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Colorado House Bill HB1021

Colorado 2025 Regular Session

Colorado House Bill HB1021 Compare Versions

Only one version of the bill is available at this time.
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11 First Regular Session
22 Seventy-fifth General Assembly
33 STATE OF COLORADO
44 INTRODUCED
55
66
77 LLS NO. 25-0573.01 Megan McCall x4215
88 HOUSE BILL 25-1021
99 House Committees Senate Committees
1010 Business Affairs & Labor
1111 A BILL FOR AN ACT
1212 C
1313 ONCERNING TAX INCENTIVES FOR BUSINESSES THAT TRANSITION TO 101
1414 EMPLOYEE-OWNED BUSINESSES IN WHOLE OR IN PART .102
1515 Bill Summary
1616 (Note: This summary applies to this bill as introduced and does
1717 not reflect any amendments that may be subsequently adopted. If this bill
1818 passes third reading in the house of introduction, a bill summary that
1919 applies to the reengrossed version of this bill will be available at
2020 http://leg.colorado.gov
2121 .)
2222 The bill creates 2 income tax subtractions for income tax years
2323 commencing on or after January 1, 2027, but before January 1, 2038. The
2424 first subtraction is for an amount equal to state capital gains that are
2525 realized by a taxpayer during the taxable year for the conversion by an
2626 increment of at least 20% ownership to a qualified employee-owned
2727 business of a qualified business. The taxpayers that are eligible for this
2828 HOUSE SPONSORSHIP
2929 Lindstedt and Taggart,
3030 SENATE SPONSORSHIP
3131 Bridges,
3232 Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
3333 Capital letters or bold & italic numbers indicate new material to be added to existing law.
3434 Dashes through the words or numbers indicate deletions from existing law. subtraction are the same taxpayers that would be eligible for the tax credit
3535 for conversion costs for employee business ownership.
3636 The second subtraction is allowed to worker-owned cooperatives
3737 in an amount equal to the worker-owned cooperative's federal taxable
3838 income for the tax year not to exceed $1 million.
3939 The bill also makes changes to the tax credit for conversion costs
4040 for employee business ownership (credit). Under current law, the credit
4141 is available through income tax year 2026. The bill extends the credit
4242 through income tax year 2037. The bill also specifies that the aggregate
4343 amount of credits that can be claimed for each income tax year
4444 commencing on or after January 1, 2026, but before January 1, 2032, is
4545 $3 million and that the aggregate amount of credits that can be claimed
4646 for each income tax year commencing on or after January 1, 2032, but
4747 before January 1, 2038, is $4 million. The percentage of conversion or
4848 expansion costs that are eligible to be claimed for the credit is currently
4949 50%; however, the bill increases this percentage to 75% beginning in tax
5050 year 2026 while maintaining the existing dollar caps for the different
5151 methods of conversion.
5252 Additionally, the bill revises several definitions to expand
5353 eligibility for the credit and allows for qualified support entities, which
5454 are nonprofit organizations that provide services to businesses that qualify
5555 under the credit to convert or expand to employee-ownership, to be
5656 eligible to receive the credit for up to 75% of the costs incurred for
5757 providing such support, including for staff salaries and benefits,
5858 marketing and outreach, and consulting and technical assistance not to
5959 exceed $167,000.
6060 The bill makes conforming amendments to several of the credit's
6161 expanded definitions that are also applicable to the tax credit for new
6262 employee-owned businesses.
