2015 Colorado legislation: SB15-130 (Assist Conservation Easement Tax Credit Buyers) dies in committee

Saguache Creek
Saguache Creek

From The Denver Post (David Migoya):

A bill that aimed to offer relief to taxpayers who bought into the early days of Colorado’s conservation easement program and were blind-sided years later by hefty penalties was defeated in committee Tuesday.

The bill, SB-130, by Sen. John Kefalas, D-Fort Collins, met with stern opposition from state revenue officials who said taxpayers who purchased millions of dollars worth of easement tax credits were on their own, and the state shouldn’t have to fix their errors.

“This bill would place the government in the middle of a financial transaction between two private parties, and that is an area we should not occupy,” said John Vecchiarelli, Colorado’s director of taxation at the Department of Revenue. “Those responsible should be held accountable and the people of the state should not have to provide that relief.”

The Senate Finance Committee voted 5-0 to defeat the measure despite acknowledgments of testimony from taxpayers who were forced to pay as much as 10 times the original amount of their income tax bill.

“It’s our obligation to pay taxes so government works, but don’t do it in a way that makes me feel robbed,” said Julius Medgyesy, who runs Front Range Cancer Specialists in Fort Collins. “We’ve done nothing wrong in trusting a government program.”

At issue were millions of dollars in tax credits given to landowners in return for preserving their property from future development. The tax credits could be sold and taxpayers bought them at a discount and used them against their personal tax liability.

The first years of the program were not policed by the state and credits were claimed on donations whose underlying appraisals were grossly inflated — some by as much as 166,000 percent, state officials said.

Credit buyers learned of the abuses and poor appraisals years after they’d already used the credits, only to learn they had to pay the state their original tax debt. Worse, the landowners they’d bought the credits from no longer had the cash to repay the buyers and their land was now virtually worthless, stuck in the conservation easement forever.

“We are left taking bankrupt or broke landowners to court to collect money that’s no longer there,” testified Mark Heiden of Fort Collins. “What’s been fair to the credit buyers? Nothing. I’ve paid 150 percent to the state of what my normal tax liability would have been. The landowners got my money and spent it. The state got the rest.”

Senators said they struggled between an obvious injustice and the state’s liability to cover the taxpayers’ losses.

“This was a troubling afternoon of testimony,” said Sen. Mike Johnston, D-Denver. “We have those who supported (a program) and got short-changed on their investment, and that’s unfortunate and catastrophic. But the challenge is I can’t fit it into the precedent of the state’s obligation to correct it for them.”

More 2015 Colorado legislation coverage here.

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