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HB26-1221 • 2026

Tax Expenditure Adjustments

The bill adjusts 3 2 existing tax expenditures. Section 2 of the bill limits the alternative minimum tax credit to income tax years commencing prior to January 1, 2026; Section 4 3 requires a corporat

Children Taxes
Passed Legislature

This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.

Sponsor
Rep. E. Sirota, Rep. Y. Zokaie, Sen. J. Amabile, Sen. K. Wallace, Rep. J. Bacon, Rep. A. Boesenecker, Rep. K. Brown, Rep. C. Clifford, Rep. S. Lieder, Rep. M. Lindsay, Rep. J. Mabrey, Rep. K. McCormick, Rep. K. Nguyen, Rep. M. Rutinel, Rep. L. Smith, Rep. S. Woodrow
Last action
2026-05-11
Official status
Senate Committee on Finance Postpone Indefinitely
Effective date
Not listed

Plain English Breakdown

The official summary states the bill adjusts existing expenditures and creates a new credit, but does not provide specific dollar amounts or detailed eligibility criteria for families.

Tax Expenditure Adjustments and New Child Credit

This bill changes three existing state tax rules to raise revenue, which is then used to fund a new refundable tax credit for families with children.

What This Bill Does

  • Limits the alternative minimum tax credit only to income tax years starting before January 1, 2026.
  • Requires corporations to add back certain executive compensation deductions when calculating state taxable income for years starting on or after January 1, 2027.
  • Reduces the time net operating losses can be carried forward from 20 years to 10 years for losses generated in tax years starting on or after January 1, 2027.
  • Limits the amount of net operating loss deductions corporations can claim to 70% instead of 80% for applicable tax years.
  • Creates a new refundable tax credit based on the number and age of children and family income.

Who It Names or Affects

  • Taxpayers who currently use the alternative minimum tax credit.
  • Corporations that claim executive compensation deductions or net operating losses.
  • Families with children who qualify for state child-related tax credits.

Terms To Know

Refundable tax credit
A reduction in taxes owed where the government pays back any remaining amount if the credit is larger than the tax bill.
Net operating loss
When a business's expenses are greater than its income, allowing it to reduce taxable income in other years.
Carry forward
Using an unused tax benefit from one year to lower taxes owed in future years.

Limits and Unknowns

  • The exact dollar amount of the new credit depends on annual projections by legislative council staff.
  • Changes to corporate deductions and loss carryforwards only apply to tax years starting in 2027.
  • The bill text does not list specific income limits or age cutoffs for the new child tax credit eligibility.

Amendments

These notes stay tied to the official amendment files and metadata from the legislature.

L.002

HOU Finance

Passed [*]

Plain English: This amendment changes how income limits are calculated for a tax credit by replacing fixed dollar amounts with new definitions based on the Family Affordability Tax Credit rules.

  • It creates two new terms, 'Joint Filer Adjusted Base Income' and 'Single Filer Adjusted Base Income,' which set specific income levels needed to qualify for a tax credit starting in 2026.
  • It removes the fixed dollar limits of $15,000 for single filers and $25,000 for joint filers found on page 10 of the bill.
  • It replaces those old numbers with the new 'Adjusted Base Income' terms so that income requirements are tied to future tax credit rules instead of set amounts.
  • The amendment text does not explain exactly how much money a person needs to earn to qualify, only that it will be calculated by the Department based on Section 39-22-130.
  • Some parts of the original bill text provided in the metadata were cut off or incomplete, so this explanation relies only on the specific changes listed in the amendment.
L.003

HOU Finance

Passed [*]

Plain English: This amendment removes two sections of the bill and adds a rule that only applies to amounts over $250,000.

  • Removes lines 13 through 22 on page 3 of the original bill.
  • Removes lines 10 through 26 on page 6 of the original bill.
  • Adds a requirement that applies only to amounts greater than $250,000.
  • The amendment text does not explain what specific tax rules were removed or exactly how the new dollar limit will be used because it only lists page and line numbers without showing the full content of those sections.
  • It is unclear which parts of the bill are affected by the $250,000 rule since the surrounding context was deleted.
L.009

Second Reading

Passed [**]

Plain English: This amendment changes a tax credit rule to last one year longer by moving its end date from January 1, 2026, to January 1, 2027.

