| Summary |
If the state exceeds its constitutional fiscal year spending limit, it
is required by the Taxpayer's Bill of Rights (TABOR) to refund the
excess state revenues (TABOR refunds). There are currently 2 active
mechanisms for TABOR refunds, which occur in the following order of
priority:
•
First, a reimbursement paid to counties for allocation to
local governments to offset the reduction in property taxes
resulting from property tax exemptions for qualifying
seniors, veterans with disabilities, and spouses of veterans
who died in the line of duty or as a result of a
service-related injury or disease (homestead exemptions);
and
•
Last, a sales tax refund for individual taxpayers, the amount
of which is either an identical flat refund amount or based
on 6 tiers of income.
Another refund mechanism exists in current law but is not active. That
mechanism is a temporary reduction in the state individual income tax
rate from 4.63% to 4.5%. Because the current state individual income tax
rate is 4.4%, however, this temporary rate reduction refund mechanism
is not able to be triggered by any excess state revenues.
The bill affects the existing TABOR refund mechanisms and
creates a fourth TABOR refund mechanism; except that the homestead
exemptions are not affected.
Under the current sales tax refund mechanism, all qualified
individuals receive an identical refund amount if the identical refund
amount is less than or equal to $15 dollars, but if the identical refund
amount would be above $15 dollars, the excess state revenues are instead
refunded through a 6-tier refund mechanism based on the qualified
individual's adjusted gross income. The bill increases the identical refund
amount above which the 6-tier mechanism is triggered and ties this
identical refund threshold to internal revenue service calculations of sales
tax paid in the state. The 6-tiered income classifications of the sales tax
refund are not changed. The bill clarifies that if, by September 1 of any
year, the executive director of the department of revenue has not received
advice from the internal revenue service that an identical refund is
regarded as a refund of sales tax and not as an accession to wealth, no
identical refund is allowed and all excess state revenues are refunded
through the 6-tier mechanism. The sales tax refund mechanism is
addressed in sections 3 through 8 of the bill.
The temporary income tax rate reduction is reactivated for income
tax years 2025 through 2035. To refund excess state revenues from fiscal
year 2023-24, the income tax rate for income tax year 2024 is temporarily
reduced from 4.40% to 4.25%. After that year, if the amount of excess
state revenues exceeds the projected total amount of TABOR refunds
issued as reimbursement to counties for the homestead exemptions, then
the state individual income tax rate is temporarily reduced by the
following percentages according to the total amount of excess state
revenues remaining after the reimbursement is paid (remaining excess
state revenues):
•
If the remaining excess state revenues are above $300
million but less than or equal to $500 million, the
individual income tax rate is temporarily reduced by
0.04%;
•
If the remaining excess state revenues are above $500
million but less than or equal to $600 million, the
individual income tax rate is temporarily reduced by
0.07%;
•
If the remaining excess state revenues are above $600
million but less than or equal to $700 million, the
individual income tax rate is temporarily reduced by
0.09%;
•
If the remaining excess state revenues are above $700
million but less than or equal to $800 million, the
individual income tax rate is temporarily reduced by
0.11%;
•
If the remaining excess state revenues are above $800
million but less than or equal to $1 billion, the individual
income tax rate is temporarily reduced by 0.12%;
•
If the remaining excess state revenues are above $1 billion
but less than or equal to $1.5 billion, the individual income
tax rate is temporarily reduced by 0.13%; and
•
If the remaining excess state revenues are above $1.5
billion, the individual income tax rate is temporarily
reduced by 0.15%.
The individual income tax rate reduction refund mechanism is set to
repeal on July 1, 2035. The income tax rate reduction refund mechanism
is addressed in sections 1 and 2.
The bill also establishes a fourth TABOR refund mechanism for
remaining excess state revenues for fiscal years starting on July 1, 2024,
but before July 1, 2034. Under this mechanism, if the amount of
remaining excess state revenues is equal to or greater than $1.5 billion
and exceeds the projected total amount of TABOR refunds issued as
reimbursement to counties for the homestead exemptions and through the
temporary income tax rate reduction, then the state sales and use tax rates
are temporarily reduced by 0.13%. The state sales and use tax rate
reduction refund mechanism is set to repeal on July 1, 2035. The sales
and use tax rate reduction refund mechanism is addressed in sections 9
through 15.
Whether the TABOR refund mechanisms are triggered and, if so,
how many of the mechanisms are triggered depends on the amount of
remaining excess state revenues as follows:
•
If remaining excess state revenues are less than or equal to
$300 million, TABOR refunds are distributed only through
the tiered or flat sales tax refund mechanism;
•
If remaining excess state revenues are greater than $300
million but less than or equal to $1.5 billion, TABOR
refunds are distributed first through the income tax rate
reduction and then through the tiered or flat sales tax
refund mechanism; and
•
If remaining excess state revenues are greater than $1.5
billion, TABOR refunds are distributed first through the
income tax rate reduction, next through the sales and use
tax rate reduction, and finally through the tiered or flat
sales tax refund mechanism.
If there are not sufficient excess state revenues to pay the full amount of
an income tax rate reduction refund mechanism or the sales and use tax
rate reduction TABOR refund mechanism, then the affected refund
mechanism is not triggered.
The bill also repeals statutory sections related to TABOR refund
mechanisms that are no longer applicable, including the 4-tier sales tax
refund mechanism to refund excess revenues from fiscal year 1997-98,
and makes conforming amendments.
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