DENVER — The Internal Revenue Service (IRS) on Wednesday published new guidance that would tax Taxpayer's Bill of Rights (TABOR) refunds.
The guidance focuses on how the department handles state tax refunds and payments under social benefit programs. Under the new rules, TABOR refunds would be seen as taxable income beginning in the 2023 tax year.
The TABOR Amendment, which was approved by voters in 1992, requires tax revenue in excess of the revenue cap be refunded to taxpayers. Those refunds have never been taxed by the IRS.
Governor Jared Polis called the IRS' decision absurd.
“I've already talked to the White House about this. Obviously, we're going to also be talking to the higher ups at the IRS,” Polis told Denver7. “I will always defend Coloradans. And the federal government coming after $300 or $400 from Coloradans just because we have a strong budget and a surplus, that makes no sense.”
Polis believes the IRS is confusing TABOR refunds with benefits given out by some states during the COVID-19 pandemic.
“Arguably, those might be subject to taxation. That's not our fight,” Polis said.
The IRS is seeking the public's input on the proposed rules. You can submit your thoughts electronically through this link or by mail through the address below:
Internal Revenue Service, CC:PA:LPD:PR (Notice 2023-56), Room 5203
P.O. Box 7604, Ben Franklin Station
Washington, D.C., 20044.
The agency will accept public comment through October 16.
