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January 17, 2022 HB 22-1026
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 22-0161
Rep. Bird; Woog
Sen. Hansen; Liston
Date:
Bill Status:
Fiscal Analyst:
January 17, 2022
House Finance
Jeff Stupak | 303-866-5834
Jeff.Stupak@state.co.us
Bill Topic: ALTERNATIVE TRANSPORTATION OPTIONS TAX CREDIT
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☒ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill replaces a corporate income tax deduction for expenses related to providing
alternative transportation options for employees with a refundable tax credit for similar
expenses available to corporate and non-corporate employers. The bill will decrease
state revenue through FY 2032-33, and increase state expenditures on an ongoing
basis beginning in FY 2022-23.
Appropriation
Summary:
For FY 2022-23, the bill requires an appropriation of $93,758 and 0.2 FTE to the
Department of Revenue.
Fiscal Note
Status:
This fiscal note reflects the introduced bill, which was recommended by the Legislative
Oversight Committee Concerning Tax Policy.
Table 1
State Fiscal Impacts Under HB 22-1026
Budget Year
FY 2022-23
Out Year
FY 2023-24
Revenue General Fund (up to $9.9 million) (up to $21.3 million)
Total Revenue (up to $9.9 million) (up to $21.3 million)
Expenditures General Fund $93,758 $6,370
Centrally Appropriated $2,462 $1,429
Total Expenditures $96,220 $7,799
Total FTE 0.2 FTE 0.1 FTE
Transfers - -
Other Budget Impacts TABOR Refund (up to $9.9 million) (up to $21.3 million)
General Fund Reserve $14,064 $956
Commented [EVR1]: Marie: Can you fix the page 2 header,
please and thanks! Page 2
January 17, 2022 HB 22-1026
Summary of Legislation
The bill eliminates the current corporate income tax deduction for expenses incurred to provide
alternative means of transportation for employees, and replaces this deduction with a new refundable
tax credit equal to 50 percent of expenditures incurred by employers to provide alternative
transportation options to their employees beginning in 2023. The tax credit is set to expire at the end
of 2032.
Alternative transportation includes free or partially subsidized mass transit, and free or partially
subsidized ridesharing arrangements. Qualifying expenses as part of a ridesharing arrangement
include providing vehicles for ridesharing arrangements, cash incentives to employees to participate
in ridesharing arrangements, and administrative costs borne by the employer associated with those
ridesharing arrangements. The tax credit is available to both corporate and non-corporate employers.
Background
The current state corporate income tax deduction for alternative means of transportation is not widely
used by corporate employers. Prior to 2018, a federal deduction for employer expenses related to
transportation benefits meant that the state-level deduction was largely unusable as corporate
employers would only be able to deduct transportation expenses at the state level that they had not
already deducted at the federal level. Given the higher federal relative to state corporate income tax
rates, the benefit to claiming the deduction at the federal level was generally larger than at the state
level. As of 2018, this federal deduction was eliminated by the 2017 Tax Cuts and Jobs Act. In spite
of the repeal of the federal deduction, the state-level deduction remained rarely used, according to
data and information published by the Office of the State Auditor (OSA). The OSA concluded that
lack of its use is due to the relatively low tax benefit of the state-level deduction and a lack of
knowledge that the deduction exists.
1
Assumptions
The eligible population for this new tax credit includes private sector employers offering subsidized
public transportation and carpooling benefits to their employees. To estimate the reduction in state
revenue associated with this bill, this fiscal note uses an estimate of the number of Colorado employees
receiving these subsidized benefits. Since no specific data are available for this specific subset of
employees, a number of statistics about the broader regional and Colorado workforce are used.
According to the Bureau of Labor Statistics, approximately 11 percent of employees in the mountain
region receive subsidized commuting benefits from their employer, which includes subsidized
parking, public transportation, and carpool benefits. However, this figure includes government
employers, which do not pay state income tax, and are therefore ineligible for this new tax credit.
Approximately 85 percent of employees in Colorado are employed by private (non-government)
employers. As such, this fiscal note assumes that approximately 9.4 percent (11 percent × 85 percent)
of private sector employees receive subsidized transit benefits.
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Mass Transit and Ridesharing Expenses Deduction, Evaluation Summary, January 2021, Office of the State Auditor:
https://leg.colorado.gov/sites/default/files/2021-te7_mass_transit_expenses_deduction.pdf Page 3
January 17, 2022 HB 22-1026
However, this 9.4 percent of employees that receive subsidized transit benefits includes solo drivers
receiving subsidized parking benefits who are not eligible for this new tax credit, as well as employees
receiving public transportation and carpooling benefits. According to the Bureau of Transportation
Statistics, approximately 8.6 percent of employees in Colorado carpool to work and 3.2 percent take
public transportation. Based on these figures, this fiscal note assumes that of the total estimated
3.1 million employees in 2023 and 3.2 million in 2024 approximately 0.8 percent of employees
(9.4 percent x 8.6 percent), or about 25,052 employees, will receive carpooling benefits from their
employer in 2023, and 0.3 percent (9.4 percent x 3.2 percent), or about 9,395 employees, will receive
public transit benefits from their employer in 2023.
