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Second Regular Session

Sixty-first General Assembly

LLS NO. 98­0458.01D SLE SENATE BILL 98­169

STATE OF COLORADO

BY SENATOR Norton;

also REPRESENTATIVE Anderson.

FINANCE

A BILL FOR AN ACT

CONCERNING A TEMPORARY REDUCTION IN THE STATE INCOME TAX RATE FOR THE PURPOSE OF REFUNDING STATE EXCESS REVENUES THAT VOTERS HAVE NOT AUTHORIZED THE STATE TO RETAIN.

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 refunding of state revenues that exceed the constitutional limitation on state fiscal year spending for any given fiscal year through a temporary reduction of the state income tax rate if the voters have not authorized the state to retain such excess revenues. Requires the temporary reduction of the state income tax rate for the taxable year commencing during the calendar year following the fiscal year for which there are state excess revenues to be refunded. Provides for the executive director of the department of revenue to calculate the income tax rate or rates necessary to refund the amount of state excess revenues required to be refunded.

Specifies that the executive director shall notify the governor and the executive committee of the legislative council of the general assembly of the income tax rate or rates calculated and the basis for each calculation. States that the executive director shall utilize the most recent general fund estimates prepared by the staff of the legislative council in calculating such adjusted income tax rate. Requires the state controller, based upon the financial statement prepared to ensure compliance with section 20 of article X of the state constitution, 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.

Makes the act effective only upon voter approval of a constitutional amendment to be submitted at the 1998 general election to extend by one year the period to refund state revenues in excess of the constitutional limitation on state fiscal year spending.

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 BY THE ADDITION OF A NEW SECTION 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 NO LATER THAN THE CLOSE OF THE SECOND FISCAL YEAR FOLLOWING THE FISCAL YEAR FOR WHICH THERE IS THE EXCESS, UNLESS VOTERS APPROVE A REVENUE CHANGE ALLOWING THE STATE TO RETAIN 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 NO LATER THAN THE CLOSE OF THE SECOND FISCAL YEAR FOLLOWING THE FISCAL YEAR FOR WHICH THERE IS THE EXCESS;

(f)  IT IS WITHIN THE LEGISLATIVE PREROGATIVE OF THE GENERAL ASSEMBLY TO ENACT LEGISLATION TO IMPLEMENT A PERMANENT MECHANISM TO TIMELY REFUND STATE EXCESS REVENUES 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 INCOME 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 RATE OF STATE INCOME TAX, AS SPECIFIED IN SECTIONS 39­22­104 (1) 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.

(3) (a)  NO LATER THAN JANUARY 31, 1999, IF IT IS CERTIFIED AND AUDITED THAT STATE REVENUES EXCEED THE LIMITATION ON STATE FISCAL YEAR SPENDING IMPOSED BY SECTION 20 (7) (a) OF THE STATE CONSTITUTION FOR THE FISCAL YEAR ENDING JUNE 30, 1998, THE EXECUTIVE DIRECTOR SHALL CALCULATE THE INCOME TAX RATE FOR THE TAXABLE YEAR COMMENCING ON OR AFTER JANUARY 1, 1999, BUT PRIOR TO JANUARY 1, 2000, THAT WOULD REDUCE THE ESTIMATED AMOUNT OF STATE INCOME TAX REVENUES FOR SAID TAXABLE YEAR BY AN AMOUNT EQUAL TO THE AMOUNT OF EXCESS STATE REVENUES, IF ANY, REQUIRED TO BE REFUNDED. IN CALCULATING THE INCOME TAX RATE IN ACCORDANCE WITH THE PROVISIONS OF THIS PARAGRAPH (a), THE EXECUTIVE DIRECTOR SHALL TAKE INTO ACCOUNT ANY BALLOT QUESTIONS APPROVED BY THE VOTERS STATEWIDE AT THE 1998 GENERAL ELECTION THAT AUTHORIZE THE STATE TO RETAIN AND SPEND ALL OR ANY PORTION OF THE AMOUNT OF EXCESS STATE REVENUES FOR THE FISCAL YEAR ENDING JUNE 30, 1998.

(b)  UPON CALCULATING THE INCOME TAX RATE FOR THE TAXABLE YEAR COMMENCING ON OR AFTER JANUARY 1, 1999, BUT PRIOR TO JANUARY 1, 2000, IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION, THE EXECUTIVE DIRECTOR SHALL NOTIFY IN WRITING THE GOVERNOR AND THE EXECUTIVE COMMITTEE OF THE LEGISLATIVE COUNCIL CREATED PURSUANT TO SECTION 2­3­301 (1), C.R.S. SAID WRITTEN NOTIFICATION SHALL BE GIVEN WITHIN FIVE WORKING DAYS AFTER SAID CALCULATION IS COMPLETED, BUT SAID WRITTEN NOTIFICATION SHALL BE GIVEN NO LATER THAN FEBRUARY 5, 1999.

