Second Regular Session Sixty-fourth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 04-0514.01 Bob Lackner HOUSE BILL 04-1044 HOUSE SPONSORSHIP Vigil, SENATE SPONSORSHIP (None), House Committees Senate Committees Finance Appropriations A BILL FOR AN ACT Concerning the establishment of a credit against the state income tax in favor of eligible small businesses to offset the costs of premiums paid by the businesses for obtaining health insurance coverage on behalf of their employees. Bill Summary (Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.) For income tax years commencing on or after January 1, 2006, but prior to a specified date, allows a credit against the state income tax to an eligible small employer for all or any portion of the health insurance premiums paid on behalf of the employer's eligible employees in accordance with the requirements of the act. Specifies that, for any income tax year commencing on or after but prior to a specified date, each eligible small employer that does not, as of a specified date, pay all or any portion of the health insurance premiums on behalf of its employees and that begins to pay all or any portion of the premiums during the income tax year or any income tax year thereafter, shall be allowed a tax credit in an amount as follows:  A specified percent of the amount paid annually for each of the first 2 years the eligible small employer pays all or any portion of the health insurance premiums;  A specified percent of the amount paid annually for each of the 3rd and 4th years the eligible small employer pays all or any portion of the health insurance premiums; and  A specified percent of the amount paid annually for the 5th year the eligible small employer pays all or any portion of the health insurance premiums. Specifies that, for any income tax year commencing on or after but prior to a specified income tax year, each eligible small employer that fails to qualify for the tax credit because the employer was already paying all or any portion of health insurance premiums on behalf of its employees as of a specified date shall be allowed a credit in an amount equal to a specified percent of the amount paid during the tax year in premiums for each eligible employee where the employer is able to demonstrate a specified percentage increase in average premium costs for all of its eligible employees for comparable health insurance benefits for the income tax year in comparison with the preceding income tax year for which the employer is claiming the credit. Specifies that no employer shall be allowed to claim the tax credit authorized for more than 5 income tax years. Specifies that, for any particular taxable year in which the credit is allowed, no person is allowed to claim the tax credit who also claims any other state income tax credit or deduction in connection with the employer's payment of health insurance premiums on behalf of its employees. Specifies that, if the amount of the tax credit allowed pursuant to the provisions of the act exceeds the amount of income taxes otherwise due on the person's income in the taxable year for which the credit is being claimed, the amount of the credit not used as an offset against income taxes in the income tax year may be carried forward and used as a credit against subsequent years' income tax liability for a period not to exceed 5 years and shall be applied first to the earliest income tax years possible. Specifies that any credit remaining after the period shall not be refunded to the person. Authorizes the executive director of the department of revenue to promulgate rules as may be necessary to administer and enforce any provision of the act. Repeals the act on a specified date. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Part 5 of article 22 of title 39, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 39-22-529. Credit to offset employee health insurance coverage premium costs - definitions - repeal. (1) For purposes of this section, unless the context otherwise requires: (a) "Eligible employee" means an employee who works on a full-time basis and whose average work week exceeds thirty hours. "Eligible employee" includes a sole proprietor, a partner of a partnership, and an independent contractor, if the sole proprietor, partner, or independent contractor is included as an employee under the health benefit plan of an eligible small employer, but does not include an employee who works on a part-time, temporary, or substitute basis. For purposes of this section, each person, the person's spouse, and the person's minor children shall constitute only one eligible employee when the person, spouse, or children are employed by the same eligible small employer; except that, in the case of an eligible employee who is a farmer, the farmer may constitute an eligible employee and the farmer's spouse, if employed by the farmer, may constitute a second eligible employee. (b) "Eligible small employer" means any person subject to the tax imposed by this article that is actively engaged in business and that, for at least fifty percent of the time during the quarter of the calendar year preceding the income tax year for which the credit is claimed pursuant to this section, employed not more than fifty eligible employees, the majority of whom were employed by the eligible small employer within Colorado. In determining the number of eligible employees for the purposes of this section, an employer that otherwise satisfies the requirements of this section and that is affiliated with any other firm, corporation, partnership, or association, or that is eligible to file a combined tax return on behalf of itself and another entity, shall be considered one eligible small employer. (c) "Farmer" means any person who derives at least two-thirds of the person's income from using or cultivating land for the production of agricultural crops, milk or dairy products, poultry or poultry products, or fruit or other horticultural products; except that the term "farmer" shall not include any person who processes farm products or distributes farming supplies by contracting to provide spraying, harvesting, or other farming services. (d) "Person" means a resident individual, sole proprietorship, domestic or foreign corporation subject to the provisions of part 3 of this article, limited liability company, partnership, trust, or association. (2) For income tax years commencing on or after January 1, 2006, but prior to January 1, 2011, and subject to the limitations specified in this section, a credit against the tax imposed by this article shall be allowed an eligible small employer for all or any portion of the health insurance premiums paid on behalf of the employer's eligible employees in accordance with the requirements of subsections (3) and (4) of this section. (3) For any income tax year commencing on or after January 1, 2006, but prior to January 1, 2011, each eligible small employer that does not, as of January 1, 2006, pay all or any portion of the health insurance premiums on behalf of its eligible employees and that begins to pay all or any portion of the premiums during the income tax year or any income tax year thereafter, shall be allowed a credit in an amount as follows: (a) Fifty percent of the amount paid during the tax year for each of the first two years the eligible small employer pays all or any portion of the health insurance premiums; (b) Thirty-five percent of the amount paid during the tax year for each of the third and fourth years the eligible small employer pays all or any portion of the health insurance premiums; and (c) Twenty-five percent of the amount paid during the tax year for the fifth year the eligible small employer pays all or any portion of the health insurance premiums. (4) For any income tax year commencing on or after January 1, 2006, but prior to January 1, 2011, each eligible small employer that fails to qualify for the tax credit specified in subsection (3) of this section because the employer was already paying all or any portion of health insurance premiums on behalf of its eligible employees as of January 1, 2006, shall be allowed a credit in an amount equal to twenty-five percent of the amount paid during the tax year in premiums for each eligible employee where the employer is able to demonstrate at least a twenty percent increase in average premium costs for all of its eligible employees for comparable health insurance benefits over the preceding income tax year for which the employer is claiming the credit pursuant to this section. (5) Notwithstanding any other provision of this section: (a) No person shall be allowed to claim the credit authorized by this section for more than five income tax years; and (b) For any particular taxable year in which the credit authorized by this section is allowed, no person shall be allowed to claim the credit allowed by this section who also claims any other credit or deduction authorized by this article in connection with the employer's payment of health insurance premiums on behalf of its employees. (6) If the amount of the credit allowed pursuant to the provisions of this section exceeds the amount of income taxes otherwise due on the person's income in the taxable year for which the credit is being claimed, the amount of the credit not used as an offset against income taxes in the 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 shall be applied first to the earliest income tax years possible. Any credit remaining after the period shall not be refunded to the person. (7) The executive director may promulgate rules as may be necessary to administer and enforce any provision of this section. The rules shall be promulgated in accordance with article 4 of title 24, C.R.S. (8) This section is repealed, effective July 1, 2016. SECTION 2. 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 that is allowed for submitting a referendum petition pursuant to article V, section 1 (3) of the state constitution (August 4, 2004, if adjournment sine die is on May 5, 2004); except that, if a referendum petition is filed against this act or an item, section, or part of this act within such period, then the act, item, section, or part, if approved by the people, shall take effect on the date of the official declaration of the vote thereon by proclamation of the governor.