Colorado 2025 Regular Session

Colorado Senate Bill SB138 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	First Regular Session
2	2	Seventy-fifth General Assembly
3	3	STATE OF COLORADO
4	4	INTRODUCED
5	5
6	6
7	7	LLS NO. 25-0757.01 Megan McCall x4215
8	8	SENATE BILL 25-138
9	9	Senate Committees House Committees
10	10	State, Veterans, & Military Affairs
11	11	A BILL FOR AN ACT
12	12	C
13	13	ONCERNING PERMANENT REDUCTIO NS TO STATE INCOME TAX . 101
14	14	Bill Summary
15	15	(Note: This summary applies to this bill as introduced and does
16	16	not reflect any amendments that may be subsequently adopted. If this bill
17	17	passes third reading in the house of introduction, a bill summary that
18	18	applies to the reengrossed version of this bill will be available at
19	19	http://leg.colorado.gov
20	20	.)
21	21	Under current law, the state income tax rate imposed on the
22	22	taxable income of individuals, estates, trusts, and corporations is 4.4%;
23	23	except that, for the income tax year commencing on January 1, 2024, the
24	24	income tax rate is 4.25% and for any income tax year commencing on or
25	25	after January 1, 2025, but before January 1, 2035, the income tax rate is
26	26	temporarily reduced if state revenue exceeded the limitation on state
27	27	fiscal year spending imposed by section 20 (7)(a) of article X of the state
28	28	constitution for the state fiscal year that ended during the income tax year.
29	29	SENATE SPONSORSHIP
30	30	Carson,
31	31	HOUSE SPONSORSHIP
32	32	(None),
33	33	Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
34	34	Capital letters or bold & italic numbers indicate new material to be added to existing law.
35	35	Dashes through the words or numbers indicate deletions from existing law. The extent to which the rate is temporarily reduced depends on the total
36	36	amount of excess state revenues remaining after homestead exemption
37	37	reimbursements and qualified-senior primary residence reimbursements
38	38	are paid.
39	39	The bill makes the 4.25% tax rate permanent beginning with the
40	40	income tax year commencing on January 1, 2025, makes any additional
41	41	temporarily reduced income tax rate permanent for subsequent income tax
42	42	years, and eliminates the state income tax on individuals, estates, and
43	43	trusts for income tax years commencing on or after January 1, 2035.
44	44	Be it enacted by the General Assembly of the State of Colorado:1
45	45	SECTION 1. In Colorado Revised Statutes, 39-22-104, amend2
46	46	(1.7)(c), (2), (3) introductory portion, and (4) introductory portion; and3
47	47	add (1.7)(d) and (6) as follows:4
48	48	39-22-104. Income tax imposed on individuals, estates, and5
49	49	trusts - single rate - report - tax preference performance statement6
50	50	- legislative declaration - definitions - repeal. (1.7) (c) (I) Except as7
51	51	otherwise provided in section 39-22-627, subject to subsection (2) of this8
52	52	section, with respect to taxable years commencing on or after January 1,9
53	53	2022,
54	54	BUT BEFORE JANUARY 1, 2025, a tax of four and forty10
55	55	one-hundredths percent is imposed on the federal taxable income, as11
56	56	determined pursuant to section 63 of the internal revenue code, of every12
57	57	individual, estate, and trust.13
58	58	(II) E
59	59	XCEPT AS OTHERWISE PROVIDED IN SECTION 39-22-627,14
60	60	SUBJECT TO SUBSECTION (2) OF THIS SECTION, WITH RESPECT TO TAXABLE15
61	61	YEARS COMMENCING ON OR AFTER JANUARY 1, 2025, BUT BEFORE16
62	62	J
63	63	ANUARY 1, 2035, A TAX OF FOUR AND TWENTY-FIVE ONE-HUNDREDTHS17
64	64	PERCENT IS IMPOSED ON THE FEDERAL TAXABLE INCOME , AS DETERMINED18
65	65	PURSUANT TO SECTION 63 OF THE INTERNAL REVENUE CODE , OF EVERY19
