HB11-1300 PDF  | Print |  E-mail

HB11-1300

(signed May 19, 2011 by Gov. Hickenlooper)

 

This document is for informational purposes only and is not intended to provide legal advice.

 

HB11-1300 provides an opportunity for disputed conservation easement tax credits to be resolved through a district court process or an enhanced administrative process. The legislation also provides reporting requirements and adjusts the tax credit cap currently in place to provide appropriations to state agencies for the administration and implementation of the procedural changes, including litigation.

 

District Court process:

  • If a notice of deficiency, notice of disallowance, or notice of rejection of refund claim has been mailed by the Department of Revenue (DOR) as of May 1, 2011 and no final determination has been issued by DOR before the effective date of the legislation, the tax matters representative (TMR) can choose to waive the administrative process and appeal the notice of deficiency, disallowance, or rejection of refund claim directly to district court.

  • The TMR elects this waiver by mailing on or before October 1, 2011 a written notice of appeal, complete with the TMR’s certified signature, to the executive director of DOR and the district court for the county where the land encumbered by the easement is located. This must be done by certified mail.

  • No surety bond or other deposit will be required in connection with the appeal. Additionally, interest and penalties will stop accruing while the matter is on appeal, beginning with the date the notice of appeal is received by the district court.

  • DOR’s answer to the appellant’s summons must contain a statement of the legal issues, an itemization of the amount in controversy, and any proposal regarding the joinder or consolidation of related parties and appeals

  • Transferees of the tax credit or any other person who has claimed a tax credit related to the TMR’s claimed tax credit shall be allowed to intervene as a matter of right pursuant to the Colorado Rules of Civil Procedure

  • The court may consolidate any claims at law or at equity and may allow the intervention of additional parties

  • The district court’s first substantive step is to hold a hearing to determine the validity of the conservation easement tax credit. Among other determinations, this will include whether the donation is a qualified conservation contribution.

  • Before a case management conference, the following disclosures may be ordered by the court:

    • DOR: individuals with knowledge of, and documents related to, notices to the TMR disallowing the credit; notices to any taxpayer of deficiency or rejection of claim for refund; correspondence with the TMR or donee of the easement as well as any party to the conservation easement tax credit action; appraisals, review appraisals, or other expert reports; tax returns of the TMR, transferee, or any party to the tax credit action; and statements of adjustment

    • TMR: individuals with knowledge of, and documents related to, tax returns; the appraisal used to determine the value of the easement; the conservation easement deed and amendments; agreements between the TMR and the transferees; and any other expert report or evidence relating to the valuation of the underlying easement

    • Transferee/Other person claiming all or part of the credit: individuals with knowledge or, and documents related to, agreements related to the transfer of credits; tax returns; and any other expert report or evidence relating to the valuation of the underlying easement

  • After the determination of the validity of the credit, the court shall resolve the remaining issues in the following order:

    • First phase: limited to issues regarding the value of the easement

    • Second phase: limited to determinations of the tax, interest, and penalties due and apportionment of such tax liability among persons who claimed a credit in relation to the easement

      • The action shall be final at the conclusion of the second phase as to DOR and as to any taxpayer, transferee, or other party with regard to that party’s tax credit dispute with DOR

    • Third phase: shall address all other claims, including those between and among the TMR, transferees, other persons claiming a credit, and any other third party joined as a party to the action. DOR will not be required to participate in this phase.

  • The district court shall have the authority to establish the amount of any deficiency and to waive or otherwise modify the amount of any interest, penalties, or other amounts owed

  • The district court process described above also applies to a TMR who is issued a final determination by DOR on or after May 1, 2011 with the following exceptions:

    • The cessation of additional interest and penalties while the matter is on appeal does not apply; the waiving of a surety bond or other deposit does not apply; and the TMR must commence the lawsuit within 30 days after the mailing of the final determination by DOR.

    • If a TMR does not make a timely appeal under this subsection (6) of the legislation, any credit buyer related to that TMR’s donation can petition DOR to have the TMR’s designation changed. The new TMR would then have the ability to proceed with this district court process by commencing a lawsuit within 30 days after granting of the petition.

 

Administrative Process:

  • If a notice of deficiency, notice of disallowance, or notice of rejection of refund claim has been mailed by the Department of Revenue (DOR) as of May 1, 2011 and no final determination has been issued by DOR before the effective date of the legislation, a TMR who does not elect to waive the administrative process and appeal directly to district court may send a written request for a hearing and final determination by certified mail to the executive director of DOR on or before October 1, 2011

  • The executive director must issue a final determination on or before July 1, 2014 unless the executive director and the TMR mutually agree in writing to extend the date

  • If the executive director fails to issue a final determination before July 1, 2014, the authority of the executive director to dispute the claim is waived, the full amount of the credit shall be allowed, and no interest or penalties shall be imposed

  • The executive director has the discretion to:

    • consolidate cases involving common or related issues, such as common ownership of the property subject to the easement, relationships of the taxpayers, and location of the easements

