House Bill 25-1021 Preamended

A Bill for an Act

• Page 1, Line 101Concerning tax incentives for businesses that transition to

• Page 1, Line 102employee-owned businesses in whole or in part.

Bill Summary

(Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://leg.colorado.gov.)

The bill creates 2 income tax subtractions for income tax years commencing on or after January 1, 2027, but before January 1, 2038. The first subtraction is for an amount equal to state capital gains that are realized by a taxpayer during the taxable year for the conversion by an increment of at least 20% ownership to a qualified employee-owned business of a qualified business. The taxpayers that are eligible for this subtraction are the same taxpayers that would be eligible for the tax credit for conversion costs for employee business ownership.

The second subtraction is allowed to worker-owned cooperatives in an amount equal to the worker-owned cooperative's federal taxable income for the tax year not to exceed $1 million.

The bill also makes changes to the tax credit for conversion costs for employee business ownership (credit). Under current law, the credit is available through income tax year 2026. The bill extends the credit through income tax year 2037. The bill also specifies that the aggregate amount of credits that can be claimed for each income tax year commencing on or after January 1, 2026, but before January 1, 2032, is $3 million and that the aggregate amount of credits that can be claimed for each income tax year commencing on or after January 1, 2032, but before January 1, 2038, is $4 million. The percentage of conversion or expansion costs that are eligible to be claimed for the credit is currently 50%; however, the bill increases this percentage to 75% beginning in tax year 2026 while maintaining the existing dollar caps for the different methods of conversion.

Additionally, the bill revises several definitions to expand eligibility for the credit and allows for qualified support entities, which are nonprofit organizations that provide services to businesses that qualify under the credit to convert or expand to employee-ownership, to be eligible to receive the credit for up to 75% of the costs incurred for providing such support, including for staff salaries and benefits, marketing and outreach, and consulting and technical assistance not to exceed $167,000.

The bill makes conforming amendments to several of the credit's expanded definitions that are also applicable to the tax credit for new employee-owned businesses.

• This Unofficial Version Includes Committee

• Amendments Not Yet Adopted on Second Reading

• Page 2, Line 1Be it enacted by the General Assembly of the State of Colorado:

• Page 2, Line 2SECTION 1.  In Colorado Revised Statutes, 39-22-104, add

• Page 2, Line 3(4)(dd) as follows:

• Page 2, Line 439-22-104.  Income tax imposed on individuals, estates, and

• Page 2, Line 5trusts - single rate - report - tax preference performance statement

• Page 2, Line 6- legislative declaration - definitions - repeal. (4)  There shall be

• Page 2, Line 7subtracted from federal taxable income:

• Page 2, Line 8(dd) (I)  For income tax years commencing on or after

• Page 3, Line 1January 1, 2027, but before January 1, 2038, an amount equal to

• Page 3, Line 2qualifying capital gains that are subject to tax under this

• Page 3, Line 3article 22 and that are realized by an owner during the taxable

• Page 3, Line 4year for the qualified sale of a qualified business.

• Page 3, Line 5(II)  As used in this subsection (4)(dd), unless the context

• Page 3, Line 6otherwise requires:

• Page 3, Line 7(A)  "Owner" has the same meaning as set forth in section

• Page 3, Line 839-22-542 (2)(h).

• Page 3, Line 9(B)  "Qualified business" has the same meaning as set forth

• Page 3, Line 10in section 39-22-542 (2)(i).

• Page 3, Line 11(C)  "Qualified employee-owned business" has the same

• Page 3, Line 12meaning as set forth in section 39-22-542 (2)(j).

• Page 3, Line 13(D)  "Qualified sale" means the conversion to a qualified

• Page 3, Line 14employee-owned business; except that the conversion must be by

• Page 3, Line 15an increment of at least twenty percent of the total ownership

• Page 3, Line 16of the entire qualified employee-owned business.

• Page 3, Line 18(E)  "Qualifying capital gains" means the amount of net

• Page 3, Line 19capital gains, as defined in section 1222 (11) of the internal

• Page 3, Line 20revenue code.