  • Updates the House Finance Committee Report page numbers and line references for accuracy.
  • Changes the year '2026' to '2027' on Page 10 of the bill regarding tax credit limits.
  • Moves the deadline from January 1, 2026, to January 1, 2027, in three specific places within the bill text.
  • The amendment only provides instructions on where and how to change dates but does not explain which specific tax credit is affected.
  • The full context of why these date changes are needed is not included in this short text snippet.

Bill History

  1. 2026-05-11 Senate

    Senate Committee on Finance Postpone Indefinitely

  2. 2026-05-04 Senate

    Introduced In Senate - Assigned to Finance

  3. 2026-05-04 House

    House Third Reading Passed - No Amendments

  4. 2026-05-01 House

    House Second Reading Special Order - Passed with Amendments - Committee, Floor

  5. 2026-04-30 House

    House Second Reading Laid Over Daily - No Amendments

  6. 2026-04-28 House

    House Committee on Appropriations Refer Unamended to House Committee of the Whole

  7. 2026-03-09 House

    House Committee on Finance Refer Amended to Appropriations

  8. 2026-02-17 House

    Introduced In House - Assigned to Finance

Official Summary Text

The bill adjusts
3

2
existing tax expenditures.

Section 2

of the bill limits the alternative minimum tax credit to income tax years commencing prior to January 1, 2026;

Section

4

3
requires a corporation, for purposes of determining their state taxable income for state income tax years commencing on or after January 1, 2027, to add to their federal taxable income the amount, if any, that the taxpayer claimed as a deduction on the taxpayer's federal tax return pursuant to the employee remuneration deduction allowed pursuant to section 162 (m) of the internal revenue code; and

Section

5

4
limits the period of time that net operating losses generated in income tax years commencing on or after January 1, 2027, can be carried forward from 20 years to 10 years and limits the amount of losses that may be claimed to 70% rather than 80%.

Section

3

2
creates a new tax credit. The new tax credit allows taxpayers to claim a refundable tax credit, in addition to the child tax credit and the family affordability tax credit, in an amount determined by the amount and age of the taxpayer's children and the taxpayer's income. The total amount of the new tax credit is adjusted annually based on legislative council staff projections, such that the total amount of the new tax credit claimed in an income tax year is projected to be the same as the amount of revenue raised in
sections

2, 4,

3
and
5

4

.
(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)
(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)

