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Conferee -- Taxation Disputes
As provided by Sections 39-21-103 and 39-21-104 of the Colorado Revised Statutes (C.R.S.), and Section 29-2-106.1, C.R.S., a formal administrative hearing before the Director of Revenue must be allowed for taxpayers who timely dispute a notice of deficiency or rejection of refund claim. To help reduce the workload of formal hearings, the taxpayer may have the opportunity to hold a pre-hearing conference with a tax professional from the Tax Conferee Section.
The Tax Conferee Section receives and attempts to resolve tax protests or lawsuits involving tax adjustments made by the various taxing divisions within the Department of Revenue. These can include individual and corporate income tax, withholding, sales, use, cigarette and tobacco products, gasoline and special fuel, severance, special district and statutory city and county taxes. The pre-hearing conference provides a level of independence from the Tax Audit and Compliance Division and the Taxpayer Service Division interests. These pre-hearing conferences have led to a resolution rate of approximately 95 percent of the cases before going on to a formal administrative hearing.
The Tax Conferee Section also receives and facilitates resolution of tax protests involving tax adjustments made by the various home rule taxing jurisdictions. Section 29-2-106.1, C.R.S.
If the pre-hearing steps fail, the Tax Conferee Section can request, coordinate and augment legal representation by the Attorney General in formal hearings, district court trials, appellate actions, and even facilitate settlement possibilities at any of these litigation stages.
File an Appeal
Disputes regarding state and state collected taxes:
To protest a notice of deficiency or rejection of refund claim, or any part thereof, a taxpayer must make a timely written application to the Executive Director of the Colorado Department of Revenue. This written application is a request for a formal hearing to present the facts, laws and arguments of the dispute. The written application (protest) through Revenue Online or on paper must be filed within thirty (30) days from the mailing date of the notice of deficiency or the notice of rejection of refund claim. If the protest is not filed within the 30-day period of the mailing date of the notice of deficiency or rejection of refund claim (note: this is not the date of receipt by the taxpayer), the Executive Director is required by law to make a final determination per Section 39-21-103(8), C.R.S. If the 30-day period ends on a Saturday, Sunday, or legal holiday, the protest will be due on the following business day. The 30-day period is a statutory requirement and cannot be modified or extended.
The protest must contain at least the following information:
Taxpayer name and address
A reference number (may be account number or any other reference number noted on the notice or denial)
The taxable period(s) involved
The amount(s) and kind(s) of tax in dispute
An itemized schedule of the findings with which the taxpayer does not agree
A statement summarizing the reasons the taxpayer believes tax is not due or the refund denial is incorrect
A taxpayer may opt to submit their case to the Executive Director by written brief instead of in person at a formal administrative hearing as provided in Section 39-21-103(7), C.R.S. For each notice of deficiency or notice of rejection of refund claim that is being protested, a new protest must be filed.
Each protest must be signed by the taxpayer and they must swear that the facts stated therein are true. Only the named individual taxpayer, general partner of a partnership, officer of a named corporation, or an individual authorized by such proper person's power of attorney may sign the protest.
Applications improperly signed are invalid and will not be accepted. Failure to file a valid protest may deny the taxpayer valid standing in an appeal to the courts, and allow the Department to begin collection procedures. Sections 39-21-103 and 39-21-104, C.R.S. The application for a hearing is made to the Executive Director; however, it should be mailed to the attention of the reviewer or the section whose name and address appear on the notice of deficiency or rejection of refund claim. All protests will first be reviewed by the originating section for factual matters. If the review of factual matters does not resolve the protest, the originating section will forward the protest to the Tax Conferee Section. The Tax Conferee Section may address any remaining factual matters and will then review disputed matters of law.
Disputes regarding home rule jurisdiction’s taxes:
The Department of Revenue also provides dispute resolution for home rule jurisdictions’ sales and use tax assessments or refund denials. Section 29-2-106.1, C.R.S. Taxpayers must first exhaust their administrative remedies with the local jurisdiction. Within 30 days of exhausting their local remedies taxpayers may request that the Department of Revenue hold an administrative hearing regarding a home rule jurisdiction’s assessment or denial of refund. Taxpayers must submit a request for hearing pursuant to Section 29-2-106.1, C.R.S. within 30 days of exhausting their local remedies. These requests for a hearing must be submitted on paper, with a duplicate copy of such request for hearing filed contemporaneously with the applicable home rule jurisdiction(s). The protest should contain the information listed above in “The protest must contain at least the following information:” section. Additionally the taxpayer should provide a copy of the home rule jurisdiction’s notice of assessment or refund denial and copy of the hearing officer’s decision, if a decision was issued by the local jurisdiction. Requests for hearing of home rule disputes should be mailed to the Colorado Department of Revenue at PO. Box 17087, Denver, CO 80217-0087.
