First Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 11-0067.01 Ed DeCecco HOUSE BILL 11-1104 HOUSE SPONSORSHIP Ferrandino, Duran, Hullinghorst, Kefalas, Levy, Pabon, Pace, Tyler SENATE SPONSORSHIP Steadman, Hodge House Committees Senate Committees Finance A BILL FOR AN ACT Concerning a tax expenditure report. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The bill requires the department of revenue (department) to prepare an annual tax expenditure report (report). The report includes information for every state tax and federal income tax regarding each tax expenditure, which is a tax provision that provides a gross or taxable income definition, deduction, exemption, credit, or rate for certain persons, types of income, transactions, or property that results in reduced tax revenue for the state. Among the information that will be included in the report is the decrease in revenue that results from the tax expenditure, whether the tax expenditure is achieving its intended purpose, and the effect of the tax expenditure on the distribution of the tax burden by various income and business classes. Legislative council staff will assist the department in the preparation of some of the information required in the report. The department is required to: Provide copies of the report to each member of the general assembly; Present the report to the finance committees of the house of representatives and the senate; Make the report available for public inspection; and Publish the report on the department web site. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Title 39, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW ARTICLE to read: ARTICLE 36 Tax Expenditure Report 39-36-101. Legislative declaration. (1) The general assembly hereby finds and declares that: (a) The general assembly uses both direct expenditure of government funds and special or selective tax relief, which is known as a tax expenditure, to further various public policy goals; (b) A tax expenditure differs from a direct spending program because a direct spending program continues only if funds are appropriated for each budget period, while the continuation of a tax expenditure generally does not require any legislative action; (c) In addition, a direct spending program is generally detailed on the expenditure side of the budget, but a tax expenditure is simply included on the revenue side of the budget without itemization; (d) A tax expenditure should receive a periodic and comprehensive review as to its total cost and effectiveness in achieving its objectives; and (e) It is important that state government be accountable and transparent in such a way that the general public can understand the value of tax expenditures given by the state. (2) In enacting this article, it is the intent of the general assembly to create a means for providing the general assembly and the public with this vital tax-related information in an annual tax expenditure report. 39-36-102. Definitions. As used in this article, unless the context otherwise requires: (1) "Department" means the department of revenue. (2) "Executive director" means the executive director of the department of revenue. (3) "Tax expenditure" means a tax provision that provides a gross or taxable income definition, deduction, exemption, credit, or rate for certain persons, types of income, transactions, or property that results in reduced tax revenue. (4) "Tax expenditure report" or "report" means the annual report that the department of revenue is required to prepare pursuant to section 39-36-103 (1). (5) "Tax of interest" means the federal income tax and any tax levied and collected by the state. 39-36-103. Tax expenditure report. (1) On or before January 1, 2012, and each January 1 thereafter, the department shall prepare a tax expenditure report for the state that includes the information set forth in subsection (2) of this section. (2) (a) To the extent data or information is available, a tax expenditure report must include the following information for each tax expenditure for each tax of interest: (I) A citation of the statutory or other legal authority for the tax expenditure; (II) The year that the tax expenditure was enacted; (III) A description of the tax expenditure; (IV) An estimate of the decrease in state revenue that results from the tax expenditure for the current tax year and for the next three tax years; (V) A statement of the intended purpose of the tax expenditure; (VI) An analysis of whether the tax expenditure is achieving its intended purpose; (VII) The effect of the tax expenditure on the distribution of the tax burden by income class and industry or business class, as appropriate; and (VIII) The effect of the tax expenditure on total income by class. (b) The income classes to be included in the report pursuant to subparagraphs (VII) and (VIII) of paragraph (a) of this subsection (2) shall: (I) At a minimum, use quintiles of the income distribution, with the highest quintile or other proportional category subdivided into the top one percent of income, the next four percent of income, and the remainder of the income within the quintile or category; (II) Separately consider corporate and individual income taxpayers. (c) The report shall also include an estimate of the total decrease in state revenue that results from all tax expenditures for each separate tax of interest for the current tax year and for the next three tax years. (3) Legislative council staff shall provide the information required pursuant to subparagraphs (V) and (VI) of paragraph (a) of subsection (2) of this section to the department for its inclusion in the tax expenditure. (4) (a) The department shall provide a copy of the report to all members of the general assembly in accordance with section 24-1-136 (9), C.R.S. (b) No later than February 1, 2012, and each February 1 thereafter, the executive director of the department, or his or her designee, shall present the annual tax expenditure report to the finance committees of the house of representatives and the senate, or any successor committees. (c) The department shall make the tax expenditure report available for public inspection and shall publish the report on the department web site. (5) The reporting requirement set forth in this section is exempt from the provisions of section 24-1-136 (11), C.R.S., and the annual reporting requirement shall remain in effect until changed by the general assembly acting by bill. SECTION 2. Act subject to petition - effective date. This act shall take effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly (August 10, 2011, if adjournment sine die is on May 11, 2011); except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part shall not take effect unless approved by the people at the general election to be held in November 2012 and shall take effect on the date of the official declaration of the vote thereon by the governor.