Current Bill Text

Read the full stored bill text
Second Regular Session
Seventy-fifth General Assembly
STATE OF COLORADO
REENGROSSED
This Version Includes All Amendments
Adopted in the House of Introduction
LLS NO. 26-0488.03 Pierce Lively x2059 HOUSE BILL 26-1221
House Committees Senate Committees
Finance
Appropriations
A BILL FOR AN ACT
CONCERNING THE ADJUSTMENT OF CERTAIN TAX EXPENDITURES.101
Bill Summary
(Note: This summary applies to this bill as introduced and does
not reflect any amendments that may be subsequently adopted. If this bill
passes third reading in the house of introduction, a bill summary that
applies to the reengrossed version of this bill will be available at
http://leg.colorado.gov.)
The bill adjusts 3 existing tax expenditures.
! Section 2 of the bill limits the alternative minimum tax
credit to income tax years commencing prior to January 1,
2026;
! Section 4 requires a corporation, for purposes of
determining their state taxable income for state income tax
years commencing on or after January 1, 2027, to add to
their federal taxable income the amount, if any, that the
HOUSE
3rd Reading Unamended
May 4, 2026
HOUSE
Amended 2nd Reading
May 1, 2026
HOUSE SPONSORSHIP
Zokaie and Sirota, Bacon, Boesenecker, Brown, Clif ford, Lieder, Lindsay, Mabrey,
McCormick, Nguyen, Rutinel, Smith, Woodrow
SENATE SPONSORSHIP
Amabile and Wallace,
Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
Capital letters or bold & italic numbers indicate new material to be added to existing law.
Dashes through the words or numbers indicate deletions from existing law.
taxpayer claimed as a deduction on the taxpayer's federal
tax return pursuant to the employee remuneration deduction
allowed pursuant to section 162 (m) of the internal revenue
code; and
! Section 5 limits the period of time that net operating losses
generated in income tax years commencing on or after
January 1, 2027, can be carried forward from 20 years to 10
years and limits the amount of losses that may be claimed
to 70% rather than 80%.
Section 3 creates a new tax credit. The new tax credit allows
taxpayers to claim a refundable tax credit, in addition to the child tax
credit and the family affordability tax credit, in an amount determined by
the amount and age of the taxpayer's children and the taxpayer's income.
The total amount of the new tax credit is adjusted annually based on
legislative council staff projections, such that the total amount of the new
tax credit claimed in an income tax year is projected to be the same as the
amount of revenue raised in sections 2, 4, and 5.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. Legislative declaration. (1) The general assembly2
finds and declares that:3
(a) The general assembly has an ongoing responsibility to review,4
evaluate, and update the state tax code within constitutional limitations5
to ensure that the state tax code is effective, equitable, and aligned with6
Colorado's priorities;7
(b) (I) (A) The Colorado executive compensation income tax8
deduction has changed frequently in recent years due to changes in the9
federal tax code;10
(B) A taxpayer can claim the executive compensation income tax11
deduction regardless of whether the executives earning that compensation12
reside or work in Colorado; and13
(C) To ensure that the state tax code is effective, equitable, and14
aligned with Colorado's priorities, and insulated from changes in the15
federal tax code, the executive compensation income tax deduction16
