Practice and Procedure: Colorado Eliminates Bond Requirements for Most Judicial Tax Appeals

Colorado made a significant change to its state tax administration process during the 2016 legislative session by passing S.B. 36, which goes into effect in August 2016.

Prior to the legislative change, taxpayers who wished to appeal a final determination by the Colorado Department of Revenue of an assessment or claim for refund had to file a surety bond with the district court equal to double the amount of the taxes, interest, and other charges set forth in the final determination. Alternatively, taxpayers could deposit the disputed amount with the department, which would allow a judicial appeal to move forward and also stop the accrual of interest.

The bond requirement was particularly onerous for taxpayers since Colorado does not have an independent tax tribunal or other independent tax dispute forum, making the department the final arbiter of its own decision. Certainly this aspect of the state’s tax administration process is a major reason why Colorado was one of the lowest ranked states in the most recent edition of The Best and Worst of State Tax Administration: Scorecard on Tax Appeals and Procedural Requirements, published by the Council on State Taxation (COST).

With the enactment of S.B. 36, Colorado taxpayers seeking to file a judicial appeal of a final determination will generally not be required to file a surety bond or deposit the tax in order to effectuate the appeal. However, any taxpayer whose request for a hearing was rejected and deemed a frivolous submission by the Executive Director of the Colorado Department of Revenue will still be required to post a surety bond in order to pursue a judicial appeal.

In addition, taxpayers filing appeals of adverse district court rulings, who were not required to file a deposit or bond for the appeal from the department’s final determination, are still required to post a surety bond or make a deposit in order to continue the appeals process.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Is the removal of the bond requirement for most judicial appeals a significant improvement to Colorado’s tax appeal process?

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