The Internal Revenue Service won’t treat refund checks distributed last year to Colorado taxpayers as taxable income, the agency announced Friday afternoon after the state’s federal lawmakers called on the IRS commissioner to stick to longstanding policy.

Earlier this week, the federal tax-collection agency told taxpayers in Colorado to delay filing their 2022 income tax returns until the agency decided whether to tax refunds issued last summer under the state’s Taxpayer’s Bill of Rights.

The move drew stern reproval on Friday from Colorado lawmakers, who noted that the IRS has never taxed TABOR refunds and urged the agency to issue a prompt decision.

The state sent TABOR refunds to millions of Coloradans last summer as a way to distribute the bulk of the state’s excess revenue, as required by the 1992 voter-approved constitutional amendment – $750 for individual filers and $1,500 for joint filers.

Every member of Colorado’s congressional delegation signed on to a letter Friday morning asking the IRS to treat the refund checks as nontaxable income, like the agency has done for decades.

“We hope that your agency can resolve this in a timely manner to avoid further confusion within our state,” read the letter, which was led by U.S. Rep. Joe Neguse, a Lafayette Democrat.

The lawmakers’ letter detailed the agency’s history of treating previous TABOR refunds – distributed using a variety of mechanisms, including property tax breaks and higher-than-usual state income tax refunds – as nontaxable income.

But it could have been a call Friday morning from U.S. Sen. Michael Bennet to acting IRS Commissioner Douglas O’Donnell that spurred the swift response.

Bennet, who took over this week as chair of the Senate Finance Committee’s Subcommittee on Taxation and IRS Oversight, explained to O’Donnell how Colorado’s unique TABOR refunds work and why it doesn’t make sense for the federal government to tax them, the Colorado Democrat said in a statement.

Bennet applauded the IRS decision.

“The last thing Colorado families need right now is a $400 million tax increase. I’m relieved that the IRS heeded our call and won’t tax Coloradans’ TABOR payments this year,” Bennet said in a statement, referring to his office’s estimate of the additional cost state taxpayers would face if the IRS had decided to tax the refunds.

Added Bennet: “The week-long uncertainty about whether the IRS was going to tax state refunds was a disaster. As chair of the Senate’s subcommittee on IRS oversight, I will demand answers for why the IRS explored this radical change, and why this took place in the middle of filing season. And as the IRS looks to the 2023 tax year, I will continue to fight to keep TABOR tax-free.”

Gov. Jared Polis welcomed the agency’s decision.

“We, like millions of Coloradans, are breathing a sigh of relief that the IRS and federal government have stepped away from taxing our refunds this year,” he said in a statement. “This ultimately is the best outcome for families and individuals and we will continue seeking out more ways to save people money. I will continue fighting to maintain this precedent that refunds under TABOR should never be taxed.”

Neguse, a Lafayette Democrat, told Colorado Politics he, too, is pleased with the agency’s decision.

“For thirty years TABOR revenue payments have rightfully made their way to Colorado families without any issues from the IRS,” he said via text message. “I am grateful the agency has heeded my call, joined by my colleagues, to ensure that it stays that way and that these payments will not be taxed.”

Last year’s one-size-fits-all TABOR refund checks were a one-time program, resulting from bipartisan legislation described by Democratic sponsors as a way to get money to Coloradans faster than usual as inflation surged.

Republican critics blasted the program, dubbed the “Colorado Cashback,” as a blatant attempt to curry favor with voters just before ballots started going out for the November election.