House Committee on Business Affairs and Labor (01/28/2009)

Final
STAFF SUMMARY OF MEETING

HOUSE COMMITTEE ON BUSINESS AFFAIRS AND LABOR

Date:	01/28/2009	ATTENDANCE

Time:	10:40 AM to 05:07 PM	Balmer	X
		Bradford	X
Place:	HCR 0112	Gagliardi	X
		Liston	X
This Meeting was called to order by		Priola	X
	Representative Rice	Ryden	X
		Scanlan	X
This Report was prepared by		Soper	X
	Christie Lee	Stephens	X
		Casso	X
		Rice	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
HB09-1105 HB09-1076 HB09-1001 HB09-1085		Amended, Referred to Finance Amended, Referred to Appropriations Amended, Referred to Finance Amended, Referred to Appropriations

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

12:23 PM -- House Bill 09-1076

Representative Pace, prime sponsor, presented House Bill 09-1076 concerning remuneration resulting from an employee's separation from employment for the purpose of calculating the postponement of unemployment insurance benefits. This bill requires that all types of payments a claimant receives when leaving employment be treated the same in calculating when the claimant can begin receiving unemployment insurance (UI) benefits and the maximum allowable benefit. Under HB09-1076, any payments received are divided by the claimant's average weekly wage to calculate postponement of claim payments on a week for week basis. After the postponement, the claimant receives full benefits. Another provision of the bill is that benefits will not be reduced for claimants who also receive social security payments.

Under current law, if an employer identifies a payment made at separation as severance pay, the claimant's UI claim payments are postponed by the number of weeks of severance pay granted and benefits are reduced by the same number of weeks. If the employer does not identify a payment as severance pay, the claimant's UI claim is postponed only for the week in which the payment was made and benefits are not reduced.

12:32 PM -- Mike Cullen, Director of the Unemployment Insurance Program in Colorado, testified in support of the bill. He talked about the current issues the department has with severance pay versus other types of pay. He explained that it does not matter what the remuneration is, whether it is sick pay, annual pay, severance pay, they should all be treated the same in calculating when the claimant can begin receiving unemployment insurance (UI) benefits and the maximum allowable benefit.

12:39 PM -- Kathy White, Colorado Fiscal Policy Institute, testified in support of the bill and distributed a handout (Attachment D).


BILL:	HB09-1076
TIME:	12:43:57 PM
MOVED:	Casso
MOTION:	Moved amendment L.001 (Attachment E). The motion passed without objection.
SECONDED:	Gagliardi
		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:	HB09-1076
TIME:	12:44:40 PM
MOVED:	Casso
MOTION:	Moved to refer House Bill 09-1076, as amended, to the Committee on Appropriations. The motion passed 9-0.
SECONDED:	Soper
		VOTE
	Balmer	Excused
	Bradford	Yes
	Gagliardi	Yes
	Liston	Yes
	Priola	Yes
	Ryden	Yes
	Scanlan	Yes
	Soper	Yes
	Stephens	Yes
	Casso	Yes
	Rice	Excused

Final YES: 9 NO: 0 EXC: 2 ABS: 0 FINAL ACTION: PASS

03:00 PM -- House Bill 09-1001

Representative Rice, prime sponsor, presented House Bill 09-1001 concerning the creation of an income tax credit to incentivize Colorado job growth. HB 09-1001 provides an income tax credit to firms that create at least 20 jobs in Colorado and retain them for at least one year. The tax credit, effective for tax years 2009 through 2019, is equal to one-half of the amount the employer is required to pay in federal social security and Medicare taxes on the created jobs. In most cases, this is equal to 3.825 percent of each job's annual wage. For each job created, firms receive the credit each year the job is retained for up to five years, but no later than tax year 2019. Each year's credit may be carried forward for ten years and is non-refundable. The bill allows the credit to be given for jobs in any industry and with any wage level.

