Colorado 2022 Regular Session

Colorado Senate Bill SB124 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
	1	+	Second Regular Session
	2	+	Seventy-third General Assembly
	3	+	STATE OF COLORADO
	4	+	REREVISED
	5	+	This Version Includes All Amendments
	6	+	Adopted in the Second House
	7	+	LLS NO. 22-0769.01 Ed DeCecco x4216
1	8		SENATE BILL 22-124
2		-	BY SENATOR(S) Woodward and Kolker, Hisey, Holbert, Kirkmeyer,
3		-	Rankin, Ginal, Hinrichsen, Pettersen, Zenzinger;
4		-	also REPRESENTATIVE(S) Ortiz and Van Winkle, Lynch, Van Beber,
5		-	Bernett, Bird, Bockenfeld, Carver, Exum, Herod, Jodeh, Lindsay,
6		-	McCluskie, McLachlan, Mullica, Neville, Pico, Ricks, Roberts, Sandridge,
7		-	Snyder, Soper, Titone, Valdez A., Valdez D., Young, Garnett.
	9	+	Senate Committees House Committees
	10	+	Finance Business Affairs & Labor
	11	+	Appropriations Appropriations
	12	+	A BILL FOR AN ACT
8	13		C
9		-	ONCERNING THE AUTHORITY OF A PASS -THROUGH BUSINESS ENTITY TO
10		-	ELECT TO PAY STATE INCOME TAXES AT THE ENTITY LEVEL
11		-	.
12		-	Be it enacted by the General Assembly of the State of Colorado:
13		-	SECTION 1. In Colorado Revised Statutes, 39-22-202, add (4) as
14		-	follows:
	14	+	ONCERNING THE AUTHORITY OF A PASS -THROUGH BUSINESS ENTITY101
	15	+	TO ELECT TO PAY STATE INCOME TAXES AT THE ENTITY
	16	+	LEVEL.102
	17	+
	18	+	Bill Summary
	19	+	(Note: This summary applies to this bill as introduced and does
	20	+	not reflect any amendments that may be subsequently adopted. If this bill
	21	+	passes third reading in the house of introduction, a bill summary that
	22	+	applies to the reengrossed version of this bill will be available at
	23	+	http://leg.colorado.gov
	24	+	.)
	25	+	The "SALT Parity Act" (act) was enacted in 2021 and, for income
	26	+	tax years commencing on or after January 1, 2022, the act allows
	27	+	pass-through entities to elect to pay state income tax at the entity level,
	28	+	which allows the entity to claim an unlimited deduction at the federal
	29	+	level for state and local taxes paid. While this election reduces federal
	30	+	HOUSE
	31	+	Amended 3rd Reading
	32	+	May 10, 2022
	33	+	HOUSE
	34	+	Amended 2nd Reading
	35	+	May 5, 2022
	36	+	SENATE
	37	+	3rd Reading Unamended
	38	+	April 27, 2022
	39	+	SENATE
	40	+	Amended 2nd Reading
	41	+	April 26, 2022
	42	+	SENATE SPONSORSHIP
	43	+	Woodward and Kolker, Hisey, Holbert, Kirkmeyer, Rankin, Ginal, Hinrichsen, Pettersen,
	44	+	Zenzinger
	45	+	HOUSE SPONSORSHIP
	46	+	Ortiz and Van Winkle, Lynch, Van Beber, Bernett, Bird, Bockenfeld, Carver, Exum,
	47	+	Garnett, Herod, Jodeh, Lindsay, McCluskie, McLachlan, Mullica, Neville, Pico, Ricks,
	48	+	Roberts, Sandridge, Snyder, Soper, Titone, Valdez A., Valdez D., Young
	49	+	Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
	50	+	Capital letters or bold & italic numbers indicate new material to be added to existing statute.
	51	+	Dashes through the words indicate deletions from existing statute. taxable income for the pass-through entity, it does not reduce Colorado
	52	+	taxable income under current law.
	53	+	The bill makes provisions of the act retroactive to January 1, 2018.
	54	+	Be it enacted by the General Assembly of the State of Colorado:1
	55	+	SECTION 1. In Colorado Revised Statutes, 39-22-202, add (4)2
	56	+	as follows:3
15	57		39-22-202. Resident partners - definition. (4) F
16	58		OR PURPOSES OF
17		-	SECTION
18		-	39-22-108, EACH RESIDENT PARTNER IS CONSIDERED TO HAVE PAID
19		-	A TAX ON EACH RESIDENT PARTNER IN AN AMOUNT EQUAL TO EACH
20		-	RESIDENT PARTNER
21		-	'S PRO RATA SHARE OF ANY NET INCOME TAX PAID BY THE
22		-	PARTNERSHIP TO A STATE THAT DOES NOT MEASURE THE INCOME OF
23		-	PARTNERS OF A PARTNERSHIP BY REFERENCE TO THE INCOME OF THE
24		-	PARTNERSHIP
25		-	. AS USED IN THIS SUBSECTION (4), "NET INCOME TAX" MEANS
26		-	NOTE: This bill has been prepared for the signatures of the appropriate legislative
27		-	officers and the Governor. To determine whether the Governor has signed the bill
28		-	or taken other action on it, please consult the legislative status sheet, the legislative
29		-	history, or the Session Laws.
