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February 20, 2023 HB 23-1018
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Revised Fiscal Note
(replaces fiscal note dated January 31, 202)
Drafting Number:
Prime Sponsors:
LLS 23-0143
Rep. Lynch
Sen. Simpson
Date:
Bill Status:
Fiscal Analyst:
February 20, 2023
House Finance
David Hansen | 303-866-2633
david.hansen@coleg.gov
Bill Topic: TIMBER INDUSTRY INCENTIVES
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☒ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill creates an income tax credit for equipment used in the timber, wood product
manufacturing, forest health, and wildfire mitigation industries. The bill decreases
state revenue and increases state expenditures on an ongoing basis.
Appropriation
Summary:
For FY 2023-24, the bill requires an appropriation of $96,329 to the Department of
Revenue.
Fiscal Note
Status:
The fiscal note reflects the introduced bill, as amended by the House Agriculture,
Water, and Natural Resources. The bill was recommended by the Wildfire Matters
Committee.
Table 1
State Fiscal Impacts Under HB 23-1018
Current Year
FY 2022-23
Budget Year
FY 2023-24
Out Year
FY 2024-25
Revenue General Fund up to ($3.2 million) up to ($6.5 million) up to ($6.5 million)
Total Revenue up to ($3.2 million) up to ($6.5 million) up to ($6.5 million)
Expenditures General Fund - $96,329 $7,683
Centrally Appropriated - $2,703 -
Total Expenditures - $99,032 $7,683
Total FTE - 0.2 FTE -
Transfers - - -
Other Budget
Impacts
TABOR Refund up to ($3.2 million) up to ($6.5 million) up to ($6.5 million)
General Fund Reserve - $14,449 $1,152
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February 20, 2023 HB 23-1018
Summary of Legislation
The bill creates an income tax credit for tax years 2023 through 2027 for businesses involved in forestry,
logging, timber, wood product manufacturing, forest health, and wildfire mitigation. The tax credit
is allowed for businesses that purchase the following:
mechanized equipment that is used for harvesting, skidding, processing, and loading trees;
trucks and trailers used for hauling logs;
equipment used to manufacture wood products;
equipment used in small-diameter tree removal and processing; and
equipment used in prescribed burning.
The tax credit is valued at 20 percent of the purchase cost for qualifying items, capped at $10,000 per
taxpayer per year. The bill requires that a taxpayer purchase a Colorado-produced or
electric-powered product in order to qualify for the credit, and allows the credit for products produced
elsewhere or using other power sources only if the preferred version is unavailable. The credit is
nonrefundable and any excess amount may be carried forward for up to five years.
State Revenue
The bill is expected to decrease General Fund revenue up to $3.2 million in FY 2022-23, and up to
$6.5 million in FY 2022-23, with similar impacts in subsequent years as explained below.
In 2021, there were an estimated 500 employer firms in Colorado involved in logging, sawmills, and
wood product manufacturing based on data from the U.S. Bureau of Labor Statistics Quarterly Census
of Employment and Wages (QCEW). Additionally, another 100 employer firms involved in tree
removal services for wildfire mitigation may claim the credit based on QCEW data and industry
research. The number of employers in the state has fluctuated little through the last economic
expansion and is assumed constant through the analysis period. This analysis assumes that
100 percent of employer firms claim the maximum tax credit each year.
Taxpayers eligible under the bill could include firms without employees. In 2019, there were 415 sole
proprietors in wood product manufacturing based on data from the Department of Revenue. Based
on business receipts statistics for proprietors from the Internal Revenue Service, and assuming capital
expenditures represent a similar proportion of business receipts for proprietors as for employer firms,
each proprietor is estimated to claim the tax credit for 20 percent of qualifying purchases, or about
$1,100 each tax year.
Assuming that tax liability for each business claiming the income tax credit exceeds the value of the
credit, the bill will reduce General Fund revenue by $3.2 million in FY 2022-23 (half-year impact), and
$6.5 million in FY 2023-24, with similar impacts in subsequent years. To the extent that employer
firms claim less than the maximum allowable credit or the credit is carried-forward and claimed
against income tax in subsequent years, the timing and magnitude of the revenue impact will vary.
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February 20, 2023 HB 23-1018
State Expenditures
The bill increases state General Fund expenditures by $99,032 in FY 2023-24 and $7,683 in FY 2024-25,
with similar impacts in future years. Expenditures are shown in Table 2 and detailed below.
Table 2
Expenditures Under HB 23-1018
Cost Components FY 2023-24 FY 2024-25
Department of Revenue
Personal Services $5,353 -
Computer and User Acceptance Testing $49,468 -
GenTax Computer Programming $22,500 -
Office of Research and Analysis $7,392 $7,328
Postage and Document Management $11,616 $355
Centrally Appropriated Costs
1
$2,703 -
Total $99,032 $7,683
Total FTE 0.2 FTE -
1
Centrally appropriated costs are not included in the bill's appropriation.
Department of Revenue. The Department of Revenue will require 0.2 FTE to review and process
returns claiming the new income tax credit and to resolve errors in returns. The credit will also require
100 hours of GenTax computer programming billed at a contractor rate of $225 per hour in FY 2023-24.
Computer and user acceptance testing associated with the programming changes will result in an
additional cost of $49,468 in FY 2023-24. The Office of Research and Analysis will also incur additional
costs, an estimated $7,392 in FY 2023-24 and subsequent years, to track and report on the new and
expanded tax expenditures. Lastly the department will have an increase in expenditures for postage
and document management, with funds reappropriated to the Department of Personnel and
Administration.
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 above. This estimate assumes the
December 2022 LCS revenue forecast. A forecast of state revenue subject to TABOR is not available
beyond FY 2024-25. 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.
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February 20, 2023 HB 23-1018
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. 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, decreasing the amount of General Fund available for other purposes.
Effective Date
The bill takes effect 90 days following adjournment of the General Assembly sine die, assuming no
referendum petition is filed, except the bill’s income tax credit is effective January 1, 2023.
State Appropriations
For FY 2023-24, the bill requires a General Fund appropriation of $96,329 to the Department of
Revenue and 0.2 FTE. Of this amount, $11,616 is reappropriated to the Department of Personnel and
Administration.
State and Local Government Contacts
Forest Service Information Technology Personnel
Revenue State Auditor
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.