By

Dan Pilcher

CACI Senior Vice President

& Chief Operating Officer

Phone: 303.866-9600

E-Mail: dpilcher@COchamber.com

Friday, January 25, 2008

Almost 450 Attend CACI Business Day at the Legislature Luncheon to Hear Governor Ritter Discuss Business Issues for the 2008 Legislative Session and Beyond

Yesterday, a CACI audience packed the Grand Ballroom at the Brown Palace Hotel to hear Governor Bill Ritter outline business issues facing the Colorado General Assembly and, potentially, the voters in November.  The luncheon audience greeted the Governor with a standing ovation.

The Governor said that his economic development strategy is focused on helping four sectors of the Colorado economy: aero-space, bio-science, tourism, and renewable energy, the latter which he describes as the foundation of the “New Energy Economy.”

For the other sectors of the state’s economy, the Governor said his goal is to encourage a “business-friendly environment” with four initiatives:

(1)  Simplifying the corporate income tax with the adoption of a single-sales factor bill (see below);

(2)  Providing business personal property tax relief to about 30,000 very small firms by increasing the tax exemption from the current $2,500 to $7,000 over several years;

(3)  Removing the state’s so-called “fly-away” sales tax on aircraft built in Colorado but located outside of Colorado to encourage aircraft production in Colorado; and

(4)  Allocating $7 million in state money split between a new Bioscience and Life Science Fund and a new Clean Energy Fund.

On the health-care reform front, the Governor said polls reveal that health-care is a top issue for the voters—but they don’t want to pay increased taxes to solve the problem.  The Governor said that his focus will be on increasing efficiencies of the current system, lowering costs and extending health-insurance to more children who lack it--but without going to the November ballot for a tax increase to pay for health-care reform.

Governor Ritter said his blue-ribbon transportation commission came forth with four proposals, with price tags ranging from $500 million to $2 billion per year.  He said he wants to hold a “statewide conversation” on how Colorado should solve the transportation funding problem, again without going to the November ballot for a tax increase.

He said that education is the critical to Colorado’s economic future and said that he’s open to a “conversation” about a November ballot measure to increase the severance tax to pay for reforms and additional funding for the state’s educational system.

Single-Sales Factor Bill:  Complicated . . . but Extremely Important!

Last September, Governor Bill Ritter unveiled a package of economic development initiatives that included a “single-sales factor” concept for companies, which have multi-state operations, to determine how to calculate their Colorado corporate income tax.

The economic development purpose is to encourage companies to locate or retain operations in Colorado in terms of payroll and property by decreasing the tax they pay.  Conversely, the proposal would increase the tax on companies located outside of Colorado but that have significant sales in Colorado.  The proposal is not intended affect companies that only operate in Colorado.

Under current law, companies may use either a two- or three-factor method to determine how to apportion their income tax obligation to Colorado.  The three factors are property, payroll and sales.  A company now can study which combination of these factors—either two or three—are most advantageous for determining its corporate tax obligation.

Representatives of the Ritter Administration presented the concept to the Tax Council at its November meeting, and the Council continued the discussion at its December meeting.  The Ritter Administration early this year provided a draft bill to the CACI Tax Council for review.

At a meeting of the Tax Council earlier this month, the Administration representatives returned again for a lengthy, detailed discussion of the bill draft with the Tax Council.  Tax Council Chair Rhonda Sparlin of PriceWaterhouseCoopers afterwards created a subcommittee to continue working on the bill draft with the Administration’s representatives, who have said that the bill will be introduced in February.

Because of the technical expertise and experience of its members, the CACI Tax Council has been for almost three months the leading entity in the Colorado business community dealing with the Administration on the specifics of the proposal.

CACI members who do not have representatives on the CACI Tax Council should contact Loren Rachel Furman, CACI Director of Government Affairs, as soon as possible about this proposal.  Although some companies may benefit, others could face higher corporate income taxes, depending on such factors as whether or not they are engaged in the sale of products or services, whether or not they sell to the Federal Government, and the “nexus” of their operations.  Loren can be reached at 303.866.9642 or via e-mail at lfurman@COchamber.com

In addition, the Administration is trying to make the bill “revenue-neutral” so that it does not cost the State lost revenue.  If the bill results in a significant fiscal note, i.e., the amount of lost state revenue, it will likely be killed in the legislature.

