Polis Administration Applauds IRS Decision Not to Tax Expedited Tax Refunds

Friday, February 10, 2023

DENVER - The Internal Revenue Service (IRS) announced today that it would not require Coloradans to pay federal income tax on the expedited tax refunds they received last year to help provide immediate relief. The Polis administration was pleased with the IRS’s decision to uphold the 30-year precedent of not taxing these refunds and will continue to advocate that they not be taxed in future years. Earlier today, Governor Polis urged the IRS Commissioner to avoid taxing the money rightfully owed to Coloradans. 

The refunds, overwhelmingly approved by the legislature in a bipartisan manner and signed by Governor Polis, put $750 or $1,500 in the pockets of single and joint filers, was a TABOR refund of excess sales tax revenue that the state expedited to taxpayers to help hardworking Coloradans.

“We, like millions of Coloradans, are breathing a sigh of relief that the IRS and federal government have stepped away from taxing our refunds this year. This ultimately is the best outcome for families and individuals and we will continue seeking out more ways to save people money,” said Governor Polis. “I will continue fighting to maintain this precedent that refunds under TABOR should never be taxed.”

The state of Colorado has been doing some form of TABOR refund mechanism for 30 years in those years when the state’s revenues exceed the revenue cap and it refunds to taxpayers under TABOR, regardless of the form they take, has never been taxed.  

“We appreciate the outcome of this decision and will continue to advocate that TABOR refunds are not taxable for the hardworking people of Colorado,” said Colorado Department of Revenue Executive Director Mark Ferrandino. 

The decision is good news for any Coloradans who have already filed their tax returns as it requires no additional action on the part of the filer. The full statement from the IRS can be found here.

The taxability of the refunds was called into question on February 3, 2023, when the IRS released a statement telling Americans to delay filing until they determined whether the stimulus checks sent out by over 19 different states last year were subject to federal income tax,  including Colorado. Governor Polis and the state’s congressional delegation advocated strongly to ensure TABOR refunds would not be taxed, especially given how close we are to the tax filing deadline.