Colorado Secretary of State Wayne Williams
Colorado Secretary of State Wayne Williams

Both the Colorado secretary of state’s office and the representative association for Colorado’s small-business community want the Colorado Supreme Court to decide a case regarding the use of business filing fees.

The National Federation of Independent Business argues that the secretary of state’s office shouldn’t be using filing fees to pay for elections and other office expenses.

“The issue is whether it’s a fee or a tax,” said Deputy Secretary of State Suzanne Staiert. “They sued under [the Taxpayer’s Bill of Rights], saying it’s a tax. But we’ve been doing this since the 1980s and TABOR didn’t come in until 1992, so it’s been part of the law before TABOR.”

NFIB’s petition asks the Supreme Court to take the case to make clear that the secretary’s statutory authorization to unilaterally raise business filing “fees” is facially unconstitutional and urges the court to issue a definitive ruling that all of the secretary’s increased business filing charges, post-1992, have amounted to illegal taxes under TABOR.

At issue is whether the secretary of state violated TABOR by imposing excessive licensing fees on small businesses to finance programs entirely unrelated to the provision of any service to those companies. For example, the secretary has increased business filing fees in recent years to cover the costs of administering general elections.

“The renewal fee for a business is $10,” Staiert said. “It can’t go much lower. We’re already among the lowest in the country.”

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The case was heard in Denver District Court in 2014 and went to the appeals court, which remanded it back to district court.

“Appeals didn’t reach a decision. They said they needed more information,” Staiert said. “Neither of us wants to go back down to district court. We agree with the NFIB that all the facts are in evidence. We both filed to be heard by the [state] Supreme Court.

“The other issue is the court never decided how exact the formula has to be.”

She said the secretary of state office budget is about $20 million, with about $8 million used for elections.

“The whole $20 million is in play” with the court ruling, Staiert said. “If we lose, business filing fees would have to go down or the money we spent would have to benefit them more directly — like with training, our economic indicators report or other things we do.”

She said the $20 million budget comes almost exclusively from business filing fees.

“If the court would rule against us, the Legislature would have to give us money to operate out of the general fund,” Staiert said.

In its writ of certiorari (a request for a higher court to review a lower court’s findings) filed July 17, the National Federation of Independent Business argues that “… the unquestionable primary use of the Business charges is to pay for functions and activities unrelated to business services. NFIB contends that this arrangement makes the Business Charges a tax rather than a valid fee. As a tax, the Business Charges are subject to TABOR.”

The defendants in the case, Secretary of State Wayne Williams and the state of Colorado have also filed a writ seeking the Supreme Court to take the case — but for different reasons. Williams argues that his office has maintained “authority to charge business filing fees long before TABOR.”

Karen Harned, executive director for NFIB’s Small Business Legal Center, disagrees with the secretary’s suggestion that he can legitimately raise fees to cover expenses unrelated to business: “Because a significant portion of the business licensing charges are appropriated to defray the Secretary of State’s general expenses, the business licensing charges are a tax and not ‘a fee.’ Thus, the state is imposing an illegal tax on small businesses to fund obligations; that should be a cost shared by everyone rather than just Colorado’s entrepreneurs.”

According to the NFIB’s writ, “The Department collects over $20 million annually from these charges. However, only a small portion of that revenue is used to cover the Department’s costs in collecting and managing these filings. Instead, the vast majority of the revenue — as much as 90 percent — is used to fund other unrelated functions within the Department, most notably coordinating state elections and directly funding some local elections … these ‘fees’ are in reality a tax — money raised and spent for the general expenses of government. And as such, the Colorado Constitution … requires that voters authorize this tax. Because no such approval was obtained, the Charge amounts beyond that necessary to cover the costs of managing the business filings, along with their authorizing statutes are unconstitutional.”

Staiert said the Supreme Court should decide whether to hear the case by fall, though a decision wouldn’t likely come until 2018.