The bill is advocated by the Economic Developers Council of Colorado, a statewide association comprised mainly of local economic development officials, and the Governor’s Office of Economic Development and International Trade.

Bill Favoring Plaintiffs in Settlement Offers Rolls Quickly On . . . Pushed by Colorado Trial Lawyers Association

The House Monday gave final passage to a bill favoring plaintiffs in settlement offers in civil court cases.  Both CACI and the Civil Justice League, with which CACI is affiliated, initially opposed the bill, which passed the House Judiciary Committee on a party-line six-to-four vote.  The Northern Colorado Legislative Alliance, which represents the Fort Collins, Greeley and Loveland chambers of commerce, and the National Federation of Independent Businesses (NFIB) have also signed on in opposition to the bill.

The bill has been assigned to the Senate Judiciary Committee, which has scheduled the bill for a hearing when the Committee convenes at 1:30 p.m. in Senate Committee Room 352 on Monday, January 28th.

HB-1020 changes Colorado’s balanced litigation system by requiring a defendant to pay pre-offer costs of a plaintiff who rejected a reasonable offer to settle a case but who still won something at trial.  This will discourage settling cases and increase litigation, wasting time and money of the judge, jury, taxpayers and defendants. 

HB-1020 creates a disincentive for a plaintiff to accept a reasonable offer of settlement because even a nominal finding in favor of the plaintiff would require that the defense pay all the plaintiff’s pre-offer costs.  If the plaintiff recovers in a judgment after the defense made an offer, the defense may still be required to pay the costs incurred by the plaintiff.  The bill is sponsored by House Majority Leader Alice Madden (D-Boulder); the Senate sponsor is Senator Jennifer Veiga (D-Denver).

CACI President Chuck Berry yesterday told the CACI Board of Directors that this bill appears to be on a “fast-track” through the legislative process.

CACI Works to Improve Bill Allowing County Assessors to Use “Contingency-Fee” Private-Sector Auditors

Although it has not yet been introduced, a draft bill in its original form would have authorized county commissioners to permit county assessors to contract with private-sector firms to audit the business-personal-property tax filings of companies.  If the private-sector auditor determined that a company owed more in taxes, then the firm would be paid a percentage of the difference.  Public utilities would be exempt from the bill’s provisions.

The House sponsor will be Representative Debbie Benefield (D-Arvada) and the Senate sponsor will be Senator Steve Johnson (R-Fort Collins). 

The CACI Tax Council has expressed to the bill’s proponents its concerns about the contingency-fee language as well as a broadening of the scope of the audit.  Based on CACI’s concerns, the proponents have narrowed the scope of the bill to eliminate the contingency-fee provision.  CACI is continuing to work with the proponents on other concerns about the bill.

CACI Works to Amend “Information Document Request” Bill Advocated by Colorado Department of Revenue

CACI continues to work with the House sponsor to develop compromise language on HB-1091 that, in its original form, would allow the Colorado Department of Revenue (CDOR) to demand production of information from a taxpayer in order to determine tax liability by issuing an “Information Document Request” (IDR).

Failure by the taxpayer to produce or provide access to all of the documents requested in the IDR would bar the taxpayer from introducing the information in subsequent administrative or court proceedings or audits.

CACI believes that the CDOR already has adequate authority—subpoena and financial penalties—to obtain the documents that it thinks it needs from a recalcitrant company--without resorting to such a drastic step that would apply to all Colorado businesses.  To CACI, it appears that the only constituency for this bill is CDOR and that the Department is over-reaching to solve a problem that does not occur in the majority of audits.