    • issue a final order finding that a case cannot reasonable be resolved through the administrative process and transferring the case to the district court

    • issue a final determination if a TMR fails to appear at a hearing or adequately participate in a hearing, including but not limited to failing to file the required pleadings or to appear at a scheduled conference

    • invite participation by any person who may be affected or aggrieved by a final determination, including but not limited to transferees

    • issue a final determination if a TMR has not provided any document related to the credit that was required to be provided as part of the taxpayer’s return or, if requested by DOR, a copy of the complete appraisal obtained at the time of donation and the TMR fails to provide the requested documents within sixty days of any such request

  • If a TMR or one or more of the transferees pays an amount on or before June 30, 2012 that satisfies a deficiency in an amount agreed to by the DOR, all additional amounts of penalties and interest shall be waived

 

The “Do Nothing” process:

  • If a TMR does not elect to waive the administrative process and file in district court or request a final determination, the executive director must issue a final determination on or before July 1, 2016.

  • If the executive director fails to issue a final determination by July 1, 2016, the authority of the executive director to dispute the claim is waived, the full amount of the credit shall be allowed, and no interest or penalties shall be imposed

  • If a TMR does not make an election to waive into district court or file a written request for a final determination, any person who has claimed a credit or who may be eligible to claim a tax credit in relation to the TMR’s donation may petition DOR on or before November 1, 2011 to change the TMR’s designation. DOR must promulgate rules on or before September 1, 2011 specifying the procedures for a change to the TMR’s designation when the executive director determinates that the TMR is unavailable or unwilling to act as the TMR.

    • If DOR grants the petition, the new TMR may elect to follow the district court process described above or request a final determination. This must be done within 30 days of DOR’s order granting the petition.

    • This petition process to change the TMR’s designation is also available if a TMR fails to file a timely appeal of a final determination

 

Conservation Easement Oversight Commission:

  • On or before August 1, 2011, the Conservation Easement Oversight Commission (CEOC) shall review conservation easements which they have not already reviewed for which a tax credit is claimed and for which a notice of deficiency, disallowance, or rejection of refund claim has been issued, but no final determination has been, on or before May 1, 2011

  • The CEOC shall issue an initial recommendation to DOR on whether the credit should be denied or accepted

  • The bill makes clear that members of the CEOC are immune from liability in accordance with the Colorado Governmental Immunity Act

 

Notice:

  • The executive director must send a notice by certified mail by July 1, 2011 to each TMR eligible to waive a hearing and appeal to a district court to notify them about the provisions of this bill. The executive director must also provide notice of the provisions of the bill on DOR’s website and by any other appropriate means.

  • If the executive director determines that the TMR has transferred a disputed credit to a person who has not claimed the credit or to a person who claimed or may claim a disputed credit but cannot be identified or located, the executive director will provide notice by publishing a notice in a local newspaper chosen by the district court as well as on DOR’s website.

 

Reporting Requirements:

  • Beginning July 1, 2011 and on a quarterly basis thereafter, DOR must provide a report to the Joint Budget Committee (JBC) and the Finance Committees of the General Assembly describing

    • The number of credits claimed for which the executive director mailed a notice of deficiency, notice of rejection of refund claim, or notice of disallowance

    • The number of such cases sent to the CEOC

    • The number of such cases returned to DOR with the advice of the CEOC and the action taken, if any, by DOR

    • The number and progress of any cases in mediation

    • The number of cases referred to the Attorney General’s office

    • The number of cases finally resolved by DOR

    • The amount of deficient taxes, interest, and penalties determined to be owed or waived by DOR

    • The number and total amount of credits that were originally contested but subsequently allowed to be claimed in full

    • The amount of moneys expended by DOR in resolving these cases

  • Beginning March 15, 2012 and on a quarterly basis thereafter, the State Court Administrator shall provide a report to the JBC and the Finance Committees of the General Assembly describing

    • The number of taxpayers who elected to waive into district court

    • The number of cases pending before the district courts or on appeal before other courts

    • The number of cases finally resolved

    • The amount of moneys estimated to have been expended by the courts in administering the appeals

    • The amount of deficient taxes, interest, and penalties determined to be owed or waived in connection with the appeals

  • Beginning July 1, 2011 and on a quarterly basis thereafter, the CEOC shall provide a report to the JBC and the Finance Committees of the General Assembly describing

    • The number of credits for which DOR has sought the advice of the CEOC

    • The date any such advice was sought

    • The number of credits for which the CEOC provided advice to DOR

    • And the date any such advice was provided

 

Funding:

  • The tax credit cap established in HB10-1197 provided for $26 million in tax credits for easements conveyed in income tax years commencing during the 2011, 2012, and 2013 calendar years. This bill reduces the $26 million for years 2011 and 2012 to $22 million for each year. The bill increases the $26 million for year 2013 to $34 million. Thus, the total amount of credits able to be claimed during the three years of the tax credit cap, $78 million, has not been reduced; the distribution of it has just been adjusted to reflect the funds appropriated to implement the bill.

 

 
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