Second Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 12-0575.01 Jason Gelender x4330 HOUSE BILL 12-1132 HOUSE SPONSORSHIP Miklosi, Todd SENATE SPONSORSHIP Williams S., House Committees Senate Committees Finance A BILL FOR AN ACT Concerning creative district tax incentives, and, in connection therewith, allowing a state income tax credit for income derived from creative business activities conducted within a creative district and reducing the rate of the state sales tax imposed on sales made within a creative district. 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.) Section 2 of the bill: Defines a creative business activity as an activity that generates income for the person conducting it and that the creative industries division of the Colorado office of economic development (division) determines involves the design, creation, production, sale, exhibition, or performance of artistic, literary, musical, architectural, design, or other creative work product or otherwise directly relates to such work product; and For income tax years commencing on or after January 1, 2013, but before January 1, 2018, allows a person who earns income from engaging in creative business activities within a creative district certified by the division to claim a 50% income tax credit against the income tax liability attributable to income derived from the activities. Section 3 of the bill reduces the rate of sales tax imposed on sales made within a creative district on and after January 1, 2013, but before January 1, 2018, from 2.9% to 1.45%; except that, for a creative district certified on or after November 1, 2012, the reduced rate does not apply until the first day of the third month following the month of certification. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Legislative declaration. The general assembly hereby declares that the intended purpose of the tax expenditures included in this act is to encourage the creation and development of creative districts and thereby stimulate the economy of the state of Colorado by offering tax incentives to persons who conduct income-generating creative business activities or sell taxable goods or services within creative districts. SECTION 2. In Colorado Revised Statutes, add 39-22-534 as follows: 39-22-534. Credit for persons earning income from creative business activities in state-certified creative districts - rules - definitions - repeal. (1) As used in this section, unless the context otherwise requires: (a) "Creative business activity" means an activity that generates income for the person conducting it and that the division determines involves the design, creation, production, sale, exhibition, or performance of artistic, literary, musical, architectural, design, or other creative work product or otherwise directly relates to such work product. (b) "Creative district" means a state-certified creative district, as defined in section 24-48.5-314 (2) (d), C.R.S. (c) "Credit certificate" means a statement issued to a person by the division that certifies that the person has engaged in creative business activity within a creative district at a permanent place of business where the person regularly conducts creative business activity and therefore qualifies for the tax credit allowed by this section. (d) "Division" means the creative industries division of the office of economic development created in section 24-48.5-301 (1), C.R.S. (e) "Person" shall have the same meaning as provided in section 39-21-101 (3). (2) For income tax years commencing on or after January 1, 2013, but before January 1, 2018, a person who engages in one or more creative business activities within a creative district at a permanent place of business where the person regularly conducts creative business activity may claim a credit against the tax imposed pursuant to this article in an amount equal to fifty percent of the person's tax liability attributable to income derived from creative business activity during the income tax year. The credit is not refundable and may not be carried forward to any subsequent income tax year. (3) A person shall apply for the right to claim the credit allowed by subsection (2) of this section by applying to the division for a credit certificate. To obtain a credit certificate, an applicant shall comply with all application deadlines, procedures, and requirements specified by the division and shall provide to the division any information that the division requires to: (a) Verify that the person has engaged in one or more creative business activities within a creative district at a permanent place of business where the person regularly conducts creative business activity during the income tax year for which the person intends to claim credit; and (b) Verify the amount of income that the person has earned from engaging in one or more creative business activities within a creative district at a permanent place of business where the persons regularly conducts creative business activity. (4) When issuing a credit certificate, the division shall certify both that the certificate recipient qualifies to claim the credit and the amount of the recipient's income that is attributable to one or more of the recipient's creative business activities within a creative district at a permanent place of business where the person regularly conducts creative business activity. (5) A person who receives a credit certificate from the division shall claim the credit allowed by subsection (2) of this section by submitting a copy of the certificate to the department of revenue with the person's income tax return and claiming the credit on the return. The division shall provide to the department an electronic list of persons to whom the division has issued credit certificates, which the division shall promptly update whenever it issues a credit certificate. (6) The executive director of the department of revenue may promulgate rules as may be necessary to administer and enforce the provisions of this section. The executive director shall promulgate any such rules in accordance with article 4 of title 24, C.R.S. (7) This section is repealed, effective July 1, 2021. SECTION 3. In Colorado Revised Statutes, 39-26-106, amend (1) (a) (II); and add (1) (a) (III) as follows: 39-26-106. Schedule of sales tax - repeal. (1) (a) (II) Except as otherwise provided in subparagraph (III) of this paragraph (a), on and after January 1, 2001, there is imposed upon all sales of commodities and services specified in section 39-26-104 a tax at the rate of two and ninety one-hundredths percent of the amount of the sale to be computed in accordance with schedules or systems approved by the executive director of the department of revenue. Said schedules or systems shall be designed so that no such tax is charged on any sale of seventeen cents or less. (III) (A) In lieu of the tax imposed pursuant to subparagraph (II) of this paragraph (a), on and after January 1, 2013, but before January 1, 2018, there is imposed on all sales made within a state-certified creative district, as defined in section 24-48.5-314 (2) (d), C.R.S., of commodities and services specified in section 39-26-104, a tax at the rate of one and forty-five one-hundredths percent of the amount of the sale to be computed in accordance with schedules or systems approved by the executive director of the department of revenue; except that this sub-subparagraph (A) does not apply to sales made within a state-certified creative district certified on or after November 1, 2012, until the first day of the third month following the month of certification. Said schedules or systems shall be designed so that no such tax is charged on any sale of seventeen cents or less. (B) This subparagraph (III) is repealed, effective July 1, 2021. SECTION 4. Act subject to petition - effective date. This act takes 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 7, 2012, if adjournment sine die is on May 9, 2012); 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 will not take effect unless approved by the people at the general election to be held in November 2012 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor.