First Regular Session

Sixty-first General Assembly

LLS NO. 97­0789.01D SLE HOUSE BILL 97­1349

STATE OF COLORADO

BY REPRESENTATIVES Anderson, Grampsas, Owen, and Dyer;

also SENATORS Norton, Lacy, Blickensderfer, B. Alexander, Ament, Chlouber, Dennis, Hopper, Mutzebaugh, and Wattenberg.

FINANCE

A BILL FOR AN ACT

CONCERNING TAX POLICY REFORM, AND, IN CONNECTION THEREWITH, ALLOWING AN ANNUAL REFUNDABLE INCOME TAX CREDIT FOR CERTAIN COLORADO RESIDENTS, LIMITING THE AMOUNT OF STATE SALES AND USE TAX REVENUES TO BE TRANSFERRED TO THE HIGHWAY USERS TAX FUND, REPEALING CERTAIN INCOME TAX CREDITS, REPEALING THE "URBAN AND RURAL ENTERPRISE ZONE ACT", PROHIBITING THE CARRY FORWARD OF ANY INCOME TAX CREDITS SO REPEALED, AND CREATING AN EXEMPTION FROM THE STATUTORY SALES AND USE TAX LIMITATION.

Bill Summary

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

Beginning with the 1998 income tax year, allows a $34 annual refundable income tax credit to qualified full­time Colorado residents.

Requires the amount of net revenue from state sales and use tax to be credited to the highway users tax fund to be based upon the first 3 percentage points of the rate of the state sales and use tax.

For income tax years commencing on and after January 1, 1998, repeals the income tax credits for the following:

­  Purchases of Colorado coal;

­  Investment in certain properties;

­  Costs incurred in preservation of historic properties;

­  Equipment utilizing postconsumer waste;

­  Purchases of business vehicles using alternative fuels;

­  Child care center investments.

Repeals the "Urban and Rural Enterprise Zone Act". For income tax years commencing on and after January 1, 1998, prohibits the carry forward of any of the repealed income tax credits that were not used to offset tax liability for income tax years commencing prior to January 1, 1998.

Specifies that the increase in the rate of state sales and use tax set forth in section 22 of article X of the state constitution is exempt from the 7% limitation on the total sales or use tax imposed by the state, counties, and municipalities.

Makes the act effective January 1, 1998, only upon voter approval of specific constitutional amendments submitted at the November 1997, statewide election. Refers the measure to voters for approval at the November 1997, statewide election.

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

SECTION 1.  Part 1 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:

39­22­120.  Resident tax credit.  (1)  FOR INCOME TAX YEARS BEGINNING ON AND AFTER JANUARY 1, 1998, THERE SHALL BE ALLOWED A CREDIT AGAINST THE TAX IMPOSED BY PART 1 OF THIS ARTICLE FOR ANY RESIDENT INDIVIDUAL:

(a)  WHO RESIDES IN THIS STATE FOR THE ENTIRE TAXABLE YEAR FOR WHICH SUCH CREDIT IS CLAIMED; AND

(b)  FOR WHICH A PERSONAL EXEMPTION IS ALLOWED OR WOULD BE ALLOWED FOR FEDERAL INCOME TAX PURPOSES PURSUANT TO SECTION 151 (b) OF THE INTERNAL REVENUE CODE FOR THE TAXABLE YEAR FOR WHICH SUCH CREDIT IS CLAIMED.

(2)  SAID CREDIT SHALL BE IN AN AMOUNT EQUAL TO THIRTY­FOUR DOLLARS. IF THE CREDIT ALLOWED UNDER THIS SECTION EXCEEDS THE INCOME TAXES OTHERWISE DUE ON THE INDIVIDUAL'S TAXABLE INCOME, THE AMOUNT OF THE CREDIT NOT USED AS AN OFFSET AGAINST INCOME TAXES SHALL BE REFUNDED.

SECTION 2.  39­26­123 (2) (a) (I) (A), Colorado Revised Statutes, 1994 Repl. Vol., as amended by Senate BILL 97­13491, enacted at the First Regular Session of the Sixty­first General Assembly, is amended, and the said 39­26­123 (2) (a) is further amended BY THE ADDITION OF THE FOLLOWING NEW SUBPARAGRAPHS, to read:

39­26­123.  Receipts ­ disposition. (2) (a) (I) (A)  Eighty­five percent of all receipts collected under the provisions of this article shall be credited to the old age pension fund. For the fiscal year commencing July 1, 1997, and for four succeeding fiscal years thereafter, the remaining fifteen percent shall be allocated between and credited to the general fund and the highway users tax fund, as a portion of the sales and use taxes attributable to sales or use of vehicles and related items, as follows: SUBJECT TO THE PROVISIONS OF SUBPARAGRAPH (IV) OF THIS PARAGRAPH (a), ten percent of net revenue from sales and use tax to the highway users tax fund and five percent thereof to the general fund.

