Colorado LegiSource

An informational and educational resource for the Colorado General Assembly by the Office of Legislative Legal Services.

Author: olls

  • Creating an Enterprise Pursuant to TABOR – Part 2

    by Esther van Mourik

    This week we are continuing our discussion about the definition of an “enterprise” under TABOR. If you missed Part 1 of our discussion, please click here for that article.

    Part 2

    Part 1 focused on the definition of an enterprise and what kinds of activities might qualify as enterprises. But might there be a time when the activity of an entity is too tenuous to qualify as a business? The 2015 and 2016 debates around the hospital provider fee are illustrative of the difficulty in determining what a government-owned business really is.

    The hospital provider fee was established in 2009 under the Health Care Affordability Act of 2009. This act requires Colorado hospitals to pay a fee to the state, which, when added to certain state funds, is then matched through a federal government program. The fee is combined with federal money and the total amount ($805 million dollars in FY 2015-16) is distributed back to Colorado hospitals as compensation for health care services provided to individuals covered by Medicaid. The fees paid by the state hospitals are currently counted as state budget year revenue under TABOR and count toward the state’s budget year revenue limit. Because state revenue has been forecasted to exceed the limit, some have proposed creating an enterprise to collect the hospital provider fee. Removing the fee revenue from the calculation of the state’s budget year revenue, would allow the state to collect other revenues without exceeding its TABOR limit while still ensuring that the hospitals can receive state and federal moneys for the provision of Medicaid services.

    At the time the hospital provider fee enterprise was first proposed, no new statute had been written or court decision rendered about the definition of an enterprise since the Colorado Bridge Enterprise or CBE decision. As a result of the debates over the proposal, several new opinions are now available regarding the matter, one from the Office of Legislative Legal Services (Office), one from practitioners in this legal area, and one from the Colorado Attorney General.

    Our Office’s opinion, dated December 31, 2015, states that, while legislation enacted by the General Assembly is presumed constitutional, an enterprise created only to charge and collect the hospital provider fee is not a business for purposes of enterprise status under TABOR. The conclusion hinges on the fact that all the entity would be doing is collecting money to leverage and obtain more money from the federal government. If that is all the entity would be doing, there would be no “fee for service” because there is no real service being provided. The opinion also relies on there being no private sector analogue for paying a fee in order to leverage that fee to seek matching federal money for Medicaid services.

    Not everyone agreed with our Office’s conclusion. Trey Rogers of Lewis Roca Rothgerber Christie, LLP, and Jon Anderson of Holland & Hart, LLP, issued their own opinion on February 11, 2016, concluding that since the fee is collected to access a program that helps hospitals defray the costs of providing medical services to Coloradans who could not otherwise afford to pay for health care, there is a “fee for service” and the activity qualifies as a business. They further argue there is no requirement for a private sector analogue after the CBE decision and, even so, the service provided by the entity would be similar to services provided by insurance and investment brokers to the private sector. The hospitals paying the hospital provider fee are paying the entity their money in exchange for access to greater returns, the increased amount of federal money available to reimburse the hospitals for the provision of Medicaid services.

    On February 29, 2016, Attorney General Cynthia Coffman released her opinion on the matter, concluding that a hospital provider fee enterprise would survive a constitutional challenge. First, she points to the enactment of the hospital provider fee as a fee, not a tax, thus ensuring the entity does not have the power to tax, something the Nicholl decision held to be inconsistent with the characteristics of a business. Second, the Attorney General argues that the fee pays for services that reduce the amount of uncompensated care hospitals are exposed to. Finally, she points out that the entity would be financially distinct from its parent government, a fact that both the Colorado Supreme Court and the Colorado Court of Appeals found important in their respective Nicholl and CBE decisions.

    While the hospital provider fee enterprise debate was continuing, the General Assembly created a new enterprise in 2016. Senate Bill 16-115 creates an electronic recording technology board, which is allowed to impose an electronic filing surcharge when someone records a document with a county clerk and recorder. This fee is to be used to develop and modernize electronic filing systems throughout the state. As stated earlier, legislation passed by the General Assembly is presumed constitutional. But, what is the fee for service here? A better filing system? Fewer headaches when recording deeds? Being able to electronically access recorded documents? It’s not really clear what specific service patrons recording documents with county clerks and recorders will be getting for this additional surcharge, but it’s arguably an activity conducted in the pursuit of a benefit.

    Taking all of these opinions, the newly created electronic recording technology enterprise, and the presumption of constitutionality, where do things stand on the definition of an enterprise for purposes of TABOR? We’re still not absolutely certain, and the analysis has clearly evolved over the past 24 years. Each proposed enterprise needs to be considered in light of the relevant court decisions, legal opinions, and examples of existing enterprises. Members of the General Assembly are encouraged to contact the Office to discuss whether a particular activity may appropriately be characterized as an enterprise under TABOR.

    As a final tool to assist you, the Office has developed this relatively simple flow chart to help determine whether an activity could be designated as an enterprise:

  • Creating an Enterprise Pursuant to TABOR

    by Esther van Mourik

    While the Legislative Council’s December Economic Forecast highlighted improvements in economic gains, it also stated that this optimism is tempered by global economic uncertainty, indicating that the outlook still shows a heightened downside risk. It also laid out the budget realities for the Colorado General Assembly as it begins the 2017 session: “Assuming the $169.2 million shortfall in FY 2016-17 is addressed by reducing the required reserve, revenue will exceed the amount required to maintain the same level of appropriations in FY 2017-18 as is currently budgeted for FY 2016-17 by $215.7 million, or 2.1 percent.”

    The Taxpayer’s Bill of Rights, or TABOR, is a Colorado constitutional provision added by an initiative approved by voters in 1992 that contains tax, revenue, and debt limitations. If a district, including the state, brings in revenue above its limit, as the state did in the 2014-15 budget year, it must refund those excess revenues in the next fiscal year. The December forecast shows that the state is currently projected to exceed the limit again in the 2017-18 and 2018-19 budget years, prompting estimated TABOR refunds of $279.4 million in budget year 2018-19 and $287.2 million in budget year 2019-20. Those refunds are made from the general fund, thereby diverting dollars that would otherwise be available to pay for programs.