6363 Be it enacted by the General Assembly of the State of Colorado:1
6464 SECTION 1. In Colorado Revised Statutes, 39-22-104, add2
6565 (4)(dd) as follows:3
6666 39-22-104. Income tax imposed on individuals, estates, and4
6767 trusts - single rate - report - tax preference performance statement5
6868 - legislative declaration - definitions - repeal. (4) There shall be6
6969 subtracted from federal taxable income:7
7070 (dd) (I) F
7171 OR INCOME TAX YEARS COMMENCING ON OR AFTER8
7272 HB25-1021-2- JANUARY 1, 2027, BUT BEFORE JANUARY 1, 2038, AN AMOUNT EQUAL TO1
7373 QUALIFYING CAPITAL GAINS THAT ARE SUBJECT TO TAX UNDER THIS2
7474 ARTICLE 22 AND THAT ARE REALIZED BY A QUALIFIED TAXPAYER DURING3
7575 THE TAXABLE YEAR FOR THE QUALIFIED SALE OF A QUALIFIED BUSINESS .4
7676 (II) A
7777 S USED IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE5
7878 REQUIRES:6
7979 (A) "O
8080 WNER" HAS THE SAME MEANING AS SET FORTH IN SECTION7
8181 39-22-542 (2)(h).8
8282 (B) "Q
8383 UALIFIED BUSINESS" HAS THE SAME MEANING AS SET FORTH9
8484 IN SECTION 39-22-542 (2)(i).10
8585 (C) "Q
8686 UALIFIED EMPLOYEE-OWNED BUSINESS" HAS THE SAME11
8787 MEANING AS SET FORTH IN SECTION 39-22-542 (2)(j).12
8888 (D) "Q
8989 UALIFIED SALE" MEANS THE CONVERSION TO A QUALIFIED13
9090 EMPLOYEE-OWNED BUSINESS; EXCEPT THAT THE CONVERSION MUST BE BY14
9191 AN INCREMENT OF AT LEAST TWENTY PERCENT OF THE TOTAL OWNERSHIP15
9292 OF THE ENTIRE QUALIFIED EMPLOYEE-OWNED BUSINESS.16
9393 (E) "Q
9494 UALIFIED TAXPAYER" MEANS, IN THE CASE OF A QUALIFIED17
9595 BUSINESS THAT IS A C CORPORATION, THE QUALIFIED BUSINESS AND, IN18
9696 THE CASE OF A QUALIFIED BUSINESS THAT IS A PARTNERSHIP OR AN S19
9797 CORPORATION, THE OWNER.20
9898 (F) "Q
9999 UALIFYING CAPITAL GAINS" MEANS THE AMOUNT OF NET21
100100 CAPITAL GAINS, AS DEFINED IN SECTION 1222 (11) OF THE INTERNAL22
101101 REVENUE CODE.23
102102 (III) I
103103 N ACCORDANCE WITH SECTION 39-21-304 (1), WHICH24
104104 REQUIRES EACH BILL THAT CREATES A NEW TAX EXPENDITURE TO INCLUDE25
105105 A TAX PREFERENCE PERFORMANCE STATEMENT AS PART OF A STATUTORY26
106106 LEGISLATIVE DECLARATION , THE GENERAL ASSEMBLY FINDS AND27
107107 HB25-1021
108108 -3- DECLARES THAT THE PURPOSE OF THE INCOME TAX SUBTRACTION1
109109 PROVIDED IN THIS SUBSECTION (4)(dd) IS TO:2
110110 (A) I
111111 NDUCE CERTAIN DESIGNATED BEHAVIOR BY TAXPAYERS ,3
112112 SPECIFICALLY FOR BUSINESSES TO ESTABLISH EMPLOYEE STOCK4
113113 OWNERSHIP PLANS OR EMPLOYEE OWNERSHIP TRUSTS OR TO CONVERT TO5
114114 A WORKER-OWNED COOPERATIVE; AND6
115115 (B) P
116116 ROVIDE TAX RELIEF FOR CERTAIN BUSINESSES OR7
117117 INDIVIDUALS, SPECIFICALLY TO BUSINESSES THAT ESTABLISH EMPLOYEE8
118118 STOCK OWNERSHIP PLANS OR EMPLOYEE OWNERSHIP TRUSTS OR THAT9
119119 CONVERT TO A WORKER-OWNED COOPERATIVE.10
120120 (IV) T
121121 HE GENERAL ASSEMBLY AND THE STATE AUDITOR SHALL11
122122 MEASURE THE EFFECTIVENESS OF THE SUBTRACTION IN ACHIEVING THE12
123123 PURPOSE SPECIFIED IN SUBSECTION (4)(dd)(III) OF THIS SECTION BASED ON13
124124 THE NUMBER AND AGGREGATE AMOUNT OF SUBTRACTIONS CLAIMED IN A14
125125 TAX YEAR.15
126126 (V) T
127127 HIS SUBSECTION (4)(dd) IS REPEALED, EFFECTIVE JULY 1,16
128128 2042.17
129129 SECTION 2. In Colorado Revised Statutes, 39-22-304, add (3)(s)18
130130 and (3)(t) as follows:19
131131 39-22-304. Net income of corporation - legislative declaration20
132132 - definitions - repeal. (3) There shall be subtracted from federal taxable21
133133 income:22
134134 (s) (I) F
135135 OR INCOME TAX YEARS COMMENCING ON OR AFTER23
136136 J
137137 ANUARY 1, 2027, BUT BEFORE JANUARY 1, 2038, AN AMOUNT EQUAL TO24
