on-the-job

injuries are not in the nature of workmen’s compensation acts”); 

. Statutes providing benefits for any injury or illness that is sustained by an

employee, regardless of whether it was incurred in the course of employment, are

not statutes in the nature of workmen’s compensation acts under § 104. See 

; 

(“[A] statute that does not distinguish

between work-related injuries and other types of injuries is not ‘in the nature of a

workmen’s compensation statute.’”).

      Both the firefighters’ disability statute and the police officers’ statute

award benefits only for injuries or illnesses incurred in the course of




                                          -5-
employment. 3 The firefighters’ disability pension statute provides, in pertinent

part:

        Any officer, member, or employee of said fire department who
        becomes mentally or physically disabled while on active duty during
        regularly assigned hours of duty from any cause not self-inflicted nor
        due to the habitual use of intoxicants or drugs to an extent whereby
        he is unable to perform his duties shall be retired by the board.

C.R.S. § 31-30-508(1) (emphasis added). The relevant language from the police

officers’ disability statute provides:

        If any officer, member, or employee of the police department, while
        in the performance of his duty, becomes mentally or physically
        permanently disabled by reason of service in such department so as
        to render necessary his retirement from service in such department,
        the board shall retire such disabled member from service in such
        department. No such retirement on account of disability shall occur


        3
          For the first time on appeal, Defendant finds fault in the language of C.R.S. §
31-30-508, the firefighters’ disability pension statute. Defendant insists that the statute is
not in the nature of a workmen’s compensation statute because it benefits

        any firefighter that sustains an injury or sickness on the job, regardless of
        whether the injury or sickness is sustained by reason of such service. Under
        [the] statute, for example, a firefighter who falls off a stool at a lunch
        counter during his regular duty hours and becomes permanently disabled as
        a result of such fall would still qualify for the payment of benefits under the
        firefighters disability statute.

Appellee’s Br. at 23. Not only does Defendant fail to cite any authority for such a strict
construction of “work-related injury,” Defendant failed to raise this argument in the
district court. We, therefore, do not address Defendant’s contentions. See Tele-
Communications, Inc. v. Commissioner, 

, 1233 (10th Cir. 1997) (“[T]o
preserve the integrity of the appellate structure, we should not be considered ‘a second-
shot’ forum . . . where secondary, back-up theories may be mounted for the first time.”);
Walker v. Mather, 

, 896 (10th Cir. 1992).

                                              -6-
       unless said member has contracted said disability while in the service
       of said police department.

C.R.S. § 31-30-608(1) (emphasis added). Because the disability pensions under

C.R.S. § 31-30-508 and § 31-30-608 are only paid for work-related disabilities

and those benefits are paid without regard for an employee’s age or length of

service, those statutes have the hallmark characteristic of statutes in the nature of

workmen’s compensation acts. 4

       Defendant contends that although the two statutes restrict benefits to work-

related injuries, thus capturing the essential purpose of workmen’s compensation

statutes, they are not in the nature of workmen’s compensation acts because they

do not require quick delivery of benefits. Defendant bases this argument on the

substantial amount of time that exists between some Plaintiffs’ initial injuries and

their applications for disability pensions. It is true that some authorities have

stated that an ancillary purpose of workmen’s compensation statutes is to provide

“swift compensation” for work-related injuries. See 

;

C.R.S. § 8-40-102(1) (“It is the intent of the general assembly that the ‘Workers’

Compensation Act of Colorado’ be interpreted so as to assure the quick and

efficient delivery of disability and medical benefits to injured workers at a


       4
          The district court made an identical determination in its initial order denying
Plaintiffs’ Motion for Summary Judgment. Attach. to Appellants’ Br. (Order filed April
11, 1995, at 4) (these statutes are “indisputably in the nature of a worker’s compensation
act”).

                                            -7-
reasonable cost to employers, without the necessity of any litigation.”). 5

However, we hold that the lengthy interval between the officers’ and firefighters’

initial injuries and their filing for benefits is not fatal to the determination that

C.R.S. § 31-30-508 and § 31-30-608 are statutes in the nature of workmen’s

compensation acts. The Colorado statutes, like typical workmen’s compensation

acts, hold the police and fire departments strictly liable for work-related injury

and sickness. See 

; 

. Rather than

influencing our classification of the statutes, the time interval between Plaintiffs’

initial injuries and their disability claims is more appropriately a factor for us to

consider in determining whether Plaintiffs’ pensions were actually received

“under workmen’s compensation acts as compensation for personal injuries or

sickness.” 26 U.S.C. § 104(a)(1) (emphasis added). We consider the time interval

in our discussion below where we determine whether the payments were actually

received under the statutes as compensation for injuries as opposed to pensions

based on length of service.