    The possibility of TABOR refunds raises the reality that the Office of Legislative Legal Services (Office) will see more bill requests proposing a variety of approaches to retain excess revenues. One such approach that many are talking about is creating an enterprise in order to classify certain governmental activities outside of the requirements of TABOR.

    TABOR applies to all “districts,” which are defined to include the state or any local government, excluding “enterprises.” This means that an enterprise is exempt from the limitations imposed by TABOR, including TABOR’s revenue limit that restricts how much revenue a district can bring in each budget year. If an enterprise generates revenue, that revenue is not counted as part of a district’s budget year revenue for purposes of the district’s revenue limit. Creating an enterprise to classify certain governmental activities outside of TABOR before a year in which revenues are anticipated to exceed the limit, requiring TABOR refunds, has the effect of reducing, if not eliminating, the projected refunds.

    Although enterprises are getting more attention recently, the exception for enterprises was included in the original initiative, and the state designated a variety of activities as enterprises starting shortly after TABOR was adopted. The multi-million dollar question is what activity can qualify as an “enterprise.” Multi-million from the perspective of what would or wouldn’t be counted as part of the state’s revenue limit, thereby possibly helping out with budget constraints, but also from the perspective of the penalties TABOR provides. If the state is successfully sued for creating an enterprise in a refund year that doesn’t fit the definition, it potentially faces serious consequences set forth in the constitution. So, while the court has never struck down an enterprise established by the state, it is clear why many want to know what can and cannot be appropriately classified as an enterprise under TABOR.

    The Colorado Constitution defines an enterprise as a “government-owned business authorized to issue its own revenue bonds and receiving under 10% of annual revenue in grants from all Colorado state and local governments combined.” The reference to “annual revenue in grants” requires an annual determination that an enterprise meets all elements of the enterprise definition. Even from a lawyer’s perspective, this language is less than clear, and its meaning has been heavily debated since 1992. Part 1 of this article gives a primer about those debates. Part 2 – to be posted next week – will cover more recent discussions and will conclude with what the Office thinks we know now.

    PART 1

    After TABOR took effect, the General Assembly passed legislation during the 1993 session to further define some of the terms used in the new constitutional provision in order to assist in administering the law at the state level. Those definitions are laid out in section 24-77-102, C.R.S. The statutory definition of an “enterprise” is identical to what is found in the Constitution. However, that definitional section does clarify the meaning of a “grant” and the “state,” which are not defined in TABOR. Most important is the list of things that are not a “grant,” such as federal funds. The Colorado Supreme Court upheld the General Assembly’s ability to define terms since the General Assembly was seeking to comply with the provisions of TABOR by defining the terms consistent with TABOR.

    During the same legislative session, the General Assembly also created several state enterprises. Those enterprises include higher education auxiliary facilities, the state lottery, a student loan division in the department of higher education, and the veterans’ community living centers. No legal challenges were made to the creation of these enterprises. Subsequently, the General Assembly enacted legislation creating additional state enterprises in 1994, 2000, 2001, 2002, 2004, 2005, 2009, and most recently in 2016. (A list of state enterprises can be found here.)

    An enterprise created by a duly enacted statute is presumed constitutional. What does this presumption of constitutionality mean? If a person claims that a statute is not constitutional, the courts require that person to prove the statute’s unconstitutionality beyond a reasonable doubt (a very high standard that gives great deference to the General Assembly’s law-making authority). And, if a court can read the statute two ways, a constitutional way and an unconstitutional way, the court must choose the constitutional interpretation. (See “Statutory Construction: Legislative Intent and the Presumptions Used to Interpret Statutes”)

    The first (and only) Colorado Supreme Court case that gave direct guidance regarding the creation of enterprises was decided in 1995 in what is often referred to as the Nicholl decision. The case involved the E-470 Public Highway Authority (Authority), which was created by several counties. One of the counties took issue with some of the actions the Authority was taking and sued, claiming that the Authority violated TABOR’s debt and revenue limitations. In response, the Authority claimed that it was an enterprise and thus not subject to TABOR’s limitations.

    The Colorado Supreme Court broke the issue down into three questions: 1) whether the Authority is “government-owned,” which the Court dispatched with ease (the contracts creating the Authority said it was a political subdivision of the state), 2) whether the Authority is a business, and 3) whether the Authority receives more than 10% of its annual revenue in grants from the state and local governments, which the Court noted it did not. With respect to the second question, the Court said that a business is generally understood to mean an “activity which is conducted in the pursuit of benefit, gain, or livelihood.” The Court found that the Authority was organized with the express intent that it provide access to its highway in exchange for the payment of tolls and user fees, thus indicating that the Authority would fit the general understanding of a business. However, because the Authority had the power to levy a tax, a power that the Court found to be inconsistent with the characteristics of a business and the definition of an enterprise as a whole, the Court held that the Authority was not an enterprise. The General Assembly remedied the problem by immediately passing legislation to eliminate the taxing power of the E-470 Public Highway Authority. Because the Authority has continued to satisfy the three-part test every year since, it remains an enterprise to this day. The Nicholl decision established that, to qualify as a business for enterprise status, an entity’s activities have to be conducted in the pursuit of benefit, gain, or livelihood and the entity may not have the power to tax.

    Because of the lack of an abundance of Colorado Supreme Court cases on this topic, secondary interpretations have been helpful. The Colorado Attorney General, private practitioners, and municipal attorneys have opined on what constitutes an enterprise, so it can be useful to consider their opinions as well.

    In 1995, Gale Norton, the Colorado Attorney General at the time, wrote an opinion to answer the question of whether an enterprise providing internal services such as telecommunications and insurance operations to its government-owner, in addition to the public, disqualifies it from being a business. The conclusion was that such entities are still businesses and therefore can be enterprises. Ms. Norton stated that, in order to meet the “business” requirement, an enterprise must be independent, self-supporting, and financially distinct, and must provide goods and services for a fee. The fact that the enterprise also provides services for a fee to its government-owner doesn’t change the result because the Nicholl decision didn’t question the identity of the customers but examined the activity carried out by the entity. The opinion generally states that an enterprise’s provision of goods and services should be something that is commonly carried on for profit outside the government and that the activities should bear the indicia of arms length, market exchanges.

