Colorado Legislative Council Staff

STATE and LOCAL

FISCAL IMPACT


Drafting Number:

Prime Sponsor(s):

LLS 99-0927

Rep. Plant

 

Date:

Bill Status:

Fiscal Analyst:

April 16, 1999

House Finance

Harry Zeid (303-866-4753)

 

TITLE:            CONCERNING THE ADDITION OF VETERANS' ORGANIZATIONS REGISTERED UNDER SECTION 501 (C) (19) OF THE "INTERNAL REVENUE CODE OF 1986", AS AMENDED, THAT SPONSOR A SPECIAL EVENT, MEETING, OR OTHER FUNCTION IN THE STATE OF COLORADO TO THE DEFINITION OF CHARITABLE ORGANIZATION FOR PURPOSES OF THE SALES AND USE TAX EXEMPTION.


Fiscal Impact Summary

FY 1999/2000

FY 2000/2001

State Revenues

General Fund


General Fund Revenue Reduction

State Expenditures

General Fund


 


 

FTE Position Change

0.0 FTE

0.0 FTE

Other State Impact: TABOR Impact; SB97-1 Sales Tax Transfer Impact

Effective Date: Upon signature of the Governor

Appropriation Summary for FY 1999-2000: None

Local Government Impact: Statutory cities and counties and other districts that are statutorily authorized to impose a sales tax will experience a revenue reduction in the collection of local sales tax revenue from qualified veterans' organizations within their boundaries. Home rule cities would be unaffected by the bill.



Summary of Legislation


            This bill amends the definition of "charitable organization" for purposes of sales and use taxation to include any veterans' organization registered under Section 501 (c) (19) of the Internal Revenue Code for the purpose of sponsoring a special event, meeting, or other function in the state of Colorado so long as such event, meeting, or function is not part of such organization's regular activities in the state. The bill will reduce the revenues of the state and statutory cities, counties, and certain special districts where the local sales tax is collected by the state. Therefore, the bill is assessed as having state and local fiscal impact. The bill does not create an impact on state or local expenditures.




State Revenues


            State sales tax revenue will be impacted in two ways: (1) sales by veterans' organizations; and (2) purchases by veterans' organizations.

 

               Since the bill defines veterans' organizations as a "charitable organization," they will be covered by Section 39-26-114 (18), C.R.S. This section states that all occasional sales by a charitable organization shall be exempt from sales tax. Part of the stipulation for this exemption is that funds raised by these organizations through these occasional sales cannot exceed $25,000 per organization per calendar year. The number of such fundraising events that would occur annually by veterans' organizations is not known. Therefore, the impact on reduced state sales tax revenue is unknown.

 

               Purchases by veterans' organizations to sponsor an event, meeting, or function that is not part of their regular activities would be exempt from sales and use tax. For example, if a qualified organization were to sponsor a convention in the state, purchases such as the rental of tables and chairs, food for the event, and related printing costs would be exempt from sales and use tax. The number of events and the amount of purchases that would be affected cannot be estimated at this time.



State Expenditures


            State expenditures will not be affected by the bill.



Other State Impacts


            Under current law, SB97-1 requires the diversion of 10 percent of sales tax revenues to the Highway User Tax Fund for use on highway projects. This bill will reduce state sales tax revenues beginning in FY 1999-00 and will, therefore, reduce the amount of state funds available for the SB 97-1 diversion. Additionally, 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.



Local Government Impact


            Except for specific exceptions, sales and use tax exemptions authorized at the state level also apply to statutory cities, counties, and special districts since their sales and use tax is collected by the state. Home rule cities collect their own sales and use tax, and may determine their own tax base. Because of various local sales tax rates and the lack of information regarding the geographic distribution of the companies that may be affected by the bill, no estimate has been made regarding the potential amount of sales and use tax revenue losses to local governments.



Spending Authority


            The fiscal note implies that no new spending authority or appropriations are required to implement the provisions of the bill.



Departments Contacted

 

            Revenue          Legislative Council Staff