By Ed Sealover for the Denver Business Journal
Colorado law offers 236 different tax exemptions, deductions and credits totaling some $7.4 billion in any given year, ranging from broad breaks on energy used in manufacturing to narrowly targeted credits that the state has not recorded anyone taking in years.
And as the 2021 legislative session officially convenes Jan. 13 and majority Democrats in the House and Senate begin their search for more money to pump into K-12 and higher education, the question is not which tax expenditures are on the table, but which are not.
Leaders of organizations representing both broad coalitions of industries and specific sectors of the economy are worried about which long-entrenched tax breaks legislators may seek to eliminate, and they are frustrated that they’ve been given little chance to offer input so far. Legislators introduced a bill late in the 2020 regular session that sought to curtail $1.2 billion in tax exemptions over a four-year period then cut it significantly, but only after statewide and local business organizations descended upon the Capitol to demand that employers not have needed resources taken from them in the middle of an economic downturn.
Colorado Chamber of Commerce senior vice president Loren Furman noted that the manufacturing-energy exemption, which was paused in the 2010 tax-exemption-cut package and continues to have a target on it, is one that is offered by 45 states. While many think of it as being used by giant manufacturing plants, it’s also used by small companies like restaurants and breweries that make goods and see it as a defense against being taxed twice — once while making they product they sell and a second time while selling the finished product.
Similarly, the net-operating-loss provision that originally was included in HB 1420 is something that is needed more than ever by companies that are looking to invest in growing again even at a time when they are losing money. Furman pointed out those companies could include restaurants buying outdoor heating equipment to seat customers through the winter, and Small Business Majority state director Hunter Railey said users of the exemption likely also include early-stage biotech companies that aren’t making profits while they are working on producing vaccines and other needed breakthroughs.