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Colorado Senate Bill SB040

Colorado 2025 Regular Session

Colorado Senate Bill SB040 Compare Versions

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11 First Regular Session
22 Seventy-fifth General Assembly
33 STATE OF COLORADO
4-REENGROSSED
5-This Version Includes All Amendments
6-Adopted in the House of Introduction
4+ENGROSSED
5+This Version Includes All Amendments Adopted
6+on Second Reading in the House of Introduction
77 LLS NO. 25-0165.01 Clare Haffner x6137
88 SENATE BILL 25-040
99 Senate Committees House Committees
1010 Agriculture & Natural Resources
1111 Appropriations
1212 A BILL FOR AN ACT
1313 C
1414 ONCERNING THE CREATION OF THE FUTURE OF SEVERANCE TAXES101
1515 AND WATER F UNDING TASK FORCE , AND, IN CONNECTION
1616 102
1717 THEREWITH, MAKING AN APPROPRIATION .103
1818 Bill Summary
1919 (Note: This summary applies to this bill as introduced and does
2020 not reflect any amendments that may be subsequently adopted. If this bill
2121 passes third reading in the house of introduction, a bill summary that
2222 applies to the reengrossed version of this bill will be available at
2323 http://leg.colorado.gov/
2424 .)
2525 Water Resources and Agriculture Review Committee. The bill
2626 creates the future of severance taxes and water funding task force (task
2727 force).
2828 The department of natural resources is required to contract with a
2929 third party to conduct a study on severance taxes and water funding and
3030 SENATE
31-3rd Reading Unamended
32-April 15, 2025
33-SENATE
3431 Amended 2nd Reading
3532 April 14, 2025
3633 SENATE SPONSORSHIP
37-Roberts and Simpson, Bridges, Marchman, Pelton B., Amabile, Pelton R.
34+Roberts and Simpson, Bridges, Marchman, Pelton B.
3835 HOUSE SPONSORSHIP
3936 McCormick and Martinez,
4037 Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
4138 Capital letters or bold & italic numbers indicate new material to be added to existing law.
4239 Dashes through the words or numbers indicate deletions from existing law. develop recommendations for ways to continue funding water needs in
4340 the face of decreasing severance tax revenue (study). The purpose of the
4441 task force is to work with the third party to conduct the study and develop
4542 recommendations.
4643 No later than January 15, 2026, the third party must submit a draft
4744 report, detailing the results of the study and any recommendations, to the
4845 department of natural resources and the task force for review. The task
4946 force is required to provide input on the draft report. No later than July
5047 15, 2026, the third party must submit a final report, which incorporates
5148 the input of the task force, to the water resources and agriculture review
5249 committee (committee). The task force must present the final report to the
5350 committee during the 2026 legislative interim.
5451 Be it enacted by the General Assembly of the State of Colorado:1
5552 SECTION 1. Legislative declaration. (1) The general assembly
5653 2
5754 finds and declares that:3
5855 (a) Severance taxes provide a source of revenue to the state and4
5956 the state's political subdivisions;5
6057 (b) A portion of revenues derived from severance taxes is used to6
6158 fund the development and conservation of the state's water resources;7
6259 (c) Another portion of revenues derived from severance taxes is8
6360 made available to local governments to offset the impact created by9
6461 nonrenewable resource development;10
6562 (d) The state also relies on severance tax revenue to fund staff11
6663 positions in the department of natural resources and the department of12
6764 local affairs;13
6865 (e) In times of need, the state has relied on severance tax revenue14
6966 to backfill the state budget, which depletes funding from programs that15
7067 would otherwise benefit local governments; and16
7168 (f) There is a need to study how the state can:17
7269 (I) Avoid using severance tax revenue to backfill the state budget18
