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I_LOCC_TPTF_2021A 08/24/2021 09:00:36 AM Committee Summary

PUBLIC
STAFF SUMMARY OF MEETING
INTERIM COMMITTEE  LEGISLATIVE OVERSIGHT COMMITTEE CONCERNING TAX POLICY & TASK FORCE
Date 08/24/2021
Attendance
Bird *
Kolker X
Liston E
Woog X
Hansen X
Benavidez X
Time 09:00:36 AM to 03:44:08 PM
Place HCR 0112
This Meeting was called to order by Benavidez
This Report was prepared by Luisa Altmann
Hearing Items Action Taken
Tax Expenditures and Tax Expenditure Evaluation Committee Discussion Only
Tax Expenditures in Colorado's State Budget Committee Discussion Only
TABOR Considerations Committee Discussion Only
Lunch Committee Discussion Only
Written Scope of Tax Policy for Committee and Task Force Committee Discussion Only
Tax Expenditure Policy Considerations I: Income Tax Committee Discussion Only
Mass Transit and Ridesharing Expenses Deduction Committee Discussion Only
Old and New Investment Tax Credits Committee Discussion Only
New Plastic Recycling Technology Investment Tax Credit Committee Discussion Only
Crop and Livestock Contribution Corporate Income Tax Credit Committee Discussion Only
State-Employed Chaplains Housing Allowance Committee Discussion Only
Alternative Income Tax Committee Discussion Only
Deduction for Wages and Salaries Due to Internal Revenue Code 280C Committee Discussion Only
Previously Taxed Income or Gain Deduction for C Corporations Committee Discussion Only
Previously Taxed Income Deduction for Individuals, Estates, and Trusts Committee Discussion Only
State Income Tax Refund Deductions for Individuals, Estates, and Trusts Committee Discussion Only

Tax Expenditures and Tax Expenditure Evaluation - Committee Discussion Only


09:01:37 AM  
Katherine Loughead, representing the Tax Foundation, presented to the committee.

A copy of the presentation can be found here: https://leg.colorado.gov/sites/default/files/images/committees/2017/tax_...

Ms. Loughead's presentation covered the following topics:
- principles of sound tax policy;
- common types of tax expenditures;
- structural versus preferential tax expenditures;
- why the evaluation of tax expenditures is important;
- the effectiveness of tax incentives; and
- questions to ask when evaluating tax expenditures.

Throughout the presentation, Ms. Loughead responded to questions regarding the net operating loss deduction, the aspects of a broad-based and competitive tax code, and making all services subject to sales tax.

09:36:50 AM  
Ms. Loughead concluded
her presentation and responded to questions from the committee regarding
the effectiveness of tax incentives designed to attract new businesses
to a state and if any other states require businesses to pay back incentives
if the business doesn't meet the original objectives of the incentive.
09:40:25 AM  
John Hamman, representing The Pew Charitable Trusts, presented to the committee.

A copy of the presentation can be found here: https://leg.colorado.gov/sites/default/files/images/committees/2017/pew_...

Mr. Hamman's presentation covered the following topics:
- why it is necessary to evaluate tax expenditures;
- how different states approach the evaluation of tax expenditures;
- the components of high-quality evaluations;
- a history of Colorado's tax expenditure evaluation process;
- how other states have been using tax expenditure evaluations to inform policy;
- questions to consider when evaluating tax expenditures; and
- success stories from tax expenditure evaluations in Maryland and North Dakota.

Throughout the presentation, Mr. Hamman responded to questions from the committee regarding how to measure business activity that would have occurred without a specific tax incentive.

10:10:50 AM  
Mr. Hamman concluded his presentation and responded to questions from the committee regarding the changes made to Colorado's tax code during the 2021 legislative session and whether tax expenditures should be evaluated in groups, for example by industry or purpose.

Ms. Loughead also responded to questions from the committee about the evaluation of tax expenditures in groups.

Mr. Hamman and Ms. Loughead continued to respond to questions from the committee about making services subject to sales tax and how Colorado compares to other states in regard to the competitiveness of the state's tax code.



Tax Expenditures in Colorado's State Budget - Committee Discussion Only


10:33:07 AM  
Elizabeth Ramey, representing Legislative Council Staff, presented to the committee on tax expenditures in Colorado's state budget.

A copy of Dr. Ramey's presentation can be found here: https://leg.colorado.gov/sites/default/files/images/committees/2017/lcs_...

Dr. Ramey's presentation covered the following topics:
- how tax expenditures impact the state's General Fund revenue and how these impacts depend on the state's TABOR situation; and
- estimates of the amount of revenue that is lost in the state due to various types of tax expenditures.

Throughout her presentation, Dr. Ramey responded to questions from the committee regarding the data available on individual income tax forms.

10:51:36 AM  
Dr. Ramey concluded her presentation.

Greg Sobetski, representing Legislative Council Staff, responded to questions from the committee regarding the pension and annuity deduction and the insurance premium tax.



TABOR Considerations - Committee Discussion Only


10:59:53 AM  
The committee took a brief recess.
11:10:01 AM  
The committee reconvened.
11:10:18 AM  
Ed DeCecco, representing
the Office of Legislative Legal Services, presented to the committee on
various aspects of the Taxpayer's Bill of Rights (TABOR) for the committee
to consider in its work.



