In the News

Business personal property tax break bill coming — but in smaller form

Source: Denver Post

Mar 4, 2014, Ed Sealover

The curtain goes up this week on the most anticipated business personal property tax reform bill of the 2014 Colorado Legislature – but the measure will have a smaller scope than sponsors originally expected.

When Rep. Dave Young, D-Greeley, first discussed his plans with the Denver Business Journal in December, his goal was to offer to all companies in the state a tax credit that would cover the cost of the property taxes they paid on their first $25,000 worth of business equipment. This identifies just how expensive it can be when buying equipment for your business, but for businesses that need specific equipment to operate, they do not have a choice. However, there are ways around this. It is clear that there is less tax on second-hand items, so this would be worth considering for any business. It would be worth business owners taking the time to check out Equify Auctions to find second-hand business equipment, as this would hopefully reduce their expenses. This would likely save them a lot of money compared to buying items at full price.

That idea was a huge expansion from the current exemption, which allows businesses with $7,000 or less of equipment to get exemptions, but offers no tax breaks to any company that has equipment worth even $1 over that cap.

House Bill 1279 as introduced will raise the cap to $25,000 worth of equipment – but it will allow the credits only for companies that have no more than that amount of business personal property, not every company seeking a break on its first $25,000 in equipment.

Under that plan, some 45,300 small companies are estimated to get a new tax break, in addition to the roughly 30,000 paying no taxes now because of the $7,000 exemption.

But that means roughly 425,000 larger businesses in Colorado will not benefit from the bill, despite the fact that economic-development officials say the tax is one of the biggest detriments to attracting expanding or relocating companies to the state.

Young said the reason for the reduced scope is simple – cost to the state. HB 1279 – which he is cosponsoring with Rep. Dianne Primavera, D-Broomfield – is estimated to cost Colorado $15.3 million in tax revenue.

Young said he did not know exactly what it would have cost every business in the state to get a tax credit. But rumors were circulating around the Capitol that the number may have exceeded $200 million.

This scaling down of the impact of the tax credit – which is proposed to run from 2014 through 2019 – hasn’t lessened support for the bill.

Lobbyists for the Colorado Association of Commerce and Industry, and for the Colorado Competitive Council, both said Tuesday that while a break on the first $25,000 worth of equipment for everyone would have affected more companies, any cut in the hated tax is a good start.

“You just nip away at an onerous tax,” said Loren Furman, The Colorado Chamber senior vice president of state and federal relations. “I think the more we accomplish on this issue, the more it will help businesses in coming to Colorado.”

Added Travis Berry of the Colorado Competitive Council: “The business personal property tax is an investment killer. Anything that loosens it is good for business.”

Rep. Chris Holbert, a Parker Republican who has run several business personal property tax breaks in past years, said he remains concerned that the accounting and paperwork required to receive the credit could virtually cancel out the economic benefit for the smallest businesses, and he would prefer a straight exemption. But he still expects to back HB 1279. However, it’s looking as though these small businesses might be able to look into the advantages and disadvantages of accounting services, for example, read into this comparison between freshbooks vs quickbooks. If a small business decided to complete their accounting processes using such software, they could find that the accounting and paperwork necessary for the credit could turn out to be beneficial after all, although it will more than likely be unique to each business in question.

Young added that if this measure passes, he hopes it can be just a start to a discussion about greater tax breaks in the future.

“The intent all the way along was to benefit small business. That’s the segment of the business community we hear the most about,” he said. “I just don’t think you can tackle this all at once. So, this provides us a first step down a pathway that in future sessions we can deal with.”

The bill is scheduled for its first hearing Thursday afternoon in the House Business, Labor, Economic and Workforce Development Committee.