First Regular Session

Sixty-first General Assembly

LLS NO. 97­0130.01 JY HOUSE BILL 97­1097

STATE OF COLORADO

BY REPRESENTATIVE Tool

FINANCE

A BILL FOR AN ACT

CONCERNING MODIFICATIONS TO STATE TAX POLICY TO PROMOTE ECONOMIC DEVELOPMENT.

Bill Summary

"Income Tax Credits"

(Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments which may be subsequently adopted.)

For income tax years beginning on and after January 1, 1997, allows certain income tax credits for a taxpayer employing persons in the state and meeting the following requirements:

• Selling at least 75% of its products outside the state; and

• Paying its employees more than the average local wage.

Specifies the types of tax credits available to an eligible taxpayer. Provides that the tax credits are available to any eligible taxpayer regardless of the location of the taxpayer's business facility within the state. Allows a taxpayer to claim the same tax credits under the "Urban and Rural Enterprise Zone Act" if certain criteria are met. Specifies the manner in which any unused tax credits may be carried forward. Requires the executive director of the department of revenue to promulgate rules governing the eligibility for such tax credits.

Requires a taxpayer to sign an affidavit stating the credits for which the taxpayer qualifies and to submit a copy annually to the department of revenue and the governor's office of business development. Requires the governor's office of business development to report to the general assembly annually on the success of the tax credits.

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, 1994 Repl. Vol., as amended, is amended BY THE ADDITION OF A NEW SECTION to read:

39­22­520.  Tax credits ­ products sold outside Colorado. (1)  FOR INCOME TAX YEARS COMMENCING ON AND AFTER JANUARY 1, 1997, CREDITS ARE ALLOWED AGAINST THE TAX IMPOSED PURSUANT TO THIS ARTICLE FOR ANY TAXPAYER EMPLOYING PERSONS IN THE STATE AND MEETING THE REQUIREMENTS OF SUBSECTION (2) OF THIS SECTION.

  (2)  IN ORDER TO QUALIFY FOR A TAX CREDIT UNDER THE PROVISIONS OF THIS SECTION, A TAXPAYER SHALL SATISFY THE FOLLOWING REQUIREMENTS:

(a) (I)  THE TAXPAYER SELLS AT LEAST SEVENTY­FIVE PERCENT OF THE TAXPAYER'S PRODUCTS, WHICH MAY BE GOODS OR SERVICES, OUTSIDE THE STATE OF COLORADO. ANY TAXPAYER SUPPLYING OVER SEVENTY­FIVE PERCENT OF THE TAXPAYER'S PRODUCT, LIMITED TO COMPONENT PARTS, DIRECTLY TO A BUSINESS THAT SELLS ITS PRODUCTS OUTSIDE THE STATE OF COLORADO ALSO QUALIFIES FOR THE CREDIT.

(II)  FOR PURPOSES OF THIS PARAGRAPH (a), "COMPONENT PARTS" MEANS GOODS OR SERVICES THAT ARE ESSENTIAL OR VALUE­ADDED ELEMENTS THAT, WHEN COMBINED, FORM A FINISHED PRODUCT.

(b)  THE TAXPAYER PAYS ITS EMPLOYEES AN AVERAGE WAGE IN THE COUNTY THAT EXCEEDS THE PREVAILING LOCAL AVERAGE WAGE AS DETERMINED BY THE DEPARTMENT OF LABOR AND EMPLOYMENT USING ANNUALIZED ES 202 DATA. COUNTY AVERAGE WAGES SHALL BE DETERMINED ANNUALLY ON A COUNTY­BY­COUNTY BASIS.

(3) (a)  A TAXPAYER SATISFYING THE REQUIREMENTS OF SUBSECTION (2) OF THIS SECTION SHALL BE ELIGIBLE FOR THE FOLLOWING INCOME TAX CREDITS CURRENTLY AVAILABLE TO A TAXPAYER LOCATED IN AN AREA DESIGNATED AS AN ENTERPRISE ZONE UNDER SECTION 39­30­103 (1):

(I)  AN INVESTMENT TAX CREDIT UNDER THE PROVISIONS OF SECTION 39­30­104 (1);

(II)  A RESEARCH AND DEVELOPMENT TAX CREDIT UNDER THE PROVISIONS OF SECTION 39­30­105.5; AND

(III)  A JOB­TRAINING TAX CREDIT UNDER THE PROVISIONS OF SECTION 39­30­104 (4) (a).