Tax Conferee review:
For administrative efficiency and as authorized by Section 39-21-112(1), C.R.S. the taxpayer's written protest will be reviewed by the Tax Conferee Section prior to the scheduling of any formal hearing. Suggested changes listed in the protest may be accepted or rejected based on their validity or applicability. An informal conference may be scheduled to discuss the protest and to allow the submitting of additional evidence in support of the protest. The informal conference does not waive the taxpayer's right to an administrative hearing. In the event the protest is not resolved by the Tax Conferee the protest will be forwarded to the Executive Director for formal hearing.
This information is provided as a guide through the hearing process. It is not intended to restrict or expand the application of the Colorado Revised Statutes. The Colorado Revised Statutes and regulations thereunder control the hearing process at the Department of Revenue.
A taxpayer may request an administrative hearing by written protest to the Executive Director within thirty days of mailing of a notice of deficiency or rejection of a refund claim regarding income, estate, passenger-mile, gasoline, special fuel, cigarette, tobacco products, sales, use, severance, value of oil and gas tax, and motor vehicle registration tax and fees. Sections 39-21-103(2) and 104, C.R.S.
In lieu of a request for hearing, the taxpayer may file a written brief and request that the Executive Director of the Dept. of Revenue reconsider the deficiency without a hearing. Section 39-21-103(7), C.R.S.
. The request for hearing shall set forth the taxpayer's reasons for and the amount of the requested changes in the deficiency or refund rejection. Section 39-21-103(3), C.R.S.
C. Informal conferences.
Upon receipt of a request for hearing, the department’s Tax Conferee Section will assign the case to a Tax Conferee. The Tax Conferee may schedule an informal conference with the taxpayer or their representative. The purpose of this conference is to discuss the procedure to be followed in the administrative hearing, to clarify the relevant issues, facts and law, and, if possible to settle the matters in dispute. More than one informal conference may be held. The informal conference does not waive of the taxpayer's right to an administrative hearing. In the event the protest is not resolved by the Tax Conferee the protest will be forwarded to the Executive Director for formal hearing.
If the Tax Conferee is unable to resolve the protest the case will be forwarded to the Hearing’s Division of the Department and an administrative (formal) hearing will be scheduled.
The hearing will be before the Executive or Deputy Director of the Department of Revenue unless the Director designates someone else to act. If the Deputy Director or another person is designated by the Executive Director, that person performs all the duties described below for the Executive Director, including making the decision.
. The hearing is held at the Department of Revenue in Denver unless the taxpayer is entitled to have the hearing held outside of Denver and so requested in the protest. The taxpayer can request that the hearing be held outside of Denver only if either (1) the deficiency involved is $200 or less or (2) the deficiency involves a sales or use tax. Section 39-21-103(4), C.R.S.
. An individual may be represented in person or by an attorney. A partnership or corporate taxpayer must be represented by an attorney. The department will be represented by an Assistant Attorney General as required by Section 24-25-112, C.R.S . A power of attorney is required of attorneys not accompanied by the taxpayer.
. The Executive Director/ Deputy Director must notify the taxpayer in writing of the time, date, and place for hearing at least 30 days prior to the date of the hearing. Section 39-21-103(4), C.R.S.
E. Administrative pre-hearing data certificate
. Prior to the hearing, the taxpayer and the Attorney General's office (which represents the Department of Revenue at the hearing and in any subsequent court proceedings) will be asked to submit administrative pre-hearing data certificates.
The certificates are due by the date specified in the hearing officer’s order. Extensions may be granted at the discretion of the hearing officer.
. The certificates enable the Executive Director/Deputy Director to become familiar with the important facts and issues in the case prior to the hearing.
. The certificates may require any or all of the following under appropriate headings:
a. A listing of each legal issue to be determined by the Executive Director/Deputy Director.
b. For each legal issue, the amount of tax, penalty and interest in controversy and the tax periods involved, followed by total amounts for all issues.
c. A statement of facts, referencing attached exhibits as appropriate.
d. For each legal issue cite the relevant statutes and regulations with copies included as an attachment.
e. For each legal issue, the applicable case authority, with copies included as an attachment.
f. A listing of witnesses, with brief summaries of the testimony to be presented.
g. A position statement: The position statement must be double-spaced, and it must not exceed ten pages. For each issue to be determined, the position statement must state the issue, then argue the position by clearly articulating application of relevant facts and law, and referencing the exhibits and attachments, as appropriate. Regardless of the number of issues, the position statement is limited to ten pages in length.
h. Copies of all exhibits and attachments. (The respondent's certificate must include all notices, demands, protest letters, and explanations of adjustments in the exhibits).