The CACI Tax Council last week voted to recommend that the CACI Board of Directors oppose the bill in its introduced form after hearing a presentation on the bill from CDOR staff.  A Tax Council subcommittee is working with CDOR staff on the bill.  CACI members who want more information on this proposal should contact Loren Rachel Furman, CACI Director of Government Affairs, at 303.866.9642 or via e-mail at lfurman@COchamber.com

HB-1091 has been assigned to the House Finance Committee, which is chaired by the bill’s sponsor, Representative Joel Judd (D-Denver).  CACI is working with Representative Judd to address CACI’s concerns about the proposed bill.  The Senate Sponsor is Senator Jennifer Veiga (D-Denver).

CACI Endorses Governor’s Bill to Advance Bioscience Discoveries and Commercialization

HB-1001 would use funds from limited gaming funds to encourage bioscience research grants and advancements.  The bill’s sponsors are Representative Jim Riesberg (D-Greeley) and Senator Bob Bacon (D-Fort Collins)  It has been assigned to the House Finance Committee.

The bill would allow early-stage bioscience companies to apply for grants from the existing Bioscience Discovery Evaluation Grant Program, which already provides grants to technology transfer offices at higher-educational research institutions.  Total funding for the Program would be $3.5 million.  The Program also would support partnerships between the bioscience industry and research institutions to commercialize various research efforts.

One Passes, One Dies: CACI Testifies in Support of Bills to Ban Strikes by Public Employees

Larry Hudson, CACI contract lobbyist, yesterday testified before the House Business Affairs and Labor Committee in support of two bills that would prohibit strikes by public workers.  He stressed the need to clarify that the Governor’s November 3rd Executive Order does not allow public employees to strike, which could negatively affect the ability of businesses and the general public to receive key state services.

The bills were heard in the heated political context of the Governor’s Executive Order that allows unions to represent state workers in creating “partnership agreements” with the managers of state departments and agencies.

The House State, Veterans and Military Affairs Committee killed on a party-line seven-to-four vote HB-1187, sponsored by Representative Bob Gardner (R-Colorado Springs), which would have prohibited strikes by all public workers and their employee organizations at either the state or local level.  Two amendments were proposed: one would have included the Regional Transportation District (RTD); the other would have allowed local governments to opt out of the bill’s coverage.

The Committee passed, however, HB-1189, sponsored by Representative Jim Riesberg (D-Greeley), which only applies to state workers who are covered by the State Personnel System.  Governor Ritter has said he will sign such a bill in the wake of an opinion by Attorney General John Suthers that state workers have the right to strike.

HB-1189 passed on a six-to-five vote, with Representative John Soper (D-Thornton), voting for the bill, with Representative Morgan Carroll (D-Aurora) joining the four Republican members in voting against it.

CACI Testifies on Bill to Increase CDPHE Flexibility to Enforce Hazardous-Waste Laws

CACI Vice President of Governmental Affairs Donnah Moody testified Wednesday on SB-37 before the Senate Health and Human Services Committee, which passed the bill and sent it to the Senate Floor.

Following negotiations with the Colorado Department of Public Health and Environment, the CACI Industrial Waste Committee recommended that the CACI Board of Directors remain neutral on the bill.  The bill is sponsored by Senator Ron Tupa (D-Boulder) and Representative Randy Fischer (D-Fort Collins).

SB-37 is a CDPHE omnibus bill that would make a change requested by the legislature’s Capital Development Committee regarding the time-frame for funding for “brown-field” cleanup.  The bill revamps hazardous-waste fees to fairly allocate Federal dollars by removing the caps and changing the formula, but maintaining the concept behind the fee structure.  The bill also proposes to revamp the environmental covenants to allow institutional controls when dealing with the Federal Government. 

The environmental-use restriction is an effort to develop mechanisms short of litigation to resolve institutional-control issues at Federal-facility cleanup sites.  CACI’s Industrial Waste Committee was concerned about the unilateral imposition of environmental use restrictions on Colorado private-property owners.

For More Information on Legislation . . .

CACI members with questions about legislation that CACI opposes or supports should contact Chuck Berry, CACI President, at 303.866.9652 or e-mail him at cberry@COchamber.com

Questions pertaining to health-care bills should be directed to Ralph Pollock, Chair of the CACI HealthCare Council, at 303.866.9657 or via e-mail at ralph@apaccess.com