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Dan Pilcher
CACI Senior Vice President
& Chief Operating Officer
Phone: 303.866.9600
E-Mail:
dpilcher@cochamber.com
Friday, April 30, 2010
House Finance Committee Approves Bill Targeting Business Tax
Credits for Review
Late this afternoon, the House Finance Committee passed on a
bipartisan six-to-four vote HB-1429, which will require the
House and Senate Finance Committees each year to jointly review
specific business tax credits and decide whether they should be
continued, repealed, or modified. Representative Ellen Roberts
(R-Durango) was excused and not present.
CACI is strongly opposed to the bill. CACI Vice President of
Governmental Affairs Loren Furman and CACI Tax Council Chair
Rhonda Sparlin testified against the bill.
The bill now goes to the House Floor for Second Reading. House
Majority Leader Paul Weissmann (D-Louisville) is sponsoring the
late bill, which was only introduced Wednesday.
The bill targets the following taxes paid by businesses:
severance tax, gasoline and special fuel tax, alcohol beverage
tax, sales-and-use tax and income tax.
The bill will require the two legislative committees to conduct
the review by focusing on the following criteria:
·
Any known economic benefits related to the tax benefit;
·
Whether the tax benefit is accomplishing the purpose for which
it was created;
·
The amount of state and local government tax revenue that is
directly lost as a result of the tax benefit;
·
The fairness of the tax benefit; and
·
Whether the tax benefit is in the public interest.
One of CACI’s main objections to the bill is the relative
subjectiveness of the above five criteria.
The bill requires the staff of the Legislative Council to
conduct a study of each tax. The Council director will decide
which sales-and-income taxes will be reviewed in any given
year. The Joint Finance Committee can recommend bills to repeal
or modify “any tax benefit” without being subjected to any of
the legislature’s bill-introduction deadlines or limitations.
Representative Pommer Kills Own Bill Limiting Corporate
Income-Tax Credit for Employee Compensation
This afternoon, in the House Finance Committee, Representative
Jack Pommer (D-Boulder), killed his own bill, HB-1263, which was
a priority bill for defeat by CACI.
CACI strongly opposed HB-1263, which would have “de-coupled”
state business income-tax deductions from Federal deductions.
The bill would have increased taxes on businesses by $27.7
million for the two years beginning July 1, 2010.
CACI understood that the Colorado Office of Economic Development
and International Trade also had significant concerns with the
bill.
Representative Pommer, who chairs the influential Joint Budget
Committee and the House Appropriations Committee, told the House
Finance Committee that the Capitol had been beset by a “swarm of
business lobbyists” whose arguments against his bill “were
patently untrue.” He said lawmakers had been caught this
session in a “maelstrom” by business groups and lobbyists who
“called us anti-business.” In a left-handed compliment to the
business lobbying corps, Representative Pommer said “ . . we
react to the people who lobby the hardest . . .”
The bill’s fiscal note estimated that HB-1263 would have brought
in $8.8 million in fiscal 2010-2011, beginning July 1, 2010, and
$18.9 million in the following fiscal year. In other words, the
bill would have increased taxes on businesses by $27.7 million
over the two fiscal years.
This proposal was not included in Governor Ritter’s efforts to
balance the 2009-2010 budget nor in his proposed 2010-2011
budget released last November.
Under Federal income-tax law, salary or other compensation for
personal services generally are deductible in computing the
taxable income of the payer of services. This avoids double
taxation since the amounts paid to the provider of the services
are generally included in their income. Additionally, Federal
tax law imposes limits on an amount of compensation that may be
deducted ($1 million), but that only applies to publicly-traded
corporations and corporations receiving Federal bailout funds.
CACI’s objections to the bill included the following:
·
HB-1263 included “other compensation for personal services,”
which encompassed all benefits, including accident and health
insurance benefits, retirement plans and other income received
as “compensation” which are currently excluded from taxable
income.
·
HB-1263 would have complicated Colorado income-tax law by
creating a significant difference between Federal income-tax law
and Colorado income-tax law and would have imposed an unusual
and unnecessary cost on Colorado businesses.
·
The bill would have discouraged companies and corporate
headquarters (including high-tech and green jobs) from locating
to Colorado. This bill would have required Colorado to create
more incentives to attract companies to Colorado.
·
Neither the payer nor the recipient would have needed to be a
resident or even be present in Colorado for HB-1263 to apply.
·
A corporation headquartered in London with business activity in
Colorado would have been subjected to the limit if the
corporation filed a Colorado state income-tax return. Because
the cost of living in London is higher, salaries there will be
higher than for an equivalent Colorado position. HB-1263 imposes
value systems on businesses in different cultures half a world
away.
