In Chronos Builders, LLC v. Department of Labor and Employment, the Colorado Supreme Court addressed the constitutionality of premiums collected under the Paid Family and Medical Leave Insurance Act. Chronos Builders, a small home-building company in Grand Junction, Colorado, challenged the premiums required by the Act, arguing they violated the Taxpayer's Bill of Rights (TABOR). Specifically, the company claimed that these premiums constituted an unconstitutional tax on income under section 8(a) of TABOR.
The Paid Family and Medical Leave Insurance Act, enacted through Proposition 118 in the 2020 election, established a state-administered paid leave program funded by premiums from employers and employees. These premiums were calculated as a percentage of employee wages to fund wage replacement benefits during family or medical leave.
Trial Court Decision
Chronos Builders filed a complaint seeking to block the premium collection, alleging it represented an "added tax or surcharge" on income in violation of TABOR. The district court dismissed the case, finding that the premiums were not taxes but fees used to fund specific services. The court also determined that TABOR's section 8(a) applied only to changes in income tax laws, which the Act did not involve.
Colorado Supreme Court Ruling
The Colorado Supreme Court affirmed the district court's decision, concluding that the Act's premiums were fees and did not violate TABOR. Key findings included:
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Definition of a Fee: The court reiterated that a fee is a charge intended to defray the cost of specific services, distinguishing it from a tax, which raises revenue for general government expenses. The premiums collected under the Act were specifically allocated for providing paid leave benefits, making them fees rather than taxes.
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Application of Section 8(a): TABOR's section 8(a) restricts changes to income tax laws, requiring all taxable income to be taxed at a single rate without added taxes or surcharges. The court found the Paid Family and Medical Leave Insurance Act was a labor law, not an income tax law, and thus did not fall under section 8(a).
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Legislative Intent: The court emphasized the Act’s clear intent to establish a self-sustaining program, with premiums designated for a specific purpose. The premiums were structured to ensure the program remained financially independent, further supporting their classification as fees.
Conclusion
The decision underscores the importance of statutory language and purpose in distinguishing fees from taxes. It also reaffirms the scope of TABOR, limiting its application to changes in tax law rather than broader legislative initiatives.
Joe Whitcomb