138138 QUALIFYING CAPITAL GAINS THAT ARE SUBJECT TO TAX UNDER THIS25
139139 ARTICLE 22 AND THAT ARE REALIZED BY A QUALIFIED TAXPAYER DURING26
140140 THE TAXABLE YEAR FOR THE QUALIFIED SALE OF A QUALIFIED BUSINESS .27
141141 HB25-1021
142142 -4- (II) AS USED IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE1
143143 REQUIRES:2
144144 (A) "O
145145 WNER" HAS THE SAME MEANING AS SET FORTH IN SECTION3
146146 39-22-542 (2)(h).4
147147 (B) "Q
148148 UALIFIED BUSINESS" HAS THE SAME MEANING AS SET FORTH5
149149 IN SECTION 39-22-542 (2)(i).6
150150 (C) "Q
151151 UALIFIED EMPLOYEE-OWNED BUSINESS" HAS THE SAME7
152152 MEANING AS SET FORTH IN SECTION 39-22-542 (2)(j).8
153153 (D) "Q
154154 UALIFIED SALE" MEANS THE CONVERSION TO A QUALIFIED9
155155 EMPLOYEE-OWNED BUSINESS; EXCEPT THAT THE CONVERSION MUST BE BY10
156156 AN INCREMENT OF AT LEAST TWENTY PERCENT OF THE TOTAL OWNERSHIP11
157157 OF THE ENTIRE QUALIFIED EMPLOYEE-OWNED BUSINESS.12
158158 (E) "Q
159159 UALIFIED TAXPAYER" MEANS, IN THE CASE OF A QUALIFIED13
160160 BUSINESS THAT IS A C CORPORATION, THE QUALIFIED BUSINESS AND, IN14
161161 THE CASE OF A QUALIFIED BUSINESS THAT IS A PARTNERSHIP OR AN S15
162162 CORPORATION, THE OWNER.16
163163 (F) "Q
164164 UALIFYING CAPITAL GAINS" MEANS THE AMOUNT OF NET17
165165 CAPITAL GAINS, AS DEFINED IN SECTION 1222 (11) OF THE INTERNAL18
166166 REVENUE CODE.19
167167 (III) I
168168 N ACCORDANCE WITH SECTION 39-21-304 (1), WHICH20
169169 REQUIRES EACH BILL THAT CREATES A NEW TAX EXPENDITURE TO INCLUDE21
170170 A TAX PREFERENCE PERFORMANCE STATEMENT AS PART OF A STATUTORY22
171171 LEGISLATIVE DECLARATION , THE GENERAL ASSEMBLY FINDS AND23
172172 DECLARES THAT THE PURPOSE OF THE INCOME TAX SUBTRACTION24
173173 PROVIDED IN THIS SUBSECTION (3)(s) IS TO:25
174174 (A) I
175175 NDUCE CERTAIN DESIGNATED BEHAVIOR BY TAXPAYERS ,26
176176 SPECIFICALLY FOR BUSINESSES TO ESTABLISH EMPLOYEE STOCK27
177177 HB25-1021
178178 -5- OWNERSHIP PLANS OR EMPLOYEE OWNERSHIP TRUSTS OR TO CONVERT TO1
179179 A WORKER-OWNED COOPERATIVE; AND2
180180 (B) P
181181 ROVIDE TAX RELIEF FOR CERTAIN BUSINESSES OR3
182182 INDIVIDUALS, SPECIFICALLY TO BUSINESSES THAT ESTABLISH EMPLOYEE4
183183 STOCK OWNERSHIP PLANS OR EMPLOYEE OWNERSHIP TRUSTS OR THAT5
184184 CONVERT TO A WORKER-OWNED COOPERATIVE.6
185185 (IV) T
186186 HE GENERAL ASSEMBLY AND THE STATE AUDITOR SHALL7
187187 MEASURE THE EFFECTIVENESS OF THE SUBTRACTION IN ACHIEVING THE8
188188 PURPOSE SPECIFIED IN SUBSECTION (3)(s)(III) OF THIS SECTION BASED ON9
189189 THE NUMBER AND AGGREGATE AMOUNT OF SUBTRACTIONS CLAIMED IN A10
190190 TAX YEAR.11
191191 (V) T
192192 HIS SUBSECTION (3)(s) IS REPEALED, EFFECTIVE JULY 1, 2042.12
193193 (t) (I) F
194194 OR INCOME TAX YEARS COMMENCING ON OR AFTER13
195195 J
196196 ANUARY 1, 2027, BUT BEFORE JANUARY 1, 2038, AN AMOUNT EQUAL TO14
197197 A QUALIFIED TAXPAYER'S FEDERAL TAXABLE INCOME FOR THE TAX YEAR15
198198 NOT TO EXCEED ONE MILLION DOLLARS .16
199199 (II) A
200200 S USED IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE17
201201 REQUIRES:18
202202 (A) "Q
203203 UALIFIED TAXPAYER" MEANS A TAXPAYER THAT IS SUBJECT19
204204 TO TAX UNDER THIS ARTICLE 22 AND THAT IS A WORKER -OWNED20
205205 COOPERATIVE.21
206206 (B) "W
207207 ORKER-OWNED COOPERATIVE" HAS THE SAME MEANING AS22
208208 SET FORTH IN SECTION 1042 (c)(2) OF THE INTERNAL REVENUE CODE .23
209209 (III) I
210210 N ACCORDANCE WITH SECTION 39-21-304 (1), WHICH24
211211 REQUIRES EACH BILL THAT CREATES A NEW TAX EXPENDITURE TO INCLUDE25
212212 A TAX PREFERENCE PERFORMANCE STATEMENT AS PART OF A STATUTORY26
213213 LEGISLATIVE DECLARATION , THE GENERAL ASSEMBLY FINDS AND27
