On November 9, 2009, Colorado Governor Bill Ritter released his revised FY10 budget recommendations. Among other things, the Governor proposed a tax reform package in an effort to help balance the state budget. The General Assembly introduced this proposed tax legislation on January 22, 2010, and fast-tracked a number of the individual bills at the Governor's request. Of specific interest are:
- House Bill 1190: Effective March 1, 2010, HB 1190 places a two-year prohibition on the sales and use tax exemption for energy (i.e., electricity, coal, gas, fuel, etc.) used for industrial or manufacturing purposes. The bill carves out and retains the exemption for utilities used for such purposes.
- House Bill 1192: Effective March 1, 2010, HB 1192 expands the sales and use tax base by adding "standardized software" to the definition of taxable "tangible personal property." The bill defines "standardized software" as "computer software, including prewritten upgrades, that is not designed or developed to the specifications of a specific purchaser" or "computer software designed and developed to the specifications of a specific purchaser but then sold to another purchaser."
- House Bill 1193: HB 1193 originally provided for a broad version of affiliate nexus but was significantly amended in the Senate amid contentious debate. The amended bill now provides a nexus presumption, effective March 10, 2010: "if a retailer that does not collect Colorado sales tax is part of a controlled group of corporations, and that controlled group has a component member that is a retailer with physical presence in [Colorado], the retailer that does not collect Colorado sales tax is presumed to be doing business in [Colorado]" (emphasis added). The terms "controlled group of corporations" and "component member" are defined by reference to section 1563 of the Internal Revenue Code. This nexus presumption may be rebutted with evidence that the component member with physical presence in Colorado "did not engage in any constitutionally sufficient solicitation" on behalf of the out-of-state retailer. Also of note, the bill mandates significant new information reporting and notification requirements. A noncollecting retailer that fails to provide a purchaser with notice that he or she must file a sales or use tax return would be liable to Colorado for $5 per infraction.
- House Bill 1199: Effective January 1, 2011, HB 1199 limits the use of net operating losses to $250,000 annually for the next three taxable years. Taxpayers may add one additional year in carryforward for each year that they are affected by this new limit and may accrue interest on these additional carryforwards at 3.25 percent.
The bills passed both chambers of the General Assembly in less than a month, evidencing Colorado's dire need for revenue. On February 23, 2010, the enrolled versions of the bills were signed by the Speaker of the House and the President of the Senate. The Governor signed the bills into law on February 24, 2010.