Committee advances bill creating tax credit for state employees who save money

The City Senate Committee on Revenue and Fiscal Affairs on April 28 reported Senate Bill 33 favorable, a proposal to award state employees a refundable individual income tax credit for verified state savings.

Senator Alland, sponsor of the bill, told the committee the measure is intended to "incentivize state employees that go above and beyond" by offering a tax credit when an agency certifies an idea produces savings. "Right now, there is no reason for a state employee to go the extra mile. They don't know if they're gonna even get credit for the idea," Alland said.

Under the bill as presented, an eligible employee would submit a savings proposal to the agency head, who would recommend certification to the commissioner of administration. The commissioner would review agency recommendations and certify or deny credits. The bill includes a fiscal-year cap of $10,000,000 for credits and phases the credit as a percentage of documented savings: 15% in year one, 10% in year two and 5% in year three. Credits would be claimed on the employee's individual income tax return and unused credits could be carried forward up to 10 years. The bill also contains a recapture provision allowing recovery of credits issued in violation of program rules.

Committee members asked how the credit would translate to take-home benefit. Senator Lambert pressed through an example, and Alland explained the credit cannot exceed the taxpayer's liability in a given year and unused credit amounts roll forward subject to the ten-year limit. Questions about whether the reward would be treated as taxable income were deferred for further review.

The committee recorded no objections when Senator Munoz moved to report the bill favorable; the measure moves forward for further consideration. The committee did not adopt additional amendments during the hearing.

Sources at the hearing said the sponsor had consulted with Secretary Nelson and Commissioner Barra on implementation; Alland said Commissioner Barra had raised concerns that the sponsor planned to resolve prior to placing the bill on the calendar.

The committee's action was procedural: reporting the bill favorable sends it to the next house or committee stage. No changes to the credit rates, cap or carryforward period were adopted in committee.