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April 3, 2024 HB 24-1340
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 24-0501
Rep. Bird; Taggart
Sen. Kirkmeyer; Zenzinger
Date:
Bill Status:
Fiscal Analyst:
April 3, 2024
House Education
Louis Pino | 303-866-3556
louis.pino@coleg.gov
Bill Topic: INCENTIVES FOR POST-SECONDARY EDUCATION
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☒ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill creates two state refundable income tax credits to encourage enrollment in a
Colorado higher education institution. The bill decreases state revenue beginning in
the current FY 2023-24 through FY 2029-30, and increases state expenditures
beginning in FY 2024-25 through FY 2029-30.
Appropriation
Summary:
For FY 2024-25, the bill requires a General Fund appropriation of $580,886 to multiple
agencies.
Fiscal Note
Status:
The fiscal note reflects the introduced bill.
Table 1
State Fiscal Impacts Under HB 24-1340
Current Year
FY 2023-24
Budget Year
FY 2024-25
Out Year
FY 2025-26
Out Year
FY 2026-27
Revenue General Fund ($44.8 million) ($89.8 million) ($114.2 million) ($138.9 million)
Total Revenue ($44.8 million) ($89.8 million) ($114.2 million) ($138.9 million)
Expenditures General Fund - $580,886 $492,887 $948,820
Centrally Appropriated - $116,495 $113,194 $220,509
Total Expenditures - $697,381 $606,081 $1,169,329
Total FTE - 7.1 FTE 6.9 FTE 13.2 FTE
Transfers - - - -
Other Budget
Impacts
TABOR Refunds ($44.8 million) ($89.8 million) ($114.2 million) Not estimated
General Fund Reserve - $87,133 $73,933 $142,323
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April 3, 2024 HB 24-1340
Summary of Legislation
The bill creates two state refundable income tax credits to encourage enrollment in Colorado
higher education institutions.
Top Jobs Tax Credit. The first incentive provides a state income tax credit for a student, or a
taxpayer claiming the student as a dependent, that graduates from a Colorado higher education
institution in an instructional program that supports an occupation identified as a “Top Job”
from the 2023 Talent Pipeline Report prepared by the Colorado Workforce Development Council
(CWDC). The amount of the state income tax credit is equal to:
$250 for a certification program less than one year in duration;
$500 for a certification program between one year and two years in duration;
$1,500 for a graduate of an associate’s degree program; or
$3,000 for a graduate of a bachelor’s degree program.
The state credit is available for income tax years 2024 through 2029 and is refundable, meaning
if the taxpayer’s state tax liability is less than the amount of the credit allowed, the remaining
amount is refunded to the taxpayer. The qualifying student must have completed the program
during the income tax year the credit is claimed. By July 31, 2024, the Department of Higher
Education (CDHE) must create a list of eligible programs based on the 2023 Colorado Talent
Pipeline Report.
College Pathways Tax Credit. The second incentive provides a state income tax credit for a
student, or a taxpayer claiming the student as a dependent, that transfers credits from a
two-year Colorado higher education institute, or qualified college courses completed in high
school, to a four-year Colorado higher education institute. The amount of the incentive is equal
to $50 per credit hour transferred, up to 60 credit hours, or $3,000. To qualify, a student must
subsequently complete at least 15 credit hours at the four-year institution.
The credit is available for income tax years 2026 through 2029 and is refundable.
Credit limitation, qualification, and notification. For both state credits, availability of the
incentive is dependent on the amount of excess state revenues (TABOR refund) projected for the
ending fiscal year by either Legislative Council Staff (LCS) or the Office of State Planning and
Budgeting (OSPB) in their quarterly June revenue forecast. If the forecasts show the amount of
the TABOR refund is between $500 million and $750 million, the amount of the credit is reduced
by 50 percent for that income tax year. If the amount of the TABOR refund is projected to be
less than $500 million, the credit is not allowed for that income tax year.
A private institution of higher education may qualify for the purpose of the credits in this bill if
they enter into an agreement with the CDHE.
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April 3, 2024 HB 24-1340
Finally, the CDHE must develop standard language to notify students about the income tax
credits, assist the State Auditor on their tax evaluation reports, and provide the Department of
Revenue with social security numbers and incentive amounts by November 1 of each tax year
the credit is available. If a social security number is not available, the CDHE must provide a
student identification number.
Background
Colorado Talent Pipeline Report. The Colorado Workforce Development Council (CWDC)
provides an annual report identifying areas of growing demand and opportunity, key features of
the current labor force, and strategies to balance the supply and demand equation for talent. It
also highlights the Top Jobs in Colorado, jobs with high annual openings, above average
growth, and a good wage.
On December 15, 2023, the CWDC published their 2023 Talent Pipeline Report. Table 2 on
pages 23 through 26 of the report shows the 2023 Top Jobs and their industries.
