Colorado Legislative Council Staff

STATE

REVISED FISCAL NOTE

(Replaces Fiscal Note dated February 18, 1998)

TABOR Refund Impact

General Fund Revenue and Expenditure Impact


Drafting Number:

Prime Sponsor(s):

LLS 98-568

Rep. Taylor

Sen. Coffman

Date:

Bill Status:

Fiscal Analyst:

April 27, 1998

Senate 2nd Reading

Harry Zeid (866-4753)

 

TITLE:            CONCERNING AN EXCLUSION OF CERTAIN INCOME FROM COLORADO TAXABLE INCOME, AND, IN CONNECTION THEREWITH, EXCLUDING CERTAIN INTEREST INCOME, DIVIDEND INCOME, AND NET CAPITAL GAINS FROM THE INCOME TAX IMPOSED ON INDIVIDUALS, ESTATES, AND TRUSTS.



Summary of Legislation


STATE FISCAL IMPACT SUMMARY

FY 1998/99

FY 1999/2000

State Revenues

General Fund (reduction)

Other Fund


($19,688,301)*


($40,498,836)

State Expenditures

General Fund

Other Fund


 


$17,735

FTE Position Change

None

None

Local Government Impact — None

             *This amount represents a six-month impact on an accrual accounting basis.

 

            Effective for income tax years commencing on and after January 1, 1999, this bill, as amended in Senate Appropriations (Senate Journal, April 23, 1998, page 946), would exclude from Colorado taxable income up to $2,300 of interest income that is included in federal taxable income (and not otherwise subtracted from federal taxable income) for individuals, estates, and trusts for state income tax purposes. The bill would reduce the amount of General Fund revenues over the amount that would otherwise be collected beginning in FY 1998-99. Therefore, the bill is assessed as having state fiscal impact. The bill would become effective upon signature of the Governor.



State Revenues

 

            The amended bill would exempt the first $2,300 of interest income per individual and would apply to tax year 1999 for income taxes due in 2000. It is estimated that this exemption would reduce General Fund revenues by $19,688,301 in FY 1998-99 (for the six-month period beginning January 1, 1999), and $40,498,836 in FY 1999-00.



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


            An estimated 943,359 Colorado individual income tax returns would be eligible for the reduced income tax liability in 1999. Beginning in FY 1999-00, the Department of Revenue will require $17,735 annually (General Fund) for the additional cost to record additional data reported on the state income tax return that will be necessary to compute the impact on Colorado taxable income. 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 670 hours of programming time necessary to make changes to the income tax system and the Fairshare programs during the normal annual rewrite by the Department.



Spending Authority


            The fiscal note would imply that no new spending authority or appropriations are required for FY 1998-99 to implement the provisions of the bill. An appropriation in the amount of $17,735 (GF) would be required in FY 1999-00.



Departments Contacted

 

            Revenue          Legislative Council