F. Prior to the administrative hearing.
Review of certificates.
Prior to the hearing, each party should review the certificate filed by the opposing party to become familiar with the opposing party's case (i.e., facts and legal arguments). The opposing party's certificate should be reviewed to determine (1) any facts claimed as undisputed really are undisputed and (2) both parties have identified the same issues needing resolution at the hearing.
Review of witnesses and exhibits
Testimony should be reviewed with each of the witnesses so the witnesses will know what to expect at the hearing and the taxpayer's representative will know what to expect to hear as testimony at the hearing. The taxpayer's representative must review each of the exhibits that will be introduced at the hearing, including those of the opposing party, so he or she is familiar with the contents and the significance of each exhibit.
A position statement must be prepared on all legal issues in the case and included in the pre-hearing data certificate (See E. 3. g.).
a. Briefs are not required but may be requested by the hearing officer before issuing a final determination.
b. In lieu of a request for hearing, the taxpayer may elect to file a written brief. Section 39-21-103(7), C.R.S. (See A. Scope.).
Burden of proof. The burden of proof is on the taxpayer. Therefore, the taxpayer's representative must introduce sufficient evidence at the hearing to establish each essential element of the case.
G. What happens at the hearing?
At the hearing, the taxpayer may assert any facts, make any arguments, and file any briefs and affidavits he believes pertinent to the case. Section 39-21-103(6), C.R.S.
Taxpayer's opening statement.
The taxpayer presents his or her case first. The taxpayer's representative presents the opening argument which summarizes the important facts and legal issues and sets the stage for what is to follow.
Department's opening statement.
The attorney for the Department of Revenue usually waits to present his or her opening statement until the taxpayer's case has been presented. However, he may chose to make his opening statement immediately following the taxpayer’s opening statement.
The taxpayer's representative calls his or her witnesses. Each witness swears that his or her testimony will be truthful. After direct examination by the taxpayer's representative, the attorney for the Department of Revenue has the opportunity to cross-examine each witness.
The taxpayer's representative must introduce each exhibit into evidence. A witness may need to explain the contents of the various exhibits or authenticate them.
Throughout the proceeding, either party may make objections to the questions being asked, the testimony being given, the admissibility or relevancy of various evidence, etc. The taxpayer's representative should be familiar with the Colorado Rules of Evidence and be prepared to make and respond to objections based thereon.
Taxpayer's burden of proof.
When the taxpayer's representative believes that sufficient evidence has been introduced to establish each essential element of the case, the taxpayer's representative so indicates, and the attorney for the Department of Revenue has the opportunity to present the Department's opening statement (See G.8.) if not already made. The attorney for the Department may or may not present any evidence. If the attorney for the Department decides to present no evidence, the taxpayer will not be permitted to introduce further evidence. If instead, evidence is introduced by the attorney for the Department, the taxpayer will have an opportunity to introduce more evidence. The additional evidence will be limited to rebuttal (i.e., only testimony and exhibits which rebut the testimony and exhibits presented on behalf of the Department will be permitted). Therefore, the taxpayer must prove his or her case before the Department of Revenue.
. Motions, like objections, are permitted throughout the proceedings. After the taxpayer's evidence has been presented, the attorney for the Department of Revenue will frequently move for a decision in favor of the Department on the basis that the taxpayer failed to carry his or her burden of proof.
Department's opening statement
. If the attorney for the Department of Revenue decides to present evidence, an opening statement is usually made after all the taxpayer's evidence has been presented. In addition to summarizing the Department of Revenue's case, the attorney for the Department may then comment on any weaknesses in the taxpayer's case.
Department's witnesses and exhibits.
The attorney representing the Department of Revenue may call witnesses and introduce evidence as exhibits.
After the Department presents its case, the taxpayer's representative may recall witnesses, call additional witnesses, and/or introduce additional exhibits to rebut the Department's case.
Closing arguments, which permit each party to present legal arguments and relate the facts to those arguments, are then presented. The arguments should be well organized, well researched, and persuasive. The taxpayer's representative presents his or her arguments first, then the Department's attorney presents its arguments, and the taxpayer's representative has a chance for a brief rebuttal.
. The atmosphere at the hearing is not as formal as a courtroom, but the format clearly follows that of a courtroom hearing.
The proceedings are usually recorded. If recorded, the taxpayer may request a copy of the recording.
These hearings are not open to the public.
