First Regular Session Sixty-fifth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 05-0825.02 Jason Gelender HOUSE BILL 05-1292 HOUSE SPONSORSHIP Hall, Stengel, McCluskey, Berens, Hoppe, Liston, Massey, May M., Penry, Rose, Stafford, Sullivan, and White SENATE SPONSORSHIP Teck, Entz, Johnson, and Kester House Committees Senate Committees Finance A BILL FOR AN ACT Concerning the adjustment of the amount of state revenues generated in excess of the limitation on state fiscal year spending imposed by section 20 (7) of article X of the state constitution that is required to be refunded in order to provide a more stable means of funding state budgetary needs, and, in connection therewith, reducing the state income tax rate from four and sixty-three one-hundredths percent to four and one-half percent, authorizing the state to retain and spend all excess state revenues for each state fiscal year through 2009-10, and authorizing the state to retain and spend for the 2010-11 state fiscal year and for each succeeding state fiscal year amounts of excess state revenues determined by a formula that includes annual adjustments for inflation and changes in state population. Bill Summary (Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.) Refers to the voters of the state a measure that:  Reduces the state income tax rate from 4.63% to 4.5% for income tax years that commence on or after January 1, 2006.  Authorizes the state to retain all state revenues in excess of the limitation on state fiscal year spending (excess state revenues) for each state fiscal year through 2009-10.  Authorizes the state to retain and spend an amount of excess state revenues for the 2010-11 state fiscal year and for each succeeding state fiscal year determined by a formula that includes annual adjustments for inflation and changes in state population.  Defines terms. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Article 77 of title 24, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 24-77-103.8. Retention of excess state revenues - definitions. (1) (a) Notwithstanding the provisions of this article or any other provision of law, for each state fiscal year commencing on or after July 1, 2004, but before July 1, 2010, the state shall be authorized to retain and spend all excess state revenues. (b) For the 2010-11 state fiscal year, the state shall be authorized to retain and spend a maximum amount of excess state revenues equal to the difference between: (I) The sum of the state revenues and the excess state revenues retained by the state for the 2009-10 state fiscal year plus the product of that amount and the sum of inflation and the percentage change in state population in 2009, adjusted for the qualification or disqualification of an enterprise; and (II) The maximum amount of state fiscal year spending permitted for the 2010-11 state fiscal year under section 20 (7) (a) of article X of the state constitution. (c) For the 2011-12 state fiscal year and for each succeeding state fiscal year, the state shall be authorized to retain and spend a maximum amount of excess state revenues equal to the difference between: (I) The maximum sum of state revenues and excess state revenues that the state was authorized to retain and spend for the prior state fiscal year plus the product of that amount and the sum of inflation and the percentage change in state population in the prior calendar year, adjusted for the qualification or disqualification of an enterprise; and (II) The maximum amount of state fiscal year spending permitted for the state fiscal year under section 20 (7) (a) of article X of the state constitution. (2) The approval of this section by the registered electors of the state voting on the issue at the November 2005 general election constitutes a voter-approved revenue change to allow the retention of state revenues in excess of the constitutional limitation on state fiscal year spending imposed by section 20 (7) (a) of article X of the state constitution. (3) As used in this section: (a) "Excess state revenues" means state revenues in excess of the limitation on state fiscal year spending imposed by section 20 (7) (a) of article X of the state constitution. (b) "State revenues" means state revenues that are included in state fiscal year spending, as defined in section 24-77-102 (17), and subject to the limitation on state fiscal year spending imposed by section 20 (7) (a) of article X of the state constitution. SECTION 2. 