    Amy Kennedy and Dee P. Wisor, two attorneys practicing in the area of government law, wrote an article in 1998 in The Colorado Lawyer further explaining enterprises. The authors questioned whether there is a necessity for the enterprise to have a “private business analogue” or, in other words, whether the enterprise must have a private business counterpart with customers who freely choose to use it. They argued that the Nicholl decision may have implied the private business analogue was necessary when the Colorado Supreme Court cited to an unrelated case that defined a government business as “a function of a government which offers any goods or services to the public for which there are reasonable substitutes provided by nongovernmental entities.” The authors came to this conclusion: “Unless and until the Colorado Supreme Court directly rules on whether ‘businesses’ under [TABOR] must provide services that also are offered in the private sector,” be careful.

    The Colorado Municipal League (CML) has also weighed in on the issue in its publication “TABOR: A Guide to the Taxpayer’s Bill of Rights.” CML created this publication to assist municipal officials in interpreting and applying TABOR in their local government operations. In both its 1993 and 2011 revised versions, CML points out that there are two interpretations: 1) the business must have some counterpart in the private sector, the “private sector analogue”; or 2) the activity is irrelevant so long as the enterprise subsists on an annual budget which includes less than 10% in state and local grants, making it more or less self-supporting, thus making the revenue stream the determining factor. By recognizing both of these conflicting interpretations, the CML guide illustrates the difficulty of developing a consistent test to determine whether specific governmental activities can be classified as enterprises.

    In 2014, the Colorado Court of Appeals issued the Colorado Bridge Enterprise or CBE decision. This case stemmed from the creation of the Colorado Bridge Enterprise in 2009, defined as a government-owned business within the Colorado Department of Transportation and authorized to impose a bridge safety surcharge on motorists’ registration fees to fix certain Colorado highway bridges. In 2012, the TABOR Foundation filed a lawsuit claiming, among other things, that the Colorado Bridge Enterprise does not qualify as an enterprise. The TABOR Foundation relied on Gale Norton’s 1995 opinion that a government-owned business must gain its revenue from market exchanges taking place in a competitive, arms-length manner. However, the Colorado Court of Appeals declined to follow that opinion and decided that the Colorado Bridge Enterprise is indeed an enterprise because it pursues a benefit (fixing bridges) and generates revenue by collecting fees from service users through car registrations, which the Court ruled is not a tax.

    The Colorado Supreme Court declined to take the CBE decision up on appeal, and the Colorado Court of Appeals decision doesn’t provide a thorough analysis indicating that service users must actually attain a benefit for an activity to rise to the level of a business. We can only speculate why the Colorado Supreme Court declined to take the case. We know that Justice Eid would have reviewed the case to look at three issues, including whether an enterprise must involve market exchanges taking place in a competitive, arms-length manner. But one Supreme Court Justice’s opinion on the petition for certiorari doesn’t rise to the level of law. The CBE decision is undoubtedly current law, but it still leaves governmental entities uncertain about what activities can be designated as enterprises. Perhaps CML’s analysis that the entity’s activity is irrelevant so long as all the other factors are checked off is spot on. Perhaps not. At best, the CBE decision begs the question whether the activity, or service provided, would ever be too tenuous to reasonably argue that the entity is truly a business for purposes of enterprise status. Please tune in next week for further discussion on this topic.

  • Minding Your Strike Types and Small Caps

    by Jessica Wigent

    Every bill, no matter the content, has a few things in common: each has numbered sections and each has at least one amending clause.

    The amending clause is not only an important tool, it’s also the bill sponsor’s friend. It announces how a bill plans to change the law and illustrates how the bill adds new language, strikes and deletes previous language, or repeals entire portions of law. A bill isn’t a bill, and it’s definitely not sitting on Capitol Hill, without it.

    Here’s how amending clauses work:

    Let’s say a bill sponsor wants to amend an entire section of law that’s in the Colorado Revised Statutes. The amending clause would look like this:

          SECTION 1. In Colorado Revised Statutes, amend 1-1-1101 as follows:

    The language following the “as follows” specifies what the bill and its amending clause are up to:

          SECTION 1. In Colorado Revised Statutes, amend 1-1-1101 as follows:

          1-1-1101. The above amending clause amends an entire section of law. (1) Within the section that the bill is amending, the changes it makes to the law are illustrated in two ways:

          (a) In small caps; or

          (b) In strike type.

          (2) If a bill adds new provisions to the law, the new language is shown in small caps.

          (3) If a bill repeals provisions of the law, the language is shown in strike type When amending, a bill can both add and remove language in the same provision.

    This is a nifty way to change the law, but maybe the bill sponsor still hasn’t found what she’s looking for. Let’s try it another way:

          SECTION 2. In Colorado Revised Statutes, 1-1-1102, amend (1)(b) as follows:

          1-1-1102. The above amending clause amends a specific provision of the law. (1) Sometimes a bill sponsor doesn’t  need (or doesn’t want) to amend an entire section of the law. When that happens:

          (a) The bill will specify the provision the sponsor wants to change in the amending clause; and

          (b) The bill will make changes to that section subsection of the law only.

    Maybe amending isn’t in a bill sponsor’s plans. But creating new law is:

          SECTION 3. In Colorado Revised Statutes, add 1-1-1103 as follows:

          1-1-1103. The above amending clause adds a new provision of law. (1) Sometimes the bill sponsor will want to add a brand new section of law to the Colorado Revised Statutes.

          (2) When a bill does this, all language in that section will be shown in small caps.

          (3) A bill can add new articles, new parts, new sections, and new subsections.

    Now that we’re on a roll, what if the bill sponsor wants the bill to eliminate not create law?

          SECTION 4. In Colorado Revised Statutes, repeal 1-1-1105 as follows:

          1-1-1105. Use the above amending clause if to the bill doesn’t add to or change a law, but instead removes it from the books entirely.(1) There are two ways a bill can repeal this section 1-1-1105.

          (2) The example shown here shows all of the language that was currently in law in strike type.

          (3) This is how most repeals are drafted, so that legislators and the public can see exactly what provisions are removed from the law.

    Sometimes a bill won’t show the repealed language in strike type because it’s removing the equivalent of 30 pages of law from the Colorado Revised Statutes, and the bill really doesn’t need to be that long. That’s when the bill sponsor might want to use what we in the drafting-amending-clauses-biz call a “straight repealer,” which announces that the provision of law the bill is amending is la fin; it’s over and out of the statutes, without showing the removed language in strike type:

          SECTION 4. In Colorado Revised Statutes, repeal 1-1-1105.

