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Second Regular Session

Sixty-first General Assembly

LLS NO. 98­0717.01 SLE HOUSE BILL 98­1228

STATE OF COLORADO

BY REPRESENTATIVE C. Berry;

also SENATOR Powers. REREVISED

FINANCE

A BILL FOR AN ACT

CONCERNING A TEMPORARY STATE INCOME TAX RATE REDUCTION FOR THE PURPOSE OF REFUNDING STATE REVENUES IN EXCESS OF THE LIMITATION ON STATE FISCAL YEAR SPENDING FOR ANY GIVEN FISCAL YEAR.

Bill Summary

(Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.)

Requires the executive director of the department of revenue to calculate the income tax rate necessary to refund the amount of state revenues in excess of the constitutional limit on state fiscal year spending for the most recently closed fiscal year. States that the executive director shall utilize the most recent general fund estimates prepared by the staff of the legislative council of the general assembly in calculating such adjusted income tax rate.

Specifies that the executive director shall notify the executive committee of the legislative council of the income tax rate or rates calculated and the basis for each calculation. Provides for the automatic approval of such adjusted income tax rate or rates by the executive committee under certain circumstances. If the executive committee disapproves of an income tax rate calculated by the executive director, requires the executive committee to specify the adjusted income tax rate to be used by the executive director.

Based upon the financial statement prepared to ascertain compliance with section 20 of article X of the state constitution, requires the state controller to certify the amount of state revenues in excess of the constitutional limit on state fiscal year spending for a given fiscal year by a specified date. Requires the state auditor to conduct an audit of the certified amount of excess state revenues by a specified date.


Be it enacted by the General Assembly of the State of Colorado:

SECTION 1.  39­22­104 (1), Colorado Revised Statutes, is amended to read:

39­22­104.  Income tax imposed on individuals, estates, and trusts ­ single rate. (1)  EXCEPT AS OTHERWISE PROVIDED IN SECTION 39­22­627, subject to subsection (2) of this section, with respect to taxable years commencing on or after January 1, 1987, a tax of five percent is imposed on the federal taxable income, as determined pursuant to section 63 of the internal revenue code, of every individual, estate, and trust.

SECTION 2.  39­22­301 (1) (d) (I) (G), Colorado Revised Statutes, is amended to read:

39­22­301.  Corporate tax imposed. (1) (d) (I)  A tax is imposed upon each domestic C corporation and foreign C corporation doing business in Colorado annually in an amount of the net income of such C

corporation during the year derived from sources within Colorado as set forth in the following schedule of rates:

(G)  EXCEPT AS OTHERWISE PROVIDED IN SECTION 39­22­627, for income tax years commencing on or after July 1, 1993, five percent of the Colorado net income.

SECTION 3.  Part 6 of article 22 of title 39, Colorado Revised Statutes, is amended to read:

39­22­627.  Legislative declaration ­ temporary adjustment of rate of income tax ­ authority of executive director. (1)  THE GENERAL ASSEMBLY HEREBY FINDS AND DECLARES THAT:

(a)  SECTION 20 OF ARTICLE X OF THE STATE CONSTITUTION, WHICH WAS APPROVED BY THE REGISTERED ELECTORS OF THIS STATE IN 1992, LIMITS THE ANNUAL GROWTH OF STATE FISCAL YEAR SPENDING;

(b)  IT IS ANTICIPATED THAT, DURING THE 1997­98 FISCAL YEAR AS WELL AS FUTURE FISCAL YEARS, STATE REVENUES FROM SOURCES NOT EXCLUDED FROM STATE FISCAL YEAR SPENDING WILL EXCEED THE LIMITATION ON STATE FISCAL YEAR SPENDING;

(c)  WHEN REVENUES EXCEED THE STATE FISCAL YEAR SPENDING LIMITATION FOR ANY GIVEN FISCAL YEAR, SECTION 20 (7) (d) OF ARTICLE X OF THE STATE CONSTITUTION REQUIRES THAT THE EXCESS REVENUES BE REFUNDED IN THE NEXT FISCAL YEAR UNLESS VOTERS APPROVE A REVENUE CHANGE ALLOWING THE STATE TO KEEP THE REVENUES;

(d)  IN ADDITION, SECTION 20 (1) OF ARTICLE X OF THE STATE CONSTITUTION STATES THAT REFUNDS NEED NOT BE PROPORTIONAL WHEN PRIOR PAYMENTS ARE IMPRACTICAL TO IDENTIFY OR RETURN AND AUTHORIZES THE USE OF ANY REASONABLE METHOD FOR REFUNDING EXCESS REVENUES;

(e)  IF VOTERS DO NOT APPROVE A REVENUE CHANGE, THE STATE IS REQUIRED TO REFUND THE REVENUES IN EXCESS OF THE STATE FISCAL YEAR SPENDING LIMITATION FOR ANY GIVEN FISCAL YEAR DURING THE FOLLOWING FISCAL YEAR;