Firms are required to file an initial application to the Colorado Economic Development Commission (Commission) outlining the number of jobs they expect to create over a period of up to five years and must provide documentation indicating that, if not for the credit, the jobs would have been created in a competing state. Once an initial credit application has been approved, firms are required to file an annual application for each year's credit with documentation on the actual number of jobs created and retained during that year. Each year, the Commission is required to issue a tax credit certificate in the amount of the credit for that year to the firm, who in turn must submit the certificate with its income tax return to the Department of Revenue. The total amount any firm may receive in credits during the period agreed upon in the initial application cannot exceed the total amount calculated in the initial application for that period.

The bill grants the Commission authority to deny any initial application. In addition, the Commission is authorized to audit the accounts of each firm within twelve months following the receipt of the credit by the firm. The Commission is required to provide annual reports on the credits granted and claimed to the House and Senate Finance Committees and to share information with the Department of Revenue about each taxpayer for which they approved a credit.

03:05 PM

Representative Rice addressed the fiscal note and stated that the higher the number on the fiscal note, the more jobs in Colorado. Representative Soper asked about the fact that the bill applies to any job at any wage level. Representative Liston asked why the fiscal analyst did not include the increase in the number of jobs and he feels that it is alright that the bill applies to any type of job. Representative Rice responded to the type of jobs and said that under the bill, the higher paying the job in the state, the bigger the tax credit. He also addressed the concerns about the fiscal note. Representative Rice responded to additional questions from the committee.

03:19 PM -- Carol Hedges, representing the Colorado Fiscal Policy Institute, testified against the bill. She explained that the bill is not the right answer right now. Ms. Hedges talked about the importance and impact of education, transportation, and health care over tax credits in this economy. She commended the sponsor for his work on the bill. Ms. Hedges talked about the difficulty of figuring out whether jobs were created due to a tax credit or whether they would have been created regardless.

03:29 PM -- Don Elliman, representing the Office of Economic Development and International Trade, testified in support of the bill. He responded to questions from the committee. Representative Soper asked what other ways exist that could create jobs other than tax credits. Mr. Elliman responded.

03:39 PM -- Richard Wobbekind, representing himself, testified in support of the bill. Mr. Wobbekind talked about the fiscal note and said that the bill provides a small incentive. He talked about the high income jobs that were lost in early 2000s. Mr. Wobbekind talked about an economic study that was recently completed. Representative Liston asked for some examples of what other states are doing. Mr. Wobbekind deferred to the next witness.

03:49 PM -- Tom Clark, representing the Denver Metro Chamber of Commerce, testified in support of the bill. He talked about the Colorado business climate and recent legislation that has been passed in the state. Mr. Clark said the bill is copied after the Chicago package that brought some big companies to Chicago. Representative Liston asked for some examples of what other states are doing. Mr. Clark talked about some projects Colorado and Texas have competed for that Texas won.

03:57 PM -- Clarke Beeker, representing the Economic Development Council of Colorado, testified in support of the bill.

04:00 PM -- Preston Gibson, President of the Jefferson Economic Council, testified in support of the bill. He said his board unanimously supported this bill.

04:02 PM -- Loren Furman, representing the Colorado Association of Commerce and Industry, the state-wide chamber of commerce, testified in support of the bill. Representative Stephens talked about the importance of getting business here with incentives and keeping businesses here in the long-term.

Representative Rice discussed amendment L.001 (Attachment F).


BILL:	HB09-1001
TIME:	04:06:33 PM
MOVED:	Rice
MOTION:	Moved amendment L.001 (Attachment F). The motion passed without objection.
SECONDED:	Balmer
		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:	HB09-1001
TIME:	04:07:22 PM
MOVED:	Rice
MOTION:	Moved amendment L.003 (Attachment G). The motion passed without objection.
SECONDED:	Balmer
		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:	HB09-1001
TIME:	04:10:37 PM
MOVED:	Rice
MOTION:	Moved amendment L.004 (Attachment H). The motion passed without objection.
SECONDED:	Balmer
		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

04:11 PM

Representative Rice gave some closing comments on the bill. Some members talked about their concern about the fiscal note, but felt that the bill will gain money.


