Colorado Legislative Council Staff

STATE and LOCAL

FISCAL NOTE

TABOR Refund Impact

General Fund Revenue Impact

Local Revenue Impact


Drafting Number:

Prime Sponsor(s):

LLS 98-712

Rep. Sinclair

Date:

Bill Status:

Fiscal Analyst:

January 25, 1998

House Finance

Harry Zeid (866-4753)

 

TITLE:            CONCERNING AN EXEMPTION FROM STATE USE TAX FOR CERTAIN DONATIONS OF MANUFACTURED GOODS BY THE MANUFACTURER OF SUCH GOODS.



Summary of Legislation


STATE FISCAL IMPACT SUMMARY

FY 1998/99

FY 1999/2000

State Revenues

General Fund - (reduction)

Cash Fund


Minimal General Fund Revenue Reduction

State Expenditures

General Fund

Other Fund


 


 

FTE Position Change

None

None

Local Government Impact — Sales tax revenue would be reduced for statutory cities, counties and special districts where the local sales tax is collected by the state. School districts and other governmental entities would be the recipients of donated high technology goods.


            This bill would create a use tax exemption for manufactured goods donated by the manufacturer to governmental entities and not-for-profit organizations that are exempt from federal income taxes pursuant to Section 501 (c)(3) of the Internal Revenue Code. The use tax exemption would apply to donations of manufactured goods where a single donation exceeds $5,000. The bill would reduce the revenues of the state and statutory cities, counties, and special districts where the local sales tax is collected by the state. Therefore, the bill is assessed as having state and local fiscal impact. The bill will become effective October 1, 1998, or on April 1, 1999, if a referendum petition is filed pursuant to Article V, Section 1 (3) of the State Constitution, and the question is approved by the people.



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 a use tax exemption for manufactured goods donated by the manufacturer to governmental entities and other not-for profit organizations where a single donation exceeds $5,000. This will reduce sales and use tax revenues beginning in FY 1998-99, thereby reducing the projected state revenue excess.


            The number and amount of donations of manufactured goods that would qualify for the use tax exemption is unknown. While the exemption would reduce General Fund revenues, the impact is anticipated to be minimal. Furthermore, it is likely that the donation of high technology goods to schools and universities may reduce the expenditures that these institutions may otherwise have made on these types of high technology goods in the future.



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.



Local Government Impact


            Sales and use tax exemptions authorized at the state level also apply to statutory cities, counties and special districts, since their sales and use tax is collected by the state. Home rule cities collect their own sales and use tax, and may determine their own tax base. Because of various local sales tax rates and the lack of information regarding the geographic distribution of the companies that may make qualified donations, no estimate has been made regarding the potential amount of sales and use tax revenue losses to local governments.


            School districts and other governmental entities would be the recipients of the donated high technology goods.



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.



Departments Contacted


            Revenue