Will Colorado tax sacramental wine? A legislative committee is studying the idea

Denver, Colo., Oct 29, 2019 / 15:45 pm

A bicameral committee in Colorado's legislature is considering two bills that would tax sacramental wine and insurance premiums paid to fraternal societies, like the Knights of Columbus, that sell insurance to their members.

The Tax Expenditure Evaluation Interim Study Committee of the Colorado General Assembly is tasked with evaluating recommendations regarding Colorado's tax exemptions and credits from the state's auditor.

Colorado governor Jared Polis pledged during his 2018 campaign to close "tax loopholes," which he says lead to higher tax rates for state residents and businesses.

"We pay too much because special interests get too much in tax breaks," Polis told business leaders earlier this year.

At an Oct. 30 hearing, the legislature's study committee is expected to review a draft bill "concerning the repeal of the excise tax exemption for sacramental wines."

The bill would repeal an existing state tax exemption for "sacramental wine sold and used for religious purposes."

According to the draft bill, the tax exemption for sacramental wine is "claimed by a small number of taxpayers for a total amount of only $2,600."

"There is no corresponding excise tax exemption for religious organizations that use other goods with excise taxes for religious ceremonies," the bill says, proposing to eliminate the exemption "to simplify the collection and administration of taxes for the state of Colorado."

Among other bills the committee will review is a draft bill "concerning the repeal of the insurance premium tax exemption for fraternal societies."

"Under current law, the insurance premium tax exemption for fraternal societies states that fraternal benefit societies that offer insurance products to their members are exempt from the insurance premium tax. The bill repeals this exemption," the draft text explains.

A January 2019 report from Colorado's state auditor explains that 35 "fraternal benefit societies...which are social groups organized around a common bond that offer insurance products to their members." The groups are exempt from state insurance tax premiums.

Fraternal benefit societies include the Knights of Columbus, Thrivent Financial for Lutherans, the Catholic Order of Foresters, and other social groups, both religious and non-religious.

The auditor's report says that fraternal organizations have 116,000 members in Colorado, and received $189 million in premiums during 2017, but added that the use of fraternal organizations for the purchase of insurance is declining.

"In Colorado, as of Calendar Year 2017, about 2.4 percent of all life insurance policies were purchased through fraternals," the report said. A decline in policies issued decreases the amount of revenue the state could collect by eliminating the tax exemption.

"Despite their decline in membership and insurance market share, we found that many fraternals continue to provide social and charitable benefits to the State," the auditor's office added, while noting that ending the insurance exemption would lead to an increase of state tax revenues totaling only around $3.8 million.

Colorado's budget in 2018-19 was 28.19 billion.

While the draft bill proposes to eliminate the exemption, the bills are still under consideration by the tax committee.