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April 18, 2024 SB 24-126
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Fiscal Note
(replaces fiscal note dated February 27, 2024)
Drafting Number:
Prime Sponsors:
LLS 24-0505
Sen. Will; Winter F.
Rep. Lukens; Lynch
Date:
Bill Status:
Fiscal Analyst:
April 18, 2024
House Ag., Water & Natural Res.
Louis Pino | 303-866-3556
louis.pino@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 and increases the maximum
amount of conservation easement tax credits that may be certified through 2031. It
decreases state revenue and increases state expenditures on an ongoing basis.
Appropriation
Summary:
For FY 2024-25, the bill requires an appropriation of $12,925 to the Department of
Regulatory Agencies.
Fiscal Note
Status:
The revised fiscal note reflects the introduced bill, as amended by the Senate
Agriculture and Natural Resources Committee, the Senate Finance Committee, and the
Senate Appropriations Committee.
Table 1
State Fiscal Impacts Under SB 24-126
Budget Year
FY 2024-25
Out Year
FY 2025-26
Out Year
FY 2026-27
Revenue General Fund ($7,500,000) ($20,000,000) ($27,500,000)
Cash Funds $33,900 $56,500 $56,500
Total Revenue ($7,466,100) ($19,943,500) ($27,443,500)
Expenditures Cash Funds $12,925 $25,850 $90,475
Centrally Appropriated $3,585 $7,170 $25,095
Total Expenditures $16,510 $33,020 $115,570
Total FTE 0.2 FTE 0.4 FTE 1.4 FTE
Transfers - - -
Other Budget Impacts TABOR Refunds ($7,466,100) ($19,943,500) Not estimated
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April 18, 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 and
modifies commission membership.
Conservation easement tax credit. 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 $60 million for tax year 2025, $70 million for 2026, and $75 million for
each year from 2027 through 2031. For tax years 2025 and 2026, the value of the credit is
90 percent of the value of the donated easement, as in current law. For tax years 2027 through
2031, the amount decreases to 80 percent of the value of the donated easement. The bill
directs DORA to prioritize and issue tax credit certificates in the order that claims are received,
and repeals the $15 million limit on the amount of tax credits that may be reserved against
future year caps. The bill also allows transferees to claim the credit against the insurance
premium tax, rather than the state income tax, subject to the same limitations that would
otherwise apply. Beginning in tax year 2025, the holder of the conservation easement may
approve wind or solar energy facilities that are compatible with conservation values. Finally, the
bill removes the requirement that state revenues exceed certain thresholds for taxpayers to
claim a refundable tax credit.
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.
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April 18, 2024 SB 24-126
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.
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 allowed cap in 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 $7.5 million in FY 2024-25 and by $19.9 million in
FY 2025-26, $27.4 million in FY 2026-27 and about $30 million annually for tax years 2027
through 2031. 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
$7.5 million in FY 2024-25, $20 million in FY 2025-26, $27.5 million in FY 2026-27and by about
$30 million annually through FY 2031-32, 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.
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. This bill
increases tax credit certification fees, with total revenue generate to the Conservation Cash Fund
based on the assumed number of new certifications each year. The fee revenue is subject to
TABOR. 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.
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April 18, 2024 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 2025-26 Tax Credit Certification Fee $11,300 5 $56,500
State Expenditures
The bill increases state expenditures in DORA by $16,500 in FY 2024-25, $33,000 in FY 2025-26,
$115,600 in FY 2026-27, and smaller amounts in later years. Expenditures are paid from the
Conservation Cash Fund. Expenditures are shown in Table 3 and detailed below.
Table 3
Expenditures Under SB 24-126
FY 2024-25 FY 2025-26 FY 2026-27
Department of Regulatory Agencies
Personal Services $12,669 $25,338 $88,683
Operating Expenses $256 $512 $1,792
Centrally Appropriated Costs
1
$3,585 $7,170 $25,095
Total Costs $16,510 $33,020 $115,570
Total FTE 0.2 FTE 0.4 FTE 1.4 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
Department of Regulatory Agencies. The bill requires the addition of 0.4 FTE personnel in
DORA to review additional applications for tax credit certificates. 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 requires ongoing expenditures for
1.0 FTE compliance specialist to perform these duties. Continuation costs for this staff person are
included in Table 3 beginning in FY 2026-27. This portion of the bill does not require the
addition of staff beyond the current staffing level. Page 5
April 18, 2024 SB 24-126
Department of Revenue. Beginning in FY 2025-26, the bill increases department workload to
process tax credit claims. This workload increase is assessed as minimal and can be
accomplished within existing appropriations.
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 also 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.
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 $12,925 from the Conservation Cash Fund
to DORA, and 0.2 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.