214214 HB25-1021
215215 -6- DECLARES THAT THE PURPOSE OF THE INCOME TAX SUBTRACTION1
216216 PROVIDED IN THIS SUBSECTION (3)(t) IS TO:2
217217 (A) I
218218 NDUCE CERTAIN DESIGNATED BEHAVIOR BY TAXPAYERS ,3
219219 SPECIFICALLY FOR BUSINESSES TO CONVERT TO A WORKER -OWNED4
220220 COOPERATIVE; AND5
221221 (B) P
222222 ROVIDE TAX RELIEF FOR CERTAIN BUSINESSES, SPECIFICALLY6
223223 TO PROVIDE ONGOING SUPPORT TO BUSINESSES THAT CONVERT TO A7
224224 WORKER-OWNED COOPERATIVE.8
225225 (IV) T
226226 HE GENERAL ASSEMBLY AND THE STATE AUDITOR SHALL9
227227 MEASURE THE EFFECTIVENESS OF THE SUBTRACTION IN ACHIEVING THE10
228228 PURPOSE SPECIFIED IN SUBSECTION (3)(t)(III) OF THIS SECTION BASED ON11
229229 THE NUMBER AND AGGREGATE AMOUNT OF SUBTRACTIONS CLAIMED IN A12
230230 TAX YEAR AND THE NUMBER OF SUBTRACTIONS CLAIMED YEAR OVER13
231231 YEAR.14
232232 (V) T
233233 HIS SUBSECTION (3)(t) IS REPEALED, EFFECTIVE JULY 1, 2042.15
234234 SECTION 3. In Colorado Revised Statutes, 39-22-542, amend16
235235 (1)(a)(I), (1)(a)(III), (2)(e), (2)(j)(II), (3)(a) introductory portion,17
236236 (3)(a.5)(I), (3)(c), (3)(d), (4), (5)(a)(V), (5)(a)(VI), (6)(a)(I), (8), (10),18
237237 (11) introductory portion, and (14); and add (2)(c.5), (2)(j.5), (2)(k.5),19
238238 (3)(a.3), (3)(a.5)(III), (3)(a.7), (3)(b)(III), and (5)(a)(VII) as follows:20
239239 39-22-542. Employee-ownership tax credit - definitions -21
240240 legislative declaration - repeal. (1) Legislative declaration. (a) The22
241241 general assembly hereby finds and declares that:23
242242 (I) The purpose of this section is to provide an incentive for small
243243 24
244244 businesses to establish employee stock ownership plans or employee25
245245 ownership trusts or to convert to a worker-owned cooperative,
246246 AND TO26
247247 PROVIDE AN INCENTIVE TO ENTITIES THAT SUPPORT BUSINESSES IN SUCH27
248248 HB25-1021
249249 -7- ESTABLISHMENT OR CONVERSION ;1
250250 (III) This section encourages small business owners to sell2
251251 through three different options, their businesses to the very employees3
252252 that contributed to their success; and4
253253 (2) Definitions. As used in this section, unless the context5
254254 otherwise requires:6
255255 (c.5) "C
256256 ORPORATE HEADQUARTERS " MEANS THE SOLE LOCATION7
257257 WITHIN A REGIONAL OR NATIONAL AREA WHERE THE MAJORITY OF THE8
258258 TAXPAYER'S OR QUALIFIED SUPPORT ENTITY 'S STAFF MEMBERS OR9
259259 EMPLOYEES ARE DOMICILED AND EMPLOYED AND WHERE THE MAJORITY10
260260 OF THE TAXPAYER 'S OR QUALIFIED SUPPORT ENTITY 'S FINANCIAL,11
261261 PERSONNEL, LEGAL, PLANNING, OR OTHER BUSINESS FUNCTIONS ARE12
262262 CONDUCTED ON A REGIONAL OR NATIONAL BASIS .13
263263 (e) "Employee ownership trust" means an indirect form of14
264264 employee ownership in which a trust holds a controlling stake
265265 AT LEAST15
266266 TWENTY PERCENT OF THE FULLY DILUTED SECURITIES in a qualified16
267267 business and benefits all employees on an equal basis.17
268268 (j) "Qualified employee-owned business" means a taxpayer that18
269269 is subject to tax under this article 22, including but not limited to a C19
270270 corporation, S corporation, limited liability company, partnership, limited20
271271 liability partnership, sole proprietorship, or other similar pass-through21
272272 entity, that:22
273273 (II) Has its corporate headquarters located in this state. For23
274274 purposes of this subsection (2)(j), "corporate headquarters" means the24
275275 sole location within a regional or national area where the taxpayer's staff25
276276 members or employees are domiciled and employed, and where the26
