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COLORADO TAX CHANGES EFFECTIVE FOR
THE TAX YEAR
2005
No Colorado TABOR Deductions or Tax Credits
available for 2005
OVERVIEW
Colorado's Taxpayer's Bill of Rights (TABOR) constitutionally limits the state
government’s annual revenue growth. Any revenue growth that exceeds the
permitted revenue growth generates a "TABOR Surplus" that the state must refund
to the taxpayers. This refund process consists of several income tax credits and
deductions, the existence and amount of each of which is based on the amount of the TABOR
surplus. All of the Colorado tax credits, deductions and refunds contingent on the
TABOR surplus were last available to Colorado taxpayers for their 2001
tax returns.
Since 2001, there has been no "TABOR
Surplus", therefore for 2005, as it was for 2002, 2003 and 2004, ALL of the credits
and deductions that are contingent on the "TABOR Surplus" for are not
available, except for the child care credit and some credits relating to
enterprise zones.
IN ADDITION, in November 2005, the Colorado voters passed
Referendum C. By its passage, there will NOT be any budget surplus for
the years 2006 through 2010. As a result, none of the TABOR triggered
credits or deductions will be available until 2011 at the earliest.
STATE SALES TAX REFUND
THE COLORADO SALES TAX REFUND IS BACK FOR 2005
Under the terms of the Taxpayer’s Bill of Rights
("TABOR"), the state of Colorado is required to refund excess revenues to
Colorado taxpayers. For the tax year 2005, the state will be refunding
$45 million under this program. The state has chosen to make the
refunds through the income tax system, as it has done in the past.
This means that to claim the refund, a person must file a 2005 Colorado
individual income tax return, Form 104. Note: Taxpayers passed
Referendum C in November 2005 which overrides TABOR, so there will be no
sales tax refunds for the years 2006 through 2010 since there will be no
TABOR surplus revenue in those years.
HOW MUCH CAN I EXPECT TO RECEIVE AS MY COLORADO SALES TAX
REFUND?
Hold your breath on this one! It depends, either
$15 or $30! The sales tax refund is calculated based upon a taxpayer’s
filing status and is on a per-tax return basis. For purposes of
eligibility for the sales tax refund there are two categories of tax filers,
qualifying (see below) taxpayers filing a joint income tax return, and all
other qualifying tax filers. The sales tax refund due to qualifying
tax filers filing a joint Colorado income tax return is $30. The sales
tax refund due to all other qualifying tax filers, single, head of
household, married filing separately, and widowers with minor children, is
$15. The amount will show as an additional payment on the qualifying
tax return and will be used to reduce any income taxes owed, or added to any
overpayment. The $15/$30 amounts do not justify the cost of preparing
tax returns for those who would otherwise not need to file.
WHO "QUALIFIES" FOR THE COLORADO SALES TAX REFUND?
Round up the usual suspects.
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In-Group One – Full year Colorado residents who were
over age 18 on January 1, 2005, are eligible for the Colorado sales tax
refund. |
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In-Group Two – Full year Colorado residents who were
under age 18 at any time during 2005 are eligible for the state sales
tax refund ONLY when the taxpayer has an income tax liability shown on
his/her 2005 Colorado individual income tax return on Line 14 or has any
Colorado income taxes withheld from his/her 2005 wages on Line 25. |
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The Out-Group - All others including part-year
residents, nonresidents, and persons incarcerated for at least 180 days
during 2005 are not eligible for the Colorado sales tax refund,
regardless of their age. |
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WHAT IS THE FILING DEADLINE TO RECEIVE THE COLORADO SALES
TAX REFUND?
It depends. (A.) If you report a Colorado
income tax liability on your 2005 Colorado individual income tax return or
have any Colorado income taxes withheld, the latest you can file a Colorado
tax return and obtain your Colorado sales tax refund is October 16, 2006, or
(B.) If you do not have any Colorado income tax liability on Line 14
of your 2005 Colorado individual income tax return AND you did not show any
Colorado income taxes withheld, you must file by April 16, 2006, otherwise
you lose any claim to the Colorado sales tax refund.
HOW DOES THE STATE KNOW IF I AM A FULL-YEAR COLORADO
RESIDENT?
Show me the proof! The burden of proof lies with
the taxpayer. If you filed a Colorado tax return in 2004 as a
resident, the presumption is you are still a full year resident if you
indicate this on your Colorado tax return. If you did not file a 2004
Colorado tax return, you need to include your Colorado driver’s license
number at the bottom of the Colorado income tax return, or attach a copy of
your utility bills for January and for December 2005 to your tax return.
DEDUCTIONS AND CREDITS NOT AVAILABLE FOR 2005
THROUGH 2010.
The following income tax
deductions and credits will not be permitted for 2005 individual income tax returns to be
filed in 2006, and will not be available until the year 2011 at the
earliest:
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Earned Income Tax Credit. |
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Child Tax Credit. |
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Charitable Credits for Matching Contributions
to Individual Development Accounts. |
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Interest, Dividend and Capital Gains
Subtraction. |
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Expanded Colorado Capital Gains Subtraction
for Colorado Property (Note: The subtraction is still available but ONLY for
Colorado assets acquired AFTER May 9, 1994, and owned continuously for 5 years prior to
sale.) |
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Tax Credit for Rural Health Care
Professionals. |
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Foster Care Tax Credit. |
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Credits for Contributions to Colorado's High
Technology Scholarship Program. |
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Charitable contribution deduction for
contributions in excess of $500 for taxpayers who do not itemize. |
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Credit for Health Benefit Plans for Taxpayers
Not Covered By An Employer Plan. |
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Income Tax Credit for Investments in
Agricultural Cooperatives. |
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The following income tax deductions and credits are not
available to corporations, fiduciaries and partnerships for 2005 returns:
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Expanded Colorado Capital Gains Subtraction for Colorado Property
(See above for exception). |
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Interest, Dividend and Capital Gains Deduction (Fiduciaries Only). |
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Income Tax Credit for Investments in Agricultural Cooperatives. |
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Credits for Contributions to Colorado's High Technology Scholarship
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"COLORADO HALL OF SHAME"
Starting in January 2004, the Colorado Department of
Revenue was required to disclose for public inspection a list of all taxpayers who
have owed more than $20,000 in delinquent taxes to the State of Colorado for at least 6
months. The list is shown on the Colorado Department of Revenue
website under delinquent taxpayers and it shows the taxpayer's name and
address and the amounts owed each year.
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Certified
Public Accountant