First Regular Session Seventieth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 15-0163.01 Esther van Mourik x4215HOUSE BILL 15-1227 HOUSE SPONSORSHIP Becker K., SENATE SPONSORSHIP Heath, House Committees Senate Committees Finance Appropriations A BILL FOR AN ACT Concerning the creation of an income tax credit to encourage employers to assist in repayment of employee student loans if the employee earns certain degrees. 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 creates an income tax credit for a limited number of years for employers doing business in Colorado who hire and retain new employees for a 12-month period and during that period make payments directly to a lender on behalf of each new employee for the new employee's student loan that he or she incurred while earning an approved degree. An employer who has multiple new employees may seek credits for each new employee. The bill requires the approved degree to be an associate or bachelor's degree that represents the completion of a course of study in science, technology, engineering, or mathematics, or a vocational certificate related to industry, manufacturing, or information technology from a Colorado institution of higher education. The bill requires each new employee to be a Colorado resident, work full-time, and receive a base salary or hourly wages totaling less than $60,000 per year. The bill sets up a process whereby the employer seeks preapproval of a credit through the Colorado office of economic development (office) and then allows the office to issue credit certificates after the employer has documented that the requirements of the credit have been met by the employer. The bill specifies that the amount of the credit is calculated as 50% of the payments made directly by the employer to a new employee's lender, subject to a specified maximum per new employee and a specified maximum per employer, except that the per employer maximum may be waived by the Colorado economic development commission. The bill further limits the number of credits that the office may issue in each income tax year that the credit is available. 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) Colorado's workforce is one of the most educated workforces in the nation; (b) When a company decides where to locate and grow, available talent is one of its biggest considerations; (c) Colorado's highly educated workforce is an important asset to the state; (d) States around the country recognize the importance of having an educated workforce and have announced various funding programs to grow talent in their states; (e) In order to keep Colorado at the forefront of innovation, the state must continue to retain and attract educated, innovative individuals in the fields of science, technology, engineering, and mathematics; (f) Colorado's institutions of higher education continue to grow and strengthen their programs in the fields of science, technology, engineering, and mathematics, and it is important to Colorado's economy that graduates of these programs remain in Colorado; (g) In order to remain competitive when retaining and attracting talent and companies to Colorado, the state must be able to show that it supports its educated workforce and that it is committed to growing its talent base; and (h) The state will more successfully retain and attract an educated workforce to stay in Colorado if there is an incentive for local employers to help pay for an employee's student loans. SECTION 2. In Colorado Revised Statutes, add 39-22-538 as follows: 39-22-538. Colorado talent tax credit - rules - definitions - repeal. (1) As used in this section, unless the context otherwise requires: (a) "Affiliate" means any person or entity that controls, is controlled by, or is under common control with another person or entity. For purposes of this paragraph (a), "control" means the power to determine the policies of an entity whether through ownership of voting securities, by contract, or otherwise. (b) "Approved degree" means an associate or bachelor's degree that represents the completion of a course of study in science, technology, engineering, or mathematics, or a vocational certificate related to industry, manufacturing, or information technology, from a Colorado institution of higher education and that is approved by the office. (c) "Colorado institution of higher education" means an institution of higher education as defined in section 23-3.1-102 (5), C.R.S., that is located in Colorado. (d) "Commission" means the Colorado economic development commission created in section 24-46-102, C.R.S. (e) "Credit certificate" means a statement issued by the office certifying that the employer qualifies for the talent tax credit allowed in this section and specifying the amount of the credit allowed. (f) "Credit period" means a period of twelve consecutive months calculated from the later of: (I) The day the conditional approval is granted by the office as specified in paragraph (a) of subsection (4) of this section; or (II) The day the new employee begins working for the employer. (g) "Department" means the department of revenue. (h) "Employer" means a person or affiliate doing business in the state. (i) "Guidelines" means the guidelines developed by the office as specified in paragraph (c) of subsection (3) of this section. (j) "New employee" means a resident individual who performs labor or services in the state for an employer, for which the employer files a federal form W-2, and who: (I) Is hired by the employer on or after the effective date of this subparagraph (I); (II) Has a job title and job description for which an approved degree is either a direct requirement or a strong preference of the employer; (III) Receives a base salary or hourly wages totaling less than sixty thousand dollars per year; (IV) Works full-time; and (V) Graduated with an approved degree no earlier than December 31, 2010. (k) "Office" means the Colorado office of economic development created