• Page 3, Line 21(III)  In accordance with section 39-21-304 (1), which

• Page 3, Line 22requires each bill that creates a new tax expenditure to include

• Page 3, Line 23a tax preference performance statement as part of a statutory

• Page 3, Line 24legislative declaration, the general assembly finds and

• Page 3, Line 25declares that the purpose of the income tax subtraction

• Page 3, Line 26provided in this subsection (4)(dd) is to:

• Page 3, Line 27(A)  Induce certain designated behavior by taxpayers,

• Page 4, Line 1specifically for businesses to establish employee stock

• Page 4, Line 2ownership plans or employee ownership trusts or to convert to

• Page 4, Line 3a worker-owned cooperative; and

• Page 4, Line 4(B)  Provide tax relief for certain businesses or

• Page 4, Line 5individuals, specifically to businesses that establish employee

• Page 4, Line 6stock ownership plans or employee ownership trusts or that

• Page 4, Line 7convert to a worker-owned cooperative.

• Page 4, Line 8(IV)  The general assembly and the state auditor shall

• Page 4, Line 9measure the effectiveness of the subtraction in achieving the

• Page 4, Line 10purpose specified in subsection (4)(dd)(III) of this section based on

• Page 4, Line 11the number and aggregate amount of subtractions claimed in a

• Page 4, Line 12tax year.

• Page 4, Line 13(V)  This subsection (4)(dd) is repealed, effective July 1,

• Page 4, Line 142042.

• Page 4, Line 15SECTION 2.  In Colorado Revised Statutes, 39-22-304, add (3)(s)

• Page 4, Line 16and (3)(t) as follows:

• Page 4, Line 1739-22-304.  Net income of corporation - legislative declaration

• Page 4, Line 18- definitions - repeal. (3)  There shall be subtracted from federal taxable

• Page 4, Line 19income:

• Page 4, Line 20(s) (I)  For income tax years commencing on or after

• Page 4, Line 21January 1, 2027, but before January 1, 2038, an amount equal to

• Page 4, Line 22qualifying capital gains that are subject to tax under this

• Page 4, Line 23article 22 and that are realized by an owner during the taxable

• Page 4, Line 24year for the qualified sale of a qualified business.

• Page 4, Line 25(II)  As used in this subsection (3)(s), unless the context

• Page 4, Line 26otherwise requires:

• Page 4, Line 27(A)  "Owner" has the same meaning as set forth in section

• Page 5, Line 139-22-542 (2)(h).

• Page 5, Line 2(B)  "Qualified business" has the same meaning as set forth

• Page 5, Line 3in section 39-22-542 (2)(i).

• Page 5, Line 4(C)  "Qualified employee-owned business" has the same

• Page 5, Line 5meaning as set forth in section 39-22-542 (2)(j).

• Page 5, Line 6(D)  "Qualified sale" means the conversion to a qualified

• Page 5, Line 7employee-owned business; except that the conversion must be by

• Page 5, Line 8an increment of at least twenty percent of the total ownership

• Page 5, Line 9of the entire qualified employee-owned business.

• Page 5, Line 11(E)  "Qualifying capital gains" means the amount of net

• Page 5, Line 12capital gains, as defined in section 1222 (11) of the internal

• Page 5, Line 13revenue code.

• Page 5, Line 14(III)  In accordance with section 39-21-304 (1), which

• Page 5, Line 15requires each bill that creates a new tax expenditure to include

• Page 5, Line 16a tax preference performance statement as part of a statutory

• Page 5, Line 17legislative declaration, the general assembly finds and

• Page 5, Line 18declares that the purpose of the income tax subtraction

• Page 5, Line 19provided in this subsection (3)(s) is to:

• Page 5, Line 20(A)  Induce certain designated behavior by taxpayers,

• Page 5, Line 21specifically for businesses to establish employee stock

• Page 5, Line 22ownership plans or employee ownership trusts or to convert to

• Page 5, Line 23a worker-owned cooperative; and

• Page 5, Line 24(B)  Provide tax relief for certain businesses or

• Page 5, Line 25individuals, specifically to businesses that establish employee

• Page 5, Line 26stock ownership plans or employee ownership trusts or that

• Page 5, Line 27convert to a worker-owned cooperative.

