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Second Regular Session
Seventy-fifth General Assembly
STATE OF COLORADO
REENGROSSED
This Version Includes All Amendments
Adopted in the House of Introduction
LLS NO. 26-0464.01 Pierce Lively x2059 HOUSE BILL 26-1222
House Committees Senate Committees
Finance
Appropriations
A BILL FOR AN ACT
CONCERNING THE MODIFICATION OF TAX EXPENDITURES , AND , IN101
CONNECTION THEREWITH , MAKING ADDITIONS TO THE102
DEFINITION OF FEDERAL TAXABLE INCOME FOR TAX YEARS103
COMMENCING ON OR AFTER JANUARY 1, 2027, AND CREATING104
THE FAMILY AFFORDABILITY CREDIT.105
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.)
Recent changes to the federal income tax code significantly
increased the amount of business-related expenses that may be deducted
HOUSE
3rd Reading Unamended
May 4, 2026
HOUSE
Amended 2nd Reading
May 1, 2026
HOUSE SPONSORSHIP
Garcia and McCormick, Bacon, Boesenecker, Brown, Clifford, Duran, Froelich, Hamrick,
Jackson, Lindsay, Lukens, Mabrey, McCluskie, Nguyen, Rutinel, Rydin, Sirota, Smith, Story,
Titone, Velasco, Woodrow, Zokaie
SENATE SPONSORSHIP
Kipp,
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.
for federal income tax purposes as follows:
! Expanded the business interest deduction limitation
pursuant to section 163 (j) of the internal revenue code
(IRC) by adding back depreciation, amortization, and
depletion for calculation of adjusted taxable income and
determination of the deduction base, resulting in many
taxpayers, especially capital intensive businesses, being
able to deduct a larger portion of their business interest
expense;
! Expanded the bonus depreciation deduction pursuant to
section 168 (k) of the IRC by permanently restoring the
100% first-year bonus depreciation deduction for "qualified
property" acquired and placed in service on or after January
20, 2025;
! Created an elective 100% depreciation deduction in section
168 (n) of the IRC for "qualified production property",
which is property largely tied to manufacturing, production,
or refining facilities and that would not otherwise qualify
for section 168 (k) bonus depreciation; and
! Created a new section 174A of the IRC that allows
taxpayers to immediately deduct domestic research and
experimental expenditures paid or incurred during the
taxable year, rather than requiring such costs to be
capitalized and amortized over time.
Because the state income tax is imposed on federal taxable
income, these changes to the definition of federal income also exclude
these business-related expenses from state income taxation. The bill
reverses these changes to the federal tax code for purposes of the state
income tax code and creates a new tax credit using the resulting revenue.
Sections 2 and 4 of the bill provide, for income tax years
commencing on or after January 1, 2027, that individual and corporate
state income taxpayers must add the following to their federal taxable
income for purposes of applying the state income tax:
! An amount equal to the federal deduction claimed by the
taxpayer for business interest pursuant to the limitation in
section 163 (j) of the IRC to the extent the amount exceeds
the amount the taxpayer would have been allowed to claim
before the limitation was changed as described above;
! An amount equal to the federal deduction claimed by the
taxpayer for qualified property depreciation pursuant to
section 168 (k) of the IRC to the extent the amount claimed
exceeds the amount the taxpayer would have been allowed
to claim under section 168 (k) prior to the change described
above; except that, the taxpayer may reduce the amount
required to be added back by the amount of depreciation
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the taxpayer would have been allowed to claim for the
taxable year with respect to the same property pursuant to
any section other than section 168 (k) of the IRC prior to
the recent federal changes;
! An amount equal to the federal deduction claimed by the
taxpayer for qualified production property depreciation
pursuant to section 168 (n) of the IRC; except that, the
taxpayer may reduce the amount required to be added back
by the amount of depreciation the taxpayer would have
been allowed to claim for the taxable year with respect to
the same property pursuant to any section other than
section 168 (k) of the IRC prior to the recent federal
change; and
! An amount equal to the federal deduction claimed by the
taxpayer for the income tax year for domestic research and
experimental expenditures pursuant to section 174A of the
IRC; except that, the taxpayer may reduce the amount
required to be added back by the amount of the deduction
the taxpayer would have been allowed to claim for the
taxable year with respect to the same research and
experimental expenditures pursuant to section 174 of the
IRC prior to the recent federal changes.
Sections 2 and 4 allow taxpayers who are required to make
additions to their federal taxable income pursuant to the new provisions
to subtract the amounts of their disallowed federal deductions over time,
using time periods that reflect how the property or expense would have
been treated prior to the recent changes to the federal tax code.