(IV)  THE AMOUNT OF NET REVENUE FROM SALES AND USE TAX CREDITED TO THE HIGHWAY USERS TAX FUND PURSUANT TO SUBPARAGRAPH (I) OF THIS PARAGRAPH (a) SHALL BE BASED UPON THE NET REVENUE FROM SALES AND USE TAX ATTRIBUTABLE TO THE FIRST THREE PERCENTAGE POINTS OF THE RATE OF SALES AND USE TAX IMPOSED PURSUANT TO LAW.

(V)  THIS PARAGRAPH (a), AS AMENDED, SHALL TAKE EFFECT ONLY IF SENATE BILL 97­13491 IS ENACTED AT THE FIRST REGULAR SESSION OF THE SIXTY­FIRST GENERAL ASSEMBLY AND BECOMES LAW.

SECTION 3.  39­22­308, Colorado Revised Statutes, 1994 Repl. Vol., is repealed as follows:

39­22­308.  Credit allowed for purchase of Colorado coal. (1)  For income tax years commencing on or after January 1, 1989, but prior to January 1, 2005, there shall be allowed, as a credit against any taxes imposed on income by this part 3, an amount equal to one dollar per ton for each ton of Colorado coal purchased by and delivered to the taxpayer in excess of the number of tons of Colorado coal purchased by and delivered to the taxpayer in the income tax year commencing on or after January 1, 1988. If the amount of the tax credit allowed by this section exceeds the amount of income tax due for the taxable year, the excess amount may be carried forward as a credit against subsequent years' income tax liability for a period not exceeding three years and shall be applied first to the earliest income tax years possible. For purposes of this section, "Colorado coal" means coal mined in Colorado, as certified by the producer of such coal.

(2) (a)  Any public or private corporate purchaser who is not liable for or subject to state income tax during the year the coal is purchased and who is otherwise eligible for the credit allowed by subsection (1) of this section may by written agreement transfer such credit to the producer of the coal. Said producer shall be allowed, as a credit against any taxes imposed on income by this part 3, an amount equal to the amount of credit for which the purchaser would otherwise have been eligible pursuant to subsection (1) of this section. Any such credit shall be subject to any limitations established in subsection (1) of this section. Said producer shall reduce the purchase price of said coal to such corporate purchaser by the amount of the credit so transferred.

(b)  The corporate purchaser shall file a copy of the written agreement with the department of revenue. The agreement shall contain, but shall not be limited to, terms stipulating the number of tons of Colorado coal purchased by the corporate purchaser in the 1988 base income tax year and the number of tons of Colorado coal over and above that base amount which is being purchased pursuant to the agreement.

SECTION 4.  39­22­507.5 (12), Colorado Revised Statutes, 1994 Repl. Vol., is repealed as follows:

39­22­507.5.  Credits against tax ­ investment in certain property. (12)  In lieu of the amount of the investment tax credit allowed by subsection (1) of this section, a person who has invested in property used in an enterprise zone, as designated pursuant to section 39­30­103, shall be allowed a credit in the amount designated in section 39­30­104, subject to the terms and conditions of that section.

SECTION 5.  39­22­507.6, Colorado Revised Statutes, 1994 Repl. Vol., is repealed as follows:

39­22­507.6.  Credits against corporate tax ­ investment in certain property. (1)  Except as otherwise provided in this section, there shall be allowed to any person as a credit against the tax imposed by part 3 of this article, for income tax years commencing on or after January 1, 1988, an amount equal to the total of:

(a)  Investment tax credit carryovers claimed by such person for such taxable year; and

(b)  Ten percent of that part of the credit that would have been allowed for the same income tax year by section 38 of the internal revenue code, as determined under the provisions of subsection (a) of section 46 of the internal revenue code without regard to the limitations imposed by said section 38, had section 49 of the internal revenue code not been enacted, to the extent such part of such credit is determined by reference to property which is used in Colorado. The references in this paragraph (b) to sections 38, 46, and 49 of the internal revenue code mean sections 38, 46, and 49 of the internal revenue code as they existed immediately prior to the enactment of the federal "Revenue Reconciliation Act of 1990".