• Page 6, Line 1(IV)  The general assembly and the state auditor shall

• Page 6, Line 2measure the effectiveness of the subtraction in achieving the

• Page 6, Line 3purpose specified in subsection (3)(s)(III) of this section based on

• Page 6, Line 4the number and aggregate amount of subtractions claimed in a

• Page 6, Line 5tax year.

• Page 6, Line 6(V)  This subsection (3)(s) is repealed, effective July 1, 2042.

• Page 6, Line 7(t) (I)  For income tax years commencing on or after

• Page 6, Line 8January 1, 2027, but before January 1, 2038, an amount equal to

• Page 6, Line 9a qualified taxpayer's federal taxable income for the tax year

• Page 6, Line 10not to exceed one million dollars.

• Page 6, Line 11(II)  As used in this subsection (3)(t), unless the context

• Page 6, Line 12otherwise requires:

• Page 6, Line 13(A)  "Qualified taxpayer" means a taxpayer that is subject

• Page 6, Line 14to tax under this article 22 and that is a worker-owned

• Page 6, Line 15cooperative.

• Page 6, Line 16(B)  "Worker-owned cooperative" has the same meaning as

• Page 6, Line 17set forth in section 1042 (c)(2) of the internal revenue code.

• Page 6, Line 18(III)  In accordance with section 39-21-304 (1), which

• Page 6, Line 19requires each bill that creates a new tax expenditure to include

• Page 6, Line 20a tax preference performance statement as part of a statutory

• Page 6, Line 21legislative declaration, the general assembly finds and

• Page 6, Line 22declares that the purpose of the income tax subtraction

• Page 6, Line 23provided in this subsection (3)(t) is to:

• Page 6, Line 24(A)  Induce certain designated behavior by taxpayers,

• Page 6, Line 25specifically for businesses to convert to a worker-owned

• Page 6, Line 26cooperative; and

• Page 6, Line 27(B)  Provide tax relief for certain businesses, specifically

• Page 7, Line 1to provide ongoing support to businesses that convert to a

• Page 7, Line 2worker-owned cooperative.

• Page 7, Line 3(IV)  The general assembly and the state auditor shall

• Page 7, Line 4measure the effectiveness of the subtraction in achieving the

• Page 7, Line 5purpose specified in subsection (3)(t)(III) of this section based on

• Page 7, Line 6the number and aggregate amount of subtractions claimed in a

• Page 7, Line 7tax year and the number of subtractions claimed year over

• Page 7, Line 8year.

• Page 7, Line 9(V)  This subsection (3)(t) is repealed, effective July 1, 2042.

• Page 7, Line 10SECTION 3.  In Colorado Revised Statutes, 39-22-542, amend

• Page 7, Line 11(1)(a)(I), (1)(a)(III), (2)(a)(II), (2)(e), (2)(j)(II), (2)(j)(III), (3)(a)

• Page 7, Line 12introductory portion, (3)(a.5)(I), (3)(c), (3)(d), (4), (5)(a)(V), (5)(a)(VI),

• Page 7, Line 13(6)(a)(I), (8), (10), (11) introductory portion, and (14); repeal (2)(j)(I);

• Page 7, Line 14and add (2)(c.5), (2)(j.5), (2)(k.5), (3)(a.3), (3)(a.5)(III), (3)(a.7),

• Page 7, Line 15(3)(b)(III), and (5)(a)(VII) as follows:

• Page 7, Line 1639-22-542.  Employee-ownership tax credit - definitions -

• Page 7, Line 17legislative declaration - repeal. (1)  Legislative declaration. (a)  The

• Page 7, Line 18general assembly hereby finds and declares that:

• Page 7, Line 19(I)  The purpose of this section is to provide an incentive for small

• Page 7, Line 20businesses to establish employee stock ownership plans or employee

