House Bill 25-1335 Engrossed

A Bill for an Act

• Page 1, Line 101Concerning the determination of the extent of the

• Page 1, Line 102availability of income tax credits that are contingent

• Page 1, Line 103upon the compound annual growth rate.

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/.)

Joint Budget Committee. The bill makes similar changes to both the family affordability tax credit and the earned income tax credit. The bill modifies how the extent of the availability of both tax credits is determined. Under current law, the availability of both tax credits is determined by the compound annual growth rate between actual state revenue in state fiscal year 2024-25 and projected state revenue for the fiscal year that begins during the relevant state income tax year. Under the bill, the availability of both tax credits is determined by the compound annual growth rate between state revenue for state fiscal year 2024-25, as projected in the March 2024 office of state planning and budgeting revenue forecast, and projected state revenue for the fiscal year that begins during the relevant state income tax year.

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

• Page 2, Line 2SECTION 1.  Legislative declaration. (1)  The general assembly finds and declares that:

• Page 2, Line 3(a)  In the 2024 regular session, the general assembly created the family affordability tax credit and expanded the earned income tax credit;

• Page 2, Line 4(b)  Both tax credits were unconditionally available for state

• Page 2, Line 5income tax year 2024 and are only available conditionally, and in conditional amounts, beginning in state income tax year 2025;

• Page 2, Line 6(c)  Whether the tax credits are available and the amounts of the

• Page 2, Line 7credits that are available are determined in part by the compound annual

• Page 2, Line 8growth rate between certain state revenue in state fiscal year 2024-25 and

• Page 2, Line 9the corresponding state revenue in the state fiscal year that begins in the relevant state income tax year;

• Page 2, Line 10(d)  It was the general assembly's intent, in using state fiscal year

• Page 2, Line 112024-25 state revenue as an element of determining the extent to which

• Page 2, Line 12the tax credits are available, to use a state fiscal year in which state

• Page 2, Line 13revenue was sufficient not to limit the general assembly's ability to appropriate money from the general fund;

• Page 2, Line 14(e)  The most recent revenue forecasts prepared by legislative

• Page 2, Line 15council staff and the office of state planning and budgeting acknowledge

• Page 2, Line 16a significant possibility that, contrary to the general assembly's intent,

• Page 2, Line 17using state fiscal year 2024-25 state revenue as an element of determining

• Page 3, Line 1the extent to which the tax credits are available may limit the general assembly's ability to appropriate money from the general fund;

• Page 3, Line 2(f)  Using state fiscal year 2024-25 state revenue as forecast in the

• Page 3, Line 3March 2024 office of state planning and budgeting revenue forecast in

• Page 3, Line 4determining the extent to which the tax credits are available would not

• Page 3, Line 5similarly limit the general assembly's ability to appropriate money from the general fund;

• Page 3, Line 6(g)  This House Bill 25-1335 modifies both tax credits so that

• Page 3, Line 7whether the tax credits are available and the amounts of the credits that

• Page 3, Line 8are available are determined based on the compound annual growth rate

• Page 3, Line 9between certain state revenue in state fiscal year 2024-25 as forecast in

• Page 3, Line 10the March 2024 office of state planning and budgeting revenue forecast

• Page 3, Line 11and the corresponding state fiscal year that begins in the relevant state income tax year;

• Page 3, Line 12(h)  The primary purpose of the modification of these tax credits

• Page 3, Line 13is to better effectuate the intent of the general assembly in creating the

• Page 3, Line 14family affordability tax credit and expanding the earned income tax credit;

• Page 3, Line 15(i)  Any state revenue gain that results from the modification of

• Page 3, Line 16these tax expenditures is de minimis and incidental to the primary purpose of modifying these tax credits; and

• Page 3, Line 17(j)  Therefore, consistent with the Colorado supreme court's

• Page 3, Line 18holding in TABOR Foundation v. Reg'l Transp. Dist., 2018 CO 29, that

• Page 3, Line 19legislation that causes only an incidental and de minimis tax revenue

• Page 3, Line 20increase does not amount to a new tax or a tax policy change that requires

• Page 3, Line 21prior voter approval pursuant to section 20 of article X of the state

• Page 3, Line 22constitution, the modifications to these tax credits are not tax policy changes that require voter approval.