277277 majority of the taxpayer's financial, personnel, legal, planning, or other27
278278 HB25-1021
279279 -8- business functions are conducted on a regional or national basis.1
280280 (j.5) "Q
281281 UALIFIED SUPPORT ENTITY" MEANS AN ORGANIZATION2
282282 EXEMPT FROM TAXATION UNDER SECTION 501 (c)(3) OF THE INTERNAL3
283283 REVENUE CODE THAT:4
284284 (I) H
285285 AS BEEN IN EXISTENCE FOR NOT LESS THAN TWELVE MONTHS5
286286 PRIOR TO JANUARY 1 OF THE INCOME TAX YEAR FOR WHICH THE QUALIFIED6
287287 SUPPORT ENTITY CLAIMS THE CREDIT;7
288288 (II) E
289289 ITHER HAS PROVIDED SERVICES THAT HAVE SUPPORTED AT8
290290 LEAST ONE SUCCESSFUL CONVERSION OR EXPANSION TO A QUALIFIED9
291291 EMPLOYEE-OWNED BUSINESS IN THE INCOME TAX YEAR OR HAS PROVIDED10
292292 SERVICES THAT HAVE SUPPORTED AT LEAST THREE QUALIFIED BUSINESSES11
293293 THAT HAVE THE INTENT OF CONVERTING OR EXPANDING TO A QUALIFIED12
294294 EMPLOYEE-OWNED BUSINESS;13
295295 (III) H
296296 AS ITS CORPORATE HEADQUARTERS LOCATED IN THIS STATE ;14
297297 AND15
298298 (IV) I
299299 S APPROVED BY THE OFFICE FOR THE TAX INCENTIVES IN THIS16
300300 SECTION.17
301301 (k.5) "S
302302 UPPORT COSTS" MEANS COSTS THAT ARE OR ARE RELATED18
303303 TO:19
304304 (I) S
305305 TAFF SALARIES AND BENEFITS FOR STAFF THAT ARE DIRECTLY20
306306 INVOLVED IN PROVIDING SERVICES OF THE QUALIFIED SUPPORT ENTITY FOR21
307307 THE CONVERSION OR EXPANSION OF A QUALIFIED BUSINESS TO A22
308308 QUALIFIED EMPLOYEE-OWNED BUSINESS;23
309309 (II) M
310310 ARKETING AND OUTREACH FOR PRODUCING EDUCATIONAL24
311311 MATERIALS OR HOSTING WORKSHOPS OR CONFERENCES ON CONVERTING25
312312 A BUSINESS TO EMPLOYEE-OWNERSHIP; AND26
313313 (III) C
314314 ONSULTING AND TECHNICAL ASSISTANCE WHICH MAY27
315315 HB25-1021
316316 -9- INCLUDE LEGAL, FINANCIAL, AND BUSINESS CONSULTING FOR CONVERTING1
317317 A QUALIFIED BUSINESS TO A QUALIFIED EMPLOYEE -OWNED BUSINESS.2
318318 (3) (a) E
319319 XCEPT AS OTHERWISE PROVIDED IN SUBSECTION (3)(a.3)3
320320 OF THIS SECTION AND subject to certification by the office pursuant to this4
321321 section, for income tax years commencing on or after January 1, 2022, but5
322322 prior to January 1, 2027
323323 BEFORE JANUARY 1, 2038, a qualified business6
324324 is allowed a credit with respect to the income taxes imposed pursuant to7
325325 this article 22 as follows:8
326326 (a.3) F
327327 OR INCOME TAX YEARS COMMENCING ON OR AFTER9
328328 J
329329 ANUARY 1, 2026, BUT BEFORE JANUARY 1, 2038, THE ALLOWABLE10
330330 PERCENTAGE OF CONVERSION COSTS INCURRED BY A QUALIFIED BUSINESS11
331331 FOR THE APPLICABLE CONVERSION OF THE QUALIFIED BUSINESS SET FORTH12
332332 IN SUBSECTIONS (3)(a)(I), (3)(a)(II), AND (3)(a)(III) OF THIS SECTION FOR13
333333 PURPOSES OF CALCULATING THE CREDIT IS UP TO SEVENTY -FIVE PERCENT14
334334 OF THE CONVERSION COSTS.15
335335 (a.5) (I) E
336336 XCEPT AS OTHERWISE PROVIDED IN SUBSECTION16
337337 (3)(a.5)(III)
338338 OF THIS SECTION and subject to certification by the office17
339339 pursuant to this section, for the
340340 income tax years commencing on or after18
341341 January 1, 2024, but prior to January 1, 2027 BEFORE JANUARY 1, 2038,19
342342 a qualified employee-owned business is allowed a credit with respect to20
343343 the income taxes imposed pursuant to this article 22 of up to fifty percent21
344344 of the expansion costs, not to exceed twenty-five thousand dollars,22
345345 incurred to expand a qualified employee-owned business's employee23
346346 ownership trust, employee stock ownership plan, worker-owned24
347347 cooperative, or alternate equity structure.25
348348 (III) F
349349 OR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY26
