Colorado State Income Tax Protest Letter

COLORADO STATE INCOME TAX PROTEST LETTER

TABLE OF CONTENTS

1. Header and Mailing Information
2. Re: Line and Identifying Information
3. Introduction and Statement of Protest
4. Jurisdictional Statement and Timeliness
5. Statement of Facts
6. Grounds for Protest
7. Refund Claim (If Applicable)
8. TABOR Overlay (If Applicable)
9. Hearing Request and Procedural Election
10. Reservation of Rights
11. Requested Relief
12. Signature Block and Power of Attorney
13. Exhibits and Certificate of Service
14. Colorado Practice Notes
15. Sources and References

1. HEADER AND MAILING INFORMATION

[LAW FIRM / TAXPAYER LETTERHEAD]

[DATE OF LETTER]

VIA CERTIFIED MAIL — RETURN RECEIPT REQUESTED

AND VIA EMAIL TO [protest mailbox or assigned auditor email]

Colorado Department of Revenue
Taxation Division — Tax Conferee Section
P.O. Box 17087
Denver, CO 80217-0087

2. RE: LINE AND IDENTIFYING INFORMATION

3. INTRODUCTION AND STATEMENT OF PROTEST

Pursuant to C.R.S. § 39-21-103(1), Taxpayer [TAXPAYER NAME] ("Taxpayer") hereby protests, in whole, the [Notice of Deficiency / Notice of Rejection of Refund Claim] identified above (the "Notice") and requests an administrative hearing before the Hearings Division of the Colorado Department of Revenue (the "Department").

Taxpayer disputes the proposed assessment in its entirety and contends that no additional tax, interest, or penalty is owed for the periods at issue. To the extent any portion of the Notice is sustained on hearing, Taxpayer reserves the right to appeal to district court for de novo review pursuant to C.R.S. § 39-21-105.

4. JURISDICTIONAL STATEMENT AND TIMELINESS

4.1. Statutory authority. This protest is filed pursuant to C.R.S. § 39-21-103, which entitles a taxpayer aggrieved by a notice of deficiency or rejection of refund claim to a hearing upon timely written application.

4.2. Timeliness. The Notice was mailed on [NOTICE MAILING DATE]. This protest is filed on [FILING DATE], within thirty (30) days of the mailing date as required by C.R.S. § 39-21-103(1).

4.3. Form of protest. This writing identifies (i) the notice protested, (ii) the tax periods at issue, (iii) the amount in dispute, (iv) the grounds for protest, and (v) the relief requested, satisfying the requirements of 1 CCR 201-1 and Department guidance on the contents of a written protest.

4.4. Stay of collection. Pursuant to C.R.S. § 39-21-103(8), enforced collection of the disputed portion of the assessment is stayed during the pendency of the protest and any timely appeal therefrom.

5. STATEMENT OF FACTS

5.1. Taxpayer is a [individual / Colorado-domiciled C-corporation / S-corporation / pass-through entity / nonresident] with [its principal place of business at / its primary residence at] [ADDRESS].

5.2. For tax year(s) [YYYY], Taxpayer timely filed Colorado Form [DR 0104 / DR 0112 / DR 0106] reporting Colorado [taxable income / loss] of $[AMOUNT] and tax of $[AMOUNT].

5.3. The Department initiated examination by letter dated [DATE] and issued Information Document Requests on [DATES], to which Taxpayer responded on [DATES].

5.4. On [DATE], the Department issued a Notice of Proposed Adjustment ("30-day letter") proposing to [disallow / reclassify / source / increase] [ITEM] in the amount of $[AMOUNT].

5.5. Taxpayer responded on [DATE] providing [describe documents / legal citations submitted].

5.6. The Department issued the Notice of Deficiency on [NOTICE MAILING DATE], asserting [summarize adjustments], computed as follows: [brief computation].

6. GROUNDS FOR PROTEST

Taxpayer protests the Notice on each of the following independent grounds. Each ground is asserted in the alternative and without waiver of any other.

6.1. Erroneous Application of Colorado Statute

The Department has misapplied [C.R.S. § 39-22-XXX] governing [describe issue: Colorado modifications to federal taxable income, sourcing of sales under § 39-22-303.6, apportionment under § 39-22-303.5, NOL carryforward under § 39-22-504, pass-through entity tax election under § 39-22-340 et seq., or other]. The Department's interpretation is contrary to [regulation citation, Department FYI / GIL, Colorado Court of Appeals authority], which [explain].

6.2. Federal Conformity / Internal Revenue Code Linkage

Colorado taxable income begins with federal taxable income under C.R.S. § 39-22-104 (individuals) / § 39-22-304 (corporations). The Department's adjustment effectively rejects a properly reported federal item. Because [the IRS has accepted / the federal item is governed by IRC § XXX / no Colorado-specific modification applies], the federal treatment controls.

6.3. Burden of Proof and Sufficiency of Evidence

Although Taxpayer bears the initial burden under C.R.S. § 39-21-105(2)(b), the documentation already provided (Exhibits [B–G]) is sufficient to establish the disputed item. The Department has produced no contrary evidence and the Notice rests on conclusory assertions.

