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The Colorado Supreme Court and Colorado Court of Appeals. (Jeremy Martinez, Special to The Colorado Sun)

More than 25 years since the Taxpayer’s Bill of Rights won voters’ approval in Colorado, one question continues to vex policymakers and judges: What qualifies as as tax?

The question sat at the center of a 5-year-old case before the Colorado Supreme Court challenging the fees the secretary of state’s office charges businesses. The 22-page ruling issued by the court Monday, however, once again avoids a direct answer.

What is clear in the decision: The fees the Department of State charges to businesses for registration, licenses and other purposes do not equate to a tax that needs approval for voters under the requirements of TABOR. 

The National Federation of Independent Business, which represents small businesses, filed a lawsuit in 2014 challenging this system as unconstitutional. The group argued that the charges to businesses were taxes — rather than fees — because the revenue paid for other unrelated agency services, such as overseeing elections. And if true, any increase in the charges or alteration in the policy would run afoul of TABOR, which mandates such moves need consent from voters.

The state Supreme Court’s decision rejecting the claim affirmed a lower court ruling that sided with the secretary of state and vacated a Court of Appeals determination that kept the case alive. The case started under Republican Secretary of State Scott Gessler and continued under his GOP successor Wayne Williams. But in the end it carried the name of Secretary Jena Griswold, a Democrat, who applauded the decision.

MORE: TABOR faces a reckoning with Prop. CC. Here’s what you should know about its impact on state spending

The question about taxes comes as spotlight shines on TABOR

All three courts that considered the case refused, as a matter of procedural review, to decide whether the charges to businesses amounted to taxes under Colorado law. 

This point, in particular, irritated NFIB. “Colorado businesses should be thoroughly disappointed with the court’s lackadaisical attitude in examining the fee versus tax issue,” Tony Gagliardi, the organization’s Colorado state director, said in a statement responding to the ruling.

It’s not the first time the courts avoided one of the most fundamental questions about Colorado’s unique, and often contradictory, spending constitutional spending restraints governed by TABOR, which voters approved in 1992. 

But the question is now in the spotlight as Colorado voters decide Proposition CC in the November election whether to remove the spending caps put in place by TABOR and other advocacy groups consider a 2020 ballot measure to repeal it entirely. At the same time, another case in federal court is challenging its broader constitutionality.

Writing for the entire court, Justice William Hood — an appointee of former Gov. John Hickenlooper — opened the ruling in the NFIB case by acknowledging the familiar ground for the discussion: “This case provides us another opportunity to examine the implications of the Taxpayer’s Bill of Rights.”

Here’s how the courts analyze TABOR after decades of challenges

One of the most basic tenets of TABOR is the requirement that voters approve any new tax, tax-rate increase or tax policy change that leads to an increase in government revenue. The goal was to limit the spending discretion of state lawmakers and government officials. But as the state Supreme Court’s ruling states: “TABOR does not, however, define these key terms, nor have we.”

The “nor have we” statement is what so frustrates organizations like NFIB that support a strict reading of TABOR and want the court to better define what constitutes a “new tax” or “tax policy change.”

“The decision leaves unresolved whether and to what extent the secretary may continue increasing fees on the small business community,” Karen Harned, executive director of the NFIB Small Business Legal Center, said in a statement in which she vowed to continue to “scrutinize increased charges going forward.”

MORE: Is Colorado’s 2019 ballot question about TABOR spending caps really a tax hike? The answer is sort of.

That’s not to say the court hasn’t provided guidance about the parameters of those terms. As Hood writes in summarizing decades of court decisions on TABOR: “Two principles emerge from these cases.”

First, “a change resulting in an incidental and de minimis increase in government revenue is not a new tax or a tax policy change.” And second, “ministerial, nondiscretionary adjustments to taxation schemes authorized by statutes enacted before TABOR remain valid, even without voter approval,” he wrote.

In applying this doctrine to the NFIB case against the secretary of state, the court pointed to the agreed upon facts of the case — that the number of documents filed with the agency from the 1991 fiscal year to the 2014 fiscal year increased fourfold, which is about the same as the amount of money collected. So, the court reasons that such fee increases were incidental.

Because NFIB could not demonstrate the fee increases generated significant revenue gain — one test under TABOR — the court never ruled on whether the charges were, in fact, taxes.

Penn Pfiffner, a former state lawmaker and the board chairman at the TABOR Foundation, a group that educates people about the constitutional provision, suggested the ruling missed the point. “The court didn’t need to take out a microscope here,” he said, adding: “By taking a really narrow look at the issue they really sidestepped the point.”

John Frank is a former Colorado Sun staff writer. He left the publication in January 2021.