350350 1,
351351 2026, BUT BEFORE JANUARY 1, 2038, THE ALLOWABLE PERCENTAGE OF27
352352 HB25-1021
353353 -10- EXPANSION COSTS INCURRED BY A QUALIFIED EMPLOYEE -OWNED BUSINESS1
354354 TO EXPAND A QUALIFIED EMPLOYEE -OWNED BUSINESS AS SET FORTH IN2
355355 SUBSECTION (3)(a.5)(I) OF THIS SECTION FOR PURPOSES OF CALCULATING3
356356 THE CREDIT IS UP TO SEVENTY-FIVE PERCENT OF THE CONVERSION COSTS.4
357357 (a.7) S
358358 UBJECT TO CERTIFICATION BY THE OFFICE PURSUANT TO THIS5
359359 SECTION, FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY6
360360 1,
361361 2027, BUT PRIOR TO JANUARY 1, 2038, A QUALIFIED SUPPORT ENTITY IS7
362362 ALLOWED A CREDIT WITH RESPECT TO THE INCOME TAXES IMPOSED8
363363 PURSUANT TO THIS ARTICLE 22 OF UP TO SEVENTY-FIVE PERCENT OF THE9
364364 SUPPORT COSTS, BUT NOT TO EXCEED ONE HUNDRED SIXTY -SEVEN10
365365 THOUSAND DOLLARS, INCURRED IN PROVIDING SERVICES THAT SUPPORT11
366366 THE CONVERSION OR THE EXPANSION OF QUALIFIED BUSINESSES TO12
367367 QUALIFIED EMPLOYEE-OWNED BUSINESSES.13
368368 (b) (III) I
369369 N THE CASE OF A QUALIFIED SUPPORT ENTITY, THE CREDIT14
370370 IS ALLOWED TO THE QUALIFIED SUPPORT ENTITY .15
371371 (c) The maximum amount of all tax credit certificates that the16
372372 office may reserve under subsection (6)(a) of this section in any tax year
373373 17
374374 is ten million dollars. IS:18
375375 (I) T
376376 EN MILLION DOLLARS FOR ANY INCOME TAX YEAR19
377377 COMMENCING ON OR AFTER JANUARY 1, 2022, BUT BEFORE JANUARY 1,20
378378 2026;21
379379 (II) T
380380 HREE MILLION DOLLARS FOR ANY INCOME TAX YEAR22
381381 COMMENCING ON OR AFTER JANUARY 1, 2026, BUT BEFORE JANUARY 1,23
382382 2032;
383383 AND24
384384 (III) F
385385 OUR MILLION DOLLARS FOR ANY INCOME TAX YEAR25
386386 COMMENCING ON OR AFTER JANUARY 1, 2032, BUT BEFORE JANUARY 1,26
387387 2038.27
388388 HB25-1021
389389 -11- (d) (I) A qualified business or qualified employee-owned business1
390390 may apply for and claim only one tax credit for the conversion or2
391391 expansion costs incurred per tax year.3
392392 (II) A
393393 QUALIFIED SUPPORT ENTITY MAY APPLY FOR AND CLAIM4
394394 ONLY ONE TAX CREDIT PER TAX YEAR .5
395395 (4) (a) A business
396396 OR, WHERE APPLICABLE, A NONPROFIT6
397397 ORGANIZATION shall submit an application to the office for the issuance7
398398 of a credit certificate for the credit allowed in this section by the deadlines8
399399 established in the office's guidelines. E
400400 XCEPT AS OTHERWISE PROVIDED IN9
401401 SUBSECTION (4)(b) OF THIS SECTION, the application must include10
402402 information, as set forth in the office's guidelines, regarding the type of11
403403 conversion or expansion the business intends to undertake, a list of the12
404404 expected conversion or expansion costs, and an estimated amount, as13
405405 calculated by the business, of the expected conversion or expansion costs.14
406406 (b) A
407407 N APPLICATION FOR A NONPROFIT ORGANIZATION SUBMITTING15
408408 THE APPLICATION TO BE APPROVED AS A QUALIFIED SUPPORT ENTITY MUST16
409409 INCLUDE INFORMATION, AS SET FORTH IN THE OFFICE 'S GUIDELINES,17
410410 REGARDING THE SUPPORT SERVICES THE NONPROFIT ORGANIZATION18
411411 PROVIDES TO QUALIFIED BUSINESSES , WHETHER THE NONPROFIT19
412412 ORGANIZATION SUPPORTED A SUCCESSFUL CONVERSION OF A QUALIFIED20
413413 BUSINESS TO A QUALIFIED EMPLOYEE-OWNED BUSINESS IN THE TAXABLE21
414414 YEAR, IF THE NONPROFIT ORGANIZATION HAS NOT SUPPORTED A22
415415 SUCCESSFUL CONVERSION, THE NUMBER OF QUALIFIED BUSINESSES THE23
416416 NONPROFIT ORGANIZATION IS SUPPORTING THAT INTEND TO CONVERT OR24