    The bill sponsor is in it to win it now, but maybe the bill should be even more specific:

          SECTION 5.  In Colorado Revised Statutes, 1-1-1104, amend (1) introductory portion and (1)(a); repeal (2); and add (3) as follows:

          1-1-1104. The above amending clause is good at multitasking. (1) Sometimes a bill sponsor does not want to amend an entire section:

          (a) Amending an entire section leaves the entire section open to additional amendments that fit under the title of the bill during the legislative process.

          (b) This is something a sponsor should consider when deciding how to change the law.

          (2) We should all just give up now, it’s getting too complicated.

          (3) Put the amending clause to work. In this example, the bill sponsor wanted to leave (1)(b) alone (to not make any changes to it). So the sponsor only amended, repealed, and added very specific subsections in this section.

    Okay, you say. But what if a bill is amending nearly every provision of a section, part, or article? Is there anything we can do besides use our trusty amend direction? But of course. Here’s where a bill sponsor might choose a different kind of amending vehicle—the R&RE or “repeal and reenact.” To illustrate: Instead of repealing section 1-1-1105 (Section 4 of the bill in the earlier example), let’s repeal and reenact it:

          SECTION 4. In Colorado Revised Statutes, repeal and reenact, with amendments, 1-1-1105 as follows:

          1-1-1105. Repealing and reenacting a provision of law has its pros and cons. (1) On the PRO side, it can be complicated and confusing to extensively amend a section; at some point the reader might have no idea where the strike type starts and the small caps begin. That’s when repealing and reenacting can be useful.

          (2) In the first SECTION for example, subsection (1) read “There are two ways a bill can repeal this section 1-1-1105.” However, because we’re repealing and reenacting this section, we’re removing all the existing language and replacing it with the new and newly arranged—so everything’s in small caps.

          (3) The potential issue with the R&RE is that legislators and the public can’t see, on the page, how 1-1-1105 used to read, which might make it difficult for them to know exactly how the bill is changing the law without dusting off their Colorado Revised Statutes and comparing the original version to the new one.

    We’ve only just scratched the surface of amending clauses. But it’s clear that a well-crafted bill uses amending clauses (and strike types and small caps) wisely.

    In drafting their bills, legislators should work with the drafters to ensure that their fellow legislators, the public, and especially their constituents, can clearly see how the bill is changing the law.

  • Statutory Revision Committee to Introduce 15 Bills

    by Kate Meyer

    In August, Legisource told you about the Statutory Revision Committee (SRC), a recently rebooted entity that examines the Colorado Revised Statutes to develop legislation that will modify or eliminate antiquated, redundant, or contradictory rules of law and to bring the statutes of this state into harmony with modern conditions. Since that article was published, the SRC has been hard at work, meeting three times and ultimately approving 15 bills for introduction in the 2017 legislative session.

    Committee process. Bill ideas can originate from any number of sources: Committee members or other legislators; legislative staff; jurists, attorneys, and other legal professionals; executive agencies; lobbyists; the public; etc. In its first meeting, the SRC adopted the following basic process for considering potential bills:

    final-src-request-flowchart

    (Click image to enlarge)

    The process starts when the SRC’s staff from the Office of Legislative Legal Services receives or creates a bill proposal and initially decides whether the proposal fits within the committee’s charge. Persons may submit bill proposals identifying possible defects or anachronisms in the law or possible antiquated, redundant, or contradictory laws by contacting a committee member or sending an e-mail to SRC staff at StatutoryRevision.ga@coleg.gov

    If staff finds that a bill proposal fits within the committee’s charge, they schedule it for committee discussion. The SRC’s process affords interested persons two opportunities to comment publicly on potential legislation:

    • First the public may testify at an initial meeting when the SRC receives a memorandum describing the genesis, scope, and intent of the proposed bill. The SRC then votes whether to have a draft bill prepared.
    • Second, for proposals for which the staff writes drafts, the public may testify at a subsequent meeting when the SRC votes whether to recommend bills for introduction. An affirmative vote from at least five members of the SRC is required for a bill to be introduced, ensuring that every bill has bipartisan support.

    The staff includes memoranda and bill drafts with the SRC agendas, which are posted on the SRC’s website one week in advance of a meeting date. And of course, the chance to weigh in on bills doesn’t end with the committee. Each introduced bill is debated and vetted through normal how-a-bill-becomes-a-law legislative procedures.

    Bills approved in 2016. Every bill recommended for introduction from the 2016 SRC proceedings received unanimous committee approval. The breadth of bill subjects typifies the SRC’s ability to consider a wide range of topics, including:

    • Repealing obsolete congressional and state legislative district laws;
    • Aligning statutory reporting requirements with section 24-1-136 (11), C.R.S.;
    • Updating certain outdated references to standards promulgated by the American National Standards Institute;
    • Removing “ghost statutes” inadvertently left on the books in 2016; and
    • Implementing recommendations received from the Department of Education and the Office of the State Auditor to modernize and correct various statutes related to those entities.

    To read the full text of the approved bills, please see the SRC’s 2016 Annual Report and the upcoming supplement on the SRC’s website.

    Looking ahead. Although the SRC expects to conduct the majority of its work during legislative interims, the committee will meet early in the 2017 session (date TBD) to select a new chairperson and vice-chairperson; to continue analyzing bill drafts that reconcile reporting requirements with section 24-1-136 (11), C.R.S.; and to consider a fix to the “Uniform Trust Decanting Act.”

    Among the topics the SRC will discuss in the 2017 interim is a comprehensive bill to modernize, without substantively changing, the transfer terminology used in the Colorado Revised Statutes relating to the organization of state governmental agencies under the “Administrative Organization Act of 1968.”

    Additional information. To learn more about the SRC, please contact a committee member or send an e-mail to SRC staff at StatutoryRevision.ga@coleg.gov. You may also check out a brief video detailing the SRC posted on the Colorado Channel’s website.

