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State Policy News
Data-Center Tax-Incentive Bill Passes House Business Committee with One Dissenting Vote
Yesterday, the House Business Affairs and Labor Committee, with bipartisan reservations about the amount of money that the measure would cost the State and how appropriate it is to target one industry, approved HB-1158, the bill that would provide a tax incentive for companies that invest in data centers.
The CACI Tax Council supports the measure, which was advanced by a large business coalition of business organizations and individual companies. Data centers, which store information in the “cloud,” in recent years have become one of the hottest recruitment targets for state economic development efforts across the country.
The bill is noteworthy because of its bipartisan, leadership sponsorship in the House: House Speaker Pro Tempore Dan Pabon (D-Denver) and House Minority Leader Brian DelGrosso (R-Loveland).
Specifically, the bill provides for a refund of the state sales-and-use tax paid by a company that invests in information-technology equipment used in certain data centers. Here’s how the fiscal note describes the proposal in detail:
Summary of Legislation
This bill creates a sales and use tax refund for equipment used in qualified data centers. The refund can be claimed for sales and use taxes paid on equipment like computers, cables, switches, climate control, power generation, and backup power. The refund is available for sales and use taxes paid on equipment on or after January 1, 2016. The refund must be claimed between January 1 and April 1 in the year following the year when the sales taxes were paid. The maximum refund is $3 million per year, per taxpayer. In addition to the owner or operator of a data center, tenants making qualified purchases are also eligible to claim a refund.
Data centers must meet certain requirements for the equipment to be eligible for the refund and the Office of Economic Development and International Trade (OEDIT) must certify that those requirements are met. To qualify as a new data center, it must be at least 25,000 square feet and have at least $40 million in investments in a five-year period beginning January 1, 2011. A qualified refurbished data center must include 25,000 square feet and have a $20 million investment in a two-year period, beginning on January 1, 2014. Investments made prior to December 31, 2015 can be used to qualify as a new or refurbished data center, but no sales tax refunds are allowed on these purchases. Once a data center is certified by the OEDIT, it retains its status as a qualified data center for 20 years. Each year, the OEDIT is required to report to the General Assembly the economic benefits of the state sales and use tax exemption on IT equipment used in data centers.
There are two basic types of data centers: enterprise and co-location data centers. Enterprise data centers are owned and operated by an individual company to provide the computing power necessary for their single business. The single company builds and maintains the infrastructure, including the heating and cooling, backup power, and security systems necessary to protect their own computer equipment. In co-location data centers there is an owner or operator that builds and maintains the infrastructure and leases space to individual tenants. For example, staff has identified a data center with 220 tenants that own or lease the physical computer equipment, but the owner or operator owns the building and support infrastructure. The number of taxpayers claiming the refund will vary by the type of data center, but the overall investment is likely to be similar for both types of centers.
The bill passed on an 11-to-1 vote, with Representative Jon Keyser (R-Morrison) excused.
The lone dissenter, Representative Paul Rosenthal (D-Denver), cast what he called a “soft” vote in opposition to the bill. Both Republican and Democratic committee members expressed concerns about the fiscal note, which projected how much the bill, if enacted, would cost the State and whether or not it is appropriate for the State to target a benefit to one industry. A number of lawmakers said that this bill would receive close scrutiny when it is heard by the Finance Committee, which is the next stop on the bill’s journey.
Among those who testified in support of the bill was Donna Stephens with CACI member Hewlett-Packard. Donna, a member of the CACI Tax Council, told the Committee that HP has evolved as a company over the years because technology and the economy have changed. Consequently, the Hewlett-Packard Enterprise Company now operates two data centers in Colorado, one in Colorado Springs and one in Fort Collins. Donna indicated that HB-1158 would be helpful to H-P as it considers further expansion in Colorado.
At the end of the 2014 session, the first data-center bill met a puzzling fate when then-Senate President Morgan Carroll (D-Aurora) assigned the bill to four different committees on the Monday with the legislature was due to adjourn on Wednesday. It was clear that she intended to provide an insurmountable hurdle for the bill.