(f)  IT IS WITHIN THE LEGISLATIVE PREROGATIVE OF THE GENERAL ASSEMBLY TO ENACT LEGISLATION TO IMPLEMENT A PERMANENT MECHANISM TO REFUND STATE EXCESS REVENUES FOR ANY GIVEN FISCAL YEAR IN COMPLIANCE WITH SECTION 20 OF ARTICLE X OF THE STATE CONSTITUTION;

(g)  IT IS A REASONABLE AND NECESSARY EXERCISE OF THE LEGISLATIVE PREROGATIVE TO DETERMINE THAT, DUE TO THE IMPOSSIBILITY OF IDENTIFYING OR RETURNING PRIOR PAYMENTS, IT IS NOT FEASIBLE TO MAKE PROPORTIONAL REFUNDS OF STATE EXCESS REVENUES;

(h)  IT IS ALSO A REASONABLE AND NECESSARY EXERCISE OF THE LEGISLATIVE PREROGATIVE TO DETERMINE WHAT CONSTITUTES A REASONABLE METHOD OF REFUNDING STATE EXCESS REVENUES AFTER CONSIDERATION OF THE BEST INFORMATION AVAILABLE AT THE TIME REGARDING: THE AMOUNT AND SOURCE OF EXCESS REVENUES TO BE REFUNDED; THE QUALIFICATIONS FOR AND NUMBER OF ELIGIBLE RECIPIENTS; AND THE RELATED ADMINISTRATIVE EXPENSES;

(i)  IT IS THE CONSIDERED JUDGMENT OF THE GENERAL ASSEMBLY THAT:

(I)  THE STATE EXCESS REVENUES FOR ANY GIVEN FISCAL YEAR ARE DERIVED FROM A WIDE VARIETY OF STATE TAXES AND FEES RANGING FROM STATE SALES TAX TO SEVERANCE AND TRANSPORTATION TAXES TO HEALTH SERVICE FEES TO COURT FINES TO PERMIT AND LICENSE FEES TO HIGHER EDUCATION FEES;

(II)  IT IS NOT FEASIBLE TO MAKE PROPORTIONAL REFUNDS OF STATE EXCESS REVENUES FOR ANY GIVEN FISCAL YEAR DUE TO THE IMPOSSIBILITY OF IDENTIFYING OR RETURNING PRIOR PAYMENTS;

(III)  IT IS REASONABLE AND FAIR TO REFUND STATE EXCESS REVENUES FOR ANY GIVEN FISCAL YEAR THROUGH A TEMPORARY REDUCTION OF THE STATE INCOME TAX RATE; AND

(IV)  REFUNDING STATE EXCESS REVENUES FOR ANY GIVEN FISCAL YEAR THROUGH THE STATE INCOME TAX SYSTEM IN THE MANNER SET FORTH IN THIS SECTION IS A REASONABLE METHOD FOR REFUNDING SUCH EXCESS REVENUES.

(2)  IF, FOR ANY STATE FISCAL YEAR COMMENCING ON OR AFTER JULY 1, 1997, THE AMOUNT OF STATE REVENUES EXCEEDS THE LIMITATION ON STATE FISCAL YEAR SPENDING IMPOSED BY SECTION 20 (7) (a) OF ARTICLE X OF THE STATE CONSTITUTION AND VOTERS STATEWIDE HAVE NOT AUTHORIZED THE STATE TO RETAIN AND SPEND ALL OR ANY PORTION OF THE EXCESS STATE REVENUES FOR THAT FISCAL YEAR, THE EXECUTIVE DIRECTOR SHALL TEMPORARILY REDUCE THE STATE INCOME TAX RATE, AS SPECIFIED IN SECTIONS 39­22­104 AND 39­22­301 (1) (d) (I) (G), IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION TO REFUND THE AMOUNT OF EXCESS STATE REVENUES THAT IS REQUIRED PURSUANT TO SECTION 20 (7) (d) OF ARTICLE X OF THE STATE CONSTITUTION AND THAT IS NOT REFUNDED BY ANOTHER METHOD ESTABLISHED BY LAW.