  • United States Supreme Court Effectively Upholds Colorado Internet Sales Tax Law

    by Esther van Mourik

    When you buy a present for your friend at a store in Colorado, the retailer collects the sales tax on that purchase and remits that amount to the Colorado Department of Revenue. If you buy the same item online from a retailer that does not have a brick and mortar store in the state, you are personally responsible for paying the same amount of tax (now called a use tax instead of a sales tax) to the Department of Revenue. Generally speaking this is because of the United States Supreme Court’s interpretation of the United States Constitution: To protect interstate commerce, a state can’t require retailers that don’t have a brick and mortar presence in the state to collect sales tax on its behalf. Instead, the responsibility for getting the tax money to the state falls to individual purchasers.

    Because many people aren’t aware of the responsibility to pay the use tax, Colorado is missing out on a lot of tax revenue. And because the economy is rapidly changing so that more people are buying presents (and other “tangible personal property”) online from retailers without brick and mortar stores in the state, the lost revenue effect is even greater. Estimates indicate that the state’s annual lost revenue due to online sales exceeds $150 million.

    In 2010, the General Assembly passed House Bill 10-1193, the so-called “Amazon law,” a reporting requirements statute that compels retailers who are not collecting sales tax to report a number of things to both the Department of Revenue and their Colorado customers. The law was immediately challenged in court and has been in litigation for the past six years. A state court also enjoined the enforcement of the new law while it was being litigated in federal court.

    On February 22, 2016, the 10th Circuit Court of Appeals issued an opinion upholding the constitutionality of House Bill 10-1193. On Friday, December 9, 2016, the United States Supreme Court declined to hear an appeal of the Court of Appeals decision. By declining to hear the appeal, the Supreme Court effectively affirmed the constitutionality of the law. This means that the Department of Revenue can start enforcing the requirements in House Bill 10-1193. Many news agencies have reported on this decision. You can read some of those articles here, here, here, and here.

    House Bill 10-1193 requires retailers who do not collect Colorado sales tax to do three things:

    1. Notify Colorado purchasers that sales or use tax is due on certain purchases made from the retailer and that Colorado requires the purchaser to file a sales or use tax return;
    2. Send notice to all Colorado purchasers by January 31 of each year showing certain information that the Department of Revenue will require by rule, including the total amount the purchaser paid for Colorado purchases in the previous calendar year. The notice must include, if available, the purchase dates, the purchase amounts, and the category of each purchase, including, if the retailer knows, whether the purchase is exempt or not exempt from taxation. This notice must also state that Colorado requires the purchaser to file a sales or use tax return and pay the sales or use taxes on certain Colorado purchases that the purchaser made from the retailer.
    3. File an annual statement with the Department of Revenue by March 1 of each year for each Colorado purchaser that shows the total amount the purchaser paid for Colorado purchases in the last calendar year.

    If the retailers who do not collect Colorado sales tax fail to do the three things listed above, those retailers are subject to fines for each failure. The Department of Revenue is trying to determine when the law will take effect. Hampering that decision is the fact that the state court injunction is still in place and must be vacated before the Department of Revenue can enforce the law. Many articles in the media that discussed House Bill 10-1193 appeared to argue that the law was intended to compel retailers who do not collect sales tax to voluntarily start collecting. While that intention is not clearly established in the law, it remains to be seen how retailers will respond when the law takes effect.

    There are efforts by other states, particularly in South Dakota, to require retailers that do not collect tax on internet sales to start collecting. Legislation of this type is a direct challenge to the United States Supreme Court’s constitutional interpretation that states cannot require out-of-state retailers to collect sales tax. So while the United States Supreme Court’s decision not to hear the Colorado case represents movement on this issue of online sales taxation, many questions remain to be answered. Stay tuned!

  • A New Citation Format for the Colorado Revised Statutes

    by Tom Morris

    While trying to read a statute to unravel its meaning, have you ever felt dismayed or sidetracked when you came across a phrase such as this: “as specified in sub-subparagraph (D) of subparagraph (III) of paragraph (g) of subsection (4) of this section”? That’s a lot of words—what is a “sub-subparagraph”, anyway?—and understanding them is made even more difficult due to the fact that they’re presented in reverse order from how most of us probably think. It’s as if, to describe how much money was being appropriated, we said “19 cents, 235 dollars, 452 thousand dollars, and 2 million dollars” instead of “2,452,235.19 dollars”. Surely, a better format for statutory references is possible.

    Well, the Office of Legislative Legal Services has decided that a better format is possible, and, in drafting bills for the 2017 regular session, we have already started using it.

    First, it’s important to understand the scope of the changes. When a statute refers to a portion of a different statute, that’s called an “external” reference, and we don’t use the format described above. Instead, if you’re in a statute other than section 24-30-122, the reference would previously have been something like “section 24-30-122 (4)(g)(III)(D), C.R.S.”. The main difference in external references going forward is that we’re dropping the “C.R.S.” (the abbreviation for “Colorado Revised Statutes”). We figure that, if you’re reading title 8, you know when you see a reference to section 24-1-104, it’s referring to a section in another title of the Colorado statutes and that we’re not straying down the freeway and into another state’s statutes.

    Second, we used to include the number of a title or article only when the reference was located in a title or article other than the one being referenced, but we would always include the part number regardless of whether the reference was in or out of that part. We will now treat titles and articles as we currently treat parts: We’ll always include the article and title number (so references to “this article” in statute now become “this article 12,” for example).

    The most significant changes we’re making relate to “internal” references. For example, if the reference is located in section 24-30-122 and the reference is to a portion of that same section, that’s an internal reference. Instead of listing the various types of C.R.S. subdivisions (sub-subparagraph, subparagraph, paragraph, and subsection) in reverse order, we’ll use a format similar to that used for external references. So if you’re in section 24-30-122, the reference will usually be “subsection (4)(g)(III)(D) of this section”.

    There are a few things to note about this new format. First, we’re no longer going to refer to sub-subparagraphs, subparagraphs, or paragraphs; every internal reference to a C.R.S. subdivision will be to a “subsection”. Second, for both external and internal references, we will no longer put a space between the parentheses—so it will be “(2)(a)” rather than “(2) (a)”. Third, if the internal reference is to the same subdivision where the internal reference is located, we will include the complete string of higher-level subdivisions in the reference. For example, we used to write “this paragraph (d)”, but now we’ll write “this subsection (3)(d)”. Finally, every internal reference to a different subdivision will end with “of this section”. We used to write “paragraph (a) of this subsection (1)”, but now we’ll write “subsection (1)(a) of this section”.

