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May 5, 2023 HB 23-1112
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Revised Fiscal Note
(replaces fiscal note dated April 25, 2023.)
Drafting Number:
Prime Sponsors:
LLS 23-0125
Rep. Bird; Young
Sen. Hansen; Kolker
Date:
Bill Status:
Fiscal Analyst:
May 5, 2023
Senate Second Reading
Elizabeth Ramey | 303-866-3522
elizabeth.ramey@coleg.gov
Bill Topic: EARNED INCOME AND CHILD TAX CREDITS
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☒ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill expands the state earned income tax credit and child tax credit. It decreases
state revenue starting in FY 2023-24 and increases expenditures in FY 2024-25. In
FY 2023-24 and FY 2024-25, the bill decreases the state obligation for TABOR refunds
to taxpayers.
Appropriation
Summary:
No appropriation is required.
Fiscal Note
Status:
The fiscal note reflects the reengrossed bill, as amended by the Senate Finance
Committee.
Table 1
State Fiscal Impacts Under HB 23-1112
Budget Year
FY 2023-24
Out Year
FY 2024-25
Revenue General Fund ($74.8 million) ($97.6 million)
Expenditures General Fund - $76,168
Other Budget Impacts TABOR Refund ($74.8 million) ($97.6 million)
General Fund Reserve - $11,425
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May 5, 2023 HB 23-1112
Summary of Legislation
For tax year 2024, the bill expands the state earned income tax credit (EITC) and child tax credit (CTC),
as discussed below.
Earned income tax credit. The Colorado EITC is available to taxpayers who claim the federal EITC,
and to taxpayers who would otherwise be able to claim the federal EITC but who are ineligible because
they do not have a valid social security number. The Colorado EITC is a refundable credit calculated
as a percentage of the federal EITC. For tax year 2024, the bill increases the Colorado EITC from
25 percent of the federal EITC to 38 percent of the federal EITC.
Child tax credit. Starting in tax year 2022, the state CTC is available for single income tax filers with
less than $75,000 and for joint filers with less than $85,000, in federal adjusted gross income (AGI),
who claimed the federal CTC, or would otherwise be able to claim the federal CTC but who are
ineligible because one or more of their qualifying children does not have a valid social security
number. The state CTC is available for eligible taxpayers’ children under the age of six.
The tax credit is a refundable credit calculated as a percentage of the federal CTC. Starting in tax year
2024, the bill establishes fixed credit amounts based on the taxpayer’s filing status and income as
shown in Table 2. Two taxpayers who are married and may file taxes jointly, but choose to file
separately, may only claim the credit on one return per year. Beginning in tax year 2024, the bill
requires that DOR adjust the federal AGI thresholds for inflation, as measured by the Denver-Aurora-
Lakewood consumer price index or its successor, if the adjustment results in an increase of at least
$1,000 when rounded to the nearest $1,000.
Table 2
Amounts of the Colorado Child Tax Credit
Single Filers Joint Filers
Federal AGI*
Current Law
(% of Federal
Credit)
Under
HB 23-1112 Federal AGI*
Current Law
(% of Federal
Credit)
Under
HB 23-1112
Up to
$25,000
60 percent
$1,200 Up to
$35,000
60 percent $1,200
$25,001 to
$50,000
30 percent
$600 $35,001 to
$60,000
30 percent $600
$50,001 to
$75,000
10 percent
$200 $60,001 to
$85,000
10 percent $200
* AGI = adjusted gross income; current income thresholds, not adjusted for inflation
Assumptions
Economic forecast. All revenue estimates assume future economic activity consistent with the
March 2023 Legislative Council Staff forecast. Page 3
May 5, 2023 HB 23-1112
State Revenue
The bill is expected to decrease state revenue by $74.8 million in FY 2023-24, by $97.6 in FY 2024-25,
by $45.6 million in FY 2025-26 and by similar amounts in future years. The bill decreases revenue
from income taxes, which are subject to TABOR.
Earned income tax credit. Increasing the EITC is expected to decrease state revenue by $52.0 million
in each of FY 2023-24 and FY 2024-25. For both fiscal years, these estimates represent a half-year
impact for tax year 2024 on an accrual accounting basis. Estimates are based on actual EITC claims,
adjusted for expected increases in the eligible population. The estimate captures the impact of
increasing the EITC from 25 percent of the federal credit under current law to 38 percent only in 2024.
It does not incorporate an adjustment to utilization rates. If the bill causes a greater share of eligible
taxpayers to claim the credit than anticipated under current law, the revenue decrease will be greater
than estimated.
Child tax credit. The state child tax credit is expected to decrease state revenue by $$22.8 million in
FY 2023-24, by $45.6 million in FY 2024-25, and by similar amounts in future years. Estimates are
based on an analysis of Colorado taxpayers with children under 6 for tax year 2019, adjusted for
increases in the eligible population. The actual revenue decrease will depend on the rate at which the
credit is utilized and could be greater or less than estimated.
State Expenditures
The bill increases General Fund expenditures by $76,168 and in FY 2024-25. These costs represent
administrative expenses in the DOR to implement the new tax credit. Expenditures are shown in
Table 3 and detailed below.
Table 3
Expenditures Under HB 23-1112
FY 2023-24 FY 2024-25
Department of Revenue
Computer Programming and Testing - $68,014
Research and Analysis - $7,392
Document Management - $762
Total Cost - $76,168
Computer programming and testing. The DOR will have one-time costs of $68,014 in FY 2024-25 for
computer programming and testing. Programming costs are estimated at $5,794 representing 25
hours of contract programming at a rate of $231.75 per hour. Costs for user acceptance testing at the
department are estimated at $62,220, representing 1,220 hours for the Systems Support Office at
$35 per hour and 610 hours of user acceptance testing at a rate of $32 per hour.
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May 5, 2023 HB 23-1112
Research and Analysis. Expenditures in the Office of Research and Analysis are required for changes
in related GenTax reports so that the department can access and document tax statistics related to the
new tax policy. These costs are estimated at $7,392, or 231 hours for data management and reporting
at a rate of $32 per hour FY 2024-25.
Document management. The DOR will have one-time costs of $762 in FY 2024-25 for form changes
and the creation of new forms. These services are performed in the Department of Personnel and
Administration using reappropriated DOR funds.
Other Budget Impacts
TABOR refunds. The bill is expected to decrease the amount of state revenue required to be refunded
to taxpayers by the amounts shown in the state revenue section above. These estimates assume the
March 2023 LCS revenue forecast. A forecast of state revenue subject to TABOR is not available
beyond FY 2024-25. Because TABOR refunds are paid from the General Fund, decreased General
Fund revenue will lower the TABOR refund obligation, but result in no net change to the amount of
General Fund otherwise available to spend or save.
Effective Date
The bill takes effect 90 days following adjournment of the General Assembly sine die, assuming no
referendum petition is filed.
State and Local Government Contacts
Information Technology Personnel Revenue
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit: leg.colorado.gov/fiscalnotes.