Colorado Legislative Council Staff

STATE and LOCAL

REVISED FISCAL NOTE

(replaces Fiscal Note dated February 2, 1998)

TABOR Refund Impact

State Cash Fund Revenue Impact

Local Revenue and Expenditure Impact


Drafting Number:

Prime Sponsor(s):

LLS 98-086

Rep. May

Sen. Mutzebaugh

Date:

Bill Status:

Fiscal Analyst:

April 14, 1998

House 2nd Reading

Scott Nachtrieb (866-4752)

 

TITLE:            CONCERNING ADMINISTRATION OF THE EXCISE TAX ON FUEL, AND MAKING AN APPROPRIATION IN CONNECTION THEREWITH.



Summary of Legislation


            The bill, as amended by the House Appropriations Committee, House Journal April 13, 1998, page 1277, would require any supplier, importer, exporter, carrier, or blender of gasoline and special fuel to obtain a license from the Department of Revenue (DOR). Exporter licensees would have to prove that they have the appropriate valid license in each state into which the gasoline will be exported. Conviction of an offense of operating without a valid license would result in an unclassified misdemeanor. Exporters would also have to report gasoline diverted in or out of the state within one working day after the diversion. Individuals who would not file a timely report of a diversion and any unlicensed person who imports gasoline into the state would be subject to the following fines:

          $5,000 for the first violation;

          $10,000 for the second violation; and

          $15,000 for a third or subsequent violation.


STATE FISCAL IMPACT SUMMARY

FY 1998/99

FY 1999/2000

State Revenues

General Fund

Highway User Tax Fund

Highway User Tax Fund (Penalties)

Highway User Tax Fund (Licenses)



$11,551,043

300,000

19,950



$11,551,043

300,000

0

State Expenditures

General Fund

Highway Users Tax Fund



$622,857



$565,407

FTE Position Change

1.5 FTE

1.5 FTE

Local Government Impact — Additional Highway User Tax Fund distributions


            The DOR could detain a shipment of gasoline or special fuel until applicable fines and excise taxes are collected. Licensees would be required to file monthly reports and the reports could be filed electronically. The DOR would be authorized to contract with a private entity to provide a computer-based program to monitor and track the data that licensees are required to report. Tax-exempt special fuel would be required to have an indelible dye meeting federal regulations added at a terminal rack or refinery. Governmental entities would be granted tax exempt status for purchasing undyed special fuel. This bill would become effective July 1, 1998.


State Revenues


            The revenue impact of this bill will depend upon the amount of tax evasion that is corrected by an accurate motor fuel tracking system. Colorado collected $462,041,707 in excise taxes from gasoline, gasohol, and special fuel. The state of Montana adopted a similar program for tracking motor fuels and experienced a 5.5 percent increase in motor fuel excise tax collections. If Colorado were to experience a similar 5.5 percent increase, motor fuel tax collections would increase approximately $25.4 million. For purposes of this fiscal note it is assumed that the additional motor fuel excise tax collections in Colorado would be increase approximately 2.5 to 3.0 percent. A 2.5 percent increase would generate $11,551,043 in HUTF revenues and a 3.0 increase would generate $13,861,251 in Highway User Tax Fund (HUTF) revenue.


            The State Highway Fund would receive 65 percent of the first seven cents of the increase and 60 percent of the remaining tax. It is estimated that the State Highway fund would receive $7,114,403 of a 2.5 percent increase, $8,537,283 of a 3.0 percent increase and $15,651,686 of a 5.5 percent increase. These distributions would be reduced an incremental amount by the amount of this program that is paid from the HUTF.


            There are approximately 1,995 additional persons that would be licensed at $10 per license. This would generate an additional $19,950 in HUTF revenue. Generally, the DOR experiences a delinquency rate of approximately three percent. This would mean that approximately 60 persons would be fined at least one time a year. The fines required in the bill increase from $5,000 for a first offense to $15,000 for third offenses. For purposes of this fiscal note it is assumed that 60 persons will receive one fine at $5,000. This would generate $300,000 in fine revenue to the HUTF. The State Highway Fund would also receive 65 percent of the increased penalties and licenses. This would add an additional $207,968. The total increase to the State Highway Fund has been estimated to be $7,322,370 in FY 1998-99 and $7,309,402 in FY 1999-00.


            The amended bill would change the class 6 felony in the bill to an unclassified misdemeanor for anyone to distribute, supply, import, export, carry or blend gasoline in this state without a license. Conviction of an unclassified misdemeanor could result in a sentence to county jail or a fine. The provision does not specify the penalty for an unclassified misdemeanor.


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


            Under current law, persons that use motor fuel for off-road purposes do not pay the tax at the time of the purchase or they may pay the tax and request a refund. This bill would require all persons to pay the tax and then request a refund. The number of refunds issued would increase. It is estimated that there will be 150 additional requests each month for tax refunds and each refund would require 30 minutes to complete. This would require 0.5 FTE Tax Examiner. The DOR would also be required to maintain 1,995 accounts. This would require licensing, renewals, issuing assessments, maintain accounts, and review monthly report exceptions. Each account would require one hour of work annually. An estimated 1.0 FTE Tax Examiner would be required. The total expenditures required by this bill would be 1.5 FTE and $55,857. Of that amount $47,657 would be for personal services, $750 would be operating costs, $3,750 would be for computers, and $2,700 would be for capital outlay. The DOR would also require a $517,000 expenditure to contract with a vendor to provide the tracking system. Finally, the DOR would require $50,000 in computer programming changes to allow for the interface with the vendor and to ensure the integration of data with existing systems and licensing. The total estimated expenditures for the DOR would be 1.5 FTE and $622,857 in Highway Users Tax Funds in FY 1998-99 and 1.5 FTE and $565,407 in FY 1999-00.


Local Government Impact


            The cities and counties would also receive additional HUTF distributions from increased collections. Counties would receive 26 percent of the first seven cents of the increase and 22 percent of the remaining tax. It is estimated that counties would receive $2,771,438 of a 2.5 percent increase, $3,309,088 of a 3.0 percent increase and $5,134,261 of a 5.0 percent increase. Cities would receive 9 percent of the first sevens cents of the increase and 18 percent of the remaining tax. It is estimated that counties would receive $1,777,184 of a 2.5 percent increase, $2,126,862 of a 3.0 percent increase and $3,339,229 of a 5.5 percent increase. These distributions would be reduced proportionally by the amount of this program that is paid from the HUTF.


Spending Authority


            This fiscal note implies that the Department of Revenue would require an HUTF appropriation of 1.5 FTE and $622,857 in FY 1998-99 to implement this bill.


Departments Contacted


Revenue          Legislative Council Staff