In this Capitol Report:
- CACI Tax Council Discusses “Tax Haven” Legislation with House Sponsor
- Two Former Gubernatorial Legal Counsels Issue Bipartisan Opinion about Hospital Provider Fee
- News Media Coverage
- CACI Federal Affairs Council Kicks Off 2016 With Drone Discussion
- U.S. Supreme Court Issues “Stay Order” Against EPA’s Clean Power Plan; Colorado Governor, Regulators Still Push State Plan Development
- What To Know About the TPP Trade Agreement
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State Policy News
CACI Tax Council Discusses “Tax Haven” Legislation with House Sponsor
Today, Representative Mike Foote (D-Louisville) appeared before the CACI Tax Council to discuss his “tax-haven” legislation, which is still in draft form.
In the waning days of the 2015 session, Representative Foote and Representative Brittany Pettersen (D-Lakewood) co-sponsored HB-1346, which CACI opposed and which died in the Senate “kill committee,” the Senate State, Veterans and Military Affairs Committee.
HB-1346 sought to recover income tax due Colorado when multi-national companies, which operate in Colorado, “shelter” profits generated by their “affiliated corporations” or subsidiaries by parking funds in 40 so-called, off-shore “tax haven” countries.
Representative Foote said that he is sponsoring tax-haven legislation targeting corporations that are avoiding paying Colorado taxes by using tax havens again for two reasons: (1) tax avoidance is not “fair” to companies that do not engage in such activities and (2) Colorado needs the tax revenue for its ‘priorities.”
Representative Foote told the Tax Council that a major change to the 2016 draft, when compared to the 2015 bill, is that a list of tax-haven countries would not be specified in the bill but that the authority to determine which countries should be labeled tax havens would be conducted by the staff of the Colorado Department of Revenue (DOR). Every two years thereafter, the DOR would revisit the list and update it. The DOR would determine whether or not an affiliated company in a tax-haven would need to be included in a “combined report” by a corporation operating in Colorado.
One Council member told Representative Foote that he has serious concerns that the DOR lacks the capacity—specifically international tax expertise—to make such determinations.
Another Council member told Representative Foote that he’s concerned about the “ambiguity” in the draft bill, which could lead to litigation. Current Colorado law has an explicit, six-part test that determines whether or not an affiliated company should be part of the combined report for a corporation operating in Colorado, he explained.
Other issues discussed by Representative Foote and the Council included:
- The effect that such a law could have on the Colorado business environment and state and local economic development efforts; and
- The problems and issues that the other states—Oregon, to be specific—have had with their tax-haven laws because only a handful have enacted such legislation.
On Wednesday, January 13th, House Speaker Dickey Lee Hullinghorst (D-Boulder), in her speech before the House on the legislative session’s first day, called for passage of a bill that CACI and its business allies last year successfully worked to kill that sought to apply the state’s income tax to profits held by corporations in so-called off-shore “tax havens.”
Here are the prepared remarks of the Speaker:
We will not tolerate those who game the system. We must ensure that the hard-working people of Colorado who are trying to provide for their families do not have the extra burden of supporting those who won’t play by the same rules as the rest of us.
Big corporations that can hire a legion of lobbyists and lawyers should not be able to buy success. One of the biggest steps this General Assembly can take to promote fairness in Colorado is to close the loophole that allows big special interests to hide their profits in offshore tax havens.
These bad actors steal from the schools their employees’ children attend.
These bad actors steal from the schools their employees’ children attend. These bad actors withhold their fair share toward the upkeep of the roads they use just like the rest of us. They leave the rest of us to pick up the tab.
Last year we sought to make the bad actors who are hiding their profits overseas stop dodging taxes and start paying their fair share. That would bring about 150 million dollars back to Colorado and send it where it is needed most — our kids’ classrooms.
We will reintroduce this bill in this session. Let’s pass this bill!
The 2016 version of this bill has not yet been introduced. When it is, the CACI Tax Council will closely study the measure and decide on CACI’s position on the bill.
CACI members with questions about the tax-haven issue should contact Loren Furman, CACI Senior Vice President, State and Federal Relations, at 303.866.9642.
For more information on this issue, read:
“The Curious Case of Disappearing Corporate Taxes,” by Liz Farmer, Governing, January 2016.
“State ‘Tax Haven” Designations and Punitive Treatment of Multinational Businesses,” Council on State Taxation.
“Off-Shore ‘Tax Havens’ Criticized by Colorado Democrats,” by Kareem Maddox, Colorado Public Radio, January 26th.