• Page 7, Line 21ownership trusts or to convert to a worker-owned cooperative, and to

• Page 7, Line 22provide an incentive to entities that support businesses in such

• Page 7, Line 23establishment or conversion;

• Page 7, Line 24(III)  This section encourages small business owners to sell

• Page 7, Line 25through three different options, their businesses to the very employees

• Page 7, Line 26that contributed to their success; and

• Page 7, Line 27(2)  Definitions. As used in this section, unless the context

• Page 8, Line 1otherwise requires:

• Page 8, Line 2(a) (II)  The office shall develop guidelines that clarify the types

• Page 8, Line 3of employee ownership grants that qualify as an alternate equity structure.

• Page 8, Line 4The office may develop guidelines that adjust the percentages

• Page 8, Line 5set forth in subsection (2)(a)(I) of this section; except that the

• Page 8, Line 6percentages shall not be adjusted to an amount less than

• Page 8, Line 7twenty percent. The office may periodically update any guidelines

• Page 8, Line 8issued pursuant to this subsection (2)(a)(II).

• Page 8, Line 9(c.5)  "Corporate headquarters" means the sole location

• Page 8, Line 10within a regional or national area where the majority of the

• Page 8, Line 11taxpayer's or qualified support entity's staff members or

• Page 8, Line 12employees are domiciled and employed and where the majority

• Page 8, Line 13of the taxpayer's or qualified support entity's financial,

• Page 8, Line 14personnel, legal, planning, or other business functions are

• Page 8, Line 15conducted on a regional or national basis.

• Page 8, Line 16(e)  "Employee ownership trust" means an indirect form of

• Page 8, Line 17employee ownership in which a trust holds a controlling stake at least

• Page 8, Line 18twenty percent of the fully diluted securities in a qualified

• Page 8, Line 19business and benefits all employees on an equal basis.

• Page 8, Line 20(j)  "Qualified employee-owned business" means a taxpayer that

• Page 8, Line 21is subject to tax under this article 22, including but not limited to a C

• Page 8, Line 22corporation, S corporation, limited liability company, partnership, limited

• Page 8, Line 23liability partnership, sole proprietorship, or other similar pass-through

• Page 8, Line 24entity, that:

• Page 8, Line 25(I)  Is owned in whole or in part by an employee ownership trust;

• Page 8, Line 26(II)  Has its corporate headquarters located in this state;For

• Page 8, Line 27purposes of this subsection (2)(j), "corporate headquarters" means the

• Page 9, Line 1sole location within a regional or national area where the taxpayer's staff

• Page 9, Line 2members or employees are domiciled and employed, and where the

• Page 9, Line 3majority of the taxpayer's financial, personnel, legal, planning, or other

• Page 9, Line 4business functions are conducted on a regional or national basis.

• Page 9, Line 5(III) (A)  Is owned in whole or in part by an employee

• Page 9, Line 6ownership trust;

• Page 9, Line 7(B)  Has an employee stock ownership plan;

• Page 9, Line 8(C)  Is in whole or in part a worker-owned cooperative; or

• Page 9, Line 9(D)  Has an alternate equity structure; and

• Page 9, Line 10(j.5)  "Qualified support entity" means an organization

• Page 9, Line 11exempt from taxation under section 501 (c)(3) of the internal

• Page 9, Line 12revenue code or a taxpayer subject to tax under this article 22,

• Page 9, Line 13including a C corporation, S corporation, limited liability

• Page 9, Line 14company, partnership, limited liability partnership, sole

• Page 9, Line 15proprietorship, or other similar pass-through entity that:

• Page 9, Line 16(I)  Has been in existence for not less than twelve months

• Page 9, Line 17prior to January 1 of the income tax year for which the qualified

• Page 9, Line 18support entity claims the credit;

• Page 9, Line 19(II)  Either has provided services that have supported at

• Page 9, Line 20least one successful conversion to or expansion of a qualified

• Page 9, Line 21employee-owned business in the income tax year or has provided

• Page 9, Line 22services that have supported at least three either qualified

• Page 9, Line 23businesses that have the intent of converting to qualified

• Page 9, Line 24employee-owned businesses or qualified employee-owned

• Page 9, Line 25businesses that have the intent of expanding;

• Page 9, Line 26(III)  Has its corporate headquarters located in this state;

• Page 9, Line 27and

• Page 10, Line 1(IV)  Is approved by the office for the tax incentives in this

• Page 10, Line 2section.