·
HB-1263 would have affected corporations and sole proprietors
paying for personal services. Consider an attorney who hires a
private investigator who charges above $250,000 based on
national market pay rates. The attorney would have lost the
deduction above $250,000, giving him a cost disadvantage with
firms outside Colorado.
House Finance Committee Chair Buries His Bill to Eliminate
Enterprise-Zone Tax Credits
On Wednesday, House Finance Committee Chair Joel Judd
(D-Denver), lacking the votes to get his bill out of his own
Committee, postponed HB-1396 until May 30th. The
session must end by midnight on next Wednesday, May 12th,
according to the Colorado Constitution.
CACI was part of a massive coalition of business organizations,
individual companies, local chambers of commerce, economic
development organizations, trade associations and towns and
counties that successfully fought the bill.
HB-1396 would have increased taxes on businesses located in
enterprise zones by $37.4 million in fiscal year 2010-2011 and
by $77 million in fiscal year 2011-2012 for a total of $114.4
million over the two fiscal years.
Here’s the list of companies, business organizations, towns,
counties and other organizations that have joined the
broad-based business coalition to oppose HB-1396:
Companies, Business Organizations and Other Organizations
A. Marvin Strait, CPA
Action 22
American Furniture Warehouse
CaridianBCT
Climax Molybdenum
Club 20
Colorado Concern
Colorado Competitive Council (C3)
Colorado Counties Inc.
Colorado Municipal League
Colorado Motor Carriers Association
EnCana Oil & Gas
Evraz Rocky Mountain Steel
Green Industries
International Association of Shopping Centers
NAIOP
National Federation of Independent Businesses
Printing Industries of Colorado
Progressive 15
Qwest
St. Mary Land & Exploration
St. Mary’s Hospital Foundation
Suncor Energy
Teague Diversified
Union Pacific
Verizon and Verizon Wireless
Xcel Energy
Economic Development Organizations
Economic Developers' Council of Colorado
Adams County Economic Developers' Council
Aurora Economic Development Council
Broomfield Economic Development Council
Colorado Springs Economic Development Council
Grand Junction Economic Development Council
Jefferson Economic Development Council
Metro-Denver Economic Development Council
Montrose Economic Development Council
Northern Colorado Economic Development Council
Pueblo Economic Development Council
Region Nine Economic Development District
Rifle Economic Development Corporation
Westminster Economic Development Council
Chambers of Commerce, Business Organizations, Towns and Counties
Akron Chamber of Commerce and Town of Akron
Arvada Chamber of Commerce
Aurora Chamber of Commerce
Broomfield Chamber of Commerce
Colorado Springs Chamber of Commerce
Colorado Women’s Chamber of Commerce
Douglas County Business Alliance
Fort Collins Chamber of Commerce
Fruita Chamber of Commerce
Grand Junction Chamber of Commerce
Greater Woodland Park Chamber of Commerce
Highlands Ranch Chamber of Commerce
Metro Denver Chamber of Commerce
Golden Chamber of Commerce
Metro North Chamber of Commerce
Northern Colorado Legislative Alliance
Phillips County
Rifle Chamber of Commerce
Town of Limon
West Chamber Serving Jefferson County
House Sends Bill Limiting Enterprise-Zone Tax Credits (and
Raising Business Taxes $36.4 Million) to Senate
On Tuesday, the House gave a whisker-thin, 33-to-32 margin of
approval on final, Third Reading, to an amended HB-1200, which
would limit enterprise-zone investment tax credits. In the
Senate, the bill has been assigned to the Finance Committee.
The Senate sponsor is Senator Rollie Heath (D-Boulder).
In the House, the minority Republicans were joined in opposition
to HB-1200 by five Democrats: Edward Casso (Commerce City),
Buffie McFadyen (Pueblo West), Wes McKinley (Walsh), Sal Pace
(Pueblo) and Ed Vigil (Fort Garland).
The bill limits to $250,000 the income tax credit that a company
could take on its corporate income tax for investments in an
enterprise zone. The bill’s sponsor, Representative Dickey Lee
Hullinghorst (D-Boulder), asserted that a company, to take
advantage of the credit, would have to earn at least $5 million
yearly. She said that only about 30 of the 5,500 companies that
take the credit each year would be affected by her bill.
Companies could carry forward the amount of the credit above
$250,000 for three years before they could take advantage of
that amount as a credit.
