CPR News -
Colorado's TABOR refunds won’t be considered taxable income by the IRS this tax season. Sen. Michael Bennet confirmed in a meeting with the IRS and Gov. Jared Polis that TABOR refunds will remain tax-free this filing season, according to a Bennet spokesperson.
The IRS put out guidance in late August that would have essentially considered TABOR refunds taxable income. While the state gets revenues from different sources, the state constitution sets a limit on how much the state can keep. Funding above that amount is given back to the public.
Colorado’s elected officials were critical of the move, noting that there had been a 30-year precedent not to tax TABOR refunds. Polis called it absurd saying, “the IRS would cost Coloradans money and confuse people.” A bipartisan group of congressional lawmakers, wrote to the IRS commissioner on Aug. 31, urging the IRS “not to abandon 30 years of precedent.” “The IRS has never treated TABOR refunds as income subject to tax,” the group wrote. Congressional lawmakers also submitted public comment, urging the IRS not to tax TABOR refunds and arguing it is a repayment of excess tax by the state.
In February 2023, state lawmakers were able to avert taxation of TABOR, when the IRS said then that it may consider TABOR as federal taxable income.