Modification of Certain Tax Expenditures

The bill adjusts several state tax expenditures as follows:

• Section 2 of the bill prohibits certain local use tax ordinances, resolutions, or proposals from applying to construction and building materials used by a common rail carrier pursuant to a contract with the state, a political subdivision of the state, or a special district allows the contracting government to use the carrier's property or tracks for the provision of public passenger rail service;
• Section 3 , for income tax years commencing on and after January 1, 2027, requires a taxpayer to add to the taxpayer's federal taxable income the excess of any gain excluded from federal gross income pursuant to section 1400Z-2 (a)(1)(A) of the internal revenue code over the gain invested by the taxpayer in a Colorado-qualified opportunity fund in a manner that qualifies for exclusion from federal gross income pursuant to the same section of the internal revenue code;
• Section 4 , for income tax years commencing on and after January 1, 2027, creates an income tax credit for certain individuals who are 65 years old or older in the income tax year, or who are a surviving spouse of that individual, and who were previously eligible to receive a grant for real property tax assistance and heat or fuel expenses assistance;

       

• Section 5 , for income tax years commencing on or after January 1, 2027, allows a combined group to elect to make a water's-edge filing election and describes what should be taken into account in such a filing;
• Section 6 , for income tax years commencing on or after January 1, 2027, repeals the state corporate income tax deduction for wages or salaries paid that are not allowed to be deducted at the federal level pursuant to section 280C of the internal revenue code;
• Section 6 , for income tax years commencing on or after January 1, 2027, also eliminates the ability of corporations to deduct from their income tax liability any amount included in federal taxable income pursuant to sections 951 (a) or 951A (a) of the internal revenue code with respect to a controlled foreign corporation incorporated in a foreign jurisdiction for the purpose of tax avoidance;

       

• Sections 7, 12, and 13 eliminate a potential reduction in the amount available for the innovative motor vehicle tax credit, the heat pump technology and thermal energy network tax credit, and the electric bicycle tax credit, respectively, based on an economic forecast by the office of state planning and budgeting or legislative council staff;
• Section 7 also increases the innovative motor vehicle tax credit from $1,000 to $2,000 for certain vehicles sold or leased during the 2027 income tax year, and from $500 to $1,000 for certain vehicles sold or leased during the 2028 income tax year. Currently, an additional $2,500 in tax credit is allowed for certain vehicles sold or leased on or after January 1, 2024, but prior to January 1, 2029, that have a manufacturer's suggested retail price (MSRP) below $35,000. Section 7 provides that certain vehicles with an MSRP below $40,000 that are sold or leased on or after January 1, 2027, but before January 1, 2029, are eligible for the additional tax credit.
• Section 8 , for income tax years commencing on or after January 1, 2027, modifies the income tax credit for wildfire hazard mitigation expenses by adding the thinning of woody vegetation that is at risk of mountain pine beetle or spruce beetle infestation or that has been killed by mountain pine beetles or spruce beetles to the definition of "wildfire mitigation measures", modifying the amount of the credit available, and allowing the credit to be carried forward for 5 years;
• Section 9 , for income tax years commencing on or after January 1, 2027, expands the income tax credit for the purchase of small food business recovery grant program equipment to be available for additional food distributors and producers, adjusts the amount of the tax credit that may be offered and claimed for the purchase of small food business recovery grant program equipment or participation in the supplemental food assistance benefit program, and dictates the order in which the department of agriculture shall award these tax credits;
• Sections 10 and 16 extend the electric powered lawn equipment tax credit until January 1, 2030, and allow a retailer to receive quarterly advance payments of the credit;
• Section 11 , for income tax years commencing on or after January 1, 2027, allows an entity not subject to income tax to be eligible for an income tax credit for developing a qualified industrial facility, allows a taxpayer to claim the credit for installing equipment used for utilization of biomethane, and requires the Colorado energy office (CEO) to review applications for the credit within 120, rather than 90, days;

       