30		-	________
31		-	Capital letters or bold & italic numbers indicate new material added to existing law; dashes
32		-	through words or numbers indicate deletions from existing law and such material is not part of
33		-	the act. ANY TAX IMPOSED ON, OR MEASURED BY, A PARTNERSHIP'S NET INCOME.
34		-	SECTION 2. In Colorado Revised Statutes, 39-22-343, amend (1)
35		-	as follows:
36		-	39-22-343. Election. (1) (a) Notwithstanding sections 39-22-201,
37		-	39-22-302, and 39-22-322, and except as provided in subsection (2) of this
38		-	section, for income tax years commencing on or after January 1, 2022
39		-	JANUARY 1, 2018, an S corporation or partnership may annually elect to be
40		-	subject to tax at the entity level for the taxable period.
	59	+	4
	60	+	SECTION 39-22-108, EACH RESIDENT PARTNER IS CONSIDERED TO HAVE5
	61	+	PAID A TAX ON EACH RESIDENT PARTNER IN AN AMOUNT EQUAL TO EACH6
	62	+	RESIDENT PARTNER'S PRO RATA SHARE OF ANY NET INCOME TAX PAID BY7
	63	+	THE PARTNERSHIP TO A STATE THAT DOES NOT MEASURE THE INCOME OF8
	64	+	PARTNERS OF A PARTNERSHIP BY REFERENCE TO THE INCOME OF THE9
	65	+	PARTNERSHIP. AS USED IN THIS SUBSECTION (4), "NET INCOME TAX"10
	66	+	MEANS ANY TAX IMPOSED ON , OR MEASURED BY, A PARTNERSHIP'S NET11
	67	+	INCOME.12
	68	+	SECTION 2. In Colorado Revised Statutes, 39-22-343, amend13
	69	+	(1) as follows:14
	70	+	39-22-343. Election. (1) (a) Notwithstanding sections 39-22-201,15
	71	+	39-22-302, and 39-22-322, and except as provided in subsection (2) of16
	72	+	this section for income tax years commencing on or after January 1, 202217
	73	+	J
	74	+	ANUARY 1, 2018, an S corporation or partnership may annually elect to
	75	+	18
	76	+	be subject to tax at the entity level for the taxable period.19
41	77		(b) E
42		-	XCEPT AS SET FORTH IN SUBSECTION (1)(c)(I) OF THIS ~~SECTION,~~
43		-	~~the S corporation or partnership shall make the election on the return filed~~
44		-	~~by such~~ S corporation or partnership ~~under section 39-22-601.~~ The ~~filing of~~
45		-	such
46		-	A return FILED UNDER SECTION 39-22-601 ~~OR SUBSECTION (1)(c)(I) OF~~
47		-	THIS SECTION
48		-	~~is binding on all electing~~ pass-through entity owners.
	78	+	XCEPT AS SET FORTH IN SUBSECTION (1)(c)(I) OF THIS
	79	+	20
	80	+	SECTION, the S corporation or partnership shall make the election on the21
	81	+	return filed by such S corporation or partnership under section 39-22-601.22
	82	+	The filing of such A return FILED UNDER SECTION 39-22-601 OR23
	83	+	SUBSECTION (1)(c)(I) OF THIS SECTION is binding on all electing24
	84	+	124-2- pass-through entity owners.1
49	85		(c) (I) F
50		-	OR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY
51		-	1, 2018, BUT PRIOR TO JANUARY 1, 2022, THE S CORPORATION OR
52		-	PARTNERSHIP MUST MAKE THE ELECTION ON OR AFTER
53		-	SEPTEMBER 1, 2023,
54		-	BUT BEFORE JULY 1, 2024, IN A COMPOSITE AMENDED TAX RETURN FOR ALL
55		-	OF THE YEARS FOR WHICH THE ELECTION IS MADE THAT IS FILED ON BEHALF
56		-	OF THE
57		-	S CORPORATION OR PARTNERSHIP AND ALL OF THE ELECTING
58		-	PASS
59		-	-THROUGH ENTITY OWNERS . THE DEPARTMENT OF REVENUE SHALL
60		-	ESTABLISH THE RETURN
61		-	, WHICH SHALL NOT INCLUDE ANY CHANGES TO THE
62		-	PAST RETURNS OTHER THAN THOSE THAT ARE DIRECTLY RELATED TO THE
63		-	ELECTION
64		-	. THE PROVISIONS OF SECTIONS 39-21-107 (2) AND 39-21-108 (1)
65		-	SHALL NOT APPLY TO THE PAYMENT OR REFUND OF THE TAX MADE
66		-	PURSUANT TO THE RETURN
67		-	.
