The Colorado coal-mining industry is peeved over a looming state policy reversal that could cause coal severance taxes to jump by 30 percent.
The state Department of Revenue is considering ending a severance-tax freeze for coal mining that has been in place for 14 years, since Colorado residents passed the Taxpayer’s Bill of Rights.
The potential change follows an opinion from Attorney General John Suthers that said the department erred in 1993 when it froze the tax rate for coal companies.
And a government watchdog group claimed Thursday that the state is owed $20 million for three years of back taxes because of its “erroneous” policy.
Before the freeze, the coal severance-tax rate fluctuated each year based on a formula using the federal commodity price index. The rate has been stuck at 54 cents per ton since Colorado passed TABOR, which requires voters to approve any new tax.
Now the Department of Revenue might return to the previous formula, which could result in a rate bump to 72 cents per ton, according to a coal industry estimate.
The Colorado Mining Association is accusing the department of trying to circumvent voters by changing tax policy without an election.
“Now, 14 years later, the Department of Revenue is doing a complete about-face,” said Stuart Sanderson, president of the association, which represents 10 coal-mining operations. “It isn’t fair policy, and it’s not good government.”
The department plans to hold an Oct. 2 public hearing on the issue, but executive director Roxy Huber said she is “inclined to concur with the attorney general’s opinion that the rate needs to be raised.”
Colorado Ethics Watch called on the department to end the tax freeze and collect three years in back taxes “erroneously not assessed but legally owed by coal companies.” The group calculated the state is owed about $20 million for the past three years, which is the statute of limitations for collections.
“If the department decides not to collect these back taxes, it should explain to the people of Colorado why coal companies are not being required to pay their fair share in taxes,” said Ethics Watch director Chantell Taylor.
Huber said she has not decided whether the department should make any tax-rate change retroactive.
And the mining association maintains that a retroactive policy would be illegal and wrong.
Coal-mining companies were informed in 1993 of the tax-rate freeze, which Sanderson called a “legal and announced interpretation of the law,” not a “mere oversight.”
The department can’t now come back and say, “Oh, by the way, we were wrong and you get to pay the price,” he said.
Sanderson also warned that electricity customers probably would pay the cost if severance-tax bills jump for coal mines.
The coal industry paid more than $9 million in severance taxes last year, he said.
Staff writer Jennifer Brown can be reached at 303-954-1593 or jenbrown@denverpost.com.
54 cents
Per-ton coal severance-tax rate frozen by TABOR in 1993
72 cents
Per-ton coal severance-tax rate if previous formula is used