• Page 10, Line 3(k.5) (I)  "Support costs" means, subject to guidelines

• Page 10, Line 4developed by the office pursuant to subsection (5)(a) of this

• Page 10, Line 5section, costs that are or are related to:

• Page 10, Line 6(A)  Staff salaries and benefits for staff involved in

• Page 10, Line 7business development, marketing, and outreach;

• Page 10, Line 8(B)  Marketing and outreach for producing educational

• Page 10, Line 9materials or hosting workshops or conferences on converting

• Page 10, Line 10a business to employee-ownership and similar costs; and

• Page 10, Line 12(C)  A proportional amount of basic organizational

• Page 10, Line 13overhead costs including general or administrative costs,

• Page 10, Line 14expenses, rent, and facilities costs.

• Page 10, Line 15(II)  "Support costs" does not include any costs that are

• Page 10, Line 16conversion costs.

• Page 10, Line 17(3) (a)  Except as otherwise provided in subsection (3)(a.3)

• Page 10, Line 18of this section and subject to certification by the office pursuant to this

• Page 10, Line 19section, for income tax years commencing on or after January 1, 2022, but

• Page 10, Line 20prior to January 1, 2027 before January 1, 2038, a qualified business

• Page 10, Line 21is allowed a credit with respect to the income taxes imposed pursuant to

• Page 10, Line 22this article 22 as follows:

• Page 10, Line 23(a.3)  For income tax years commencing on or after

• Page 10, Line 24January 1, 2026, but before January 1, 2038, the allowable

• Page 10, Line 25percentage of conversion costs incurred by a qualified business

• Page 10, Line 26for the applicable conversion of the qualified business set forth

• Page 10, Line 27in subsections (3)(a)(I), (3)(a)(II), and (3)(a)(III) of this section for

• Page 11, Line 1purposes of calculating the credit is up to seventy-five percent

• Page 11, Line 2of the conversion costs.

• Page 11, Line 3(a.5) (I)  Except as otherwise provided in subsection

• Page 11, Line 4(3)(a.5)(III) of this section and subject to certification by the office

• Page 11, Line 5pursuant to this section, for the income tax years commencing on or after

• Page 11, Line 6January 1, 2024, but prior to January 1, 2027 before January 1, 2038,

• Page 11, Line 7a qualified employee-owned business is allowed a credit with respect to

• Page 11, Line 8the income taxes imposed pursuant to this article 22 of up to fifty percent

• Page 11, Line 9of the expansion costs, not to exceed twenty-five thousand dollars,

• Page 11, Line 10incurred to expand a qualified employee-owned business's employee

• Page 11, Line 11ownership trust, employee stock ownership plan, worker-owned

• Page 11, Line 12cooperative, or alternate equity structure.

• Page 11, Line 13(III)  For income tax years commencing on or after January

• Page 11, Line 141, 2026, but before January 1, 2038, the allowable percentage of

• Page 11, Line 15expansion costs incurred by a qualified employee-owned business

• Page 11, Line 16to expand a qualified employee-owned business as set forth in

• Page 11, Line 17subsection (3)(a.5)(I) of this section for purposes of calculating

• Page 11, Line 18the credit is up to seventy-five percent of the conversion costs.

• Page 11, Line 19(a.7)  Subject to certification by the office pursuant to this

• Page 11, Line 20section, for income tax years commencing on or after January

• Page 11, Line 211, 2027, but prior to January 1, 2038, a qualified support entity is

• Page 11, Line 22allowed a credit with respect to the income taxes imposed

• Page 11, Line 23pursuant to this article 22 of up to seventy-five percent of the

• Page 11, Line 24support costs, but not to exceed one hundred sixty-seven

• Page 11, Line 25thousand dollars, incurred in providing services that support

• Page 11, Line 26the conversion of qualified businesses to qualified

• Page 11, Line 27employee-owned businesses or the expansion of qualified

• Page 12, Line 1employee-owned businesses.

