Colorado Capitol Report

Senate Committee Torpedoes The Colorado Chamber-Opposed Bill to Black-List Countries as “Tax Havens,” Forcing Colorado Corporations to Prove They Are Not Hiding Income

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State Policy News

Senate Committee Torpedoes CACI-Opposed Bill to Black-List Countries as “Tax Havens,” Forcing Colorado Corporations to Prove They Are Not Hiding Income

Late yesterday afternoon, the Senate State, Veterans and Military Affairs Committee on a partisan 3-2 vote killed HB-1275.  A similar bill died in the Senate at the end of the 2015 legislative session.

HB-1275 would have empowered the Colorado Department of Revenue (DOR) to “black list” countries that it alleged were “tax havens.”  Colorado corporations with subsidiaries or affiliates operating in these countries would then have had to prove to the DOR that their operations were legitimate business activities and were not attempts to shelter income from the Colorado corporate income tax of 4.63 percent.

Had the bill been passed by the legislature, it would have gone before the voters on the November ballot because, under TABOR, it would have been a change in tax policy and, according to a fiscal note that the CACI Tax Council disputed, it would have brought in $140 million in new tax revenue over the state’s next three fiscal years beginning July 1st that would have been earmarked for K-12 education.

Testifying against the bill were the following:

  • Rhonda Sparlin, CACI Tax Council Chair; Partner, RubinBrown LLP; Member, CACI Board of Directors
  • Nikki Dobay, Council on State Taxation, Portland, Ore.
  • Scott Froehlich, TerumoBCT
  • Patrick Boyle, Colorado Competitive Council
  • Nicholas Colglazer, Colorado Competitive Council & Metro Denver Chamber of Commerce
  • Michelle McCarthy, Colorado Bar Association

“This bill has sent a chilling message to multinational corporations in Colorado that House Democrat lawmakers are targeting them for legal operations in countries that the Colorado Department of Revenue alone could decide to blacklist as ‘tax havens,” said Loren Furman, CACI Senior Vice President State and Federal Relations,” and the DOR would require that the corporations prove that they are not sheltering income from Colorado’s corporate income tax.”

“Forcing a corporation to prove to the Colorado Revenue Department that it is operating legally abroad in a black-listed country would have sent a terrible economic development message to corporations considering either locating or continuing to operate or expand in our state,” Loren said.

Making the bill a House Democratic Caucus priority, Speaker Dicky Lee Hullinghorst (D-Boulder) fast-tracked the proposal through the House.

On the morning of House floor debate on Final, Third Reading, The Denver Post carried an editorial that said that “it would be a major mistake for Colorado to start officially labeling countries like the Netherlands, Ireland and Singapore as tax havens and requiring companies that operate there to prove they are not trying to dodge state corporate income taxes.”

Republican House members had sharply questioned during committee and floor debate why Governor John Hickenlooper (D) and Fiona Arnold, executive director of the Colorado Office of Economic Development and International Trade, did not speak out against the bill, given that some of the corporations named by the bill’s proponents as having operations in the so-called tax havens were corporations that the Governor and his economic team had recruited to Colorado in highly publicized fashion.  No one from OEDIT appeared before the Senate State Affairs Committee yesterday to testify about the bill.

HB-1275 can be viewed as just one more arrow in the quiver of progressive Democrats, who are shooting under the theme of income inequality at Wall Street, large corporations and wealthy individuals in this highly combustible election year at both the state and national levels.

If the Democrats regain control of the Senate this November and retain control of the House, then it’s a fairly safe bet that the legislature in 2017 may send a new version of this bill to Governor John Hickenlooper to sign.  If this troublesome scenario comes to pass, CACI will ask the Governor to veto the bill.

The Senate co-sponsors of the bill were Senator Matt Jones (D-Louisville) and Senator Kerry Donovan (D-Wilcott).

CACI members are encouraged to thank the following members of the Committee for opposing and killing HB-1275:

Although Senator Ray Scott (R-Grand Junction) chairs the Committee, he had to leave the hearing and his place was taken by Senator Cooke.

The following two Democrat Senators voted for the bill:

Since the introduction of the bill in the House on February 17th, the CACI lobbying team and members of the CACI Tax Council have worked hard to stop HB-1275, including assembling a large business coalition to fight the proposal.

CACI members with questions about HB-1275 should contact Loren Furman, CACI Senior Vice President, State and Federal Relations, at 303.866.9642.

For news media coverage of HB-1275, read:

“Bill targeting offshore corporate tax havens runs aground in Colorado Senate,” by Ed Sealover, The Denver Business Journal, March 29th.

“House Sends Hotly Debated Off-Shore Tax Bill to Senate,” CACI Colorado Capitol Report, March 11th.