The legal battle between an organization representing Colorado small businesses and the Secretary of State isn’t over, despite a Colorado Court of Appeals ruling this week.
“It’s a jump ball,” said Tony Gagliardi, the Colorado director of the National Federation of Independent Businesses, who sued the state of behalf of its members.
The Colorado Court of Appeals this week said the business licensing charges collected by the Secretary of State and used to pay for all the activities run by the office are constitutional under that Taxpayer’s Bill of Rights (TABOR).
But the court ordered the case back to district court and instructed the Secretary of State to produce a list of all the business fee increases since 1992, when TABOR was enacted.
The ruling didn’t appear to favor either side and leaves the issue of whether the business license charges collected fall under the rules of TABOR for the district court to decide.
“Depending on the court’s determination, it may need to reach the issue as to whether the business and licensing charges constitute a tax or a fee,” the ruling said.
NFIB had challenged the fee collection saying it ran afoul with the rules of the TABOR. The organization, on behalf of its members, filed a lawsuit in 2014 against then Colorado Secretary of State Scott Gessler. The office is now held by Wayne Williams.
Since 1983, the Colorado Secretary of State’s office has collected fees from businesses and used the money to pay for all of the activities run by the office, including elections. The funding structure of the office, which is unique in the state, was set up before voters approved TABOR, which requires voter approval on new taxes and tax increases.
At the heart of NFIB’s argument was that fees, which are not subject to TABOR, are intended to defray the costs of a particular government service like processing business licenses. A tax is designed to raise revenues to defray the general expense of government.
The Secretary of State’s office collects about $20 million a year in fees from businesses that are filing required forms, but only about 11 percent of that is needed to oversee the business-licensing program.
The rest of the money pays for elections, bingo and raffle regulation and other functions that aren’t related to business. Therefore, NFIB argued, it is a tax and should have been approved by voters.
Current business licensing fees range from $1 to $125, but the charges have increased every year, NFIB has said. NFIB was asking that the state only collect the amount it needs to run the business licensing program.
“While we are glad the court overturned a lower court decision that had dismissed our complaint, we are disappointed that the appellate court could not see this case as the straight-up violation of TABOR that it so obviously is,” said Karen Harned, executive director of NFIB’s Small Business Legal Center. “We think the law is clear, and the secretary of state’s office violated it.”
But she added that she was happy that the issue is still alive.
Williams said that since he became secretary of state in 2015, fees have either been lowered or stayed the same.
“ My office will work to provide the court with the necessary information,” Williams said. “But researching 25 years of data is expected to take time.”
Monica Mendoza covers banking and financial services, legal services, retail, the economy and economic development, and sports business. Phone: 303-803-9230.
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