Advance Colorado Files Lawsuit Over Tax Legislation in Denver District Court
Denver, CO — Advance Colorado has initiated a lawsuit in Denver District Court, contesting the constitutionality of certain provisions in House Bill 25-1296. The group argues that the legislation violates the Taxpayer’s Bill of Rights (TABOR), which mandates voter approval for new taxes.
The lawsuit, which includes state Sen. Barbara Kirkmeyer and Fremont County Commissioner Kevin Grantham among its plaintiffs, primarily targets the bill’s overtime pay provision. Under HB 1296, any overtime income excluded from federal gross income will be added to taxpayers’ federal taxable income, impacting tax liabilities starting January 1, 2026. The plaintiffs claim this constitutes a new tax requiring voter consent under TABOR.
The contested bill aligns with federal tax changes signed into law by former President Donald Trump, which offer temporary deductions for overtime and tipped wages—set to expire in 2028. However, Colorado’s legislation lacks explicit provisions for tipped wages. Despite receiving bipartisan opposition, HB 1296 passed along party lines in both the House and Senate.
The lawsuit argues that this new tax will result in significant revenue gains for the state, estimating an increase of $5.4 million in 2025-26, potentially doubling in subsequent years. Additionally, the suit raises concerns over other compensation types, such as stock options and disability benefits, which could generate up to $600 million annually without voter approval.
Advance Colorado has also filed an initiative for the 2026 ballot to repeal these provisions. Michael Fields, a representative of the organization, criticized the legislation as burdensome for Colorado families. He urged that state government should prioritize tax cuts and reduce regulations to foster economic growth.
A special session may be on the horizon to address the overtime tax issue, with potential legislation set to expedite the tax collection timeline. The case is filed under Advance Colorado v. Humphreys.
Source
Photo credit denvergazette.com