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should be limite d to only an income tax deduction for a set amount of1
executive compensation.2
(II) (A) The Colorado net operating loss income tax deduction,3
like the Colorado executive compensation income tax deduction, has4
changed frequently in recent years due to changes in the federal tax code;5
(B) C corporations that have the majority of their activities and6
investment outside of Colorado may claim the Colorado net operating7
loss income tax deduction; and8
(C) To ensure that the state tax code is effective, equitable, and9
aligned with Colorado's priorities, and insulated from changes in the10
federal tax code, the net operating loss income tax deduction should be11
limited.12
13
(c) (I) Colorado state income tax is determined based on the14
amount of a person's federal taxable income;15
(II) Recent federal law modified the computation of federal16
taxable income and so impacted Colorado state income tax revenue;17
(III) The net impact of the recent federal modification to the18
computation of federal taxable income was a reduction in state income19
tax revenue;20
(IV) The amount and availability of the family affordability tax21
credit is determined in part by the amount of state income tax revenue;22
(V) Therefore, by modifying the computation of federal taxable23
income, federal law impacted the amount and availability of the family24
affordability tax credit; and25
(VI) At least in part due to the enactment of recent federal law, the26
family affordability tax credit will not be available for the 2026 state27
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income tax year and will be available in a reduced amount for income tax1
years 2027 and 2028;2
(d) (I) In establishing the family afford ability tax credit, the3
general assembly found and declared that:4
(A) Colorado families struggle to afford many necessary goods5
and services, such as child care, housing, and health care. Eighty-three6
percent of Colorado parents worry that their children won't be able to7
afford to live in the state in the future;8
(B) Targeted tax credits are a proven tool to lift families out of9
poverty. Research has shown that families that claim these types of tax10
credits, such as the state and federal child tax credit and the state and11
federal earned income tax credit, have better health, improved schooling12
outcomes, and increased adult earning potential. As the cost of raising13
children has increased, a family affordability tax credit is critical for the14
well-being of many children and families across Colorado.15
(C) According to the Institute on Taxation and Economic Policy,16
"[t]o cut child poverty rates by half, the majority of states would require17
a base credit value of between three thousand dollars and four thousand18
five hundred dollars per child plus a twenty percent boost for young19
children." When coupled with the state and federal earned income tax20
credit and the state and federal child tax credit, the additional investment21
provided by the family affordability tax credit would establish Colorado22
as a national leader in equitable economic policy.23
(D) Colorado is dealing with rising costs and funding shortfalls in24
many areas across our state, and it is necessary to provide tax credits to25
the people who need it most in a way that will do the most good.26
Establishing the family affordability tax credit is a proven way to do that;27
