WASHINGTON – Today, U.S. Senator John Hickenlooper joined the entire Colorado delegation in a letter to Internal Revenue System (IRS) Commissioner Danny Werfel once again urging the agency to not tax Colorado Taxpayer’s Bill of Rights (TABOR) refunds. The delegation’s successful letter last year ensured TABOR refunds would remain tax-free for the 2023 filing season. A bill enacted in 2023 by Colorado’s General Assembly made payments flat-rate refunds for one additional year. That method of refund is under consideration by the IRS for taxability. State lawmakers adjusted the refund mechanisms to comport with IRS guidance on taxability in the most recent 2024 legislative session, so that the only year currently in question is the last year when flat refunds were issued.
The letter was co-signed by the entire Colorado delegation, including U.S. Senator Michael Bennet and Representatives Diana DeGette, Joe Neguse, Jason Crow, Yadira Caraveo, Doug Lamborn, Greg Lopez, Brittany Pettersen, and Lauren Boebert, and has the full support of Colorado Governor Jared Polis and Colorado’s Department of Revenue.
“We understand that the IRS is considering treating the flat $800 and $1,600 TABOR payments issued by the state for fiscal year 2022-2023 as federal taxable income. As you know, our offices strongly disagree with such an interpretation. Moreover, we are particularly concerned that if such guidance were to apply to the tax year in question, Colorado Department of Revenue officials may be unable to successfully and appropriately prepare for this change, and that taxpayers would thereby be left scrambling to determine whether they had unanticipated tax liabilities,” wrote the Colorado lawmakers.
“I appreciate Assistant Democratic Leader Neguse, Senator Bennet and the Colorado delegation for their support in ensuring that Coloradans’ TABOR refunds are not taxed and keeping more money in the pocket of hardworking Coloradans. I urge the federal government to maintain the decades of precedence that tax refunds are not taxed,” added Governor Jared Polis.
The TABOR Amendment was approved by voters in 1992, and since that time, the State of Colorado has refunded excess revenue generated by the state to the taxpayers.
Read the full letter HERE and below.
Dear Commissioner Werfel:
We write to once again urge the Internal Revenue Service (“IRS”) not to treat the State of Colorado’s Taxpayer’s Bill of Rights (“TABOR”) refunds as taxable income. While we appreciate you and your agency’s continued communication with our offices, we request that this be resolved in a timely manner to avoid further confusion for taxpayers in our state.
We understand that the IRS is considering treating the flat $800 and $1,600 TABOR payments issued by the state for fiscal year 2022-2023 as federal taxable income. As you know, our offices strongly disagree with such an interpretation. Moreover, we are particularly concerned that if such guidance were to apply to the tax year in question, Colorado Department of Revenue officials may be unable to successfully and appropriately prepare for this change, and that taxpayers would thereby be left scrambling to determine whether they had unanticipated tax liabilities.
As you are well aware, the IRS has never considered TABOR refund payments as taxable income since the state constitutional amendment was ratified by Colorado voters in 1992—over thirty years ago. A change this significant would take considerable time and resources from the state to ensure regulatory stability and to appropriately inform the public of how these changes may affect them. It would also have a significant impact on taxpayers – especially low-income taxpayers – who may have new unanticipated tax obligations as a result of this policy interpretation. Moreover, the Colorado General Assembly has adjusted the refund mechanisms to comport with IRS guidance on taxability so that this question is fully resolved going forward.
With that in mind, we ask that the IRS treat the current flat TABOR refund payments for tax year 2024 as not taxable. We appreciate your prompt attention to this matter.
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