The following day, Tuesday, the Senate State, Veterans and Military Affairs Committee killed the bill with a bipartisan 3-2 vote. The Committee was widely known as Senate President’s “kill committee” where she sent bills to their final demise. But defeat of the bill allowed the state-holders advocating the proposal to begin working on a bill for the 2015 session.
For news media coverage of this issue, read:
“Colorado legislators back data center tax breaks – for now,” by Ed Sealover, The Denver Business Journal, February 27th.
“Plan to give tax breaks to Colorado data centers faces many hurdles,” by Ed Sealover, The Denver Business Journal, February 26th.
For more information on HB-1158, contact Loren Furman, Senior Vice President, State and Federal Governmental Relations, at 303.866.9642.
CACI’s Legislative Agenda Takes Shape as Legislature Nears Session Mid-Point
Today is the 52nd day of the 120-day long first regular session of the 70th General Assembly. As of this morning, legislators have introduced 424 bills: 248 in the House and 186 in the Senate.
Below are the positions that the CACI four policy Councils have taken on the bills that have come before them. CACI’s Colorado Manufacturing Initiative also is advocating one bill. Finally, the Governmental Affairs Council has taken positions on six bills that did not fall into the jurisdiction of any of the four policy Councils.
Energy and Environment Council
SB-46, “Concerning Reducing the Cost of Attainment of Renewable Energy Standards by Electric Utilities That Are Not Investor-Owned, and, in Connection therewith, Allowing Purchases of Electricity from Community Solar Gardens by Cooperative Electric Associations to Qualify as Retail Distributed Generation,” Senator Kevin Grantham (R-Canon City). CACI position: SUPPORT.
SB-93, “Concerning Compensation to be Awarded to Owners of Minerals Interests for a Diminution in the Value of Their Mineral Rights Caused by Regulatory Restrictions on Mineral Extraction Operations,” Senator Jerry Sonnenberg (R-Sterling). CACI position: SUPPORT.
SB-120, “Concerning a Requirement That Each Provider of Retail Electric Service in Colorado Develop an Electric Grid Modernization Plan,” Senator Matt Jones (D-Louisville). CACI position: OPPOSE. Dead.
HB-1119, “Concerning a Requirement That a Local Government That Bans Hydraulic Fracturing Compensate Oil and Gas Royalty owners Affected by the Ban,” Representative Perry Buck (R-Windsor). CACI position: SUPPORT.
SB-19, “Concerning the Authority of the State Auditor to conduct a Performance Audit of the Colorado Health Benefit Exchange,” Senator Jerry Sonnenberg (R-Sterling) and Senator Cheri Jahn (D-Wheat Ridge). CACI position: SUPPORT.
SB-123, “Concerning the Ability of a Person Eligible for Prescription Drug Benefits Under a Health Benefit Plan to Choose the Pharmacy at Which to Fill a Prescription Drug Order for Certain medications,” Senator Larry Crowder (R-Alamosa). CACI positon: OPPOSE. Dead.
HB-1029, “Concerning Coverage under a Health Benefit Plan for Health Care Services Delivered through Telehealth in Any Area of the State,” Representative Perry Buck (R-Windsor) and Representative Joan Ginal (D-Fort Collins). CACI position: SUPPORT.
HB-1083, Concerning Patient Financial Contributions for Physical Rehabilitation Services,” Representative Dianne Primavera (D-Broomfield). CACI position: OPPOSE.
Labor and Employment Council
SB-31, “Concerning Reciprocity to Practice a Profession in Colorado During a Person’s First Year of Residency in This State,” Senator Owen Hill (R-Colorado Springs). CACI position: OPPOSE. Dead.
SB-69, “Concerning the Repeal of the ‘Job Protection and Civil Rights Enforcement Act of 2013,’” Senator Laura Woods (R-Arvada). CACI position: SUPPORT.