(c)  ANY INCOME TAX RATE ADJUSTMENT MADE PURSUANT TO THE PROVISIONS OF THIS SUBSECTION (3) SHALL BE MADE BY RULE PROMULGATED BY THE EXECUTIVE DIRECTOR IN ACCORDANCE WITH ARTICLE 4 OF TITLE 24, C.R.S. SAID RULE SHALL BE PROMULGATED NO LATER THAN FEBRUARY 10, 1999.

(4) (a)  NO LATER THAN OCTOBER 1, 1999, AND NO LATER THAN OCTOBER 1 OF EACH CALENDAR YEAR THEREAFTER, IF IT IS CERTIFIED AND AUDITED IN ACCORDANCE WITH SECTION 24­77­106.5, C.R.S., THAT STATE REVENUES EXCEED THE LIMITATION ON STATE FISCAL YEAR SPENDING IMPOSED BY SECTION 20 (7) (a) 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 THE FOLLOWING CALENDAR YEAR, BUT PRIOR TO JANUARY 1 OF THE NEXT FOLLOWING 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.

(b)  IF ONE OR MORE BALLOT QUESTIONS ARE SUBMITTED TO THE VOTERS AT A STATEWIDE ELECTION TO BE HELD IN NOVEMBER OF ANY 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 THAT CALENDAR YEAR, THE EXECUTIVE DIRECTOR SHALL CALCULATE THE INCOME TAX RATE FOR THE TAXABLE YEAR COMMENCING ON OR AFTER JANUARY 1 OF THE FOLLOWING CALENDAR YEAR, BUT PRIOR TO JANUARY 1 OF THE NEXT FOLLOWING 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 THE BALLOT QUESTIONS ARE APPROVED BY VOTERS STATEWIDE.

(c)  UPON CALCULATING THE INCOME TAX RATE OR RATES FOR ANY TAXABLE YEAR IN ACCORDANCE WITH THE PROVISIONS OF THIS SUBSECTION (4), THE EXECUTIVE DIRECTOR SHALL NOTIFY IN WRITING THE GOVERNOR AND THE EXECUTIVE COMMITTEE OF THE LEGISLATIVE COUNCIL CREATED PURSUANT TO SECTION 2­3­301 (1), C.R.S. 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 10 OF THAT CALENDAR YEAR.

(d) (I)  ANY INCOME TAX RATE ADJUSTMENT MADE PURSUANT TO THE PROVISIONS OF THIS SUBSECTION (4) SHALL BE MADE BY RULE PROMULGATED BY THE EXECUTIVE DIRECTOR IN ACCORDANCE WITH ARTICLE 4 OF TITLE 24, C.R.S. EXCEPT AS OTHERWISE PROVIDED IN SUBPARAGRAPH (II) OF THIS PARAGRAPH (d), SUCH RULE SHALL BE PROMULGATED NO LATER THAN OCTOBER 30 OF ANY GIVEN CALENDAR YEAR IN WHICH THE EXECUTIVE DIRECTOR IS REQUIRED TO ADJUST THE INCOME TAX RATE PURSUANT TO THE PROVISIONS OF THIS SECTION.

(II)  IF ONE OR MORE BALLOT QUESTIONS ARE SUBMITTED TO THE VOTERS AT A STATEWIDE ELECTION TO BE HELD IN NOVEMBER OF ANY 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 ADJUSTED INCOME TAX RATE CORRECTLY REFLECTS THE IMPACT OF THE RESULTS OF SAID ELECTION, IF ANY, ON THE AMOUNT OF EXCESS STATE REVENUES REQUIRED TO BE REFUNDED.

(5)  IN CALCULATING THE INCOME TAX RATE OR RATES IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION, THE EXECUTIVE DIRECTOR SHALL UTILIZE THE MOST RECENT ESTIMATE OF STATE INCOME TAX REVENUES 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.

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, 1998, 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.  Effective date.  This act shall take effect following proclamation of the governor of the vote of the registered electors at the 1998 general election approving Senate Concurrent Resolution 98­__. This section shall not take effect if the registered electors at the 1998 general election disapprove Senate Concurrent Resolution 98­__.

SECTION 6.  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.