417417 EXPAND TO QUALIFIED EMPLOYEE -OWNED BUSINESSES AND THE STATUS25
418418 OF THE ANTICIPATED CONVERSIONS OR EXPANSIONS , AND INFORMATION26
419419 REGARDING SUPPORT COSTS INCURRED IN THE INCOME TAX YEAR .27
420420 HB25-1021
421421 -12- (5) (a) The office shall develop guidelines for the administration1
422422 of this section, including, but not limited to:2
423423 (V) Detailed guidelines regarding expansion costs; and3
424424 (VI) Guidelines and standards for certifying a business as a4
425425 qualified employee-owned business;
426426 AND5
427427 (VII) G
428428 UIDELINES AND STANDARDS FOR CERTIFYING A NONPROFIT6
429429 ORGANIZATION AS A QUALIFIED SUPPORT ENTITY .7
430430 (6) (a) (I) After the office provides the written report required in8
431431 subsection (5)(b) of this section, a reservation of tax credits is permitted9
432432 for the tax credit allowed in this section. If the office determines that the10
433433 application filed under subsection (4) of this section is complete, the11
434434 office shall determine whether the business is a qualified business, or
435435 a12
436436 qualified employee-owned business,
437437 OR A QUALIFIED SUPPORT ENTITY,13
438438 review the list of the expected conversion or expansion costs, and review14
439439 the estimated conversion, or
440440 expansion, OR SUPPORT costs as calculated15
441441 by the business. If the office approves the business as a qualified16
442442 business, or a qualified employee-owned business, OR A QUALIFIED17
443443 SUPPORT ENTITY, the list of expected conversion or expansion costs, and18
444444 the estimated conversion, or expansion, OR SUPPORT costs, the office may19
445445 reserve for the benefit of the qualified business, the qualified20
446446 employee-owned business, or the owner of the business, OR THE21
447447 QUALIFIED SUPPORT ENTITY an allocation of a tax credit subject to the22
448448 limitation specified in subsection (3)(b) of this section. The office shall23
449449 notify the qualified business, or the qualified employee-owned business,24
450450 OR THE QUALIFIED SUPPORT ENTITY in writing of the amount of the25
451451 reservation. The reservation of a tax credit does not entitle the qualified26
452452 business, the qualified employee-owned business, or the owner of the27
453453 HB25-1021
454454 -13- business, OR THE QUALIFIED SUPPORT ENTITY to an issuance of a tax credit1
455455 certificate until the qualified business, or the qualified employee-owned2
456456 business,
457457 OR THE QUALIFIED SUPPORT ENTITY complies with all of the3
458458 other requirements specified in this section for the issuance of the tax4
459459 credit certificate.5
460460 (8) If the credit allowed under this section exceeds the income6
461461 taxes due on the income of the qualified business, qualified7
462462 employee-owned business, or
463463 owner of the business, OR QUALIFIED8
464464 SUPPORT ENTITY, the amount of the credit not used to offset income taxes9
465465 must be refunded to the qualified business, qualified employee-owned10
466466 business, or owner of the business, OR QUALIFIED SUPPORT ENTITY.11
467467 (10) (a) To claim the income tax credit allowed in this section, the12
468468 qualified business, qualified employee-owned business, or owner of the13
469469 business,
470470 OR QUALIFIED SUPPORT ENTITY shall attach a copy of the credit14
471471 certificate to its state income tax return. No tax credit is allowed under15
472472 this section unless the qualified business, qualified employee-owned16
473473 business, or
474474 owner of the business, OR QUALIFIED SUPPORT ENTITY17
