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February 20, 2024 SB 24-126
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 24-0505
Sen. Will; Winter F.
Rep. Lukens; Lynch
Date:
Bill Status:
Fiscal Analyst:
February 20, 2024
Senate Ag. & Natural Resources
Greg Sobetski | 303-866-4105
greg.sobetski@coleg.gov
Bill Topic: CONSERVATION EASEMENT INCOME TAX CREDIT
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☒ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill extends the Conservation Easement Oversight Commission and the program
for certifying conservation easement holders indefinitely, increases the maximum
amount of conservation easement tax credits that may be certified annually, and
broadens the circumstances in which tax credits may be transferred. It decreases state
revenue and increases state expenditures on an ongoing basis.
Appropriation
Summary:
For FY 2024-25, the bill requires an appropriation of $32,500 to the Department of
Regulatory Agencies.
Fiscal Note
Status:
The fiscal note reflects the introduced bill.
Table 1
State Fiscal Impacts Under SB 24-126
Budget Year
FY 2024-25
Out Year
FY 2025-26
Revenue General Fund ($15,000,000) ($30,000,000)
Cash Funds $33,900 $56,500
Total Revenue ($14,966,100) ($29,943,500)
Expenditures General Fund - $152,724
Cash Funds $32,520 $51,700
Centrally Appropriated $7,170 $17,741
Total Expenditures $39,690 $222,165
Total FTE 0.4 FTE 1.0 FTE
Transfers - -
Other Budget Impacts TABOR Refunds ($14,966,100) ($29,943,500)
General Fund Reserve - $22,909 Page 2
February 20, 2024 SB 24-126
Summary of Legislation
The bill makes modifications to the conservation easement tax credit program, as discussed
below.
Extension of expiring provisions. The sections of state law that create the Conservation
Easement Oversight Commission and require the certification of conservation easement holders
are scheduled to expire on July 1, 2026. The bill extends these provisions indefinitely.
Conservation easement tax credit. Beginning for tax year 2025, the bill increases the cap on
the amount of tax credit certificates that may be issued by the Department of Regulatory
Agencies (DORA) for each tax year from $45 million to $75 million.
Under current law, a donor of a conservation easement may transfer all or a portion of their tax
credit to another taxpayer (transferee). The bill allows transferees to transfer the credit to other
taxpayers (“subsequent transferees”). The bill also allows credits to be transferred to
pass-through business entities, including partnerships and S corporations, in which case the
credit is allocated to owners of the business.
Background
Conservation easements. A conservation easement is a voluntary legal agreement between a
landowner and a charitable organization or government entity that permanently preserves
scenic or agricultural open space, natural habitat, or recreational areas for the benefit of the
public.
Tax credit. The state has offered a tax credit for the donation of conservation easements since
2000. The tax credit is nonrefundable, meaning that the amount claimed each year may not
exceed the taxpayer’s income tax liability. The excess may be carried forward to later tax years or
transferred (usually sold) to another taxpayer with greater tax liability.
The Division of Conservation in DORA reviews conservation easement donations and certifies tax
credits. Under current law enacted in House Bill 21-1233, tax credits are valued at 90 percent of
the value of the donated easement. The division may certify up to $45 million in credits in any
tax year, and certifications that would exceed one year’s cap may be reserved against future
caps. Demand for the credit increased significantly after the passage of HB 21-1233, and credits
are already reserved against the 2024, 2025, and 2026 caps.
Conservation Easement Oversight Commission. The commission was created in House
Bill 08-1323 to advise the Division of Conservation and the Department of Revenue (DOR)
regarding conservation easement tax credits. The commission was extended in House
Bill 19-1264 following a 2017 sunset review, and is currently set to repeal on July 1, 2026.
Certification of conservation easement holders. HB 08-1323 also requires DORA to certify the
organizations that hold conservation easements through the application of qualifications and
identification of fraudulent holders. The certified holder program was extended in HB 19-1264
following a 2017 sunset review, and is currently set to repeal on July 1, 2026. Page 3
February 20, 2024 SB 24-126
Assumptions
Based on the volume of certificate applications received since the passage of HB 21-1233, DORA
is expected to certify tax credits up to the $75 million cap each year for at least the first several
years for which the higher cap level established in this bill is in place. Because a portion of the
current law cap has already been reserved through tax year 2026, the increase in the number of
certificates awarded is initially expected to be limited to about 10 percent, or about 5 certificates
annually.
State Revenue
On net, the bill decreases state revenue by $15.0 million in FY 2024-25 and by $29.9 million in
FY 2025-26 and later years. The bill decreases General Fund income tax revenue and increases
Conservation Cash Fund fee revenue as discussed below.
General Fund. The bill decreases income tax revenue, which is subject to TABOR. Increasing the
maximum amount of tax credits that may be certified annually will decrease state revenue by
$30 million annually, based on the above assumption that the full amount allowed under the
cap will be certified. The actual timing of revenue reductions may vary across fiscal years
depending on the pace of transfers and the timing when credits are claimed. The revenue
impact for FY 2024-25 represents a half-year impact for tax year 2025 on an accrual accounting
basis.