• Page 12, Line 2(b) (III)  In the case of a qualified support entity, the credit

• Page 12, Line 3is allowed to the qualified support entity.

• Page 12, Line 4(c)  The maximum amount of all tax credit certificates that the

• Page 12, Line 5office may reserve under subsection (6)(a) of this section in any tax year

• Page 12, Line 6is ten million dollars. is:

• Page 12, Line 7(I)  Ten million dollars for any income tax year

• Page 12, Line 8commencing on or after January 1, 2022, but before January 1,

• Page 12, Line 92026;

• Page 12, Line 10(II)  Three million dollars for any income tax year

• Page 12, Line 11commencing on or after January 1, 2026, but before January 1,

• Page 12, Line 122032; and

• Page 12, Line 13(III)  Four million dollars for any income tax year

• Page 12, Line 14commencing on or after January 1, 2032, but before January 1,

• Page 12, Line 152038.

• Page 12, Line 16(d) (I)  A qualified business or qualified employee-owned business

• Page 12, Line 17may apply for and claim only one tax credit for the conversion or

• Page 12, Line 18expansion costs incurred per tax year.

• Page 12, Line 19(II)  A qualified support entity may apply for and claim

• Page 12, Line 20only one tax credit per tax year.

• Page 12, Line 21(4) (a)  A business or, where applicable, a nonprofit

• Page 12, Line 22organization shall submit an application to the office for the issuance

• Page 12, Line 23of a credit certificate for the credit allowed in this section by the deadlines

• Page 12, Line 24established in the office's guidelines. Except as otherwise provided in

• Page 12, Line 25subsection (4)(b) of this section, the application must include

• Page 12, Line 26information, as set forth in the office's guidelines, regarding the type of

• Page 12, Line 27conversion or expansion the business intends to undertake, a list of the

• Page 13, Line 1expected conversion or expansion costs, and an estimated amount, as

• Page 13, Line 2calculated by the business, of the expected conversion or expansion costs.

• Page 13, Line 3(b)  An application for a business or a nonprofit

• Page 13, Line 4organization submitting the application to be approved as a

• Page 13, Line 5qualified support entity must include information, as set forth

• Page 13, Line 6in the office's guidelines, regarding the support services the

• Page 13, Line 7business or the nonprofit organization provides to qualified

• Page 13, Line 8businesses or qualified employee-owned businesses, whether the

• Page 13, Line 9business or the nonprofit organization supported a successful

• Page 13, Line 10conversion of a qualified business to a qualified employee-owned

• Page 13, Line 11business or expansion of a qualified employee-owned business in

• Page 13, Line 12the taxable year, if the business or the nonprofit organization

• Page 13, Line 13has not supported a successful conversion or expansion, the

• Page 13, Line 14number of qualified businesses or qualified employee-owned

• Page 13, Line 15businesses the business or the nonprofit organization is

• Page 13, Line 16supporting that intend to convert or expand, as applicable, and

• Page 13, Line 17the status of the anticipated conversions or expansions, and

• Page 13, Line 18information regarding support costs incurred in the income tax

• Page 13, Line 19year.

• Page 13, Line 20(5) (a)  The office shall develop guidelines for the administration

• Page 13, Line 21of this section, including, but not limited to:

• Page 13, Line 22(V)  Detailed guidelines regarding expansion costs; and

• Page 13, Line 23(VI)  Guidelines and standards for certifying a business as a

• Page 13, Line 24qualified employee-owned business; and

• Page 13, Line 25(VII)  Guidelines and standards for certifying a business

• Page 13, Line 26or a nonprofit organization as a qualified support entity.

