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Senate bill would phase down corporate credit carryover cap to smooth state's cash flow; DRA: $162M current liability
Summary
SB 652 would gradually reduce the maximum corporate tax credit carryover percentage over multiple biennia to limit mandatory refunds and stabilize cash flow. DRA testified the state's recorded carryforward liability for FY25 is about $162 million and provided modeled refund schedules under current law and the bill's staged reductions.
Sen. Tim Lang described SB 652 to the House Ways and Means committee as a cash‑management bill that staggers reductions to corporate tax credit carryover caps to avoid disruptive large mandatory refunds.
"What this bill does is just says that we're gonna reduce it by 50% every year until we get to 150% maximum credit carryover every biennium," Lang said, explaining the proposal would phase down the cap rather than make an immediate large cut.
Jennifer Ramsey, tax policy counsel with the Department of Revenue Administration, told the committee that fiscal 2025 carryforward liability recorded by DRA totaled about $162 million. She provided a table (handed out to members) showing projected refunds under current law and the more graduated schedule in the senator's proposal, and explained why the two‑year step cycles create biennial "sawtooth" patterns in refund amounts: larger step‑down years require larger one‑time refunds when caps fall.
DRA also said the state does not owe interest on money simply held as a credit on account; interest begins only if a taxpayer requests a refund and DRA does not process it within 90 days. Ramsey said DRA worked with the senator on drafting and can implement the revision if the legislature adopts it.
Committee members asked about alternatives, including setting aside the overpayments in a dedicated fund to earn interest and be immediately available for refunds; DRA and members agreed the treasurer could be asked to explain customary cash‑management practices. Several lawmakers said they preferred a slower phase‑down to avoid revenue volatility, while others urged guardrails and additional study.
Ending: Committee members requested follow‑up with the treasurer and DRA on guardrails and the mechanics of any dedicated account; they discussed scheduling a work session before a final committee recommendation.
