by Nicole Myers

Senators, has this ever happened to you?  You have a great idea for a bill to create a tax credit. It will provide assistance or incentives to deserving Coloradans who satisfy the criteria to claim it. You submit your bill request to the OLLS at your earliest opportunity, and within a day or two, an OLLS attorney calls you to discuss your request.  But before you can even explain your great idea, the attorney respectfully tells you that because your bill creates a tax credit, it is considered revenue raising and therefore should start in the House of Representatives.

Now hold on just a minute.  You are a State Senator! Why is an OLLS attorney telling you that your bill, which was your idea, should start in the House?  What’s with this revenue-raising thing…did the OLLS make this up? And, how can a tax credit, which is revenue reducing, be considered a bill that raises revenue?

Senators, your OLLS attorney gave you this unhappy news because Section 31 of article V of the state constitution requires that “[a]ll bills for raising revenue shall originate in the house of representatives, but the senate may propose amendments, as in the case of other bills.” This requirement is known as the “Origination Clause” and was likely modeled after a similar provision in the United States constitution.

You may be wondering why the Colorado and United States Constitutions require bills that raise revenue to originate in the House of Representatives. The right to introduce money bills is an ancient privilege of the House of Commons, the lower house of the British Parliament. This privilege was awarded the lower house in the belief that the House of Lords, a permanent, hereditary body created by the king, would be more subject to influence by the crown than the House of Commons, a temporary elective body.  They thought it was more dangerous to let the Lords impose new taxes; better to leave that to the body elected by the people.

A substantial number of state constitutions and the United State constitution maintain the privilege of the “lower” house to introduce money bills. While the limitation regarding revenue-raising bills is a remnant of Parliament’s struggles with the Crown, in modern times it expresses a preference for keeping the power to tax as close as possible to those subject to the tax. The House of Representatives, deemed the “lower” house, is presumed to more directly represent the people both because lower houses are customarily larger than their corresponding upper chamber and their membership is usually subject to election more frequently.

There are many Colorado cases in which the court has assessed the constitutionality of bills under the Origination Clause, and there have been various interpretations of the phrase “bills for raising revenue” as stated in both the Colorado and United States Constitutions. In Colorado, the courts have determined that a bill for raising revenue “is one which provides for the levy and collection of taxes for the purpose of paying the officers and of defraying the expenses of government.” The courts have also held that “[a] bill designed to accomplish some purpose other than raising revenue, is not a revenue-raising measure.  Merely because as an incident, to its main purpose, it may contain provisions, the enforcement of which produces a revenue does not make it a revenue measure.”

If you are thinking “but the General Assembly can’t pass a bill for the levy and collection of taxes for any purpose,” you are one step ahead of me. Today, the accountability to taxpayers for tax increases that the Origination Clause provides is largely superseded by the Taxpayers’ Bill of Rights. TABOR requires voter approval for any legislation that increases taxes, so now the voters directly decide whether taxes should be increased. (Interestingly, a bill that includes a referendum clause asking voters to increase or decrease state general fund revenue is considered a bill for raising revenue, even though voter approval is required.) So why are OLLS attorneys still bothering you with e-mails or phone messages about revenue-raising bills?

The Colorado Attorney General’s Office has issued several opinions regarding bills for raising revenue. One of these opinions states that a bill that would have the obvious effect of decreasing collected revenues is still a bill for raising revenue.[1] The Attorney General’s Office determined through its research that bills for raising revenue “means bills which provide for the levy and collection of taxes. A bill levying taxes may cause a tax to decrease as well as increase.  Accordingly, art. V (section) 31 precludes the senate from introducing measures that decrease state taxes”. For this reason, the OLLS advises members of the General Assembly that a bill that affects the amount of general fund revenue collected by the state is considered a revenue-raising bill and should be introduced first in the House. Bills that fall into this category include income tax credits, income tax exemptions, bills to decrease any state tax, and bills that seek voter approval for an increase or decrease in any state tax or approval for the creation of a new state tax. Bills that are not deemed to affect the amount of general fund revenue collected by the state and therefore can be introduced in the Senate include bills that delegate authority to local governments to levy local property taxes, bills that appropriate money from the general fund, and bills that create, increase, or decrease a fee or toll as compensation for the use of government facilities or for services provided by the government.[2]

Although the OLLS does its best to advise Senators of the provisions of section 31 of article V of the state constitution, Senators have started many revenue-raising bills in the Senate. There is now precedent for these bills being enacted after starting in the Senate, and these bills are presumed to be constitutional. To our knowledge, no one has challenged any of these revenue-raising bills in court based on a violation of the Origination Clause; therefore, the OLLS does not know whether a court would give more weight to the constitutional provisions of the Origination Clause or the presumption of constitutionality afforded every measure enacted by the General Assembly. Regardless, it is interesting to note that one Speaker of the House within recent memory, to protect the House’s authority to introduce revenue-raising bills, refused to introduce in the House any Senate bill that was revenue raising. While a Senator may decide that he or she is not going to let the Origination Clause stop him or her from introducing a Senate Bill that affects the overall amount of revenue coming into the state general fund, the House of Representatives may use the Origination Clause to prevent the bill from proceeding in the House.

As all Colorado State Senators and Representatives know, the OLLS will never tell a member of the General Assembly that he or she cannot introduce a bill for any reason. So if you are a Senator and are ever advised that your bill is revenue raising and, pursuant section 31 of article V of the state constitution, should start in the House, it is just the OLLS reminding you of the requirements of the Origination Clause. We do this in an effort to protect the constitutionality of your bill, maintain the authority of the House of Representatives to introduce revenue-raising bills, and preserve the integrity of the laws and traditions that govern the legislative process in Colorado. We leave it to you to determine whether to be afraid!

[1] For a list of specific Attorney General Opinions discussing article V (section) 31, please see section 8.1.5 of the OLLS Drafting Manual.

[2] For a more thorough discussion of bills that are and are not considered revenue raising, please see sections 8.1 and 8.2 of the OLLS drafting manual.