‘TABOR tax refunds aren’t taxable’
First time in 30 years, feds looking at taxing TABOR refund checks sent to Colorado taxpayers
Colorado’s congressional delegation is asking the Internal Revenue Service to keep its hands off of the TABOR tax refunds Coloradans received last year.
Congressman Ken Buck, who represents the state’s 4th Congressional
District, released a copy of the letter sent by all 10 members of Colorado’s delegation to acting IRS commissioner Douglas O’Donnell Friday morning explaining that, in the 30 years since the so-called Taxpayer Bill of Rights has been in force, the federal government has never taxed those refunds.
TABOR requires the state to return to the taxpayers any tax revenues collected beyond that allowed by a complex formula written into the state constitution. In years past the Legislature has used as many as 21 different mechanisms to return the money, such as income tax credits, deductions for child care, business property tax refunds and so on. Refunds have been as small as $41 per taxpayer to as high as the Fiscal Year 2021-2022 refund of $750 per person or $1,500 per household.
Most of the mechanisms for refunds have been designed to avoid simply mailing checks out to millions of Coloradans, although that’s exactly what happened this past year.
The IRS has not explained yet why it suddenly targeted TABOR refunds, but did urge Coloradans to hold off on filing their income tax returns until it could sort things out. According to a Denver Post article posted on Friday, the IRS advises taxpayers to wait for more guidance about the taxability of those payments or to consult with a tax professional. It does not recommend amending a previously filed return.
Colorado’s congressional delegation isn’t waiting until next week, and fired off a letter Friday morning asserting Colorado’s position that the refunds aren’t taxable.
“(W) respectfully request that the IRS continue to treat TABOR revenue payments as nontaxable, as you have in previous
tax years, and that your agency promptly announce the same,” the letter said.
The delegation also criticized the IRS for the timing of the announcement, so late in the months leading up to the April 15 deadline for filing federal tax returns.
“A late announcement during tax season will cause Coloradans unnecessary stress as they prepare to file,” the letter said. “Moreover, as you know, regulatory stability and transparency promote compliance, whereas sudden changes with thin justification do not. Potential new rules promulgated within months of the filing deadline, with the possibility of costing taxpayers a significant amount of money, would impose unnecessary financial distress on countless Coloradans.”