In this Capitol Report:
- U.S. Representative Coffman Tours CACI-Member Wright & McGill Company, Praises Manufacturer for Bringing Jobs Back to Colorado
- CACI Testifies Against Repeal of Tax Regulation Impacting Colorado Corporations
- Colorado Businesses Can Receive a Colorado Child Care Contribution Tax Credit
- NAM and CACI Promote “National Manufacturing Day” on October 2nd
- DOL Accepting Public Comments on Overtime Rule Until COB Friday
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State Policy News
U.S. Representative Coffman Tours CACI-Member Wright & McGill Company, Praises Manufacturer for Bringing Jobs Back to Colorado
U.S. Representative Mike Coffman, who represents Colorado’s Sixth Congressional District, recently visited CACI-member Wright & McGill, the manufacturer of famous Eagle Claw fish hooks, to learn how the company had returned part of its manufacturing from China back to Colorado. The following article ran in Representative Coffman’s email newsletter:
Recently, I toured the Wright & McGill Company which is located in Denver. Many of its workers reside in the 6th Congressional District. The Wright & McGill Co. is, by international standards a small business. Wright & McGill occupies about 200,000 square feet, employs approximately 250 people and is internationally renowned for its Eagle Claw fish hooks. Yes Fish Hooks! At present, in fact, Wright & McGill is the only U.S. manufacturer of fish hooks and most of its products compete in the world wide recreational fishing market.
Manufacturing employment in the USA peaked in 1979 and has trended downward ever since. Starting with the recession in 2001 it dropped through 2010 at an accelerating rate. Manufacturing has had some tough times in the United States and one reason for that was the trend, which Wright & McGill followed, of setting up a substantial manufacturing operation in China.
But I did not visit Wright & McGill to learn about how it exported jobs; I went to visit to hear about Wright & McGill bringing manufacturing jobs back to Colorado. On the tour, I visited a section of the shop filled with machines Wright & McGill used to run in China. Wright & McGill
moved production to China because all of its competitors are foreign and they were using cheaper Chinese and Indonesian labor to reduce costs. After a decade in China, however, Wright & McGill decided that there is another way to compete and moved those same machines and jobs back to Colorado despite the higher wages of American workers. When asked how Wright & McGill did this they explained that they redesigned their production processes to take advantage of the ability of their American workers to multitask, be more quality conscience, to run multiple machines at the same time and in the end due to these capabilities be more productive.
The productivity and flexibility of American workers when combined with lower energy cost and the ingenuity of American engineers to develop more efficient production facilities have made manufacturing in American once again competitive. Another factor aiding American manufacturing is lower energy costs due to new technologies such as hydraulic fracturing.
The net result is that manufacturing jobs in the United States are no longer on the decline and this is an exciting and welcome development for all Americans.
CACI Testifies Against Repeal of Tax Regulation Impacting Colorado Corporations
On September 2nd, the Colorado Department of Revenue (DOR) held a rulemaking hearing to discuss its recommendation to repeal existing tax regulation 39-22-303.12(c) which addresses Corporations Without Property or Payroll Factors. CACI submitted formal comments outlining the concerns with repealing this rule, and Loren Furman testified during the rulemaking hearing along with Stan Dempsey on behalf of the Colorado Petroleum Association. The Council of State Taxation (COST) also submitted a letter to the Department in opposition of the repeal.
Background: Under current statute, there are limitations as to when a legal entity may be included in a combined Colorado income tax return. Among those limitations, a Colorado combined return may only include “includible C corporations,” which Colorado statute defines as “any C corporation which has more than 20% of the C corporation’s property and payroll as determined by factoring pursuant to section 24‑60‑1301, C.R.S., assigned to locations inside the United States.”
The regulation that the Department has recommended to repeal was adopted in 1994 and aligns with current statute. It clearly addresses how the statute should be applied to corporations without property and payroll factors and states that corporations with no property and payroll, “by definition, cannot be included in a combined report.”
