TITLE: CONCERNING THE PROMOTION OF CULTURAL ACTIVITIES, AND, IN CONNECTION THEREWITH, ESTABLISHING THE COLORADO CULTURAL TRUST FUND TO SUPPORT CULTURAL FACILITIES AND PROGRAMS AND ESTABLISHING A CREDIT AGAINST THE STATE INCOME TAX FOR CONTRIBUTIONS TO THE COLORADO CULTURAL TRUST FUND.

Fiscal Impact Summary	FY 1999/2000	FY 2000/2001	FY 2001/02
State Revenues General Fund Cash Fund Cash Fund Exempt Federal Fund	Income Tax Reduction Contributions/Interest	Income Tax Reduction Contributions/Interest	Income Tax Reduction up to $10,000,000 Contributions/Interest
State Expenditures General Fund - Transfer			up to $10,000,000
FTE Position Change	0.0 FTE	0.0 FTE	0.0 FTE
Other State Impact: TABOR
Effective Date: 90 days after adjournment unless a referendum petition is filed. Provides income tax credit effective January 1, 2000
Appropriation Summary for FY 1999-2000: None
Local Government Impact: None

This bill (as amended by the House Finance Committee, February 4, 1999) requires the members appointed by the Governor to the State Council on the Arts within the Department of Higher Education to be confirmed by the Senate. The bill authorizes the council to develop procedures to elicit and verify information concerning monetary and in-kind contributions made to cultural facilities and programs.

The bill establishes the "Colorado Cultural Trust Fund Act" and creates the Colorado Cultural Trust Fund as a public endowment to support cultural facilities and programs. The fund, to be administered by the council, is to consist of moneys contributed to the fund and appropriated by the state. All investment earnings of the fund and all unused moneys in the fund are to remain in the fund. Moneys in the fund are subject to annual appropriation by the General Assembly for allocation to the council. Annual appropriations are to continue until such time that the annual investment earnings are sufficient to fund the council duties. The bill requires the council, starting with the preparation of the budget for FY 2001-02, to annually provide the General Assembly a report identifying:

• all contributions made to the trust fund during the previous calendar year, and

• all contributions made to cultural programs and facilities during the previous calendar year.

The bill requires the council, starting with FY 2001-02, to annually request the General Assembly make an appropriation to the trust fund equal to the aggregate amount of those contributions, not to exceed $10 million. The bill specifies that no more than 50% of the annual investment earnings of the trust fund may be expended by the council until such time that the total amount of the trust fund equals $136 million. When the total amount of the assets in the fund equals $136 million, no additional moneys are to be appropriated to the fund. However, the bill allows the council to continue to collect contributions.

For income tax years commencing January 1, 2000, but prior to January 1, 2006, the bill allows any taxpayer an income tax credit for a monetary contribution to the trust fund. The credit is to be equal to 25.0 percent of the amount of the contribution, but the total credit is to not exceed $100,000 per taxpayer per calendar year. The bill allows any unused amount of the credit to be carried forward for up to five years.

The amended bill allows the tax credit only if the amount of state revenues for the immediately preceding fiscal year exceeded the limitation on state fiscal year spending imposed by Section 20(7)(a) of Article X of the State Constitution and the voters did not spend all the excess state revenues for that state fiscal year.

This bill provides an income tax credit to any taxpayer for a monetary contribution to the Colorado Cultural Trust Fund commencing January 1, 2000. Therefore, this bill will reduce income tax revenue to the state General Fund starting in FY 1999-2000. This fiscal note cannot assess the amount of annual contributions to the trust fund. Therefore, the amount of any resulting income tax revenue decrease has not been estimated.

The bill allows contributions, grants, and gifts to be made to the trust fund. The amount of contribution revenue to the trust fund has not been estimated. NOTE: contributions to the trust fund are considered to be exempt from state revenue limitation considerations.

The bill specifies that no more than 50 % of the investment earnings credited to the trust fund during the previous fiscal year shall be available for disbursement by the council. The principle of the trust fund is to be comprised of two elements: 1) contributions to the trust fund, starting FY 1999-2000; and 2) annual state appropriations up to $10 million, starting FY 2001-02, amounting to the total of all contributions to the trust fund and to all cultural programs and facilities during the prior year. The annual state appropriations will cease when the trust fund balance reaches $136 million.

An economic impact study conducted by the Western States Arts Federation in 1998 indicates annual corporate and individual donations to nonprofit arts organizations in Colorado amounted to approximately $26 million. In the event this level of annual contributions is maintained, the state would be required to transfer $10 million annually from the state General Fund to the trust fund, starting FY 2001-02, regardless of the amount of contributions to the trust fund.

Based upon an annual investment earnings rate of 5.5 percent, $275,000 would be available for appropriation to the council for disbursement for FY 2002-03. This amount would be in addition to any investment earnings generated by contributions to the trust fund. For each year thereafter, if $10 million is annually transferred to the trust fund, the amount of the investment earnings will be increased by an additional $550,000.

The bill requires the council to administer the program, including verification of the amounts of contributions to all cultural programs and facilities. The Department of Higher Education indicates any associated administrative costs will be absorbed within existing resources.

The bill is only effective for years in which the amount of state revenues for the immediately preceding state fiscal year exceeded the limitation on state fiscal year spending imposed by Section 20(7)(a) of Article X of the State Constitution (the TABOR amendment). The income tax revenue reduction identified in this bill will mean a reduction in the amount of state funds required to be refunded to taxpayers under the terms of TABOR, and less state funds available for capital construction needs. A state income tax reduction will increase a taxpayer's federal income tax obligation.

This fiscal note would imply no new state appropriations would be required for FY 1999-2000.