What was Colorado Cash Back, and how did one-time TABOR refund payments work?

Colorado Cash Back was a one-time accelerated refund program created by the Colorado legislature in 2022 to return a large state revenue surplus to taxpayers faster than the standard TABOR refund schedule. Under the Taxpayer's Bill of Rights (TABOR), Colorado must refund revenue collected above a constitutional spending cap, but the method and timing can vary by legislative action. The 2022 program issued flat-dollar checks rather than the percentage-of-income refunds used in the ordinary six-tier TABOR mechanism, making the payment equal for most qualifying taxpayers regardless of income. Understanding this history helps Colorado taxpayers recognize how TABOR refunds can take different forms in different years.

Background: Why Colorado Issues TABOR Refunds

Colorado's Taxpayer's Bill of Rights, added to the state constitution in 1992, limits how much revenue the state government may keep each year. When actual revenue exceeds the TABOR cap, the surplus must be returned to taxpayers. The legislature has some flexibility in choosing the refund mechanism - it can use the standard six-tier income-based system, issue flat checks, apply credits against future tax liability, or combine approaches.

The Standard TABOR Refund Mechanism

In most years when a surplus exists, Colorado uses a tiered refund system tied to a taxpayer's income level. Higher-income filers receive a larger dollar refund, though the percentage returned is structured across six income brackets. Refunds are typically claimed on the Colorado individual income tax return for the year following the surplus year, meaning there is often a lag of a year or more between when the state collects excess revenue and when taxpayers receive it back.

Colorado Cash Back: The 2022 One-Time Program

In May 2022, Governor Jared Polis signed Senate Bill 22-233, creating the Colorado Cash Back program. Key features included:

Flat-dollar amount: Most eligible taxpayers received $750 (single filers) or $1,500 (joint filers), regardless of income - a departure from the percentage-based standard mechanism.
Accelerated timeline: Payments were issued beginning in late summer 2022, ahead of the normal refund schedule tied to the 2022 tax return filing season.
Eligibility: Taxpayers who filed a 2021 Colorado individual income tax return by June 30, 2022, and met residency requirements were generally eligible.
Source of funds: The payments drew on the large revenue surplus Colorado accumulated during fiscal year 2021-2022, driven by strong income and sales tax collections.

The program was designed to put money back in taxpayers' hands more quickly than waiting for the standard refund process tied to the following year's tax return.

How Colorado Cash Back Differed from Ordinary TABOR Refunds

Feature	Standard TABOR Refund	Colorado Cash Back (2022)
Refund method	Six-tier income-based credit on tax return	Flat-dollar direct payment or check
Timing	Claimed on the following year's return	Issued mid-2022, before return filing
Amount variation	Varies by income bracket	Same amount for most filers ($750/$1,500)
Legislative action required	No - default mechanism	Yes - special legislation (SB 22-233)

TABOR Refund History by Year: 2022-2024

The form and availability of TABOR refunds has varied from year to year depending on surplus size and legislative decisions. The collapsible sections below summarize what happened in each recent year.

2022 - Colorado Cash Back one-time payment

2022 was the year the Colorado Cash Back program was created and payments were issued. A large revenue surplus from fiscal year 2021-2022 triggered the program. Most eligible single filers received $750 and most joint filers received $1,500 as a flat-dollar direct payment, issued beginning in late summer 2022. This was an accelerated, legislatively created program separate from the standard TABOR refund mechanism. Taxpayers who filed their 2021 Colorado return by June 30, 2022 were generally eligible for this accelerated payment.

2023 - Standard TABOR refund mechanism returned

Colorado did not repeat the Colorado Cash Back flat-payment program for the 2023 filing year. However, a TABOR surplus still existed, and eligible taxpayers received refunds through the standard six-tier income-based mechanism claimed on their 2022 Colorado individual income tax return. The refund amounts varied by income bracket rather than being a uniform flat dollar amount.

2024 - TABOR refunds continued under standard mechanism

Colorado continued to have a TABOR surplus requiring refunds for the 2024 filing year (covering the 2023 tax year). Refunds were again issued through the standard six-tier system on the Colorado individual income tax return rather than through a special flat-payment program. The legislature did not enact a new Colorado Cash Back-style program for this period. Refund amounts depended on the taxpayer's income bracket as defined under the standard TABOR refund structure.

Historical Context: Other One-Time or Accelerated TABOR Refunds

Colorado Cash Back was not the first time the legislature modified the standard refund approach. Over the history of TABOR, Colorado has periodically adjusted refund methods in response to surplus size, economic conditions, or policy goals. In some years, surpluses were small enough that refunds were minimal; in others, the legislature used sales tax refunds or income tax rate reductions as the refund vehicle. The 2022 program stood out for its size, speed, and the flat-dollar structure that treated most taxpayers equally.

Does Colorado Cash Back count as taxable income on a federal return?

This question generated significant attention in early 2023. The IRS initially asked taxpayers in Colorado and several other states to delay filing while it reviewed whether state relief payments were federally taxable. The IRS ultimately determined that Colorado Cash Back payments were not includable in federal gross income for most recipients, because the payments represented a return of taxes already paid rather than new income. Taxpayers who had already filed and included the payment as income were advised to consider an amended return. For specific guidance on your situation, consult a tax professional or the IRS FAQ published at the time.

Will Colorado issue similar one-time payments in future years?

Whether Colorado uses a flat-dollar accelerated payment in any future year depends on the size of the revenue surplus, legislative priorities, and the political environment at the time. The standard six-tier TABOR refund mechanism remains the default. A one-time program like Colorado Cash Back requires a separate legislative act each time. Taxpayers should watch for announcements from the Colorado Department of Revenue and the legislature during years when a large surplus is projected.