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July 18, 2023 HB 23-1277
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Final Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 23-0940
Rep. Marshall; Taggart
Sen. Kolker; Smallwood
Date:
Bill Status:
Fiscal Analyst:
July 18, 2023
Signed into Law
Emily Dohrman | 303-866-3687
emily.dohrman@coleg.gov
Bill Topic: REPORTING ADJUSTMENTS TO TAXABLE INCOME
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☐ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill makes several changes to income tax reporting requirements, including the
information to be included on forms and the time when forms are due. It minimally
increases state revenue on an ongoing basis and requires one-time expenditures for
implementation.
Appropriation
Summary:
No appropriation is required or included.
Fiscal Note
Status:
The fiscal note reflects the enacted bill.
Table 1
State Fiscal Impacts Under HB 23-1277
Budget Year
FY 2023-24
Out Year
FY 2024-25
Revenue - -
Expenditures General Fund - $76,080
Centrally Appropriated - $9,870
Total Expenditures - $85,950
Total FTE - 0.6 FTE
Transfers - -
Other Budget Impacts General Fund Reserve - $11,412
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July 18, 2023 HB 23-1277
Summary of Legislation
The bill makes three primary changes to income tax reporting for partnerships, S corporations, and
C corporations.
Partnerships and S corporations are entities that pass income, losses, deductions, and credits on to
their shareholders for tax purposes (“pass-through entities”). Under current law, partnerships and
S corporations have three options for ensuring that the income taxes owed by the nonresident owners
are paid. They may file a composite return on behalf of the nonresident owners, withhold an
estimated payment, or file an agreement that the owners will file a separate option. The bill
consolidates two of these options, the composite return and withholding estimated payments options,
and clarifies how the payment is calculated.
The amount of income tax owed to the state is dependent on the amount of federal taxable income. If
a taxpayer’s federal taxable income is adjusted after filing their return, the taxpayer is required to
report the change to Colorado. The bill replaces the current statute regarding these adjustments with
a model statute developed by the Multistate Tax Commission. The new language allows more time
to report adjustments to federal taxable income and allows pass-through entities to handle these
adjustments on behalf of their owners.
Finally, the bill moves the state income tax return deadline for C corporations from April 15 to May 15,
and moves the extension deadline from October 15 to November 15.
State Revenue
The bill minimally increases General Fund revenue on an ongoing basis beginning in FY 2023-24.
Adopting the Multistate Tax Commission’s standard language ensures that the Department of
Revenue (DOR) will be able to collect tax in the event that the federal government adjusts federal
taxable income for certain taxpayers. The revenue impact will depend on the adjustments made at
the federal level, but is expected to be small.
State Expenditures
The bill increases General Fund expenditures by $85,950 and 0.6 FTE in FY 2024-25 only. Expenditures
are outlined in Table 2 and described below.
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July 18, 2023 HB 23-1277
Table 2
Expenditures Under HB 23-1277
FY 2023-24 FY 2024-25
Department of Revenue
Personal Services - $34,827
Operating Expenses - $810
User Acceptance Testing - $16,506
GenTax Programming - $23,175
DPA Form Changes - $762
Centrally Appropriated Costs
1
- $9,870
Total - $85,950
Total FTE - 0.6 FTE
Department of Revenue. The DOR will require temporary staff in FY 2024-25 only for development
and testing in support of GenTax programming that will be required to update systems for reporting.
The bill also requires expenditures to update computer systems. Programming costs are estimated at
$23,175, representing 100 hours at $231.75 per hour. Costs for testing at the department are estimated
at $16,560, representing 655 hours of user acceptance testing at a rate of $25.20 per hour. Lastly, the
Department of Personnel and Administration will require $762 to update forms using reappropriated
funds from the DOR.
Centrally appropriated costs. Pursuant to a Joint Budget Committee policy, certain costs associated
with this bill are addressed through the annual budget process and centrally appropriated in the Long
Bill or supplemental appropriations bills, rather than in this bill. These costs, which include employee
insurance and supplemental employee retirement payments, are shown in Table 2.
Effective Date
The bill was signed into law by the Governor on June 1, 2023 and takes effect on January 1, 2024.
State and Local Government Contacts
Information Technology Personnel and Administration 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.