Colorado recently kicked off an extraordinary legislative session aimed at closing a projected $1.2 billion budget gap for fiscal year 2026 caused by the federal One, Big, Beautiful Bill Act. Several tax bills are among those that will be considered.
One of the bills offers a tax-savings opportunity for careful planners. House Bill 25B-1004 would allow taxpayers to prepay insurance premium and corporate taxes by buying tax credits for use in future years. The bill authorizes the State Treasurer to issue up to $125 million in credits.
Credits may be purchased by authorized companies with corresponding tax liabilities. The Treasurer may work with an independent third party to develop an application and potentially a bidding process for the credits. Under the bill’s current language, eligible companies would apply to purchase credits by making an irrevocable offer at a specified percentage of the face value of the tax credits. By default, tax credits would be available for purchase at 75% of their face value. That amount may be modified after consultation with taxpayers and in accordance with market conditions as of the offer date. Failure to pay for awarded credits may incur penalties.
Credits issued in fiscal year 2025-26 could then be used to offset insurance premium or corporate tax liabilities for any tax years beginning before January 1, 2034. Unused credits expire and would not be refundable. Credits cannot be sold under the current proposal but can be transferred as a result of a merger, acquisition, or line of business divestiture transaction. Credits can also be transferred to another eligible company if a taxpayer selected to purchase credits fails to pay for them within the specified time determined by the Treasurer.
Other tax bills to be considered are largely aimed at eliminating exemptions and deductions. One bill would expand Colorado’s list of tax haven countries, requiring income from subsidiaries in those countries to be added back to the parent corporation’s Colorado return. Amounts deducted as foreign derived deduction eligible income (FDDEI) would also be added back to taxable income. Another proposal would require amounts deducted for qualified business income to be added back to state taxable income. The sales tax vendor fee may also be eliminated, which currently allows retailers to retain 4% of state sales tax collected, up to a maximum of $1,000 per period.
Ryan is monitoring the extraordinary legislative session, and our experts will be ready to assist taxpayers dealing with the changes that are ultimately enacted. Savvy taxpayers and their consultants will need to act quickly to account for these changes and take advantage of any savings opportunities that arise.
TECHNICAL INFORMATION CONTACTS:
Susan Bittick
Principal
Ryan
916.414.0400
susan.bittick@ryan.com
Jonathan Geiger
Manager
Ryan
425.428.4686
jonathan.geiger@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.