Bill seeks more revenues from companies employing offshore tax havens
Companies with Colorado locations that shelter some of their profits in an offshore tax haven will be made to pay more tax to the state — as much as $150 million a year, some estimates say — under a bill that is scheduled for its first hearing Wednesday in the state Legislature.
House Bill 1346, sponsored by Democratic Reps. Mike Foote of Lafayette and Brittany Pettersen of Lakewood, is the latest effort by Democratic House members to rein in corporations that they don’t see as treating employees fairly or paying their fair share of taxes to the state. It comes after bills introduced last week that propose to permit employees to see and amend their personnel files and that would require employers to pay overtime to any workers making less than three times the minimum wage.
Colorado law currently requires companies doing business here to pay taxes on the portion of national income that the corporation generates in this state. But that equation gets more complicated with companies that off-shore some of their business by setting up subsidiaries in tax-friendly countries, transferring intellectual properties to those subsidiaries and have the subsidiaries sell that property — such as, say, a logo — back to the main corporation for a cost that sometimes can be as large as the overall profit that corporation makes in the U.S., Foote said.
HB 1346 would force those companies to combine their offshore income with their American income to determine the amount of taxes they must pay to Colorado, a change that could raise another $100 million to $150 million for the state, Pettersen said. If it passes, the bill then would authorize a statewide ballot initiative seeking to keep money coming in from that source and put it to the State Education Fund rather than be forced to refund it to voters for being in excess of the revenue cap imposed on the state by the Taxpayer’s Bill of Rights.
“We pay taxes … because we want to make sure we have things in this state like roads and courts,” Foote said at a news conference in the Capitol on Tuesday. “There are some corporations in this state who don’t pay taxes like the rest of us, unfortunately. It’s not fair to the state of Colorado, and it’s not fair to the rest of us.”
Bill backers didn’t say exactly which corporations or types of companies they expect to go after with HB 1346, If passed, Colorado would become just the third state in the country with a law like this. But a news release from the CoPIRG Foundation, a primary backer of the proposal, noted that General Electric, Microsoft and Pfizer are examples of companies that each have moved tens of billions of dollars offshore and have reduced federal tax burdens because of that.
Loren Furman, senior vice president of state and national affairs for the Colorado Association of Commerce and Industry, said the bill has more far-reaching consequences than just going after a few big-money corporations, however.
Furman said that HB 1346 changes the way that affiliate companies are defined in order to put the proposal into place. And it also lists dozens of countries specifically defined as tax havens — some of which are well-known Caribbean tax-sheltering nations but others that include European countries and countries like Panama and Belize that are becoming bigger trading partners with Colorado.
“We think this is the wrong way to go after changing tax policy to gain revenue for Colorado, because it damages the relationship we have with these companies that are doing business with Colorado,” Furman said.