    Here’s a table that summarizes our old and new citation formats for internal references:

    Format Before 2017 Format Beginning in 2017
    this paragraph (d) this subsection (3)(d)
    this sub-subparagraph (C) this subsection (1)(e)(II)(C)
    paragraph (a) of this subsection (1) subsection (1)(a) of this section
    subparagraph (III) of paragraph (b) of this subsection (4) subsection (4)(b)(III) of this section
    sub-subparagraph (A) of subparagraph (IV) of paragraph (c) of subsection (2) of this section subsection (2)(c)(IV)(A) of this section

    Finally, we will make these changes only prospectively and only in those sections of statute that are included in bills; we will not update the citation format for the entire C.R.S. through the publications process. All new citations will follow the new format. The bill drafters, subject to the sponsors’ preferences, will update existing references in the same way that other grammatical or terminology updates to existing statutes are made.

    So there will be some inconsistency in the C.R.S. in how our statutory references are phrased for quite some time. But we’ve concluded that using a citation format that is as specific and accurate as our current system—and that uses less terminology and is more concise, easier to understand, and more internally consistent—is an easy choice. We hope that you’ll agree!

  • Revisor of Statutes Ensures Access to Colorado’s Laws

    by Julie Pelegrin

    As we explained a couple of weeks ago, the Office of Legislative Legal Services is responsible not only for writing bills and amendments, but also for publishing the statutes. But these functions—drafting and publishing—have not always been housed in the same office or even in the same branch of government.

    The history of publishing statutes in Colorado is long and complicated. Starting in 1861, the Territorial Legislature published the session laws after each biennial legislative session, which contained all of the bills the Legislature passed. Until 1868, if someone wanted to amend a bill that passed in an earlier session, he had to amend the bill as it appeared in the session laws.

    The first consolidation of the state’s laws occurred before Colorado became a state. In 1868, the Territorial Legislature authorized consolidation of the general statutes, all of the laws enacted since 1861 with any amendments to those laws, arranged into 90 chapters, alphabetic by topic. The Territorial Legislature then adopted this consolidation, making it the “positive law” of the state, which means that a person could cite to the section of consolidated statute, rather than having to cite to the act as it was published and later amended in session laws.[i]

    The General Assembly voted to reconsolidate and republish the laws at various times: The General Laws of 1877; the General Statutes of 1883; Mills’ Annotated Statutes of 1891; the Revised Statutes of 1908; the Compiled Laws of 1921; and the Colorado Statutes Annotated of 1935. Each of these, except the Mills’ Annotated Statutes, was created with the General Assembly’s official authorization, but there was not a specific official or office that was consistently responsible for codifying and republishing Colorado’s laws on a regular basis.

    Until 1951.

    That year, the General Assembly adopted House Bill No. 201. Like earlier acts, this act provided for revising and codifying the laws of the state, but with this act, the General Assembly for the first time took a longer view. It created the Committee on Statute Revision within the Judicial Department, chaired by the Chief Justice of the Colorado Supreme Court. The committee consisted of the Attorney General, two Senators, and two Representatives.

    2012 Session Laws of Colorado/photo by Ashley Zimmerman

    The act also created the position of Revisor of Statutes. The act directed the Committee to appoint an attorney to this position and to oversee his work. The Revisor could hire attorney associates and clerical staff to assist him in collating, compiling, editing, and preparing the statutes; publishing the statutes and other important documents like the state and federal constitutions; and creating source notes, annotations, an index, and comparative tables of prior compilations. All of this work was to be completed and submitted to the General Assembly by the 1953 legislative session.

    H.B. No. 201 also directed the Revisor, at the end of each legislative session after 1953, to annotate, arrange, and prepare pocket parts or supplements for the 1953 revision of the statutes. The Office of the Revisor of Statutes was now a continuing enterprise, responsible for maintaining the accuracy of the published statutes on an annual basis. The General Assembly also directed the Revisor to assist the Legislative Reference Bureau (in the Attorney General’s Office) in drafting bills and amendments and engrossing and enrolling bills.

    Finally, a permanent process existed to ensure the published statutes kept up to date. But in 1958, 1959, and 1960, the office fell behind in publishing the pocket parts. So, in 1961, the General Assembly directed the Revisor of Statutes to publish a new recodification, incorporating all of the changes since 1953 into a single set of volumes: the Colorado Revised Statutes 1963. At this time, the Revisor was still working out of the judicial branch.

    In the mid-1960’s, the General Assembly undertook a study of the organization of Colorado’s state government. In 1968, it passed Senate Bill No. 1, concerning the administrative reorganization of state government, which completely reorganized the executive branch of government, and moved the Legislative Drafting Office (LDO) from the Attorney General’s Office to the legislative branch. Then, in 1969, the General Assembly passed Senate Bill No. 396, which created the Office of Revisor of Statutes (ORS) in the legislative branch. Both the LDO and the ORS were under the direction of the Committee on Legal Services.

    Finally, in 1988, the General Assembly passed House Bill No. 1329, which combined the LDO and the ORS into the Office of Legislative Legal Services (OLLS). In combining the offices, the General Assembly named the Director of the OLLS the ex officio Revisor of Statutes, although the Director was authorized to appoint another attorney to serve as the Revisor. This has been the Director’s practice since 1988. The current Revisor of Statutes, Jennifer Gilroy, was appointed March 26, 2004, and is the first woman to serve in this capacity.

    The Revisor’s duties have not changed significantly over time. Under the direction of the Committee on Legal Services, the Revisor must compile, edit, arrange, and prepare for publication the Colorado statutes, the state and federal constitutions, other significant documents, an index of the statutes, and tables comparing the current statutes with previous compilations. Each section of the statutes must have a source note, which provides the history of the section, and annotations of any cases interpreting the section. In publishing the statutes each year, the Revisor, with assistance from legislative editors and attorneys in the OLLS, can correct errors in grammar and punctuation, and may identify other errors or inconsistencies that may be fixed in a revisor’s bill introduced in the next legislative session.

