Suzy Ageton George Karakehian KC Becker Tim ... - City of Boulder

intent to tax all software purchased for use in the city, regardless of whether it is
downloaded or purchased on a disk.
We do not believe that the amendment would be subject to the Colorado Taxpayer Bill of
Rights and therefore require a public vote. The relevant TABOR language is as follows:
[D]istricts must have voter approval in advance for . . . any new tax, tax rate increase,
mill levy above that for the prior year, valuation for assessment ratio increase for a
property class, or extension of an expiring tax, or a tax policy change directly causing a
net tax revenue gain to any district.
Colorado Const. Art. 10, § 20 (4)(a)(emphasis added).
Amending the ordinance would not be a tax policy change. The city has consistently
construed this ordinance to apply to downloaded software and database access. While the
court’s decision rejected this interpretation, the amendment would not be a change in the
city’s tax policy. The Colorado Supreme Court has explained that “tax policy change” is
“an undefined ‘catch-all’ phrase attempting to encompass any district action that is the
equivalent of a new tax or a tax rate change that would not be covered by the more
specific requirements listed before it.” Mesa County v. State, 203 P.3d 519, 529 (Colo.
2009). The amendment would not be the equivalent of a new tax, but a clarification of
the city’s intent with respect to an old tax.
In addition, to be subject to TABOR, the tax policy change must cause “a net tax revenue
gain.” In Mesa County, the Court held that TABOR’s voter approval requirements do not
apply to policy modifications that would have only a de minimis impact on a district’s
revenues. Requiring an election for a de minimis revenue gain would “make any
legislative action in the revenue arena nearly impossible and cripple the government’s
ability to function.” The Court provided little guidance as to what constituted a de
minimis revenue gain. It simply stated that the voters could not have intended, when
passing TABOR, that the government be required to hold elections that cost more than
the additional revenue obtained. Id. Since the city has always collected this tax, the
amendment would yield no new revenue above that previously collected. Thus, the
amendment would not result in a “net tax revenue gain.”
ANALYSIS
The council’s decision in 1981 to tax software involved an intense public process and
faced significant opposition from the business community. Nevertheless, the council
decided to tax software. The clarification to include “computer instructions” to the
definition in 1999 was considered a housekeeping item by council. The Ball Aerospace
decision will ultimately eliminate this tax as most if not all software is downloaded over
the internet. Council can choose to acquiesce and not clarify its intent or adopt the
proposed ordinance to clarify that the tax does not depend on the method of delivery.
ATTACHMENT A Proposed Ordinance.
K:\FIAD\First Read Agenda memo Software Ord.-.doc
Agenda Item 3M Page 4