5 Colorado cities, together with Denver, filed a lawsuit in opposition to the state Thursday over a brand new regulation that exempts constructing supplies used for public faculties from gross sales taxes, arguing it will lower their income base by thousands and thousands of {dollars}.
Denver, Boulder, Commerce Metropolis, Pueblo and Westminster sued in Denver District Court docket, difficult Home Invoice 1024, which Gov. Jared Polis signed into regulation in April. The invoice, set to take impact on Aug. 10, extends an current gross sales tax exemption for constructing supplies utilized in public works initiatives to additionally apply to public college building initiatives inside dwelling rule municipalities.
Dwelling rule municipalities are self-governing localities with the facility to make their very own legal guidelines and keep away from state interference in native points. The lawsuit claims the invoice violates the state structure by imposing state management over the taxing authority of dwelling rule municipalities.
“The authority to levy gross sales and use taxes to boost income is the guts of dwelling rule municipalities and a important operate of municipal operations,” stated Denver Metropolis Legal professional Kristin Bronson. “HB22-1024 unlawfully intrudes on the Colorado Structure, and the residents of dwelling rule municipalities have the total proper of self-governance in native and municipal issues.”
There are 104 dwelling rule municipalities in Colorado, 69 of which self-collect gross sales and use taxes, together with Denver, Boulder, Commerce Metropolis, Pueblo and Westminster, based on the lawsuit. These municipalities don’t exempt college constructing supplies from gross sales taxes.
The lawsuit alleges that the tax exemption would harm dwelling rule municipalities on an area degree, akin to by reducing Denver’s gross sales tax income by $2 million to $4 million yearly. On common, Pueblo would lose $3 million to $4 million yearly; Boulder would lose $450,000; Commerce Metropolis, $600,000; and Westminster, $100,000.
Sen. Chris Hansen, D-Denver, who sponsored the invoice, stated lawmakers anticipated this sort of authorized problem would come up however took motion to deal with the problem within the invoice.
Lawmakers added an modification to the invoice, stating that the present tax exemption disparities between dwelling rule municipalities and different municipalities hurt the state’s capacity to supply public education. The modification stated that, by refusing to supply the tax exemption, dwelling rule municipalities improve the price of offering public training and incentivize faculties to go to cheaper municipalities, somewhat than municipalities the place they’re wanted probably the most.
“We imagine there’s a clear statewide curiosity to assist increase training building, particularly since we face a $17 billion backlog throughout Colorado,” Hansen stated.
Invoice sponsor Rep. Shannon Chicken, D-Westminster, stated the Colorado Supreme Court docket has beforehand dominated that dwelling rule authority just isn’t absolute, significantly when a state regulation and native ordinance battle.
“Cities that levy this tax usually are not solely costing taxpayers of their jurisdictions extra to construct faculties, however they’re additionally impeding the state’s constitutional accountability to supply a uniform system of public training,” Chicken stated. “Colleges are precious property and needed sources in all of our communities. … It’s not honest for college students and it’s definitely not honest to taxpayers.”
The lawsuit claims that the taxation independence of dwelling rule municipalities extends to actions argued to be a matter of statewide concern.
The invoice simply handed the Colorado legislature with bipartisan assist, receiving a 49-12 vote within the Home and a 20-12 vote within the Senate.
The lawsuit requests that the Denver District Court docket block the implementation of the invoice.