(b) (I)  SUBJECT TO THE PROVISIONS OF SUBPARAGRAPH (II) OF THIS PARAGRAPH (b), IN ADDITION TO ANY OTHER CREDIT ALLOWED UNDER THIS SECTION, A TAXPAYER SATISFYING THE REQUIREMENTS OF SUBSECTION (2) OF THIS SECTION SHALL BE ELIGIBLE FOR A CREDIT AGAINST THE TAX IMPOSED PURSUANT TO THIS ARTICLE IN AN AMOUNT EQUAL TO TEN PERCENT OF THE TOTAL EXPENDITURES MADE DURING THE TAXABLE YEAR FOR OFF­SITE INFRASTRUCTURE IMPROVEMENTS.

(II)  PRIOR TO CLAIMING THE TAX CREDIT SPECIFIED IN THIS PARAGRAPH (b), ANY OFF­SITE INFRASTRUCTURE IMPROVEMENTS FOR WHICH A CREDIT MAY BE CLAIMED SHALL BE APPROVED BY THE COLORADO ECONOMIC DEVELOPMENT COMMISSION. THE COMMISSION SHALL ONLY APPROVE OFF­SITE INFRASTRUCTURE IMPROVEMENTS MADE BY THE TAXPAYER THAT THE COMMISSION DETERMINES TO MEET THE CRITERIA SET FORTH IN SUBPARAGRAPH (III) OF THIS PARAGRAPH (b), INCLUDING THE CRITERIA THAT THEY BENEFIT THE COMMUNITY OR STATE AT LARGE. UPON APPROVAL OF ANY OFF­SITE INFRASTRUCTURE IMPROVEMENTS, THE COMMISSION SHALL PROVIDE THE TAXPAYER WITH A CERTIFICATE OF APPROVAL TO BE FILED WITH THE DEPARTMENT OF REVENUE FOR THE PURPOSE OF CLAIMING THE CREDIT ALLOWED BY THIS PARAGRAPH (b).

(III)  FOR PURPOSES OF THIS PARAGRAPH (b), "OFF­SITE INFRASTRUCTURE IMPROVEMENTS" MEANS THE CONSTRUCTION OR IMPROVEMENT OF ROADS OR THE CONSTRUCTION, IMPROVEMENT, INSTALLATION, OR PURCHASE OF ANY WATER, SANITATION, ELECTRIC, GAS, OR TELECOMMUNICATIONS FACILITIES THAT BENEFIT THE COMMUNITY OR THE STATE AT LARGE.

(c)  THE TAX CREDITS SET FORTH IN PARAGRAPHS (a) AND (b) OF THIS SUBSECTION (3) ARE AVAILABLE TO ANY TAXPAYER THAT QUALIFIES FOR SUCH CREDITS AND THAT MEETS THE REQUIREMENTS OF SUBSECTION (2) OF THIS SECTION REGARDLESS OF THE LOCATION OF THE TAXPAYER'S BUSINESS FACILITY WITHIN THE STATE.

(d)  ANY TAXPAYER ELIGIBLE FOR THE TAX CREDITS SET FORTH IN PARAGRAPH (a) OF THIS SUBSECTION (3) AND LOCATED WITHIN AN AREA THAT IS DESIGNATED AS AN ENTERPRISE ZONE UNDER THE CRITERIA SET FORTH IN SECTION 39­30­103 (1) AND THAT MEETS AT LEAST TWO OF THE CRITERIA SET FORTH IN SAID SECTION SHALL ALSO BE ELIGIBLE TO CLAIM IN ANY INCOME TAX YEAR THE SAME CREDITS UNDER THE "URBAN AND RURAL ENTERPRISE ZONE ACT", ARTICLE 30 OF THIS TITLE.

(e)  IN ADDITION TO THE INCOME TAX CREDITS DESCRIBED IN PARAGRAPHS (a) AND (b) OF THIS SUBSECTION (3), LOCAL GOVERNMENTS MAY NEGOTIATE PROPERTY TAX RELIEF WITH ANY TAXPAYER ELIGIBLE FOR SAID CREDITS PURSUANT TO SECTION 39­30­107.5.

