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June 14, 2022 SB 22-119
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Final Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 22-0766
Sen. Simpson; Winter
Date:
Bill Status:
Fiscal Analyst:
June 14, 2022
Postponed Indefinitely
Josh Abram | 303-866-3561
Josh.Abram@state.co.us
Bill Topic: CONSERVATION EASEMENT TAX CREDIT
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☒ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill would have changed the Conservation Easement Tax Credit program to create
a new transferable tax credit for previously disallowed tax credits and an ombudsman
and arbitration process to resolve disputes concerning the distribution of the credit
among affected parties. The bill would have reduced state revenue and increased
state expenditures in both FY 2022-23 and FY 2023-24. The bill was postponed
indefinitely, so the impacts identified in this final fiscal note do not take effect.
Appropriation
Summary:
For FY 2022-23, the bill requires appropriations totaling $5.7 million to multiple state
agencies.
Fiscal Note
Status:
The fiscal note reflects the introduced bill. This bill was not enacted into law; therefore,
the impacts identified in this analysis do not take effect.
Table 1
State Fiscal Impacts Under SB 22-119
Budget Year
FY 2022-23
Out Year
FY 2023-24
Revenue General Fund ($66.6 million) ($88.8 million)
Total Revenue ($66.6 million) ($88.8 million)
Expenditures General Fund $5,729,218 $3,515,727
Centrally Appropriated $72,238 $53,459
Total Expenditures $5,801,459 $3,569,186
Total FTE 17.4 FTE 16.4 FTE
Transfers - -
Other Budget Impacts TABOR Refund ($66.6 million) ($88.8 million)
General Fund Reserve $859,383 $527,359
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June 14, 2022 SB 22-119
Summary of Legislation
The bill makes changes to the Conservation Easement Tax Credit to allow taxpayers to reclaim
disallowed credits from tax years 2000 through 2013, and creates a new dispute resolution process
when there are multiple claimants for the same credit.
Claiming previously disallowed tax credits. The bill allows a landowner to claim a tax credit for
each conservation easement in gross donated between January 1, 2000, and December 31, 2013, for
which a tax credit was claimed but was denied in whole or in part by the Colorado Department of
Revenue (DOR). A disallowed donation is eligible if the land subject to the easement was owned by
the landowner, a family member, or a trust controlled by the family for not less than three years prior
to the date of the donation.
The amount of the tax credit must equal the amount of the credit that could have been claimed for the
donation based on the fair market value that was in effect at the time of the donation. The fair market
value is defined as the lesser of the value of the donation accepted as a deduction by the federal
Internal Revenue Service, or, if the donated property was purchased by the donor, 250 percent of the
donor’s cost basis.
No later than August 15, 2022, the DOR must post information online notifying eligible taxpayers
concerning the new tax credit. Taxpayers have until September 30, 2023, to submit a claim for a credit
certification to the Division of Conservation in the Department of Regulatory Agencies (DORA). The
division must create rules for the application and approval process in coordination with the working
group created in House Bill 19-1264.
Multiple claimants. If multiple taxpayers file claims concerning the same conservation easement, the
claimants may work together to coordinate the distribution of tax credit certificates. If the original tax
credit was transferred to another taxpayer, the transferee may claim the portion of the credit that was
transferred.
Objections and disputes. Taxpayers and other parties to a disallowed credit may object to a claim for
certification of reclaimed tax credits and submit their own application. These objections must be
referred to a newly created ombudsman in the Division of Conservation to resolve the dispute. If
parties are unable to resolve their objections to a claim, the ombudsman may refer the matter to an
arbitrator at the expense of the DOR. Once the objection is resolved, the DOR must allow the tax credit
to be claimed in accordance with the terms of the agreement reached.
Background
The Conservation Easement Tax Credit was originally enacted in 1999. The credit is allowed for
individuals and corporations that donate land for a perpetual conservation easement to a government
entity or a charitable organization. The owner of an easement may prohibit certain acts on the
property in order to preserve its value for recreation, education, habitat, open space, or historical
importance. If the taxpayer's state income tax liability is larger than the amount of the tax credit, the
unused portion of the credit may be carried forward for up to 20 years. Alternatively, the tax credit
can be transferred to one or more other taxpayers. Page 3
June 14, 2022 SB 22-119
House Bill 19-1264 created a working group of stakeholders to propose an alternative method to the
existing appraisal process for certifying the value of a conservation easement tax credit, and to develop
eligibility criteria and a process to provide retroactive tax credits to taxpayers whose conservation
easement tax credit claim was denied in whole or in part from 2000 to 2013. As introduced, this bill
includes some of the recommendations of the working group.
State Revenue
The bill is expected to reduce General Fund revenue by up to $66.6 million in FY 2022-23, and up to
$88.8 million in FY 2023-24. The estimates for FY 2022-23 represents a half-year impact on an accrual
accounting basis. The bill reduces individual and corporate income tax revenue, which is subject to
TABOR.
