Date: 04/07/2010
Final
BILL SUMMARY for HB10-1200
HOUSE COMMITTEE ON FINANCE
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10:35 AM -- House Bill 10-1200 - Concerning the Three Percent Investment Tax Credit
Representative Hullinghorst, prime sponsor, explained the provisions of the bill. She noted that under state law, a taxpayer can claim a state income tax credit equal to three percent of any qualified investment that is either acquired, placed into service, or constructed and used exclusively in an enterprise zone for the first year of ownership by the taxpayer. The three percent investment tax credit can be used to offset the first $5,000 of tax liability plus 50 percent of tax liability in excess of $5,000. Representative Hullinghorst closed by noting the 12-year carry forward provision in current law.
The committee discussed the temporary nature of the cap in the bill. Representative Hullinghorst continued by saying the cap on the credit was in place for tax years 2011, 2012, and 2013. She said that the bill limits the amount of the investment tax credit that a taxpayer can claim to $250,000 and defers any portion of the credit that exceeds $250,000 to tax year 2014. This bill also allows taxpayers that defer claiming any credit in excess of $250,000 to carry forward the credit for 12 income tax years after the year the credit was initially allowed, plus one additional year for each year the taxpayer defers claiming the credit in excess of $250,000.
Representative Hullinghorst responded to questions about the safety clause in the bill. She continued by noting that 30 companies out of 500 companies that recently responded to a business survey indicated that they would be affected by the cap in the bill.
The committee discussed the potential job losses that could result from the cap in the bill. Representative Hullinghorst responded by noting that the bill is in response to balancing the budget.
The following persons testified:
11:01 AM -- Mr. John McCormick, representing Qwest, testified in opposition toward the bill. He noted that Qwest pays a disproportionately high dollar amount of taxes as a result of the state and local government tax structure. Mr. McCormick noted that the bill would result in less capital investment by Qwest. Mr. McCormick asked that a cap of the greater of 25 percent of investment or the current $250,000 cap be considered as an amendment. He continued by saying that such a cap would level the playing field for all size businesses, both big and small. Mr. McCormick closed by urging the committee to amend the cap in the bill.
The committee discussed the bill as a way to give more flexibility to school districts. The committee continued the discussion on the priority of capital investment by businesses in the state.
11:39 AM -- Mr. Doug Hurst, representing Qwest, testified in opposition to the bill. Mr. Hurst noted that states differ in terms of their tax structure. However, this bill is very unfair to big businesses that have a large workforce. He closed by noting that there are only 30 companies that would be affected by the cap in the bill in Colorado.
The committee discussed whether House Bill 10-1200 would shift the cost of the bill forward to consumers. Mr. McCormick, who returned to the table, noted that given the regulatory environment, the options for Qwest to pass on the cost to consumers is limited. Mr. McCormick closed by saying that at some point, higher taxes get shifted forward to consumers.
11:56 AM -- Mr. Rich Jones, representing the Bell Policy Center, testified in support of the bill and discussed the tax credits and exemptions that need to be re-evaluated by the legislature to balance the budget. He noted that this bill will help balance out the cuts needed to address the budget shortfall. Mr. Jones noted that the center is very sceptical of the effects that enterprise zones have on Colorado's economy. Mr. Jones continued by commenting that incentives under the enterprise zone program do not drive businesses to relocate. He closed by saying that the best way to grow Colorado's economy is to invest in the state's infrastructure. Mr. Jones responded to questions regarding what drives a company to locate to a specific area of the nation. He noted that the quality-of-life in an area is a good starting point.
12:11 PM
The committee recessed.
01:33 PM
The committee reconvened.
01:33 PM -- Mr. Aron Diaz, representing the Associated Governments of Northwest Colorado (AGNC) and who is the Northwest Enterprise Zone Administrator, testified in opposition to the bill. He noted that the bill would have a $25.2 million impact in the northwest region alone. The committee discussed the budget shortfall and the need to balance the budget. The committee also discussed the 2007 performance audit of the program that the Office of the State Auditor contracted to Clifton Gunderson LLP to conduct (Attachment A). Discussion concluded on the impact of the legislation on economic development in Colorado and the merits of the Colorado Enterprise Zone Program.
02:09 PM
Representative Judd, Chairman, laid over the bill for action only on Friday, April 9, 2010, upon adjournment.