	86	+	OR INCOME TAX YEARS COMMENCING ON OR AFTER
	87	+	2
	88	+	J
	89	+	ANUARY 1, 2018, BUT PRIOR TO JANUARY 1, 2022, THE S CORPORATION
	90	+	3
	91	+	OR PARTNERSHIP MUST MAKE THE ELECTION ON OR AFTER SEPTEMBER 1,4
	92	+	2023, BUT BEFORE JULY 1, 2024, IN A COMPOSITE AMENDED TAX RETURN5
	93	+	FOR ALL OF THE YEARS FOR WHICH THE ELECTION IS MADE THAT IS FILED6
	94	+	ON BEHALF OF THE S CORPORATION OR PARTNERSHIP AND ALL OF THE7
	95	+	ELECTING PASS-THROUGH ENTITY OWNERS. THE DEPARTMENT OF REVENUE8
	96	+	SHALL ESTABLISH THE RETURN, WHICH SHALL NOT INCLUDE ANY CHANGES9
	97	+	TO THE PAST RETURNS OTHER THAN THOSE THAT ARE DIRECTLY RELATED10
	98	+	TO THE ELECTION. THE PROVISIONS OF SECTIONS 39-21-107 (2) AND11
	99	+	39-21-108
	100	+	(1) SHALL NOT APPLY TO THE PAYMENT OR REFUND OF THE TAX
	101	+	12
	102	+	MADE PURSUANT TO THE RETURN .13
68	103		(II) N
69	104		OTWITHSTANDING ANY OTHER PROVISION OF LAW , IF AN S
70		-	~~CORPORATION OR PARTNERSHIP FILES A RETURN SPECIFIED IN SUBSECTION~~
71		-	~~(1)(c)(I) OF THIS SECTION, NEITHER THE S~~ CORPORATION OR PARTNERSHIP
72		-	~~NOR THE ELECTING PASS~~
73		-	~~-THROUGH ENTITY OWNERS SHALL INCUR ANY~~
74		-	~~PENALTIES FOR FILING LATE NOR OWE INTEREST ON SUCH AMOUNTS~~
75		-	~~, AND~~
76		-	~~THE DEPARTMENT SHALL NOT BE REQUIRED TO PAY~~ PENALTIES OR INTEREST
77		-	~~ON ANY AMOUNTS OWED~~ TO ~~THE TAXPAYERS~~
78		-	.
	105	+	14
	106	+	CORPORATION OR PARTNERSHIP FILES A RETURN SPECIFIED IN SUBSECTION15
	107	+	(1)(c)(I)
	108	+	OF THIS SECTION, NEITHER THE S CORPORATION OR PARTNERSHIP
	109	+	16
	110	+	NOR THE ELECTING PASS-THROUGH ENTITY OWNERS SHALL INCUR ANY17
	111	+	PENALTIES FOR FILING LATE NOR OWE INTEREST ON SUCH AMOUNTS , AND18
	112	+	THE DEPARTMENT SHALL NOT BE REQUIRED TO PAY PENALTIES OR19
	113	+	INTEREST ON ANY AMOUNTS OWED TO THE TAXPAYERS .20
79	114		(III) N
80	115		OTWITHSTANDING THE DATES PROVIDED IN SUBSECTION
81		-	(1)(c)(I) OF THIS SECTION, THE DEPARTMENT SHALL HAVE ONE YEAR FROM
82		-	PAGE 2-SENATE BILL 22-124 THE DATE THE COMPOSITE AMENDED TAX RETURN IS FILED TO REVIEW THE
83		-	RETURN AND MAKE A WRI TTEN PROPOSED ADJUSTMENT IN ACCOR DANCE
84		-	WITH SECTION
85		-	39-21-103. THE DEPARTMENT MUST MAKE ANY ASSESSMENT
86		-	WITHIN ONE YEAR AFTER A FINAL DETERMINATION IS MADE UNDER SECTION
87		-	39-21-103 (8). ANY FINAL DETERMINATION MADE AS SPECIFIED IN THIS
88		-	SUBSECTION
89		-	(1)(c)(III) MAY BE ENFORCED AT ANY TIME WITHIN SIX YEARS
90		-	FROM THE DATE OF THE FINAL DETERMINATION
91		-	.
92		-	SECTION 3. In Colorado Revised Statutes, 39-22-344, amend (1)
93		-	introductory portion, (2), and (3), as follows:
94		-	39-22-344. Imposition of tax. (1) With respect to any taxable
95		-	period for which it has made the election under section 39-22-343, an
96		-	electing pass-through entity is subject to a tax in an amount equal to four
97		-	and fifty-five one-hundredths percent of THE TAX RATE SET FORTH IN
98		-	SECTION
99		-	39-22-301 FOR THE APPLICABLE INCOME TAX YEAR MULTIPLIED BY
100		-	the sum of the following, all as determined pursuant to sections 39-22-202,
101		-	39-22-203, 39-22-322, and 39-22-323:
102		-	(2) An electing pass-through entity is treated as a corporation under
103		-	section 39-22-606 with respect to the tax imposed under this subpart 3;
104		-	except that section 39-22-606 (5)(c)(I)
105		-	THE REQUIREMENT TO MAKE
106		-	ESTIMATED PAYMENTS UNDER SECTION
107		-	39-22-606 does not apply during thefirst taxable period for which this subpart 3 is applicable FOR INCOME TAX
108		-	YEARS COMMENCING PRIOR TO
109		-	JANUARY 1, 2023.