• Page 13, Line 27(6) (a) (I)  After the office provides the written report required in

• Page 14, Line 1subsection (5)(b) of this section, a reservation of tax credits is permitted

• Page 14, Line 2for the tax credit allowed in this section. If the office determines that the

• Page 14, Line 3application filed under subsection (4) of this section is complete, the

• Page 14, Line 4office shall determine whether the business or, if applicable, the

• Page 14, Line 5nonprofit organization is a qualified business, or a qualified

• Page 14, Line 6employee-owned business, or a qualified support entity, review the

• Page 14, Line 7list of the expected conversion or expansion costs, and review the

• Page 14, Line 8estimated conversion, or expansion, or support costs as calculated by

• Page 14, Line 9the business. If the office approves the business or, if applicable, the

• Page 14, Line 10nonprofit organization as a qualified business, or a qualified

• Page 14, Line 11employee-owned business, or a qualified support entity, the list of

• Page 14, Line 12expected conversion or expansion costs, and the estimated conversion, or

• Page 14, Line 13expansion, or support costs, the office may reserve for the benefit of the

• Page 14, Line 14qualified business, the qualified employee-owned business, or the owner

• Page 14, Line 15of the business, or the qualified support entity an allocation of a tax

• Page 14, Line 16credit subject to the limitation specified in subsection (3)(b) of this

• Page 14, Line 17section. The office shall notify the qualified business, or the qualified

• Page 14, Line 18employee-owned business, or the qualified support entity in writing

• Page 14, Line 19of the amount of the reservation. The reservation of a tax credit does not

• Page 14, Line 20entitle the qualified business, the qualified employee-owned business, or

• Page 14, Line 21the owner of the business, or the qualified support entity to an

• Page 14, Line 22issuance of a tax credit certificate until the qualified business, or the

• Page 14, Line 23qualified employee-owned business, or the qualified support entity

• Page 14, Line 24complies with all of the other requirements specified in this section for

• Page 14, Line 25the issuance of the tax credit certificate.

• Page 14, Line 26(8)  If the credit allowed under this section exceeds the income

• Page 14, Line 27taxes due on the income of the qualified business, qualified

• Page 15, Line 1employee-owned business, or owner of the business, or qualified

• Page 15, Line 2support entity, the amount of the credit not used to offset income taxes

• Page 15, Line 3must be refunded to the qualified business, qualified employee-owned

• Page 15, Line 4business, or owner of the business, or qualified support entity.

• Page 15, Line 5(10) (a)  To claim the income tax credit allowed in this section, the

• Page 15, Line 6qualified business, qualified employee-owned business, or owner of the

• Page 15, Line 7business, or qualified support entity shall attach a copy of the credit

• Page 15, Line 8certificate to its state income tax return. No tax credit is allowed under

• Page 15, Line 9this section unless the qualified business, qualified employee-owned

• Page 15, Line 10business, or owner of the business, or qualified support entity

• Page 15, Line 11provides the copy of the credit certificate with its filed state income tax

• Page 15, Line 12return. The amount of the credit that the qualified business, or the

• Page 15, Line 13qualified employee-owned business, or the qualified support entity

• Page 15, Line 14may claim under this section is the amount stated on the tax credit

• Page 15, Line 15certificate.

• Page 15, Line 16(b)  A qualified support entity that is an organization

• Page 15, Line 17exempt from taxation under section 501 (c)(3) of the internal

• Page 15, Line 18revenue code and that claims the credit allowed by this section

• Page 15, Line 19shall file a return pursuant to section 39-22-601 (7)(b) and

• Page 15, Line 20attach a copy of the credit certificate in accordance with

• Page 15, Line 21subsection (10)(a) of this section.

• Page 15, Line 22(11)  The office shall, in a sufficiently timely manner to allow the

• Page 15, Line 23department to process returns claiming the income tax credit allowed in

• Page 15, Line 24this section, provide the department with an electronic report of each

• Page 15, Line 25qualified business, qualified employee-owned business, and owner of a

• Page 15, Line 26business, and qualified support entity that the office approved for the

• Page 15, Line 27income tax credit allowed in this section for the preceding calendar year

• Page 16, Line 1that includes the following information:

• Page 16, Line 2(14)  This section is repealed, effective December 31, 2033

• Page 16, Line 3December 31, 2042.

