U.S. representatives fire off letter after IRS says it might tax TABOR refunds
Some members of Colorado's Congressional Delegation are stepping in after CBS News Colorado learned the IRS is considering taxing last year's TABOR refunds.
Congressmen Ken Buck and Joe Neguse plan to send a letter to the IRS that they are hoping the entire delegation will sign.
When the Governor and legislature decided to move up TABOR refunds last year, amid $4 a gallon gas and 40-year high inflation, it was meant to help Coloradans make ends meet, but apparently, it should have looped in the IRS.
"We're getting wrapped into what other states have done," said Mark Ferrandino, executive director of the Department of Revenue.
He says the IRS sees Colorado's TABOR checks as no different than the stimulus checks 17 other states sent out last year - extra income that's taxable - even though the law changing when the money went out specified it wasn't a refund subject to taxation.
Michael Fields, with the conservative-leaning nonprofit Advance Colorado Institute, has written several ballot measures aimed at preserving TABOR.
"I think that the fact that we said they're sales tax refunds gives us a better case but the IRS could look at this and say, no matter what you say it's our standards that you have to go by," he said.
Complicating the situation further, the sales tax refunds have historically been dispersed as income tax write-offs.
"The IRS could come in and say, look historically we didn't go after this but we should have so that's where I think the problem is. I think the state should have had a conversation with the IRS before sending out $3 billion in refunds to make sure what they thought was the case was actually the case," he said.
He added, "these checks went out in August, right? And now they say 'delay your tax returns' here in February because they don't have an answer on this and maybe we'll have it next week. This should have dealt with a long time ago."
While we've had TABOR refunds for 30 years, Fields says he thinks what caught the IRS attention this year is that they were sent as checks - rather than tax write-offs and that they were big - $750 for individuals and $1,500 for joint filers - and not the $10 to $20 refunds people usually get.
If the money is taxed, it could be a significant hit for some Coloradans that could cost hundreds of dollars.
Colorado is expected to top the TABOR cap by $7 billion over the next three years, regardless of how the money is refunded, the state really needs a long-term resolution.
The IRS is expected to make a decision by next week at the latest.