110		-	(3) Any credit allowed pursuant to this article 22 that is attributable
111		-	to the activities of an electing pass-through entity in the taxable year shallbe claimed by the entity and not IS passed through to or AND MUST BE
112		-	claimed by the electing pass-through entity owner. Notwithstanding any
113		-	section to the contrary in this article 22, any excess income tax credit, net
114		-	operating loss, or other modification may be carried forward on the electing
115		-	pass-through entity's return but may only be utilized in a year in which the
116		-	electing pass-through entity has made the election allowed in section
117		-	39-22-343; except that any limitation specified in the specific section for an
118		-	income tax credit, the net operating loss, or any other modification shall
119		-	apply to the electing pass-through entity.
120		-	SECTION 4. In Colorado Revised Statutes, amend 39-22-345 as
121		-	follows:
122		-	PAGE 3-SENATE BILL 22-124 39-22-345. Owner exclusion. (1) Notwithstanding sections
123		-	39-22-201 and 39-22-322, and as provided in 39-22-104 (4)(aa) and
124		-	39-22-304 (3)(r), electing pass-through entity owners shall not be liable for
125		-	the tax and the alternative minimum tax under this article 22 in their
126		-	separate or individual capacities, and the electing pass-through entity's
127		-	income attributable to the state and the income not attributable to the state
128		-	is not taken into account by the electing pass-through entity owners.
129		-	(2) Notwithstanding the provisions of this subpart 3 and sections
130		-	39-22-104 (4)(aa) and 39-22-304 (3)(r), The basis in the hands of an
131		-	electing pass-through entity owner in the interest in the partnership or the
132		-	stock or indebtedness in the S corporation is determined as if the election
133		-	under section 39-22-343 had not been made.
134		-	SECTION 5. In Colorado Revised Statutes, amend 39-22-346 as
135		-	follows:
136		-	39-22-346. Credit for tax paid in other states. An electing
137		-	pass-through entity is entitled to the credit under section 39-22-108, and
138		-	subject to the limitations of section 39-22-108, for taxes paid to other states
139		-	with respect to the electing pass-through entity's income not attributable to
140		-	this state that is subject to taxation pursuant to section 39-22-344 whether
141		-	the tax was paid by the electing pass-through entity itself or by the electing
142		-	pass-through entity owners. The resident electing pass-through entity
143		-	owners are not entitled to any credit under section 39-22-108 with respect
144		-	to income of the electing pass-through entity FOR PURPOSES OF THE
145		-	RESIDENT PASS
146		-	-THROUGH ENTITY OWNERS , THE CREDIT ALLOWED UNDER
147		-	SECTION
148		-	39-22-108 IS CALCULATED WITHOUT REGARD TO THE CREDIT
149		-	ALLOWED UNDER SECTION
150		-	39-22-347.
151		-	SECTION 6. In Colorado Revised Statutes, add 39-22-347 as
152		-	follows:
153		-	39-22-347. Credit for electing pass-through entity owner - tax
154		-	preference performance statement - legislative declaration. (1) (a) T
155		-	HE
156		-	GENERAL ASSEMBLY HEREBY FINDS AND DECLARES THAT THE PURPOSE OF
157		-	THIS TAX CREDIT IS TO
158		-	:
	116	+	21
	117	+	(1)(c)(I)
	118	+	OF THIS SECTION, THE DEPARTMENT SHALL HAVE ONE YEAR FROM
	119	+	22
	120	+	THE DATE THE COMPOSITE AMENDED TAX RETURN IS FILED TO REVIEW THE23
	121	+	RETURN AND MAKE A WRITTEN PROPOSED ADJUSTMENT IN ACCORDANCE24
	122	+	WITH SECTION 39-21-103. THE DEPARTMENT MUST MAKE ANY25
	123	+	ASSESSMENT WITHIN ONE YEAR AFTER A FINAL DETERMINATION IS MADE26
	124	+	UNDER SECTION 39-21-103 (8). ANY FINAL DETERMINATION MADE AS27
	125	+	124
	126	+	-3- SPECIFIED IN THIS SUBSECTION (1)(c)(III) MAY BE ENFORCED AT ANY TIME1
	127	+	WITHIN SIX YEARS FROM THE DATE OF THE FINAL DETERMINATION .2
	128	+	SECTION 3. In Colorado Revised Statutes, 39-22-344, amend3
	129	+	(1) introductory portion, (2), and (3), as follows:4
	130	+	39-22-344. Imposition of tax. (1) With respect to any taxable5
	131	+	period for which it has made the election under section 39-22-343, an6
	132	+	electing pass-through entity is subject to a tax in an amount equal to four7
