BB0E802387F1BE658725891700589DB4 Hearing Summary CLICS/CLICS2022A/commsumm.nsf PUBLICBILL SUMMARY For REVIEW OF NEW RULESJOINT COMMITTEE COMMITTEE ON LEGAL SERVICESDate Dec 13, 2022 Location Old State Library Review of new rules - Committee Discussion Only 09:09:01 AM Megan McCall, Office of Legislative Legal Services, introduced the Office and the Office's rule review process then reviewed her recommendations for rule 39-30-105.1 concerning Enterprise Zone Business Facility Employee Credits to not be extended 09:10:00 AM Ms. McCall stated that the statute the rule is promulgated under is section 39-30-105.1 CRS and that the rule's definition of "business facility" conflicts with the statutory definition 09:12:22 AM Ms. McCall explained that in her legal interpretation the definition the Department of Revenue uses in their rule differs from the statutory definition because their rule exempts "temporary structures" from the definition, which results in the rule being more narrow and limited than the statute requires 09:14:19 AM Representative Snyder asked for more clarification on what is being contested and by whom 09:14:30 AM Ms. McCall explained that the Department of Revenue is contesting the Office's recommendation to not extend the rule by asking the committee to extend the rule 09:14:52 AM Representative Weissman, chair, expressed his thoughts on the two definitions and that the statutory definition does not require permanency of a business facility as the rule definition does 09:16:56 AM Ms. McCall responded clarifying that the way the terms are defined in the statute is broad and that some of the structures listed could be temporary, such as warehouses 09:18:12 AM Senator Lee asked if tents or canvas structures set up by businesses qualify under the definition for the tax credit 09:18:46 AM Ms. McCall explained that if the tent falls within the definition of facility in one of the enumerated categories then it's possible it could qualify for the tax credit but that it would need to also comport with all other requirements and components of the statute 09:19:26 AM Senator Lee asked for clarity on the purpose of the tax credit and if it was created to incentivize businesses to set up more permanent types of facilities in a community that won't be removed 09:20:02 AM Ms. McCall explained the tax credit is an enterprise zone tax credit and that the legislative intent for the enterprise zone tax credits is as Senator Lee described and that the tax credit is particularly for employees 09:21:57 AM Esther van Mourik, Department of Revenue, provided comments on the Department's rule making authority, describing it as broad. She explained that the reason it is broad is because a statute simply cannot cover all possible situations that will apply to it. Ms. van Mourik explained that in order to promulgate the rule, the Department needs to be able to apply it to any situation that comes up and fill in any gaps when a statute is silent for smooth administration 09:25:29 AM Anne Mangiardi, senior assistant attorney general representing the Department of Revenue, discussed the Department's interpretation of the language of the statute and that the definition needs to be read in the context of the whole statute, which would not allow for "building" to be read as something temporary 09:28:23 AM Ms. Mangiardi expressed the opinion of the Department that the statute is a silent statute on permanence or non-permanence and that it is the role of the Department to fill in the gaps when a statute is silent 09:29:47 AM Ms. Mangiardi discussed the legislative intent behind the enterprise zone tax credits set out in the legislative declaration in section 39-30-102 CRS and how a temporary job doesn't carry out those intents as well as a more permanent job does 09:33:14 AM Representative Pico explained what he has seen in his own experience with businesses building temporary facilities before building a permanent one while they're getting started in a new community 09:34:16 AM Ms. Mangiardi responded by saying that the legislative intent of the statute seems to exclude those situations from the credit but that if a business started up in a tent then moved to a permanent facility they would start receiving the tax credit then 09:35:09 AM Representative Pico explained that in his experience the tax credit is an incentive for a business to get started 09:35:44 AM Representative Weissman, chair, asked that, in the absence of the rule, what would happen when a tax-payer tried to claim the credit 09:36:53 AM Ms. van Mourik explained that the tax-payer can reach out to a representative to get information on the tax credit or call their call center 09:37:57 AM Representative Weissman, chair, brought up a similar court case in the past regarding Title 39 that relates and asked if there are other Colorado cases that may be helpful in interpretation 09:39:49 AM Ms. Mangiardi discussed "chevron deference" and explained that the rules that have gone through the formal rule making process get deference 09:40:38 AM Representative Weissman, chair, asked if the committee should find more judicial deference for the rules in the tax space 09:41:36 AM Ms. Mangiardi explained that for cases that have gone to the supreme court level the court seemed to see agency rule-making as valuable in the complex tax arena 09:42:33 AM Senator Gardner, vice chair, expressed that he agrees with the Office's recommendation and that the Department has engaged in a policy argument rather than a discussion on if the rule should be extended based on what the general assembly authorized in statute 09:44:36 AM Ms. McCall noted that the case law discussed is specific to judicial review and that case law does not require the committee to give deference 09:45:38 AM Ms. van Mourik explained that a broad interpretation would