First Regular Session

Sixty-first General Assembly

LLS NO. 97­0554.01 JY HOUSE BILL 97­1229

STATE OF COLORADO

BY REPRESENTATIVE Pankey;

also SENATOR Alexander.

FINANCE

A BILL FOR AN ACT

CONCERNING PROVIDING INCOME TAX RELIEF TO STATE TAXPAYERS, AND, IN CONNECTION THEREWITH, PROVIDING A REFUND OF REVENUES IN EXCESS OF THE STATUTORY STATE GENERAL FUND APPROPRIATIONS LIMIT THROUGH A TEMPORARY STATE INCOME TAX CREDIT FOR THE 1997 INCOME TAX YEAR AND, FOR EACH TAX YEAR THEREAFTER, INSTITUTING A PERMANENT REDUCTION IN THE STATE INCOME TAX RATE TO PREVENT FUTURE ACCUMULATIONS OF REVENUE IN EXCESS OF THE STATUTORY APPROPRIATIONS LIMIT AND REQUIRED RESERVE.

Bill Summary

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

For the 1997 income tax year, allows a tax credit in the amount of 10% of the income tax liability resulting from the imposition of the 5% state income tax on the federal taxable income of individuals and corporations, which tax credit is equal to a 2% reduction of tax on taxable income.

For the 1998 income tax year and each tax year thereafter, reduces the rate from 5% to 4.5% for:

• The state tax imposed on the federal taxable income of each individual, estate, and trust; and

• The state corporate tax imposed on the state net income of each domestic C corporation and foreign C corporation doing business in Colorado.

For purposes of the statutory provisions on state fiscal policy relating to section 20 of article X of the state constitution, expands the definition of "expenditure" to include any refund of revenues by the state that is not required under said section 20.

Be it enacted by the General Assembly of the State of Colorado:

SECTION 1.  Legislative declaration. (1)  The general assembly hereby finds and declares that:

(a)  The state is subject to a statutory limitation on the annual growth of state general fund appropriations, as provided in section 24­75­201.1 (1) (a), Colorado Revised Statutes;

(b)  In addition, section 20 of article X of the state constitution, which was approved at the 1992 general election, controls the growth of state government by limiting the fiscal year spending of the state;

(c)  While state revenues do not exceed the state fiscal year spending limit at the present time, state general fund revenues currently exceed the statutory state general fund appropriations limit and cannot be appropriated for the 1997­98 fiscal year;

(d)  Revenues in excess of the statutory general fund appropriations limit are not required by the state constitution or by statute to be refunded; however, the general assembly intends to refund such excess revenues to taxpayers in the form of an income tax credit for the 1997 income tax year;

(e)  Nothing in section 20 of article X of the state constitution limits the method of refunding revenues that are in excess of the statutory limit on general fund appropriations but not in excess of the limit on fiscal year spending;

(f)  Although section 20 of article X of the state constitution refers to the treatment of refund tax credits for purposes of calculating fiscal year spending, those references when read in context apply to refunds that are mandated by section 20 of article X and not to refunds of revenues enacted voluntarily by the general assembly;

(g)  The general assembly may enact laws to resolve any ambiguity in section 20 of article X of the state constitution with regard to the treatment of a tax credit that covers revenues in excess of the statutory appropriations limit;

(h)  Since the 1997 income tax year has already commenced, the general assembly is constitutionally prohibited from lowering the rate of the state income tax for such tax year, and a temporary income tax credit for such tax year is the most effective and efficient manner in which to refund the revenues in excess of the statutory appropriations limit to the taxpayers;

(i)  For the 1997 income tax year, a temporary income tax credit has the same effect as the collection and subsequent refunding of revenues in excess of the statutory appropriations limit through the issuance of refund checks, but such tax credit is a more efficient and cost­effective refunding method;

(j)  The amount of excess state general fund revenues refunded through the temporary income tax credit established pursuant to section 39­22­520, Colorado Revised Statutes, has the same effect as an expenditure, as defined in section 24­77­102 (4), Colorado Revised Statutes, for purposes of calculating state fiscal year spending for the fiscal year commencing July 1, 1997;