During the rulemaking hearing, DOR staff discussed CACI’s formal comments and shared the following reasons for their recommendation to repeal the rule:
- DOR staff does not believe the current rule accurately reflects the current statute;
- If repealed, DOR would determine when a return is includible on a case-by-case basis;
- DOR staff believes a repeal does not violate 24-4-103(8)(d) which requires statutory or judicial authority to promulgate a new rule;
- The DOR may consider different regulatory language on this issue, but does not have new language available yet and prefers a repeal of the current rule first. Staff believes taxpayers have been relying on an incorrect rule for the last 21 years.
During her testimony, CACI’s Loren Furman shared the following concerns/comments regarding the proposed repeal of the rule:
1) lack of predictability for taxpayers if the rule is repealed after 21 years of being in place;
2) lack of unknown: taxpayers won’t have any guidance if DOR simply repeals the rule and does not propose new language. Or alternatively, the DOR could rely on regulations that have been previously rejected by the General Assembly;
3) concern that repeal of rule is recommended without a change in statute, constitutional change or decision by the Courts;
4) concern that the recommendation is being made while litigation is being pursued by taxpayers in two different court cases without a decision/guidance by the Courts;
5) requested that the Hearing Office either reject the DOR staff recommendation to repeal the rule, or delay the recommendation until taxpayers know what a new DOR regulation would state.
Next steps: The Department of Revenue Hearing Officer has 30 days to make his decision to either approve DOR’s recommendation, deny the recommendation, or delay the recommendation for further discussion. We will keep CACI members apprised of this decision.
Please contact Loren Furman at [email protected] or at 303-866-9642 with any questions regarding this matter.
Colorado Businesses Can Receive a Colorado Child Care Contribution Tax Credit
During the 2015 Legislative Session, the General Assembly fully restored the Colorado Child Care Contribution Tax Credit (CCTC) which was originally created in 1998. The CCTC enables an individual or business donor to make a gift to a qualified child care provider and claim a 50% tax credit. This overview is an effort to bring awareness to CACI members who may want to take advantage of this tax credit. Please see the following Q&A to help answer any questions:
CCTC Frequently Asked Questions:
- Q. What is the CCTC?
- A. The CCTC is Colorado’s Child Care Contribution Tax Credit. When an individual makes a financial donation to a qualified child care provider, they receive an income tax credit for 50% of the contribution, plus potential standard state and federal deductions. Please discuss with your financial/tax advisor to determine which additional deductions can be claimed.
- Q. How does the CCTC benefit my business?
- A. In addition to the tax credit, you/your business could benefit from a stronger employee and customer base. Workers with access to high-quality, safe and convenient child care can seek employment, training, have better attendance and be more productive.
- Q. How does the CCTC benefit me/the community?
- A. The CCTC benefits the community because many child care facilities are small businesses and such financial support enables providers to make program improvements as well as keep teachers and staff employed.
- Q. How is this different than making a gift directly to a child care provider of my choice?
- A. It isn’t different. The funds still can be directed to any qualified child care provider—nonprofit, for-profit, faith-based—and the money goes directly to that provider. However, the CCTC allows for the additional tax credit.
- Q. Where can I find a list of qualified child care facilities?
- A. https://www.colorado.gov/pacific/sites/default/files/ChildCareContributionCreditAgenciesByName.pdf
- Q. What if I don’t see my choice provider on the list?
- A. That means the provider must be undergoing the registration process.
- Q. How can the providers use this money?
- A. The providers can use it in many ways that help the children right now; for example, to purchase enrichment materials or send staff to professional development. Other ways the funds can be used:
- Purchase of equipment
- Facility changes
- Staff professional development
- Staff wages
- Establishment or operation of a child care facility
- Q. Can I make a gift through my business, or does it have to be an individual gift?
- A. Gifts can be made through any tax-paying business, corporation or individual. The same 50% tax credit applies.
- Q. How do I do this?
- A. It is simple—after making a donation to a qualified provider, the provider will complete just one form and hand you a copy to attach to your tax returns.
- Q. Who can I contact if I have more questions?
- A. The Colorado Department of Revenue has an easy to use reference at: https://www.colorado.gov/pacific/sites/default/files/Income35.pdf
NAM and CACI Promote “National Manufacturing Day” on October 2nd
The annual “National Manufacturing Day,” organized by the National Association of Manufacturers (NAM), is set this year for Friday, October 2nd.
