Advance Colorado Sues Over Overtime Tax Law
Denver, CO – Advance Colorado has filed a lawsuit in the Denver District Court challenging the constitutionality of House Bill 25-1296, which they claim violates the Taxpayer’s Bill of Rights (TABOR). The lawsuit targets two provisions of the bill that adjusts tax expenditures, particularly a new tax related to overtime pay.
Key plaintiffs include state Sen. Barbara Kirkmeyer, R-Brighton, and Fremont County Commissioner Kevin Grantham, along with two El Paso County employees. The contentious provision necessitates that any overtime income excluded from federal gross income must be added to a taxpayer’s federal taxable income starting January 1, 2026. The lawsuit argues that TABOR mandates voter approval for any new tax, emphasizing that this provision could lead to increased state revenue.
The passage of HB 1296 followed federal tax legislation that temporarily allows deductions for overtime wages up to $12,500 and tipped wages up to $25,000, with the latter not included in Colorado’s law. Democratic lawmakers pushed the bill through with a final vote of 40-24 in the House and a party-line vote in the Senate. However, much of the discussion revolved around other provisions, with the overtime issue largely overlooked.
The lawsuit raises concerns that the law could net the state an additional $5.4 million in revenues for 2025-26, with projections doubling by the next fiscal year. It also questions the inclusion of non-cash compensation, potentially bringing in $400 million to $600 million in annual state revenues.
In response to the proposed changes, Advance Colorado has initiated efforts for a ballot measure in the 2026 election to repeal the law. Michael Fields, a representative of the group, stated, “Hardworking families shouldn’t bear the burden of excessive taxes.” Meanwhile, a special legislative session regarding this issue may occur the week of August 18. The case is formally filed as Advance Colorado v. Humphreys.
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