(4) (a)  IF THE AMOUNT OF THE INCOME TAX CREDITS PROVIDED FOR PURSUANT TO THE PROVISIONS OF PARAGRAPHS (a) AND (b) OF SUBSECTION (3) OF THIS SECTION EXCEEDS THE AMOUNT OF INCOME TAXES OTHERWISE DUE ON THE INCOME OF THE TAXPAYER IN THE INCOME TAX YEAR FOR WHICH THE CREDITS ARE BEING CLAIMED, THE AMOUNT OF THE CREDIT NOT USED AS AN OFFSET AGAINST INCOME TAXES IN THAT INCOME TAX YEAR MAY BE CARRIED FORWARD AS A CREDIT AGAINST SUBSEQUENT YEARS' INCOME TAX LIABILITY IN THE FOLLOWING MANNER:

(I)  FOR THE INVESTMENT TAX CREDIT SPECIFIED IN SUBPARAGRAPH (I) OF PARAGRAPH (a) OF SUBSECTION (3) OF THIS SECTION AND FOR THE JOB­TRAINING TAX CREDIT SPECIFIED IN SUBPARAGRAPH (III) OF SAID PARAGRAPH (a), IN THE SAME MANNER AS ANY INVESTMENT TAX CREDIT CARRYOVER UNDER SECTION 39­30­104 (2.5) OF THE "URBAN AND RURAL ENTERPRISE ZONE ACT";

(II)  FOR THE RESEARCH AND DEVELOPMENT TAX CREDIT SPECIFIED IN SUBPARAGRAPH (II) OF PARAGRAPH (a) OF SUBSECTION (3) OF THIS SECTION, IN THE SAME MANNER AS ANY CARRY FORWARD AMOUNT OF THE RESEARCH AND DEVELOPMENT TAX CREDIT UNDER SECTION 39­30­105.5 (2) (b) OF THE "URBAN AND RURAL ENTERPRISE ZONE ACT".

(III)  FOR THE OFF­SITE INFRASTRUCTURE IMPROVEMENTS TAX CREDIT SPECIFIED IN PARAGRAPH (b) OF SUBSECTION (3) OF THIS SECTION, IN THE SAME MANNER AS ANY CARRY FORWARD AMOUNT OF THE TAX CREDIT FOR CONTRIBUTIONS TO ENTERPRISE ZONE ADMINISTRATORS UNDER SECTION 39­30­103.5 (1) (d) OF THE "URBAN AND RURAL ENTERPRISE ZONE ACT".

(b)  NOTHING IN THIS SUBSECTION (4) SHALL BE CONSTRUED TO MEAN THAT THE AMOUNT OF THE INCOME TAX CREDIT NOT USED AS AN OFFSET IN ACCORDANCE WITH PARAGRAPH (a) OF THIS SUBSECTION (4) MAY BE CARRIED BACK AGAINST PREVIOUS YEARS' INCOME TAX LIABILITY.

(5) (a)  A TAXPAYER CLAIMING INCOME TAX CREDITS UNDER THE PROVISIONS OF THIS SECTION SHALL SIGN AN AFFIDAVIT STATING THE SPECIFIC CREDITS FOR WHICH THE TAXPAYER QUALIFIES AND SHALL SUBMIT ONE COPY ANNUALLY, WITH THE TAXPAYER'S INCOME TAX FORMS, TO THE DEPARTMENT OF REVENUE AND TO THE COLORADO OFFICE OF BUSINESS DEVELOPMENT CREATED IN SECTION 24­48.5­101, C.R.S., WITHIN THE GOVERNOR'S OFFICE.

