Colorado Legislative Council Staff

STATE

REVISED FISCAL IMPACT

(replaces fiscal impact dated April 17, 1999)

Drafting Number:

Prime Sponsor(s):

LLS 99-0013

Rep. Spradley

Sen. Owen

Date:

Bill Status:

Fiscal Analyst:

April 28, 1999

Conference Committee

Harry Zeid (303 866-4753)

 

TITLE:            CONCERNING THE CREATION OF AN INCOME TAX CREDIT FOR TAXPAYERS WHO DONATE REAL PROPERTY INTERESTS FOR CONSERVATION PURPOSES.


Fiscal Impact Summary

FY 1999/2000

FY 2000/2001

FY 2001/2002

State Revenues

General Fund


-$238,500


-$715,500


-$1,162,500

State Expenditures

General Fund

 


 


 

FTE Position Change

0.0 FTE

0.0 FTE

0.0 FTE

Other State Impact: TABOR Impact

Effective Date: 90 days after adjournment; and applies to income tax years commencing on or after January 1, 2000.

Appropriation Summary for FY 1999-2000: None

Local Government Impact: The bill would encourage the donation of conservation easements to governmental entities or charitable organizations.



Summary of Legislation


            Effective for income tax years commencing on and after January 1, 2000, the rerevised bill establishes a refundable income tax credit for individuals and corporations who donate all or part of a perpetual conservation easement in gross to a governmental entity or to a 501(c)(3) charitable organization. In order to qualify for the tax credit, the taxpayer must file any appraisals of the conservation easement that were prepared when the conservation easement was created with the Department of Revenue at the time the tax return is filed seeking the tax credit. The amount of the credit would be equal to the fair market value of the conservation easement when it was created. The credit may be carried forward and applied against the income tax due for up to 20 succeeding income tax years. The credit may not exceed $100,000 per donation.


            The income tax credit would reduce General Fund revenues on an accrual accounting basis at the state level beginning in FY 1999-00. Therefore, the bill is assessed as having state revenue fiscal impact.



State Revenues


            The tax credit provided for by the bill is equal to the fair market value of a donated conservation easement in gross when it was created. The credit may not exceed $100,000 per donation. It is assumed that the value of the conservation easement tax credit will greatly exceed the income tax liability of the donor. The credit may be carried forward and applied against the income tax due for up to 20 succeeding income tax years.


            The number of individual and corporate taxpayers that would claim the income tax credit for donation of a conservation easement is not known. Based on information provided by the Colorado Coalition of Land Trusts, historically, the number of conservation easement donations in the state has averaged 50 donations per year. Assuming that the average donation is 500 acres, with an easement value of $1,000 per acre, the average value of a conservation easement is estimated to be $500,000. It is assumed that three-quarters of the individuals donating the easement have an average state income tax liability of $1,500, and one-quarter of the individuals have a state income tax liability of $35,000. The first-year income tax revenue reduction is projected to be $238,500 on an accrual accounting basis for the six-month period from January through June, 2000 (FY 1999-00). Assuming that 50 additional conservation easement donations are made annually, the value of the income tax credit is projected to be $715,500 in FY 2000-01, $1,162,500 in FY 2001-02, and $1,399,500 in FY 2002-03. It is anticipated that the value of the income tax credit will level off at approximately $1.5 million per year beginning in FY 2003-04.



State Expenditures


            The bill does not require any state expenditure.



Other State Impacts


            The reduced state revenues will mean a reduction of the amount of future state funds required to be refunded to taxpayers under the terms of TABOR, and less state funds will be available in the General Fund reserve. Table 1. summarizes the net impact of this bill on these state obligations. The changes in Table 1. are changes from a base that includes continuing capital construction projects.


Table 1. Additional Impact of HB 99-1155 (millions of dollars)


 

FY 1999-00

FY 2000-01

FY 2001-02

General Fund Revenue

-0.24

-$0.72

-$1.16

SB 97-1 Diversion

0.00

0.00

0.00

Excess General Fund Reserve

-0.24

-0.72

-1.16

Federal Income Taxes Paid by Colorado Taxpayers

0.05

0.15

0.23

TABOR Refund (from prior year)

0.00

-0.24

-0.72




Spending Authority


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



Departments Contacted

 

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