“Senate Committee Kill’s CACI-Opposed ‘Tax Haven’ Bill that would Have Hurt Colorado Companies,” CACI Colorado Capitol Report, May 4, 2015.
Two Former Gubernatorial Legal Counsels Issue Bipartisan Opinion about Hospital Provider Fee
Yesterday, two attorneys, Jon Anderson and Trey Rogers, both of whom served as Colorado gubernatorial legal counsels, issued a legal memo that said that the legislature could convert the hospital provider fee (HPF) into a state enterprise, which would free up hundreds of millions of dollars for transportation, education and State capital construction.
CACI supports converting the HPF to a state enterprise.
Some additional, critical factors in this important debate will be the opinion of the State’s top legal official and the state’s economic-and-tax-revenue performance.
Governor John Hickenlooper, a Democrat, has asked Republican Attorney General Cynthia Coffman for an opinion on this matter.
“Another factor in this debate will be the March economic-and-revenue forecasts by the Office of State Planning and Budgeting and the legislature’s economists,” said Loren Furman, CACI Senior Vice President, State and Federal Relations,” because the forecasts could affect the amount of projected TABOR surplus, which will be politically important in the discussions.”
Under TABOR, a state enterprise is defined as “ . . . a government-owned business authorized to issue its own revenue bonds and receiving under 10 percent of annual revenue in grants from all Colorado state and local governments combined.”
John Anderson, a Partner with Holland and Hart LLP, served as chief legal counsel to then-Republican Governor Bill Ritter. Full disclosure: Anderson serves as CACI’s Legal Counsel.
Trey Rogers, a partner with Lewis Roca Rothberger Christine LLP, served as chief legal counsel to then-Democrat Governor Bill Ritter.
Here’s the news media release that accompanied the Anderson-Rogers legal memo:
FOR IMMEDIATE RELEASE Feb. 11, 2016
Comprehensive legal review by former top lawyers to Owens and Ritter shows path for lawmakers to create Hospital Provider Fee enterpriseDENVER — In a comprehensive legal review (attached) conducted for a statewide group of business and community organizations, attorneys Jon Anderson and Trey Rogers concluded that proposals for a state-owned business that would charge, collect, and administer a hospital provider fee similar to the current one, exempt from state revenue limits, would be “legally sound and fiscally responsible.”
Colorado Springs Mayor and former Colorado Attorney General (2005-2014) John Suthers agreed, saying “The way Hospital Provider Fees are accounted in the state budget has created a serious problem. If this situation is not addressed soon, important state programs will be cut that negatively impact Colorado Springs and every other local community in Colorado. Transportation funding, in particular, will continue to suffer. Based on my experience, I believe that some form of a Hospital Provider enterprise could be designed to be constitutional under state law.”
While this recent legal review is at odds with a 2015 memorandum from the Office of Legislative Legal Services, Anderson and Rogers note that the OLLS memo does not appear to have been drafted or intended to serve as “comprehensive, complete or definitive analysis.”
Anderson, a partner with Holland & Hart, and Rogers, a partner with Lewis Roca Rothgerber Christie, served as chief legal counsel to governors Owens and Ritter, respectively.
“The only point on which we differ with OLLS is the question of whether a self-sufficient, state-owned provider fee business would qualify as an enterprise under TABOR. We believe it would.” Rogers added, “TABOR is intended to limit the growth of government that is paid for by our tax dollars, but it is not intended to limit the growth of self-sufficient, government-owned businesses that receive no tax dollars.”
The pair said the OLLS memo concluded, “incorrectly, that the new entity ‘would lack the characteristics of a business required for and shared by enterprises that are exempt from state revenue limits.
Anderson cited the University of Colorado as an enterprise similar to what would be envisioned for the hospital fee.
“CU provides a great service to its students and, as a result of that great service, attracts more students and money through tuition, which is good growth and the type of growth the Taxpayers Bill of Rights was not intended to limit. This is precisely why CU is an enterprise and thus when the school brings in more revenue through more students’ tuition that revenue does not trigger a refund from the general fund,” he said. “By the same token, a provider fee enterprise could be created that is a self-sufficient, government-owned business helping hospitals defray the costs of serving their patients. That’s why growth of the provider fee shouldn’t trigger a refund from the general fund as it would today.”
The provider fee enterprise would charge a fee to its customer hospitals, obtain matching federal funds, and pay the combined fee and federal funds back to the hospitals to provide care for low-income patients. It would keep a portion of its revenues to pay employees, cover its costs of operation and to provide other valuable services to hospitals. It would do all this with no financial support from the state. That’s exactly the kind of self-supporting state-owned business TABOR identifies as an enterprise.
