A Bill for an Act
Page 1, Line 101Concerning additions to the definition of federal taxable
Page 1, Line 102income for purposes of determining a taxpayer's state
Page 1, Line 103taxable income.
Bill Summary
(Note: This summary applies to this resolution as introduced and does not reflect any amendments that may be subsequently adopted. If this resolution passes third reading in the house of introduction, a resolution summary that applies to the reengrossed version of this resolution will be available at http://leg.colorado.gov/.)
For tax years commencing on and after January 1, 2026, current law requires taxpayers to add the amount of any overtime compensation excluded or deducted from that taxpayer's federal gross income to that taxpayer's federal taxable income for purposes of determining the taxpayer's state taxable income. The bill repeals this addition and clarifies that this addition is "a tax policy change directly causing a net tax revenue gain to any district", so that reinstating this addition requires voter approval in advance pursuant to section 20 (4)(a) of article X of the state constitution.
For tax years commencing before January 1, 2026, current law requires certain taxpayers to add to their federal taxable income, for purposes of determining their state taxable income, an amount equal to the federal qualified business income deduction allowed under section 199A of the federal "Internal Revenue Code of 1986". The bill clarifies that extending this tax policy to apply to any tax year commencing on or after January 1, 2026, would be "a tax policy change directly causing a net tax revenue gain to any district" and requires voter approval in advance pursuant to section 20 (4)(a) of article X of the state constitution.
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) The state of Colorado is currently facing a budgetary structural
Page 2, Line 4deficit that the office of state planning and budgeting has projected will be $783 million for state fiscal year 2025-26;
Page 2, Line 5(b) The structural deficit does not allow the general assembly to disregard the state constitution or violate the rights of Colorado taxpayers;
Page 2, Line 6(c) Section 20 (4)(a) of article X of the state constitution requires
Page 2, Line 7the state to obtain voter approval in advance of a tax policy change directly causing a net tax revenue gain to any district;
Page 2, Line 8(d) Accordingly, the general assembly shall not enact a bill that
Page 2, Line 9would require an addition to a taxpayer's federal taxable income for
Page 2, Line 10purposes of determining the taxpayer's state taxable income without obtaining voter approval in advance for such an addition; and
Page 2, Line 11(e) Doing otherwise would violate section 20 (4)(a) of article X of the state constitution.
Page 2, Line 12SECTION 2. In Colorado Revised Statutes, 39-22-104, repeal as it will become effective January 1, 2026, (3)(u); and add (6) as follows:
Page 3, Line 139-22-104. Income tax imposed on individuals, estates, and
Page 3, Line 2trusts - single rate - report - tax preference performance statement
Page 3, Line 3- legislative declaration - definitions - repeal. (3) There shall be added to the federal taxable income:
Page 3, Line 4(u)
The amount of any overtime compensation excluded or deducted from federal gross income.Page 3, Line 5(6) (a) The addition to federal taxable income of an
Page 3, Line 6amount equal to the deduction allowed under section 199A of
Page 3, Line 7the internal revenue code for a taxpayer who files a single
Page 3, Line 8return and whose adjusted gross income is greater than five
Page 3, Line 9hundred thousand dollars, and for taxpayers who file a joint
Page 3, Line 10return and whose adjusted gross income is greater than one
Page 3, Line 11million dollars, qualifies as "a tax policy change directly
Page 3, Line 12causing a net tax revenue gain to any district" and either
Page 3, Line 13extending or enacting this addition requires voter approval in
Page 3, Line 14advance pursuant to section 20 (4)(a) of article X of the state constitution.
Page 3, Line 15(b) The addition to federal taxable income of the amount
Page 3, Line 16of any overtime compensation excluded or deducted from
Page 3, Line 17federal gross income qualifies as "a tax policy change directly
Page 3, Line 18causing a net tax revenue gain to any district" and requires
Page 3, Line 19voter approval in advance pursuant to section 20 (4)(a) of article X of the state constitution.
Page 3, Line 20SECTION 3. In Session Laws of Colorado 2025, repeal section 18 of chapter 202.
Page 3, Line 21SECTION 4. Safety clause. The general assembly finds,
Page 4, Line 1determines, and declares that this act is necessary for the immediate
Page 4, Line 2preservation of the public peace, health, or safety or for appropriations for
Page 4, Line 3the support and maintenance of the departments of the state and state institutions.