Colorado Legislative Council Staff

STATE

FISCAL NOTE

TABOR Refund Impact

General Fund Revenue Impact


Drafting Number:

Prime Sponsor(s):

LLS 98-488

Rep. Udall

Date:

Bill Status:

Fiscal Analyst:

January 17, 1998

House Finance

Harry Zeid (866-4753)

 

TITLE:            CONCERNING THE CREATION OF AN INCOME TAX CREDIT FOR TAXPAYERS WHO DONATE REAL PROPERTY INTERESTS FOR CONSERVATION PURPOSES..



Summary of Legislation


STATE FISCAL IMPACT SUMMARY

FY 1998/99

FY 1999/2000

State Revenues

General Fund (reduction)

Other Fund


General Fund Revenue Reduction

State Expenditures

General Fund

Other Fund


 


 

FTE Position Change

None

None

Local Government Impact — The bill would encourage creation of conservation easements and the donation of real property interests to governmental entities or tax-exempt charitable organizations for conservation purposes. A conservation easement is exempt from property tax.


            Effective for income tax years commencing on and after January 1, 1999, the bill would establish an income tax credit for individuals and corporations who create a conservation easement in gross on real property that they own or other real property that is donated to a governmental entity or to a 501(c)(3) charitable organization. In order to qualify for the tax credit, the taxpayer would need to obtain certification from the Department of Natural Resources that the donated real property or the real property subject to the conservation easement in gross is suitable for conservation purposes.


            The income tax credit would be an amount equal to 25 percent of the fair market value of the conservation easement in gross, but would be limited to $50,000 for a resident individual, or $100,000 for a domestic or foreign corporation. The income tax credit may be carried forward and applied against the income tax due for five succeeding income tax years if the tax credit exceeds the income tax due for the taxpayer. Only one tax credit claim per taxpayer would be authorized per income tax year.


            The income tax credit would reduce General Fund revenues at the state level. Therefore, the bill is assessed as having state revenue fiscal impact. The bill will become effective at 12:01 a.m. on the day following the ninety-day period after adjournment sine die of the General Assembly, or on the date of the official declaration of the vote of the people as proclaimed by the Governor, if a referendum petition is filed pursuant to Article V, Section 1 (3) of the State Constitution.



State Revenues


            Legislative Council staff has projected the state’s revenues that will be in excess of the state fiscal year spending limitation for the 1998-99 fiscal year, as required by Section 20 of Article X of the State Constitution, to be $286.10 million. This bill would create an income tax credit for taxpayers who donate real property interests for conservation purposes, reducing income tax revenues beginning January 1, 1999, thereby reducing the projected state revenue excess.


            The number of individual and corporate taxpayers that would claim the income tax credit for donation of real property interests for conservation purposes is unknown. Therefore, the value of the General Fund revenue reduction that would occur as a result of the tax credit has not been estimated.



TABOR Refund Impact


            Section 20 of Article X of the Colorado Constitution, limits the maximum annual percentage increase in state fiscal year spending. Once total state revenue from all sources that are not specifically excluded from fiscal year spending exceeds these limits for the fiscal year, the state constitution requires that the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset. Based on the current Legislative Council economic forecast, it is projected that the state will be in a TABOR refund position during each of the next five fiscal years. Any increase or decrease in state revenue from changes in fees, fines, licenses, or other revenue sources will affect the amount of the state revenue to be refunded.



State Expenditures


            The bill would not require additional resources of the Department of Revenue or the Department of Natural Resources in order to implement the requirements of the bill. Since the number of credits claimed or its value would not be separately tracked by the Department of Revenue, no additional data entry would be required. Based on an agreement with the Joint Budget Committee, Legislative Council Fiscal Note Staff, and the Department of Revenue, the Department of Revenue will absorb the costs of approximately 100 hours of programming time necessary to make changes to the Federal State Electronic Filing (FSEF) system.


            The bill requires the taxpayer to obtain certification from the Executive Director of the Department of Natural Resources (or the Director’s designee) that the donated real property or the real property subject to a conservation easement in gross is suitable for conservation purposes. It is not anticipated that this certification will require additional department resources.


Local Government Impact

 

            The bill would encourage creation of conservation easements and the donation of real property interests to governmental entities or tax-exempt charitable organizations for conservation purposes. However, there would be no fiscal impact on local governments. A conservation easement is exempt from property tax.



Spending Authority


            The fiscal note would imply that no appropriations or spending authority are required to implement the provisions of the bill.



Departments Contacted

 

            Revenue          Natural Resources