DENVER—Colorado’s severance tax rate on coal could jump by more than a third under an attorney general’s ruling that the tax was incorrectly frozen in 1993, state officials said Tuesday.
It wasn’t immediately clear how much extra revenue that would mean to the state, but the tax generated almost $8.6 million last year and $10.2 million in 2005.
The Department of Revenue froze the rate at 54 cents per ton after voters passed the Taxpayer’s Bill of Rights in 1992, a constitutional amendment that requires a statewide vote to approve any tax increase.
In an opinion dated Friday, Attorney General John Suthers said the statutes for calculating the coal tax rate were enacted before TABOR went into effect, so raising the tax rate as required by those laws would not violate TABOR.
The pre-TABOR laws required the coal severance tax to rise or fall 1 percent for any 1.5-point change in an index of producers’ prices. That formula would put the new rate at 73.4 cents, Department of Revenue spokeswoman Diane Reimer said.
The department has not calculated the potential income based on the higher rate.
The Colorado Mining Association, which represents the state’s coal producers, strongly disagreed with the opinion and said it still believes TABOR bars raising the rate.
“The opinion by the attorney general sanctions an administrative end run on the TABOR amendment,” association President Stuart Sanderson said, adding that it reversed an interpretation of tax law that stood for 14 years.
He also said increased severance taxes would be passed on to electric utilties and ultimately consumers.
Colorado is the seventh-ranked coal-producing state in the nation, with 35.5 million short tons last year, the association said. A short ton is 2,000 pounds.
Reimer said the department hopes to write new regulations by mid-August, then hold a public hearing in October.
The Department of Revenue had asked Suthers to rule on the question.
TABOR requires voter approval for a “tax policy change resulting in a net revenue gain,” Suthers wrote.
Previous attorneys general have concluded that a change in tax policy occurs when statutes are changed. The Department of Revenue would not be changing or creating a tax policy if it were only following a statutory formula for determining tax rates, Suthers wrote.
“The fact that the department erroneously failed to implement the statutory mandate of (the law) since 1993 does not change this conclusion,” Suthers wrote.