Assumptions
Top Jobs Tax Credit
Data from the National Center for Education Statistics shows approximately 37,407 students
completed a credential in a qualified Colorado Higher Education Institution (both private and
public) in school year 2021-22 (the latest data available) that is consistent with the Top Jobs
industry categories as identified in the 2023 Talent Pipeline Report.
The estimates in Table 2 in the State Revenue section below were adjusted by Legislative Council
Staff’s 2024 Higher Education Forecast. For 2024, the first year the income tax credit is available,
the fiscal assumes approximately 38,500 students will qualify for the credit. Consistent with other
tax credits, the fiscal note assumes a slightly faster growth rate through the period the credit is
available as taxpayers become aware of the benefit. Finally, the fiscal note assumes just over
40,000 students will qualify for the credit by tax year 2029.
College Pathways Tax Credit
Transfers from community colleges. Data from the CDHE shows approximately 5,780 students
transferred from a two-year Colorado higher education institute to a four-year Colorado higher
education institute (this does not include private institutions of higher education). The fiscal
note assumes the majority of these students will transfer about 60 credits and meet the 15 credit
hours minimum at the four-year Colorado institution of higher education to claim the credit in
the first year. For example, a transfer student in tax year 2026 with 60 hours of two-year credits
will meet the 15 credit hours minimum by November 1, 2026, and be eligible for the income tax
credit in that year.
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April 3, 2024 HB 24-1340
Concurrent and dual programs. In school year 2020-21, the latest data available, approximately
51,383 Colorado high school students were enrolled in a concurrent or dual program earning
credit towards a postsecondary institution. It is assumed that about 43 percent of these students
will transfer to a four-year higher education institution. Of these, approximately 22 percent will
graduate high school with an associate’s degree with the remainder transferring a range of
credits.
AP and IB courses. Data from the CDE shows approximately 68,840 students were earning
college credit for the Advanced Placement (AP) or International Baccalaureate (IB) exams in
school year 2019-20. Of these, about 19,300 students scored a three or higher on their exams. In
Colorado, a score of three or higher is guaranteed to transfer credit, but may not apply to
degree requirements. On average, each course represented 3 class credits or about
59,000 qualifying credits for the state income tax credit. This amount has adjusted by a
three-year historical average of the number of Colorado high school students earning college
credit through the AP or IB exams.
TABOR Outlook
The March 2024 TABOR outlook for both LCS and OSPB project state revenue subject to TABOR
to exceeded the Referendum C cap in the current FY 2023-24 through FY 2025-26, the last year
of the forecast, by more than $750 million. The fiscal note assumes the full amount for both
credits will be available during this period.
State Revenue
Based on the assumptions above, the bill is expected to decrease General Fund revenue by
$44.8 million in the current FY 2023-24 (half-year impact), $89.8 million in FY 2024-25,
$114.2 million in FY 2025-26, $138.9 million in FY 2026-27, the first full fiscal year both income
tax credits are expected to be available. The bill reduces income tax revenue, which is subject to
TABOR.
To the extent more students complete the eligible credentials as assumed above, the state
revenue estimates below will be higher. Conversely, if the number of qualified students is lower
than assumed above, the state revenue estimates below will be lower. Finally, if the TABOR
outlook indicates excess state revenue of less than $750 million in the June revenue forecast
from LCS and OSPB, the amount of revenue estimated below will be less.
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April 3, 2024 HB 24-1340
Table 2
Revenue Under HB 24-1340*
Dollars in Millions
FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28
Top Jobs Tax Credit ($44.8) ($89.8) ($90.0) ($90.3) ($90.6)
College Pathways Tax Credit - - ($24.2) ($48.6) ($49.2)
Transfers from Community Colleges - - ($9.1) ($18.4) ($18.6)
Concurrent and Dual Programs - - ($13.5) ($27.2) ($27.5)
AP and IB Courses - - ($1.5) ($3.1) ($3.1)
Revenue Impact ($44.8) ($89.8) ($114.2) ($138.9) ($139.7)
* Totals may not sum due to rounding.
The Top Jobs Tax Credit is available beginning in tax year 2024, which reduces state revenue for
the 2024 tax year and represents a half-year impact of $44.8 million for the current FY 2023-24.
In FY 2025-26, when the College Pathways Tax Credit becomes available, the revenue estimate
shows a half-year impact from the College Pathways Tax Credit and full revenue impact from the
Top Jobs Tax Credit. The estimate for FY 2027-28 is a full year impact and for both income tax
credits and is similar to the impact expected for later years, with fluctuations for economic
circumstances and policy changes.
State Expenditures
The bill increases General Fund expenditures by about $697,000 in FY 2024-25, $606,000 in
FY 2025-26, $1.2 million in FY 2026-27, and $1.1 million in FY 2027-28 through FY 2029-30.
Expenditures are shown in Table 3 and detailed below.