    The most important recent changes to the published statutes are a result of technology. In addition to publishing the entire set of statutes each year, the Revisor oversees the electronic publication of and access to the Colorado Revised Statutes on the internet, on disc, and through e-books.

    The last time the General Assembly recodified and reorganized the entire Colorado Revised Statutes was in 1973. With that recodification, it adopted a numbering convention that provides a great deal of flexibility and room for expansion in the statutes. In the last legislative session, the General Assembly recreated the Statutory Revision Committee to address defects and anachronisms in the law. These provisions make another complete recodification of the statutes less likely.

     

    ________

    [i] See “Colorado Statutes: Past, Present, and Future” J. Myron Jacobstein, 33 Rocky Mountain Law Review, pg 36 (1960-61).

  • Legislature Passes the Laws – But Executive Branch Used to Write Them

    by Julie Pelegrin

    Newly elected legislators are often (pleasantly) surprised to find that they do not have to write their own bills. The Office of Legislative Legal Services – a nonpartisan legislative staff agency – provides expert legislative drafting services to help legislators put their policy ideas into statutory language. But this was not always the case. For over 90 years, Colorado’s legislation was written by employees of the executive branch.

    From the first Legislative Assembly of the Colorado Territory in 1861 until 1917, it’s not clear who was writing the legislation. There is no mention of bill drafting services in the statutes or anywhere else that we can find. Presumably, every legislator wrote his or her own bills, although some may have sought help from private attorneys or the Attorney General. The first mention we find of a bill drafting office is in the 1917-18 biennial report of Colorado Attorney General (AG) Leslie E. Hubbard. He reports that he formed a division within the Attorney General’s office to assist legislators in writing bills. His motivation: To avoid the introduction of bills with “patent inaccuracies, conflicts and constitutional objections” and so reduce the amount of litigation against the state.

    2012 Colorado Revised Statutes/Photo by Ashley ZimmermanIt appears this informal division of the AG’s office continued to operate until 1927. That year, the General Assembly officially created a legislative reference office (LRO) within the Attorney General’s office with the passage of S.B. No. 200. The LRO consisted of one attorney who served as director of the office and at least one stenographer. The Attorney General appointed the LRO director, with the consent of the Governor. S.B. No. 200 also authorized the Supreme Court Librarian to assign library employees to work with the LRO during the legislative session.

    From the beginning, the employees of the LRO were nonpartisan – appointed without reference to party affiliation, solely on the ground of fitness. The director of the LRO had to be an attorney licensed to practice law for at least five years before appointment. And all bill requests were confidential; neither the director nor any employee of the LRO could reveal to anyone outside the office the contents or nature of a bill request without the requesting legislator’s consent. Also, the director and the LRO employees were prohibited from lobbying in favor of or against any type of legislation.

    The LRO had several duties including: Maintaining bill files and information relating to bills; accumulating data and statistics concerning the practical operation of Colorado’s statutes and those of other states; studying the statutes to find ways to reduce the number and bulk of the statutes; and working with the legislative reference bureaus in other states.

    Most importantly, at a legislator’s or the Governor’s request, the LRO was required to draft bills, resolutions, and amendments; advise the legislature or the Governor as to the constitutionality or probable effect of proposed legislation; prepare summaries of existing laws and compilations of laws in other states; and research proposed legislation.

    Although employees of the executive branch were drafting legislation for the legislative branch, the separation-of-powers implications did not seem to cause any concern – at least not until 1968. That year, Senator Bill Armstrong and Representative Star Burton Caywood introduced and passed S.B. 1, concerning the administrative reorganization of state government. This was a massive bill, the product of at least two years of interim committee meetings and planning. The act significantly restructured state government, reducing the sprawling mass of executive branch agencies and offices to just 17 state executive departments.

    S.B. 1 also moved the LRO out of the Attorney General’s office and into the legislative department, renaming it the Legislative Drafting Office (LDO). And the bill created the Legislative Drafting Committee, a bipartisan committee consisting of the three members of leadership in each house and one additional minority party member appointed from each house.

    The new LDO had a director, appointed by the legislative drafting committee without regard to party affiliation, who had to be an attorney. The director could appoint additional attorneys and clerical personnel as necessary to staff the office. The duties of the new LDO were essentially the same as the old LRO, except the attorneys in the LDO could no longer advise the Governor as to whether to sign a bill.

    In 1969, the General Assembly passed S.B. 396, which, among other things, renamed the legislative drafting committee the Committee on Legal Services and changed the membership to consist of eight legislators and the Attorney General – but it remained a bipartisan committee. The General Assembly removed the Attorney General from the committee in 1973 and expanded the membership to 10 legislators in 1985.

    Finally, in 1988, the General Assembly passed House Bill 1329, which combined the LDO and the Office of the Revisor of Statutes into what we now know as the Office of Legislative Legal Services (OLLS). The duties of the OLLS did not change significantly from those exercised by the LDO, but, with the addition of the Office of the Revisor of Statutes, the OLLS is also responsible for revising, codifying, and publishing the statutes.front-door-of-office-1

    Several things about the OLLS have not changed as it has evolved from the executive branch into the legislative branch. Bill and amendment requests and communications between OLLS staff and legislators are all still confidential. The OLLS is still nonpartisan and is still charged with providing legal services. And, finally, the mission of the OLLS continues to be providing “the best technical advice and information … available to the General Assembly, agencies of state government, and the people of this state.”

  • Art at the Capitol: By and For Coloradans

    By Gwynne Middleton

    If you’ve wandered the halls of the state Capitol basement recently, you’ve likely noticed visual art exhibits in the rotunda. Curious about these rotating art displays, I gumshoed my way to a conversation with Ruth Bruno, the liaison for Creative Colorado Industries, Inc.’s Creative Capitol program, to learn more about its role in showcasing Colorado artists at the Capitol.

    The brainchild of Colorado Creative Industries, Inc. (CCI), a division of the Colorado Office of Economic Development & International Trade, the Creative Capitol program started in 2008 to combat the dearth of new public art hung at the Capitol. Since Capitol public art projects are usually tied to the state’s Capitol Construction funds and 2008 was far from a banner year for the state’s budget, public art was not a top priority when it came to new Capitol Construction requests. With no new public art projects to manage, CCI started Creative Capitol to provide consistent access to art for Capitol visitors and staff. Funds for this program come from the CCI budget, avoiding a financial burden for the state during both fat and lean years.

