Colorado Urges IRS to Continue $750-$1,500 TABOR Refund Tax Exemption for 3 Million Residents
Colorado lawmakers are pushing back against potential IRS changes that could tax the state’s TABOR refunds, which have remained non-taxable for decades. The effort aims to prevent confusion and financial strain for taxpayers.
Colorado Lawmakers Appeal to IRS to Preserve TABOR Refunds’ Tax-Free Status for Third Year
According to Colorado Newsline, for the third consecutive year, Colorado lawmakers are urging the IRS to refrain from taxing the state’s TABOR (Taxpayer Bill of Rights) refunds. In a bipartisan letter to IRS Commissioner Danny Werfel, members of Congress argued that keeping these refunds tax-free is crucial to avoid additional stress for residents, particularly low-income families. Lawmakers warn that taxing these refunds, historically exempt from federal taxes, would create unnecessary confusion.
The concern arose in 2022 when the IRS considered taxing certain state refunds issued during the COVID-19 pandemic. Colorado distributed flat-rate refunds of $750 for individuals and $1,500 for joint filers, deviating from its usual income-based refund system. Initially, the IRS considered taxing these payments but ultimately chose not to tax the 2022 and 2023 refunds. However, recent IRS guidance has raised concerns that future refunds may be taxed unless state laws change to protect their tax-free status.
Governor Jared Polis Praises Efforts to Keep TABOR Refunds Untaxed
Governor Jared Polis expressed gratitude to lawmakers for advocating to maintain the tax-free status of TABOR refunds. Polis emphasized that TABOR, which mandates returning surplus state revenue to taxpayers, should not be subject to new taxation. He called on the IRS to uphold the long-standing precedent of exempting these refunds from federal taxes, arguing that such a shift would undermine the intent of TABOR and unnecessarily burden Colorado taxpayers.
