STAFF SUMMARY OF MEETING
HOUSE COMMITTEE ON FINANCE
|Time:||10:35 AM to 05:46 PM|
|This Meeting was called to order by|
|This Report was prepared by|
X = Present, E = Excused, A = Absent, * = Present after roll call
|Bills Addressed: ||Action Taken:|
Amended, Referred to the Committee of the Whole
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.
The committee recessed.
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.
Representative Judd, Chairman, laid over the bill for action only on Friday, April 9, 2010, upon adjournment.
02:09 PM -- Senate Bill 10-162 - Concerning the Colorado Enterprise Zone Program
Representative May, and Representative Hullinghorst, prime sponsors, explained the provisions of the bill. Representative May noted that Senate Bill 10-162 makes changes to the Colorado Enterprise Zone Program. The bill increases the population limit to qualify an enterprise zone from 80,000 people to 100,000 people for urban zones and from 100,000 people to 150,000 people for rural zones. He continued by saying that the bill also requires that the population of an enterprise zone be calculated using data from the most recent federal decennial census at the county, municipal, or block levels.
The following persons testified:
02:18 PM -- Mr. Matt Cheroutes, representing the Office of Economic Development and International Trade (OEDIT), testified in support of the bill. He explained that legislation passed in the 2009 session required OEDIT to review the enterprise zone program and after considerable outreach, the office concluded it cannot expand the program in these economic times. Thus, the office is looking at low-cost ways to make the program more effective. Mr. Cheroutes stated the bill will add an additional level of accountability and efficiency to the Colorado enterprise zone program. Mr. Cheroutes responded to questions from committee members about the pre-certification process for businesses that claim enterprise zone tax credits.
02:20 PM -- Ms. Alice Kotrlik, representing OEDIT, responded to committee questions about the pre-certification provisions in the bill. She explained that the bill will change the process and business will need to get prior approval in order to take the tax credits on their income tax form at a later time. Committee discussion continued about this process and about educating business owners about the credits. Ms. Kotrlik explained there would be a two-year process of outreach to educate business owners in these areas.
03:07 PM -- Mr. Aron Diaz, representing AGNC and who is the Northwest Enterprise Zone Administrator, testified in opposition to the bill. He noted that his opposition is due to the pre-certification process in the bill. He closed by urging the committee to oppose the legislation.
03:16 PM -- 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.
The committee continued its discussion on the change in certification process under the bill and the merits of the Colorado Enterprise Zone Program. At this time, Mr. Jones distributed a study by the Center on enterprise zones (Attachment B).
03:34 PM -- Mr. Lyle Williamson, representing Verizon Communications, testified in support of the bill.
03:40 PM -- Mr. Pat Duran, representing the Yuma County Economic Development Corporation, testified in support of the bill. He closed by noting the importance of economic development incentives to communities in southwest Colorado.
|TIME: || 03:45:24 PM|
|MOTION:||Refer Senate Bill 10-162, as amended, to the Committee of the Whole. The motion passed on a 9-0 vote.|
Final YES: 9 NO: 0 EXC: 2 ABS: 0 FINAL ACTION: PASS
The committee recessed.
04:04 PM -- House Bill 10-1396 - Concerning the Elimination of the Tax Incentives of the Enterprise Zone Program
The committee reconvened.
Representative Judd, prime sponsor, explained that House Bill 10-1396 eliminates all state income tax credits and one sales and use tax exemption available to qualified taxpayers through the Urban and Rural Enterprise Zone Act. He continued by saying that there is no economic benefit tied to economic incentives under the program. He noted that there are nonprofit organizations that benefit from the program but that the bill could be amended to maintain this assistance. The committee discussed the state tax structure in relation to the bill. Representative Judd discussed the factors that support House Bill 10-1396 and the need to shift state money to the infrastructure.
The following persons testified.
04:24 PM -- Mr. Peter Minahan, representing Black Hills Energy, testified in opposition to the bill. Mr. Minahan discussed the construction of the Pueblo Power Plant that is located in a enterprise zone and noted that the tax incentives under the program were important to the area's economic development. He closed by urging the committee to oppose the bill.
04:32 PM -- Mr. Greg Fulton, representing the Colorado Motor Carriers Association, testified in opposition to the bill. Mr. Fulton discussed the challenges that the trucking industry faces in Colorado that have driven trucking companies to locate in states other than Colorado. Over the past 15 years, not one trucking company has relocated to Colorado, he said. Mr. Fulton closed by discussing the jobs that could be lost in Colorado as a result of the bill and said that tax policy makes a difference.
04:40 PM -- Mr. Ernest House, representing the Colorado Springs Chamber of Commerce, testified in opposition toward the bill. He closed by saying that the bill is anti-business and will result in many companies closing their doors.
04:42 PM -- Mr. Tom Clark, representing the Metro Denver Economic Development Corporation, testified in opposition of the bill. Mr. Clark talked about a successful enterprise zone, namely lower downtown Denver (LODO). Mr. Clark noted that tax incentives were important to the economic development of downtown Denver. Mr. Clark closed by discussing the challenges that rural businesses in Colorado face during an economic downturn and said that the tax incentives targeted in the bill are important economic development tools for the state.
04:51 PM -- Mr. Mizraim Cordero, representing the City of Commerce City, testified in opposition toward the bill. He noted that this bill eliminates a major tool for economic development. Mr. Cordero closed by saying that tax incentives under the program help bring jobs to depressed areas of the state.
04:54 PM -- Mr. Preston Gibson, representing the Jefferson Economic Council, distributed a study on enterprise zones (Attachment D) and testified in opposition toward the bill. Mr. Gibson noted that this bill will cost jobs and tax dollars for state and local governments. These tax incentives under the program strengthen Colorado's economic viability by creating jobs and spurring economic development. The committee engaged in a discussion on the tax incentives in the bill. Mr. Gibson closed by discussing the secondary and indirect effects of tax credits.
05:08 PM -- Ms. Loren Furman, representing the Colorado Association of Commerce and Industry (CACI), testified in opposition of the bill and distributed a handout to the committee (Attachment E).
05:14 PM -- Mr. Pat Duran, representing the Yuma County Economic Development Corporation, testified in opposition of the bill.
05:15 PM -- Mr. Richard Werner, representing the Pueblo Economic Development Corporation, testified in opposition to the bill. He noted that when companies look at economic incentives, they look at the cost of business. He closed by saying that Forbes ranked Colorado fourth in its economic business climate.
05:33 PM -- Mr. Doug Hurst, representing Qwest, testified in opposition to the bill. He closed by discussing the tax incentives offered by other states. He closed by discussing the tax incentives under the program and the jobs that it brings to Colorado.
05:44 PM -- Mr. Matt Cheroutes, representing OEDIT, testified in opposition to the bill.
The bill was laid over.
The committee adjourned.