Type Bill Session 2023 Regular Session Subjects State Revenue & Budget

Concerning the creation of an identical refund payment of excess state revenues from all sources as a mechanism to refund a portion of the excess state revenues for the 2022-23 state fiscal year only.

If the state exceeds its fiscal year spending limit, it is required to refund the excess state revenues (TABOR refund). The act changes the way the state will distribute a TABOR refund for the 2022-23 state fiscal year. Currently, there are 3 different methods to effectuate a TABOR refund:

A reimbursement to counties for property tax revenue reductions as a result of the senior and veteran property tax exemption;

A reimbursement to counties for reductions in property tax revenues due to reductions in valuation for assessment; and

A six-tier sales tax refund for individual taxpayers under which refunds increase, based on the tiers, as a taxpayer's income increases.

APPROVED by Governor May 24, 2023

PORTIONS EFFECTIVE May 24, 2023

PORTIONS EFFECTIVE January 1, 2024

NOTE: Section 2 of the act states that section 1 of the act takes effect only if, at the November 2023 statewide election, a majority of voters approve the ballot issue submitted for their approval or rejection pursuant to section 24-77-202, C.R.S., as enacted by Senate Bill 23-303 and that if the voters at the November 2023 statewide election approve the ballot issue, then section 1 of this act takes effect on the later of January 1, 2024, or the date of the official declaration of the vote thereon by the governor. (Note: This summary applies to this bill as enacted.)

Type Bill Session 2025 Regular Session Subjects Fiscal Policy & Taxes

Concerning the healthy school meals for all program.

The act refers 2 ballot issues to the voters at the November 2025 statewide election concerning funding for the healthy school meals for all program.

Section 2 refers a ballot issue to the voters at the November 2025 statewide election to allow the state to retain and spend state revenue that would otherwise need to be refunded for exceeding the estimate in the ballot information booklet analysis for Proposition FF and to allow the state to maintain the increases in state taxable income established in Proposition FF that would otherwise need to be decreased. If voters reject the ballot issue, the state will both:

Refund $12,430,388 to individuals who have a federal taxable income of $300,000 or more and claimed itemized or standard state income tax deductions greater than $12,000 for single tax return filers and $16,000 for joint tax return filers; and

Adjust the limit on itemized deductions established in Proposition FF to a level that would have reduced the amount of income tax revenue attributable to these itemized deductions by $12,430,388.

The state will not refund $12,430,388 to individuals who have a federal taxable income of $300,000 or more and claimed itemized or standard state income tax deductions greater than $12,000 for single tax return filers and $16,000 for joint tax return filers; and

The increases in federal taxable income as a result of Proposition FF will stay at the levels established by Proposition FF.

Section 3 refers a ballot issue to the voters at the November 2025 statewide election to allow the state to increase taxes by $95 million annually by increasing state taxable income to support the healthy school meals for all program. If voters approve the ballot issue:

Income tax deductions for individuals who have a federal taxable income of $300,000 or more will be reduced from current levels to $1,000 for single filers and $2,000 for joint filers; and

The state will allocate the additional revenue generated by the reduction in income tax deductions to the healthy school meals for all program.

In addition to the income tax changes and potential refunds that may result from voters approving or rejecting the ballot issues described in sections 2 and 3, the act also changes the healthy school meals for all program cash fund (fund) and healthy school meals for all programs. If voters approve the ballot issue submitted pursuant to section 2 and reject the ballot issue submitted pursuant to section 3, $1 million is transferred annually from the fund to local school food purchasing programs. If voters approve the ballot issue submitted pursuant to section 3, regardless of whether the voters approve the ballot issue submitted pursuant to section 2:

The permissible distribution of local food purchasing grants is modified;

Certain school food authorities are allowed to collaborate to implement advisory committees;

The duties of an advisory committee are clarified; and

The distribution of funds from the fund is changed so that the amounts distributed through local food purchasing grants for increasing wages or providing stipends for individuals whom the participating school food authority employs to directly prepare and serve food for school meals and through the local school food purchasing technical assistance and education grant program are modified based on the amount of money in the fund.

Type Bill Session 2024 Regular Session Subjects Fiscal Policy & Taxes State Revenue & Budget

Concerning mechanisms to refund excess state revenues, and, in connection therewith, making an appropriation.

If the state exceeds its constitutional fiscal year spending limit, it is required by the Taxpayer's Bill of Rights (TABOR) to refund the excess state revenues (TABOR refunds). The act concerns the 4 TABOR refund mechanisms: a reimbursement to counties for lost property tax revenue, an income tax rate reduction, a sales and use tax rate reduction, and a sales tax refund.

