Lawmakers to IRS: Do not tax Coloradans’ TABOR refunds

WASHINGTON, D.C. – U.S. Rep. Diana DeGette (D-CO) and other members of Colorado’s Congressional delegation sent a letter to the head of the IRS, Commissioner Daniel Werfel, urging the agency not to move forward with a proposal to tax Coloradans’ TABOR refunds.

The letter comes less than 24 hours after the agency released new guidance that would consider Coloradans’ TABOR refunds as taxable income starting in 2024. The guidance represents a stark reversal of the agency’s long-standing policy not to tax the TABOR refunds that Coloradans receive from the state as income.

“The IRS has never treated TABOR refunds as income subject to tax,” the lawmakers wrote. “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.”

In 1992, Colorado passed an amendment to limit the amount of tax revenue the state can retain each year and require that any excess revenue be returned to taxpayers in the form of a refund.

Since the amendment was passed, the IRS has never considered the tax refunds as taxable income, allowing Coloradans to retain the full amount they receive from the state.

When the IRS announced last year that it was considering changing the policy to begin taxing the payments, Colorado’s entire Congressional Delegation joined forces in opposition to the plan.

Shortly after the lawmakers sent a letter to IRS Commissioner Werfel in February, the agency announced it would not change its treatment of Coloradans’ TABOR payments as nontaxable for that year.

Now, DeGette and others are hoping they can dissuade the agency from moving forward with any proposal that would require Coloradans to pay taxes on the refunds they receive from the state going forward.

In the letter sent to Werfel Thursday, the lawmakers requested to meet with the commissioner at his earliest convenience to discuss the matter further.

A copy of the lawmakers’ letter to Werfel is available here.