decrease revenue and not be in line with the original fiscal note 09:46:37 AM Representative Carver brought up the example of a warehouse and her concern that the proposed rule by the Department would be too narrow because she believes warehouses can be prefab and could be impermanent 09:49:01 AM Ms. van Mourik explained that there is a lot of nuance in the language they use when writing a rule and that the way the rule is written accounts for impermanent structures to be included in the definition if they are used in association with more permanent structures 09:51:16 AM Representative Carver expressed concern of the use of the phrase "more permanent" as it is not clear and that the rule seems to differ from the statute 09:53:14 AM Representative Weissman, chair, brought up modular housing and how sometimes factory built structures can be permanent and asked how evolving technology like the creation of modular housing would be handled under the rule 09:54:27 AM Ms. van Mourik explained that since technology changes and building codes change that's exactly the reason why the Department needs rule making authority so that they don't have to ask the general assembly for permission to interpret new situations on a weekly basis 09:56:08 AM Senator Lee asked which sorts of temporary facilities would not qualify for the credit under the rule and asked if a specific facility under section 39-30-104 CRS would or wouldn't 09:57:34 AM Ms. van Mourik explained that section 39-30-104 CRS concerns a different credit than the one the Department promulgated a rule for that is being discussed today 09:58:09 AM Senator Lee asked again what sort of temporary facility would not qualify under the actual rule 09:58:29 AM Ms. van Mourik explained that, given the definition in the rule, something like a tent not used in association with permanent structures would not qualify for the credit 09:59:48 AM Representative Bacon asked more about the legislative intent previously discussed and asked if the temporary nature of a structure is linked to the temporary nature of a business and if that is why the distinction is important 10:01:43 AM Ms. van Mourik explained that enterprise zone credits are unique because they are administered by the Department but in conjunction with the Office of Economic Development and that the Office of Economic Development questioned whether a temporary structure would meet the qualification of the credit, which is why the rule was written the way it was 10:04:06 AM Ms. Mangiardi explained that the reason why the Department believes the statute would require a structure at all, based on their interpretation of the legislative intent, is because the general assembly wanted to give a credit to businesses that had a permanent presence in a community rather than temporary 10:05:47 AM Ms. McCall discussed the legislative history of the statute and that the section broadened the scope to allow "any" business facility to qualify, not just new business facilities, and that the tax credit is specific to employees including seasonal employees, not just permanent employees, and that the credit also covers businesses that operate for less than a full year 10:08:39 AM Representative Weissman, chair, expressed his belief that the rule should be extended based on the committee discussion and the Department's reasoning 10:11:05 AM Committee recessed for discussion 10:28:10 AM The committee returned from recess 10:28:23 AM Motion I move to extend Rule 39-30-105.1 (1) of the rules of the Executive Director of the Department of Revenue Moved Snyder Seconded Lee Bacon Yes Buckner Yes Carver No Cooke No Lee Yes Pico No Rodriguez Yes Snyder Yes Gardner No Weissman Yes YES: 6 NO: 4 EXC: 0 ABS: 0 FINAL ACTION: PASS 10:30:24 AM Sarah Lozano, Office of Legislative Legal Services, introduced Regulation Number 19 Part A II.B.13 a (iii) concerning the control of lead hazards and the Office's recommendation to not extend the rule as it conflicts with statute 10:33:44 AM Michael Ogletree, Department of Public Health and Environment, introduced the role of the Department in limiting the risk of lead exposure for children and recommended aligning the relevant state statute with federal law 10:35:48 AM Laura Manyak, Department of Public Health and Environment, introduced herself and indicated she was present for any technical questions 10:36:17 AM Representative Bacon echoed the concern of lead exposure for children and clarified that the committee is not addressing lead dangers but instead whether the rule conflicts with statute 10:37:06 AM Representative Weissman discussed the importance of the Department and legislation to address the conflict between the rule and statute 10:38:28 AM Motion I move to extend Regulation Number 19 Part A II.B.13.a.(iii) of the rules of the Air Quality Control Commission Moved Snyder Seconded Lee Bacon No Buckner No Carver No Cooke No Lee No Pico No Rodriguez No Snyder No Gardner No Weissman No YES: 0 NO: 10 EXC: 0 ABS: 0 FINAL ACTION: FAIL 10:40:29 AM Brita Darling, Office of Legislative Legal Services, introduced rule 5.A. concerning the Colorado Student Loan Equity Act and the Office's recommendation to not extend the rule as the rule's requirements for a private education lender differ from statute 10:44:18 AM Ms. Darling explained that statute does not allow the administrator authority to grant private education lenders an exemption from reporting requirements 10:47:01 AM Senator Gardner, vice chair, requested a 17c prior to the motion 10:47:35 AM Motion I move to extend Rule 5.A. of the rules of the Administrator for the Uniform Consumer Credit Code and Commission on Consumer Credit Moved Snyder Seconded Lee Bacon No Buckner No Carver No Cooke No Lee No Pico No Rodriguez No Snyder No Gardner Excused Weissman No YES: 0 NO: 9 EXC: 1 ABS: 0 FINAL ACTION: FAIL