7370 in the future;19
7471 040-2- (II) Begin to pay back the severance tax revenue previously used1
7572 to backfill the state budget; and2
7673 (III) Continue to fund water needs and grants to local3
7774 governments without relying on the revenues derived from severance4
7875 taxes.5
7976 SECTION 2. In Colorado Revised Statutes, add 37-98-106 as6
8077 follows:7
8178 37-98-106. Future of severance taxes and water funding task8
8279 force - created - membership - third party to conduct study - report9
8380 - definitions - repeal. (1) A
8481 S USED IN THIS SECTION, UNLESS THE10
8582 CONTEXT OTHERWISE REQUIRES :11
8683 (a) "C
8784 OMMITTEE" MEANS THE WATER RESOURCES AND12
8885 AGRICULTURE REVIEW COMMITTEE CREATED IN SECTION 37-98-10213
8986 (1)(a)(I).14
9087 (b) "T
9188 ASK FORCE" MEANS THE FUTURE OF SEVERANCE TAXES AND15
9289 WATER FUNDING TASK FORCE CREATED IN SUBSECTION (2) OF THIS16
9390 SECTION.17
9491 (c) "T
9592 HIRD PARTY" MEANS THE THIRD PARTY HIRED BY THE18
9693 DEPARTMENT OF NATURAL RESOURCES PURSUANT TO SUBSECTION (5)(a)19
9794 OF THIS SECTION.20
9895 (2) (a) T
9996 HE FUTURE OF SEVERANCE TAXES AND WATER FUNDING21
10097 TASK FORCE IS CREATED IN THE DEPARTMENT OF NATURAL RESOURCES .22
10198 (b) T
10299 HE TASK FORCE CONSISTS OF THE FOLLOWING MEMBERS :23
103100 (I) T
104101 HE EXECUTIVE DIRECTOR OF THE DEPARTMENT OF NATURAL24
105102 RESOURCES OR THE EXECUTIVE DIRECTOR 'S DESIGNEE;25
106103 (II) T
107104 HE DIRECTOR OF THE COLORADO WATER CONSERVATION26
108105 BOARD CREATED IN SECTION 37-60-102 OR THE DIRECTOR'S DESIGNEE;27
109106 040
110107 -3- (III) THE COMMISSIONER OF AGRICULTURE OR THE1
111108 COMMISSIONER'S DESIGNEE;2
112109 (IV) A
113110 REPRESENTATIVE OF AN ENVIRONMENTAL ADVOCACY3
114111 ORGANIZATION, APPOINTED BY THE SPEAKER OF THE HOUSE OF4
115112 REPRESENTATIVES;5
116113 (V) A
117114 REPRESENTATIVE OF THE OIL AND GAS INDUSTRY WITH6
118115 EXPERIENCE IN SEVERANCE TAX ISSUES , APPOINTED BY THE MINORITY7
119116 LEADER OF THE SENATE;8
120117 (VI) A
121118 REPRESENTATIVE OF A WATER CONSERVATION DISTRICT ,9
122119 APPOINTED BY THE PRESIDENT OF THE SENATE ;10
123120 (VII) A
124121 REPRESENTATIVE OF THE AGRICULTURE INDUSTRY WITH ,
125122 11
126123 TO THE EXTENT POSSIBLE , EXPERIENCE IN THE INTERSECTION OF12
127124 AGRICULTURE, WATER PROJECTS, AND THE OIL AND GAS INDUSTRY ,13
128125 APPOINTED BY THE MINORITY LEADER OF THE HOUSE OF14
129126 REPRESENTATIVES;15
130127 (VIII) A
131128 COUNTY COMMISSIONER FROM A COUNTY THAT CONTAINS16
132129 OIL AND GAS OPERATIONS, APPOINTED BY THE GOVERNOR; AND17
133130 (IX) A
134131 N ELECTED MUNICIPAL OFFICIAL OR CITY OR TOWN18
135132 MANAGER FROM A CITY , TOWN, OR CITY AND COUNTY THAT HAS BEEN
136133 19
137134 SOCIALLY OR ECONOMICALLY IMPACTED BY THE DEVELOPMENT ,20
138135 PROCESSING, OR ENERGY CONVERSION OF OIL AND GAS OPERATIONS21
139136 SUBJECT TO TAXATION UNDER ARTICLE 29 OF TITLE 39, APPOINTED BY THE22
140137 GOVERNOR.23
141138 (3) T
142139 HE PURPOSE OF THE TASK FORCE IS TO CONSULT AND24
143140 COORDINATE WITH THE THIRD PARTY IN THE DEVELOPMENT OF A STUDY25
144141 REGARDING THE FUTURE OF SEVERANCE TAXES AND WATER FUNDING IN26
145142 THE STATE.27
146143 040
147144 -4- (4) (a) NO LATER THAN SEPTEMBER 1, 2025, THE APPOINTING1
148145 AUTHORITIES SHALL MAKE APPOINTMENTS TO THE TASK FORCE .2
149146 (b) T
150147 HE DEPARTMENT OF NATURAL RESOURCES SHALL PROVIDE3
151148 STAFF AND OTHER RESOURCES TO SUPPORT THE WORK OF THE TASK FORCE .4
152149 (c) T
153150 HE TASK FORCE SHALL CONDUCT MEETINGS AS NECESSARY TO5
154151 PERFORM ITS DUTIES PURSUANT TO THIS SECTION. EVERY MEETING OF THE
155152 6
156153 TASK FORCE MUST BE OPEN TO THE PUBLIC AND INCLUDE AN OPPORTUNITY7
157154 FOR PUBLIC TESTIMONY.8
158155 (d) T
159156 HE MEMBERS OF THE TASK FORCE SERVE WITHOUT9
160157 COMPENSATION BUT MAY BE REIMBURSED FOR ANY REASONABLE10
161158 EXPENSES INCURRED IN THE PERFORMANCE OF THE DUTIES REQUIRED11
162159 UNDER THIS SECTION.12
163160 (5) (a) T
164161 HE DEPARTMENT OF NATURAL RESOURCES SHALL13