	133	+	and fifty-five one-hundredths percent of THE TAX RATE SET FORTH IN8
	134	+	SECTION 39-22-301 FOR THE APPLICABLE INCOME TAX YEAR MULTIPLIED9
	135	+	BY the sum of the following, all as determined pursuant to sections10
	136	+	39-22-202, 39-22-203, 39-22-322, and 39-22-323:11
	137	+	(2) An electing pass-through entity is treated as a corporation12
	138	+	under section 39-22-606 with respect to the tax imposed under this13
	139	+	subpart 3; except that section 39-22-606 (5)(c)(I) THE REQUIREMENT TO14
	140	+	MAKE ESTIMATED PAYMENTS UNDER SECTION 39-22-606 does not apply15
	141	+	during the first taxable period for which this subpart 3 is applicable FOR16
	142	+	INCOME TAX YEARS COMMENCING PRIOR TO JANUARY 1, 2023.17
	143	+	(3) Any credit allowed pursuant to this article 22 that is18
	144	+	attributable to the activities of an electing pass-through entity in the19
	145	+	taxable year shall be claimed by the entity and not IS passed through to or20
	146	+	AND MUST BE claimed by the electing pass-through entity owner.21
	147	+	Notwithstanding any section to the contrary in this article 22, any excess22
	148	+	income tax credit, net operating loss, or other modification may be carried23
	149	+	forward on the electing pass-through entity's return but may only be24
	150	+	utilized in a year in which the electing pass-through entity has made the25
	151	+	election allowed in section 39-22-343; except that any limitation specified26
	152	+	in the specific section for an income tax credit, the net operating loss, or27
	153	+	124
	154	+	-4- any other modification shall apply to the electing pass-through entity.1
	155	+	SECTION 4. In Colorado Revised Statutes, amend 39-22-345 as2
	156	+	follows:3
	157	+	39-22-345. Owner exclusion. (1) Notwithstanding sections4
	158	+	39-22-201 and 39-22-322, and as provided in 39-22-104 (4)(aa) and5
	159	+	39-22-304 (3)(r), electing pass-through entity owners shall not be liable6
	160	+	for the tax and the alternative minimum tax under this article 22 in their7
	161	+	separate or individual capacities, and the electing pass-through entity's8
	162	+	income attributable to the state and the income not attributable to the state9
	163	+	is not taken into account by the electing pass-through entity owners.10
	164	+	(2) Notwithstanding the provisions of this subpart 3 and sections11
	165	+	39-22-104 (4)(aa) and 39-22-304 (3)(r), The basis in the hands of an12
	166	+	electing pass-through entity owner in the interest in the partnership or the13
	167	+	stock or indebtedness in the S corporation is determined as if the election14
	168	+	under section 39-22-343 had not been made.15
	169	+	SECTION 5. In Colorado Revised Statutes, amend 39-22-346 as16
	170	+	follows:17
	171	+	39-22-346. Credit for tax paid in other states. An electing18
	172	+	pass-through entity is entitled to the credit under section 39-22-108, and19
	173	+	subject to the limitations of section 39-22-108, for taxes paid to other20
	174	+	states with respect to the electing pass-through entity's income not21
	175	+	attributable to this state that is subject to taxation pursuant to section22
	176	+	39-22-344 whether the tax was paid by the electing pass-through entity23
	177	+	itself or by the electing pass-through entity owners. The resident electing24
	178	+	pass-through entity owners are not entitled to any credit under section25
	179	+	39-22-108 with respect to income of the electing pass-through entity FOR26
	180	+	PURPOSES OF THE RESIDENT PASS-THROUGH ENTITY OWNERS , THE CREDIT27
	181	+	124
	182	+	-5- ALLOWED UNDER SECTION 39-22-108 IS CALCULATED WITHOUT REGARD1
	183	+	TO THE CREDIT ALLOWED UNDER SECTION 39-22-347.2
	184	+	SECTION 6. In Colorado Revised Statutes, add 39-22-347 as3
	185	+	follows:4
	186	+	39-22-347. Credit for electing pass-through entity owner - tax5
	187	+	preference performance statement - legislative declaration.6
	188	+	(1) (a) T
	189	+	HE GENERAL ASSEMBLY HEREBY FINDS AND DECLARES THAT THE
	190	+	7
	191	+	PURPOSE OF THIS TAX CREDIT IS TO:8
159	192		(I) E
160		-	NSURE THE STATE DOES NOT HAVE A NET TAX REVENUE CHANGE
161		-	WHILE ACCOMPLISHING THE PURPOSE SET FORTH IN SECTION
162		-	39-22-341; AND
163		-	PAGE 4-SENATE BILL 22-124 (II) REPLACE A RELATED STATE INCOME TAX DEDUCTION .