A copy of the presentation slides can be found here:
https://leg.colorado.gov/sites/default/files/images/committees/2017/olls_tabor_presentation.pdf



Mr. DeCecco's presentation covered the following topics:

- circumstances that require prior voter approval under TABOR, including
new taxes, tax rate increases, increases in the assessment rate on classes
of property, and tax policy changes that directly cause a net tax revenue
gain to any district;

- several court case decisions that may impact the committee's work;

- circumstances that do not require prior voter approval under TABOR;

- the election provisions that exist under TABOR;

- the TABOR fiscal year spending limit; and

- other considerations under TABOR.



Throughout Mr. DeCecco's presentation, he responded to questions from the
committee regarding impacts on TABOR refund requirements, TABOR's refund
mechanisms, and the Referendum C cap,



Mr. Sobetski returned to the table and responded to questions from the
committee regarding the impact of the recent Census on the population adjustments
to the TABOR limit.



Lunch - Committee Discussion Only


12:07:17 PM  
The committee recessed for lunch.
12:59:59 PM  
The committee reconvened.



Written Scope of Tax Policy for Committee and Task Force - Committee Discussion Only


01:15:00 PM  
The committee discussed
the written scope of tax policy for the committee and task force.


01:15:05 PM
Motion Adopt stated scope for the committee
Moved Bird
Seconded
Bird Yes
Kolker Yes
Liston Excused
Woog No
Hansen Yes
Benavidez Yes
YES: 4   NO: 1   EXC: 1   ABS:  0   FINAL ACTION:  PASS
01:15:27 PM  
The committee discussed
the scope of the task force.



The committee decided to ask the task force for a full policy analysis
of the following topics:



1 - using adjusted gross income (AGI) instead of federal taxable income;

2 - the homestead exemption for seniors and disabled veterans;

3 - Enterprise Zones;

4 - the property tax treatment of short-term rentals; and

5 - options to broaden the state's sales tax base to include services.





The committee asked to have presentations to the committee on the following
topics in the future:



- the child care contribution tax credit; and

- the alternative minimum tax.



Tax Expenditure Policy Considerations I: Income Tax - Committee Discussion Only


01:46:00 PM  
Trey Standley, representing the Office of the State Auditor (OSA), provided information to the committee regarding the OSA tax expenditure evaluations and their staff's plan for the overview over the next two meetings.

The documents referenced throughout the presentation can be found here:

http://leg.colorado.gov/sites/default/files/images/committees/2017/osa_p...

http://leg.colorado.gov/sites/default/files/images/committees/2017/osa_t...



Mass Transit and Ridesharing Expenses Deduction - Committee Discussion Only


01:49:52 PM  
Mr. Standley discussed the Mass Transit and Ridesharing Expenses Deduction.

The committee discussed the possibility of changing the deduction to a credit, the original purpose of the deduction, and how mass transit benefits may be included in an employee's total benefits package for taxation purposes.



Old and New Investment Tax Credits - Committee Discussion Only


02:05:20 PM  
Mr. Standley discussed the old and new investment tax credits.

Mr. Standley responded to questions from the committee regarding why businesses may not be taking advantage of these tax credits and other aspects of the tax credits.



New Plastic Recycling Technology Investment Tax Credit - Committee Discussion Only


02:23:05 PM  
Mr. Standley discussed the new plastic recycling technology investment tax credit.

Mr. Standley responded to questions from the committee regarding a similar program in Idaho and other programs that have been created in the recycling area in Colorado.



Crop and Livestock Contribution Corporate Income Tax Credit - Committee Discussion Only


02:29:50 PM  
Mr. Standley discussed the crop and livestock contribution corporate income tax credit.

Mr. Standley responded to questions from the committee regarding the applicability of the tax credit.



State-Employed Chaplains Housing Allowance - Committee Discussion Only


02:36:29 PM  
Mr. Standley discussed the state-employed chaplains housing allowance.



Alternative Income Tax - Committee Discussion Only


02:45:56 PM  
Kim Tinnell, Office of the State Auditor, continued the presentation with a discussion of the alternative income tax.

Ms. Tinnell and Mr. Standley responded to questions from the committee regarding the multi-state tax compact.



Deduction for Wages and Salaries Due to Internal Revenue Code 280C - Committee Discussion Only


02:55:07 PM  
Ms. Tinnell discussed
the deduction for wages and salaries due to Internal Revenue Code 280C.



Committee discussion regarding this deduction ensued.



Previously Taxed Income or Gain Deduction for C Corporations - Committee Discussion Only


03:03:15 PM  
Ms. Tinnell discussed the previously taxed income or gain deduction for C corporations.

The committee discussed the role of the Statutory Revision Committee.



Previously Taxed Income Deduction for Individuals, Estates, and Trusts - Committee Discussion Only


03:06:47 PM  
Ms. Tinnell discussed the previously taxed income deduction for individuals, estates, and trusts.

Ms. Tinnell responded to questions from the committee regarding the impact of this deduction on PERA and Denver Public Schools retirees and the timing of the deduction.



State Income Tax Refund Deductions for Individuals, Estates, and Trusts - Committee Discussion Only


03:30:20 PM  
Ms. Tinnell discussed the state income tax refund deduction for individuals, estates, and trusts.

The committee discussed this tax deduction further.



03:42:02 PM
Mr. Sobetski provided additional information for the committee about the other meetings scheduled for this week.


03:44:08 PM   The committee adjourned.






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