Second Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 12-0413.01 Esther van Mourik x4215HOUSE BILL 12-1251 HOUSE SPONSORSHIP Hullinghorst, Ferrandino SENATE SPONSORSHIP Heath, House Committees Senate Committees Finance A BILL FOR AN ACT Concerning reforms to the "Urban and Rural Enterprise Zone Act". 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: For the income tax years commencing on or after January 1, 2014, limits the amount of an income tax credit that may be claimed in an income tax year for qualified investments in an enterprise zone to the sum of the taxpayer's actual tax liability for the income tax year up to $5,000, plus 50% of any portion of the tax liability for the income tax year that exceeds $5,000 up to a maximum of $500,000. Allows a taxpayer to appeal to the Colorado economic development commission (commission) for permission to claim a credit in excess of the limit specified in the bill. Requires the commission to annually post information regarding claimed investment tax credits on its web site or the Colorado office of economic development's web site. Requires the commission to provide the department of revenue with information related to taxpayers receiving any credits allowed under the "Urban and Rural Enterprise Zone Act". Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Legislative declaration. (1) The general assembly hereby finds and declares that: (a) It is the duty of the general assembly to ensure that every taxpayer dollar is spent in the most effective and efficient way possible in order to obtain the best possible return on investment; (b) Reviewing and improving existing state economic development programs, such as the "Urban and Rural Enterprise Zone Act", article 30 of title 39, Colorado Revised Statutes, in order to ensure that the programs remain relevant, efficient, and effective in expanding Colorado's economy is a priority for the general assembly and allows the general assembly to use any savings to promote other economic development programs that are highly targeted to those businesses that need the most assistance; (c) Promoting sustainable economic growth remains a critical priority while Colorado's economy is recovering, and it is important to update and modernize existing economic development programs to meet the changing needs of Colorado's economy; and (d) The money saved will be used to fund effective economic development programs within the Colorado office of economic development and will provide a source for an economic stability fund to help economic development during times of economic downturn. SECTION 2. In Colorado Revised Statutes, 39-30-104, amend (2); and add (2.7) as follows: 39-30-104. Credit against tax - investment in certain property - repeal. (2) (a) For income tax years commencing prior to January 1, 2014, the amount of the credit set forth in subsection (1) of this section shall be subject to the limitations of section 39-22-507.5; except that, in computing the limitations on credit pursuant to section 39-22-507.5 (3), a taxpayer's actual tax liability for the income tax year shall not be reduced by the amount of credits allowed by section 39-30-105 and the limit on that portion of a taxpayer's tax liability that exceeds five thousand dollars shall be fifty percent. (b) In addition to the limitations set forth in paragraph (a) of this subsection (2), for income tax years commencing on or after January 1, 2011, but prior to January 1, 2014, any taxpayer that is eligible to claim a credit pursuant to subsection (1) of this section in excess of five hundred thousand dollars shall defer claiming any amount of the credit allowed pursuant to this section that exceeds five hundred thousand dollars until an income tax year commencing on or after January 1, 2014. The five hundred thousand dollar limitation specified in this paragraph (b) shall apply to any credit allowed in the current year income tax years commencing on or after January 1, 2011, but prior to January 1, 2014, including any amount carried forward from a prior year. (c) (I) For income tax years commencing on or after January 1, 2014, except as provided in subparagraph (III) of this paragraph (c), the amount of the credit set forth in subsection (1) of this section for any income tax year shall not exceed the sum of up to five thousand dollars of the taxpayer's actual tax liability for the income tax year plus fifty percent of any portion of the tax liability for the income tax year that exceeds five thousand dollars up to a maximum of five hundred thousand dollars. (II) In computing the limitations of the credit pursuant to this paragraph (c), a taxpayer's actual tax liability for the income tax year shall be derived from the calculated tax before any reduction of credits. (III) (A) A taxpayer may appeal the five hundred thousand dollar limitation specified in subparagraph (I) of this paragraph (c) by applying in writing to the Colorado economic development commission for permission to claim a credit in excess of such limit. The taxpayer shall provide to the Colorado economic development commission information that indicates the additional income tax credit is a substantial factor to the start-up, expansion, or relocation of the taxpayer's business in the enterprise zone. The Colorado economic development commission may require the taxpayer to provide an independent analysis, at the taxpayer's expense, indicating that the additional income tax credit is a substantial factor to the start-up, expansion, or relocation of the taxpayer's business in the enterprise zone. The appeal shall be considered at a public hearing of the Colorado economic development commission. (B) The economic development commission may allow all, part, or none of a taxpayer's request to claim a credit in excess of the five hundred thousand dollar limit. The Colorado economic development commission shall issue a credit certificate for that calendar year in the amount of the tax credit in excess of the five hundred thousand dollar limit to the taxpayer. The credit certificate shall be submitted by the taxpayer to the department of revenue with the taxpayer's income tax return for the tax year that includes the December 31 of the calendar year for which the credit certificate is issued. If the amount of the credit allowed by the Colorado economic development commission pursuant to this subparagraph (III) exceeds the amount of income taxes otherwise due on the taxpayer's income in the income tax year for which the credit is being claimed, the amount of the credit allowed pursuant to this subparagraph (III) and not used as an offset against income taxes in the current income tax year may be carried forward and used as a credit against subsequent years' income tax liability for a period not to exceed twelve years and shall be applied first to the earliest income tax years possible. Any credit remaining after said period shall not be refunded or credited to the taxpayer. (C) In the event the Colorado economic development commission approves a taxpayer's appeal, the Colorado economic development commission shall include the result of the appeal in its annual report to the general assembly specified in section 39-30-103 (4) (b.7), including the taxpayer's name, the amount of the appeal, and the Colorado economic development commission's justification for approving the appeal. (2.7) The Colorado economic development commission shall annually post on its web site, or on the Colorado office of economic development's web site, the following information regarding any income tax credits claimed pursuant to subsection (1) of this section: (a) The enterprise zone for the claimed credit; (b) The name of the taxpayer or business; (c) The type of business; (d) The tax year the credit is being claimed for; (e) The total qualified investment reported; (f) The amount of the qualified investment that qualifies for the credit; (g) The calculated credit; and (h) The county where the qualified investment is made. SECTION 3. In Colorado Revised Statutes, 39-30-111, add (5) as follows: 39-30-111. Department of revenue - enterprise zone data - electronic filing - submission of carryforward schedule. (5) No later than September 1, 2012, and no later than September 1 of each year thereafter, the Colorado economic development commission shall provide the department of revenue with an electronic report of the taxpayers receiving one or more income tax credits pursuant to this article for the preceding calendar year or any fiscal year ending in the preceding calendar year and of any credits disallowed pursuant to this article. The report shall contain the following information for each taxpayer: (a) The taxpayer's name; (b) The taxpayer's Colorado account number and federal employer identification number; (c) The amount of each credit allowed to the taxpayer; and (d) Any associated taxpayers' names, Colorado account numbers, and federal employer identification numbers or social security numbers, if the credit allowed in this section is allocated from a pass-through entity. 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 8, 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.