HOUSE Amended 2nd Reading July 6, 2006First Extraordinary Session Sixty-fifth General Assembly STATE OF COLORADO ENGROSSED This Version Includes All Amendments Adopted on Second Reading in the House of Introduction LLS NO. 06B-2081.01 Jason Gelender HOUSE BILL 06S-1015 HOUSE SPONSORSHIP Kerr A., J. Kerr, and McGihon SENATE SPONSORSHIP Keller, House Committees Senate Committees Business Affairs and Labor A BILL FOR AN ACT Concerning a requirement that a person withhold Colorado income tax from a payment to a person other than an employee for services performed. Bill Summary (Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.) Requires a person that makes a payment to another person for services performed and reports that payment on internal revenue service form 1099-MISC to deduct and withhold state income tax at the rate of 4.63% if the person who performed the services:  Fails to provide a correct taxpayer identification number; or  Provides an internal revenue service-issued taxpayer identification number issued for nonresident aliens. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Part 1 of article 37.5 of title 24, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 24-37.5-107. Work eligibility verification portal. The office shall, within existing resources and no later than January 1, 2007, establish a work eligibility verification portal that enables a person to access a database to verify whether a taxpayer identification number is valid. SECTION 2. 39-22-604, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SUBSECTION to read: 39-22-604. Withholding tax - requirement to withhold - tax lien - exemption from lien. (18) (a) Any person who makes a payment to any person that is not otherwise subject to state income tax withholding but that requires an information return, including but not limited to any payment for which internal revenue service form 1099 is required, shall deduct and withhold state income tax at the rate of four and sixty-three one-hundredths percent if the person who performed the services: (I) Fails to provide a validated taxpayer identification number; or (II) Provides an internal revenue service-issued taxpayer identification number issued for nonresident aliens. (b) An employer who makes any payment for services to a natural person that is not reported on any information return shall deduct and withhold state income tax at the rate of four and sixty-three one-hundredths percent, unless the employer making payment has a validated taxpayer identification number from the person to whom payment is made. (c) The requirement to withhold and deduct pursuant to paragraph (a) of this subsection (18) shall not apply to an individual who is exempt from federal withholding pursuant to a properly filed internal revenue service form 8233 if a copy of such form has been filed with the department of revenue. (d) For purposes of all other provisions of this section, excluding paragraph (a) of subsection (3) of this section, a person who deducts and withholds state income tax from a person who performs services pursuant to the provisions of this subsection (18) shall be treated as an employer withholding and deducting wages from an employee, and such other provisions of this section shall apply accordingly. This paragraph (d) shall not be construed as making the person who performed the services an employee of the person who deducts and withholds state income tax for any other purpose in law. (e) The executive director may promulgate rules to authorize any amounts deducted and withheld pursuant to this subsection (18) to be paid to the department of revenue as part of the state income tax return. (f) For purposes of this subsection (18), "validated taxpayer identification number" means a number that has been confirmed by the person or employer making a payment to a person through the portal described in section 24-37.5-107, C.R.S., or any other equally effective form of third-party verification approved by the department of revenue as having been assigned by the internal revenue service to the person to whom payment is made and as not having been assigned as a taxpayer identification number issued for nonresident aliens. (g) This subsection (18) shall be enforced without regard to race, religion, gender, ethnicity, or national origin. SECTION 3. Effective date - applicability. This act shall take effect January 1, 2007, and shall apply to services performed and payment obligations accrued on or after said date. SECTION 4. 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.