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 and 4.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. Legislative declaration.2
(1) The general assembly 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
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to ensure that the state code is effective, equitable, and aligned with1
Colorado's priorities;2
(b) (I) Recent changes in the federal tax code materially expanded3
certain business-related deductions, including deductions related to4
business interest expense, bonus depreciation, qualified production5
property, and domestic research and experimental expenditures (business6
deductions).7
(II) The business deductions significantly reduce federal taxable8
income without regard to a taxpayer's ability to pay or connection to9
household economic security.10
(c) (I) Colorado state income tax is determined based on the11
amount of a person's federal taxable income.12
(II) The material expansion of the federal business deductions13
modified the computation of federal taxable income and so impacted14
Colorado state income tax revenue.15
(III) The net impact of the recent federal tax code modification to16
the computation of federal taxable income was a reduction in state17
income tax revenue.18
(IV) The amount and availability of the family affordability tax19
credit is determined in part by the amount of state income tax revenue.20
(V) Therefore, by modifying the computation of federal taxable21
income, the expansion of the business deductions impacted the amount22
and availability of the family affordability tax credit.23
(VI) At least in part due to the enactment of recent changes to the24
federal tax code, the family affordability tax credit will not be available25
for the 2026 state income tax year and will be available in a reduced26
amount for income tax years 2027 and 2028.27
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(d) (I) In establishing the family affordability tax credit, the1
general assembly found and declared that:2
(A) Colorado families struggle to afford many necessary goods3
and services, such as child care, housing, and health care. Eighty-three4
percent of Colorado parents worry that their children won't be able to5
afford to live in the state in the future.6
(B) Targeted tax credits are a proven tool to lift families out of7
poverty. Research has shown that families that claim these types of tax8
credits, such as the state and federal child tax credit and the state and9
federal earned income tax credit, have better health, improved schooling10
outcomes, and increased adult earning potential. As the cost of raising11
children has increased, a family affordability tax credit is critical for the12
well-being of many children and families across Colorado.13
(C) According to the Institute on Taxation and Economic Policy,14
"[t]o cut child poverty rates by half, the majority of states would require15
a base credit value of between three thousand dollars and four thousand16
five hundred dollars per child plus a twenty percent boost for young17
children". When coupled with the state and federal earned income tax18
credit and the state and federal child tax credit, the additional investment19
provided by the family affordability tax credit would establish Colorado20
as a national leader in equitable economic policy.21
(D) Colorado is dealing with rising costs and funding shortfalls in22
many areas across our state, and it is necessary to provide tax credits to23
the people who need it most in a way that will do the most good.24
Establishing the family affordability tax credit is a proven way to do that;25
and26
(E) By prioritizing the state's lowest-income households,27
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expanding the child age eligibility, and including more families, the state1
can provide research-backed investments for families. Through2
thoughtful and strategic investment, Colorado can cut child poverty nearly3
in half.4
(II) Therefore, it is a priority of Colorado to provide a tax credit5
