Colorado tax-haven bill passes after ‘big business vs. little guy’ debate

Colorado House Democrats succeeded Wednesday for a second straight year in sending a bill to the Senate that would generate more tax revenue from some international companies — but only after a lengthy and very pointed debate that often sought to pit big businesses against small companies and average Colorado residents.

By a fully partisan 34-30 vote, the House approved House Bill 1275, sponsored by Democratic Reps. Mike Foote of Lafayette and Brittany Pettersen of Lakewood. The bill would change Colorado corporate income-tax policy to include in corporations’ taxable income to include any revenue generated by affiliated companies that are located in countries like Bermuda, which are considered tax havens because of their low tax rates and lack of transparency.

Business groups and economic developers have argued the bill will stunt Colorado’s ability to attract and retain international companies, both because of the additional tax burden and because of what it says to prospective companies looking to open headquarters or regional centers here. The additional income that would be included in their taxable rates would be taxed at the state’s corporate income rate of 4.63 percent.

“(The rate) 4.63 percent doesn’t sound like much, but it sends a message to companies looking to move to Colorado that we are not a business-friendly state and that we are going to find ways to take as much of your profit as possible,” said Rep. Polly Lawrence, a Roxborough Park Republican and small-business owner. “This sounds small and insignificant in the grand scheme of international companies, but it is not.”

However, Foote responded that the handful of states that have implemented similar laws — including Alaska, Montana and Oregon — have shown no adverse effects in those areas. He, in turn, accused big business and special interests of manufacturing a potential crisis in order to avoid paying the taxes they owe from sales generated in Colorado, as small businesses without offshore holdings must.

“Anyone can come down to the Capitol and say things at any time. It doesn’t mean that it’s true. It doesn’t mean that it has merit,” Foote said. “I think there’s more evidence of Santa Claus existing than there is of economic harm that would occur from this bill passing.”

HB 1275 will have a tough time passing through the Republican-majority Senate, where a similar version died last year in the state, veterans and military affairs committee. If it were to get through that chamber, it would still head to Gov. John Hickenlooper, who has yet to weigh in on it, and then to voters, who would have to approve the tax-policy change that’s expected to generate $75 million annually for K-12 education.

But leaders from both parties spoke of the proposal Wednesday in terms that presage their November campaign themes as much as those that explain their specific thoughts on the bill.

House Speaker Dickey Lee Hullinghorst, making a rare pitch for a bill during final-vote debate, criticized the “well-paid lobbyists” who had been trying to get the bill killed at the expense of its benefits for state schools.

“That’s the kind of message people are responding to now because they believe — and I believe they’re right — that big corporations are benefiting the most from the economic recovery,” the Gunbarrel Democrat said. “And I think that we should do anything we can to reassure them that we’re representing them.”

House Minority Leader Brian DelGrosso, R-Loveland, said the bill puts Colorado at a competitive disadvantage in recruiting companies and jobs whose taxes fund schools and other infrastructure, especially because corporations identified as having tax-haven affiliates would have to prove to the Colorado Department of Revenue that they are doing legitimate business in those flagged countries to avoid paying higher taxes.

“This is basically like saying that any person who leaves a bar is presumed drunk and you have to submit to a sobriety test to prove you’re not drunk,” DelGrosso said. “This is one of the most irresponsible bills I’ve seen so far in this session.”