A provider fee enterprise created by the legislature would have additional legal clout, Rogers and Anderson said.
“Our courts have said that statutes enacted by the General Assembly enjoy a strong presumption of constitutionality and will not be overturned unless the statute is unconstitutional beyond a reasonable doubt,” Rogers said. “It is hard to imagine a court would find a provider fee enterprise to be unconstitutional beyond a reasonable doubt.”
For additional information and a full list of supporters, visit: http://fixtheglitch.org
More than 100 businesses, business organizations, higher education institutions, hospitals, non-profit organizations, K-12 entities, medical organizations and others have endorsed the HPF conversion.
In early January, Colorado Senate President Bill Cadman (R-Colorado Springs) released a memo from the legislature’s Office of Legislative Legal Services about the constitutionality of converting the hospital provider fee to a state enterprise. The memo, which was dated December 31, 2015, concluded that the HPF could not be converted to a state enterprise:
Because the entity would not satisfy the requirement of being a government–owned business, it would not qualify as a TABOR-exempt enterprise, and HPF revenue it collected would be included in state fiscal year spending and counted against both state fiscal year spending limits.
CACI members with questions about the HPF and transportation funding should contact Loren Furman, CACI Senior Vice President, State and Federal Relations, at 303.866.9642.
For more information on this issue, read:
“Bipartisan legal opinion surfaces regarding Colorado’s hospital fee and road funding,” by Ed Sealover, The Denver Business Journal, February 11th.
“Missing the point on Colorado transportation funding,” editorial, The Denver Post, February 9th.
“Colorado’s road problems collide at Capitol,” by John Frank, The Denver Post, January 26th.
News Media Coverage
Below is recent news-media coverage of state and federal political, policy and governmental issues of interest to CACI
“Clean Power Plan ruling divides Colorado,” by Peter Marcus, The Durango Herald, February 10th.
“Colorado lawmakers consider $100 million in mid-year budget cuts,” by John Frank, The Denver Post, February 9th.
“Lawmakers mull helping people overcome past mistakes with the law when seeking employment,” by Peter Marcus, The Durango Herald, February 8th.
Federal Policy News
CACI Federal Affairs Council Kicks Off 2016 With Drone Discussion
On Thursday, February 4th, CACI’s Federal Affairs Council welcomed a panel of speakers to talk about drones – and each brought unique expertise. Through this panel, CACI members heard about the history and use of drones in other countries (Japan has been using drones since WWII and Germany requires drones weigh no more than 11 lbs.), how U.S. utilization has grown exponentially in the last four years and how drones are regulated.
Our attendees learned why the Federal Aviation Administration (FAA) oversees our skies “from grass blades, up” and that business applications for drones are highly regulated, while private consumer use has limited rules (i.e. flying no higher than 400 feet and maintaining line of sight at all times)
Thomas Dougherty: Partner, Lewis, Roca, Rothgerber & Christie – Legal go-to expert for Colorado and region on drones. He brought a military background, expertise in drone history plus a balanced view of the emerging drone market, and what that means for Colorado.
Sen. Linda Newell (D-SD26): Shared stories from her constituents, her work on last year’s drone legislation and the need to balance privacy rights with drone enthusiasm.
Rep. Polly Lawrence (R-HD29): Shared challenges of drones as a legislator and is bringing “technology agnostic” privacy protection legislation (HB-1213) this session (focused on consumer, not business use of drones). Shared personal experience using drones and land surveying technology to prove exact measurements (i.e. dirt removed from construction site) for more accurate billing for her construction company.
Sarah Thomas: Boeing Network & Space Systems – Sarah spoke to the UAV prototypes innovated by Boeing and the applications those technologies now have in search and rescue efforts, forest fire fighting, as well as removing human risk for research and military purposes.
Brent Boydston: Farm Bureau – Shared experience of farmers and ranchers as some of the earliest adopters of drone technology to map crop yield, more accurate pesticide application, water monitoring and tracking grazing animals.
Philip Moffett: Hawk Aerial – Philip brought fantastic visual aids – a professional-use drone used to inspect utility lines and industrial applications, as well as a “hobby drone” equipped with infrared camera for commercial surveying. Philip spoke to a growing vertical model for his drone businesses, where companies can rent his drones or hire out his professional pilots for surveying (Yes, commercial drone pilots must be aviation pilots!).
