TITLE: CONCERNING THE EXPANSION OF THE EXISTING MODIFICATION TO COLORADO TAXABLE INCOME FOR CAPITAL GAINS TO INCLUDE CAPITAL GAINS EARNED ON PROPERTY ACQUIRED PRIOR TO MAY 9, 1994.

Fiscal Impact Summary	FY 1999-2000	FY 2000/2001	FY 2001/2002
State Revenues General Fund -Excess TABOR Revenue Refund		-$43,430,000	-$41,710,000
State Expenditures General Fund		$61,200
FTE Position Change	0.0 FTE	0.0 FTE	0.0 FTE
Other State Impact: None
Effective Date: 90 days after adjournment; effective for income tax years commencing on or after January 1, 2000.
Appropriation Summary for FY 1999-2000: None required
Local Government Impact: None

Current law allows taxpayers to claim a modification for the "qualifying capital gains receiving capital treatment" if the qualified asset was purchased on or after May 9, 1994 and was held for a period of at least five years. This bill, as adopted by the conference committee, extends the existing modification to Colorado taxable income to cover capital gains earned on property acquired before May 9, 1994. The bill will reduce state General Fund revenues beginning with income tax years commencing on or after January 1, 2000 in years when the State Controller certifies that the amount of state revenues for the immediately preceding state fiscal year commencing on or after July 1, 1999, exceeded the limitation on state fiscal year spending imposed by Section 20(7)(a) of Article X of the State Constitution exceeds $260 million. The bill would not be allowed in years in which the excess revenues did not exceed $260 million, adjusted to reflect the rate of growth of Colorado personal income for the calendar year immediately preceding the calendar year in which the adjustment is made.

Removing the qualifying date from current law that only pertains to capital gains on an asset purchased on or after May 9, 1994, will increase the value of capital gains that would qualify for the income modification. Any qualified taxpayer could take the modification on capital gains earned on real or tangible personal property located within Colorado or on the sale of stock or an ownership interest in a Colorado company, limited liability company, or partnership that they owned for at least five years after June 1, 1994, regardless of when the asset was purchased.

Table 1 identifies the projected value of this refund of excess TABOR revenues that will occur as a result of the bill, as compared to the current law projected fiscal impact of the existing modification to Colorado taxable income for capital gains. The table identifies the General Fund revenue impact for individuals and for corporations for FY 2000-01 and FY 2001-02.

Fiscal Year

Current Law

Additional Impact of HB 99-1237

Total

FY 2000-01

Individuals

Corporations

Total

$10.30

1.70

$12.00

$38.53

4.90

$43.43

$48.83

6.60

$55.43

FY 2001-02

Individuals

Corporations

Total

$15.50

2.40

$17.90

$37.21

4.50

$41.71

$52.71

6.90

$59.61

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 modification to Colorado Taxable income for capital gains, 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.

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