475475 provides the copy of the credit certificate with its filed state income tax18
476476 return. The amount of the credit that the qualified business, or the19
477477 qualified employee-owned business,
478478 OR THE QUALIFIED SUPPORT ENTITY20
479479 may claim under this section is the amount stated on the tax credit21
480480 certificate.22
481481 (b) A
482482 QUALIFIED SUPPORT ENTITY THAT CLAIMS THE CREDIT23
483483 ALLOWED BY THIS SECTION SHALL FILE A RETURN PURSUANT TO SECTION24
484484 39-22-601 (7)(b)
485485 AND ATTACH A COPY OF THE CREDIT CERTIFICATE IN25
486486 ACCORDANCE WITH SUBSECTION (10)(a) OF THIS SECTION.26
487487 (11) The office shall, in a sufficiently timely manner to allow the27
488488 HB25-1021
489489 -14- department to process returns claiming the income tax credit allowed in1
490490 this section, provide the department with an electronic report of each2
491491 qualified business, qualified employee-owned business, and owner of a3
492492 business,
493493 AND QUALIFIED SUPPORT ENTITY that the office approved for the4
494494 income tax credit allowed in this section for the preceding calendar year5
495495 that includes the following information:6
496496 (14) This section is repealed, effective December 31, 2033
497497 7
498498 D
499499 ECEMBER 31, 2042.8
500500 SECTION 4. In Colorado Revised Statutes, 39-22-542.5, amend9
501501 (2)(d)(III) and (2)(f) as follows:10
502502 39-22-542.5. Tax credit for new employee-owned businesses11
503503 - employee ownership cash fund - tax preference performance12
504504 statement - legislative declaration - definitions - repeal.13
505505 (2) Definitions. As used in this section, unless the context otherwise14
506506 requires:15
507507 (d) "Employee-owned business" means a taxpayer that is subject16
508508 to tax under this article 22, including but not limited to a C corporation,17
509509 S corporation, limited liability company, partnership, limited liability18
510510 partnership, sole proprietorship, or other similar pass-through entity, that:19
511511 (III) Has its corporate headquarters located in this state. For20
512512 purposes of this subsection (2)(d), "corporate headquarters" means the21
513513 sole location within a regional or national area where
514514 THE MAJORITY OF22
515515 the taxpayer's staff members or employees are domiciled and employed,23
516516 and where the majority of the taxpayer's financial, personnel, legal,24
517517 planning, or other business functions are conducted on a regional or25
518518 national basis.26
519519 (f) "Employee ownership trust" means an indirect form of27
520520 HB25-1021
521521 -15- employee ownership in which a trust holds a controlling stake AT LEAST1
522522 TWENTY PERCENT OF THE FULLY DILUTED SECURITIES in a business and2
523523 benefits all employees on an equal basis and otherwise meets the3
524524 definition of an alternate equity structure.4
525525 SECTION 5. Act subject to petition - effective date. This act5
526526 takes effect at 12:01 a.m. on the day following the expiration of the6
527527 ninety-day period after final adjournment of the general assembly; except7
528528 that, if a referendum petition is filed pursuant to section 1 (3) of article V8
529529 of the state constitution against this act or an item, section, or part of this9
530530 act within such period, then the act, item, section, or part will not take10
531531 effect unless approved by the people at the general election to be held in11
532532 November 2026 and, in such case, will take effect on the date of the12
533533 official declaration of the vote thereon by the governor.13
534534 HB25-1021
535535 -16-