Fracking tax refunds frustrating government entities needing cash
GLENWOOD SPRINGS — State officials this week told anxious government entities in Garfield and Rio Blanco counties that continuing refunds for energy companies are possible in the fallout of a 2010 court decision applying to hydraulic fracturing operations.
“We’re not out of the woods yet,” said Eric Myers, director of the Taxpayer Services Division for the state Department of Revenue.
That news failed to provide the assurance being sought by library, emergency responder and other entities that have seen sales tax revenue reduced or even eliminated while the rebates continue.
“It has been a really difficult couple of years for us and it’s not over. That’s the hardest part,” said Amelia Shelley, executive director of Garfield County Libraries, speaking to Myers and other Revenue officials.
The refunds stem from a 2010 Colorado Court of Appeals ruling favoring Noble Energy in a lawsuit against the Department of Revenue. Noble objected to being charged sales tax on fracturing materials such as sand, contending they’re just part of the fracturing process that is the real goal of the transaction.
The Noble claim was for $2.8 million plus interest, but also has resulted in other companies putting in for refunds. More than $4 million has been refunded in Garfield County alone by withholding sales tax distributions.
Garfield County’s Emergency Communications Authority is funded solely from sales taxes and has experienced months with no revenue, forcing it to tap reserves.
“How do you expect us to provide those critical 911 services to this community?“asked Garfield Sheriff Lou Vallario of state officials. He is chairman of the authority’s board.
Myers said the Department of Revenue only distributes money rather than appropriating it, and isn’t in a position to backfill the refunded amounts.
Debbie Morlan, sales and use tax administrator for Rio Blanco County, asked why the state didn’t appeal the ruling to the Colorado Supreme Court.
“I think we should have had a say on whether the state went to the Supreme Court on this,” she said.
Garfield County Attorney Frank Hutfless questioned why the county was on the hook for any of the $2.8 million Noble claim when it wasn’t even a party to the lawsuit.
A three-year statute of limitations applies to tax refund filings. Four claims filed within three years of the April 2010 ruling continue to be considered by the state. In addition, companies can continue seeking refunds in more recent cases in which they mistakenly overpay, as long as they do it within three years of the payment.
One concern for tax entities is that the refunds seem to be higher than the amount of taxes the entities would expect energy companies to have paid for the materials in question.
“We’re getting into quite a large number here,” Shelley said. “We’re just trying to correlate that number with some sense of reality.”