(3)  EXCEPT AS OTHERWISE PROVIDED IN SUBSECTION (4) OF THIS SECTION, NO LATER THAN OCTOBER 1 OF ANY GIVEN CALENDAR YEAR DURING WHICH IT IS CERTIFIED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 24­77­106.5, C.R.S., THAT STATE REVENUES EXCEED THE LIMITATION ON STATE FISCAL YEAR SPENDING IMPOSED BY SECTION 20 (7) (a) OF ARTICLE X OF THE STATE CONSTITUTION FOR THE FISCAL YEAR ENDING IN THAT CALENDAR YEAR, THE EXECUTIVE DIRECTOR SHALL CALCULATE THE INCOME TAX RATE FOR THE TAXABLE YEAR COMMENCING ON OR AFTER JANUARY 1 OF SAID CALENDAR YEAR THAT WOULD REDUCE THE ESTIMATED AMOUNT OF STATE INCOME TAX REVENUES FOR SUCH TAXABLE YEAR BY AN AMOUNT EQUAL TO THE AMOUNT OF EXCESS STATE REVENUES REQUIRED TO BE REFUNDED THAT IS NOT REFUNDED BY ANOTHER METHOD ESTABLISHED BY LAW.

(4)  IF ONE OR MORE BALLOT QUESTIONS ARE SUBMITTED TO THE VOTERS AT A STATEWIDE ELECTION TO BE HELD IN NOVEMBER OF ANY GIVEN CALENDAR YEAR THAT SEEK AUTHORIZATION FOR THE STATE TO RETAIN AND SPEND ALL OR ANY PORTION OF THE AMOUNT OF EXCESS STATE REVENUES FOR THE FISCAL YEAR ENDING DURING SAID CALENDAR YEAR, NO LATER THAN OCTOBER 1 OF SAID CALENDAR YEAR, THE EXECUTIVE DIRECTOR SHALL CALCULATE THE INCOME TAX RATE FOR THE TAXABLE YEAR COMMENCING ON OR AFTER JANUARY 1 OF SAID CALENDAR YEAR THAT WOULD REDUCE THE ESTIMATED AMOUNT OF STATE INCOME TAX REVENUES FOR SUCH TAXABLE YEAR BY AN AMOUNT EQUAL TO THE AMOUNT OF EXCESS STATE REVENUES, IF ANY, REQUIRED TO BE REFUNDED IF ONE OR MORE OF SUCH BALLOT QUESTIONS ARE APPROVED BY VOTERS STATEWIDE AND THAT IS NOT REFUNDED BY ANOTHER METHOD ESTABLISHED BY LAW.

(5)  IN CALCULATING THE INCOME TAX RATE IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION, THE EXECUTIVE DIRECTOR SHALL UTILIZE THE MOST RECENT ESTIMATE OF GENERAL FUND REVENUES ATTRIBUTABLE TO THE STATE INCOME TAX FOR THE APPLICABLE TAX YEAR PREPARED BY THE STAFF OF THE LEGISLATIVE COUNCIL OF THE GENERAL ASSEMBLY IN ACCORDANCE WITH SECTION 24­75­201.3, C.R.S.

(6) (a)  UPON CALCULATING THE INCOME TAX RATE OR RATES FOR ANY TAXABLE YEAR IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION, THE EXECUTIVE DIRECTOR SHALL NOTIFY IN WRITING THE EXECUTIVE COMMITTEE OF THE LEGISLATIVE COUNCIL CREATED PURSUANT TO SECTION 2­3­301 (1), C.R.S., OF ANY INCOME TAX RATE SO CALCULATED AND THE BASIS FOR SUCH CALCULATION. SUCH WRITTEN NOTIFICATION SHALL BE GIVEN WITHIN FIVE WORKING DAYS AFTER SUCH CALCULATION OR CALCULATIONS ARE COMPLETED, BUT SUCH WRITTEN NOTIFICATION SHALL BE GIVEN NO LATER THAN OCTOBER 1 OF THE CALENDAR YEAR.

(b)  IT IS THE FUNCTION OF THE EXECUTIVE COMMITTEE TO REVIEW AND APPROVE OR DISAPPROVE SUCH CALCULATED INCOME TAX RATE WITHIN TWENTY DAYS OF RECEIPT OF SUCH WRITTEN NOTIFICATION FROM THE EXECUTIVE DIRECTOR. ANY INCOME TAX RATE CALCULATED PURSUANT TO THE PROVISIONS OF THIS SECTION WHICH IS NOT APPROVED OR DISAPPROVED BY THE EXECUTIVE COMMITTEE WITHIN SAID TWENTY DAYS SHALL BE AUTOMATICALLY APPROVED; EXCEPT THAT, IF WITHIN SAID TWENTY DAYS THE EXECUTIVE COMMITTEE SCHEDULES A HEARING ON SUCH CALCULATED INCOME TAX RATE, SUCH AUTOMATIC APPROVAL SHALL NOT OCCUR UNLESS THE EXECUTIVE COMMITTEE DOES NOT APPROVE OR DISAPPROVE SUCH CALCULATED INCOME TAX RATE AFTER THE CONCLUSION OF SUCH HEARING. ANY HEARING CONDUCTED BY THE EXECUTIVE COMMITTEE PURSUANT TO THE PROVISIONS OF THIS PARAGRAPH (b) SHALL BE HELD NO LATER THAN TWENTY­FIVE DAYS AFTER RECEIPT OF SUCH WRITTEN NOTIFICATION FROM THE EXECUTIVE DIRECTOR.

