SB 25-046
Fiscal Note
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
SB 25-046: LOCAL GOVERNMENT TAX AUDIT CONFIDENTIALITY
Prime Sponsors:
Sen. Bridges
Rep. Taggart
Published for: Senate Finance
Drafting number: LLS 25-0196
Fiscal Analyst:
Amanda Liddle, 303-866-5834
amanda.liddle@coleg.gov
Version: Initial Fiscal Note
Date: January 14, 2025
Fiscal note status: This fiscal note reflects the introduced bill, which was recommended by the Sales and
Use Tax Simplification Task Force.
Summary Information
Overview. The bill establishes confidentiality standards for third-party auditors and creates a new
misdemeanor for those who violate those confidentiality requirements.
Types of impacts. The bill is projected to affect the following areas:
Local Government
Appropriations. No appropriation is required.
Table 1
State Fiscal Impacts
Type of Impact
Budget Year
FY 2024-25
Out Year
FY 2025-26
State Revenue $0 $0
State Expenditures $0 $0
Transferred Funds $0 $0
Change in TABOR Refunds $0 $0
Change in State FTE 0.0 FTE 0.0 FTE Page 2
January 14, 2025 SB 25-046
Summary of Legislation
The bill clarifies confidentiality standards for the protection of taxpayer information used or
obtained for a sales and use tax investigation performed by a third-party auditor on behalf of a
local taxing jurisdiction. A violation of these standards is a misdemeanor punishable by a fine of
no more than $1,000 per violation. The bill prohibits auditors from divulging any taxpayer
information related to a sales and use tax audit except for in certain circumstances. Finally, the
bill clarifies the Department of Revenue’s (DOR) authority to share taxpayer information with
local taxing jurisdictions.
Background
Sales and use tax for statutory municipalities and some home-rule municipalities are state-
administered, meaning the DOR administers, collects, and performs audits for these
municipalities’ sales and use tax revenue. All audits conducted by the Department of Revenue
occur in-house.
Some self-collecting local taxing jurisdictions may choose to contract with a third-party auditor
rather than conducting audits in-house. If a third-party auditor identifies a business to audit that
conducts sales in multiple local taxing jurisdictions, under current law, the third-party auditor
may ask those jurisdictions if they would like to participate in an audit of that business. That
business may then be audited by multiple local taxing jurisdictions who contract with the
third-party auditor. This process is referred to as coordinated auditing, which was approved by
the state legislature in the 1980s. Under this bill, the new confidentiality requirements applicable
to third-party auditors clarify that confidential taxpayer information will not be disclosed during
coordinated audits conducted on behalf of local taxing jurisdictions.
Comparable Crime Analysis
Legislative Council Staff is required to include certain information in the fiscal note for any bill
that creates a new crime, changes the classification of an existing crime, or creates a new factual
basis for an existing crime. The following section outlines crimes that are comparable to the
offense in this bill and discusses assumptions on future rates of criminal convictions resulting
from the bill.
Prior Conviction Data and Assumptions
This bill creates the new offense of breaching confidentiality in a sales and use tax investigation,
an unclassified misdemeanor. To form an estimate on the prevalence of this new crime, the fiscal
note analyzed the existing offense of violating confidentiality of state documents as a
comparable crime. From FY 2021-22 to FY 2023-24, zero offenders have been sentenced and
convicted for this existing offense; therefore, the fiscal note assumes that there will be minimal Page 3
January 14, 2025 SB 25-046
or no additional case filings or convictions for the new offense under the bill. Because the bill is
not expected to have a tangible impact on criminal justice-related expenditures or revenue at
the state or local levels, these potential impacts are not discussed further in this fiscal note.
Local Government
To the extent that local taxing jurisdictions generate sales tax revenue from underpayments
identified by third-party auditors who share taxpayer information in ways that are no longer
permitted by this bill, sales tax revenue may be reduced for those local taxing jurisdictions. To
the extent other allowable audit strategies are used in place of those prohibited by the bill, any
reduction may be offset.
Effective Date
The bill takes effect July 1, 2025.
State and Local Government Contacts
Counties
District Attorneys
Judicial
Local Affairs
Municipalities
Revenue
Special District Association
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit the General Assembly website.