      Because we have determined that § 31-30-508 and § 31-30-608 are in the

nature of workmen’s compensation acts, we must next consider whether the

district court was correct in concluding that no reasonable jury could find that


      5
          This language in C.R.S. § 8-40-102 relating to the purpose of Colorado’s general
workmen’s compensation act was adopted in 1990 after all Plaintiffs had filed their
disability claims.

                                           -8-
Plaintiffs’ pensions were paid for personal injuries or sickness. Although there is

no dispute that Plaintiffs each received an injury as a result of the performance of

their duties, see Appellee’s Br. at 28, at the time Plaintiffs were granted disability

retirement, each was eligible for retirement based on length of service which

would have provided them with the same benefits as disability retirement.

Plaintiffs’ initial injuries, the basis of their disability retirement claims, occurred

from six to twenty-four years before Plaintiffs applied for disability retirement.

In the interim Plaintiffs continued working, and two were promoted to higher

ranks. A sizable percentage of all retiring police officers and firefighters

received disability retirement pensions under § 31-30-508 and § 31-30-608 when

those statutes were in effect. See Appellee’s Br. at 10. In fact, few police

officers and firefighters who applied for disability retirement under those statutes

were denied. See 

court suggested that the high number of

disability retirees was due, in large part, to a standard of determining disability

which was, in the court’s opinion, “fatally flawed.” Attach. to Appellants’ Br.

(Order filed March 28, 1996, at 4). The court relied on its conclusion that the

pension board’s use of police and fire department entrance tests was a flawed

criteria for disability in its order granting Defendant summary judgment. Then

the court concluded its order by stating: “The sheer number of police and fire

retirees who retire with disabilities as well as the very substantial amounts of time


                                           -9-
that often exist between the injuries and the disabilities refute the assertion that

these payments are compensation for the injuries as opposed to pensions based on

length of service.” 

5).

      It could be inferred from the evidence recited above that Plaintiffs did not

actually receive their pension benefits for work-related disabilities and that the

benefits were awarded for length of service. However, the standard for granting

summary judgment requires a liberal construction of the record in Plaintiffs’

favor. See Sierra Club v. Lujan, 

, 314 (10th Cir. 1992); Setliff v.

Memorial Hosp. of Sheridan County, 

, 1391-92 (10th Cir. 1988).

As the district court itself conceded, “there is no basis for the Court to conclude

that the pension board made their disability determination based on any reference

to length of service.” Attach. to Appellants’ Br. (Order filed April 11, 1995, at

5).

      In addressing Defendant’s summary judgment motion, the court should

have made the reasonable inference that jobs with the police and fire departments

are dangerous and prone to cause disabling injury rather than inferring that the

large number of retirees with disabilities implied that the disabilities were not

legitimate. Undoubtedly, at least some police officers and firefighters were

retired based on legitimate disabilities. The court should have made individual

inquiries into the actual basis for the benefits received by these particular


                                          -10-
plaintiffs. Although disability retirement may have been granted under a

“flawed” standard for determining disability, the possible flaw of using

department entrance tests to determine employees’ disabilities does not require us

to hold that every employee retired under that test was not in actuality disabled.

Such a holding would foster the absurdity of pronouncing retired employees

nondisabled despite the contrary evidence of medical experts and common

observation. Although the district court held that there was “no evidence that

[Plaintiffs’] injuries caused physical deterioration over time which eventually

resulted in them being unable to work,” Attach. to Appellants’ Br. (Order filed

March 28, 1996, at 4), our review of the record reveals that Plaintiffs presented

some evidence that their initial injuries caused progressive deterioration that

ultimately resulted in an inability to perform their jobs. See Appellants’

Supplemental App. at 5, 6, 11, 13, 21, 27, 47, 49. Whether Plaintiffs were

granted retirement benefits based on a work-related disability is a disputed

question of fact that should have precluded the district court from granting

Defendant summary judgment.

      Our de novo review of the district court’s summary judgment decision

reveals that Defendant did not meet the burden required for summary judgment in

its favor. Because we cannot hold that no reasonable jury could find that

Plaintiffs’ pension payments were received as compensation for their injuries, we


                                         -11-
reverse the district court’s order granting summary judgment to Defendant. We

therefore VACATE the district court’s judgment and REMAND for a full factual

inquiry.

      Appellants’ Motion to File a Supplemental Appendix is GRANTED, and

the judgment is VACATED and REMANDED.




                                      -12-