Thanks to Holland & Hart for sponsoring this Council. Our next Federal Affairs Council will be April 26th. If you have any questions, ideas or topics for upcoming councils, please contact Leah Curtsinger, Federal Affairs Director at [email protected] or (303) 866-9641.
U.S. Supreme Court Issues “Stay Order” Against EPA’s Clean Power Plan; Colorado Governor, Regulators Still Push State Plan Development
On Tuesday, the U.S. Supreme Court issued temporary “stay” orders, halting implementation of the U.S. Environmental Protection Agency’s (EPA) Clean Power Plan (CPP) until the courts can decide if the Obama Administration’s landmark carbon plan is constitutional.
This action was widely welcomed by businesses, industry groups and the more than 27 states currently opposing the sweeping new regulatory program.
In the meantime, CACI remains part of the U.S. Chamber of Commerce’s Amicus Curiae brief for the underlying court case.
The CPP would require states to reduce CO2 emissions 32 percent from 2005 levels by 2030. Until the Court’s stay order was issued, state plans for compliance were to be due this September, although many states were expected to file for a two-year extension to that deadline.
CACI has been closely monitoring CPP developments on behalf of Colorado businesses for almost two years. At the Federal level, CACI has worked hard to ensure its public comments to the EPA accurately captured and reflected the Colorado business voice.
CACI also ensured that concerns from CACI members about the CPP were shared directly with each member of Colorado’s House and Senate Delegation. After hearing these business and community concerns, almost half of Colorado’s nine members of Congress either sent letters or met directly with EPA Administrator Gina McCarthy.
Last spring Leah Curtsinger, CACI Federal Policy Director, met with Region VIII Director Shaun McGrath, the EPA Acting Assistant Director Callie Videtich, the Air Quality Director, and the EPA Region VIII Congressional Liaison to address concerns raised by CACI members.
From that meeting, CACI was able to leverage EPA Assistant Director and Regulatory Assistance Manager Videtich to attend a CACI Energy and Environment Council meeting to hear CACI members’ perspectives.
Dan O’Connell, CACI State Government Affairs Representative, continues to lead CACI’s state efforts as an active voice in regular and ongoing stakeholder meetings with the Colorado Department of Public Health and Environment (CDPHE).
At the March 2015 CACI Energy and Environment Council meeting with EPA Acting Assistant Director Videtich, CDPHE Environmental Programs Director Martha Rudolph was an outspoken guest speaker who identified impossible-to-meet deadlines imposed by the EPA and articulating Colorado’s stakeholder process to encourage CACI member participation. These efforts have been particularly important, as Colorado considered how best to address CPP requirements both before the stay – and now after.
On Wednesday, CDPHE issued a public reaction to the Supreme Court’s decision (via Twitter), saying it will continue to move forward with implementation plans despite the Court’s stay.
Governor Hickenlooper said, “While we’re still reviewing the implications of the Supreme Court’s decision, we remain committed to having the cleanest air in the nation. We’ll continue to build upon the great strides we’ve made as a state — with the Clean Air Clean Jobs Act and our Renewable Energy Standard — to protect our public health and environment.”
At the Colorado legislature, CACI will continue to educate legislators about the lasting policy and negative economic consequences of continued CPP implementation. Prior to the Supreme Court stay, state plans for CPP compliance were due to the EPA by September 6, 2016.
- Click here for Supreme Court stay order FAQs from our partners at the U.S. Chamber and their legal counsel team.
- Click here for EPA’s Colorado-specific numbers, interim standards and calculations for compliance.
While the D.C. Circuit Court has agreed to quickly hear the consolidated case brought by 27 states and business leaders against the federal government and EPA, a simultaneous request for a ‘stay of implementation’ was denied on January 21st, 2016. States and businesses appealed that decision and elevated stay requests to the U.S. Supreme Court and Chief Justice John Roberts. The Supreme Court decided 5-4 to issue the stay order, and several pundits believe the Supreme Court has not forgotten EPA conduct during and after the Mercury and Air Toxics Standard, “MATS rule”, decision from last June (2015).
Very similarly to the current case, states and business leaders sued the federal government over implementation of overreaching, broad and expensive new air quality standards created by the EPA. However, in this case the stay was denied on all levels and states were required to continue meeting deadlines. For states and energy suppliers, this meant millions of dollars in implementation costs piled up while waiting for the Supreme Court’s decision.
Although the Supreme Court eventually ruled MATS unconstitutional due to cost burdens on states, the EPA used several stall tactics and suddenly a majority of states had been required to comply with MATS. The EPA may have lost the MATS court case in technicality, but they publicly celebrated a political win and “successful” implementation. CACI is pleased the Supreme Court is allowing the constitutionality of the CPP to be decided before forced implementation proceeds any further.
