A Bill for an Act
Page 1, Line 101Concerning income tax expenditures that benefit individuals
Page 1, Line 102engaged in military service.
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/.)
Legislative Oversight Committee Concerning Tax Policy. The bill changes how income tax expenditures that benefit individuals engaged in military service are provided as follows:
- Beginning with income tax years commencing on or after January 1, 2027, section 2 of the bill eliminates the state income tax subtraction for an amount equal to any compensation received for active duty service in the armed forces of the United States by an individual who has reacquired residency in the state to the extent that the compensation is included in federal taxable income; and
- For income tax years commencing on or after January 1, 2027, but before January 1, 2032, section 3 allows a refundable income tax credit (credit) as a form of tuition assistance to an actively serving member of the Colorado National Guard who is eligible for tuition assistance (eligible member) under an existing statutorily-authorized program (program) administered by the department of veterans and military affairs (department).
To claim the credit, an eligible member must obtain a tax credit certificate issued by the department for each academic semester or quarter for which tuition assistance is awarded in the form of the credit.
The criteria for receiving a tax credit certificate are generally the same as the criteria for receiving other tuition assistance under the program; except that, to be eligible for a tax credit certificate, an eligible member must apply for all federal government tuition assistance that is not required to be repaid and that is generally made available to eligible members and not to the general population and must use all federal government tuition assistance received. The total amount of tuition assistance that an eligible member to whom the department has issued a tax credit certificate may obtain under the program, including the credit, is subject to existing program limits. In addition, the department may issue no more than $1 million in tax credit certificates for any income tax year.
Section 1 makes conforming amendments.
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 3SECTION 1. In Colorado Revised Statutes, 39-22-104, amend
Page 2, Line 4(4)(u) as follows:
Page 2, Line 539-22-104. Income tax imposed on individuals, estates, and
Page 2, Line 6trusts - single rate - report - tax preference performance statement
Page 2, Line 7- legislative declaration - definitions - repeal. (4) There shall be
Page 2, Line 8subtracted from federal taxable income:
Page 2, Line 9(u) (I) For income tax years commencing on or after January 1,
Page 3, Line 12016, but before January 1, 2027, an amount equal to any
Page 3, Line 2compensation received for active duty service in the armed forces of the
Page 3, Line 3United States by an individual who has reacquired residency in the state
Page 3, Line 4pursuant to section 39-22-110.5, to the extent that the compensation is
Page 3, Line 5included in federal taxable income;
Page 3, Line 6(II) This subsection (4)(u) is repealed, effective December
Page 3, Line 731, 2031.
Page 3, Line 8SECTION 2. In Colorado Revised Statutes, add 39-22-571 as
Page 3, Line 9follows:
Page 3, Line 1039-22-571. Income tax credit for qualifying educational
Page 3, Line 11expenses incurred by eligible members of the Colorado National
Page 3, Line 12Guard - pursuing higher education - tax preference performance
Page 3, Line 13statement - report - definitions - repeal. (1) Tax preference
Page 3, Line 14performance statement.In accordance with section 39-21-304 (1),
Page 3, Line 15which requires each bill that creates a new tax expenditure to
Page 3, Line 16include a tax preference performance statement as part of a
Page 3, Line 17statutory legislative declaration, the general assembly finds
Page 3, Line 18and declares that:
Page 3, Line 19(a) The general legislative purpose of the tax credit
Page 3, Line 20allowed by this section is to provide tax relief for certain
Page 3, Line 21businesses or individuals;
Page 3, Line 22(b) The specific legislative purpose of the tax credit
Page 3, Line 23allowed by this section is to provide tax relief for eligible
Page 3, Line 24members of the Colorado National Guard who are pursuing
Page 3, Line 25higher education by providing reimbursement for qualifying
Page 3, Line 26educational expenses; and
Page 3, Line 27(c) The general assembly and the state auditor shall
Page 4, Line 1measure the effectiveness of the tax credit in achieving the
Page 4, Line 2purposes specified in subsections (1)(a) and (1)(b) of this section
Page 4, Line 3based on the information required to be maintained and reported
Page 4, Line 4by the administrator pursuant to subsection (8) of this section.
Page 4, Line 5(2) Definitions.As used in this section, unless the context
Page 4, Line 6otherwise requires:
Page 4, Line 7(a) "Administrator" means the department of military and
Page 4, Line 8veterans affairs.
Page 4, Line 9(b) "Department" means the department of revenue.
Page 4, Line 10(c) "Designated institution of higher education" has the
Page 4, Line 11same meaning as set forth in section 23-7.4-302 (3)(a).
