Bennet, Neguse Lead Letter Urging IRS to Exempt TABOR Refunds from Taxes

Denver - Today, Colorado U.S. Senator Michael Bennet and Colorado U.S. Representative Joe Neguse led the entirety of Colorado's federal delegation in a letter to Internal Revenue System (IRS) Commissioner Danny Werfel urging the agency to refrain from taxing Colorado Taxpayer's Bill of Rights (TABOR) refunds. In 2023, the Colorado General Assembly enacted a bill making TABOR payments flat-rate refunds for one additional year. The IRS is currently considering this refund method for potential taxability. State lawmakers adjusted the refund mechanisms in the most recent 2024 legislative session to comport with IRS guidance on taxability.

The letter was joined by Senator John Hickenlooper and Representatives Boebert, Caraveo, Crow, DeGette, Lamborn, Lopez, and Pettersen.

"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," wrote the Colorado lawmakers."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."

"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," added Governor Jared Polis. "I urge the federal government to maintain the decades of precedence that tax refunds are not taxed."

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 HEREand 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.