The IRS last week shared a new opinion on tax refunds from states, such as the Taxpayer Bill of Rights (TABOR) refunds Coloradans receive.

The opinion means Colorado taxpayers may have to report TABOR refunds as federal income when they file their taxes.

Gov. Jared Polis issued a response opposing the opinion.

“This absurd potential action from the IRS would cost Coloradans money and confuse people, and I call on the Biden administration to reverse course. The IRS is proposing going back on thirty years of not treating TABOR refunds as taxable income,” said Governor Polis. “Our administration strongly disagrees with the IRS guidance as it fails to factor in that TABOR refunds are returning sales tax dollars in addition to income tax dollars and fees that our citizens have already paid and therefore are an entirely legitimate tax refund and should not be subject to further state or federal taxation.”

The state of Colorado has been utilizing some form of the TABOR refund mechanism for the past 30 years.

The potential policy would most affect those who itemize their tax returns and not most who claim a standard deduction.

“(I)ndividuals who claimed the standard deduction (as most individuals do) will not include State tax refunds in Federal gross income because they would not have previously deducted on their Federal income tax returns the refunded amount of State taxes paid,” the IRS’s proposal states on page 5/

The IRS opinion is not yet policy but could provide guidance for how the IRS looks at those refunds in the future.

Coloradans in 2022 received $750 or $1,500 check in the mail because of excess sales tax revenue that was returned to taxpayers.