(k)  For the 1998 income tax year and each tax year thereafter, the general assembly intends to continue providing income tax relief to taxpayers through a permanent reduction in the state income tax rate for the following reasons:

(I)  To prevent future accumulations of revenues in excess of the statutory general fund appropriations limit and required reserve;

(II)  To maintain the amount of state general fund revenues at a level reasonably related to the amount of such revenues that the state can actually spend during a given fiscal year;

(III)  To reduce the size of state government, which would force state government to be more selective and efficient in the services and programs it provides; and

(IV)  To compensate taxpayers for the negative effects of recent federal tax law changes that have eliminated personal income tax deductions and that have consequently increased the amount of federal personal income tax owed by state taxpayers.

SECTION 2.  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.  Excess revenue refund tax credit ­ 1997 tax year ­ repeal. (1)  FOR THE INCOME TAX YEAR COMMENCING ON AND AFTER JANUARY 1, 1997, BUT COMMENCING PRIOR TO JANUARY 1, 1998, A CREDIT IS ALLOWED AGAINST THE TAX IMPOSED PURSUANT TO SECTION 39­22­104 IN AN AMOUNT EQUAL TO TEN PERCENT OF THE INCOME TAXES OTHERWISE DUE ON FEDERAL TAXABLE INCOME, AS MODIFIED PURSUANT TO SECTION 39­22­104 (3) AND (4).

(2)  FOR THE INCOME TAX YEAR COMMENCING ON AND AFTER JANUARY 1, 1997, BUT COMMENCING PRIOR TO JANUARY 1, 1998, A CREDIT IS ALLOWED AGAINST THE TAX IMPOSED PURSUANT TO SECTION 39­22­301 (1) (d) (I) (G) IN AN AMOUNT EQUAL TO TEN PERCENT OF THE INCOME TAXES OTHERWISE DUE ON FEDERAL TAXABLE INCOME, AS MODIFIED PURSUANT TO SECTION 39­22­304.

(3)  THIS SECTION IS REPEALED, EFFECTIVE DECEMBER 31, 1998.

SECTION 3.  39­22­104 (1), Colorado Revised Statutes, 1994 Repl. Vol., is amended to read:

39­22­104.  Income tax imposed on individuals, estates, and trusts ­ single rate. (1) (a)  Subject to subsection (2) of this section, with respect to taxable years commencing on or after January 1, 1987, AND BEFORE JANUARY 1, 1998, a tax of five 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.

(b)  SUBJECT TO SUBSECTION (2) OF THIS SECTION, WITH RESPECT TO TAXABLE YEARS COMMENCING ON OR AFTER JANUARY 1, 1998, A TAX OF FOUR AND ONE­HALF 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.

SECTION 4.  39­22­301 (1) (d) (I) (G), Colorado Revised Statutes, 1994 Repl. Vol., is amended, and the said 39­22­301 (1) (d) (I) is further amended BY THE ADDITION OF A NEW SUB­SUBPARAGRAPH, to read:

39­22­301.  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:

(G)  For income tax years commencing on or after July 1, 1993, AND BEFORE JANUARY 1, 1998, five percent of the Colorado net income; AND

(H)  FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY 1, 1998, FOUR AND ONE­HALF PERCENT OF THE COLORADO NET INCOME.

SECTION 5.  24­77­102 (4), Colorado Revised Statutes, 1988 Repl. Vol., as amended, is amended to read:

24­77­102.  Definitions.  As used in this article, unless the context otherwise requires:

(4)  "Expenditure" means:

(a)  The appropriation or disbursement of any state general fund or cash fund moneys for any expense incurred by the state; OR

(b)  THE REFUND OF ANY REVENUES BY THE STATE THAT IS NOT REQUIRED UNDER SECTION 20 OF ARTICLE X OF THE STATE CONSTITUTION AND THAT IS ACHIEVED IN ANY MANNER, INCLUDING, BUT NOT LIMITED TO, THE ISSUANCE OF REFUND CHECKS OR THE GRANTING OF TAX CREDITS.

SECTION 6.  No appropriation.  The general assembly has determined that this act can be implemented within existing appropriations, and therefore no separate appropriation of state moneys is necessary to carry out the purposes of this act.

SECTION 7.  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.