Press Release - Veto Message on HB08-1408
OFFICE OF GOV. BILL RITTER, JR.
FOR IMMEDIATE RELEASE
TUESDAY, JUNE 3, 2008
CONTACT
Evan Dreyer, 720.350.8370, evan.dreyer@state.co.us
GOV. RITTER VETO MESSAGE ON HOUSE BILL 08-1408
June 3, 2008
Honorable Colorado House of Representatives
66th General Assembly
Second Regular Session
State Capitol
Denver, CO 80203
Ladies and Gentlemen,
I am filing with the Secretary of State House Bill 08-1408, "Concerning the Implementation of Additional Requirements on a Corporate Income Taxpayer to Verify the Validity of Transactions Related to Real Estate Investment Trusts." I vetoed this bill as of 2:27 p.m., and this letter sets forth my reasons for doing so.
House Bill 08-1408 would impose new disclosure requirements on taxpayers who attempt to obtain a tax advantage from certain types of transactions. In addition, the bill would impose penalties for failure to disclose such transactions and underpayment penalties if the tax advantage is ultimately found to be impermissible. Although I support the goal of this legislation, certain technical aspects of the bill are problematic.
Specifically, House Bill 08-1408 will put many well-intentioned taxpayers on the horns of a dilemma: either overpay the anticipated tax due before the final determination of tax liability is reached or face substantial penalties. The federal tax code and the tax codes of other states with similar laws also provide for underpayment penalties, but only where warranted by factors other than simple underpayment (such as disregard of the tax law or where a transaction or amount of underpayment exceeds a minimum value threshold).
House Bill 08-1408 contains no such triggers. As a practical matter the bill is likely to coerce taxpayers into overpaying their taxes and then go through a rebate process, creating a significant administrative burden for both the taxpayer and the Colorado Department of Revenue.
Any significant change to the corporate income tax code should be accompanied by a thorough and thoughtful process that involves and gives meaningful voice to all stakeholders. House Bill 08-1408, however, was introduced very late in the legislative session, resulting in very limited examination and consideration of the bill's effects and potential unintended consequences, such as those described in this letter. Due to the fact that this bill was introduced so close to the end of the legislative session there was simply not enough time to engage in adequate debate in order to reach a considered understanding of the consequences of this bill. I am optimistic that during the next legislative session a bill can be crafted that closes the loopholes that this bill targeted without placing taxpayers in the same untenable position as would result from House Bill 08-1408.
Accordingly, I have vetoed this bill.
Sincerely,
Bill Ritter, Jr.
Governor