165162 CONTRACT WITH A THIRD PARTY TO CONDUCT A FUTURE OF SEVERANCE14
166163 TAXES AND WATER FUNDING STUDY . THE PURPOSE OF THE STUDY IS TO15
167164 EXPLORE WAYS TO CONTINUE FUNDING WATER NEEDS AND ENERGY
168165 16
169166 IMPACT GRANTS DISTRIBUTED PURSUANT TO SECTION 39-29-110 (1)(b)(I)17
170167 IN THE FACE OF THE DECREASING AVAILABILITY OF SEVERANCE TAX18
171168 REVENUE COLLECTED PURSUANT TO ARTICLE 29 OF TITLE 39 AND TO19
172169 DEVELOP RELATED RECOMMENDATIONS . THE STUDY MUST FOCUS ON20
173170 IDENTIFYING WAYS TO ALLEVIATE THE NEED TO TRANSFER REVENUES21
174171 DERIVED FROM SEVERANCE TAXES TO THE GENERAL FUND AND TO22
175172 REPLACE SEVERANCE TAX REVENUE THAT WAS PREVIOUSLY23
176173 TRANSFERRED.24
177174 (b) N
178175 O LATER THAN JANUARY 15, 2026, THE THIRD PARTY SHALL25
179176 SUBMIT A DRAFT REPORT TO THE DEPARTMENT OF NATURAL RESOURCES26
180177 AND THE TASK FORCE DESCRIBING THE STUDY 'S FINDINGS AND ANY27
181178 040
182179 -5- RECOMMENDATIONS . THE TASK FORCE SHALL REVIEW AND PROVIDE INPUT1
183180 ON THE DRAFT REPORT.2
184181 (c) N
185182 O LATER THAN JULY 15, 2026, THE THIRD PARTY SHALL:3
186183 (I) I
187184 N CONSULTATION WITH THE DEPARTMENT OF NATURAL4
188185 RESOURCES AND THE TASK FORCE , CREATE A FINAL REPORT THAT5
189186 INCORPORATES THE TASK FORCE'S INPUT REGARDING THE DRAFT REPORT;6
190187 AND7
191188 (II) S
192189 UBMIT THE FINAL REPORT TO THE COMMITTEE .8
193190 (d) F
194191 OLLOWING THE SUBMISSION OF THE REPORT TO THE9
195192 COMMITTEE, THE TASK FORCE SHALL PRESENT A SUMMARY OF THE REPORT10
196193 TO THE COMMITTEE DURING THE 2026 LEGISLATIVE INTERIM.11
197194 (6) T
198195 HE TASK FORCE SHALL BE FUNDED SOLELY WITH MONEY FROM
199196 12
200197 THE SEVERANCE TAX PERPETUAL BASE FUND CREATED IN SECTION13
201198 39-29-109 (2)(a)(I.5).14
202199 (7) THIS SECTION IS REPEALED, EFFECTIVE DECEMBER 31, 2026.15
203200 SECTION 3. In Colorado Revised Statutes, 39-29-105, amend16
204201 (2)(b)(II) and (2)(d) introductory portion; and repeal (2)(c) as follows:17
205202 39-29-105. Tax on severance of oil and gas.18
206203 (2) (b) (II) (A) With respect to oil and gas there is allowed, as a credit19
207204 against the tax computed in accordance with the provisions of subsection20
208205 (1)(b) of this section for each taxable year commencing on or after21
209206 January 1, 2024, but prior to January 1, 2026 2027, an amount equal to22
210207 seventy-five percent of all ad valorem taxes assessed during the taxable23
211208 year in the case of accrual basis taxpayers or paid during the taxable year24
212209 in the case of cash basis taxpayers upon oil and gas leaseholds and25
213210 leasehold interests and oil and gas royalties and royalty interests for state,26
214211 county, municipal, school district, and special district purposes, except27
215212 040
216213 -6- such ad valorem taxes assessed or paid for such purposes upon equipment1
217214 and facilities used in the drilling for, production of, storage of, and2
218215 pipeline transportation of oil and gas.3
219216 (B) W
220217 ITH RESPECT TO OIL AND GAS THERE IS ALLOWED , AS A
221218 4
222219 CREDIT AGAINST THE TAX COMPUTED IN ACCORDANCE WITH SUBSECTION5
223220 (1)(b)
224221 OF THIS SECTION FOR EACH TAXABLE YEAR COMMENCING ON OR
225222 6
226223 AFTER JANUARY 1, 2027, BUT PRIOR TO JANUARY 1, 2028, AN AMOUNT7
227224 EQUAL TO EIGHTY-SEVEN AND FIVE-TENTHS PERCENT OF ALL AD VALOREM8
228225 TAXES ASSESSED DURING THE TAXABLE YEAR IN THE CASE OF ACCRUAL9
229226 BASIS TAXPAYERS OR PAID DURING THE TAXABLE YEAR IN THE CASE OF10
230227 CASH BASIS TAXPAYERS UPON OIL AND GAS LEASEHOLDS AND LEASEHOLD11
231228 INTERESTS AND OIL AND GAS ROYALTIES AND ROYALTY INTERESTS FOR12
232229 STATE, COUNTY, MUNICIPAL, SCHOOL DISTRICT, AND SPECIAL DISTRICT13
233230 PURPOSES, EXCEPT SUCH AD VALOREM TAXES ASSESSED OR PAID FOR SUCH14
234231 PURPOSES UPON EQUIPMENT AND FACILITIES USED IN THE DRILLING FOR ,15
235232 PRODUCTION OF, STORAGE OF, AND PIPELINE TRANSPORTATION OF OIL AND16
236233 GAS.17
237234 (c) For a taxable year beginning on or after January 1, 2026, but18