The first mechanism through which excess state revenues are refunded is a reimbursement paid to counties for allocation to local governments to offset the reduction in property taxes resulting from property tax exemptions for qualifying seniors, veterans with disabilities, and spouses of veterans who died in the line of duty or as a result of a service-related injury or disease (homestead exemptions). Additionally, for property tax years commencing on or after January 1, 2024, the reimbursement to local governments to offset the reduction in property taxes resulting from the newly reduced valuation for assessment of qualified-senior primary residences created in Senate Bill 24-111, concerning a reduction in the valuation for assessment of qualified-senior primary residence real property, joins the homestead exemptions reimbursement as the first TABOR refund mechanism.

The temporary income tax rate reduction is active for income tax years 2024 through 2034. To refund excess state revenues from fiscal year 2023-24, the income tax rate for income tax year 2024 is temporarily reduced from 4.40% to 4.25%. After that year, if the amount of excess state revenues exceeds the projected total amount of TABOR refunds issued as reimbursement to counties for the homestead exemptions and the qualified-senior primary residence valuation reductions, then the state individual income tax rate is temporarily reduced by the following percentages according to the total amount of excess state revenues remaining after the homestead exemptions reimbursement and the qualified-senior primary residence reimbursement are paid (remaining excess state revenues):

If the remaining excess state revenues are above $300 million but less than or equal to $500 million, the income tax rate is temporarily reduced by 0.04%;

If the remaining excess state revenues are above $500 million but less than or equal to $600 million, the income tax rate is temporarily reduced by 0.07%;

If the remaining excess state revenues are above $600 million but less than or equal to $700 million, the income tax rate is temporarily reduced by 0.09%;

If the remaining excess state revenues are above $700 million but less than or equal to $800 million, the income tax rate is temporarily reduced by 0.11%;

If the remaining excess state revenues are above $800 million but less than or equal to $1 billion, the income tax rate is temporarily reduced by 0.12%;

If the remaining excess state revenues are above $1 billion but less than or equal to $1.5 billion, the income tax rate is temporarily reduced by 0.13%; and

If the remaining excess state revenues are above $1.5 billion, the income tax rate is temporarily reduced by 0.15%.

The sales and use tax rate reduction refund mechanism is active for fiscal years 2024-25 to 2033-34. Under this mechanism, if the amount of remaining excess state revenues is greater than $1.5 billion, as annually adjusted by a percentage equal to the percentage of allowable increase in state fiscal year spending, and exceeds the projected total amount of TABOR refunds issued as reimbursement to counties for the homestead exemptions and the qualified-senior primary residence valuation reductions, plus refunds issued through the temporary income tax rate reduction, then the state sales and use tax rates are temporarily reduced by 0.13%.

Under the sales tax refund mechanism, all qualified individuals receive an identical refund amount unless the amount of excess state revenues to be refunded would make that identical refund exceed a certain threshold, in which case the excess state revenues are instead refunded through a 6-tier refund mechanism based on the qualified individual's adjusted gross income. The identical refund amount above which the 6-tier mechanism is triggered is tied to annual federal internal revenue service calculations of sales tax paid in the state by family size and income level; except that, if, by September 1 of any year, the executive director of the department of revenue has not received advice from the internal revenue service that such an identical refund is regarded as a refund of sales tax and not as an accession to wealth, the identical refund threshold remains the existing rate of $15. An individual may claim the sales tax refund by filing an income tax return or a specified assistance grant application by October 15 of the calendar year following the taxable year for which the refund is being claimed.

Whether the TABOR refund mechanisms are triggered and, if so, how many of the mechanisms are triggered depends on the amount of excess state revenues remaining after reimbursement to counties for the homestead exemptions and the qualified-senior primary residence valuation reductions as follows:

If remaining excess state revenues are less than or equal to $300 million, TABOR refunds are distributed only through the tiered or flat sales tax refund mechanism;

If remaining excess state revenues are greater than $300 million but less than or equal to $1.5 billion, TABOR refunds are distributed first through the income tax rate reduction and then through the tiered or flat sales tax refund mechanism; and

If remaining excess state revenues are greater than $1.5 billion, TABOR refunds are distributed first through the income tax rate reduction, next through the sales and use tax rate reduction, and finally through the tiered or flat sales tax refund mechanism.

The act also repeals statutory sections related to TABOR refund mechanisms that are no longer applicable, including the 4-tier sales tax refund mechanism to refund excess revenues from fiscal year 1997-98.

For the 2024-25 state fiscal year, $59,443 is appropriated from the general fund to the department of revenue for personal services and tax administration IT system support.

APPROVED by Governor May 14, 2024

PORTIONS EFFECTIVE May 14, 2024

PORTIONS EFFECTIVE August 7, 2024 (Note: This summary applies to this bill as enacted.)