Newsletter: SB 184, Office of Sen. Mike Johnston

Office of Sen. Mike Johnston
Colorado General Assembly | 200 E. Colfax Avenue | Denver, CO 80203 | 303.866.4864

FACT SHEET MEMORANDUM
SB 11-184
Tax Reporting
Sen. Steadman & Rep. Ferrandino

Staff Name: Emily Renwick

What the Bill Does:
This bill has three objectives. First, this bill would create a 60-day tax amnesty program for individuals who are delinquent in their tax payments.(1) If that individual or business participates in the tax amnesty program, by September 30, 2011, they will be required to report to the Department of Revenue the amount of money owed. That individual has two payment choices: pay in full by September 30, 2011 or sign an agreement for an installment payment plan. The taxpayer is incentivized to pay in full because the program will both provide amnesty from civil and criminal penalties, and reduce the interest payments associated with the amount owed by 50 percent. For those who opt for an installment payment plan, they must pay the full amount of interest payments, but they are still provided amnesty from civil and criminal penalties.

Second, this bill requires each state department (Department of Education, Department of Health and Human Services, etc.) to summarize the state and federal income tax expenditures that result in a loss of revenue for the state. The departments will prepare a report and share this information with each member of the General Assembly, particularly the Finance committees. These reports will also be made available to the public and published on the departments' web sites.
Third, this bill requires that, for all new legislation proposed after January 1, 2012, any bill that provides for a new tax expenditure, or extends an expiring tax expenditure, must also provide a legislative declaration explaining the purpose of the expenditure.

Colorado Context:
With respect to the tax amnesty program, this program is nearly identical to the tax amnesty program initiated in 2003. Initially, the legislative sponsors, Sen. Ron Teck (R-Grand Junction) and Rep. Tom Plat (D-Nederland) estimated that the program would raise $3-4 million dollars. In the end, the state collected $20 million in additional revenue.(2)

The tax expenditure report policy was earlier considered by the State House of Representatives as HB 11-1104. The bill was assigned to the Finance Committee, but postponed indefinitely on a 7-6 vote.(3) Nevertheless, proponents of this bill contend that a tax expenditure report would help create transparency and accountability for the state’s forgone tax revenues. As illustrated by a recent report from the Center on Budget and Policy Priorities, “[s]tates typically require extensive documentation of how much direct spending they do each year, and their budget processes entail evaluation of each item. Tax expenditures usually receive far less scrutiny.”(4) This report listed Colorado as one of nine states that leave major taxes out of their budgetary reports.(5) According to the Colorado Fiscal Policy Institute, Colorado foregoes $2 billion annually through tax expenditures.(6) Rich Jones, Director of Policy and Research at Colorado’s Bell Policy Center, testified that 30 states already report on tax expenditures.(7)

National Context:
As of 2010, at least nine states have some form of a tax amnesty voluntary reporting program.(8) These states include Florida, Kentucky, Maine, Massachusetts, Minnesota, New Mexico, Nevada, and Pennsylvania.(9) Missouri’s legislature is currently considering a similar program.(10)

Bill Provisions:
Administers a 60-day tax amnesty program for individuals delinquent after August 1, 2011 through September 2011. Creates a tax amnesty cash fund, to which payments will be allocated instead of the General Fund. Covers the costs of administering this program through the tax amnesty cash fund, and transfers any leftover funds to the state education fund. Defines a tax expenditure as any deduction, exemption, credit, or rate for certain persons, types of income, transactions, or property.

Fiscal Impact (if applicable):
The Colorado Statesman reported that initial estimates from the Joint Budget Committee indicated that this program could raise $15 million in additional revenues.(11)

1) This program will only be available to individuals so long as they have not been mailed a notice of deficiency on or before August 1, 2011, or who are not under investigation or being prosecuted for criminal or fraudulent activity as of August 1, 2011.
2) Tim Hoover, Two Democratic Lawmakers File Tax-Amnesty Bill, The Denver Post, March 3, 2011 (last viewed March 4, 2011).
3) Votes: HB 11-1104, Feb. 25, 2011, (last viewed March 8, 2011). Voting for indefinite suspension: Acree-Y; Beezley- Y; Conti-Y; Duran-N; Hullinghorst-N; Joshi-Y; Kagan-N; Kefalas-N; Labuda-N; Pabon-N; Swalm-Y; Swerdfeger-Y; DelGrosso-Y.
4) Jason Levitis, Nicholas Johnson, and Jeremy Koulish, Promoting State Budget Accountability Through Tax Expenditure Reporting, Center on Budget and Policy Priorities, April 9, 2009 (last viewed March 8, 2011).
5) Id.
6) Carolyn Siegel, Support HB 11-1104: Tax Expenditure Reporting: The Common Sense Accounting Act, Colorado Fiscal Policy Institute, (last viewed March 8, 2011).
7) Rich Jones, HB 11-1104: Concerning Tax Expenditure Report, (Testimony) Feb. 24, 2011 (last viewed March 8, 2011).
8) Janet Novak, Illinois Tax Amnesty Rakes In $717 Million, Forbes, Feb. 7, 2011 (last viewed March 6, 2011).
9) Tonya Moreno, State Tax Amnesties in 2010, About.com (last viewed March 4, 2011).
10) Chris Blank, Missouri House Endorses Tax Amnesty Period, Bloomberg Business Week, March 3, 2011 (last viewed March 4, 2011).
11) Marianne Goodland, Steadman and Ferrandino: Bring Back Tax Amnesty, Colorado Statesman, March 4, 2011 (last viewed March 4, 2011).