Denver — Colorado U.S. Senator Michael Bennet, the chair of the U.S. Senate Finance Committee’s Subcommittee on Taxation and IRS Oversight, alongside Colorado U.S. Representative Joe Neguse led a letter urging the Internal Revenue System (IRS) to not tax Colorado Taxpayer’s Bill of Rights (TABOR) refunds — as has been precedent for the past thirty years. The lawmakers’ letter follows a recent IRS policy proposal that would force Coloradans to pay taxes on future TABOR refunds. Colorado U.S. Senator John Hickenlooper and Colorado U.S. Representatives Diana DeGette, Jason Crow, Yadira Caraveo, Brittany Pettersen, Ken Buck, and Doug Lamborn co-signed this letter.
“We urge the IRS not to abandon 30 years of precedent, and we hope you can resolve the current ambiguity so that Colorado’s taxpayers do not face further confusion to say nothing of the nightmarish burden of an unprecedented tax. We would welcome the opportunity to meet with you at your earliest convenience to discuss this matter,” wrote Bennet, Hickenlooper, Neguse, DeGette, Crow, Caraveo, Pettersen, Buck and Lamborn.
Approved by voters in 1992, the TABOR Amendment mandated the State of Colorado to refund excess state revenue – collected through property, gas, and sales taxes as well as fees – back to Coloradans.
In February, after the IRS asked Coloradans to stop filing their taxes until they determined how to handle TABOR payments, Bennet called then-acting IRS Commissioner Douglas O’Donnell and urged him to continue the thirty-year precedent of treating TABOR payments as nontaxable. Following Bennet’s call, the IRS announced its decision to not tax 2022 TABOR payments. On Tax Day, Bennet urged Commissioner Danny Werfel not to tax future TABOR revenue payments.
The text of the letter is available HERE and below.
Dear Commissioner Werfel:
As you consider how to apply recent Internal Revenue Service (IRS) guidance (Notice 2023-56) to Colorado, we urge you not to tax Colorado Taxpayer’s Bill of Rights (TABOR) refunds. Colorado passed the TABOR amendment in 1992, limiting the amount of tax revenue retained by the State and refunding the excess revenue to our taxpayers. The IRS has never treated TABOR refunds as income subject to tax. The IRS’s historical practice makes good sense in lieu of its traditional recognition of states’ prerogatives to design and administer tax refunds. The IRS should not change course now.
We urge the IRS not to abandon 30 years of precedent, and we hope you can resolve the current ambiguity so that Colorado’s taxpayers do not face further confusion to say nothing of the nightmarish burden of an unprecedented tax. We would welcome the opportunity to meet with you at your earliest convenience to discuss this matter.
Sincerely,