TITLE: CONCERNING AN EXCLUSION OF CERTAIN INCOME FROM COLORADO TAXABLE INCOME, AND, IN CONNECTION THEREWITH, EXCLUDING CERTAIN INTEREST INCOME, DIVIDEND INCOME, AND NET CAPITAL GAINS FROM THE INCOME TAX IMPOSED ON INDIVIDUALS, ESTATES, AND TRUSTS.

Fiscal Impact Summary	FY 1999/2000	FY 2000/2001
State Revenues - Refund of Excess TABOR Revenues General Fund		-$39,255,973
State Expenditures General Fund		$80,310
FTE Position Change	0.0 FTE	0.0 FTE
Other State Impact: None
Effective Date: Income tax years commencing on or after January 1, 2000.
Appropriation Summary for FY 1999-2000: None
Local Government Impact: None

Effective for income tax years commencing on and after January 1, 2000, this revised bill would exclude from Colorado taxable income up to $1,200 of interest income, dividend income, and net capital gains that are included in federal taxable income (and not otherwise subtracted from federal taxable income) for individuals, estates, and trusts for state income tax purposes ($2,400 in the case of two individuals filing a joint return or a qualified individual filing as a surviving spouse). This bill would apply only if 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), and the voters did not authorize the state to retain all or a portion of the money. The bill would become effective upon signature of the Governor.

For tax year 1999, it is projected that Colorado taxpayers will earn taxable interest, dividend, and capital gains income of $9 billion. By applying the 5.0 percent Colorado individual income tax rate, it is estimated that the total income tax liability for 1999 on these three income sources will be $450 million. Beginning in income tax year 2000, for years where a refund of excess TABOR revenues is required, this bill exempts the first $1,200 of income from these three sources per individual. It is estimated that the amount of the refund will be $39,255,973 in FY 2000-01 (for income tax returns filed after January 1, 2001), and $40,653,486 in FY 2001-02.

An estimated 1,161,711 Colorado individual income tax returns would be eligible for the refund in 2000. The bill will require a new modification line on the income tax return to record the information. In order to track the information provided regarding the amount of interest, dividends, and capital gains claimed as an income modification, the department estimates the need for 900 hours of computer programming time to make the necessary changes to the current income tax system models. At the rate of $68 per hour, the Information Technology Division will require an additional General Fund expenditure of $61,200 in FY 2000-01 to make these changes. The time necessary for the Tax Audit and Compliance Division to modify their audit programs will be absorbed within existing resources.

Also, beginning in FY 2000-01, the Department of Revenue will require $19,110 annually (General Fund) to record additional data reported on the state income tax return that will be necessary to compute the impact on Colorado taxable income. 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 programming time necessary to make changes to the income tax system and the Fairshare programs during the normal annual rewrite by the Department. Total expenditures for FY 2000-01 are estimated to be $80,310.

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). While there will be increased federal income taxes paid by Colorado taxpayers that qualify for the interest, dividends and capital gains exclusion, the General Fund overview will not be affected. The increased federal income taxes that will be paid by Colorado residents is projected to be $7.73 million in FY 2000-01, and $8.01 million in FY 2001-02.

The fiscal note implies that no new state appropriations or spending authority are required to implement the provisions of the bill in FY 1999-00.