HB-1133, “Concerning the Colorado Pay Equity Commission, and, in connection therewith, Continuing the Commission Indefinitely, Requiring the Commission to Evaluate the Status of Pay Equity in the State, and allowing the Commission to Hire Staff if the Commission Receives Sufficient Funding,” Representative Jessie Danielson (D-Wheat Ridge). CACI position: OPPOSE.
HB-1172, “Concerning the Elimination of Punitive Damage Awards in Employment Discrimination Cases Filed under State Law,” House Minority Leader Brian DelGrosso (R-Loveland). CACI position: SUPPORT. Dead.
HB-1221, “Concerning Parental Involvement in a Childs’ Academic Activities,” Representative John Buckner (D-Aurora). CACI position: OPPOSE.
HB-1158, “Concerning a Refund of the State Sales and Use Tax Paid for Information Technology Equipment That Is Used in Certain Data Centers,” Representative Dan Pabon (D-Denver) and House Minority Leader Brian DelGrosso (R-Loveland). CACI position: SUPPORT.
HB-1180, “Concerning the Creation of a State Sales and use Tax Refund for Tangible Personal Property That IS Used in Colorado for Research and Development by a Qualified Medical Technology or Clean Technology Taxpayer,” Representative Tracy Kraft-Tharp (D-Arvada). CACI position: SUPPORT.
HB-1206, “Concerning a Refund of State Sales and use Taxes Paid Upon Machinery or Equipment used in the Recycling Process,” Representative Jonathan Singer (D-Longmont). CACI position: SUPPORT.
HB-1219,”Concerning the Enterprise Zone Investment Tax Credit for Renewable Energy Projects,” Representative Beth McCann (D-Denver) and Representative Jon Becker (R-Fort Morgan). CACI position: SUPPORT.
SB-141,”Concerning the Expansion of Eligibility for the State Income Tax Credit to Reimburse Personal Property Taxes Paid in the State,” Senator Mark Scheffel (R-Parker). CACI position: SUPPORT.
CACI Manufacturing Initiative
HB-1170, “Concerning Measures to Raise the Level of Postsecondary and Workforce Readiness that Colorado Students Demonstrate upon Graduation from High School,” Representative Tracy Kraft-Tharp (D-Arvada) and Representative Jim Wilson (R-Salida). SUPPORT.
The following bills do not fit within the policy purview of CACI’s standing Councils. Consequently, the positions taken reflect the direction of the CACI Governmental Affairs Council and, ultimately, the CACI Board of Directors.
HB-1057, “Concerning the Process for a Statewide Initiative to be Placed on a Ballot,” Representative Lois Court (D-Denver). CACI position: SUPPORT.
HB-1063, “Concerning Prohibited Communication Concerning Patents,” Representative Dan Pabon (D-Denver). CACI position: SUPPORT.
HB-1154, “Concerning a Prohibition against the Imposition of an Interchange Fee on the Portion of the Total Amount of an Electronic Payment Transaction that Represents Nonfederal Taxes,” Representative Jon Becker (R-Fort Morgan) and Representative Alec Garnett (D-Denver). CACI position: OPPOSE.
SB-91, “Concerning a Reduction in the Statutory Limitation period Applicable to Legal Actions for Construction Defects on Improvements to Real Property,” Senator Ray Scott (R-Grand Junction). CACI position: SUPPORT.
SB-101, “Concerning the Authority of Employers to Pay Wages to Employees Electronically,” Senator David Balmer (R-Centennial). CACI position: SUPPORT.
SB-177, “Concerning Prerequisites to the Authority of a Unit Owners’ Association to Pursue Resolution of Disputes Involving Construction Defects,” Senator Jessie Ulibarri (D-Commerce City) and Senator Mark Scheffel (R-Parker). CACI position: SUPPORT.
