This bill’s got problems

The Senate Finance Committee has approved HB-1200, which would limit enterprise-zone investment tax credits. The bill passed on a party-line four-to-three vote. CACI opposes the bill.

The bill now goes to the Senate Floor for Second Reading. The Senate sponsor is Sen. Rollie Heath (D-Boulder). 

The bill limits to $250,000 the income tax credit that a company could take on its corporate income tax for investments in an enterprise zone. Companies could carry forward the amount of the credit above $250,000 for three years before they could take advantage of that amount as a credit.

This bill was one of the 13 bills put forth last November by Gov. Bill Ritter as part of his 2010-2011 budget proposal to suspend or eliminate business tax credits, exclusions and exemptions.  

The enterprise-zone tax credit was ranked in the top four of the ones that are most critical to employers, according to a CACI survey of businesses in December. 

The bill’s fiscal note estimates that the state will receive $11.8 million in tax revenue in fiscal year 2010-2011, which begins this July 1, and $24.6 million in the following fiscal year. In other words, businesses located in enterprise affected by this bill will pay an additional $36.4 million in increased taxes over the two fiscal years. 

Currently, any depreciable equipment purchased and used within an enterprise zone is eligible for a three percent tax credit. The credit may be used up to $5,000 of the taxpayer’s tax liability plus fifty percent of the taxpayer’s liability above $5,000. 

Here are CACI’s major concerns with HB-1200:

· Because HB-1200 caps the enterprise zone credit at $250,000, it will hurt companies that invest millions of dollars in equipment to operate their business;

· If this legislation is adopted, the unfortunate likely result will be that companies will not invest in new equipment until the full credit is available again in three years; and

· By capping this credit at $250,000 for three years, companies may either be discouraged from locating in Colorado until the full credit is available or will look to locate and invest in other states that offer a higher enterprise-zone credit.

For further information on HB-1200 contact Loren Furman, CACI Vice President of Governmental Affairs, at 303.866.8642 or via e-mail at
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