66	66	INDIVIDUAL, ESTATE, AND TRUST; EXCEPT THAT, IF THE TAX RATE HAS20
67	67	SB25-138-2- BEEN REDUCED FOR AN INCOME TAX YEAR PURSUANT TO SECTION1
68	68	39-22-627,
69	69	THE TAX RATE FOR EACH INCOME TAX YEAR THEREAFTER IS2
70	70	THE REDUCED RATE.3
71	71	(d) F
72	72	OR TAXABLE YEARS COMMENCING ON OR AFTER JANUARY 1,4
73	73	2035,
74	74	THE FEDERAL TAXABLE INCOME , AS DETERMINED PURSUANT TO5
75	75	SECTION 63 OF THE INTERNAL REVENUE CODE , OF EVERY INDIVIDUAL,6
76	76	ESTATE, AND TRUST IS NOT SUBJECT TO TAX BY THE STATE. ON OR AFTER7
77	77	J
78	78	ANUARY 1, 2035, FOR PURPOSES OF SECTION 20 (8)(a) OF ARTICLE X OF8
79	79	THE STATE CONSTITUTION, "TAXABLE NET INCOME" DOES NOT INCLUDE9
80	80	FEDERAL TAXABLE INCOME OF INDIVIDUALS , ESTATES, AND TRUSTS.10
81	81	(2) B
82	82	EFORE JANUARY 1, 2030, prior to the application of the rate11
83	83	of tax prescribed in subsection (1), (1.5), or (1.7) of this section, the12
84	84	federal taxable income shall be modified as provided in subsections (3)13
85	85	and (4) of this section.14
86	86	(3) B
87	87	EFORE JANUARY 1, 2035, there shall be added to the federal15
88	88	taxable income:16
89	89	(4) B
90	90	EFORE JANUARY 1, 2035, there shall be subtracted from17
91	91	federal taxable income:18
92	92	(6) N
93	93	OTWITHSTANDING ANY OTHER LAW , FOR TAXABLE YEARS19
94	94	COMMENCING ON OR AFTER JANUARY 1, 2035, NO INDIVIDUAL, ESTATE, OR20
95	95	TRUST IS ENTITLED TO CLAIM ANY INCOME TAX CREDITS. ANY UNCLAIMED21
96	96	INCOME TAX CREDITS OF AN INDIVIDUAL , ESTATE, OR TRUST THAT ARE22
97	97	SUBJECT TO A CARRY-FORWARD PERIOD EXPIRE ON DECEMBER 31, 2034.23
98	98	SECTION 2. In Colorado Revised Statutes, 39-22-301, amend24
99	99	(1)(d)(I)(K); and add (1)(d)(I)(L) as follows:25
100	100	39-22-301. Corporate tax imposed - repeal. (1) (d) (I) A tax is26
101	101	imposed upon each domestic C corporation, foreign C corporation, and27
102	102	SB25-138
103	103	-3- combined group, as defined in section 39-22-303 (12)(a.3), doing1
104	104	business in Colorado annually in an amount of the net income of such C2
105	105	corporation during the year derived from sources within Colorado as set3
106	106	forth in the following schedule of rates:4
107	107	(K) Except as otherwise provided in section 39-22-627, for5
108	108	income tax years commencing on or after January 1, 2022,
109	109	BUT BEFORE6
110	110	J
111	111	ANUARY 1, 2025, four and forty one-hundredths percent of the Colorado7
112	112	net income. T
113	113	HIS SUBSECTION (1)(d)(I)(K) IS REPEALED, EFFECTIVE8
114	114	D
115	115	ECEMBER 31, 2030.9
116	116	(L) E
117	117	XCEPT AS OTHERWISE PROVIDED IN SECTION 39-22-627, FOR10
118	118	INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY 1, 2025, FOUR11
119	119	AND TWENTY-FIVE ONE-HUNDREDTHS PERCENT OF THE COLORADO NET12
120	120	INCOME; EXCEPT THAT, IF THE TAX RATE HAS BEEN REDUCED FOR AN13
121	121	INCOME TAX YEAR PURSUANT TO SECTION 39-22-627, THE TAX RATE FOR14
122	122	EACH INCOME TAX YEAR THEREAFTER IS THE REDUCED RATE .15
123	123	SECTION 3. In Colorado Revised Statutes, 39-22-601, amend16
124	124	(1)(a)(I), (3) introductory portion, and (4); and add (11) as follows:17
125	125	39-22-601. Returns - repeal. (1) (a) (I) B
126	126	EFORE JANUARY 1,18
127	127	2035, whenever a resident individual or a nonresident individual with19
128	128	income from Colorado sources is required to file a federal income tax20
129	129	return under the provisions of section 6012 of the internal revenue code21
130	130	or whenever a resident individual or a nonresident individual has incurred22
131	131	any tax liability under any provision of this article
132	132	THIS ARTICLE 22, the23
133	133	individual shall make a return that
134	134	CONTAINS a written declaration that it24