24-77-106.5 (1), Colorado Revised Statutes, is amended to read: 24-77-106.5. Annual financial report - certification of excess state revenues. (1) (a) For each fiscal year, the controller shall prepare a financial report for the state for purposes of ascertaining compliance with the provisions of this article. Any financial report prepared pursuant to this section shall include, but shall not be limited to, state fiscal year spending, reserves, revenues, revenues that the state is authorized to retain and spend pursuant to voter approval of section 24-77-103.8, and debt. Such financial report shall be audited by the state auditor. (b) Based upon the financial report prepared in accordance with paragraph (a) of this subsection (1) for any given fiscal year, the controller shall certify to the governor, the general assembly, and the executive director of the department of revenue no later than September 1 following the end of a fiscal year the amount of state revenues in excess of the limitation on state fiscal year spending imposed by section 20 (7) (a) of article X of the state constitution, if any, for such fiscal year and the amount of state revenues in excess of that limitation that the state is authorized to retain and spend pursuant to voter approval of section 24-77-103.8. SECTION 3. 39-22-104 (1.7) and (2), Colorado Revised Statutes, are amended, and the said 39-22-104 is further amended BY THE ADDITION OF A NEW SUBSECTION, to read: 39-22-104. Income tax imposed on individuals, estates, and trusts - single rate - definitions. (1.7) Subject to subsection (2) of this section, with respect to taxable years commencing on or after January 1, 2000, but before January 1, 2006, a tax of four and sixty-three one-hundredths percent is imposed on the federal taxable income, as determined pursuant to section 63 of the internal revenue code, of every individual, estate, and trust. (1.8) Subject to subsection (2) of this section, with respect to taxable years commencing on or after January 1, 2006, a tax of four and one-half percent is imposed on the federal taxable income, as determined pursuant to section 63 of the internal revenue code, of every individual, estate, and trust. (2) Prior to the application of the rate of tax prescribed in subsection (1), (1.5), or (1.7), or (1.8) of this section, the federal taxable income shall be modified as provided in subsections (3) and (4) of this section. SECTION 4. 39-22-301 (1) (d) (I) (I), Colorado Revised Statutes, is amended, and the said 39-22-301 (1) (d) (I) is further amended BY THE ADDITION OF A NEW SUB-SUBPARAGRAPH, to read: 39-22-301. Corporate tax imposed. (1) (d) (I) A tax is imposed upon each domestic C corporation and foreign C corporation doing business in Colorado annually in an amount of the net income of such C corporation during the year derived from sources within Colorado as set forth in the following schedule of rates: (I) For income tax years commencing on or after January 1, 2000, but before January 1, 2006, four and sixty-three one-hundredths percent of the Colorado net income; and (J) For income tax years commencing on or after January 1, 2006, four and one-half percent of the Colorado net income. SECTION 5. 39-22-601 (10), Colorado Revised Statutes, is amended to read: 39-22-601. Returns. (10) For income tax years commencing on or after January 1, 1999, the executive director shall include on every income tax return form a statement explaining that prior to January 1, 1999, the income tax rate for an individual, estate, and trust was five percent of federal taxable income and the income tax rate for corporations was five percent of net income. The statement shall also explain that the income tax rate was reduced for income tax years commencing on or after January 1, 1999, but prior to January 1, 2000, to four and three-quarters percent, and that the income tax rate was reduced for income tax years commencing on or after January 1, 2000, but before January 1, 2005, to four and sixty-three one-hundredths percent, and that the income tax rate was reduced for income tax years commencing on or after January 1, 2006, to four and one-half percent. SECTION 6. Refer to people under referendum. This act shall be submitted to a vote of the registered electors of the state of Colorado at the November 2005 election, for their approval or rejection, under the provisions of the referendum as provided for in section 1 of article V and section 20 of article X of the state constitution, and in article 40 of title 1, Colorado Revised Statutes. Each elector voting at said election and desirous of voting for or against said act shall cast a vote as provided by law either "Yes" or "No" on the proposition: "Shall the state income tax rate be reduced from four and sixty-three one-hundredths percent to four and one-half percent, shall the state be authorized to retain and spend all excess state revenues for each state fiscal year through 2009-10, and shall the state be authorized to retain and spend for the 2010-11 state fiscal year and for each succeeding state fiscal year amounts of excess state revenues determined by a formula that includes annual adjustments for inflation and changes in state population?" The votes cast for the adoption or rejection of said act shall be canvassed and the result determined in the manner provided by law for the canvassing of votes for representatives in Congress.