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April 3, 2024 HB 24-1340
Table 3
Expenditures Under HB 24-1340
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28
Department of Revenue (DOR)
Personal Services $207,942 $197,519 $561,331 $550,002
Operating Expenses $4,608 $4,352 $12,416 $12,160
Capital Outlay Costs $33,350 $20,010 $53,360 $40,020
GenTax Programming and Testing $36,729 - $36,729 -
Data Reporting $7,392 $7,328 $14,720 $14,656
Document Management and Tax Form
Changes
$3,875 $3,368 $9,954 $9,466
Centrally Appropriated Costs
1
$61,328 $58,027 $165,342 $161,956
FTE – Personal Services 3.6 FTE 3.4 FTE 9.7 FTE 9.5 FTE
DOR Subtotal $355,223 $290,604 $853,852
$788,260
Department of Higher Education
(CDHE)
Personal Services $255,830 $255,830 $255,830 $255,830
Operating Expenses $4,480 $4,480 $4,480 $4,480
Capital Outlay Costs $26,680 - - -
Centrally Appropriated Costs
1
$55,167 $55,167 $55,167 $55,167
FTE – Personal Services 3.5 FTE 3.5 FTE 3.5 FTE 3.5 FTE
CDHE Subtotal $342,157 $315,477 $315,477 $315,477
Total Cost $697,380 $606,081 $1,169,328 $1,103,737
Total FTE 7.1 FTE 6.9 FTE 13.2 FTE 13.0 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
Department of Revenue. Expenditures will increase in DOR to administer the two income tax
credits in the bill. These costs include personnel to review tax credit claims, update and test
GenTax computer programming, provide data reporting, and make changes to state income tax
forms. Costs are expected to begin in FY 2024-25 and be ongoing through FY 2029-30. DOR
expenditures are paid from the General Fund.
Tax credit administration. For FY 2024-25 and the Top Jobs Tax Credit, the department
requires 3.6 FTE tax examiners to review tax credit claims, staff call centers and manage
correspondence associated with the income tax credit, prorated for an October 2024 start
date. In FY 2025-26, this personnel reduces to 3.4 FTE. For FY 2026-27 and the College
Pathways Tax Credit, the department requires another 6.3 FTE to administer the credit,
prorated for an October 2026 start date. In FY 2027-28, this personnel reduces to 6.1 FTE.
Computer programming and testing. For FY 2024-25 and FY 2026-27, the DOR will
program, test, and update database fields in the DOR's GenTax software system for the tax
credits. Costs include programming estimated at $23,775, representing 100 hours of contract
programming at a rate of $237.75 per hour. Costs for user acceptance testing total $4,064 Page 7
April 3, 2024 HB 24-1340
for 127 hours of testing at a rate of $32 per hour, and $8,890 for 254 hours of program
design implementation.
Data reporting. Expenditures in the Office of Research and Analysis in the DOR are required
for changes in the related GenTax reports so that the department can access and document
tax statistics related to the new tax policy. These costs are estimated at $7,392 in FY 2024-25,
representing 231 hours for data management and reporting at $32 per hour, with similar
costs in later years. In FY 2026-27, these costs include data reporting expenditures for the
College Pathways Tax Credit.
Document management and tax form changes. Document management costs to make
changes to paper tax forms and process paper returns are estimated at $3,875 in
FY 2024-25. In FY 2026-27, these costs include both income tax credits for document
management and form changes for College Pathways Tax Credit. Expenditures for form
changes occur in the Department of Personnel and Administration using reappropriated
DOR funds.
Department of Higher Education. Expenditures will increase in CDHE to administer the two
income tax credits in the bill. These costs include data management, programming, and risk
management staff. Costs are expected to begin in FY 2024-25 and be ongoing through FY 2029-
30. CDHE expenditures are paid from the General Fund.
Data management. CDHE requires 1.5 FTE data manager to create a process and update
databases to collect and manage data from private higher institutions; collect and mange
student data; and create a list of eligible students from each of the institutions.
Programming staff. CDHE requires 1.0 FTE program coordinator to create a list of eligible
degree programs and the associated Standard Occupational Classification (SOC) code using
the National Center for Education Statistics’ (NCES) Classification of Instructional Programs
(CIP) CIP-SOC. This will require partial support from an economist, data analysis and
database management. Additionally, this staff will assist in collecting eligibility from
institutions and notifying DOR of student eligibility.
Risk management. CDHE requires 1.0 FTE tax compliance agent to review and monitor
submissions from higher education institutions and to track student eligibility.
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 March 2024 LCS revenue forecast. A forecast of state revenue subject to TABOR is Page 8
April 3, 2024 HB 24-1340
not available beyond FY 2025-26. 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. 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 upon signature of the Governor, or upon becoming law without his
signature.
State Appropriations
For FY 2024-25, the bill requires the following General Fund appropriations:
$293,896 and 3.6 FTE to the Department of Revenue, of which $3,875 is reappropriated to the
Department of Personnel; and
$286,990 and 3.5 FTE to the Department of Higher Education.
State and Local Government Contacts
Higher Education 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 the General Assembly website.