Court Stops Short of Tax-Versus-Fee Question in TABOR Decision

In Griswold v. NFIB, Colorado Supreme Court unanimously rules there’s insufficient evidence that state department’s filing fee increases require voter approval

In another closely watched case that might have clarified the reach of Colorado’s tax laws, the Colorado Supreme Court declined to say whether a fee regime was really a tax. In the process, the court handed a win to a state department.


On Sept. 23, the Supreme Court ruled unanimously in favor of the Colorado Department of State in a case challenging the department’s system for charging businesses filing fees. The plaintiff, the National Federation of Independent Business, claimed the office’s filing fee increases amounted to taxes that required voter approval under the Taxpayer’s Bill of Rights, or TABOR.

The justices upheld a summary judgment order saying NFIB showed no evidence that the Secretary of State’s charges constituted a tax increase under TABOR. The Supreme Court also reversed the Court of Appeals, which sent the case back down to the trial court so facts could be further developed.

In focusing on the evidence issue, the Supreme Court’s decision stopped short of the tax-versus-fee inquiry that would have had broad implications on TABOR’s reach and the autonomy state agencies have in charging fees.

NFIB is “disappointed” with the decision, NFIB’s state director for Colorado, Tony Gagliardi, said in a statement. “[H]owever, Colorado businesses should be thoroughly disappointed with the Court’s lackadaisical attitude in examining the fee versus tax issue,” he added.

Karen Harned, executive director of the NFIB Small Business Legal Center, suggested it remains an open question how much authority the state department has to raise fees on businesses. NFIB’s lawsuit, she said, “has put the Secretary on notice that we will scrutinize increased charges going forward.”

Secretary of State Jena Griswold issued a short statement saying her office was “pleased” with the decision’s outcome.

In Griswold v. NFIB, the Supreme Court declined to determine whether the Colorado Department of State’s hikes in filing fees were tax increases that required voter approval. / LAW WEEK FILE

In 1983, state lawmakers gave the Colorado Department of State the authority to adjust its own fees to align with its costs, and without the General Assembly’s oversight. NFIB had argued that the department’s filing charges are actually taxes that should have been put before Colorado voters. Those unapproved taxes, NFIB said, have harmed businesses that had to pay to make corporate filings to the department. The small business association filed a lawsuit against the department in 2014, when it was headed by Scott Gessler.

Under TABOR, Colorado voters must approve “any new tax, tax rate increase … or … tax policy change directly causing a net tax revenue gain to any district.” If a charge’s main purpose is to raise revenue for general governmental use, then it’s a tax under TABOR.

As the Supreme Court opinion noted, TABOR never defined “new taxes,” “tax rate increases” or “tax policy changes.” The court has clarified those terms in decisions such as Huber v. Colo. Mining Association in 2011 and TABOR Foundation v. RTD in April 2018.

The Supreme Court has held that TABOR can’t retroactively scuttle a fee regime like the state department’s, which was installed before TABOR’s enactment in 1992. So the court looks instead to see if that regime contributes to a net gain in revenue post-TABOR. 

According to NFIB’s complaint, the department collects over $20 million from corporate filing charges each year. But the state department uses as much as 90% of that to fund functions, like state elections, that are unrelated to collecting and managing that money.

The Denver District Court declined to decide whether the fees were actually taxes, instead focusing on whether post-TABOR hikes were technically a tax increase or change in tax policy. Granting summary judgment in the department’s favor, the court found that “the charges are part of a pre-set formula that is not a tax rate change” and doesn’t result in a net revenue gain for the state. NFIB appealed.

Notably, the parties agreed to waive discovery and instead stipulated to a set of facts. But those facts were insufficient for the Court of Appeals to determine whether TABOR even applied to the case. It remanded to the trial court for the parties to develop more facts regarding whether voter approval was required for charge adjustments under TABOR.

In its decision last week, the Supreme Court said the remand was in error; both the NFIB and the state took that position albeit for different reasons. The Supreme Court said the appeals division “mistook the absence of evidence to support NFIB’s case for a dispute of material fact.”

“Reviewing courts should not reverse a trial court’s grant of summary judgment … when the moving party establishes an absence of evidence to support the nonmoving party’s case and the nonmoving party fails to establish a genuine issue of material fact,” according to the opinion by Justice William Hood.

The Supreme Court agreed with the district court’s decision to grant the department’s motion for summary judgment, reasoning that NFIB didn’t meet its burden of showing the fees were taxes under TABOR.

Since the filing charge regime began in 1983, the number of filings the office received and the amount of revenue it generated from them increased at a similar rate. But it’s unclear from the record whether any revenue increases were because of increased filings or hikes in the charges, according to the court. “[I]f NFIB can’t show that they triggered the gain, there is no TABOR violation.”

Jim Manley, an attorney with the Pacific Legal Foundation who coauthored an amicus brief supporting NFIB, said the decision was a missed opportunity to clarify key aspects of TABOR.

“Essentially what the court decided was almost nothing,” Manley said. The opinion in Griswold v. NFIB is “kind of a retread” of Huber v. Colorado Mining Association, he added. In Huber, the court determined that increases in a coal severance tax didn’t require voter approval because they were non-discretionary, triggered by a statute that predated TABOR. 

NFIB said last week’s decision puts the Colorado State Department “on notice” for its filing charges, Manley agreed “there are some subtle warnings” in the opinion for agencies adjusting rates. 

The court emphasized that it couldn’t tell from the facts “whether the amount of collected revenue increased because of the increased filings or because the Department increased the charges for individual filings,” according to the opinion. “The record is silent on this point.”

—Doug Chartier

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