Cash funds. The bill increases revenue to the Conservation Cash Fund in DORA by $33,900 in
FY 2024-25 and $56,500 in FY 2025-26 and later years. This revenue is from tax credit
certification fees based on the assumed number of new certifications each year. The fee revenue
is subject to TABOR.
Fee impact on individuals and businesses. Colorado law requires legislative service agency
review of measures which create or increase any fee collected by a state agency. These fee
amounts are estimates only, actual fees will be set administratively by DORA based on cash fund
balance, program costs, and the number of tax credit applications subject to the fee. Table 2
below presents the fee impact of SB 24-126.
Table 2
Fee Impact of SB 24-126 on Individuals and Businesses
Fiscal Year Type of Fee
Current
Fee
Number
Newly
Affected Fee Impact
FY 2024-25 Tax Credit Certification Fee $11,300 3 $33,900
FY 2024-25 Total $33,900
FY 2025-26 Tax Credit Certification Fee $11,300 5 $56,500
FY 2025-26 Total $56,500 Page 4
February 20, 2024 SB 24-126
State Expenditures
The bill increases state expenditures in DORA and DOR by $39,690 in FY 2024-25, $222,165 in
FY 2025-26, and smaller amounts in later years. Expenditures for DORA are paid from the
Conservation Cash Fund, and expenditures for DOR are paid from the General Fund.
Expenditures are shown in Table 3 and detailed below.
Table 3
Expenditures Under SB 24-126
FY 2024-25 FY 2025-26
Department of Regulatory Agencies
Personal Services $25,338 $50,676
Operating Expenses $512 $1,024
Capital Outlay Costs $6,670 -
Centrally Appropriated Costs
1
$7,170 $14,340
FTE – Personal Services 0.4 FTE 0.8 FTE
DORA Subtotal $39,690 $66,040
Department of Revenue
Personal Services - $11,491
Software Programming and Testing - $141,233
Centrally Appropriated Costs
1
- $3,401
FTE – Personal Services - 0.2 FTE
DOR Subtotal - $156,125
Total $39,690 $222,165
Total FTE 0.4 FTE 1.0 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
Department of Regulatory Agencies. The bill requires the addition of 0.8 FTE personnel in
DORA to review additional applications for tax credit certificates and track secondary transfers of
tax credits. Personal service costs in FY 2024-25 are prorated to reflect an assumed
January 1, 2025, start date, and include standard operating expenses, and capital outlay costs
are paid from the Conservation Cash Fund.
Beginning in FY 2026-27, the bill will extend DORA expenditures that would otherwise end upon
the repeal of statute creating the Conservation Easement Oversight Commission and requiring
the certification of conservation easement holders. The bill is expected to require ongoing Page 5
February 20, 2024 SB 24-126
expenditures at current levels. These expenditures will be shown in future versions of this fiscal
note.
Department of Revenue. Expenditures in the department begin in FY 2025-26 and include
one-time software programming and testing expenses and ongoing personnel costs. Costs are a
result of allowing subsequent transfers of tax credits and allowing transfers to pass-through
business entities, which require system modifications and review by tax personnel.
Staffing. Table 3 shows expenditures for the addition of 0.3 FTE to review transferred tax
credits, prorated to reflect an expected November 1, 2025, start date.
GenTax programming and testing. The bill requires expenditures of $141,233 to program,
test, and update database fields in DOR's GenTax software system. Programming costs are
estimated at $90,383, representing 390 hours of contract programming at a rate of $231.75
per hour. Costs for testing at the department include $33,250 for 950 hours of innovation,
strategy, and delivery programming support at a rate of $35 per hour, and $17,600 for 550
hours of user acceptance testing at a rate of $32 per hour.
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 for FY 2024-25
and FY 2025-26. This estimate assumes the December 2023 LCS revenue forecast, and estimates
are not available after FY 2025-26.
The bill decreases General Fund revenue subject to TABOR, which will decrease the amount of
General Fund revenue required to be refunded to taxpayers with no net impact on the amount
available for the General Fund budget.
The bill increases cash fund revenue subject to TABOR, which will increase the amount of
General Fund revenue required to be refunded to taxpayers, correspondingly decreasing the
amount available for the General Fund budget.
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 2024-25.
Based on this fiscal note, the bill is expected to decrease the amount of General Fund held in
reserve by the amounts shown in Table 1, which will increase the amount of General Fund
available for other purposes. Page 6
February 20, 2024 SB 24-126
Effective Date
The bill takes effect 90 days following adjournment of the General Assembly sine die, assuming
no referendum petition is filed.
State Appropriations
For FY 2024-25, the bill requires an appropriation of $32,520 from the Conservation Cash Fund
to DORA, and 0.4 FTE.
State and Local Government Contacts
Agriculture Governor's Office of Boards and Commissions
Information Technology Natural Resources
Personnel 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 the General Assembly website.