that targets the same taxpayers that the family affordability tax credit6
targeted, to offset the reduction in the family affordability tax credit. 7
(e) (I) This House Bill 26-1222 constitutes a single comprehensive8
tax policy change that better aligns the state tax code with Colorado's9
priorities by, at least partially, mitigating the modified federal income tax10
code's effects on the family affordability tax credit by creating a tax credit11
that targets the same population that the family affo rdability tax credit12
targeted while also requiring taxpayers to add back to their taxable13
income only the incremental income amounts attributable to the recent14
expansion of the federal business deductions. The expanded business15
deductions disproportionately benefit large and capital-intensive16
businesses, while providing little or no direct benefit to low- and17
moderate-income households, which households are particularly sensitive18
to changes in tax policy and public investment. While Colorado's income19
tax system is designed to conform to federal law generally, state law also20
preserves the general assembly's authority to decouple from federal tax21
provisions that undermine state fiscal stability, equity, or policy priorities.22
This House Bill 26-1222 preserves the integrity of the state's commitment23
to support low-income households, while maintaining long-standing24
federal conformity for core income calculations and the state income tax25
base.26
(II) The income tax credit created in this House Bill 26-122227
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reduces state tax revenue in an amount equal to or greater than the1
amount of state revenue gain attributable to the changes made in this2
House Bill 26-1222;3
(III) Any net district revenue gain resulting from the tax policy4
change in this House Bill 26-1222 is incidental and de minimis; and5
(IV) Therefore, consistent with the Colorado Supreme Court's6
holding in TABOR Found. v. Reg'l Transp. Dist., 2018 CO 29, that a tax7
policy change that causes either no net district tax revenue gain or a net8
district tax revenue gain that is only incidental and de minimis does not9
require voter approval under section 20 (4)(a) of article X of the state10
constitution, this House Bill 26-1222 is not a tax policy change that11
requires voter approval.12
SECTION 2. In Colorado Revised Statutes, 39-22-104, add13
(3)(v), (3)(w), (3)(x), (3)(y), and (4)(ff) as follows:14
39-22-104. Income tax imposed on individuals, estates, and15
trusts - single rate - report - tax preference performance statement16
- legislative declaration - definitions - repeal.17
(3) There shall be added to the federal taxable income:18
(v) FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY19
1, 2027, AN AMOUNT EQUAL TO THE FEDERAL DEDUCTION CLAIMED BY THE20
TAXPAYER FOR THE INCOME TAX YEAR FOR BUSINESS INTEREST PURSUANT21
TO SECTION 163 OF THE INTERNAL REVENUE CODE TO THE EXTENT THE22
AMOUNT CLAIMED EXCEEDS THE AMOUNT THE TAXPAYER WOULD HAVE23
BEEN ALLOWED TO CLAIM PURSUANT TO THE LIMITATION ON BUSINESS24
INTEREST SET FORTH IN SECTION 163 (j) OF THE INTERNAL REVENUE CODE25
WITHOUT REGARD TO ANY AMENDMENT BY PUB. L. 119-21;26
(w) FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY27
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1, 2027, AN AMOUNT EQUAL TO THE FEDERAL DEDUCTION CLAIMED BY THE1
TAXPAYER FOR THE INCOME TAX YEAR FOR QUALIFIED PROPERTY2
DEPRECIATION PURSUANT TO SECTION 168 (k) OF THE INTERNAL REVENUE3
CODE TO THE EXTENT THE AMOUNT CLAIMED EXCEEDS THE AMOUNT THE4
TAXPAYER WOULD HAVE BEEN ALLOWED TO CLAIM PURSUANT TO SECTION5
168 (k) OF THE INTERNAL REVENUE CODE WITHOUT REGARD TO ANY6
AMENDMENT BY PUB. L. 119-21; EXCEPT THAT , THE TAXPAYER MAY7
REDUCE THE AMOUNT OTHERWISE REQUIRED TO BE ADDED TO THE8
TAXPAYER'S FEDERAL TAXABLE INCOME PURSUANT TO THIS SUBSECTION9
(3)(w) BY THE AMOUNT OF QUALIFIED PROPERTY DEPRECIATION THE10
TAXPAYER WOULD HAVE BEEN ALLOWED TO CLAIM FOR THE INCOME TAX11
YEAR WITH RESPECT TO THE SAME PROPERTY PURSUANT TO ANY SECTION12
OTHER THAN SECTION 168 (k) OF THE INTERNAL REVENUE CODE WITHOUT13