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and1
(E) By prioritizing the state's lowest-income families, expanding2
the child age eligibility, and including more families, the state can provide3
research-backed investments for families. Through thoughtful and4
strategic investment, Colorado can cut child poverty nearly in half.5
(II) Therefore, it is a priority of Colorado to provide a tax credit6
that targets the same taxpayers that the family affordability tax credit7
targeted, to offset the reduction in the family affordability tax credit.8
(e) (I) This House Bill 26-1221 constitutes a single comprehensive9
tax policy change that better aligns the state tax code with Colorado's10
decision to prioritize low- and middle-income families with children by,11
at least partially, mitigating the effect of recent federal law on the family12
affordability tax credit by creating a tax credit that targets the same13
population targeted by the family affordability tax credit while also14
mitigating the reduction to wealthy taxpayers and corporations' tax15
burdens as a result of recent federal law;16
(II) The income tax credit created in this House Bill 26-122117
reduces state tax revenue in an amount equal to or greater than the18
amount of state revenue gain attributable to the changes made in this19
House Bill 26-1221;20
(III) Any net district revenue gain resulting from the tax policy21
change in this House Bill 26-1221 is incidental and de minimis; and22
(IV) Therefore, consistent with the Colorado Supreme Court's23
holding in TABOR Found. v. Reg'l Transp. Dist., 2018 CO 29, that a tax24
policy change that causes either no net district tax revenue gain or a net25
district tax revenue gain that is only incidental and de minimis does not26
require voter approval under section 20 (4)(a) of article X of the state27
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constitution, this House Bill 26-1221 is not a tax policy change that1
requires voter approval.2
3
SECTION 2. In Colorado Revised Statutes, add 39-22-131 as4
follows:5
39-22-131. Family affordability credit - tax preference6
performance statement - legislative declaration - definitions.7
(1) (a) I N ACCORDANCE WITH SECTION 39-21-304 (1), WHICH8
REQUIRES EACH BILL THAT CREATES A NEW TAX EXPENDITURE TO INCLUDE9
A TAX PREFERENCE PERFORMANCE STATEMENT AS PART OF A STATUTORY10
LEGISLATIVE DECLARATION, THE GENERAL ASSEMBLY HEREBY FINDS AND11
DECLARES THAT THE PURPOSES OF THE INCOME TAX CREDIT CREATED IN12
THIS SECTION ARE THE SAME AS THE FAMILY AFFORDABILITY TAX CREDIT:13
TO SUBSTANTIALLY REDUCE CHILD POVERTY , MAKE COLORADO MORE14
AFFORDABLE FOR FAMILIES , AND HELP FAMILIES AFFORD EXPENSES15
ASSOCIATED WITH HAVING CHILDREN BY PROVIDING TAX RELIEF FOR16
CERTAIN INDIVIDUALS.17
(b) T HE GENERAL ASSEMBLY AND THE STATE AUDITOR, IN18
CONSULTATION WITH THE DEPARTMENT , SHALL MEASURE THE19
EFFECTIVENESS OF THE INCOME TAX CREDIT CREATED IN THIS SECTION IN20
COMBINATION WITH THE FAMILY AFFORDABILITY TAX CREDIT AND, IN THE21
SAME MANNER AS THE GENERAL ASSEMBLY AND THE STATE AUDITOR22
MEASURE THE EFFECTIVENESS OF THE FAMILY AFFORDABILITY TAX CREDIT23
BY DETERMINING THE NUMBER OF COLORADO FAMILIES THAT , AFTER24
CLAIMING A CREDIT PURSUANT TO THIS SECTION AND THE FAMILY25
AFFORDABILITY CREDIT, NO LONGER FALL BELOW THE FEDERAL POVERTY26
LEVEL IN THE TAX YEAR IN WHICH THEY CLAIMED THE CREDITS.27