H. Decision -- the final determination.
Based upon the evidence and arguments, or the brief and written materials submitted in lieu of a hearing, (Section 39-21-103(7), C.R.S.), the Executive Director/Deputy Director makes a final determination within sixty days. The timeframe for a final determination may be extended in sixty day increments if necessary. Section 39-21-103(8), C.R.S. The Executive Director can modify the tax, penalties, and interest disputed at the hearing or approve a refund. See Section 39-21-103(8), C.R.S. If the taxpayer fails to request a hearing or submit a brief in lieu of a hearing within the requisite thirty-day period, the Executive Director must send the notice of final determination by first-class mail accompanied by notice and demand for payment shortly after the expiration of that period.
I. Statute of limitations
. Once the Department of Revenue issues a written proposed adjustment of the tax liability prior to the expiration of the statute of limitations (including any extensions), the period is extended until one year after a final determination or assessment is made. Section 39-21-107(1) and (2), C.R.S. (as amended in 1983 by S.B. 324). Therefore, the period for assessment and collection will not expire while the taxpayer is awaiting a final determination.
The taxpayer has thirty days after the mailing of the final determination by the Executive Director/Deputy Director (as a result of a hearing, a hearing by brief, no response by the taxpayer to either a notice of deficiency, or a rejection of a refund claim) to appeal that determination to district court. Section 39-21-105(1), C.R.S. If the taxpayer does not appeal, payment of the tax, penalties, and interest must be made within thirty days of the mailing of the notice of final determination and notice and demand for payment. In addition, if the taxpayer fails to appeal within the thirty-day period the final determination by the Executive Director/Deputy Director becomes final and is not subject to judicial review. Reg. 39-21-103(8).
The taxpayer files a notice of appeal, which includes a written description of the portions of the final determination being appealed and the grounds for the appeal, together with a copy of the notice of final determination. Section 39-21-105(3), C.R.S.. The notice of appeal must conform to pleadings under the Colorado Rules of Civil Procedure. Reg. (39)21-105(3).
The notice of appeal is filed with the clerk of the district court of the county where the taxpayer resides or has his or her principal place of business. If the taxpayer has neither a residence nor a principal place of business in Colorado, the notice of appeal is filed in Denver district court. Section 39-21-105(2)(a), C.R.S.
Bond or payment
. Within fifteen days after filing of the notice of appeal, the taxpayer must either (1) file with the district court a bond for twice the amount of the taxes, penalties, and interest in the final determination which are contested on appeal or (2) deposit the disputed amount with the Executive Director of the Department of Revenue in lieu of posting a bond. Section 39-21-105(4), C.R.S. If the amount is deposited, no further interest will accrue on the deficiency during the pendency of the appeal. Failure to post the bond or deposit the disputed amount on time will result in dismissal of the appeal. Reed v. Dolan, 195 Colo. 193, 577 P.2d 284 (1978).
Trial de novo.
The district court tries the case de novo meaning that both the taxpayer and the Department have the opportunity to present any witnesses, exhibits, briefs, and arguments they choose. Section 39-21-105(2)(b), C.R.S. The district court reviews and decides anew all questions of law and fact in the case. This de novo review differs from the judicial review of certain other administrative decisions for which the court merely reviews the administrative record and overturns the administrative decision only if it is found to be arbitrary or capricious or the findings of fact are found to be clearly erroneous or unsupported by substantial evidence. Section 24-4-106, C.R.S.
Burden of proof.
The taxpayer generally has the burden of proof with respect to the issues raised in the notice of appeal. There are at least two exceptions. First, the Department of Revenue has the burden of proving the taxpayer guilty of fraud with intent to evade tax, and second, the Department must establish that a petitioner is liable for a tax as a transferee of property of a taxpayer. Section 39-21-105(2)(b), C.R.S.
The district court may affirm, modify, or reverse the determination of the Executive Director. Section 39-21-105(2)(b), C.R.S. The district court's decision on the appeal shall be entered as a judgment, as in other civil cases, against the taxpayer or against the Executive Director, as the case may be. Section 39-21-105(6), C.R.S.
. If the taxpayer or the Department of Revenue is not satisfied with the decision by the district court, either or both may appeal further. The district court's decision is reviewable by the Colorado Court of Appeals or the Colorado Supreme Court as is otherwise provided by law. Section 39-21-105(7), C.R.S.
After all appeals are exhausted, if the taxpayer has lost, the taxpayer must pay any amount the court determines is owed in order to secure a release of the bond. If the taxpayer deposited funds with the Executive Director in lieu of posting a bond, funds will be retained by the Executive Director to the extent provided by the Court's decision. If the Department of Revenue has lost in whole or part, and the taxpayer deposited funds with the Executive Director in lieu of posting a bond, the funds received in excess of the court’s judgment will be returned to the taxpayer, together with interest. The taxpayer does not have to file a claim for refund in order to be repaid any excess amount deposited as determined by the court. Section 39-21-105(4), C.R.S.