REGARD TO ANY AMENDMENT BY PUB. L. 119-21;14
(x) FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY15
1, 2027, AN AMOUNT EQUAL TO THE FEDERAL DEDUCTION CLAIMED BY THE16
TAXPAYER FOR THE INCOME TAX YEAR FOR QUALIFIED PRODUCTION17
PROPERTY DEPRECIATION PURSUANT TO SECTION 168 (n) OF THE INTERNAL18
REVENUE CODE; EXCEPT THAT, THE TAXPAYER MAY REDUCE THE AMOUNT19
OTHERWISE REQUIRED TO BE ADDED TO THE TAXPAYER 'S FEDERAL20
TAXABLE INCOME PURSUANT TO THIS SUBSECTION (3)(x) BY THE AMOUNT21
OF QUALIFIED PRODUCTION PROPERTY DEPRECIATION THE TAXPAYER22
WOULD HAVE BEEN ALLOWED TO CLAIM FOR THE INCOME TAX YEAR WITH23
RESPECT TO THE SAME PROPERTY PURSUANT TO ANY SECTION OTHER THAN24
SECTION 168 (k) OF THE INTERNAL REVENUE CODE WITHOUT REGARD TO25
ANY AMENDMENT BY PUB. L. 119-21; AND26
(y) FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY27
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1, 2027, AN AMOUNT EQUAL TO THE FEDERAL DEDUCTION CLAIMED BY THE1
TAXPAYER FOR THE INCOME TAX YEAR FOR DOMESTIC RESEARCH AND2
EXPERIMENTAL EXPENDITURES PURSUANT TO SECTION 174A OF THE3
INTERNAL REVENUE CODE ; EXCEPT THAT , THE TAXPAYER MAY REDUCE4
THE AMOUNT OTHERWISE REQUIRED TO BE ADDED TO THE TAXPAYER 'S5
FEDERAL TAXABLE INCOME PURSUANT TO THIS SUBSECTION (3)(y) BY THE6
AMOUNT OF THE DEDUCTION THE TAXPAYER WOULD HAVE BEEN ALLOWED7
TO CLAIM FOR THE INCOME TAX YEAR WITH RESPECT TO THE SAME8
RESEARCH AND EXPERIMENTAL EXPENDITURES PURSUANT TO SECTION 1749
OF THE INTERNAL REVENUE CODE WITHOUT REGARD TO ANY AMENDMENT10
BY PUB. L. 119-21.11
(4) There shall be subtracted from federal taxable income:12
(ff) (I) F OR INCOME TAX YEARS COMMENCING ON OR AFTER13
JANUARY 1, 2028, A TAXPAYER REQUIRED TO MAKE AN ADDITION TO14
FEDERAL TAXABLE INCOME PURSUANT TO SUBSECTION (3)(v), (3)(w),15
(3)(x), OR (3)(y) OF THIS SECTION, IS ALLOWED TO APPLY THE FOLLOWING16
SUBTRACTIONS IN ACCORDANCE WITH THIS SUBSECTION (4)(ff):17
(A) A N AMOUNT EQUAL TO ONE -FIFTH OF THE CUMULATIVE18
AMOUNT ADDED TO FEDERAL T AXABLE INCOME AS REQUIRED BY19
SUBSECTION (3)(v) OF THIS SECTION FOR EACH OF THE FIVE INCOME TAX20
YEARS IMMEDIATELY FOLLOWING THE INCOME TAX YEAR IN WHICH THE21
ADDITION WAS REQUIRED PURS UANT TO SUBSECTION (3)(v) OF THIS22
SECTION;23
(B) A N AMOUNT EQUAL TO ONE -TENTH OF THE CUMULATIVE24
AMOUNT ADDED TO FEDERAL T AXABLE INCOME AS REQUIRED BY25
SUBSECTION (3)(w) OF THIS SECTION FOR EACH OF THE TEN INCOME TAX26
YEARS IMMEDIATELY FOLLOWING THE INCOME TAX YEAR IN WHICH THE27
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ADDITION WAS REQUIRED PURSUANT TO SUBSECTION (3)(w) OF THIS1
SECTION;2
(C) A N AMOUNT EQUAL TO ONE THIRTY -EIGHTH OF THE3
CUMULATIVE AMOUNT ADDED TO FEDERAL TAXABLE INCOME AS REQUIRED4
BY SUBSECTION (3)(x) OF THIS SECTION FOR EACH OF THE THIRTY-EIGHT5
INCOME TAX YEARS IMMEDIATELY FOLLOWING THE INCOME TAX YEAR IN6
WHICH THE ADDITION WAS REQUIRED PURSUANT TO SUBSECTION (3)(x) OF7
THIS SECTION; AND8
(D) A N AMOUNT EQUAL TO ONE -FOURTH OF THE CUMULATIVE9
AMOUNT ADDED TO FEDERAL TAXABLE INCOME AS REQUIRED BY10
SUBSECTION (3)(y) OF THIS SECTION FOR EACH OF THE FOUR INCOME TAX11
YEARS IMMEDIATELY FOLLOWING THE INCOME TAX YEAR IN WHICH THE12
ADDITION WAS REQUIRED PURS UANT TO SUBSECTION (3)(y) OF THIS13
SECTION.14
(II) T HE TOTAL AMOUNT OF EACH SUBTRACTION ALLOWED15
PURSUANT TO SUBSECTIONS (4)(ff)(I)(A), (4)(ff)(I)(B), (4)(ff)(I)(C), AND16
(4)(ff)(I)(D) OF THIS SECTION FOR A TAXPAYER SHALL NOT EXCEED THE17
CUMULATIVE AMOUNT ADDED TO FEDERAL TAXABLE INCOME PURSUANT18
TO EACH CORRESPONDING ADDITION REQUIRED BY SUBSECTIONS (3)(v),19
(3)(w), (3)(x), AND (3)(y) OF THIS SECTION FOR THAT SAME TAXPAYER.20
(III) THE SUBTRACTIONS ALLOWED PURSUANT TO THIS SUBSECTION21
(4)(ff) APPLY AFTER THE APPLICATION OF THE OTHER SUBTRACTIONS22
PROVIDED FOR IN THIS SUBSECTION (4), EXCEPT FOR THE SUBTRACTION23
ALLOWED PURSUANT TO SUBSECTION (4)(z) OF THIS SECTION . IF THE24
AMOUNT OF THE SUBTRACTIONS ALLOWED UNDER THIS SUBSECTION (4)(ff)25
EXCEEDS A TAXPAYER 'S FEDERAL TAXABLE INCOME AS CALCULATED26
PURSUANT TO THIS SECTION WITHOUT REGARD TO THE SUBTRACTION27
