Signed by Governor Jared Polis

Vote Smart's Synopsis:

Vote to amend and pass a bill that requires taxpayers with gross incomes of $400,000 or more to add back certain itemized deductions, including charitable giving if they exceed $30,000 for a single filer or $60,000 for joint filers.

Highlights:

• Defines "office" as the Colorado Office of Economic Development (Sec. 9-2.a).

• Alleges purposes of this act are the following (Sec. 1.b):

• To conform Colorado's tax code with provisions commonly used in other states, so that Colorado is less of an outlier around the country in how taxpayers compute their taxes owed;

• To reduce tax avoidance by updating provisions of Colorado's tax code concerning certain business structures; and

• To adjust the availability of certain tax expenditures so that the availability and extent of tax expenditures are more fairly distributed across all taxpayers.

• Establishes a resident individual who claims an earned income tax credit on the individual's federal tax return is allowed an earned income tax credit against the taxes due under this article 22 that is equal to 20% of the federal credit that the resident individual claimed on his or her federal tax return for the same tax year (Sec. 4).

• Specifies for a resident individual who files a single return, the amount of the credit is equal to (Sec. 5.b.I):

• 30% of the federal child tax credit that the resident individual could have claimed on their federal tax return for each eligible child if the individual's federal adjusted gross income is $25,000 or less;

• 15% of the federal child tax credit that the resident individual could have claimed on their federal tax return for each eligible child if the individual's federal adjusted gross income is greater than $25,000 but less than or equal to $50,000; and

• 5% of the federal child tax credit that the resident individual could have claimed on their federal tax return for each eligible child if the individual's federal adjusted gross income is greater than $50,000 but less than or equal to $75,000.

• Specifies for income tax years commencing on or after January 1, 2022, in the case of a c corporation that is not incorporated in the united states, or included in a consolidated federal corporate income tax return, "federal taxable income" means the c corporation's income or loss as determined from a profit and loss statement prepared for that c corporation on a separate entity basis in the currency in which its books of account are regularly maintained, provided this profit and loss statement is subject to an independent audit, adjusted to conform to the accounting principles generally accepted in the united states for the preparation of such statements and further modified to take into account any book-tax adjustments necessary to reflect federal and state tax law (Sec. 7.b.I).

• Requires the office to develop guidelines for the administration of this section, including, but not limited to (Sec. 9-5.a):

• Application requirements, including a list of the data the office needs to meet the requirements;

• Guidelines regarding the issuing of credit certificates;

• Detailed guidelines regarding conversion costs; and

• Guidelines and standards for certifying a business as a qualified business.

• Requires the office to maintain a database of any information necessary to evaluate the effectiveness of the tax credit allowed in this law in meeting the purposes of this law, and to provide the information, and any other information that may be needed, to the state auditor as part of the state auditor's evaluation of tax expenditures (Sec. 9-12).

Full Bill Text

Vote Smart's Synopsis:

Vote to pass a bill that requires taxpayers with gross incomes of $400,000 or more to add back certain itemized deductions, including charitable giving if they exceed $30,000 for a single filer or $60,000 for joint filers.

Highlights:

• Defines "office" as the Colorado Office of Economic Development (Sec. 9-2.a).

• Alleges purposes of this act are the following (Sec. 1.b):

• To conform Colorado's tax code with provisions commonly used in other states, so that Colorado is less of an outlier around the country in how taxpayers compute their taxes owed;

• To reduce tax avoidance by updating provisions of Colorado's tax code concerning certain business structures; and

• To adjust the availability of certain tax expenditures so that the availability and extent of tax expenditures are more fairly distributed across all taxpayers.

• Establishes a resident individual who claims an earned income tax credit on the individual's federal tax return is allowed an earned income tax credit against the taxes due under this article 22 that is equal to 20% of the federal credit that the resident individual claimed on his or her federal tax return for the same tax year (Sec. 4).

• Specifies for a resident individual who files a single return, the amount of the credit is equal to (Sec. 5.b.I):

• 30% of the federal child tax credit that the resident individual could have claimed on their federal tax return for each eligible child if the individual's federal adjusted gross income is $25,000 or less;

• 15% of the federal child tax credit that the resident individual could have claimed on their federal tax return for each eligible child if the individual's federal adjusted gross income is greater than $25,000 but less than or equal to $50,000; and

• 5% of the federal child tax credit that the resident individual could have claimed on their federal tax return for each eligible child if the individual's federal adjusted gross income is greater than $50,000 but less than or equal to $75,000.

• Specifies for income tax years commencing on or after January 1, 2022, in the case of a c corporation that is not incorporated in the united states, or included in a consolidated federal corporate income tax return, "federal taxable income" means the c corporation's income or loss as determined from a profit and loss statement prepared for that c corporation on a separate entity basis in the currency in which its books of account are regularly maintained, provided this profit and loss statement is subject to an independent audit, adjusted to conform to the accounting principles generally accepted in the united states for the preparation of such statements and further modified to take into account any book-tax adjustments necessary to reflect federal and state tax law (Sec. 7.b.I).

• Requires the office to develop guidelines for the administration of this section, including, but not limited to (Sec. 9-5.a):

• Application requirements, including a list of the data the office needs to meet the requirements;

• Guidelines regarding the issuing of credit certificates;

• Detailed guidelines regarding conversion costs; and

• Guidelines and standards for certifying a business as a qualified business.

• Requires the office to maintain a database of any information necessary to evaluate the effectiveness of the tax credit allowed in this law in meeting the purposes of this law, and to provide the information, and any other information that may be needed, to the state auditor as part of the state auditor's evaluation of tax expenditures (Sec. 9-12).

Full Bill Text