135	135	is made under the penalty of perjury in the second degree. The return shall25
136	136	set forth, in such detail as the executive director shall prescribe by
137	137	RULE,26
138	138	the said individual's federal taxable income, the deductions,27
139	139	SB25-138
140	140	-4- modifications, exemptions, and credits required or allowed under this1
141	141	article ARTICLE 22, and any other information necessary to carry out the2
142	142	purposes of this article ARTICLE 22. For the purpose of this section, the3
143	143	residence of the individual taxpayer
144	144	IS the address supplied by the4
145	145	taxpayer to the department of revenue on the return.5
146	146	(3) B
147	147	EFORE JANUARY 1, 2035, every fiduciary, except a receiver6
148	148	appointed by authority of law in possession of part only of the property7
149	149	of an individual, shall make a return for any individuals, estates, or trusts8
150	150	for which he
151	151	THE INDIVIDUAL acts, which return MUST contain a9
152	152	declaration that it is made under the penalties of perjury in the second10
153	153	degree. Such return shall set forth, in such detail as the executive director11
154	154	shall prescribe by regulation, the federal taxable income and the12
155	155	deductions, modifications, exemptions, and credits required or allowed13
156	156	under this article ARTICLE 22 and any other information necessary to carry14
157	157	out the purposes of this article ARTICLE 22. The individuals, estates, or15
158	158	trusts for which a fiduciary acts are as follows:16
159	159	(4) B
160	160	EFORE JANUARY 1, 2035, every fiduciary of an estate or trust17
161	161	with a nonresident beneficiary which receives net income from real or18
162	162	tangible personal property within Colorado shall withhold and pay over19
163	163	to the executive director, out of the income to be distributed to such20
164	164	nonresident beneficiary, a tax upon the beneficiary's share of said income21
165	165	computed at the rate provided in section 39-22-104 unless the nonresident22
166	166	beneficiary files a timely return of his
167	167	THEIR total income from sources23
168	168	within Colorado, in which case the fiduciary shall withhold and pay over24
169	169	only the amount of tax disclosed by the beneficiary's return. The25
170	170	nonresident beneficiary, at his THEIR option within the time limited by this26
171	171	article ARTICLE 22, may file a return of his THEIR income and may claim27
172	172	SB25-138
173	173	-5- a refund for the amount of tax withheld in excess of the amount of tax due1
174	174	as shown by said return.2
175	175	(11) I
176	176	F A RESIDENT INDIVIDUAL, A NONRESIDENT INDIVIDUAL, AN3
177	177	ESTATE, A TRUST, OR A FIDUCIARY AS SET FORTH IN SUBSECTION (3) OF4
178	178	THIS SECTION IS REQUIRED TO OR HAS THE OPTION TO FILE A RETURN FOR5
179	179	A PURPOSE OTHER THAN REPORTING FEDERAL TAXABLE INCOME , THE6
180	180	EXECUTIVE DIRECTOR SHALL DEVELOP A FORM FOR THE RESIDENT7
181	181	INDIVIDUAL, NONRESIDENT INDIVIDUAL , ESTATE, TRUST, OR FIDUCIARY TO8
182	182	FILE INSTEAD FOR YEARS COMMENCING ON OR AFTER JANUARY 1, 2035.9
183	183	SECTION 4. In Colorado Revised Statutes, 39-22-627, amend10
184	184	(1)(a)(I) and (8); and repeal (1)(b)(II) and (11) as follows:11
185	185	39-22-627. Adjustment of rate of income tax - refund of excess12
186	186	state revenues - authority of executive director - definitions.13
187	187	(1) (a) (I) Subject to the provisions of this section, if, for any state fiscal14
188	188	year commencing on or after July 1, 2024, but before July 1, 2034, the15
189	189	amount of state revenues in excess of the limitation on state fiscal year16
190	190	spending imposed by section 20 (7)(a) of article X of the state17