Page 4, Line 12(d) "Eligible member" means an enlisted member or officer
Page 4, Line 13of the Colorado National Guard who is eligible for tuition
Page 4, Line 14assistance pursuant to section 23-7.4-302, has not yet earned a
Page 4, Line 15bachelor's degree, and is enrolled at a designated institution of
Page 4, Line 16higher education for the purpose of pursuing studies leading to
Page 4, Line 17a certificate of completion, an associate degree, or a bachelor's
Page 4, Line 18degree.
Page 4, Line 19(e) "Qualified individual" means an eligible member to
Page 4, Line 20whom the administrator issues a tax credit certificate.
Page 4, Line 21(f) "Qualifying educational expenses" means expenses
Page 4, Line 22other than tuition that are incurred by an eligible member in
Page 4, Line 23connection with the eligible member's pursuit of higher
Page 4, Line 24education, such as fees, costs incurred to purchase books or
Page 4, Line 25other course materials, and living expenses, and for which the
Page 4, Line 26eligible member has not otherwise been reimbursed.
Page 4, Line 27(g) "Rules" means the military regulations for the
Page 5, Line 1administration of tuition assistance adopted by the
Page 5, Line 2administrator pursuant to section 23-7.4-302 (7).
Page 5, Line 3(h) "Tax credit" means the income tax credit allowed
Page 5, Line 4pursuant to this section.
Page 5, Line 5(i) "Tax credit certificate" means a certificate issued by
Page 5, Line 6the administrator to a qualified individual pursuant to
Page 5, Line 7subsection (5) of this section.
Page 5, Line 8(j) "Tuition assistance" means tuition assistance awarded
Page 5, Line 9pursuant to section 23-7.4-302.
Page 5, Line 10(3) Tax credit allowed. (a) For income tax years commencing
Page 5, Line 11on or after January 1, 2027, but before January 1, 2032, a
Page 5, Line 12qualified individual is allowed a credit against the income taxes
Page 5, Line 13imposed by this article 22 in the amount set forth in the tax
Page 5, Line 14credit certificate issued to the qualified individual.
Page 5, Line 15(b) To claim a tax credit, a qualified individual must file
Page 5, Line 16a tax credit certificate with the qualified individual's income
Page 5, Line 17tax return.
Page 5, Line 18(4) Application submission and review. (a) An eligible
Page 5, Line 19member who intends to claim a tax credit must submit an
Page 5, Line 20application to the administrator for tuition assistance in
Page 5, Line 21accordance with the rules.If the administrator approves the
Page 5, Line 22application, the administrator shall also approve a tax credit
Page 5, Line 23for the applicant and determine the amount of the tax credit.
Page 5, Line 25(b) To be eligible for a tax credit certificate, an eligible
Page 5, Line 26member must apply for all federal government benefits that
Page 5, Line 27can be used to pay for educational expenses that would, if not
Page 6, Line 1paid for with such benefits, be qualifying education expenses
Page 6, Line 2that are not required to be repaid and that are generally made
Page 6, Line 3available to members of the Colorado National Guard and not
Page 6, Line 4to the general population and must use all such federal
Page 6, Line 5government benefits received.
Page 6, Line 6(5) Tax credit certificates. (a) Subject to the limitations set
Page 6, Line 7forth in subsection (5)(b) of this section, if the administrator
Page 6, Line 8determines that an eligible member should receive
Page 6, Line 9reimbursement for qualifying educational expenses in the form
Page 6, Line 10of a tax credit, the administrator shall issue to the eligible
Page 6, Line 11member a tax credit certificate for each academic semester or
Page 6, Line 12quarter for which such reimbursement for qualifying
Page 6, Line 13educational expenses is being awarded that indicates the income
Page 6, Line 14tax year for which such reimbursement for qualifying
Page 6, Line 15educational expenses is being awarded and the amount of such
Page 6, Line 16reimbursement for qualifying educational expenses to be
Page 6, Line 17awarded.
Page 6, Line 18(b) The issuance of tax credit certificates pursuant to
Page 6, Line 19subsection (5)(a) of this section is subject to the following
Page 6, Line 20limitations:
Page 6, Line 21(I) The maximum aggregate amount of tax credit
Page 6, Line 22certificates that the administrator may issue to all qualified
Page 6, Line 23individuals for any income tax year is one million dollars; and
Page 6, Line 24(II) A tax credit certificate must be issued for the income
Page 6, Line 25tax year during which the academic semester or quarter for
Page 6, Line 26which the tuition assistance in the form of a tax credit is
Page 6, Line 27awarded begins.
