The status of sports betting in each state.

Colorado's Blue Book, which provides information to voters on ballot measures that will appear on the November general election ballot, is now available online and is already landing in mailboxes.

This year’s Blue Book, produced by the General Assembly’s Legislative Council staff, covers two ballot measures: Proposition CC and Proposition DD. Both were passed by the General Assembly during the 2019 session.

Proposition CC asks voters to grant the state permission to retain any revenue it collects, particularly revenue that exceeds the state’s revenue limits as determined by the Taxpayer’s Bill of Rights (TABOR). According to House Bill 1258, the bill that became Proposition CC, that money would go to transportation, K-12 education and higher education. The measure would eliminate TABOR refunds beginning with the 2020 tax filing.

A fiscal analysis of the measure included in the Blue Book states that without the passage of CC, about $310 million would exceed the state’s TABOR spending limits in 2019-20 and would go back to taxpayers in the form of TABOR refunds, and $342 million in the following year.

If Proposition CC passes, several property tax refunds — including the senior homestead tax exemption and the disabled veterans’ property tax refund — would have to be covered by the state budget rather than by a TABOR refund. The current law requires those exemptions to be covered by TABOR refund money, and a fiscal analysis that is not included in the online Blue Book, but which is available separately, says those exemptions are already paid for until 2021-22. After that, “these obligations will be funded from General Fund revenue,” the fiscal analysis said.

Speaker of the House KC Becker of Boulder, one of the sponsors of House Bill 1258, told Colorado Politics on Tuesday that the state has only paid out the property tax refunds with TABOR surplus revenue a couple of times.

“Whether it’s paid for out of TABOR refund or whether it’s paid from the general fund, it’s still an obligation of the state, it’s in existing law. It’s going to get done. ... Nothing changes."

But the ballot measure also may have an unintended consequence, tied to the state’s troubled conservation easement program.

The separate fiscal analysis estimates the state would retain about $1.5 million in 2019-20 and $3 million in the next two years through cancellation of TABOR refunds tied to conservation easement tax credits.

Under state law, when a TABOR refund is likely, a “state income tax credit for donation of a conservation easement becomes partially refundable.” That can be up to $50,000 per taxpayer. However, since Proposition CC cancels TABOR refunds, it also cancels refunds of the tax credits tied to the easements. It does not cancel the tax credits themselves.

It works like this: If someone donates a conservation easement (usually to a land trust), the state grants that taxpayer an income tax credit, and oftentimes that credit exceeds the taxpayer’s tax liability for the year in which the donation is made.

The taxpayer has several options. One is to sell the tax credit — usually for about 80 cents on the dollar — to someone who has a larger tax liability, and the easement donor pockets the cash. The other option is to hang on to those tax credits and apply them in succeeding tax years, and the law allows that carryforward for up to 20 years. That’s where the TABOR refund comes into play. In years when the state has a TABOR surplus, the taxpayer can apply for a TABOR refund that covers a portion of that tax credit.

The law allows for a refund limited to the greater of the income tax liability, or a maximum of $50,000. For example, a person who has donated a conservation easement and who has a tax liability of $20,000 and tax credits of at least $50,000 can apply for a TABOR refund of $50,000. The $20,000 tax liability is paid for by the tax credit, and the taxpayer gets a check for the balance of $30,000. A person who has a $100,000 tax credit can apply for up to $50,000 under the refund mechanism; the rest of the tax credit would carry over into future tax years.

The original mechanism — passed by the General Assembly in 2000 and contained in CRS 39-22-522 — came about during the days when the state was flush with surplus TABOR revenue and lawmakers were looking for ways to pay out TABOR refunds. In the 20 years of the program’s existence, conservation easement tax refunds have been paid out in 2001, 2005 and 2015 and in 2018. 

The bottom line is that the mechanism allows a taxpayer who donates a conservation easement to get the cash faster, as well as the full amount, versus what the taxpayer would receive from selling off the credits through a tax broker.

While the statute that granted this option would stay on the books, if Proposition CC eliminates TABOR refunds, that option would go away. Becker said she was unaware of this; it was never mentioned during the legislative session.

Ariel Steele of Tax Credit Connection, which facilitates the sale of state income tax credits, said that once easement donors knew there was a refund available for 2018, about three-quarters of those with conservation easement tax credits took advantage of it.

"It's a no-brainer — if it's late in the year when you get that tax credit — to take that $50,000 refund," she said. It makes less sense for someone with perhaps a $1 million tax credit, she said; those people will either sell those credits or apply the credits to future tax liabilities.

The conservation easement tax issue didn’t make its way into discussions of the Blue Book when the Legislative Council held a hearing on its language earlier this month. That hearing allowed legislative leaders to review the Blue Book language, take public testimony and amend the language, if approved by the committee. 

The only member of the public to testify on both Proposition CC and DD during the Sept. 5 hearing was convicted tax felon and TABOR author Douglas Bruce of Colorado Springs.

“It’s obvious you don’t want to hear from the public,” he said. “It’s like talking to a stone.”

Bruce claimed Proposition CC would change the constitution, not just state law.

“It’s a deception, a fraud," he said.

Bruce continued to shout at the committee after he was told his testimony time was up.

“Thanks for the fraud!” he yelled. 

Proposition DD, the second measure, would allow sports betting in Colorado. It’s on the ballot because that includes a 10% tax on net sports betting proceeds, and tax increases — even those paid for by bettors — must be approved by voters under TABOR. The measure was also referred to the ballot by the General Assembly under House Bill 1327.

The tax revenue would pay for regulation of sports betting and gambling addiction programs, but the lion’s share would fund a “down payment” on the state’s water plan, estimated in the fiscal analysis at around $29 million per year, beginning in 2020-21.

Bruce was the only person to speak against Proposition DD in the hearing.

“This whole premise is fraudulent. Sports betting can be legalized without a tax increase for water,” he said, adding that the amount of money raised won’t pay for even one dam across a 2-foot-wide creek.

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