This bill was one of the 13 bills put forth last November by
Governor Bill Ritter, as part of his 2010-2011 budget proposal,
to suspend or eliminate business tax credits, exclusions and
exemptions. The enterprise-zone tax credit was ranked in the
top four of the ones that are most critical to employers,
according to a CACI survey of businesses in December.
The bill’s fiscal note estimates that the state will receive
$11.8 million in tax revenue in fiscal year 2010-2011, which
begins this July 1st, and $24.6 million in the
following fiscal year. In other words, businesses located in
enterprise affected by this bill will pay an additional $36.4
million in increased taxes over the two fiscal years.
Currently, any depreciable equipment purchased and used within
an enterprise zone is eligible for a three percent tax credit.
The credit may be used up to $5,000 of the taxpayer’s tax
liability plus fifty percent of the taxpayer’s liability above
$5,000.
Here are CACI’s major concerns with HB-1200:
·
Because HB-1200 caps the enterprise zone credit at $250,000, it
will hurt companies that invest millions of dollars in equipment
to operate their business;
·
If this legislation is adopted, the unfortunate, likely result
will be that companies will not invest in new equipment until
the full credit is available again in three years; and
·
By capping this credit at $250,000 for three years, companies
may either be discouraged from locating in Colorado until the
full credit is available or will look to locate and invest in
other states that offer a higher enterprise-zone credit.
For coverage of the House debate Tuesday by The Denver Post,
click on:
http://www.denverpost.com/legislature/ci_14972104
For further information on HB-1200 contact Loren Furman, CACI
Vice President of Governmental Affairs, at 303.866.8642 or via
e-mail at
lfurman@COchamber.com
House Gives Final Nod to Bill to Track Effect of State Economic
Development Incentives
On Wednesday night, the House gave final approval on a 33-to-30
vote to HB-1350, despite bi-partisan opposition to the bill.
Joining the minority-party Republicans were five Democratic
Representatives in opposing the bill: Joe Rice (Centennial),
Karen Middleton (Aurora), Jim Riesberg (Greeley), Christine
Scanlan (Dillon) and Sue Schafer (Wheat Ridge).
The bill has been assigned to the Senate Finance Committee. The
House Sponsor is Representative Sal Pace (D-Pueblo), and the
Senate sponsor is Senator Morgan Carroll (D-Aurora).
Last week, the House Finance Committee passed a heavily-amended
HB-1350 that, in its introduced form, would have required
businesses to disclose and rationalize economic development
incentives.
Even in its current version, however, CACI and many other
businesses and business organizations remain opposed to the bill
because it sends the wrong message to the business community,
both within the state and outside of Colorado. The Denver
Business Journal quoted Representative Spencer Swalm
(R-Centennial), who said during the debate, “We do one thing
after another down here that sends a bad message to business.
And businesses are beginning to get this message. They’re
leaving our state.”
The current version mandates that any company receiving state
economic development assistance provide to the Colorado Office
of Economic Development and International Trade (OED/IT)
information about the average and median salaries of workers
hired because of the incentives. By January 2011, the OED/IT
must give the legislature a report on how the State can
determine the number of jobs created by the various current
business tax incentives and provisions.
The original intent of Representative Pace was to review all of
Colorado’s business tax exemptions and credits and determine
whether or not they create jobs. Representative Pace believes
that these provisions should be eliminated if it cannot be
proved that they create jobs.
For more information about this bill, contact Loren Furman, CACI
Vice President of Governmental Affairs, at 303.866.8642 or via
e-mail at
lfurman@COchamber.com
Health-Care Bills Roundup
Note:
the following section was written by Dan Anglin, CACI
Governmental Affairs Representative.
Wellness-Incentives Bill Sent to Governor Ritter
The House concurred with Senate amendments to HB-1160, sending
the bill to Governor Ritter for his signature. The bill will
allow small-group and individual purchasers of health insurance
to create wellness programs and receive discounts on insurance
premiums.
As the only bill to lower the cost of purchasing insurance to be
considered by the legislature, CACI’s HealthCare Council
supported HB-1160 and worked with proponents of the bill to
ensure its passage through the legislature. To encourage the
Governor to sign HB-1160, click on this link:
http://www.colorado.gov/cs/Satellite/GovRitter/GOVR/1177024890452
Following is a summary of HB-1160:
Current law allows health-insurance carriers offering individual
health coverage plans and small -group plans and the board of
directors of the CoverColorado program or carriers providing
health-benefit plans to CoverColorado participants to offer
incentives or rewards to encourage persons covered under the
plans to participate in a wellness-and-prevention program. The
incentives or rewards can be based only on participation in a
wellness-and-prevention program and cannot be tied to any
particular outcome achieved by participating in the program.