191	191	constitution that are required to be refunded for such state fiscal year18
192	192	exceeds the amount specified in subsection (1)(b) of this section, the19
193	193	executive director shall temporarily
194	194	reduce the state income tax rate for20
195	195	the income tax year commencing during the calendar year in which the21
196	196	state fiscal year ended
197	197	AND FOR EACH SUCCEEDING INCOME TAX YEAR22
198	198	from its current percentage of the federal taxable income of every23
199	199	individual, estate, trust, and corporation, as specified in sections24
200	200	39-22-104 (1.7) and 39-22-301 (1)(d)(I), as a method to refund excess25
201	201	state revenues that are required to be refunded pursuant to section 2026
202	202	(7)(d) of article X of the state constitution. Except as otherwise provided
203	203	27
204	204	SB25-138
205	205	-6- in subsection (1)(b)(II) of this section, The state income tax rate for the1
206	206	income tax year commencing during the calendar year in which the state2
207	207	fiscal year ended is reduced, depending on the total amount of excess3
208	208	state revenues required to be refunded for a specified state fiscal year4
209	209	pursuant to section 20 (7)(d) of article X of the state constitution as5
210	210	determined by the annual certification of excess state revenues required6
211	211	by section 24-77-106.5 that exceed the amount of excess state revenues7
212	212	less the amount of reimbursement for property tax exemptions, by an8
213	213	applicable amount specified in subsection (1)(a)(II) of this section,9
214	214	subject to the annual adjustments required by subsection (1)(a)(III) of this10
215	215	section.11
216	216	(b) (II) For any state fiscal year commencing on or after July 1,12
217	217	2025, if the permanent state income tax rate then in effect is four and13
218	218	twenty-five one-hundredths percent or less of the federal taxable income14
219	219	of every individual, estate, trust, and corporation, any otherwise15
220	220	applicable temporary income tax rate reduction outlined in subsection16
221	221	(1)(a) of this section does not take effect; except that, if the amount of17
222	222	excess state revenues required to be refunded for the state fiscal year is18
223	223	equal to or greater than two billion dollars, the executive director shall19
224	224	temporarily reduce the state income tax rate to the extent necessary to20
225	225	refund all excess state revenues that would not otherwise be refunded by21
226	226	another method established by law other than the methods set forth in22
227	227	sections 39-22-2002 and 39-22-2003.23
228	228	(8) The general assembly finds and declares that a temporary state24
229	229	income tax rate reduction is a reasonable method of refunding a portion25
230	230	of the excess state revenues required to be refunded in accordance with26
231	231	section 20 (7)(d) of article X of the state constitution.27
232	232	SB25-138
233	233	-7- (11) This section is repealed, effective July 1, 2035.1
234	234	SECTION 5. Act subject to petition - effective date. This act2
235	235	takes effect at 12:01 a.m. on the day following the expiration of the3
236	236	ninety-day period after final adjournment of the general assembly; except4
237	237	that, if a referendum petition is filed pursuant to section 1 (3) of article V5
238	238	of the state constitution against this act or an item, section, or part of this6
239	239	act within such period, then the act, item, section, or part will not take7
240	240	effect unless approved by the people at the general election to be held in8
241	241	November 2026 and, in such case, will take effect on the date of the9
242	242	official declaration of the vote thereon by the governor.10
243	243	SB25-138
244	244	-8-