(b)  THE COLORADO OFFICE OF BUSINESS DEVELOPMENT SHALL BE RESPONSIBLE FOR MEASURING AND REPORTING TO THE GENERAL ASSEMBLY, ON AN ANNUAL BASIS, THE SUCCESS OF THE TAX CREDITS AWARDED UNDER THE PROVISIONS OF THIS SECTION. THE REPORT SHALL INCLUDE, FOR THE TAX CREDITS ALLOWED UNDER THIS SECTION:

(I)  THE AGGREGATE AMOUNT OF QUALIFIED INVESTMENTS FOR WHICH TAX CREDITS ARE ALLOWED UNDER SUBPARAGRAPH (I) OF PARAGRAPH (a) OF SUBSECTION (3) OF THIS SECTION AND THE AGGREGATE AMOUNT OF TAX CREDITS SO ALLOWED;

(II)  THE AGGREGATE AMOUNT OF EXPENDITURES FOR RESEARCH AND DEVELOPMENT ACTIVITIES FOR WHICH TAX CREDITS ARE ALLOWED UNDER SUBPARAGRAPH (II) OF PARAGRAPH (a) OF SUBSECTION (3) OF THIS SECTION AND THE AGGREGATE AMOUNT OF TAX CREDITS SO ALLOWED;

(III)  THE AMOUNT INVESTED IN QUALIFIED JOB TRAINING PROGRAMS FOR WHICH TAX CREDITS ARE ALLOWED UNDER SUBPARAGRAPH (III) OF PARAGRAPH (a) OF SUBSECTION (3) OF THIS SECTION AND THE AGGREGATE AMOUNT OF TAX CREDITS SO ALLOWED;

(IV)  THE AMOUNT OF EXPENDITURES MADE FOR OFF­SITE INFRASTRUCTURE IMPROVEMENTS FOR WHICH TAX CREDITS ARE ALLOWED UNDER PARAGRAPH (b) OF SUBSECTION (3) OF THIS SECTION AND THE AGGREGATE AMOUNT OF TAX CREDITS SO ALLOWED; AND

(V)  THE NUMBER OF JOBS CREATED AND RETAINED AS A RESULT OF THE TAX CREDITS ALLOWED PURSUANT TO THIS SECTION AND THE AMOUNT OF THE WAGES PAID FOR SUCH JOBS.

(6)  THE EXECUTIVE DIRECTOR, AFTER CONSULTATION WITH THE DIRECTORS OF THE DEPARTMENT OF LABOR AND EMPLOYMENT AND THE OFFICE OF BUSINESS DEVELOPMENT, SHALL PROMULGATE RULES TO EVALUATE A TAXPAYER'S ELIGIBILITY FOR INCOME TAX CREDITS UNDER THE PROVISIONS OF THIS SECTION, WHICH INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING:

(a)  SUBJECT TO THE REQUIREMENTS SET FORTH IN PARAGRAPH (d) OF SUBSECTION (3) OF THIS SECTION, PRESCRIBING THE EXTENT TO WHICH TAXPAYERS MAY BE ELIGIBLE TO CLAIM BOTH TAX CREDITS UNDER THIS SECTION AND ENTERPRISE ZONE TAX CREDITS UNDER ARTICLE 30 OF THIS TITLE WHEN USING THE MOST RECENT CENSUS DATA;

(b)  PRESCRIBING THE EXTENT TO WHICH PROPERTY MUST BE USED IN COLORADO TO QUALIFY FOR AN INVESTMENT TAX CREDIT UNDER SUBPARAGRAPH (I) OF PARAGRAPH (a) OF SUBSECTION (3) OF THIS SECTION; AND

(c)  ESTABLISHING THE CRITERIA FOR DETERMINING WHETHER PRODUCTS AND SERVICES ARE ESSENTIAL OR VALUE­ADDED ELEMENTS FOR PURPOSES OF SUBPARAGRAPH (II) OF PARAGRAPH (a) OF SUBSECTION (2) OF THIS SECTION.

SECTION 2.  24­48.5­101, Colorado Revised Statutes, 1988 Repl. Vol., as amended, is amended BY THE ADDITION OF A NEW SUBSECTION to read:

24­48.5­101.  Colorado office of business development ­ creation. (4.5)  THE COLORADO OFFICE OF BUSINESS DEVELOPMENT SHALL BE RESPONSIBLE FOR MEASURING AND REPORTING TO THE GENERAL ASSEMBLY, ON AN ANNUAL BASIS, THE SUCCESS OF THE TAX CREDITS AWARDED UNDER THE PROVISIONS OF SECTION 39­22­520, C.R.S.

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.