News Release--Does Secretary of State’s use of business “fees” for non-business purposes violate TABOR?
DENVER, Colo., July 19, 2017—This week the representative association for Colorado’s small-business community asked the state Supreme Court to review a decision from the Colorado Court of Appeals, which held that the Secretary of State’s increased business filing fees may potentially be justified.
NFIB’s petition asks the Supreme Court to take the case to make clear that the Secretary’s statutory authorization to unilaterally raise business filing “fees” is facially unconstitutional and urges the Court to issue a definitive ruling that all of the Secretary’s increased business filing charges, post-1992, have amounted to illegal taxes under Colorado’s Taxpayer Bill of Rights (TABOR).
At issue is whether the secretary of state violated TABOR by imposing excessive licensing fees on small businesses to finance programs entirely unrelated to the provision of any service to those companies. For example, the Secretary has increased business filing fees in recent years to cover the costs of administering general elections.
In its writ of certiorari (a request for a higher court to review a lower court’s findings) filed July 17, the National Federation of Independent Business argues that “… the unquestionable primary use of the Business charges is to pay for functions and activities unrelated to business services. NFIB contends that this arrangement makes the Business Charges a tax rather than a valid fee. As a tax, the Business Charges are subject to TABOR.”
The defendants in the case, Secretary of State Wayne Williams and the state of Colorado have also filed a writ seeking the Supreme Court to take the case—but for different reasons. The Secretary argues that his office has maintained “authority to charge business filing fees long before TABOR.”
Karen Harned, executive director of NFIB’s Small Business Legal Center, poignantly disagrees with the Secretary’s suggestion that he can legitimately raise fees to cover expenses unrelated to business: “Because a significant portion of the business licensing charges are appropriated to defray the Secretary of State’s general expenses, the business licensing charges are a tax and not ‘a fee.’ Thus, the state is imposing an illegal tax on small businesses to fund obligations; that should be a cost shared by everyone rather than just Colorado’s entrepreneurs.”
The case was first heard in a Denver District Court in 2014, which declined to rule on the matter. It was later taken up by the appeals court for further review. “The Department collects over $20 million annually from these charges,” according to NFIB’s writ. “However, only a small portion of that revenue is used to cover the Department’s costs in collecting and managing these filings. Instead, the vast majority of the revenue – as much as 90% — is used to fund other unrelated functions within the Department, most notably coordinating state elections and directly funding some local elections … these ‘fees’ are in reality a tax – money raised and spent for the general expenses of government. And as such, the Colorado Constitution … requires that voters authorize this tax. Because no such approval was obtained, the Charge amounts beyond that necessary to cover the costs of managing the business filings, along with their authorizing statutes are unconstitutional.”
For more than 70 years, the National Federation of Independent Business has been the Voice of Small Business, taking the message from Main Street to the halls of Congress and all 50 state legislatures. NFIB annually surveys its members on state and federal issues vital to their survival as America’s economic engine and biggest creator of jobs. NFIB’s educational mission is to remind policymakers that small businesses are not smaller versions of bigger businesses; they have very different challenges and priorities.
National Federation of Independent Business/Colorado
1580 Logan St. Suite 520
Denver, CO 80203