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ALLOWED PURSUANT TO SUBSECTION (4)(z) OF THIS SECTION, THE AMOUNT1
NOT SUBTRACTED FROM THE TAXPAYER 'S FEDERAL TAXABLE INCOME2
PURSUANT TO THIS SECTION MAY BE CARRIED FORWARD AND USED AS A3
SUBTRACTION FROM THE TAXPAYER 'S FEDERAL TAXABLE INCOME AS4
CALCULATED PURSUANT TO THIS SECTION WITHOUT REGARD TO THE5
SUBTRACTION ALLOWED PURSUANT TO SUBSECTION (4)(z) OF THIS6
SECTION IN SUBSEQUENT YEARS FOR A PERIOD NOT TO EXCEED TEN YEARS7
AND MUST BE APPLIED FIRST TO THE EARLIEST POSSIBLE INCOME TAX8
YEAR. ANY SUBTRACTION REMAINING AFTER THE PERIOD IS NOT9
REFUNDED OR CREDITED TO THE TAXPAYER.10
SECTION 3. In Colorado Revised Statutes, add 39-22-131 as11
follows:12
39-22-131. Family affordability credit - tax preference13
performance statement - legislative declaration - definitions.14
(1) (a) I N ACCORDANCE WITH SECTION 39-21-304 (1), WHICH15
REQUIRES EACH BILL THAT CREATES A NEW TAX EXPENDITURE TO INCLUDE16
A TAX PREFERENCE PERFORMANCE STATEMENT AS PART OF A STATUTORY17
LEGISLATIVE DECLARATION, THE GENERAL ASSEMBLY HEREBY FINDS AND18
DECLARES THAT THE PURPOSES OF THE INCOME TAX CREDIT CREATED IN19
THIS SECTION ARE THE SAME AS THE FAMILY AFFORDABILITY TAX CREDIT:20
TO SUBSTANTIALLY REDUCE CHILD POVERTY , MAKE COLORADO MORE21
AFFORDABLE FOR FAMILIES , AND HELP FAMILIES AFFORD EXPENSES22
ASSOCIATED WITH HAVING CHILDREN BY PROVIDING TAX RELIEF FOR23
CERTAIN INDIVIDUALS.24
(b) T HE GENERAL ASSEMBLY AND THE STATE AUDITOR , IN25
CONSULTATION WITH THE DEPARTMENT , SHALL MEASURE THE26
EFFECTIVENESS OF THE INCOME TAX CREDIT CREATED IN THIS SECTION IN27
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COMBINATION WITH THE FAMILY AFFORDABILITY TAX CREDIT AND, IN THE1
SAME MANNER AS THE GENERAL ASSEMBLY AND THE STATE AUDITOR2
MEASURE THE EFFECTIVENESS OF THE FAMILY AFFORDABILITY TAX CREDIT3
BY DETERMINING THE NUMBER OF COLORADO FAMILIES THAT , AFTER4
CLAIMING A CREDIT PURSUANT TO THIS SECTION AND THE FAMILY5
AFFORDABILITY CREDIT, NO LONGER FALL BELOW THE FEDERAL POVERTY6
LEVEL IN THE TAX YEAR IN WHICH THEY CLAIMED THE CREDITS.7
(2) AS USED IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE8
REQUIRES:9
(a) "CREDIT" MEANS THE CREDIT AGAINST INCOME TAX CREATED10
IN THIS SECTION.11
(b) "DEPARTMENT" MEANS THE DEPARTMENT OF REVENUE.12
(c) "ELIGIBLE CHILD" MEANS A QUALIFYING CHILD, AS DEFINED IN13
SECTION 152 (c) OF THE FEDERAL "INTERNAL REVENUE CODE OF 1986";14
EXCEPT THAT THE AGE REQUIREMENTS ARE SET FORTH IN SUBSECTIONS15
(3)(a)(I), (3)(a)(II), (3)(b)(I), AND (3)(b)(II) OF THIS SECTION.16
(d) "FEDERAL POVERTY LEVEL" MEANS THE POVERTY LINE THAT17
IS REQUIRED TO BE UPDATED ANNUALLY WITHIN THE FEDERAL POVERTY18
GUIDELINES ADOPTED BY THE UNITED STATES DEPARTMENT OF HEALTH19
AND HUMAN SERVICES PURSUANT TO 42 U.S.C. SEC. 9902 (2).20
(e) "INFLATION" MEANS THE ANNUAL PERCENTAGE CHANGE IN THE21
UNITED STATES DEPARTMENT OF LABOR BUREAU OF LABOR STATISTICS22
CONSUMER PRICE INDEX FOR DENVER-AURORA-LAKEWOOD FOR ALL23
ITEMS PAID BY ALL URBAN CONSUMERS , OR ITS APPLICABLE SUCCESSOR24
INDEX. 25
(f) "J OINT FILER ADJUSTED BASE INCOME" MEANS, FOR INCOME26
TAX YEARS COMMENCING BEFORE JANUARY 1, 2034, AN AMOUNT OF27
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ADJUSTED GROSS INCOME EQUAL TO THE AMOUNT OF ADJUSTED GROSS1
INCOME DETERMINED BY THE DEPARTMENT PURSUANT TO SECTION2
39-22-130 (7) TO BE NECESSARY FOR TWO RESIDENT INDIVIDUALS WHO3
FILE A JOINT RETURN TO QUALIFY FOR THE FAMILY AFFORDABILITY TAX4
CREDIT PURSUANT TO SECTION 39-22-130 FOR THE INCOME TAX YEAR5
COMMENCING ON JANUARY 1, 2027.6
(g) "SINGLE FILER ADJUSTED BASE INCOME" MEANS, FOR INCOME7
TAX YEARS COMMENCING BEFORE JANUARY 1, 2034, AN AMOUNT OF8
ADJUSTED GROSS INCOME EQUAL TO THE AM OUNT OF ADJUSTED GROSS9
INCOME DETERMINED BY THE DEPARTMENT PURSUANT TO SECTION10
39-22-130 (7) TO BE NECESSARY FOR A SINGLE RESIDENT INDIVIDUAL WHO11
FILES A SINGLE RETURN TO QUALIFY FOR THE FAMILY AFFORDABILITY TAX12
CREDIT PURSUANT TO SECTION 39-22-130 FOR THE INCOME TAX YEAR13
COMMENCING ON JANUARY 1, 2027.14
(3) (a) I N ADDITION TO THE CHILD TAX CREDIT ALLOWED BY15
