First Regular Session Sixty-fifth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 05-0057.01 Nicole Hoffman HOUSE BILL 05-1049 HOUSE SPONSORSHIP McCluskey, SENATE SPONSORSHIP (None), House Committees Senate Committees Finance A BILL FOR AN ACT Concerning the creation of a Colorado income tax credit to reimburse a taxpayer for a certain portion of the property taxes that the taxpayer pays to a school district for the taxpayer's use of business personal property. Bill Summary (Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.) Interim Committee on Stimulating Economic Development Through Business Personal Property Tax Exemptions and Other Methods. For income tax years commencing on or after January 1, 2007, creates a Colorado income tax credit in an amount equal to 50% of the business personal property taxes that the taxpayer claiming the credit paid during the income tax year to a school district for the operating portion of the property tax levy on personal property first used in a business on or after January 1, 2005. States that in order for a taxpayer to qualify for the income tax credit for business personal property first used in a business on or after January 1, 2005, the taxpayer shall include the following in the tax return:  An affidavit verifying that the taxpayer earns at least 50% of its gross receipts from products that are produced in Colorado and sold to buyers outside of Colorado, or if the gross receipts of a taxpayer are derived from the performance of services, an affidavit verifying that the services are performed in Colorado by the taxpayer or the taxpayer's employees and that the taxpayer earns at least 50% of its gross receipts from services sold or provided by the taxpayer to persons outside of Colorado;  Proof that the taxpayer paid the business personal property tax for which the income tax credit is claimed; and  Written certification from the county in which the property tax is paid stating that the amount of the business personal property tax that was collected from the taxpayer reduced the state equalization payment to the school district to which the property tax was paid in the state fiscal year in which the business personal property tax was paid. In the event that the taxpayer files an electronic income tax return, the taxpayer shall submit all required attachments to the department of revenue upon demand. In the event that a taxpayer leases the equipment for which business personal property tax is paid, the lessee shall be eligible for the income tax credit for taxes paid on the business personal property in an amount equal to the amount of the credit that the lessee would have been allowed had the lessee owned the property. Specifies that a taxpayer who purchases business personal property and leases such property shall not be entitled to the credit for purchases of new business personal property. Specifies that any taxpayer that exports extracted minerals from the state shall not qualify to receive the income tax credit for taxes paid on new business personal property. Prevents a taxpayer who qualifies for both the income tax credit for business personal property first used in a business on or after January 1, 2005, and the income tax credit pursuant to the taxpayer's bill of rights (TABOR) refund mechanism for business personal property taxes paid from receiving both credits. Authorizes the county in which the property tax is paid to impose a reasonable fee for the preparation of the certification required in order for a taxpayer to claim the income tax credit. Specifies that taxpayers that file a combined, consolidated, or combined and consolidated income tax return shall be deemed to be one taxpayer when calculating the income tax credit allowed. Authorizes the executive director of the department of revenue to promulgate rules for the implementation of the income tax credit. States that the income tax credit shall be implemented within the existing resources of the department. 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. Income tax credit for taxes paid on new business personal property. (1) Subject to the requirements of this section and except as otherwise specified in subsections (3) and (4) of this section, for income tax years commencing on or after January 1, 2007, there shall be allowed to any taxpayer a credit against the income taxes imposed by this article in an amount equal to fifty percent of the business personal property taxes that the taxpayer paid during the income tax year to any school district pursuant to section 3 of article X of the state constitution, for the operating portion of the tax levy only, on all business personal property first used in a business on or after January 1, 2005. (2) (a) In order to qualify for a tax credit pursuant to subsection (1) of this section, a taxpayer shall obtain and include the following in the taxpayer's income tax return: (I) An affidavit verifying that the taxpayer earns at least fifty percent of its gross receipts from products that are produced in Colorado and sold to buyers outside of Colorado, or if the gross receipts of a taxpayer are derived from the performance of services, an affidavit verifying that the services are performed in Colorado by the taxpayer or the taxpayer's employees and that the taxpayer earns at least fifty percent of its gross receipts from services sold or provided by the taxpayer to persons outside of Colorado. For purposes of this section, "produced" means manufactured, grown, or raised. (II) Proof that the taxpayer paid the business personal property tax for which the income tax credit is claimed; and (III) Written certification from the county in which the property tax is paid stating that the amount of the business personal property tax that was collected from the taxpayer reduced the state equalization payment to the school district in which the property tax was paid in the state fiscal year in which the business personal property tax was paid. (b) In the event that a taxpayer files an electronic income tax return, the taxpayer shall submit all attachments required pursuant to this section to the department of revenue upon demand. (3) In the event that a taxpayer leases the equipment for which business personal property tax is paid, the lessee shall be eligible for the credit specified in subsection (1) of this section in an amount equal to the amount of the credit that the lessee would have been allowed had the lessee owned the property. A taxpayer who purchases business personal property and leases such property shall not be entitled to the credit specified in subsection (1) of this section. (4) Any taxpayer that exports extracted minerals from the state, including, but not limited to, oil and gas, coal, and metallic ores shall not be eligible to receive the tax credit allowed pursuant to subsection (1) of this section. (5) The credit allowed to a taxpayer for any income tax year pursuant to this section shall not exceed the taxpayer's actual tax liability for such income tax year. Any amount of the credit in excess of the taxpayer's income tax liability shall not be allowed as a refund and shall not be carried forward as a credit against subsequent years' income tax liability. (6) In the event that a taxpayer qualifies for a tax credit pursuant to this section and section 39-22-124, the credit allowed pursuant to this section shall be the lesser of the amount of the credit calculated pursuant to this section or the difference between the total business personal property tax paid by the taxpayer and the amount of the refund issued to the taxpayer pursuant to section 39-22-124. The tax credit allowed pursuant to this section shall be offset by the tax credit issued pursuant to section 39-22-124 based on the same business personal property tax period. (7) The county in which the property tax is paid shall be allowed to impose a reasonable fee for the preparation of the certification required pursuant to subparagraph (III) of paragraph (a) of subsection (2) of this section. (8) For purposes of this section, those taxpayers that file combined, consolidated, or combined and consolidated income tax returns shall be deemed to be one taxpayer when calculating the credit allowed pursuant to subsection (1) of this section. (9) The executive director of the department of revenue or the executive director's designee may promulgate rules as are necessary to implement the provisions of this section. Such rules shall be promulgated in accordance with article 4 of title 24, C.R.S. (10) This section shall be implemented within existing resources of the department of revenue. 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 10, 2005, if adjournment sine die is on May 11, 2005); 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.