The bill repeals the restriction on incentives based on outcomes
and allows carriers to base the incentives or rewards on
satisfaction of a standard related to a health risk
factor if the incentive or reward under the wellness and
prevention program is consistent with the nondiscrimination
requirements of the federal "Health Insurance Portability and
Accountability Act of 1996."
Licensed health-care providers, community-based wellness
programs, employers and individuals participating in an
individual health coverage plan are permitted to develop
wellness-and-prevention programs for carriers to consider in
determining the types of programs to offer to covered persons.
Carriers may offer incentives or rewards based upon satisfaction
of a standard related to a health-risk factor only if the
incentive or reward is offered pursuant to a bona fide
wellness-and-prevention program and only if the following
standards are met:
·
The incentive is reasonably related to the
wellness-and-prevention program and does not exceed 20 percent
of the cost of employee-only coverage under the health coverage
or small-group plan;
·
The wellness-and-prevention program is consistent with
evidence-based research and best practices, has a reasonable
likelihood of improving the health of or preventing disease in
participating individuals, and is not overly burdensome or a
subterfuge for discrimination based on a health factor;
·
The program gives individuals the opportunity to qualify for the
incentive at the time of enrollment in the plan and at least
annually thereafter;
·
The full incentive is made available to all similarly situated
individuals, and the program allows an individual or his or her
health-care provider to request a reasonable alternative
standard or waiver of an otherwise applicable standard for
obtaining an incentive if the standard is unreasonably difficult
for the individual to meet due to a medical condition or because
it is medically inadvisable for the individual to attempt to
satisfy the standard; and
·
The incentives are provided based on a program or activity that
is scientifically proven to improve health, and the carrier does
not provide incentives based on an individual's actual health
status.
Carriers are required to submit proposed incentives or rewards
to the consumer insurance council for its review, and the
council is to make recommendations to the Colorado Insurance
Commissioner regarding whether the proposed incentives or
rewards satisfy the statutory requirements. The council is also
to review and make recommendations regarding any complaints
filed with the Colorado Insurance Division regarding incentives
or rewards.
Current law requires the Division to provide to the health-care
task force information regarding wellness-and-prevention
programs being offered in the Colorado market. Instead, the bill
would require the information to be provided by July 1, 2015, to
the House and Senate Health and Human Services Committees, the
Senate Business, Labor and Technology Committee and the House
Business Affairs and Labor Committee.
Bill to Prevent Paying Compensation to Insurance Adjusters
Passes House Committee
SB-76, “Unreasonable Insurance Claims Practices,” sponsored by
Senator Morgan Carroll (D-Aurora) and Representative Dianne
Primavera (D-Broomfield), was amended in the House Judiciary
Committee yesterday and passed on a vote of seven-to-four. The
amendment, offered by Representative Joe Miklosi (D-Denver),
removed most of the original language of the bill and changed
the bill to state that:
(hh) Unfair compensation practices: basing the compensation of
claims employees or contracted claims personnel, including
compensation in the form of performance bonuses or incentives,
on any of the following:
I.
The number of policies canceled;
II.
The number of times coverage is denied;
III.
The use of a quota or limiting or restring the number or volume
of claims; or
IV.
The use of an arbitrary quota or cap limiting or restricting the
amount of claims payments without due consideration of the
merits of the claim.
In testimony during the hearing, CACI members from the
health-insurance industry and the property-and-casualty
insurance industry informed the Committee that the practice of
incentivizing claims adjusters to deny or delay claims does not
exist.
Committee members were reminded that the Commissioner of
Insurance, Marcy Morrison, informed them as recently as last
week that a complaint that this practice was being used in
Colorado has never been filed with the Colorado Division of
Insurance. The bill, as amended, will likely be heard on the
House Floor early next week.
For information on health-care bills, contact Dan Anglin, CACI
Governmental Affairs Representative, at 303.866.9641 or via
e-mail at
danglin@COchamber.com
CACI Councils Status Report
Click here to view a status report on the bills that CACI
Councils have taken a position on.
Upcoming CACI Council Meeting
Council meetings will be held at the CACI Office beginning at 12
Noon. This will be the last Council meeting held during the
2010 session of the Colorado General Assembly, which must
adjourn sine die by Wednesday, May 12th.
·
Governmental Affairs Council,
Tuesday, May 4th; lunch sponsored by
Shayne Madsen, Jackson Kelly PLLC, whose website is
http://www.jacksonkelly.com
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