	193	+	NSURE THE STATE DOES NOT HAVE A NET TAX REVENUE
	194	+	9
	195	+	CHANGE WHILE ACCOMPLISHING THE PURPOSE SET FORTH IN SECTION10
	196	+	39-22-341;
	197	+	AND
	198	+	11
	199	+	(II) R
	200	+	EPLACE A RELATED STATE INCOME TAX DEDUCTION .
	201	+	12
164	202		(b) (I) N
165		-	OTWITHSTANDING SECTION 39-21-304 (2), THE PURPOSE OF
166		-	~~THE TAX EXPENDITURE CREATED IN THIS SECTION IS TO AVOID DOUBLE~~
167		-	~~TAXATION~~ OF ~~INCOME ON ELECTING PASS~~
168		-	-THROUGH ENTITY OWNERS .
	203	+	OTWITHSTANDING SECTION 39-21-304 (2), THE PURPOSE
	204	+	13
	205	+	OF THE TAX EXPENDITURE CREATED IN THIS SECTION IS TO AVOID DOUBLE14
	206	+	TAXATION OF INCOME ON ELECTING PASS -THROUGH ENTITY OWNERS .15
169	207		(II) T
170	208		HE GENERAL ASSEMBLY AND THE STATE AUDITOR SHALL
171		-	~~MEASURE THE EFFECTIVENESS OF THE CREDIT CREATED IN THIS SECTION IN~~
172		-	~~ACHIEVING~~ THE ~~PURPOSE SPECIFIED~~ IN ~~SUBSECTION~~
173		-	(1)(b)(I) OF ~~THIS SECTION~~
174		-	BASED ON WHETHER THE AMOUNT OF THE CREDIT IS EQUAL ~~TO THE AMOUNT~~
175		-	OF THE TAX REVENUE COLLECTED UNDER ~~SECTION~~
176		-	39-22-344.
	209	+	16
	210	+	MEASURE THE EFFECTIVENESS OF THE CREDIT CREATED IN THIS SECTION17
	211	+	IN ACHIEVING THE PURPOSE SPECIFIED IN SUBSECTION (1)(b)(I) OF THIS18
	212	+	SECTION BASED ON WHETHER THE AMOUNT OF THE CREDIT IS EQUAL TO19
	213	+	THE AMOUNT OF THE TAX REVENUE COLLECTED UNDER SECTION20
	214	+	39-22-344.21
177	215		(2) S
178	216		UBJECT TO THE LIMITATIONS SET FORTH IN SUBSECTION (3) OF
179		-	THIS SECTION
180		-	, FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY
181		-	1, 2018, AN ELECTING PASS-THROUGH ENTITY OWNER IS ALLOWED A CREDIT
182		-	AGAINST THE TAX IMPOSED BY THIS ARTICLE
183		-	22 THAT IS AN AMOUNT EQUAL
184		-	TO THE SHARE OF THE TAX IMPOSED PURSUANT TO SECTION
185		-	39-22-344 (1) ON
186		-	THE ELECTING PASS
187		-	-THROUGH ENTITY WITH RESPECT TO THE ELECTING
188		-	PASS
189		-	-THROUGH ENTITY OWNER 'S INCOME.
	217	+	22
	218	+	THIS SECTION, FOR INCOME TAX YEARS COMMENCING ON OR AFTER23
	219	+	J
	220	+	ANUARY 1, 2018, AN ELECTING PASS-THROUGH ENTITY OWNER IS
	221	+	24
	222	+	ALLOWED A CREDIT AGAINST THE TAX IMPOSED BY THIS ARTICLE 22 THAT25
	223	+	IS AN AMOUNT EQUAL TO THE SHARE OF THE TAX IMPOSED PURSUANT TO26
	224	+	SECTION 39-22-344 (1) ON THE ELECTING PASS-THROUGH ENTITY WITH27
	225	+	124
	226	+	-6- RESPECT TO THE ELECTING PASS-THROUGH ENTITY OWNER 'S INCOME.1
190	227		(3) N
191		-	O CREDIT IS ALLOWED TO AN ELECTING PASS-THROUGH ENTITY
192		-	OWNER UNDER SUBSECTION
193		-	(2) OF THIS SECTION UNLESS THE ELECTING
194		-	PASS
195		-	-THROUGH ENTITY PAID THE TAX IMPOSED UNDER THIS ARTICLE 22 AND
196		-	PROVIDED SUFFICIENT INFORMATION ON THE ELECTING PASS
197		-	-THROUGH
198		-	ENTITY TAX RETURN
199		-	, AS PRESCRIBED BY THE DEPARTMENT OF REVENUE , TO
200		-	IDENTIFY THAT ELECTING PASS
201		-	-THROUGH ENTITY OWNER .
