In this Capitol Report:
Colorado Chamber Endorses Proposition DD
The Executive Committee of the Colorado Chamber of Commerce yesterday endorsed Proposition DD, which, if approved by voters in November, could generate up to $30 million for State water projects annually from a new state tax on sports betting.
The Chamber’s 2007 mission statement includes support for such infrastructure projects as transportation, telecommunications and water.
The Legislative Council’s third draft of the proposition for the Blue Book details how the measure will operate and the arguments for and against the ballot issue.
The measure, HB-1327, was referred to the ballot with bipartisan support. The action by the Colorado legislature followed in the wake of last year’s U.S. Supreme Court ruling that states can legalize sports betting.
The bill’s final Fiscal Note summarizes how the revenue will be used for water projects:
Water Plan Implementation Cash Fund. This bill creates the Water Plan Implementation Cash Fund, which will receive deposits from sports betting revenue and any other money allocated by the General Assembly. Grants may be made from this fund pursuant to Section 37-60-106.3 (6), C.R.S., along with any expenditures that will ensure compliance with interstate water allocation compacts, equitable apportionment decrees, international treaties, and federal laws relating to interstate storage, release, apportionment, and allocation of water. Any expenditures related to the administration of this fund may also be paid out of the fund.
The Colorado Water Plan was completed in November 2015 during the administration of then-Governor John Hickenlooper.
Tax Expenditure Study Committee Takes Action on Several Tax Credits & Exemptions
On Tuesday, the legislative Tax Expenditure Evaluation Interim Study Committee met and discussed several tax exemptions, credits and deductions that are allowable to Colorado taxpayers under current law. The intent of this legislative committee is to study the policy recommendations prepared by the Office of the State Auditor in its ongoing Tax Expenditures Compilation Report. During the meeting, the staff for the State Auditor shared their research on four specific tax exemptions, credits and deductions and answered questions by Committee members. The Committee then discussed and proposed legislation for the 2020 Legislative Session that would repeal or amend several existing tax credits, exemptions or deductions. Details are provided below:
Presentation by State Auditor Staff on Four (4) Current Tax Credits/Exemptions/Deductions:
Sales to Charitable Organizations Exemption:
- Staff shared that at times, retailers don’t apply the exemption;
- Only 6% of retailers apply for the tax refunds – likely due to length of time to get the refund from DOR;
- State Auditor staff did not recommend a change to this exemption.
Rural & Frontier Healthcare Preceptor Credit
- DOR is still adjusting to this new credit/program;
- State Auditor staff did not recommend a change to this exemption.
Tax-Exempt organization insurance premium tax deduction
- Some insurers may not be getting clear instructions on how to claim deduction from Division of Insurance;
- Labeling of claiming the deduction is unclear on application;
- DOI is working on some improvements to their process;
- State Auditor staff determined the deduction is meeting purpose & did not recommend a change.
Energy Used for Industrial & Manufacturing Purposes Exemption
- State Auditor staff determined the exemption is meeting its purpose;
- Staff determined that DOR gives little guidance to taxpayers for filing the exemption & that DOR removed guidance from its website;
- DOR is now stating that they are working on guidance for taxpayers;
- State Auditor’s Office is suggesting a simplified approach – apply a flat percent based on the energy usage. Staff acknowledged that it would affect taxpayers differently depending on their usage.
Tax Council Chair, Ryan Woods, testified at the committee meeting in support of maintaining the tax exemption for Energy Used for Industrial & Manufacturing Purposes. He explained the importance of this exemption for Colorado taxpayers and how the exemption helps to keep energy costs low for consumers. Dianna Orf, lobbyist for the Colorado Mining Association, also testified in support of the exemption.
Committee Action on Potential Legislation to Repeal or Amend Existing Tax Credits, Exemptions or Deductions:
- Repeal the Non-profit Agency Fuel Tax Exemption. (Motion approved)
- Require any legislation on tax credits/exemptions to include a declaration and the parameters for the tax credit/exemption. (Motion approved)
- Repeal Crop Hail Damage Tax Credit. (Motion approved)
- Repeal Farm Close-Out sales tax exemption (Motion approved)
- Repeal Sacramental Wine Sales Tax Exemption (Motion approved)
- Repeal Occasional Sale of Liquor During Auctions tax exemption (Motion approved)
- Repeal tax exemption for sales to residents in bordering states (Motion approved)
- Repeal Long-Term Lodging State Sales Tax Exemption (not local tax exemption). (Motion approved)
- Repeal Pre-1987 net operating deduction for individuals in estates in trust. (Motion approved)
- Repeal previously taxed Income or Gain Deduction for C Corporations (Motion approved)
- Repeal Employee Premium Retirement Tax deduction (Motion approved)
- Repeal tax credit for Unsellable Alcohol Beverages (Motion approved)
- Repeal Fraternal Society Exemption (Motion approved)
- Repeal Crop & Livestock Contribution Tax Credit. (Motion approved)
- Amend Colorado Net Operating Loss Deduction by limiting carry forward to 20 years & treat financial institutions same as other corporations (Motion approved)
- Amend the Child Care Expenses Tax Credit so that credit can be refundable. (Motion approved)
- Repeal Tax Deduction for Salary & Wages due to IRC 280C. Rationale: companies can already claim the federal deduction. (Motion approved)
- Require companies to clarify type of energy they are using when claiming tax exemption for Energy Used for Industrial & Manufacturing Purposes. (Motion approved)
- The Committee also discussed next steps for the Tax Expenditure Review Committee and approved a motion for potential legislation creating a Tax Commission that would be modeled after the Colorado Commission on Taxation that was previously repealed. (Motion approved)
Next Steps: The Legislative Legal Services staff will prepare bill drafts for the Committee to review during its next meeting and determine which bills that repeal or amend the above referenced tax credits/exemptions/deductions will move forward for consideration by the full Colorado General Assembly during the 2020 Legislative Session.
Details for Next Committee Meeting:
Date: October 30, 2019
Location: Legislative Services Building – Room A