Denver Business Journal
y Renee McGaw

Lawmakers are considering major changes in how Colorado taxes corporate income, in the hope of attracting businesses that will build facilities and employ more people here.

But many companies may consider themselves losers if the bill passes. About 68 percent of corporate taxpayers would pay more -- $8,500 more, on average -- according to an analysis based on data from the state Department of Revenue. The other 32 percent would pay an average of $16,500 less.

"That's a bit of a red herring," said Tom Clark, executive vice president of the Metro Denver Economic Development Corp. (EDC), which supports House Bill 1380. "This bill was designed to help companies with substantial presence, payroll and investment in Colorado. Those are the ones who benefit. The ones who will be paying marginally more are companies that are outside the state, selling into the state. And that's exactly the way the bill was intended."

Opponents disagree.

"This is a tax giveaway to a small group of corporations, while it is a tax increase for the majority of multistate corporations," said Carol Hedges, senior policy analyst for the Colorado Fiscal Policy Institute, a low-income advocacy group. "Do these tax giveaways actually result in more economic development? Do companies locate here, do they bring jobs, do they increase employment? Quite frankly, the analysis that we've looked at suggests that's not the case."

House Bill 1380 shifts Colorado to what's called a "single-sales factor" method of taxing multistate corporations, or those that do business in more than one state. Ten states already use this method, and three others are phasing it in.

Colorado currently offers companies a choice in how they apportion income. The first method is based on sales and property in Colorado; the second considers sales, property and payroll.

A single sales factor method would eliminate that choice. It would tax business income solely on the ratio of a company's sales in Colorado to its total sales.

The primary beneficiaries would be multistate companies that have significant property and payroll in Colorado, but sell mostly outside the state. Companies that sell a lot within Colorado, but don't have much property or payroll here, would pay more. Companies that earn no income outside Colorado wouldn't be affected.

Mutual fund service companies, such as Janus and Oppenheimer Funds, also would benefit. Under the current bill, they would be treated differently, allowed to use a formula that would result in their saving an estimated $5.5 million every year.


If you have questions on any legislative topic, please contact:

Colorado Automobile Dealers Association
 290 East Speer Boulevard Denver, CO  80203
 Telephone:  303.831.1722  |  Facsimile: 303.831.4205