238235 before January 1, 2027, for each well that is not exempt from the state19
239236 severance tax pursuant to subsection (1)(b) of this section, there is20
240237 allowed a credit against the tax computed in accordance with the21
241238 provisions of subsection (1)(b) of this section in an amount calculated by22
242239 the formula C = 0.65625 x GI x ML, where:23
243240 (I) C is the amount of the credit;24
244241 (II) GI is the gross income attributable to the well for the current25
245242 taxable year; and26
246243 (III) ML is the total of all mill levies, fixed not later than27
247244 040
248245 -7- December 22 of the preceding calendar year pursuant to section 39-1-111,1
249246 by all local governments for property at the well's location.2
250247 (d) For a taxable year beginning on or after January 1, 2027 2028,3
251248 for each well that is not exempt from the state severance tax pursuant to4
252249 subsection (1)(b) of this section, there is allowed a credit against the tax5
253250 computed in accordance with subsection (1)(b) of this section in an6
254251 amount calculated by the formula C = 0.7656 x GI x ML, where:7
255252 SECTION 4. In Colorado Revised Statutes, 39-29-108, amend8
256253 (2)(e)(I) and (2)(e)(III)(B) as follows:9
257254 39-29-108. Allocation of severance tax revenues - definitions10
258255 - repeal. (2) (e) (I) Except as provided in subsection (2)(e)(II) of this11
259256 section, for the state fiscal years 2023-24 through 2026-27, the state12
260257 treasurer shall credit the discrete increased amount of severance tax for13
261258 oil and gas production that is attributable to the reduction of the credit14
262259 against tax pursuant to section 39-29-105 (2)(b)(II) and 39-29-105 (2)(c)15
263260 to the decarbonization tax credits administration cash fund created in16
264261 section 24-38.5-120 (2).17
265262 (III) As used in this subsection (2)(e), unless the context otherwise18
266263 requires:19
267264 (B) "Discrete increased amount of severance tax for oil and gas20
268265 production" means the amount of tax collected that is attributable to a21
269266 twelve and one-half percent reduction in the severance tax credit for oil22
270267 and gas production set forth in section 39-29-105 (2)(b)(II) for tax years23
271268 beginning on or after January 1, 2024, but before January 1, 2026. and a24
272269 ten and nine hundred thirty-five thousandths percent reduction set forth25
273270 in section 39-29-105 (2)(c) for tax years beginning on or after January 1,26
274271 2026, but before January 1, 2027.27
275272 040
276273 -8- SECTION 5. Appropriation. (1) For the 2025-26 state fiscal1
277274 year, $198,592 is appropriated to the department of natural resources for2
278275 use by the executive director's office. This appropriation is from the3
279276 severance tax operational fund created in section 39-29-109 (2)(b)(I),4
280277 C.R.S. To implement this act, the office may use this appropriation as5
281278 follows:6
282279 (a) $192,566 for personal services; and7
283280 (b) $6,026 for operating expenses.8
284281 (2) Any money appropriated in subsection (1) of this section not9
285282 expended prior to July 1, 2026, is further appropriated to the department10
286283 through December 31, 2026 for the same purpose.11
287284 SECTION 6. Act subject to petition - effective date. This act12
288285 takes effect at 12:01 a.m. on the day following the expiration of the13
289286 ninety-day period after final adjournment of the general assembly; except14
290287 that, if a referendum petition is filed pursuant to section 1 (3) of article V15
291288 of the state constitution against this act or an item, section, or part of this16
292289 act within such period, then the act, item, section, or part will not take17
293290 effect unless approved by the people at the general election to be held in18
294291 November 2026 and, in such case, will take effect on the date of the19
295292 official declaration of the vote thereon by the governor.20
296293 040
297294 -9-