Additionally, this fiscal note assumes that all employers offering these benefits will utilize the new
alternative transportation tax credit. Further, this fiscal note assumes that the number of employees
receiving carpooling and public transit benefits from their employers will increase 10 percent in 2024
as more employers become aware of the new tax credit.
This fiscal note assumes that employers will expend on average $1,152 per employee per year in 2023
and $1,176 in 2024 in qualifying alternative transportation benefits. This figure is based on the
estimated future price of a local RTD pass reduced by 20 percent to reflect bulk purchase pricing, an
estimated $96 per month in 2023 and $98 in 2024.
Employment and inflation estimates used in this fiscal note are consistent with the December 2021
Legislative Council Staff forecast.
State Revenue
The bill is expected to decrease state revenue by up to $9.9 million in FY 2022-23 (a half-year impact),
by up to $21.3 million in FY 2023-24, and by similar amounts in subsequent years until the credit
expires in FY 2032-33. These amounts reflect the assumptions stated above; however, the bill’s actual
revenue impact could be lower or higher depending on the rate at which the credit is utilized. The
bill decreases revenue from income taxes, which are subject to TABOR. Revenue impacts on a tax
year basis and additional information are presented in Table 2.
Table 2
Revenue Reduction Under HB 22-1026
Tax Year 2023 Tax Year 2024
Number of employees receiving alternative transportation benefits 34,447 38,536
Average annual expenditure per employee $1,152 $1,176
Total expenditures by employers $39.7 million $45.3 million
State Revenue Impact—50 percent credit
up to
($19.8 million)
up to
($22.7 million)
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January 17, 2022 HB 22-1026
Employers are estimated to expend approximately $39.7 million in qualifying alternative
transportation benefits in tax year 2023 and $45.3 million in tax year 2024. This amounts to forgone
state income tax revenue of approximately $19.8 million in 2023 and $21.3 million in 2024 due to the
50 percent tax credit, if the credit is utilized by all eligible employers.
State Expenditures
This bill is expected to increase General Fund expenditures by $96,220 and 0.2 FTE in FY 2022-23, by
$7,799 and 0.1 FTE in FY 2023-24, and by similar amounts in subsequent years until the tax credit
expires at the end of 2032.
Table 3
Expenditures Under HB 22-1026
FY 2022-23 FY 2023-24
Department of Revenue
Personal Services $5,139 $4,770
GenTax Programming $18,000 -
Computer and User Acceptance Testing $58,425 -
Tax Form Changes $12,194 -
Data Reporting - $1,600
Centrally Appropriated Costs
1
$2,462 $1,429
Total Cost $96,220 $7,799
Total FTE 0.2 FTE 0.1 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
Department of Revenue. The Department of Revenue (DOR) will require an additional 0.2 FTE tax
examiners in FY 2022-23 and 0.1 FTE tax examiners in FY 2023-24 and subsequent years. The tax
examiners are necessary to process and review additional returns claiming the new tax credit and to
resolve errors in returns.
Computer programming and testing. For FY 2022-23 only, the bill will require changes to DOR’s
GenTax software system and additional testing. Changes are programmed by a contractor at a
cost of $225 per hour. Approximately 80 hours of computer programming will be required to
implement this bill, totaling $18,000. Additional computer and user acceptance testing are
required to ensure programming changes are tested and functioning properly, resulting in an
additional $58,425 in expenditures by the department.
Tax form changes. For FY 2022-23 only, the bill requires $12,194 in expenditures to implement
tax form changes and document management. These expenditures will take place in the
Department of Personnel and Administration using reappropriated funds from the DOR.
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January 17, 2022 HB 22-1026
Data reporting. Beginning in FY 2023-24, the Office of Research and Analysis within DOR will
expend $1,600 each year to collect and report data on the new tax credit.
Centrally appropriated costs. Pursuant to a Joint Budget Committee policy, certain costs associated
with this bill are addressed through the annual budget process and centrally appropriated in the Long
Bill or supplemental appropriations bills, rather than in this bill. These costs, which include employee
insurance and supplemental employee retirement payments, are shown in Table 3.
Other Budget Impacts
TABOR refunds. The bill is expected to decrease the amount of state revenue required to be refunded
to taxpayers by the amounts shown in the State Revenue section above. This estimate assumes the
December 2021 LCS revenue forecast. A forecast of state revenue subject to TABOR is not available
beyond FY 2023-24. Because TABOR refunds are paid from the General Fund, decreased General
Fund revenue will lower the TABOR refund obligation, but result in no net change to the amount of
General Fund otherwise available to spend or save.
General Fund reserve. Under current law, an amount equal to 15 percent of General Fund
appropriations must be set aside in the General Fund statutory reserve beginning in FY 2022-23. Based
on this fiscal note, the bill is expected to increase the amount of General Fund held in reserve by
$14,064 in FY 2022-23 and $956 in FY 2023-24, which will decrease the amount of General Fund
available for other purposes.
Effective Date
The bill takes effect January 1, 2023, assuming no referendum petition is filed.
State Appropriations
For FY 2022-23, the bill requires a General Fund appropriation of $93,758 and 0.2 FTE to the
Department of Revenue. From this amount, $12,194 should be reappropriated to the Department of
Personnel and Administration.
State and Local Government Contacts
Information Technology Personnel Revenue
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit: leg.colorado.gov/fiscalnotes.