Read more on the Supreme Court MATS decision: Supreme Court to EPA: Fool Me Once, Forbes
CPP Timeline & Deadlines
- June 2014: President Obama announces Clean Power Plan and four proposed “pillars”
- October 2014: CPP issued for tribes and territories
- 2014: EPA publishes technical rate-to-mass documents in Federal Register
- August 3, 2015: President Obama announces sweeping CPP final rule, plus carbon reduction effort goals for the Obama Administration
- Same day, EPA proposes Federal Implementation Plan (FIP) alternative
- October 23, 2015: EPA finalizes CPP for existing coal-fired power plants
- Same day, Obama announces final FIP rules to be implemented where state implementation plans (SIPs) either fail to meet requirements, or where states refuse to submit compliance plans.
- January 21, 2016: DC Circuit Court denies petitioner stay request; comments due for draft FIP
- February 8, 2016: Supreme Court issues stay orders
- Summer 2016: Final model training rules expected
- September 6, 2016: ALL SIPs due to the EPA; if requesting extension, must still submit + reasons for needed extension (on hold)
- September 6, 2017: SIPs due to the EPA, if granted one-year extension and not part of multi-state plan (on hold)
- September 6, 2018: SIPs due to the EPA, if granted two-year extension and part of multi-state plan (on hold)
- 2020: First year for interim carbon reduction goals under CPP
- 2030: Final requirements must be met by states
What To Know About the TPP Trade Agreement
The Trans-Pacific Partnership (TPP) is a 12-nation trade agreement that will open doors for manufacturers and businesses here in Colorado who export from the United States to Pacific Rim nations. TPP has seen momentum in recent weeks, so this is what you need to know:
The TPP represents 12 countries, a population of more than 800 million people, 40% of the world’s GDP, and includes: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam.
Last Thursday, all 12 nations signed the TPP agreement in Auckland, New Zealand – and now each party to the agreement must individually approve the trade deal before TPP can be implemented. With TPP in place, tariff removal would reduce the cost of doing business, open doors to new markets, while allowing American companies to grow while based in their local communities.
The public will have had 60 days to review the TPP draft before President Obama signed the deal and Congress will have 90 legislative days to approve after the President’s signature. (FYI – there can be multiple calendar days in one Congressional legislative day.) Senate Majority Leader McConnell expects to address TPP after the 2016 elections in November, or potentially as late as 2017 under a new president. If the U.S. hasn’t ratified the agreement by Feb. 4, 2018, the deal will only take the approval of the six largest nation states in the deal.
Background: In October 2015, Congress approved Trade Promotion Authority (TPA … a.k.a. fast-track authority), giving President Obama the power to negotiate trade provisions, followed by an up-or-down approval vote from Congress for any agreement reached. In practice, this means Congress cannot add amendments or make changes to the TPP agreement, and therefore Congress must vote either to approve or oppose the deal. In November, the U.S. Office of Trade Representative released the current 7,000 page TPP draft for review.
The U.S. joined TPP negotiations in 2008, but faced set-backs in 2012 over agriculture and intellectual property protections.
Numbers and facts:
TPP would likely increase US annual incomes by $131 billion and increase exports $357 billion by 2030…
If delayed by one year as some suggest, NOT signing would cost each household $600/year
Removing trade barriers, tariffs and retaliatory trade practices: For the auto industry alone, TPP would remove Malaysia’s 30% foreign auto tax, Vietnam’s 70% tax and U.S. gets to keep 25-year auto tariff for Japanese autos brought to U.S. (3X longer than NAFTA trade agreement for the 1990s had allowed)
Will raise bar for labor standards abroad: By making U.S. labor practices standard for all TPP nations, holds world to better business practices, makes U.S. more competitive, plus addresses forced labor and child labor practices
Brings capitalism to historically communistic economies: Several traditionally communistic countries are part of the TPP (i.e. Vietnam), and those countries have agreed to open their markets to U.S. manufacturer products and goods, and with those open doors comes democratic principles of business
Includes environmental provisions: Congress, as part of TPA approval, required certain environmental provisions to combat illegal sea catches, illegal logging and wildlife trafficking, among other provisions
U.S. food safety standards remain intact
For currency manipulation: TPP partners had to agree to IMF and G-20 currency standards to be part of the trade deal
***China CANNOT join TPP in the future, unless the U.S. Congress approves