• Page 4, Line 1SECTION 2.  In Colorado Revised Statutes, 39-22-130, amend (2)(b)(II)(C) as follows:

• Page 4, Line 239-22-130.  Family affordability tax credit - tax preference

• Page 4, Line 3performance statement - legislative declaration - definitions - repeal.(2)  As used in this section, unless the context otherwise requires:

• Page 4, Line 4(b) (II)  As used in this subsection (2)(b):

• Page 4, Line 5(C)  "BV" means on or before December 31, 2024, the estimate of

• Page 4, Line 6the state's nonexempt revenue for state fiscal year 2024-25 included in the

• Page 4, Line 7applicable forecast excluding the projected aggregate amount of the tax

• Page 4, Line 8credit allowed pursuant to this section and the projected aggregate amount

• Page 4, Line 9of the increased portion of the earned income tax credit allowed pursuant

• Page 4, Line 10to section 39-22-123.5 (3.5), created in House Bill 24-1134, enacted in

• Page 4, Line 112024, for the given income tax year, and after December 31, 2024, the

• Page 4, Line 12amount of the state's nonexempt revenue for state fiscal year 2024-25

• Page 4, Line 13excluding the aggregate amount of the tax credit allowed pursuant to this

• Page 4, Line 14section and the aggregate amount of the increased portion of the earned

• Page 4, Line 15income tax credit allowed pursuant to section 39-22-123.5 (3.5), created

• Page 4, Line 16in House Bill 24-1134, enacted in 2024, for the given income tax year

• Page 4, Line 17the 2024 office of state planning and budgeting March revenue forecast.

• Page 4, Line 18SECTION 3.  In Colorado Revised Statutes, 39-22-123.5, amend (3.5)(a)(III) as follows:

• Page 4, Line 1939-22-123.5.  Earned income tax credit - legislative declaration

• Page 4, Line 20- repeal. (3.5) (a)  As used in this subsection (3.5), unless the context otherwise requires:

• Page 4, Line 21(III)  "BV" means on or before December 31, 2024, the estimate

• Page 5, Line 1of the state's nonexempt revenue for state fiscal year 2024-25 included in

• Page 5, Line 2the applicable forecast excluding the projected aggregate amount of the

• Page 5, Line 3increased portion of the earned income tax credit allowed pursuant to

• Page 5, Line 4subsection (3.5)(b) or (3.5)(c) of this section and the projected aggregate

• Page 5, Line 5amount of the credit allowed pursuant to section 39-22-130, created in

• Page 5, Line 6House Bill 24-1311, enacted in 2024, for the given income tax year, and

• Page 5, Line 7after December 31, 2024, the amount of the state's nonexempt revenue for

• Page 5, Line 8state fiscal year 2024-25 excluding the aggregate amount of the increased

• Page 5, Line 9portion of the earned income tax credit allowed pursuant to subsection

• Page 5, Line 10(3.5)(b) or (3.5)(c) of this section and the aggregate amount of the credit

• Page 5, Line 11allowed pursuant to section 39-22-130, created in House Bill 24-1311,

• Page 5, Line 12enacted in 2024, for the given income tax year the 2024 office of state planning and budgeting March revenue forecast.

• Page 5, Line 13SECTION 4.  Safety clause. The general assembly finds,

• Page 5, Line 14determines, and declares that this act is necessary for the immediate

• Page 5, Line 15preservation of the public peace, health, or safety or for appropriations for

• Page 5, Line 16the support and maintenance of the departments of the state and state institutions.