HB 25-1311
Fiscal Note
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
HB 25-1311: DEDUCTIONS FOR NET SPORTS BETTING PROCEEDS
Prime Sponsors:
Rep. McCluskie; Soper
Sen. Roberts
Published for: House Appropriations
Drafting number: LLS 25-0884
Fiscal Analyst:
Amanda Liddle, 303-866-5834
amanda.liddle@coleg.gov
Version: First Revised Note
Date: April 23, 2025
Fiscal note status: This revised fiscal note reflects the introduced bill, as amended by the House Finance
Committee.
Summary Information
Overview. For purposes of the sports betting tax, the bill reduces the deduction for free bets placed by
players to 1 percent on September 1, 2025, and ends the deduction on July 1, 2026.
Types of impacts. The bill is projected to affect the following areas on an ongoing basis:
State Revenue State Expenditures
Appropriations. The bill requires appropriations of $7,734 for the current FY 2024-25, and $9,401 for
FY 2025-26 to the Department of Revenue.
Table 1
State Fiscal Impacts
Type of Impact
Current Year
FY 2024-25
Budget Year
FY 2025-26
Out Year
FY 2026-27
Out Year
FY 2027-28
State Revenue $0 $5.7 million $12.9 million $11.5 million
State Expenditures $7,734 $9,401 $0 $0
Transferred Funds $0 $0 $5.7 million $12.9 million
Change in TABOR Refunds $0 $0 $0 $0
Change in State FTE 0.0 FTE 0.0 FTE 0.0 FTE 0.0 FTE Page 2
April 23, 2025 HB 25-1311
Table 1A
State Revenue
Fund Source
Current Year
FY 2024-25
Budget Year
FY 2025-26
Out Year
FY 2026-27
Out Year FY
2027-28
General Fund $0 $0 $0 $0
Cash Funds (Sports Betting Fund) $0 $5.7 million $12.9 million $11.5 million
Total Revenue $0 $5.7 million $12.9 million $11.5 million
Table 1B
State Transfers
Fund Source
Current Year
FY 2024-25
Budget Year
FY 2025-26
Out Year
FY 2026-27
Out Year
FY 2027-28
Sports Betting Fund $0 $0 -$5.7 million -$12.9 million
Water Plan Implementation CF $0 $0 $5.7 million $12.9 million
Net Transfer $0 $0 $0 $0
Table 1C
State Expenditures
1
Fund Source
Current Year
FY 2024-25
Budget Year
FY 2025-26
Out Year
FY 2026-27
Out Year
FY 2027-28
General Fund $0 $0 $0 $0
Cash Funds (Sports Betting Fund) $7,734 $9,401 $0 $0
Federal Funds $0 $0 $0 $0
Centrally Appropriated $0 $0 $0 $0
Total Expenditures $7,734 $9,401 $0 $0
Total FTE 0.0 FTE 0.0 FTE 0.0 FTE 0.0 FTE
1
Expenditures from the Water Plan Implementation Cash Fund are expected to increase beginning in
FY 2027-28 to use additional sports betting revenue on water projects. It is assumed the amount and
timing of future spending on water projects will be addressed through the annual budget process.
Summary of Legislation
Under current law, sports betting operators are allowed to deduct free bets placed by players
when calculating their net sports betting proceeds, the amount on which the sports betting tax
is assessed. The amount of free bets that may be deducted is capped under current law at:
2.25 percent of all bets during FY 2024-25;
2.00 percent of all bets during FY 2025-26; and
1.75 percent of all bets beginning in FY 2026-27. Page 3
April 23, 2025 HB 25-1311
On September 1, 2025, the bill reduces the deduction for free bets placed by players to
1 percent of all bets. Beginning in FY 2026-27, the bill ends the deduction for free bets placed by
players.
Background
Under current law, a 10 percent tax is imposed on the net sports betting proceeds of sports
betting operators. When calculating net sports betting proceeds, a sports betting operator may
deduct all payments to players, all federal excise taxes paid, and a certain percentage of free
bets placed by players from gross gaming revenue. House Bill 22-1402 established the
percentage of free bets that may be deducted when calculating net sports betting proceeds.
Prior to HB 22-1402, sports betting operators could deduct all free bets placed.
Sports betting tax revenue is exempt from TABOR and is distributed as follows after paying for
administrative costs:
6 percent of the first $29 million in sports betting revenue to the Wagering Recipients’ Hold
Harmless Fund; and
the remaining revenue to the Water Plan Implementation Cash Fund.
Sports betting revenue allocated to the Water Plan Implementation Cash Fund is annually
appropriated to the Colorado Water Conservation Board (CWCB) within the Department of
Natural Resources (DNR) through the annual CWCB Projects Bill. The CWCB uses the
appropriation for water project grants, and any unspent appropriations remain in the Water Plan
Implementation Cash Fund for future use. Through FY 2023-24, the CWCB had issued over
470 grants.
State Revenue
The bill increases revenue to the Sports Betting Fund by an estimated $5.7 million in FY 2025-26,
$12.9 million in FY 2026-27, and $11.5 million in FY 2027-28 with comparable amounts in future
years, as shown in Table 2.