6.4. Penalty Abatement — Reasonable Cause and Good Faith

The negligence and substantial-understatement penalties asserted under C.R.S. §§ 39-22-621 and 39-21-116.5 are not warranted. Taxpayer [relied on a qualified tax professional / followed published Department guidance / had substantial authority for the position] and acted with reasonable cause and in good faith. Penalty abatement is requested in full.

6.5. Statute of Limitations

To the extent the Notice reaches tax periods more than four (4) years prior to issuance, the assessment is barred by the limitations period in C.R.S. § 39-21-107(2) and any federal RAR-extension provisions are inapplicable because [no federal adjustment was made / the federal-state tie-in does not extend the period as asserted].

6.6. Constitutional Defenses

The asserted tax violates [the Commerce Clause / Due Process Clause / Equal Protection / TABOR Art. X § 20] because [explain — e.g., lack of substantial nexus, internal/external consistency under Complete Auto, discriminatory taxation of interstate commerce, retroactive application].

7. REFUND CLAIM (IF APPLICABLE)

7.1. To the extent the protested matter involves a rejected refund claim, Taxpayer also asserts an affirmative refund claim under C.R.S. §§ 39-21-108 and 39-22-622.

7.2. Limitations period. For Colorado income tax, the refund-claim period is the federal limitations period (generally three years from the due date of the return or two years from payment, whichever is later) PLUS one year, per C.R.S. § 39-21-108(1).

7.3. Amount. Taxpayer claims a refund of $[AMOUNT] plus statutory interest from [DATE] at the rate prescribed by C.R.S. § 39-21-110.

7.4. Basis. [State the legal and factual basis: overpayment due to amended federal return, recomputation of credit, withholding overpayment, etc.]

8. TABOR OVERLAY (IF APPLICABLE)

8.1. To the extent the Notice disallows or recovers any portion of the State Sales Tax Refund (TABOR refund) reported on Taxpayer's Colorado Individual Income Tax Return (DR 0104), Taxpayer asserts an independent claim under Colo. Const. Art. X, § 20.

8.2. Taxpayer was a qualifying full-year Colorado resident for tax year [YYYY] and was entitled to a TABOR refund in the amount of $[AMOUNT] under the tier applicable to Taxpayer's adjusted gross income.

8.3. Disallowance of the TABOR refund without statutory authority constitutes an unauthorized retention of excess state revenue in violation of the TABOR amendment.

9. HEARING REQUEST AND PROCEDURAL ELECTION

9.1. Formal hearing requested. Taxpayer requests a formal administrative hearing before a Hearing Officer of the Hearings Division pursuant to C.R.S. § 39-21-103 and 8 CCR 1505-15.

9.2. Pre-hearing conference. Taxpayer is willing to participate in an informal conference with the Tax Conferee prior to formal hearing in an effort to resolve disputed issues.

9.3. In-person / remote. Taxpayer requests [in-person hearing in Denver / remote (WebEx/Zoom) hearing / telephonic hearing].

9.4. Estimated time. Taxpayer estimates [NUMBER] hours for direct presentation, exclusive of cross-examination.

9.5. Witnesses. Taxpayer anticipates calling [NUMBER] witnesses, including [NAMES / ROLES]. A final witness list will be provided pursuant to the Hearing Officer's scheduling order.

9.6. Notice required. Taxpayer requests at least thirty (30) days' written notice of the time, date, and place of hearing, as required by C.R.S. § 39-21-103(4).

10. RESERVATION OF RIGHTS

10.1. Taxpayer reserves the right to amend or supplement this protest at any time prior to hearing, and to assert additional grounds, including grounds discovered through document production by the Department.

10.2. Taxpayer reserves the right to appeal any adverse Final Determination to district court for de novo review under C.R.S. § 39-21-105 within thirty (30) days of mailing of the Final Determination.

10.3. Nothing in this protest waives any defense, including statute of limitations, constitutional defenses, or the right to seek refund or credit for any other tax period.

11. REQUESTED RELIEF

WHEREFORE, Taxpayer respectfully requests that the Department:

• A. Withdraw the Notice in its entirety and abate all proposed tax, interest, and penalties for the periods at issue;
• B. In the alternative, modify the Notice to reflect the correct Colorado tax liability of $[AMOUNT] as set forth herein;
• C. Refund any overpayment together with statutory interest under C.R.S. § 39-21-110;
• D. Confirm the statutory stay of collection pursuant to C.R.S. § 39-21-103(8) during the pendency of this protest and any timely appeal;
• E. Schedule a formal administrative hearing with at least 30 days' notice; and
• F. Grant such further relief as is just and proper.