in section 24-48.5-101, C.R.S. (l) "Qualified employer" means an employer who hires and retains a new employee for a credit period and makes payments directly to a lender for a qualified loan during the credit period. (m) "Qualified loan" means a student loan that meets the definition of a "qualified education loan" in 26 U.S.C. sec. 221, as amended, incurred by the new employee while earning an approved degree from a Colorado institution of higher education. (2) (a) Except as provided in paragraph (b) of this subsection (2), for income tax years commencing on or after January 1, 2016, but prior to January 1, 2020, at the discretion of the office as specified in subsection (3) of this section, there is allowed to a qualified employer an annual talent tax credit with respect to the income taxes imposed by this article in an amount determined by the office pursuant to subsection (4) of this section. (b) The only talent tax credits allowed in the income tax year commencing on or after January 1, 2019, but before January 1, 2020, may be for those credit certificates issued by the office for the unused portion of the two million dollars per income tax year limitation allowed in subparagraph (II) of paragraph (a) of subsection (3) of this section. (3) (a) (I) The office may issue credit certificates to qualified employers for the credit allowed in subsection (2) of this section; except that the total amount of the issued credit certificates may not exceed two million dollars per income tax year. An employer who has multiple new employees may seek a credit certificate for each new employee per income tax year; except that the office shall not issue credit certificates totaling more than two hundred thousand dollars per qualified employer per income tax year, unless the commission issues a waiver as specified in subsection (5) of this section. (II) The office, in its discretion, may issue credit certificates totaling up to two million dollars per income tax year, and the unused portion of the two million dollars per income tax year may be used by the office to issue more than two million dollars in credit certificates in future income tax years, so long as the office does not issue credit certificates totaling more than six million dollars during the income tax years for which the credit allowed in subsection (2) of this section is available. (b) An employer shall submit a complete written application for conditional approval to the office by the deadline established in the office's guidelines. The application must include: (I) Identification of the new employee and the new employee's actual or anticipated hire date; (II) The base salary or hourly rate the new employee will be paid; (III) Documentation indicating the new employee will be working full-time; (IV) Documentation indicating that the new employee graduated with an approved degree no earlier than December 31, 2010; (V) Documentation regarding the qualified loan and the lender holding the loan; (VI) Documentation that establishes the employer's intended amount of qualified loan payments made for the new employee during the credit period, as calculated by the employer; and (VII) Documentation that sets forth the new employee's job title, summary job description, and an explanation of how the new employee's approved degree is a direct requirement or strong preference for the new employee's position. (c) The office shall develop guidelines for the administration of the issuance of the credit certificates for the credit allowed in this section, including application requirements and guidelines regarding the issuing of the credit certificate. The guidelines must be posted on the office's web site no later than October 1, 2015. (4) (a) The office shall review each application for a conditional approval submitted by an employer. Based on the application submitted and the office's guidelines, the office may offer conditional approval to an employer for a credit certificate. The conditional approval must include the specific terms that must be met by the employer to qualify for the credit. (b) An employer who receives conditional approval for a credit allowed in this section shall notify the office promptly if the new employee is either not hired or not retained for the credit period, in which case the conditional approval must be canceled. In the event a conditional approval is canceled, the office may offer a different conditional approval to an employer pursuant to the office's guidelines, so long as such conditional approval still meets the limitations specified in paragraph (a) of subsection (3) of this section. (c) The employer who received conditional approval as specified in paragraph (a) of this subsection (4) shall submit a request for the issuance of a credit certificate by the deadlines established in the office's guidelines. The request must include all documentation necessary to calculate the credit as specified in paragraph (d) of this subsection (4), including: (I) A list, including proof, of the date and amount of all payments made directly by the employer to a lender for a qualified loan during the credit period; (II) The lender's information; (III) The new employee's social security number; and (IV) Any other information as requested by the office. (d) If the office determines the employer is a qualified employer and such qualified employer has provided all necessary documentation, the office shall calculate the amount of the credit as fifty percent of the payments made by the qualified employer directly to lenders for qualified loans during the respective credit period, not to exceed five thousand dollars in credits per new employee per income tax year and not to exceed fifty percent of the intended amount of qualified loan payments as calculated by the employer pursuant to subparagraph (VI) of paragraph (b) of subsection (3) of this section, and shall issue a credit certificate in that amount to the qualified employer. The credit certificate must