History of TABOR
The Taxpayer's Bill of Rights (TABOR) Amendment was approved by voters in 1992. This amendment to the Constitution of the State of Colorado limits the amount of revenue the state can retain. The TABOR limit is equal to the lesser of the prior fiscal year's revenue limit plus the rate of inflation and population growth in Colorado or the current fiscal year's revenue. Also, the TABOR Amendment requires voter approval for certain tax increases. For more information about TABOR, visit the Legislative Council TABOR web page.
Ways the TABOR Surplus Can Be Refunded
- Local Government Property Tax Exemption Reimbursement
Senate Bill 17-267 mandates that the State of Colorado reimburse local governments for the net amount of property tax revenues lost as a result of local governments' property tax exemptions for seniors and disabled veterans. When there is surplus tax revenue above the TABOR cap, the state is able to use the surplus funds up to the lesser of either the total revenue surplus or the cost of full reimbursement to fund local property tax exemptions to seniors and disabled veterans. Reimbursement of the local property tax exemptions for seniors and disabled veterans is prioritized ahead of other TABOR refund mechanisms. For more information on how TABOR refunds are distributed, see the Legislative Council Staff History of TABOR Refund Mechanisms Memorandum.
- Temporary Income Tax Rate Reduction
If the TABOR surplus exceeds the cost of reimbursing local government property tax exemptions and there is enough surplus to fund a temporary income tax rate reduction, then the State of Colorado can temporarily reduce its income tax rate to 4.50%. The temporary income tax rate reduction applies to every individual, estate, trust, and corporation, as specified in Sections 39-22-104(1.7) and 39-22-301(1)(d)(I)(I) of the Colorado Revised Statutes.
For more information on how TABOR refunds are distributed, see the Legislative Council Staff History of TABOR Refund Mechanisms Memorandum.
- Six-Tier Sales Tax Refund
The third refund mechanism can be triggered in two circumstances. The first circumstance would be when there is excess revenue after reimbursing local governments for property tax refunds, but not enough to fund a temporary income tax rate reduction. The other circumstance would be when there is excess funds after funding both the local government reimbursement of property tax exemptions and the temporary income tax rate reduction.
Despite being called a sales tax refund, it appears on individual income tax forms as a means of returning sales tax revenue paid by individuals. The sales tax refund is distributed according to where a taxpayer\'s adjusted gross income falls among six adjusted gross income tiers. When the amount to be refunded is large enough to support at least $15 per taxpayer, the Colorado Department of Revenue is required to distribute the amount among the six tiers. If the amount to be refunded is less than $15 per taxpayer, an equal refund is provided to each taxpayer regardless of income. Taxpayers who file joint returns receive twice the refund amount as taxpayers who file single returns. For more information on how TABOR refunds are distributed, see the Legislative Council Staff History of TABOR Refund Mechanisms Memorandum.
How the 2019 TABOR Surplus Was Refunded
The FY 2018-2019 TABOR refund was distributed in two parts. The first part of the refund went toward reimbursing local governments for their senior and disabled veteran property tax exemptions. For more information on the local property tax exemptions for seniors and disabled veterans, see Senate Bill 17-267.
The second part of the TABOR refund was a temporary income tax rate reduction, which lowered the state income tax rate to 4.50%. The regular Colorado income tax rate was 4.63% in 2019. There were no special steps required to get this income tax rate reduction. Taxpayers automatically received this reduction when they filed their 2019 income tax returns. For more information, see the "Ways the TABOR Surplus Can Be Refunded" section above.
2019 TABOR Refund Amount
The 2019 TABOR refund was different from 2015, when there was a sales tax refund. Instead, the TABOR income tax rate reduction resulted in either a larger refund, if the taxpayer over withheld in 2019, or a smaller bill, if the taxpayer did not withhold enough/make enough estimated tax payments that year. The refund amount was different for each taxpayer, based on their unique income tax situation.
Frequently Asked Questions
- I am a senior and/or a disabled veteran. How do I apply for a property tax exemption?
Property tax exemptions are administered by your local government. Contact your local County Assessor\'s Office for more information about senior and disabled veteran property tax exemptions. The Colorado Department of Local Affairs maintains a list with contact information for each County Assessor's Office in Colorado.
- Why was there no sales tax refund for the 2019 tax year?
The excess revenue did not meet the threshold to trigger this TABOR refund mechanism. For more information, refer to the September 2019 Economic & Revenue Forecast, published by the Colorado Legislative Council Staff.
- What happens if there is an over/under-refund?
When a TABOR refund obligation is over- or under-refunded, the over/under amount is carried forward and applied to future years when there is a TABOR refund obligation. Notably, the actual amount refunded to taxpayers will differ from the estimates, due to variations in the actual number and income tax liabilities of taxpayers.
- How did the TABOR refund impact local governments?
Visit the TABOR Information for Local Governments web page for more information.