    Bristlecone pine in the Mt. Goliath grove on Mt. Evans//"The Ancient One" by Jao van de Lagemaat
    “The Ancient One” by Jao van de Lagemaat // Bristlecone pine in the Mt. Goliath grove on Mt. Evans

    When asked how the Capitol and the general public benefit from the Creative Capitol program, Bruno explained that anyone who visits the Capitol to partake in the historic architecture and permanent art installations gets the added benefit of enjoying current works created by Colorado artists. For Bruno, providing this pro bono loaned artwork in our Capitol shows that the state not only champions art and arts programming but arts and arts programming by and for Coloradans: “[S]howcasing and supporting Colorado artists is one of the key goals of [CCI]. Artists benefit from the exposure and by having a place to show their art, and CCI benefits because we can highlight the work we do to the general public and also to Capitol staff and legislators.” This promotion of talented Front Range, as well as rural and mountain, artists reflects the artistic diversity in the Centennial State and offers legislators and other public officials an insiders’ perspective on the state they know and love.

    The Capitol staff’s response to these art exhibits has been overwhelmingly positive, with numerous requests for more art to improve the quality of their offices. Since 2014, Creative Capitol has been able to meet popular demand, expanding their venture beyond the Capitol basement rotunda, with works now hung in the Lieutenant Governor’s office and the Legislative Council offices, as well as in the nearby Legislative Services Building in the Joint Budget Committee Room on the third floor and in the Committee Hearing Rooms A and B on the first floor.

    If you’re in the Capitol in the next three months, be sure to stroll through the basement rotunda to view, “The Clear Creek Watershed through the Photographer’s Eye”, the newest local artist exhibit on display. A testament to the rare natural beauty of our home state, the high-quality images in this exhibit were chosen from entries in the Clear Creek Land Conservancy Annual Photography Contest, a competition calling for photographs taken in Colorado’s Clear Creek drainage basin that highlight the awe-inspiring natural areas running from the mouth of Clear Creek Canyon in Golden to the start of Clear Creek at the Continental Divide.

    For more information on Creative Capitol’s prior exhibits, click here.

  • Bribery (Don’t Do It!)

    by Bob Lackner

    Arguably, the worst offense a public official can be accused of is the crime of bribery — essentially offering, giving, receiving, or soliciting something of value for the purpose of influencing an official in the discharge of his or her public duties. The crime violates a basic notion inherent in a healthy democracy: That a public servant’s sole motivation is the promotion of the public interest — not the securing of private gain. Although it is fortunate that, in Colorado, accusations of bribery against public officials are rare, every public official should have a basic understanding of the nature of the crime to avoid even coming close to what would constitute criminal behavior.

    The crime of bribery made its first appearance in Colorado law in the original state constitution, which went into effect on August 1, 1876. Section 40 of article V of the state constitution, the article that governs the Legislative Department, is entitled “Bribery and influence in general assembly”, and it states in relevant part:

    If any member of the general assembly shall give his vote or influence for or against any measure or proposition pending in such general assembly, or offer, promise, or assent so to do, upon condition that any other member will give or will promise or assent to give his vote or influence in favor of or against any other measure or proposition pending or proposed to be introduced in such general assembly, or in consideration that any other member hath given his vote or influence for or against any other measure or proposition in such general assembly, he shall be deemed guilty of bribery; and any member of the general assembly, or person elected thereto, who shall be guilty of either of such offenses shall be expelled, and shall not be thereafter eligible to the same general assembly; and, on conviction therefor in the civil courts, shall be liable to such further penalty as may be prescribed by law.

    Thus, as applied to a member of the General Assembly, this constitutional prohibition applies to the specific crime of “vote-trading,” whereby a legislator agrees to vote a certain way on the condition that another legislator votes in a particular way. (This practice is more informally referred to as “log-rolling.”) The inclusion of a prohibition on this practice in the section governing the legislative department reflects the deep distaste the framers of our state constitution had for the practice.

    This is especially true given that section 40 does not forbid (or even address) what we now think of as bribery; that is, offering, giving, receiving, or soliciting something of value for the purpose of influencing an official in the discharge of his or her public duties. This more conventional form of bribery is addressed and prohibited in section 6 of article XII of the state constitution, which applies to civil officers and members of the General Assembly. In relevant part, this section prohibits those individuals from soliciting or receiving, directly or indirectly, anything of value for their votes, official influence, or actions. Like the aforementioned log-rolling provision, this provision has been part of the state constitution since its adoption in August of 1876.

    Bribery is also among the many crimes addressed and prohibited in our state’s Criminal Code. Under section 18-8-302 (1)(b), C.R.S., which concerns “Bribery and Corrupt Influences,” a public servant (which includes a member of the General Assembly) commits bribery if he or she solicits or accepts any financial benefit upon any agreement or understanding that his or her vote, opinion, or other action as a public servant will be influenced. A person who offers or agrees to extend a benefit to a public servant with the intent to influence the public servant’s action in his or her official capacity commits the crime as well. (See section 18-8-302 (1) (a), C.R.S.)

    Bribery is a class 3 felony, which means that a person convicted of the crime faces a prison sentence of four to 12 years. (See section 18-1.3-401 (1) (a) (V) (A), C.R.S.)

    Other criminal offenses in the Colorado Criminal Code relating to bribery include:

    • Compensation for official past behavior (when a public servant accepts any benefit as compensation for taking official action in favor of another);
    • Trading in public office (accepting a benefit in exchange for appointing someone to public office);
    • Directing a bidder or contractor to deal with a particular person in connection with obtaining goods or services in bidding on a contract; and
    • Failing to disclose a conflict of interest when the public servant owns a substantial interest in a private entity participating in the transaction.

    In McDonnell v. United States, 579 U.S. ___ (2016), the United States Supreme Court stated that “[t]he basic compact underlying representative government assumes that public officials will hear from their constituents and act appropriately on their concerns…”. (For an in-depth discussion of the case, see this recent Legisource post) Ethical and conscientious legislators know the appropriate actions to take on behalf of their constituents and others with interests in public policy. They are also aware of those actions that may subject the legislators to criminal prosecution for engaging in bribery or related offenses that harm the public trust at the heart of representative government.