Colorado Legislative Council Staff

STATE

FISCAL NOTE

TABOR Refund Impact

General Fund Revenue Impact

TITLE:            CONCERNING A CREDIT AGAINST THE STATE INCOME TAX FOR CONTRIBUTIONS TO PROMOTE CHILD CARE IN THE STATE.

Summary of Legislation

             *The tax credit would be effective for income tax years commencing on and after January 1, 1999. Therefore, on an accrual accounting basis, there would be a six-month impact in FY 1998-99.

For income tax years commencing on or after January 1, 1999, the bill would replace the current income tax credit for monetary and in-kind contributions that promote child care in an enterprise zone with an income tax credit equal to 25 percent of the total value of a monetary or in-kind contribution to promote child care in the state. The credit could not exceed $100,000, or the taxpayer’s actual income tax liability for the year in which the credit is claimed. The credit for in-kind contributions could not exceed 50 percent of the total credit claimed in any given tax year. The type of contribution would include, but not be limited to:

            •   donating money, real estate, or property for the establishment of a child care facility;

            •   donating money to establish a grant or loan program for a parent or parents requiring financial assistance for child care;

            •   pooling moneys of several businesses and donating moneys for the establishment of a child care facility;

            •   donating money for the training of child care providers; and

            •   donating money, services, or equipment for the establishment of an information dissemination program to provide information and referral services to assist a parent or parents in obtaining child care.

            The bill would reduce state General Fund revenues. Therefore, the bill is assessed as having state 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 monetary and in-kind contributions that promote child care, effective for income tax years commencing on or after January 1, 1999. The tax credit will reduce the projected state revenue excess.

            The bill would allow the types of income tax credits to promote child care that are currently authorized through enterprise zone administrators to apply throughout the state. At the same time, the enterprise zone tax credits to promote child care would be eliminated. In FY 1997-98, 674 donations, including $1,349,779 in cash and $14,708 of in-kind contributions were made to promote child care through enterprise zone administrators. The estimated value of the income tax credit on these donations was $678,216. While an estimated 15 percent of the state’s population live within the boundaries of an enterprise zone, approximately 30 percent of the state’s employment base is located within an enterprise zone. Although the exact value of statewide contributions to promote child care in the future is uncertain, it is reasonable to expect that the total value of the tax credit will approximate the employment patterns in the state. On this basis, the annual value of the tax credit is projected to be $1,582,504 ($687,216 in current contributions within the boundaries of existing enterprise zones divided by 30 percent equals $1,582,504). The impact on FY 1998-99 would be $791,252 to reflect a six-month impact.

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

            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 220 hours of contract programming time necessary to make the changes with the Information Technology Division. Other expenses related to the bill are minimal, and will also be absorbed within existing resources of the Department of Revenue.

Spending Authority

            The fiscal note would imply that no appropriations or spending authority are required in FY 1998-99 to implement the provisions of the bill.

Departments Contacted

            Revenue