E7511A5B9B7B4271872586380068D957 Hearing Summary CLICS/CLICS2020A/commsumm.nsfPUBLICBILL SUMMARY For RULES OF THE TAXATION DIVISION, DEPARTMENT OF REVENUE, CONCERNING THE INTERNAL REVENUE CODE DEFINITIONJOINT COMMITTEE COMMITTEE ON LEGAL SERVICESDate Dec 8, 2020 Location Old State Library Rules of the Taxation Division, Department of Revenue, concerning the Internal Revenue Code definition - Rule was extended Attachment Tag File Name Attachment http://www2.leg.state.co.us/CLICS/CLICS2020A/commsumm.nsf/0/3AD01457DCEF...$File/200503EVM.pdf?OpenElement 200503EVM.pdf http://www2.leg.state.co.us/CLICS/CLICS2020A/commsumm.nsf/0/AE79BE3D49AE...$File/20201204 - Response to OLLS re 39-22-1035.3.pdf?OpenElement 20201204 - Response to OLLS re 39-22-1035.3.pdf 12:05:13 PM Esther van Mourik, Senior Attorney, Office of Legislative Legal Services, testified before the Committee. Ms. van Mourik presented the Office's rule memorandum concerning the contested rule issue of the Taxation Division of the Department of Revenue concerning the Internal Revenue Code definition and explained how the rule is inconsistent and conflicts with the statutory definition of Internal Revenue Code and makes a tax policy choice that is reserved for the General Assembly. Ms. van Mourik then took questions. 12:16:19 PM Ben Kapnik, Assistant Attorney General representing the Department of Revenue, testified before the Committee and explained that the Department disagrees with the Office's interpretation of the Internal Revenue Code definition and believes that the rule was properly promulgated and therefore should be extended. 12:25:48 PM Josh Pens, Director of Tax Policy Analysis, Department of Revenue, and Brendon Reese, Taxation Division Senior Director, Department of Revenue, testified before the Committee that they were available for questions. 12:26:11 PM Representative Weissman and Mr. Pens discussed the constitutional requirements of a balanced budget and TABOR and how accrual accounting would work from a Department of Revenue perspective now that past tax years have been closed. 12:30:42 PM Representative Soper and Mr. Pens discussed what happened in past years when retroactive changes were made. 12:31:20 PM Representative Soper and Mr. Kapnik discussed the presumption that statutes act prospectively and how that harmonizes with the constitutional prohibition on retrospective legislation. Representative Weissman responded to the discussion. 12:39:35 PM Ms. van Mourik responded to a previous question Representative Weissman had regarding the Attorney General's TABOR agrument. Representative Weissman talked about what the correct reading of the statute is concerning the definition of Internal Revenue Code and if there is a clear intent for a retroactive reading. Ms. van Mourik responded to Representative Weissman's arguments. 12:43:59 PM Representative Soper and Ms. van Mourik discussed legislation passed to stop rolling conformity of federal tax policy. 12:47:57 PM Representative Snyder and Ms. van Mourik discussed when net operating loses changed on the federal level and the General Assembly determined that they didn't like the federal changes and enacted legislation to decouple from those changes. 12:57:27 PM Motion I move to extend Rule 39-22-103(5.3) of the rules of the Taxation Division of the Department of Revenue and urge a no vote Moved Gardner Seconded Van Winkle Fields Yes Foote Yes Lundeen No Rodriguez Yes Snyder Yes Soper No Van Winkle No Weissman Yes Gardner No Herod Yes YES: 6 NO: 4 EXC: 0 ABS: 0 FINAL ACTION: PASS 12:57:28 PM Representative Weissman urged a yes vote on the motion to extend the rule and said that the core question is what is taxable income. Senator Gardner again urged a no vote in support of the staff position and said that the General Assembly made a choice to use the definition of the Internal Revenue Code, as amended.