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(2) AS USED IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE1
REQUIRES:2
(a) "CREDIT" MEANS THE CREDIT AGAINST INCOME TAX CREATED3
IN THIS SECTION.4
(b) "DEPARTMENT" MEANS THE DEPARTMENT OF REVENUE.5
(c) "ELIGIBLE CHILD" MEANS A QUALIFYING CHILD, AS DEFINED IN6
SECTION 152 (c) OF THE "INTERNAL REVENUE CODE OF 1986"; EXCEPT7
THAT THE AGE REQUIREMENTS ARE AS SET FORTH IN SUBSECTIONS8
(3)(a)(I), (3)(a)(II), (3)(b)(I), AND (3)(b)(II) OF THIS SECTION.9
(d) "FEDERAL POVERTY LEVEL" MEANS THE POVERTY LINE THAT10
IS REQUIRED TO BE UPDATED ANNUALLY WITHIN THE FEDERAL POVERTY11
GUIDELINES ADOPTED BY THE UNITED STATES DEPARTMENT OF HEALTH12
AND HUMAN SERVICES PURSUANT TO 42 U.S.C. SEC. 9902 (2).13
(e) "INFLATION" MEANS THE ANNUAL PERCENTAGE CHANGE IN THE14
UNITED STATES DEPARTMENT OF LABOR BUREAU OF LABOR STATISTICS15
CONSUMER PRICE INDEX FOR DENVER-AURORA-LAKEWOOD FOR ALL16
ITEMS PAID BY ALL URBAN CONSUMERS , OR ITS APPLICABLE SUCCESSOR17
INDEX.18
(f) "J OINT FILER ADJUSTED BASE INCOME " MEANS, FOR INCOME19
TAX YEARS COMMENCING BEFORE JANUARY 1, 2034, AN AMOUNT OF20
ADJUSTED GROSS INCOME EQUAL TO THE AMOUNT OF ADJUSTED GROSS21
INCOME DETERMINED BY THE DEPARTMENT PURSUANT TO SECTION22
39-22-130 (7) TO BE NECESSARY FOR TWO RESIDENT INDIVIDUALS WHO23
FILE A JOINT RETURN TO QUALIFY FOR THE FAMILY AFFORDABILITY TAX24
CREDIT PURSUANT TO SECTION 39-22-130 FOR THE INCOME TAX YEAR25
COMMENCING ON JANUARY 1, 2026. 26
(g) "SINGLE FILER ADJUSTED BASE INCOME" MEANS, FOR INCOME27
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TAX YEARS COMMENCING BEFORE JANUARY 1, 2034, AN AMOUNT OF1
ADJUSTED GROSS INCOME EQUAL TO THE AMOUNT OF ADJUSTED GROSS2
INCOME DETERMINED BY THE DEPARTMENT PURSUANT TO SECTION3
39-22-130 (7) TO BE NECESSARY FOR A SINGLE RESIDENT INDIVIDUAL WHO4
FILES A SINGLE RETURN TO QUALIFY FOR THE FAMILY AFFORDABILITY TAX5
CREDIT PURSUANT TO SECTION 39-22-130 FOR THE INCOME TAX YEAR6
COMMENCING ON JANUARY 1, 2026.7
(3) (a) I N ADDITION TO THE CHILD TAX CREDIT ALLOWED BY8
SECTION 39-22-129 AND THE FAMILY AFFORDABILITY TAX CREDIT9
ALLOWED BY SECTION 39-22-130, FOR INCOME TAX YEARS COMMENCING10
ON OR AFTER JANUARY 1, 2027, A RESIDENT INDIVIDUAL WHO FILES A11
SINGLE RETURN IS ALLOWED A CREDIT AGAINST THE INCOME TAXES12
IMPOSED PURSUANT TO THIS ARTICLE 22 FOR:13
(I) E ACH ELIGIBLE CHILD OF THE RESIDENT INDIVIDUAL WHO IS14
FIVE YEARS OLD OR YOUNGER AT THE CLOSE OF THE INCOME TAX YEAR IN15
AN AMOUNT DETERMINED BY STAFF OF THE LEGISLATIVE COUNCIL16
PURSUANT TO SUBSECTION (5)(b) OF THIS SECTION; AND17
(II) EACH ELIGIBLE CHILD OF THE RESIDENT INDIVIDUAL WHO IS SIX18
YEARS OLD OR OLDER BUT LESS T HAN SEVENTEEN YEARS OLD AT THE19
CLOSE OF THE INCOME TAX YEAR IN AN AMOUNT THAT IS SEVENTY -FIVE20
PERCENT OF THE AMOUNT ALLOWED IN SUBSECTION (3)(a)(I) OF THIS21
SECTION.22
(b) IN ADDITION TO THE CHILD TAX CREDIT ALLOWED BY SECTION23
39-22-129 AND THE FAMILY AFFORDABILITY TAX CREDIT ALLOWED BY24
SECTION 39-22-130, FOR INCOME TAX YEARS COMMENCING ON OR AFTER25
JANUARY 1, 2027, TWO RESIDENT INDIVIDUALS WHO FILE A JOINT RETURN26
ARE ALLOWED A FAMILY AFFORDABILITY TAX CREDIT AGAINST THE27
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INCOME TAXES DUE IMPOSED PURSUANT TO THIS ARTICLE 22 FOR:1
(I) EACH ELIGIBLE CHILD OF THE RESIDENT INDIVIDUALS WHO IS2
FIVE YEARS OLD OR YOUNGER AT THE CLOSE OF THE INCOME TAX YEAR IN3
AN AMOUNT DETERMINED BY STAFF OF THE LEGISLATIVE COUNCIL4
PURSUANT TO SUBSECTION (5)(b) OF THIS SECTION; AND5