• Page 16, Line 4SECTION 4.  In Colorado Revised Statutes, 39-22-542.5, amend

• Page 16, Line 5(2)(a) introductory portion, (2)(d)(II), (2)(d)(III), and (2)(f); and repeal

• Page 16, Line 6(2)(d)(I) as follows:

• Page 16, Line 739-22-542.5.  Tax credit for new employee-owned businesses

• Page 16, Line 8- employee ownership cash fund - tax preference performance

• Page 16, Line 9statement - legislative declaration - definitions - repeal.

• Page 16, Line 10(2)  Definitions. As used in this section, unless the context otherwise

• Page 16, Line 11requires:

• Page 16, Line 12(a)  "Alternate equity structure" means a mechanism under which

• Page 16, Line 13an employer grants to employees a form of employee ownership,

• Page 16, Line 14including but not limited to an employee stock purchase plan, LLC

• Page 16, Line 15membership, phantom stock, profit interest, restricted stock, stock

• Page 16, Line 16appreciation right, stock option, or synthetic equity. The office may

• Page 16, Line 17develop guidelines that clarify the types of employee ownership grants

• Page 16, Line 18that qualify as an alternate equity structure. The office may develop

• Page 16, Line 19guidelines that adjust the percentages set forth in this

• Page 16, Line 20subsection (2)(a); except that the percentages shall not be

• Page 16, Line 21adjusted to an amount less than twenty percent. An alternate

• Page 16, Line 22equity structure must at a minimum:

• Page 16, Line 23(d)  "Employee-owned business" means a taxpayer that is subject

• Page 16, Line 24to tax under this article 22, including but not limited to a C corporation,

• Page 16, Line 25S corporation, limited liability company, partnership, limited liability

• Page 16, Line 26partnership, sole proprietorship, or other similar pass-through entity, that:

• Page 16, Line 27(I)  Is owned in whole or in part by an employee ownership trust;

• Page 17, Line 1(II) (A)  Is owned in whole or in part by an employee

• Page 17, Line 2ownership trust;

• Page 17, Line 3(B)  Has an employee stock ownership plan;

• Page 17, Line 4(C)  Is beneficially owned in whole or in part by a worker-owned

• Page 17, Line 5cooperative; or

• Page 17, Line 6(D)  Has an alternate equity structure; and

• Page 17, Line 7(III)  Has its corporate headquarters located in this state. For

• Page 17, Line 8purposes of this subsection (2)(d), "corporate headquarters" means the

• Page 17, Line 9sole location within a regional or national area where the majority of

• Page 17, Line 10the taxpayer's staff members or employees are domiciled and employed,

• Page 17, Line 11and where the majority of the taxpayer's financial, personnel, legal,

• Page 17, Line 12planning, or other business functions are conducted on a regional or

• Page 17, Line 13national basis.

• Page 17, Line 14(f)  "Employee ownership trust" means an indirect form of

• Page 17, Line 15employee ownership in which a trust holds a controlling stake at least

• Page 17, Line 16twenty percent of the fully diluted securities in a business and

• Page 17, Line 17benefits all employees on an equal basis and otherwise meets the

• Page 17, Line 18definition of an alternate equity structure.

• Page 17, Line 19SECTION 5.  Act subject to petition - effective date. This act

• Page 17, Line 20takes effect at 12:01 a.m. on the day following the expiration of the

• Page 17, Line 21ninety-day period after final adjournment of the general assembly; except

• Page 17, Line 22that, if a referendum petition is filed pursuant to section 1 (3) of article V

• Page 17, Line 23of the state constitution against this act or an item, section, or part of this

• Page 17, Line 24act within such period, then the act, item, section, or part will not take

• Page 17, Line 25effect unless approved by the people at the general election to be held in

• Page 17, Line 26November 2026 and, in such case, will take effect on the date of the

• Page 17, Line 27official declaration of the vote thereon by the governor.