(2)  The executive director shall promulgate regulations which will prescribe the extent to which property must be used in Colorado to qualify for the credit allowed under the provisions of subsection (1) of this section, which regulations shall include a method or methods of determining what portion of the property shall qualify in the case of property which is used both within and without Colorado.

(3)  The credit allowed by this section for any income tax year shall not exceed the taxpayer's actual tax liability for the income tax year after reduction for the credit allowed by section 39­22­508.3 to the extent that such liability does not exceed one thousand dollars.

(4)  In the case of a "controlled group of corporations", as defined in section 1563 (a) of the internal revenue code, the one thousand dollars specified in subsection (3) of this section shall be apportioned among the members of the controlled group as they may elect. The election shall apply to the income tax year of the members of the controlled group ending with or including a common December 31. Should such members fail to agree on an allocation of the one thousand dollars, said one thousand dollars shall be divided equally among all members of the controlled group.

(5)  If the amount of the credit allowed by paragraph (b) of subsection (1) of this section exceeds the amount of the limitation imposed by subsection (3) of this section reduced by the credit allowed by paragraph (a) of subsection (1) of this section for any income tax year, referred to in this subsection (5) as the "unused credit year", such excess shall be an investment tax credit carryover to each of the three income tax years following the unused credit year.

(6)  The limitations on the credits allowed by this section shall be reduced by any credit allowed by section 39­22­507.5 for the same tax year.

SECTION 6.  39­22­516, Colorado Revised Statutes, 1994 Repl. Vol., is repealed as follows:

39­22­516.  Tax credit for purchase of business vehicles using alternative fuels ­ repeal.

(1)  Repealed.

(2)  With respect to taxable years commencing on or after July 1, 1994, there shall be allowed to any person a credit against the tax imposed by this article in the amount of five percent of the purchase price of each car or truck licensed in Colorado which uses or is converted within one hundred twenty days of the date of delivery to use clean­burning alternative fuel purchased by such person during the taxable year; except that such credit shall not exceed fifty percent of the actual cost of such conversion or of an original equipment manufacturer's fuel system option which results in the conversion of such vehicle to use clean­burning alternative fuel. The number of cars or trucks on which the tax credit may be claimed shall be limited to a total of fifty cars or trucks for each taxable year. For the purposes of this subsection (2), "clean­burning alternative fuel" means natural gas, liquefied petroleum gas, a fuel mixture containing not less than eighty­five percent ethanol or methanol, electricity, or any other alternative fuel approved by the air quality control commission pursuant to section 25­7­106.9 (1), C.R.S.

(3)  The credit allowed by this section for any income tax year shall not exceed the taxpayer's actual tax liability for such taxable year. If the amount of the credit allowed by this section exceeds the taxpayer's actual tax liability for any income tax year in which the car or truck investment credit is claimed, referred to in this subsection (3) as the "unused credit year", such excess shall be an investment tax credit carryover to each of the three income tax years following the unused credit year and shall be applied first to the earliest income tax years possible.

(4)  This section is repealed, effective July 1, 1998.

SECTION 7.  39­22­517, Colorado Revised Statutes, 1994 Repl. Vol., as amended, is repealed as follows:

39­22­517.  Tax credit for child care center investments. (1)  With respect to taxable years commencing on or after January 1, 1992, there shall be allowed to any person operating a child care center, family child care home, or foster care home licensed pursuant to the provisions of section 26­6­104, C.R.S., a credit against the tax imposed by this article in the amount of twenty percent of the taxpayer's annual investment in tangible personal property to be used in such child care center, family child care home, or foster care home. Such credit shall be in addition to any credit for which the taxpayer may be eligible pursuant to the provisions of section 39­22­507.5 or section 39­22­507.6.

(2)  With respect to taxable years commencing on or after July 1, 1992, there shall be allowed to any sole proprietorship, partnership, limited liability corporation, subchapter S corporation, or regular corporation which provides child care facilities which are incidental to their business and are licensed pursuant to section 26­6­104, C.R.S., for the use of its employees a credit against the tax imposed by this article in the amount of ten percent of the taxpayer's annual investment in tangible personal property to be used in such child care facilities. Such credit shall be in addition to any credit for which the taxpayer may be eligible pursuant to the provisions of section 39­22­507.5 or section 39­22­507.6.