SECTION 39-22-129 AND THE FAMILY AFFORDABILITY TAX CREDIT16
ALLOWED BY SECTION 39-22-130, FOR INCOME TAX YEARS COMMENCING17
ON OR AFTER JANUARY 1, 2027, A RESIDENT INDIVIDUAL WHO FILES A18
SINGLE RETURN IS ALLOWED A CREDIT AGAINST THE INCOME TAXES19
IMPOSED PURSUANT TO THIS ARTICLE 22 FOR:20
(I) E ACH ELIGIBLE CHILD OF THE RESIDENT INDIVIDUAL WHO IS21
FIVE YEARS OLD OR YOUNGER AT THE CLOSE OF THE INCOME TAX YEAR IN22
AN AMOUNT DETERMINED BY STAFF OF THE LEGISLATIVE COUNCIL23
PURSUANT TO SUBSECTION (5)(b) OF THIS SECTION; AND24
(II) EACH ELIGIBLE CHILD OF THE RESIDENT INDIVIDUAL WHO IS SIX25
YEARS OLD OR OLDER BUT LESS T HAN SEVENTEEN YEARS OLD AT THE26
CLOSE OF THE INCOME TAX YEAR IN AN AMOUNT THAT IS SEVENTY -FIVE27
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PERCENT OF THE AMOUNT ALLOWED IN SUBSECTION (3)(a)(I) OF THIS1
SECTION.2
(b) IN ADDITION TO THE CHILD TAX CREDIT ALLOWED BY SECTION3
39-22-129 AND THE FAMILY AFFORDABILITY TAX CREDIT ALLOWED BY4
SECTION 39-22-130, FOR INCOME TAX YEARS COMMENCING ON OR AFTER5
JANUARY 1, 2027, TWO RESIDENT INDIVIDUALS WHO FILE A JOINT RETURN6
ARE ALLOWED A FAMILY AFFORDABILITY TAX CREDIT AGAINST THE7
INCOME TAXES DUE IMPOSED PURSUANT TO THIS ARTICLE 22 FOR:8
(I) E ACH ELIGIBLE CHILD OF THE RESIDENT INDIVIDUAL WHO IS9
FIVE YEARS OLD OR YOUNGER AT THE CLOSE OF THE INCOME TAX YEAR IN10
AN AMOUNT DETERMINED BY STAFF OF THE LEGISLATIVE COUNCIL11
PURSUANT TO SUBSECTION (5)(b) OF THIS SECTION; AND12
(II) EACH ELIGIBLE CHILD OF THE RESIDENT INDIVIDUAL WHO IS SIX13
YEARS OLD OR OLDER BUT LESS T HAN SEVENTEEN YEARS OLD AT THE14
CLOSE OF THE INCOME TAX YEAR IN AN AMOUNT THAT IS SEVENTY -FIVE15
PERCENT OF THE AMOUNT ALLOWED IN SUBSECTION (3)(b)(I) OF THIS16
SECTION.17
(4) (a) NOTWITHSTANDING SUBSECTION (3) OF THIS SECTION, FOR18
INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY 1, 2027, THE19
CREDIT AMOUNTS IN:20
(I) SUBSECTION (3)(a)(I) OF THIS SECTION ARE REDUCED, BUT NOT21
BELOW ZERO , BY AN AMOUNT EQUAL TO SIX AND EIGHT HUNDRED22
SEVENTY-FIVE ONE-THOUSANDTHS PERCENT FOR EACH FIVE THOUSAND23
DOLLARS BY WHICH A RESIDENT INDIVIDUAL'S ADJUSTED GROSS INCOME24
EXCEEDS THE SINGLE FILER ADJUSTED BASE INCOME; AND25
(II) SUBSECTION (3)(b)(I) OF THIS SECTION ARE REDUCED, BUT NOT26
BELOW ZERO , BY AN AMOUNT EQUAL TO SIX AND EIGHT HUNDRED27
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SEVENTY-FIVE ONE-THOUSANDTHS PERCENT FOR EACH FIVE THOUSAND1
DOLLARS BY WHICH TWO RESIDENT INDIVIDUALS ' ADJUSTED GROSS2
INCOME EXCEEDS THE JOINT FILER ADJUSTED BASED INCOME.3
(b) FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY4
1, 2028, THE DEPARTMENT SHALL ADJUST THE JOINT FILER ADJUSTED BASE5
INCOME AND SINGLE FILER ADJUSTED BASE INCOME TO REFLECT INFLATION6
FOR EACH INCOME TAX YEAR IN WHICH THE CREDIT DESCRIBED IN THIS7
SECTION IS ALLOWED IF CUMULATIVE INFLATION SINCE THE LAST8
ADJUSTMENT, WHEN APPLIED TO THE CURRENT LIMITS , RESULTS IN AN9
INCREASE OF AT LEAST ONE THOUSAND DOLLARS WHEN THE ADJUSTED10
LIMITS ARE ROUNDED TO THE NEAREST ONE THOUSAND DOLLARS.11
(5) B EGINNING WITH THE QUARTERLY DECEMBER REVENUE12
FORECAST THAT LEGISLATIVE COUNCIL STAFF PRESENTS IN DECEMBER OF13
2027, AND FOR EACH DECEMBER REVENUE FORECAST THEREAFTER , AS14
PART OF THE QUARTERLY DECEMBER REVENUE FORECAST, LEGISLATIVE15
COUNCIL STAFF SHALL DETERMINE:16
(a) FOR THE CURRENT INCOME TAX YEAR , A PROJECTION OF THE17
NET AMOUNT OF REVENUE GAIN DIRECTLY ATTRIBUTABLE TO THE18
CHANGES MADE IN THIS HOUSE BILL 26-1222, NOTWITHSTANDING THE19
TAX CREDIT CREATED IN THIS SECTION;20
(b) A DOLLAR AMOUNT OF THE CREDIT AVAILABLE PURSUANT TO21
SUBSECTIONS (3)(a)(I) AND (3)(b)(I) OF THIS SECTION , WHICH DOLLAR22
AMOUNT MUST BE THE SAME FOR BOTH SUBSECTIONS (3)(a)(I) AND23
(3)(b)(I) OF THIS SECTION , SUCH THAT THE STAFF OF THE LEGISLATIVE24
COUNCIL PROJECTS, FOR THE CURRENT STATE INCOME TAX YEAR , THAT25
THE TOTAL DOLLAR AMOUNT OF CREDITS CLAIMED PURSUANT TO26
SUBSECTION (3) WILL EQUAL THE DOLLAR AMOUNT THAT STAFF OF THE27
1222-15-
LEGISLATIVE COUNCIL DETERMINE PURSUANT TO SUBSECTION (5)(a) OF1
THIS SECTION.2