be submitted by the qualified employer to the department with the qualified employer's income tax return for the tax year that includes the December 31 of the credit period for which the credit certificate is issued. (5) (a) A qualified employer may seek a waiver of the two hundred thousand dollars per qualified employer, per income tax year, limitation specified in subparagraph (I) of paragraph (a) of subsection (3) of this section by completing a written application to the Colorado economic development commission for permission to claim credits in excess of such limits for the income tax years in which the credit periods end. The application for waiver may be for multiple tax years and credit periods; except that an employer must still submit an application for conditional approval and request for credit issuance on an annual basis as specified in paragraph (b) of subsection (3) of this section and paragraph (c) of subsection (4) of this section, respectively. The application must include an explanation of the qualified employer's plans to make qualified loan payments for its new employees in excess of four hundred thousand dollars per income tax year and any other information the commission deems necessary. In deciding whether to grant the waiver of the limitation, the commission must consider the estimated demand for tax credits allowed in this section for other qualified employers within the two million dollars per income tax year limitation set forth in subparagraph (II) of paragraph (a) of subsection (3) of this section, and the importance of these credits in incentivizing the employer seeking the waiver to retain or grow jobs in Colorado. The qualified employer's application must be considered at a regularly scheduled meeting of the Colorado economic development commission where the public is allowed to comment. (b) The Colorado economic development commission may allow all, part, or none of the credit amount in excess of the two hundred thousand dollars per qualified employer per income tax year limitation specified in subparagraph (I) of paragraph (a) of subsection (3) of this section requested in the qualified employer's waiver application. The Colorado economic development commission shall make a resolution that sets forth the specific maximum amount of the credit that the office may issue to the qualified employer for the credit periods included in the waiver application. The credit certificate must be submitted by the qualified employer to the department of revenue with the qualified employer's income tax return for the tax year for which the credit certificate is issued. (c) In the event the Colorado economic development commission approves a qualified employer's application to waive the two hundred thousand dollar per qualified employer limitation specified in subparagraph (I) of paragraph (a) of subsection (3) of this section, the Colorado economic development commission shall include its decision in the commission's annual report required to be presented to the general assembly pursuant to section 24-46-104 (2), C.R.S., including the qualified employer's name, the amount of the credit that the commission allowed the qualified employer to claim, and the Colorado economic development commission's justification for approving the application. (6) If the amount of the credit allowed in this section exceeds the amount of income taxes otherwise due on the qualified employer's income in the income tax year for which the credit is being claimed, the amount of the credit 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 five years and must be applied first to the earliest income tax years possible. Any credit remaining after said period may not be refunded or credited to the qualified employer. (7) The office or its designee may audit a qualified employer's documentation up to twelve months following the issuance of any credit certificate. (8) The office shall include information regarding all credit certificates issued pursuant to this section, including conditional approvals, the names of qualified employers, and the amounts issued, in the Colorado economic development commission's annual report required to be presented to the general assembly pursuant to section 24-46-104 (2), C.R.S. (9) No later than September 1, 2016, and no later than September 1 of each year thereafter through September 1, 2019, the office shall provide the department with an electronic report of the qualified employers who were issued a credit certificate for the preceding calendar year or any fiscal year ending in the preceding calendar year, and any credits disallowed pursuant to paragraph (b) of subsection (4) of this section for any year, that includes the following information: (a) The qualified employer's name; (b) The qualified employer's Colorado account number and federal employer identification number; (c) The amount of the credit certificate; and (d) Any associated 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 pursuant to subsection (9) of this section. (10) If a qualified employer receiving a credit allowed in this section is a partnership, limited liability company, S corporation, or similar pass-through entity, the qualified employer may allocate the credit among its partners, shareholders, members, or other constituent entities in any manner agreed to by such partners, shareholders, members, or other constituent entities. The qualified employer shall certify to the office and the department the amount of the credit allocated to each partner, shareholder, member, or other constituent entity, and the office shall issue credit certificates in the appropriate amounts to each partner, shareholder, member, or other constituent entity. Each partner, shareholder, member, or other constituent entity is allowed to claim such amount subject to any restrictions set forth in this section. (11) This section is repealed, effective December 31, 2023. SECTION 3. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.