Bill Summary for Bill Number HB09-1105

Date: 01/28/2009

Final
BILL SUMMARY for HB09-1105

HOUSE COMMITTEE ON BUSINESS AFFAIRS AND LABOR

Votes: View-->	Action Taken:
Moved amendment L.001 (Attachment B). The motion Moved amendment L.002 (Attachment C). The motion Moved to refer House Bill 09-1105, as amended, to	Pass Without Objection Pass Without Objection PASS

10:40 AM -- House Bill 09-1105

Representative Kefalas, prime sponsor, presented House Bill 09-1105 concerning the creation of the Colorado Innovation Investment Tax Credit to be applied against state income taxes. This bill allows certain investors to receive an income tax credit for investments made in certain aerospace, bioscience, clean energy, and information technology small businesses. The credit is equal to 15 percent of the investment for each of the two tax years following the year in which the investment was made, up to a maximum total of $100,000. The credit is non-refundable, non-transferable, and may be carried forward for five years. The state may grant a maximum of $3.0 million in credits during each tax year. If applications worth more than $3.0 million qualify, they will be approved on a first-come, first-serve basis.

In order to qualify for a credit, an investor must make an investment of at least $25,000, may not own more than a 30 percent controlling interest in the small business immediately before making the investment, and cannot be a corporation. In addition, the small business must:

maintain its principal place of business in Colorado,
have at least half of its gross assets and employee base located in Colorado,
have less than $2.0 million in annual revenue and total assets of less than $2.0 million prior to receiving the investment,
have been in operation for less than five years, and
have at least two non-administrative, full-time-equivalent employees residing in Colorado.

An investor must apply for and receive a tax credit certificate from the Governor's Office of Economic Development. The tax credit certificate must then be presented to the Department of Revenue with the investor's income tax return. The bill requires the Office of Economic Development and the Department of Revenue to share information and specifies penalties for the misrepresentation of qualifications for the credit.

10:45 AM

Representative Rice talked about the fiscal note and said that he was interested in hearing how the bill would increase revenue from potential new economic activity. Representative Kefalas explained that the bill is also assigned to the House Finance Committee and that there will be witnesses that can talk to how the bill will increase revenue. Representative Stephens talked about tax incentives versus tax breaks. Representative Priola asked the sponsor to explain how he came up with the entities that can receive the tax incentive in the bill. There was a discussion about the fiscal impact of the bill and how it does not project any revenue from potential new economic activity. Representative Bradford added to Representative Priola's question and commented on the industries in the bill.

10:57 AM -- Kathy White, representing the Colorado Fiscal Policy Institute, testified against the bill. She said that they believe in proven incentives, however, in the current economy, revenue should be preserved. She talked about the potential ratchet down effect the bill may have on the general fund. Ms. White talked about the importance of budget priorities and asked the committee to save this idea for another day. Ms. White responded to questions from the committee.

11:11 AM -- Douglas Johnson, representing University Connections, testified in support of the bill. He talked about the impact the incentive would have on companies and gave a couple of examples of companies that would hire additional employees if the bill were to pass. Mr. Johnson responded to questions from the committee.

11:17 AM -- Mark Forsyth, representing the Rocky Mountain Innovation Institute, testified in support of the bill. He talked about the impact of start-up companies on the economy. Mr. Forsyth explained that one of the reasons the industries that were included in the bill were chosen is because they tend to yield high wage jobs. He noted that there are currently ten companies in Northern Colorado that are seeking angel investors.

11:25 AM -- Hoyle Curtis, representing himself as an angel investor, testified in support of the bill. He responded to a concern from Representative Stephens that the companies actually produce what they expect them to, stating that a lot of the companies bring in outside revenue from other states. He mentioned that there are currently 18 states that have these incentives. Representative Stephens asked what the state does to ensure these companies do business here long-term. Representative Liston asked Mr. Curtis to talk about the states that have the angel investor incentive and some success stories. Mr. Curtis gave the example of Spring Toys in Fort Collins.

11:40 AM -- Sandra Hagan Solin, representing the Northern Colorado Legislative Alliance, testified in support of the bill.

11:42 AM -- Su Hawk, representing the Colorado Technology Association, testified in support of the bill. She talked about the number of Information Technology jobs in Colorado and distributed an issue brief entitled, State Strategies to Promote Angel Investment for Economic Growth (Attachment A).

11:49 AM -- Dennis Oddy, representing himself, testified in support of the bill and talked about his experience using an angel investor to start a company. He gave the example of Corporate Express as a company that started up on angel investments and recently sold to Staples and the owner then went off to start a new company in Broomfield.

11:53 AM -- Denise Brown, representing the Colorado Cleantech Industry Association, testified in support of the bill. She talked about the industries provided in the bill and the impact Research Institutions have on new industries.

11:59 AM -- Stephen Miller, representing the Colorado Business Investor Association, testified in support of the bill.

12:05 PM -- Steve Murchie, representing himself as an angel investor, testified in support of the bill.


BILL:	HB09-1105
TIME:	12:08:37 PM
MOVED:	Balmer
MOTION:	Moved amendment L.001 (Attachment B). The motion passed without objection.
SECONDED:	Casso
		VOTE
	Balmer
	Bradford
	Gagliardi
	Liston
	Priola
	Ryden
	Scanlan
	Soper
	Stephens
	Casso
	Rice

Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection


BILL:	HB09-1105
TIME:	12:11:14 PM
MOVED:	Rice
MOTION:	Moved amendment L.002 (Attachment C). The motion passed without objection.
SECONDED:	Casso
		VOTE
	Balmer
	Bradford
	Gagliardi
	Liston
	Priola
	Ryden
	Scanlan
	Soper
	Stephens
	Casso
	Rice

Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection

12:13 PM

Representative Kefalas addressed some of the concerns brought up in witness testimony.


BILL:	HB09-1105
TIME:	12:16:56 PM
MOVED:	Balmer
MOTION:	Moved to refer House Bill 09-1105, as amended, to the Committee on Finance. The motion passed 8-3.
SECONDED:	Priola
		VOTE
	Balmer	Yes
	Bradford	No
	Gagliardi	No
	Liston	Yes
	Priola	Yes
	Ryden	Yes
	Scanlan	Yes
	Soper	No
	Stephens	Yes
	Casso	Yes
	Rice	Yes

Final YES: 8 NO: 3 EXC: 0 ABS: 0 FINAL ACTION: PASS