(6) N O LATER THAN TWO WEEKS BEFORE THE QUARTERLY3
DECEMBER REVENUE FORECAST THAT LEGISLATIVE COUNCIL STAFF4
PRESENTS IN DECEMBER OF 2028, AND EACH DECEMBER REVENUE5
FORECAST THEREAFTER, THE DEPARTMENT SHALL DELIVER A REPORT TO6
THE STAFF OF THE LEGISLATIVE COUNCIL THAT DESCRIBES THE REVENUE7
GAIN DIRECTLY ATTRIBUTABLE TO THE CHANGES MADE IN THIS HOUSE8
BILL 26-1222 FOR THE PREVIOUS INCOME TAX YEAR, NOTWITHSTANDING9
THE TAX CREDIT CREATED IN THIS SECTION.10
(7) IN THE CASE OF A PART-YEAR RESIDENT, THE CREDIT ALLOWED11
UNDER THIS SECTION IS APPORTIONED IN THE RATIO DETERMINED UNDER12
SECTION 39-22-110 (1).13
(8) T HE CREDIT ALLOWED UNDER THIS SECTION IS NOT14
CONSIDERED TO BE INCOME OR RESOURCES FOR THE PURPOSE OF15
DETERMINING ELIGIBILITY FOR THE PAYMENT OF PUBLIC ASSISTANCE16
BENEFITS AND MEDICAL ASSISTANCE BENEFITS AUTHORIZED UNDER STATE17
LAW OR FOR A PAYMENT MADE UNDER ANY OTHER PUBLICLY F UNDED18
PROGRAM.19
(9) THE AMOUNT OF THE CREDIT ALLOWED UNDER THIS SECTION20
THAT EXCEEDS THE RESIDENT INDIVIDUAL 'S INCOME TAXES DUE IS21
REFUNDED TO THE INDIVIDUAL.22
(10) T HE DEPARTMENT IS AUTHORIZED AND ENCOURAGED TO23
DEVELOP A MEANS OF REFUNDING THE CREDITS ALLOWED BY THIS SECTION24
TO RESIDENT INDIVIDUALS WHO QUALIFY FOR THE CREDITS IN TWELVE25
EQUAL MONTHLY REFUNDS RATHER THAN ANNUALLY.26
(11) NOTWITHSTANDING SECTION 39-21-304 (4), THE CREDIT DOES27
1222-16-
NOT REPEAL AFTER A SPECIFIED PERIOD OF TAX YEARS.1
SECTION 4. In Colorado Revised Statutes, 39-22-304, add2
(2)(m), (2)(n), (2)(o), (2)(p), and (3)(u) as follows:3
39-22-304. Net income of corporation - legislative declaration4
- definitions - repeal.5
(2) There shall be added to federal taxable income:6
(m) FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY7
1, 2027, AN AMOUNT EQUAL TO THE FEDERAL DEDUCTION CLAIMED BY THE8
TAXPAYER FOR THE INCOME TAX YEAR FOR BUSINESS INTEREST PURSUANT9
TO SECTION 163 OF THE INTERNAL REVENUE CODE TO THE EXTENT THE10
AMOUNT CLAIMED EXCEEDS THE AMOUNT THE TAXPAYER WOULD HAVE11
BEEN ALLOWED TO CLAIM PURSUANT TO THE LIMITATION ON BUSINESS12
INTEREST SET FORTH IN SECTION 163 (j) OF THE INTERNAL REVENUE CODE13
WITHOUT REGARD TO ANY AMENDMENT BY PUB. L. 119-21;14
(n) FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY15
1, 2027, AN AMOUNT EQUAL TO THE FEDERAL DEDUCTION CLAIMED BY THE16
TAXPAYER FOR THE INCOME TAX YEAR FOR QUALIFIED PROPERTY17
DEPRECIATION PURSUANT TO SECTION 168 (k) OF THE INTERNAL REVENUE18
CODE TO THE EXTENT THE AMOUNT CLAIMED EXCEEDS THE AMOUNT THE19
TAXPAYER WOULD HAVE BEEN ALLOWED TO CLAIM PURSUANT TO SECTION20
168 (k) OF THE INTERNAL REVENUE CODE WITHOUT REGARD TO ANY21
AMENDMENT BY PUB. L. 119-21; EXCEPT THAT , THE TAXPAYER MAY22
REDUCE THE AMOUNT OTHERWISE REQUIRED TO BE ADDED TO THE23
TAXPAYER'S FEDERAL TAXABLE INCOME PURSUANT TO THIS SUBSECTION24
(2)(n) BY THE AMOUNT OF QUALIFIED PROPERTY DEPRECIATION THE25
TAXPAYER WOULD HAVE BEEN ALLOWED TO CLAIM FOR THE STATE26
INCOME TAX YEAR WITH RESPECT TO THE SAME PROPERTY PURSUANT TO27
1222-17-
ANY SECTION OTHER THAN SECTION 168 (k) OF THE INTERNAL REVENUE1
CODE WITHOUT REGARD TO ANY AMENDMENT BY PUB. L. 119-21;2
(o) FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY3
1, 2027, AN AMOUNT EQUAL TO THE FEDERAL DEDUCTION CLAIMED BY THE4
TAXPAYER FOR THE INCOME TAX YEAR FOR QUALIFIED PRODUCTION5
PROPERTY DEPRECIATION PURSUANT TO SECTION 168 (n) OF THE INTERNAL6
REVENUE CODE; EXCEPT THAT, THE TAXPAYER MAY REDUCE THE AMOUNT7
OTHERWISE REQUIRED TO BE ADDED TO THE TAXPAYER 'S FEDERAL8
TAXABLE INCOME PURSUANT TO THIS SUBSECTION (2)(o) BY THE AMOUNT9
OF QUALIFIED PRODUCTION PROPERTY DEPRECIATION THE TAXPAYER10
WOULD HAVE BEEN ALLOWED TO CLAIM FOR THE STATE INCOME TAX YEAR11
WITH RESPECT TO THE SAME PROPERTY PURSUANT TO ANY SECTION OTHER12
THAN SECTION 168 (k) OF THE INTERNAL REVENUE CODE WITHOUT REGARD13
TO ANY AMENDMENT BY PUB. L. 119-21;14
(p) FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY15
1, 2027, AN AMOUNT EQUAL TO THE FEDERAL DEDUCTION CLAIMED BY THE16
TAXPAYER FOR THE INCOME TAX YEAR FOR DOMESTIC RESEARCH AND17
EXPERIMENTAL EXPENDITURES PURSUANT TO SECTION 174A OF THE18