Current Bill Version
NOTE: Most bills progressing through the legislative process are amended at various points along the way—unless or until they are killed in committee or on a chamber’s floor or they are passed and sent to the governor. Thus, to see the latest version of a bill, visit the legislature’s Web site, click on “Session Information,” and then click on either the “House Bills and Fiscal Notes” tab or the “Senate Bills and Fiscal Notes” tab. Next, click on “All Bill Versions,” which lists the following versions:
- Introduced Bill
- Engrossed Bill
- Reengrossed Bill
- Updated Bill Summary
- Revised Bill
- Rerevised Bill
- Final Act
Without deciphering the legislative terms above, the version of the bill that is lowest on the page is usually the most current. Click on “History” to see where the bill is in the legislative process.
Once you know where the bill is, check the “Calendar” for the House or Senate to see when it is scheduled for a committee hearing or floor action.
The Office of Legislative Legal Services produces an updated summary of a bill after it has been passed by one chamber but before it has been heard by the first committee in the other chamber.
For information on CACI’s lobbying agenda, contact Loren Furman, Senior Vice President, State and Federal Governmental Relations, at 303.866.9642. In addition to the bills on the CACI legislative agenda, the CACI lobbying team monitors many more bills for their potential impact on the business community.
News Media Coverage
Below is recent news-media coverage of state and federal political, policy and governmental issues of interest to CACI
“Dems stop bill seeking oversight of Colorado health exchange bonuses,” by Electa Draper, The Denver Post, February 26th.
“Panel kills bill to toughen oversight of bonuses at Colorado health exchange,” by Ed Sealover, The Denver Business Journal, February 26th.
“Colorado oil, gas task force roils already troubled waters,” by Mark Jaffe and John Frank, The Denver Post, February 25th.
“Hickenlooper’s oil and gas task force advances 9 recommendations,” by Cathy Proctor, The Denver Business Journal, February 25th.
“House speaker calls oil and gas report ‘disappointing,’ may go to ballot initiative,” by John Frank, The Denver Post, February 25th.
“Ballot proposal to ban fracking in Colorado in 2016? Not yet,” by Cathy Proctor, The Denver Business Journal, February 25th.
“New coalition seeks statewide ban on fracking in Colorado,” by Cathy Proctor, The Denver Business Journal, February 24th.
“Colorado task force faces deadline to decided how to regulate oil and gas,” by Cathy Proctor, The Denver Business Journal, February 23rd.
“Construction defects heads to Lone Tree,” by Marianne Goodland, The Colorado Statesman, February 20th.
“Republicans leverage JBC, Senate stances for policy maneuvering,” by Marianne Goodland, The Colorado Statesman, February 20th.
“Construction bill would curb lawsuits,” by Marianne Goodland, The Colorado Statesman, February 13th.
“Bipartisan construction defects bill introduced, aiming to curb legal action, spur affordable housing,” by Lars Gesing, The Colorado Statesman, February 10th.
“National site selectors urge Colorado to boost incentives,” by Ed Sealover, The Denver Business Journal, January 2nd.
Federal Policy News
NAM Report Projects $16 Billion Hit to Colorado Economy if Tougher EPA Ozone Regs Are Implemented
Yesterday, the National Association of Manufacturers (NAM) issued a national report that laid out the projected economic impact to each state if the restrictive ozone regulations proposed last November by the U.S. Environmental Protection Agency (EPA) are implemented.
For Colorado, the NAM study estimated that the rules would cost the state $16 billion in lost state gross domestic product from 2017 through 2040. The report projected a loss of 10,525 jobs per year. Colorado companies will face $815 million in compliance costs. Finally, each household is forecast to lose $390 in average household consumption annually.
Last week’s issue of CACI’s Colorado Capitol Report carried an article that detailed the letter sent by CACI President Chuck Berry to EPA Administrator Gina McCarthy, urging her to withdrawn the proposed regulations. Chuck also sent letters to members of the state’s Congressional Delegation and asked them to contact Administrator McCarthy to also urge her to pull the proposed regulations back.
CACI is the official state affiliate of NAM.