	228	+	O CREDIT IS ALLOWED TO AN ELECTING PASS -THROUGH
	229	+	2
	230	+	ENTITY OWNER UNDER SUBSECTION (2) OF THIS SECTION UNLESS THE3
	231	+	ELECTING PASS-THROUGH ENTITY PAID THE TAX IMPOSED UNDER THIS4
	232	+	ARTICLE 22 AND PROVIDED SUFFICIENT INFORMATION ON THE ELECTING5
	233	+	PASS-THROUGH ENTITY TAX RETURN, AS PRESCRIBED BY THE DEPARTMENT6
	234	+	OF REVENUE, TO IDENTIFY THAT ELECTING PASS-THROUGH ENTITY OWNER.7
202	235		(4) A
203	236		NY AMOUNT OF THE CREDIT ALLOWED BY THIS SECTION THAT
204		-	EXCEEDS THE ELECTING PASS
205		-	-THROUGH ENTITY OWNER'S INCOME TAXES DUE
206		-	IS REFUNDED TO THE ELECTING PASS
207		-	-THROUGH ENTITY OWNER .
208		-	SECTION 7. In Colorado Revised Statutes, 39-22-104, amend
209		-	(3)(r); and repeal (4)(aa) as follows:
210		-	39-22-104. Income tax imposed on individuals, estates, and
211		-	trusts - single rate - report - legislative declaration - definitions - repeal.
212		-	(3) There shall be added to the federal taxable income:
213		-	(r) Notwithstanding subsection (3)(o) of this section, for income tax
214		-	years commencing on or after January 1, 2022
215		-	JANUARY 1, 2018, an amount
216		-	PAGE 5-SENATE BILL 22-124 equal to the deduction taken under section 199A of the internal revenue
217		-	code, except to the extent the deduction is otherwise disallowed under
218		-	section 265 of the internal revenue code, for an electing pass-through entity
219		-	owner of an electing pass-through entity, as such terms are defined in
220		-	section 39-21-342, that makes the election allowed in subpart 3 of part 3 of
221		-	this article 22.
222		-	(4) There shall be subtracted from federal taxable income:
223		-	(aa) For income tax years commencing on or after January 1, 2022,
224		-	an amount equal to the electing pass-through entity owner's distributive
225		-	share of the electing pass-through entity's income attributable to the state
226		-	that is taxed pursuant to the provisions of subpart 3 of part 3 of this article
227		-	22 and income not attributable to the state that is taxed pursuant to the
228		-	provisions of subpart 3 of part 3 of this article 22.
229		-	SECTION 8. In Colorado Revised Statutes, 39-22-304, repeal
230		-	(3)(r) as follows:
231		-	39-22-304. Net income of corporation - legislative declaration -
232		-	definitions - repeal. (3) There shall be subtracted from federal taxable
233		-	income:
234		-	(r) For income tax years commencing on or after January 1, 2022,
235		-	an amount equal to the electing pass-through entity owner's distributive
236		-	share of the electing pass-through entity's income attributable to the state
237		-	that is taxed pursuant to the provisions of subpart 3 of part 3 of this article
238		-	22 and income not attributable to the state that is taxed pursuant to the
239		-	provisions of subpart 3 of part 3 of this article 22.
240		-	SECTION 9. In Colorado Revised Statutes, 39-22-601, amend
241		-	(2.5)(e) and (5)(e) as follows:
242		-	39-22-601. Returns. (2.5) (e) With respect to each of its
243		-	nonresident shareholders, an S corporation shall, for each taxable period,
244		-	either timely file with the department of revenue an agreement, as provided
245		-	in paragraph (f) of this subsection (2.5)
246		-	SUBSECTION (2.5)(f) OF THIS
247		-	SECTION
248		-	, or make a payment to this state as provided in paragraph (h) ofthis subsection (2.5) SUBSECTION (2.5)(h) OF THIS SECTION; EXCEPT THAT
249		-	THIS SUBSECTION
250		-	(2.5)(e) SHALL NOT APPLY TO AN S CORPORATION THAT
251		-	PAGE 6-SENATE BILL 22-124 MAKES THE ELECTION ALLOWED UNDER SUBPART 3 OF PART 3 OF THIS
252		-	ARTICLE
253		-	22.
254		-	(5) (e) With respect to each of its nonresident partners, a partnership
255		-	shall, for each taxable period, either timely file with the department of
256		-	revenue an agreement, as provided in paragraph (f) of this subsection (5)
257		-	SUBSECTION (5)(f) OF THIS SECTION, or make payment to this state, as
258		-	provided in paragraph (h) of this subsection (5) SUBSECTION (5)(h) OF THIS
259		-	SECTION
260		-	; EXCEPT THAT THIS SUBSECTION (5)(e) SHALL NOT APPLY TO A
261		-	PARTNERSHIP THAT MAKES THE ELECTION ALLOWED UNDER SUBPART
262		-	3 OF
263		-	PART
264		-	3 OF THIS ARTICLE 22.
265		-	SECTION 10. Safety clause. The general assembly hereby finds,
266		-	PAGE 7-SENATE BILL 22-124 determines, and declares that this act is necessary for the immediate
267		-	preservation of the public peace, health, or safety.