12. SIGNATURE BLOCK AND POWER OF ATTORNEY

Respectfully submitted,

[________________________________]

[ATTORNEY / CPA NAME]

Colorado Bar No. [####] [or CPA license # / EA #]

[FIRM NAME]

[ADDRESS]

Telephone: [NUMBER] Email: [EMAIL]

Counsel for Taxpayer [TAXPAYER NAME]

☐ Form DR 0145 Power of Attorney attached as Exhibit [__]

13. EXHIBITS AND CERTIFICATE OF SERVICE

13.1. Exhibit List

13.2. Certificate of Service

I certify that on [DATE], a true and correct copy of the foregoing Protest was served upon the Colorado Department of Revenue by certified mail, return receipt requested, addressed as set forth on page one, and by electronic mail to the assigned auditor at [EMAIL].

[________________________________]

[ATTORNEY NAME]

14. COLORADO PRACTICE NOTES

• 30-day deadline runs from MAILING date. C.R.S. § 39-21-103(1). The Department treats the postmark/mailing date on the Notice as controlling — not the date the taxpayer actually receives the Notice. Calendar conservatively from the mailing date and confirm via Department records if the postmark is illegible.
• Hearing officer model — not a board. Unlike many states, Colorado does not use a Board of Tax Appeals or Tax Court. Hearings are conducted by the Hearings Division of CDOR. The Hearing Officer issues a written recommendation; the Executive Director (or Deputy Director) signs the Final Determination. While the Executive Director historically gives substantial weight to the Hearing Officer's findings, the recommendation is not binding.
• Tax Conferee informal conference. Most protests first route to a Tax Conferee for informal resolution before reaching a formal hearing. Use the conferee stage to narrow issues, exchange information, and pursue settlement; preserve all legal theories regardless of conferee outcome.
• District court appeal is de novo. C.R.S. § 39-21-105(2)(b). The taxpayer may present new evidence, witnesses, and legal arguments not raised at the administrative level. The administrative record does NOT constrain the district court. However, novel constitutional theories should still be preserved in the protest to avoid waiver.
• Bond / payment for collection stay on appeal. While the protest itself stays collection, an appeal to district court requires either prepayment of the disputed amount or posting of a bond under C.R.S. § 39-21-105(4). Plan financing early.
• Burden of proof. The taxpayer bears the burden on all issues except (i) fraud with intent to evade tax and (ii) transferee liability, where the Department bears the burden. C.R.S. § 39-21-105(2)(b).
• TABOR overlay. Where the dispute touches the State Sales Tax Refund, plead TABOR independently. Refund-mechanism cases implicate Colo. Const. Art. X, § 20 and may sustain different remedies than ordinary income tax disputes.
• Federal RAR (Revenue Agent Report) tie-in. Colorado requires reporting of federal changes within 30 days of final IRS determination under C.R.S. § 39-22-601(6). Failure can extend the limitations period; a properly filed RAR amended return (DR 0104X / DR 0112X) starts the protest clock for any deficiency that follows.
• Penalty waiver. Penalty abatement under reasonable-cause standards is routinely available at the conferee stage for first-time or good-faith errors. Document reasonable-cause facts contemporaneously.
• Statute of limitations. Standard assessment limitations period is generally tied to the federal period plus one year for income tax (C.R.S. § 39-21-107). False/fraudulent returns and non-filers face an unlimited period.

15. SOURCES AND REFERENCES

• C.R.S. Title 39, Article 21 (Procedure and Administration) — https://leg.colorado.gov/colorado-revised-statutes
• C.R.S. § 39-21-103 (Hearings) — https://law.justia.com/codes/colorado/title-39/specific-taxes/general-and-administrative/article-21/part-1/section-39-21-103/
• C.R.S. § 39-21-105 (Appeals — district court de novo) — https://law.justia.com/codes/colorado/title-39/specific-taxes/general-and-administrative/article-21/part-1/section-39-21-105/
• C.R.S. § 39-21-108 (Refunds) — https://law.justia.com/codes/colorado/title-39/specific-taxes/general-and-administrative/article-21/part-1/section-39-21-108/
• C.R.S. Title 39, Article 22 (Income Tax) — https://leg.colorado.gov/colorado-revised-statutes
• Colorado Department of Revenue — File a Protest — https://tax.colorado.gov/file-a-protest
• Colorado Department of Revenue — Protest Rights & Process — https://tax.colorado.gov/protest-rights
• Colorado Department of Revenue — Administrative Hearings — https://tax.colorado.gov/administrative-hearings
• Colorado Department of Revenue — Hearings Division — https://cdor.colorado.gov/hearings-division
• 1 CCR 201-1 (Procedure and Administration) — https://www.sos.state.co.us/CCR/
• 8 CCR 1505-15 (Hearings Division procedural rules) — https://www.sos.state.co.us/CCR/
• Colo. Const. Art. X, § 20 (TABOR) — https://leg.colorado.gov/
• Colorado Department of Revenue — TABOR — https://tax.colorado.gov/TABOR
• Form DR 0145 (Power of Attorney) — https://tax.colorado.gov/individual-income-tax-forms

Disclaimer: This template is provided for informational purposes only and does not constitute legal advice. An attorney or qualified tax professional licensed in Colorado must review and customize this document before submission. Statutes, regulations, and Department procedures change frequently; verify all authorities and deadlines before use.