Colorado Supreme Court upholds state paid leave program

In 2020 Colorado voter passed Proposition 118, which calls for the creation of a state agency that will (not unlike current workers compensation and unemployment agencies) provide paid family leave commencing January 1, 2023. In Chronos Builders, Inc. v. CDLE, a unanimous Colorado Supreme Court upheld Proposition 118, holding that the premium the new agency will charge to fund such benefits is not a tax in violation “of section (8)(a) of the Taxpayer’s Bill of Rights (‘TABOR’), which provides, as relevant here, that ‘[a]ny income tax law change . . . shall also require all taxable net income to be taxed at one rate, . . . with no added tax or surcharge.’ Colo. Const. art. X, § 20(8)(a).”

We conclude that the premium collected by the Division does not implicate section (8)(a) because the relevant provision of that section concerns changes to “income tax law.” The Act, a family and medical leave law, is not an income tax law or a change to such a law. Moreover, the premium collected pursuant to the Act is a fee used to fund specific services, rather than a tax or comparable surcharge collected to defray general government expenses. We therefore hold that the Act does not violate section (8)(a).