BILL:	HB09-1001
TIME:	04:16:21 PM
MOVED:	Rice
MOTION:	Moved to refer House Bill 09-1001, as amended, to the Committee on Finance. The motion passed 11-0.
SECONDED:	Balmer
		VOTE
	Balmer	Yes
	Bradford	Yes
	Gagliardi	Yes
	Liston	Yes
	Priola	Yes
	Ryden	Yes
	Scanlan	Yes
	Soper	Yes
	Stephens	Yes
	Casso	Yes
	Rice	Yes

Final YES: 11 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS

04:16 PM -- House Bill 09-1085

Rep Rice, prime sponsor, presented House Bill 09-1085 concerning the regulation of mortgage loan originators, and, in connection therewith, modifying the "Mortgage Broker Licensing Act" to conform to the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008" and exempting certain financial institutions from the list of prohibited practices under the act.

This bill modifies and renames the Mortgage Broker Licensing Act. Mortgage brokers offer or negotiate the terms of a residential home loan. They are regulated by the Division of Real Estate in the Department of Regulatory Agencies (DORA).

The bill defines the term "mortgage loan originator" and replaces the term "mortgage broker" in the text and title of the law. On or after July 31, 2010, mortgage loan originators must be registered with the Nationwide Mortgage Licensing System and Registry, a national tracking system established by the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. Registry in the national system is a condition of receiving a license from the department. Nationally registered loan originators will obtain a unique identifying number that must appear on all marketing materials and loan documents.

In addition, the bill:

requires annual renewal of licenses, a change from the current 3 year renewal cycle;
increases education requirements for license renewal from 9 hours every 3 years to 8 hours annually;
requires license applicants to provide additional information to the department including personal credit reports and evidence of financial responsibility;
authorizes the department to obtain additional criminal background information; and
allows the department to order that a mortgage loan originator pay for damages to consumers.

The bill is repealed on July 1, 2011, and requires a sunset review.

04:30 PM

Erin Toll, Director of the Colorado Division of Real Estate, testified in support of the bill. She talked about the bill and explained amendment L.001.

04:32 PM -- Terry Jones, President of the Colorado Mortgage Lenders Association (CMLA), testified in support of the bill.

04:35 PM -- Bill Kidwell, representing the Colorado Association of Mortgage Brokers, testified in support of the bill and distributed a handout of his testimony (Attachment I). He suggested some changes to the bill.

04:50 PM -- Peter Minahan, representing the Colorado Services Association, testified in support of the bill. He said mortgage loan originators did not fall under the mortgage broker bill but will now fall under this bill and said they do not have many issues with the bill, and the issues they have, they have discussed with Director Toll. Mr. Minahan said his concern was over the requirement that each originator is required to have a surety bond and would like to allow an employer bond that covers everyone to be sufficient.


BILL:	HB09-1085
TIME:	04:59:17 PM
MOVED:	Rice
MOTION:	Moved amendment L.001 (Attachment J). The motion passed without objection.
SECONDED:	Gagliardi
		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

05:03 PM

Representative Rice talked about amendment L.002 that would add an appropriation clause that would take out the database required by the federal government, but said he was not going to offer the amendment at this time.


BILL:	HB09-1085
TIME:	05:06:28 PM
MOVED:	Rice
MOTION:	Moved to refer House Bill 09-1085, as amended, to the Committee on Appropriations. The motion passed 11-0.
SECONDED:	Gagliardi
		VOTE
	Balmer	Yes
	Bradford	Yes
	Gagliardi	Yes
	Liston	Yes
	Priola	Yes
	Ryden	Yes
	Scanlan	Yes
	Soper	Yes
	Stephens	Yes
	Casso	Yes
	Rice	Yes

Final YES: 11 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS

05:07 PM

Adjourn.