(II) EACH ELIGIBLE CHILD OF THE RESIDENT INDIVIDUALS WHO IS6
SIX YEARS OLD OR OLDER BUT LESS THAN SEVENTEEN YEARS OLD AT THE7
CLOSE OF THE INCOME TAX YEAR IN AN AMOUNT THAT IS SEVENTY -FIVE8
PERCENT OF THE AMOUNT ALLOWED IN SUBSECTION (3)(b)(I) OF THIS9
SECTION.10
(4) (a) NOTWITHSTANDING SUBSECTION (3) OF THIS SECTION, FOR11
INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY 1, 2027, THE12
CREDIT AMOUNTS IN:13
(I) SUBSECTION (3)(a)(I) OF THIS SECTION ARE REDUCED, BUT NOT14
BELOW ZERO , BY AN AMOUNT E QUAL TO SIX AND EIGHT HUNDRED15
SEVENTY-FIVE ONE-THOUSANDTHS PERCENT FOR EACH FIVE THOUSAND16
DOLLARS BY WHICH A RESIDENT INDIVIDUAL'S ADJUSTED GROSS INCOME17
EXCEEDS THE SINGLE FILER ADJUSTED BASE INCOME; AND18
(II) SUBSECTION (3)(b)(I) OF THIS SECTION ARE REDUCED, BUT NOT19
BELOW ZERO , BY AN AMOUNT E QUAL TO SIX AND EIGHT HUNDRED20
SEVENTY-FIVE ONE-THOUSANDTHS PERCENT FOR EACH FIVE THOUSAND21
DOLLARS BY WHICH TWO RESIDENT INDIVIDUALS ' ADJUSTED GROSS22
INCOME EXCEEDS THE JOINT FILER ADJUSTED BASE INCOME.23
(b) FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY24
1, 2027, THE DEPARTMENT SHALL ADJUST THE JOINT FILER ADJUSTED25
BASED INCOME AND SINGLE FILER ADJUSTED BASE INCOME TO REFLECT26
INFLATION FOR EACH INCOME TAX YEAR IN WHICH THE CREDIT DESCRIBED27
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IN THIS SECTION IS ALLOWED IF CUMULATIVE INFLATION SINCE THE LAST1
ADJUSTMENT, WHEN APPLIED TO THE CURRENT LIMITS , RESULTS IN AN2
INCREASE OF AT LEAST ONE THOUSAND DOLLARS WHEN THE ADJUSTED3
LIMITS ARE ROUNDED TO THE NEAREST ONE THOUSAND DOLLARS.4
(5) B EGINNING WITH THE QUARTERLY DECEMBER REVENUE5
FORECAST THAT LEGISLATIVE COUNCIL STAFF PRESENTS IN DECEMBER OF6
2027, AND FOR EACH QUARTERLY DECEMBER REVENUE FORECAST7
THEREAFTER, AS PART OF THE QUARTERLY DECEMBER REVENUE8
FORECAST, LEGISLATIVE COUNCIL STAFF SHALL DETERMINE:9
(a) FOR THE CURRENT INCOME TAX YEAR , A PROJECTION OF THE10
AMOUNT OF REVENUE GAIN DIRECTLY ATTRIBUTABLE TO THE CHANGES11
MADE IN THIS HOUSE BILL 26-1221, NOTWITHSTANDING THE TAX CREDIT12
CREATED IN THIS SECTION;13
(b) A DOLLAR AMOUNT OF THE CREDIT AVAILABLE PURSUANT TO14
SUBSECTIONS (3)(a)(I) AND (3)(b)(I) OF THIS SECTION , WHICH DOLLAR15
AMOUNT MUST BE THE SAME FOR BOTH SUBSECTIONS (3)(a)(I) AND16
(3)(b)(I) OF THIS SECTION , SUCH THAT THE STAFF OF THE LEGISLATIVE17
COUNCIL PROJECTS, FOR THE CURRENT STATE INCOME TAX YEAR , THAT18
THE TOTAL DOLLAR AMOUNT OF CREDITS CLAIMED PURSUANT TO19
SUBSECTION (3) WILL EQUAL THE DOLLAR AM OUNT OF REVENUE GAIN20
THAT STAFF OF THE LEGISLATIVE COUNCIL DETERMINES , PURSUANT TO21
SUBSECTION (5)(a) OF THIS SECTION, IS DIRECTLY ATTRIBUTABLE TO THE22
CHANGES MADE IN THIS HOUSE BILL 26-1221, NOTWITHSTANDING THE23
TAX CREDIT CREATED IN THIS SECTION.24
(6) N O LATER THAN TWO WEEKS BEFORE THE QUARTERLY25
DECEMBER REVENUE FORECAST THAT LEGISLATIVE COUNCIL STAFF26
PRESENTS IN DECEMBER OF 2027, AND EACH DECEMBER REVENUE27
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FORECAST THEREAFTER, THE DEPARTMENT SHALL DELIVER A REPORT TO1
THE STAFF OF THE LEGISLATIVE COUNCIL THAT DESCRIBES THE REVENUE2
GAIN DIRECTLY ATTRIBUTABLE TO THE CHANGES MADE IN THIS HOUSE3
BILL 26-1221 FOR THE PREVIOUS INCOME TAX YEAR, NOTWITHSTANDING4
THE TAX CREDIT CREATED IN THIS SECTION.5
(7) IN THE CASE OF A PART-YEAR RESIDENT, THE CREDIT ALLOWED6
UNDER THIS SECTION IS APPORTIONED IN THE RATIO DETERMINED UNDER7
SECTION 39-22-110 (1).8
(8) T HE CREDIT ALLOWED UNDER THIS SECTION IS NOT9