INTERNAL REVENUE CODE ; EXCEPT THAT, THE TAXPAYER MAY REDUCE19
THE AMOUNT OTHERWISE REQUIRED TO BE ADDED TO THE TAXPAYER 'S20
FEDERAL TAXABLE INCOME PURSUANT TO THIS SUBSECTION (2)(p) BY THE21
AMOUNT OF THE DEDUCTION THE TAXPAYER WOULD HAVE BEEN ALLOWED22
TO CLAIM FOR THE STATE INCOME TAX YEAR WITH RESPECT TO THE SAME23
RESEARCH AND EXPERIMENTAL EXPENDITURES PURSUANT TO SECTION 17424
OF THE INTERNAL REVENUE CODE WITHOUT REGARD TO ANY AMENDMENT25
BY PUB. L. 119-21.26
(3) There shall be subtracted from federal taxable income:27
1222-18-
(u) (I) F OR INCOME TAX YEARS COMMENCING ON OR AFTER1
JANUARY 1, 2028, A TAXPAYER REQUIRED TO MAKE AN ADDITION TO2
FEDERAL TAXABLE INCOME PURSUANT TO SUBSECTION (2)(m), (2)(n),3
(2)(o), OR (2)(p) OF THIS SECTION, IS ALLOWED TO APPLY THE FOLLOWING4
SUBTRACTIONS IN ACCORDANCE WITH THIS SUBSECTION (3)(u):5
(A) A N AMOUNT EQUAL TO ONE -FIFTH OF THE CUMULATIVE6
AMOUNT ADDED TO FEDERAL TAXABLE INCOME AS REQUIRED BY7
SUBSECTION (2)(m) OF THIS SECTION FOR EACH OF THE FIVE STATE INCOME8
TAX YEARS IMMEDIATELY FOLLOWING THE STATE INCOME TAX YEAR IN9
WHICH THE ADDITION WAS REQUIRED;10
(B) A N AMOUNT EQUAL TO ONE -TENTH OF THE CUMULATIVE11
AMOUNT ADDED TO FEDERAL T AXABLE INCOME AS REQUIRED BY12
SUBSECTION (2)(n) OF THIS SECTION FOR EACH OF THE TEN TAXABLE13
YEARS IMMEDIATELY FOLLOWING THE TAXABLE YEAR IN WHICH THE14
ADDITION WAS REQUIRED;15
(C) A N AMOUNT EQUAL TO ONE THIRTY -EIGHTH OF THE16
CUMULATIVE AMOUNT ADDED TO FEDERAL TAXABLE INCOME AS REQUIRED17
BY SUBSECTION (2)(o) OF THIS SECTION FOR EACH OF THE THIRTY -EIGHT 18
STATE INCOME TAX YEARS IMMEDIATELY FOLLOWING THE STATE INCOME19
TAX YEAR IN WHICH THE ADDITION WAS REQUIRED; AND20
(D) A N AMOUNT EQUAL TO ONE -FOURTH OF THE CUMULATIVE21
AMOUNT ADDED TO FEDERAL TAXABLE INCOME AS REQUIRED BY22
SUBSECTION (2)(p) OF THIS SECTION FOR EACH OF THE FOUR STATE INCOME23
TAX YEARS IMMEDIATELY FOLLOWING THE STATE INCOME TAX YEAR IN24
WHICH THE ADDITION WAS REQUIRED.25
(II) T HE TOTAL AMOUNT OF EACH SUBTRACTION ALLOWED26
PURSUANT TO SUBSECTIONS (3)(u)(I)(A), (3)(u)(I)(B), (3)(u)(I)(C), AND27
1222-19-
(3)(u)(I)(D) OF THIS SECTION SHALL NOT EXCEED THE CUMULATIVE1
AMOUNT ADDED TO FEDERAL TAXABLE INCOME PURSUANT TO EACH2
CORRESPONDING ADDITION REQUIRED BY SUBSECTIONS (2)(m), (2)(n),3
(2)(o), AND (2)(p) OF THIS SECTION.4
(III) T HE SUBTRACTIONS ALLOWED IN THIS SUBSECTION (3)(u)5
APPLY AFTER THE APPLICATION OF THE OTHER SUBTRACTIONS PROVIDED6
FOR IN THIS SUBSECTION (3), EXCEPT FOR THE SUBTRACTION ALLOWED7
PURSUANT TO SUBSECTION (3)(p) OF THIS SECTION. IF THE AMOUNT OF THE8
SUBTRACTIONS ALLOWED UNDER THIS SUBSECTION (3)(u) EXCEEDS A9
TAXPAYER'S FEDERAL TAXABLE INCOME AS CALCULATED PURSUANT TO10
THIS SECTION WITHOUT REGARD TO THE SUBTRACTION ALLOWED11
PURSUANT TO SUBSECTION (3)(p) OF THIS SECTION , THE AMOUNT NOT12
SUBTRACTED FROM THE TAXPAYER 'S FEDERAL TAXABLE INCOME13
PURSUANT TO THIS SECTION MAY BE CARRIED FORWARD AND USED AS A14
SUBTRACTION FROM THE TAXPAYER 'S FEDERAL TAXABLE INCOME AS15
CALCULATED PURSUANT TO THIS SECTION WITHOUT REGARD TO THE16
SUBTRACTION ALLOWED PURSUANT TO SUBSECTION (3)(p) OF THIS17
SECTION IN SUBSEQUENT YEARS FOR A PERIOD NOT TO EXCEED TEN YEARS18
AND MUST BE APPLIED FIRST TO THE EARLIEST POSSIBLE INCOME TAX19
YEAR. ANY SUBTRACTION REMAINING AFTER THE PERIOD IS NOT20
REFUNDED OR CREDITED TO THE TAXPAYER.21
SECTION 5. Act subject to petition - effective date. This act22
takes effect at 12:01 a.m. on the day following the expiration of the23
ninety-day period after final adjournment of the general assembly (August24
12, 2026, if adjournment sine die is on May 13, 2026); ex cept that, if a25
referendum petition is filed pursuant to section 1 (3) of article V of the26
state constitution against this act or an item, section, or part of this act27
1222-20-
within such period, then the act, item, section, or part will not take effect1
unless approved by the people at the general election to be held in2
November 2026 and, in such case, will take effect on the date of the3
official declaration of the vote thereon by the governor.4
1222-21-