Tax Incentive Evaluation Law: Colorado

Fact Sheet June 17, 2016 Read time:

Projects: Economic Development

This page is no longer being updated. As of June 15, 2017, newer tax incentive evaluation fact sheets are available here.

To ensure that economic development tax incentives are achieving their goals effectively, many states have approved laws requiring regular, rigorous, independent evaluations of these programs. For a list of states that have passed evaluation laws since the start of 2012, click here.

Colorado

S.B. 16-203, enacted June 6, 2016

What it does

Requires evaluation of all major tax incentives
The state auditor will conduct evaluations of Colorado’s tax incentives, including credits, deductions, and exemptions. A multiyear schedule for evaluations will ensure that each tax incentive is reviewed at least once every five years.
Sets standards for economic analysis
Each evaluation will provide key information about the tax incentive, such as the economic costs and benefits and the extent to which it is a cost-effective use of resources compared with other options for achieving the same goal. The state auditor will use the results to suggest improvements that can increase the effectiveness of the tax incentive in meeting its intended purpose.

Requires evaluation of all major tax incentives

The state auditor will conduct evaluations of Colorado’s tax incentives, including credits, deductions, and exemptions.

A multiyear schedule for evaluations will ensure that each tax incentive is reviewed at least once every five years.

Sets standards for economic analysis

Each evaluation will provide key information about the tax incentive, such as the economic costs and benefits and the extent to which it is a cost-effective use of resources compared with other options for achieving the same goal.

The state auditor will use the results to suggest improvements that can increase the effectiveness of the tax incentive in meeting its intended purpose.

Excerpt from Colorado’s law: Evaluation criteria

To the extent it can be determined by the state auditor, the tax expenditure evaluation should also include the following:

the extent to which the tax expenditure is a cost-effective use of resources compared to other options for using the same resources to address the same purpose, intent, or goal;
an analysis of the tax expenditure's effect on competition and on business and stakeholder needs;
whether there are any opportunities to improve the effectiveness of the tax expenditure in meeting its purpose, intent, or goal; and
an analysis of the effect of the state tax policies connected to local taxing jurisdictions on the overall purpose, intent, or goal of the tax expenditure.