(c) (I)  IF THE EXECUTIVE COMMITTEE DISAPPROVES ANY INCOME TAX RATE CALCULATED BY THE EXECUTIVE DIRECTOR, THE EXECUTIVE COMMITTEE SHALL SPECIFY THE ADJUSTED INCOME TAX RATE TO BE IMPLEMENTED BY THE EXECUTIVE DIRECTOR. ANY INCOME TAX RATE SPECIFIED BY THE EXECUTIVE COMMITTEE PURSUANT TO THIS SUBPARAGRAPH (I) SHALL BE CALCULATED IN ACCORDANCE WITH THE PROVISIONS OF SUBSECTION (3) OR (4) OF THIS SECTION, AS APPLICABLE.

(II)  THE EXECUTIVE DIRECTOR SHALL NOT ADJUST THE STATE INCOME TAX RATE TO ANY RATE THAT HAS NOT BEEN APPROVED PURSUANT TO THE PROVISIONS OF PARAGRAPH (b) OF THIS SUBSECTION (6).

(d) (I)  ANY INCOME TAX RATE ADJUSTMENT MADE PURSUANT TO THE PROVISIONS OF THIS SECTION SHALL BE MADE BY RULE PROMULGATED BY THE EXECUTIVE DIRECTOR IN ACCORDANCE WITH ARTICLE 4 OF TITLE 24, C.R.S.

(II)  IF ONE OR MORE BALLOT QUESTIONS ARE SUBMITTED TO THE VOTERS AT A STATEWIDE ELECTION TO BE HELD IN NOVEMBER OF ANY GIVEN CALENDAR YEAR THAT SEEK AUTHORIZATION FOR THE STATE TO RETAIN AND SPEND ALL OR ANY PORTION OF THE AMOUNT OF EXCESS STATE REVENUES FOR THE FISCAL YEAR ENDING DURING SAID CALENDAR YEAR, THE EXECUTIVE DIRECTOR SHALL NOT ADJUST THE INCOME TAX RATE UNTIL THE RESULTS OF SAID ELECTION ARE KNOWN SO THAT THE INCOME TAX RATE MAY BE ADJUSTED TO REFLECT THE IMPACT OF THE RESULTS OF SAID ELECTION ON THE AMOUNT OF EXCESS STATE REVENUES REQUIRED TO BE REFUNDED AND THAT IS NOT REFUNDED BY ANOTHER METHOD ESTABLISHED BY LAW.

SECTION 4.  24­77­106.5, Colorado Revised Statutes, is amended to read:

24­77­106.5.  Annual financial report ­ certification of state excess revenues. (1) (a)  For each fiscal year, the controller shall prepare a financial report for the state for purposes of ascertaining compliance with the provisions of this article. Any financial report prepared pursuant to this section shall include, but shall not be limited to, state fiscal year spending, reserves, revenues, and debt.

(b)  BASED UPON THE FINANCIAL STATEMENT PREPARED IN ACCORDANCE WITH PARAGRAPH (a) OF THIS SUBSECTION (1) FOR ANY FISCAL YEAR COMMENCING ON OR AFTER JULY 1, 1997, THE CONTROLLER SHALL CERTIFY TO THE GOVERNOR, THE GENERAL ASSEMBLY, AND THE EXECUTIVE DIRECTOR OF THE DEPARTMENT OF REVENUE NO LATER THAN SEPTEMBER 1 FOLLOWING THE END OF A FISCAL YEAR THE AMOUNT OF STATE REVENUES IN EXCESS OF THE LIMITATION ON STATE FISCAL YEAR SPENDING IMPOSED BY SECTION 20 (7) (a) OF ARTICLE X OF THE STATE CONSTITUTION, IF ANY, FOR SUCH FISCAL YEAR.

(2)  Such ANY financial report PREPARED AND CERTIFICATION OF STATE EXCESS REVENUES MADE PURSUANT TO SUBSECTION (1) OF THIS SECTION shall be audited by the state auditor. NO LATER THAN SEPTEMBER 15 FOLLOWING THE CERTIFICATION MADE BY THE STATE CONTROLLER FOR ANY GIVEN FISCAL YEAR, THE STATE AUDITOR SHALL REPORT AND TRANSMIT TO THE GOVERNOR, THE GENERAL ASSEMBLY, AND THE EXECUTIVE DIRECTOR OF THE DEPARTMENT OF REVENUE THE RESULTS OF ANY AUDIT CONDUCTED IN ACCORDANCE WITH THIS SUBSECTION (2).

SECTION 5. Safety clause . The General Assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.