(3)  The credit allowed by this section for any income tax year shall not exceed the taxpayer's actual tax liability for such taxable year. If the amount of the credit allowed by this section exceeds the taxpayer's actual tax liability for any income tax year in which the child care center investment credit is claimed, referred to in this subsection (3) as the "unused credit year", such excess shall be an investment tax credit carryover to each of the three income tax years following the unused credit year and shall be applied first to the earliest income tax years possible.

SECTION 8.  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.  Prohibition against carry forward of repealed tax credits.  NO TAXPAYER SHALL CARRY FORWARD AS A CREDIT AGAINST INCOME TAX LIABILITY FOR ANY INCOME TAX YEAR COMMENCING ON OR AFTER JANUARY 1, 1998, ANY AMOUNT OF CREDIT NOT USED AS AN OFFSET AGAINST INCOME TAXES IN ANY INCOME TAX YEAR COMMENCING PRIOR TO JANUARY 1, 1998, PURSUANT TO SECTION 39­22­308, 39­22­507.5, 39­22­507.6, 39­22­508.1, 39­22­508.2, 39­22­508.3, 39­22­508.4, 39­22­508.5, 39­22­508.6, 39­22­516, OR 39­22­517 OR PURSUANT TO ARTICLE 30 OF TITLE 39.

SECTION 9.  29­2­108, Colorado Revised Statutes, 1986 Repl. Vol., as amended, is amended BY THE ADDITION OF A NEW SUBSECTION to read:

29­2­108.  Limitation on amount. (5)  THE ADDITIONAL ONE AND THREE­QUARTERS PERCENT OF SALES AND USE TAX IMPOSED PURSUANT TO SECTION 22 OF ARTICLE X OF THE STATE CONSTITUTION SHALL BE EXEMPT FROM THE SEVEN PERCENT LIMITATION IMPOSED BY SUBSECTION (1) OF THIS SECTION.

SECTION 10.  Repeal.  39­22­508.1, 39­22­508.2, 39­22­508.3, 39­22­508.4, 39­22­508.5, 39­22­508.6, 39­22­514, 39­22­515, and article 30 of title 39, Colorado Revised Statutes, 1994 Repl. Vol., as amended, are repealed.

SECTION 11.  Effective date.  This act shall take effect following proclamation by the governor of the vote of the registered electors at the November 1997, statewide election approving Senate Concurrent Resolution 97­___. This act shall not take effect if the registered electors at the November 1997, statewide election disapprove Senate Concurrent Resolution 97­___.

SECTION 12.  Refer to people under referendum.  This act shall be submitted to a vote of the registered electors of the state of Colorado at the next election for which it may be submitted, for their approval or rejection, under the provisions of the referendum as provided for in section 1 of article V 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 STATE TAX POLICY BE MODIFIED BY: (1) ALLOWING A THIRTY­FOUR­DOLLAR ANNUAL REFUNDABLE INCOME TAX CREDIT TO QUALIFIED FULL­TIME COLORADO RESIDENTS; (2) LIMITING THE AMOUNT OF STATE SALES AND USE TAX REVENUES TO BE TRANSFERRED TO THE HIGHWAY USERS TAX FUND TO THE AMOUNT OF SUCH REVENUES ATTRIBUTABLE TO THE FIRST 3 PERCENTAGE POINTS OF THE RATE OF STATE SALES AND USE TAX; (3) REPEALING INCOME TAX CREDITS ALLOWED FOR PURCHASES OF COLORADO COAL, INVESTMENT IN CERTAIN PROPERTY, COSTS INCURRED IN PRESERVATION OF HISTORIC PROPERTIES, POSTCONSUMER WASTE EQUIPMENT, PURCHASES OF BUSINESS VEHICLES USING ALTERNATIVE FUELS, AND CHILD CARE CENTER INVESTMENTS; (4) REPEALING THE "URBAN AND RURAL ENTERPRISE ZONE ACT", WHICH PROVIDES TAX INCENTIVES TO BUSINESSES LOCATED IN ENTERPRISE ZONES; (5) PROHIBITING THE CARRY FORWARD OF ANY OF THE INCOME TAX CREDITS SO REPEALED; AND (6) EXEMPTING THE INCREASE IN THE RATE OF THE STATE SALES AND USE TAX PURSUANT TO THE STATE CONSTITUTION FROM THE STATUTORY SALES AND USE TAX LIMITATION?" 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.