Page 7, Line 1(6) Refundability.If the amount of a tax credit exceeds the
Page 7, Line 2amount of income taxes otherwise due on the income of a
Page 7, Line 3qualified individual in the income tax year for which the tax
Page 7, Line 4credit is claimed, the amount of the tax credit not used as an
Page 7, Line 5offset against income taxes in the income tax year is refunded to
Page 7, Line 6the qualified individual.
Page 7, Line 7(7) Revocation of tax credit certificate and recapture of tax
Page 7, Line 8credit.If, in accordance with section 23-7.4-302 and the rules, a
Page 7, Line 9qualified individual to whom the administrator has issued a tax
Page 7, Line 10credit certificate subsequently fails to fulfill all requirements
Page 7, Line 11for receiving tuition assistance for the academic semester or
Page 7, Line 12quarter for which reimbursement for qualifying educational
Page 7, Line 13expenses credit that is specified on the tax credit certificate, the
Page 7, Line 14administrator shall revoke the tax credit certificate and
Page 7, Line 15notify the qualified individual and the department of the
Page 7, Line 16revocation and that the tax credit is disallowed. If the tax
Page 7, Line 17credit has already been allowed to the qualified individual
Page 7, Line 18before the department receives notice of the revocation of the
Page 7, Line 19tax credit certificate, the qualified individual shall add the
Page 7, Line 20full amount of the tax credit that was actually used to offset
Page 7, Line 21the qualified individual's income or refunded to the qualified
Page 7, Line 22individual to the qualified individual's income tax return for the
Page 7, Line 23next income tax year as a recaptured tax credit for the income
Page 7, Line 24tax year for which the tax credit certificate is revoked
Page 7, Line 25pursuant to this subsection (7).
Page 7, Line 26(8) Reporting. (a) No later than December 31, 2028, and,
Page 7, Line 27notwithstanding the requirement in section 24-1-136 (11)(a)(I), no
Page 8, Line 1later than December 31 of each year thereafter through 2032,
Page 8, Line 2the administrator shall provide a written report to the general
Page 8, Line 3assembly and shall further make the report available to the
Page 8, Line 4public. In connection with tax credits, the report must include:
Page 8, Line 5(I) The number of tax credit certificates issued;
Page 8, Line 6(II) The aggregate amount of reimbursement for
Page 8, Line 7qualifying educational expenses provided through tax credits
Page 8, Line 8and the average amount of such reimbursement for qualifying
Page 8, Line 9educational expenses provided to each qualified individual to
Page 8, Line 10whom the administrator has issued a tax credit certificate; and
Page 8, Line 11(III) The amount of any tax credit recaptured due to
Page 8, Line 12revocation of a tax credit certificate pursuant to subsection (7)
Page 8, Line 13of this section.
Page 8, Line 14(b) The administrator shall, in a sufficiently timely
Page 8, Line 15manner to allow the department to process returns claiming
Page 8, Line 16the tax credit, provide the department with an electronic report
Page 8, Line 17of each qualified individual to whom the administrator issues
Page 8, Line 18one or more tax credit certificates for the preceding income tax
Page 8, Line 19year that includes the following information:
Page 8, Line 20(I) The qualified individual's name;
Page 8, Line 21(II) The total amount of the tax credit authorized to be
Page 8, Line 22claimed by the qualified individual and, if multiple tax credit
Page 8, Line 23certificates were issued to a qualified individual, the amount of
Page 8, Line 24the tax credit authorized to be claimed by the qualified
Page 8, Line 25individual that is specified on each tax credit certificate; and
Page 8, Line 26(III) The qualified individual's social security number or,
Page 8, Line 27if the qualified individual is not a United States citizen, the
Page 9, Line 1qualified individual's individual taxpayer identification number.
Page 9, Line 2(9) Repeal.This section is repealed, effective December 31,
Page 9, Line 32036.
Page 9, Line 4SECTION 3. Act subject to petition - effective date. This act
Page 9, Line 5takes effect at 12:01 a.m. on the day following the expiration of the
Page 9, Line 6ninety-day period after final adjournment of the general assembly; except
Page 9, Line 7that, if a referendum petition is filed pursuant to section 1 (3) of article V
Page 9, Line 8of the state constitution against this act or an item, section, or part of this
Page 9, Line 9act within such period, then the act, item, section, or part will not take
Page 9, Line 10effect unless approved by the people at the general election to be held in
Page 9, Line 11November 2026 and, in such case, will take effect on the date of the
Page 9, Line 12official declaration of the vote thereon by the governor.