268		-	____________________________ ____________________________
269		-	Steve Fenberg Alec Garnett
270		-	PRESIDENT OF SPEAKER OF THE HOUSE
271		-	THE SENATE OF REPRESENTATIVES
272		-	____________________________ ____________________________
273		-	Cindi L. Markwell Robin Jones
274		-	SECRETARY OF CHIEF CLERK OF THE HOUSE
275		-	THE SENATE OF REPRESENTATIVES
276		-	APPROVED________________________________________
277		-	(Date and Time)
278		-	_________________________________________
279		-	Jared S. Polis
280		-	GOVERNOR OF THE STATE OF COLORADO
281		-	PAGE 8-SENATE BILL 22-124
	237	+	8
	238	+	EXCEEDS THE ELECTING PASS-THROUGH ENTITY OWNER 'S INCOME TAXES9
	239	+	DUE IS REFUNDED TO THE ELECTING PASS-THROUGH ENTITY OWNER .10
	240	+	SECTION 7. In Colorado Revised Statutes, 39-22-104, amend11
	241	+	(3)(r); and repeal (4)(aa) as follows:12
	242	+	39-22-104. Income tax imposed on individuals, estates, and13
	243	+	trusts - single rate - report - legislative declaration - definitions -14
	244	+	repeal. (3) There shall be added to the federal taxable income:15
	245	+	(r) Notwithstanding subsection (3)(o) of this section, for income16
	246	+	tax years commencing on or after January 1, 2022 JANUARY 1, 2018, an17
	247	+	amount equal to the deduction taken under section 199A of the internal18
	248	+	revenue code, except to the extent the deduction is otherwise disallowed19
	249	+	under section 265 of the internal revenue code, for an electing20
	250	+	pass-through entity owner of an electing pass-through entity, as such21
	251	+	terms are defined in section 39-21-342, that makes the election allowed22
	252	+	in subpart 3 of part 3 of this article 22.23
	253	+	(4) There shall be subtracted from federal taxable income:24
	254	+	(aa) For income tax years commencing on or after January 1,25
	255	+	2022, an amount equal to the electing pass-through entity owner's26
	256	+	distributive share of the electing pass-through entity's income attributable27
	257	+	124
	258	+	-7- to the state that is taxed pursuant to the provisions of subpart 3 of part 31
	259	+	of this article 22 and income not attributable to the state that is taxed2
	260	+	pursuant to the provisions of subpart 3 of part 3 of this article 22.3
	261	+	SECTION 8. In Colorado Revised Statutes, 39-22-304, repeal4
	262	+	(3)(r) as follows:5
	263	+	39-22-304. Net income of corporation - legislative declaration6
	264	+	- definitions - repeal. (3) There shall be subtracted from federal taxable7
	265	+	income:8
	266	+	(r) For income tax years commencing on or after January 1, 2022,9
	267	+	an amount equal to the electing pass-through entity owner's distributive10
	268	+	share of the electing pass-through entity's income attributable to the state11
	269	+	that is taxed pursuant to the provisions of subpart 3 of part 3 of this article12
	270	+	22 and income not attributable to the state that is taxed pursuant to the13
	271	+	provisions of subpart 3 of part 3 of this article 22.14
	272	+	SECTION 9. In Colorado Revised Statutes, 39-22-601, amend15
	273	+	(2.5)(e) and (5)(e) as follows:16
	274	+	39-22-601. Returns. (2.5) (e) With respect to each of its17
	275	+	nonresident shareholders, an S corporation shall, for each taxable period,18
	276	+	either timely file with the department of revenue an agreement, as19
	277	+	provided in paragraph (f) of this subsection (2.5) SUBSECTION (2.5)(f) OF20
	278	+	THIS SECTION, or make a payment to this state as provided in paragraph21
	279	+	(h) of this subsection (2.5) SUBSECTION (2.5)(h) OF THIS SECTION; EXCEPT22
	280	+	THAT THIS SUBSECTION (2.5)(e) SHALL NOT APPLY TO AN S CORPORATION23
	281	+	THAT MAKES THE ELECTION ALLOWED UNDER SUBPART 3 OF PART 3 OF24
	282	+	THIS ARTICLE 22.25
	283	+	(5) (e) With respect to each of its nonresident partners, a26
	284	+	partnership shall, for each taxable period, either timely file with the27
	285	+	124
	286	+	-8- department of revenue an agreement, as provided in paragraph (f) of this1
	287	+	subsection (5) SUBSECTION (5)(f) OF THIS SECTION, or make payment to2
	288	+	this state, as provided in paragraph (h) of this subsection (5) SUBSECTION3
	289	+	(5)(h)
	290	+	OF THIS SECTION; EXCEPT THAT THIS SUBSECTION (5)(e) SHALL NOT
	291	+	4
	292	+	APPLY TO A PARTNERSHIP THAT MAKES THE ELECTION ALLOWED UNDER5
	293	+	SUBPART 3 OF PART 3 OF THIS ARTICLE 22.6
	294	+	7
	295	+	SECTION 10. Safety clause. The general assembly hereby finds,8
	296	+	determines, and declares that this act is necessary for the immediate9
	297	+	preservation of the public peace, health, or safety.10
	298	+	124
	299	+	-9-