Because some of the disallowed tax credits were claimed for land donated within three years of the
property’s purchase, those donations are ineligible for the new tax credit due to the three-year holding
requirement; however, data on which credits are affected by this provision is unavailable as of this
writing. This fiscal note shows the highest possible revenue impact estimate, assuming that all
affected taxpayers will claim the credit under this bill; however, actual revenue impacts may be less
than this amount.
Disallowed tax credits. As of March 3, 2022, the DOR estimates that up to 4,500 affected taxpayers
may be associated with disallowed credits, equaling about $177.7 million in disallowed conservation
easement donations made between January 1, 2000 and December 31, 2013. This amount is updated
as cases are settled and considered completed or resolved.
Credit claims. Based on historical data for the conservation easement credit, the fiscal note assumes
75 percent of the $177.7 million in credits will be claimed by taxpayers in the first income tax year with
the remaining 25 percent being used in the second year. In addition, the fiscal note assumes taxpayers
will begin to claim credits in tax year 2022.
Because the conservation easement credit is nonrefundable and transferable, actual revenue impacts
of the tax credit will vary. A taxpayer can claim the credit in the same tax year they receive certification
from the Division of Conservation, or use a portion of the tax credit and carry forward the balance in
up to twenty subsequent income tax years. If the full amount of tax credit is not used as early as
assumed or delayed as a result of disputes, revenue reductions will be pushed into future fiscal years.
State Expenditures
For FY 2022-23, the bill increases state expenditures by about $5.8 million and 17.4 FTE. For
FY 2023-24, increased expenditures are about $3.6 million and 16.4 FTE. Expenditures are from the
General Fund. New costs are displayed in Table 2 and described below. Personal service costs in
Table 2 are prorated for the General Fund pay date shift.
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June 14, 2022 SB 22-119
Table 2
Expenditures Under SB 22-119
Cost Components FY 2021-22 FY 2022-23
Department of Revenue
Personal Services $79,962 $15,047
Operating Expenses $2,295 -
Capital Outlay Costs $12,400 -
GenTax Programming / Systems Support $263,769 -
Document Services $46,136 $13,238
Arbitration Costs $2,751,925 $917,308
Legal Services $2,022,656 $2,022,656
Office of Research and Analysis $6,400 $6,400
Centrally Appropriated Costs
1
$29,388 $6,168
FTE – Personal Services 1.6 FTE 0.3 FTE
FTE – Legal Services 11.4 FTE 11.4 FTE
DOR Subtotal
$5,214,931 $2,980,817
Department of Regulatory Agencies
Personal Services $176,030 $192,033
Operating Expenses $4,050 $4,050
Capital Outlay Costs $18,600 -
Legal Services $344,995 $344,995
Centrally Appropriated Costs
1
$42,850 $47,291
FTE - Personal Services 2.7 FTE 3.0 FTE
FTE – Legal Services 1.7 FTE 1.7 FTE
DORA Subtotal
$586,525 $588,369
Total
$5,801,456 $3,569,186
Total FTE 17.4 FTE 16.4 FTE
1
Centrally appropriated costs are not included in the bill's appropriation
Department of Revenue. The DOR is required to process a new transferable tax credit for previously
denied claims certified by the Division of Conservation. This increases costs for programming and
testing to GenTax, and for business user acceptance testing, document servicing provided by the
Department of Personnel and Administration (DPA), and tax examiners for claim review, certification,
and payment. The DOR is responsible for the arbitration costs of disputed claims received at DORA.
The complexity of verifying claims and counter claims from original easement donations and tax
credit transferees will be labor intensive and require extensive legal services provided by the
Department of Law. It is estimated that approximately 400 disputed cases will require arbitration at
a cost of $4,290 per party per arbitration. The bulk of these cases are anticipated in the first fiscal year. Page 5
June 14, 2022 SB 22-119
Finally, the Office of Research and Analysis will have annual reporting expenses beginning in
FY 2022-23.
Department of Regulatory Agencies. The bill requires the Division of Conservation in DORA to
process claims for tax credit certifications for previously denied claims, and to establish a process for
determining if a landowner conveyed an easement in good faith and otherwise meets the
requirements for a reclaimed tax credit. If an objection to a claim is filed, the disputed and conflicting
claims are referred to a new ombudsman in the division to provide mediation and to arrange
arbitration when necessary. The ombudsman requires legal services from the Department of Law.
Final arbitration expenses, if any, must be paid by the DOR.
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 2.
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. 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
$859,383 in FY 2022-23, and by $527,359 in FY 2023-24, which will decrease the amount of General
Fund available for other purposes.
Effective Date
The bill was postponed indefinitely by the Senate Appropriations Committee on May 10, 2022.
State Appropriations
For 2022-23, the bill requires the following General Fund appropriations:
$5,185,543 to the Department of Revenue, and 1.6 FTE. Of this amount, $46,136 is reappropriated
to the Department of Personnel and Administration and $2,022,656 is reappropriated to the
Department of Law, with an additional 11.4 FTE.
$543,673 to the Department of Regulatory Agencies, and 2.7 FTE. Of this amount, $344,995 is
reappropriated to the Department of Law, with an additional 1.7 FTE. Page 6
June 14, 2022 SB 22-119
State and Local Government Contacts
Information Technology Law
Regulatory Agencies 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.