Estimates are based on actual sports betting data from the Department of Revenue and the
March 2025 LCS Forecast. Based on an analysis of free bets placed in Colorado following the
passage of HB 22-1402 and other states’ sports betting wagers data, the fiscal note assumes
that the bill will result in less free bets offered by sports betting operators leading to a
corresponding decrease in wagers. In the second year of implementation of the end of the free
bet deduction (FY 2027-28), the increase in tax revenue is partially offset by a decrease in wagers
from individuals who would have only started or continued sports betting as a direct result of
free bets. If the bill does not result in a reduction of free bets offered, sports betting revenue
would increase by a greater amount than estimated in the fiscal note.
Page 4
April 23, 2025 HB 25-1311
Table 2
Sports Betting Tax Revenue Forecast Comparison
Fund Source
Budget Year
FY 2025-26
Out Year
FY 2026-27
Out Year
FY 2027-28
Current Law $36,692,748 $39,084,865 $41,378,125
HB 25-1311 $42,346,977 $52,013,946 $52,904,793
Impact of HB 25-1311 $5,654,229 $12,929,081 $11,526,668
State Transfers
On September 30 of each year, revenue to the Sports Betting Fund received in the prior year is
transferred to the Water Plan Implementation Cash Fund, after accounting for administrative
costs and the transfers to the Wagering Recipients’ Hold Harmless Fund. Based on the projected
increase in revenue, it is estimated that $5.7 million in FY 2026-27, $12.9 million in FY 2027-28,
$11.5 million in FY 2028-29, and similar amounts in future years, will be transferred to the Water
Plan Implementation Cash Fund.
State Expenditures
The bill increases state expenditures in the Department of Revenue by $7,734 in the current
FY 2024-25 and $9,401 in FY 2025-26, paid from the Sports Betting Fund. It also increases
available funding for water projects and related administrative costs starting in FY 2026-27.
These impacts are described below.
Department of Revenue
This bill requires expenditures of $7,734 in FY 2024-25 and $9,901 in FY 2025-26 to program,
test, and update database fields in the GenTax software system.
The programming to reduce the free bet deduction must begin in the current FY 2024-25 to be
completed in time before the September 1, 2025, implementation date. Programming costs are
estimated at $6,953, representing 30 hours of contract programming at a rate of $231.75 per
hour. Costs for testing at the department include $525 for 15 hours of innovation, strategy, and
delivery programming support at a rate of $35 per hour, and $258 for 8 hours of user
acceptance testing at a rate of $32 per hour.
The programming to end the free bet deduction for FY 2026-27 and beyond will occur in
FY 2025-26. Programming costs are estimated at $6,953, representing 30 hours of contract
programming at a rate of $231.75 per hour. Costs for testing at the department include $2,680
for 48 hours of innovation, strategy, and delivery programming support at a rate of $35 per
hour, and $768 for 24 hours of user acceptance testing at a rate of $32 per hour. Page 5
April 23, 2025 HB 25-1311
Department of Natural Resources
The bill increases sports betting revenue allocated to the Water Plan Implementation Cash Fund.
However, the fiscal note assumes that increased revenue to the fund will be annually
appropriated to the CWCB in DNR through the annual budget process and annual water
projects bill, rather than in this bill, based on available projects and spending decisions by the
General Assembly and CWCB. However, for informational purposes, a preliminary estimate of
the costs to distribute grants using the anticipated revenue is provided below.
Grant Administration
Assuming around $11 million in additional grants is issued each year using the increased
revenue under the bill, the CWCB is estimated to require an additional 6.5 FTE to administer
additional grants, beginning in FY 2026-27 and ramping up to the full amount in FY 2027-28. In
additional to salary and operating costs, the CWCB will also have travel expenses and software
licensing for the additional grant managers as shown in Table 3 below. This estimate assumes an
additional 55 grants per year, with an average contract length of five years. These expenditures
would be paid from the cash fund and reappropriated funds and requested through the annual
budget process.
Table 3
Potential Expenditures in the Department of Natural Resources
Cost Component
Current Year
FY 2024-25
Budget Year
FY 2025-26
Out Year
FY 2026-27
Out Year
FY 2027-28
CWCB Staff $0 $0 $229,671 $612,043
DNR Executive Director’s Office Staff $0 $0 $0 $141,908
CWCB Travel Expenses $0 $0 $17,016 $25,524
CWCB Software Licensing $0 $0 $1,200 $1,800
Total Costs $0 $0 $247,887 $781,275
Total FTE $0 $0 1.7 FTE 6.5 FTE
Effective Date
The bill takes effect 90 days following adjournment of the General Assembly sine die, assuming
no referendum petition is filed.
State Appropriations
For FY 2024-25 the bill requires an appropriation of $7,734 from the Sports Betting Fund to the
Department of Revenue. For FY 2025-26 the bill requires an appropriation of $9,401 from the
Sports Betting Fund to the Department of Revenue.
Page 6
April 23, 2025 HB 25-1311
State and Local Government Contacts
Natural Resources 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 the General Assembly website.