CONSIDERED TO BE INCOME OR RESOURCES FOR THE PURPOSE OF10
DETERMINING ELIGIBILITY FOR THE PAYMENT OF PUBLIC ASSISTANCE11
BENEFITS AND MEDICAL ASSISTANCE BENEFITS AUTHORIZED UNDER STATE12
LAW OR FOR A PAYMENT MADE UNDER ANY OTHER PUBLICLY FUNDED13
PROGRAM.14
(9) THE AMOUNT OF THE CREDIT ALLOWED UNDER THIS SECTION15
THAT EXCEEDS THE RESIDENT INDIVIDUAL 'S INCOME TAXES DUE IS16
REFUNDED TO THE INDIVIDUAL.17
(10) T HE DEPARTMENT IS AUTHORIZED AND ENCOURAGED TO18
DEVELOP A MEANS OF REFUNDING THE CREDITS ALLOWED BY THIS SECTION19
TO RESIDENT INDIVIDUALS WHO QUALIFY FOR THE CREDITS IN TWELVE20
EQUAL MONTHLY REFUNDS RATHER THAN ANNUALLY.21
(11) NOTWITHSTANDING SECTION 39-21-304 (4), THE CREDIT DOES22
NOT REPEAL AFTER A SPECIFIED PERIOD OF TAX YEARS.23
SECTION 3. In Colorado Revised Statutes, 39-22-304, add24
(2)(m) as follows:25
39-22-304. Net income of corporation - legislative declaration26
- definitions - repeal.27
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(2) There shall be added to federal taxable income:1
(m) FOR STATE INCOME TAX YEARS COMMENCING ON OR AFTER2
JANUARY 1, 2027, THE AMOUNT, IF ANY, IN EXCESS OF TWO HUNDRED AND3
FIFTY THOUSAND DOLLARS THAT THE TAXPAYER CLAIMED AS A4
DEDUCTION ON THE TAXPAYER'S FEDERAL TAX RETURN PURSUANT TO THE5
EMPLOYEE REMUNERATION DEDUCTION ALLOWED PURSUANT TO SECTION6
162 (m) OF THE INTERNAL REVENUE CODE.7
SECTION 4. In Colorado Revised Statutes, 39-22-504, amend8
(1)(b) and (3)(b); and add (1)(c) and (3)(c) as follows:9
39-22-504. Net operating losses.10
(1) (b) For losses incurred after December 31, 2017, AND ON OR11
BEFORE DECEMBER 31, 2026, the eighty percent limitation set forth in12
section 172 (a)(2) of the internal revenue code shall apply without regard13
to the amendments made in section 2303 of the March 2020 "Coronavirus14
Aid, Relief, and Economic Security Act", Pub.L. 116-136.15
(c) FOR LOSSES INCURRED AFTER DECEMBER 31, 2026, THE EIGHTY16
PERCENT LIMITATION SET FORTH IN SECTION 172 (a)(2) OF THE INTERNAL17
REVENUE CODE SHALL BE APPLIED AS A SEVENTY PERCENT LIMITATION18
BUT SHALL OTHERWISE APPLY WITHOUT REGARD TO THE AMENDMENTS19
MADE IN SECTION 2303 OF THE MARCH 2020 "CORONAVIRUS AID, RELIEF,20
AND ECONOMIC SECURITY ACT", PUB.L. 116-136.21
(3) (b) Net operating losses of corporations generated in income22
tax years commencing on or after January 1, 2021, AND BEFORE JANUARY23
1, 2027, may be carried forward for twenty years. Net operating losses of24
corporations may not be carried back to an earlier tax year.25
(c) N ET OPERATING LOSSES OF CORPORATIONS GENERATED IN26
INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY 1, 2027, MAY BE27
1221-12-
CARRIED FORWARD FOR TEN YEARS . NET OPERATING LOSSES OF1
CORPORATIONS MAY NOT BE CARRIED BACK TO AN EARLIER TAX YEAR.2
SECTION 5. Act subject to petition - effective date. This act3
takes effect at 12:01 a.m. on the day following the expiration of the4
ninety-day period after final adjournment of the general assembly (August5
12, 2026, if adjournment sine die is on May 13, 2026); except that, if a6
referendum petition is filed pursuant to section 1 (3) of article V of the7
state constitution against this act or an item, section, or part of this act8
within such period, then the act, item, section, or part will not take effect9
unless approved by the people at the general election to be held in10
November 2026 and, in such case, will take effect on the date of the11
official declaration of the vote thereon by the governor.12
1221-13-