“’Manufacturing Day’ is a celebration of modern manufacturing meant to inspire the next generation of manufacturers,” NAM says.
Across the nation, manufacturers and NAM have planned almost 1,000 events. In Colorado, several events open to the public are planned:
Bal Seal Engineering, Inc., in Colorado Springs will host a facility tour from 7:30 a.m. until 12 Noon. Bal Seal Engineering makes “components that improve the performance and reliability of critical equipment used everywhere from deep sea to deep space.”
In Pueblo, Peweag Traction Chain will offer tours of its plant from 8 a.m. until 3 p.m. According to the company, “pewag has hundreds of years experience in the manufacturing of chains and their components. Since the first documented reference of its forging plant in Brueckl, Austria in 1479, the pewag group has become one of the leading chain manufacturers worldwide. Today its success is based on well-engineered, state-of-the-art quality products. pewag’s primary product lines are traction chains, industrial chains and tire-protection-chains. In 2014 pewag opened a brand new chain manufacturing plant in Pueblo, Colorado. The new state-of-the-art plant manufactures snow chains for the North American market.”
In Denver, three post-secondary institutions—Metropolitan State University of Denver, Emily Griffith Technical College and Community College of Denver—are cooperating to offer campus tours from 9 a.m. to 1 p.m. that focus on manufacturing careers. Visitors will tour new facilities supported by the “Colorado Helps Advance Manufacturing Program” (CHAMP), which is funded by a grant from the U.S. Labor Department to a consortium of Colorado colleges to increase the number of students earning degrees and certificates in manufacturing.
In addition, at least two manufacturers are planning events that are not open to the public.
CACI Gold Partner Lockheed Martin Space Systems will host a by-invitation-only event to educate visitors about its manufacturing capabilities for spacecraft subassemblies and vehicle integration and testing.
Intertech Plastics in Denver will provide a three-hour tour for a hands-on experience to students from the advanced manufacturing classes at MLK Early College.
It’s not too late for other CACI manufacturers to plan such events for National Manufacturing Day as inviting high-school students to tour their plants. NAM can help in the planning for such an event.
CACI & NAM
CACI is the state affiliate for NAM. Five decades ago this November, the business leaders of Colorado merged the state manufacturing association and the state chamber of commerce to create CACI.
In December 2011, the CACI Board of Directors authorized the creation of the Colorado Manufacturing Initiative to bring attention to the manufacturing sector and advance its interests through public policy advocacy at the Colorado legislature and before the U.S. Congress as well as providing other programs that meet the needs of the state’s manufacturers.
DOL Accepting Public Comments on Overtime Rule Until COB Friday
The Department of Labor (DOL) recently announced a major change in how businesses are to treat worker pay. Previously, anyone who made $23,660/year or less automatically qualified to receive overtime pay after working 40 hours in one week, with a few exceptions for “executive, administrative and professional” roles.
Under the newly-proposed rules, any worker making below $50,440 would now receive overtime – in many cases nullifying salaried positions and salaried benefits, while forcing businesses to go back to clocking workers in and out. The proposed rules also effectively eliminates the previous “duty test” exemptions noted above. CACI encourages our members to take a minute and share your concerns with the DOL today or tomorrow. (Instructions and sample language attached)
The proposed new rule:
- Takes away employer ability to define certain workers as salaried vs. hourly;
- Creates more liabilities for businesses by setting up different, new treatment for certain employees, and having to account for employee hours
- Takes away worker freedoms (i.e. flexibility for doctor appointments, retirement and incentive programs, vacation days, etc.).
- Businesses must now consider whether to allow employees to telecommute, work outside the office, and even brings into question issuing work computers. Both parties will have to report time spent using the computer – raising questions of whether answering a call or email from home on an evening constitutes overtime.
- May limit opportunities for workers if businesses cannot afford to pay overtime, as well as potentially incentivizing less productivity among workers where overtime is allowed.
- CACI opposed similar language in HB 1331 during the 2015 state legislative session.