Page 1
May 4, 2022 SB 22-124
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Revised Fiscal Note
(replaces fiscal note dated May 3, 2022)
Drafting Number:
Prime Sponsors:
LLS 22-0769
Sen. Woodward; Kolker
Rep. Ortiz; Van Winkle
Date:
Bill Status:
Fiscal Analyst:
May 4, 2022
House Appropriations
Jeff Stupak | 303-866-5834
Jeff.Stupak@state.co.us
Bill Topic: SALT PARITY ACT
Summary of
Fiscal Impact:
☐ State Revenue
☒ State Expenditure
☐ State Transfer
☐ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill allows pass-through businesses to elect to retroactively pay their state income
tax at the entity level, rather than the individual level, beginning in tax year 2018, and
creates a tax credit for owners of electing pass-through businesses. The bill increases
state expenditures beginning in FY 2022-23.
Appropriation
Summary:
For FY 2022-23, the bill requires and includes an appropriation of $550,446 to the
Department of Revenue.
Fiscal Note
Status:
The fiscal note reflects the reengrossed bill, as amended by the House Business
Committee.
Table 1
State Fiscal Impacts Under SB 22-124
Budget Year
FY 2022-23
Out Year
FY 2023-24
Revenue
- -
Expenditures General Fund $550,446 $12,800
Centrally Appropriated $64,310 -
Total Expenditures $614,756 $12,800
Total FTE 4.4 FTE -
Transfers - -
Other Budget Impacts General Fund Reserve $82,567 $1,920
Page 2
May 4, 2022 SB 22-124
Summary of Legislation
Beginning in tax year 2018, the bill allows S-corporations and partnerships (pass-through businesses)
to retroactively elect to pay their state income tax at the entity level, rather than the individual level.
Additionally, the bill repeals the state income tax deduction for electing pass-through owners created
by HB 21-1327, and replaces this deduction with a refundable tax credit equal to the electing
pass-through business owner’s distributive share of the state income tax imposed on the electing
pass-through entity.
Background
The federal Tax Cuts and Jobs Act of 2017 placed a temporary $10,000 annual cap on the federal
income tax deduction for state and local taxes (“SALT” deduction) for individual income taxpayers.
No cap exists for this deduction for C-corporations. The cap expires on December 31, 2025. This bill
allows Colorado owners of partnerships and S-corporations to file taxes at the entity level instead of
the individual level, which may allow taxpayers a larger SALT deduction.
State Revenue
The bill is not expected to affect state revenue. Under Colorado law, taxpayers are required to add
back any state and local taxes deducted at the federal level to their Colorado taxable income. As such,
total Colorado taxable income is not expected to change under this bill.
State Expenditures
The bill increases state expenditures in the Department of Revenue by $614,756 in FY 2022-23 and
$12,800 beginning in FY 2023-24 from the General Fund. Expenditures are shown in Table 2 and
detailed below.
Page 3
May 4, 2022 SB 22-124
Table 2
Expenditures Under SB 22-124
FY 2022-23 FY 2023-24
Department of Revenue
Personal Services $225,789 -
Operating Expenses $6,345 -
Capital Outlay Costs $31,000 -
GenTax Programming $135,000 -
Computer and User Acceptance Testing $138,516 -
Document Management and Form Changes $996 -
Data Reporting $12,800 $12,800
Centrally Appropriated Costs $64,310 -
Total Cost $614,756 $12,800
Total FTE 4.4 FTE -
Department of Revenue. In FY 2022-23 only, the DOR will require an additional 4.4 FTE tax
examiners to review refunds issued to taxpayers as a result of the bill’s tax credit.
Computer programming and testing. For FY 2022-23 only, the bill will require changes to the
DOR’s GenTax software system and additional testing. The DOR will implement a new online
tax form exclusively for taxpayers electing to file their taxes at the entity level. This new form will
allow the DOR to automate the review of most taxpayers’ amended returns. Changes are
programmed by a contractor at a cost of $225 per hour. Approximately 600 hours of computer
programming are required to implement this new form, totaling $135,000. Additional computer
and user acceptance testing are required to ensure programming changes are tested and
functioning properly, resulting in an additional $138,516 in expenditures by the department.
Document management and form changes. The bill requires $996 in FY 2022-23 only for
expenditures related to document management, data entry, and tax form changes. These
expenditures take place in the Department of Personnel and Administration using reappropriated
funds from the DOR.
Data reporting. Beginning in FY 2022-23, the Office of Research and Analysis within the DOR
will expend $12,800 annually to collect and report data related to the changes in this bill.
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.
Page 4
May 4, 2022 SB 22-124
Other Budget Impacts
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 the
amounts shown in Table 1.
Effective Date
The bill takes effect upon signature of the Governor, or upon becoming law without his signature.
State Appropriations
For FY 2022-23, the bill requires and includes a General Fund appropriation of $550,446 to the
Department of Revenue, and 4.4 FTE. Of this amount, $996 is reappropriated to the Department of
Personnel and Administration.
State and Local Government Contacts
Information Technology Law
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.