• Section 11 also creates a new tax credit for geothermal energy projects for income tax years commencing on or after January 1, 2027. The amount of the credit cannot exceed $5 million per taxpayer aggregated across all income tax years for which the credit may be claimed. The total amount of credits cannot exceed $35 million across all income tax years commencing on or after January 1, 2027, but before January 1, 2033.
• Section 14 repeals the sustainable aviation fuel (SAF) production facility tax credit, effective January 1, 2027;
• Section 15 establishes the sustainable aviation fuel purchase income tax credit for income tax years beginning on or after January 1, 2027, and before December 31, 2032. The amount of the credit is initially $1.50, increased by $.01 for each whole percentage of carbon intensity reduction in excess of 50%, per gallon of SAF purchased in the state by the taxpayer, and the CEO may adjust that amount annually. The total amount of credits issued cannot exceed $3 million per tax year. Taxpayers must apply to the CEO for a tax credit certificate and CEO verifies eligibility and reports approved credits to the department of revenue. The credit is refundable but may not be carried forward.
• Section 17 repeals the precious metal and bullion coins sales and use tax exemption, effective January 1, 2027;
• Section 18 , for tax periods commencing on or after July 1, 2027, exempts from tax the storage, use, or consumption of construction and building materials by or on behalf of a common carrier by rail operating in interstate or foreign commerce when the storage, use, or consumption of the construction and building materials is pursuant to a contract with the state, a political subdivision of the state, or a special district that allows the contracting government to use the railroad's property or tracks for public passenger rail service;

       

• Section 19 reinstates the sales and use tax exemption for wood from salvaged trees killed or infested in Colorado by mountain pine beetles or spruce beetles, which would otherwise expire on June 30, 2026, for a period beginning on July 1, 2027, and ending June 30, 2032;
• Section 20 repeals the sales and use tax exemption for property used in space flight, effective January 1, 2027;
• Sections 21 and 22 change from 2% to 1% the allowance to cover losses in transit and in unloading gasoline or special fuel and repeals the 0.5% allowance for the costs of collecting the gasoline or special fuel excise tax and for uncollectible bad debts for tax periods beginning on or after January 1, 2027;
• Section 23 repeals the 3% deduction for collecting and remitting the tax on the inventory of cigarette wholesalers for tax periods beginning on or after January 1, 2027;
• Section 24 repeals the 0.4% discount on the face value of tax stamps affixed to packages containing cigarettes for tax periods beginning on or after January 1, 2027;
• Section 26 repeals the 1.6% discount for expenses in the collection and remittance of the tax on the sale, use, consumption, handling, and distribution of tobacco for tax periods beginning on or after January 1, 2027;
• Section 27 repeals the 1.1% discount for expenses in the collection and remittance of the nicotine product distributors tax for tax periods beginning on or after January 1, 2027;
• Section 28 allows an income tax credit to a taxpayer who places a new renewable energy investment in service on or after January 1, 2027, and provides a 14-year carryover of any amount of the credit not used to offset the income taxes otherwise due;
• Section 28 also eliminates the enterprise zone commercial vehicle tax credit for tax periods beginning on or after January 1, 2027;
• Section 29 provides that on or after January 1, 2027, a taxpayer with more than 50 employees during an income tax year is ineligible for the new enterprise zone business employee tax credit in that same income tax year;
• Section 30 requires, beginning January 1, 2027, a taxpayer to make at least $150,000 in expenditures in research and experimental activities to be eligible for the enterprise zone research and experimental activities tax credit;
• Section 31 modifies the enterprise zone vacant building rehabilitation income tax credit so that the credit only applies to buildings that have been unoccupied for 183 days preceding when the rehabilitation is placed in service and is available in an amount equal to 25% of the aggregate qualified expenditures per building or $200,000 per building, whichever is less;

       

• Section 32, beginning January 1, 2027, ends the availability of grants for real property tax assistance and heat or fuel expenses assistance; and

       

• Sections 33 through 39 make conforming amendments for the changes made in sections 4 and 32.(Note: This summary applies to this bill as introduced.)