• Fiscal Policy & Taxes

The proposed bill, introduced by the Legislative Oversight Committee Concerning Tax Policy, aims to modify several tax expenditures in Colorado. These adjustments are designed to enhance tax policy efficiency and align with current economic conditions. The key changes are as follows:

• Income Tax Credit for Unsalable Alcohol:

  • The bill disallows this credit after December 31, 2025, and fully repeals it on December 31, 2030.

• Fuel Transit Loss Deduction:

  • Currently, taxpayers can deduct up to 2% of taxable fuel gallons removed from a terminal to account for transit losses. The bill reduces this allowance to 1%, effective January 1, 2026.

• Energy Storage System Credit:

  • The existing credit, which offers 10% of the purchase price for residential energy storage systems and is set to expire on January 1, 2025, is extended through tax years commencing before January 1, 2027. The repeal date is correspondingly extended to January 1, 2030.

• Reducing Emissions from Lawn Equipment Credit:

  • This credit, previously available until the tax year beginning January 1, 2027, is extended to the tax year beginning January 1, 2029. The Department of Revenue's reporting requirement is extended through January 1, 2030, and the credit's repeal date is moved from December 31, 2033, to December 31, 2035.

• Sales and Use Tax Exemptions for Agricultural Products:

  • Effective January 1, 2026, the bill exempts items such as soil conditioners, plant amendments, plant growth regulators, mulches, compost, certain soils, manure, and specific fish products from sales and use tax by amending the definition of "agricultural compounds."

• Clarifications of Tax Expenditure Purposes:

  • The bill articulates the purposes of several tax provisions, including:
    • Insolvency assessments paid insurance premium tax credit.
    • State refund income tax deduction.
    • Dyed special fuels and off-road fuel tax excise tax exemption.
    • Off-road fuel use refund.
    • Wholesale sales exemption from sales tax.

These clarifications aim to enhance transparency and provide measurable criteria for evaluating the effectiveness of each tax expenditure.

Legislative Oversight Committee Concerning Tax Policy. The
bill adjusts several tax expenditures as follows:
  • Section 1 of the bill disallows the income tax credit for
unsalable alcohol after December 31, 2025, and repeals the
credit on December 31, 2030;
  • Currently, a taxpayer is allowed to deduct up to 2% of the
taxable gallons of fuel removed from a fuel terminal to
account for fuel that is lost in transit. Section 2 changes the
allowance to 1% starting January 1, 2026.
  • Currently, for income tax years commencing before
January 1, 2025, a purchaser who installs an energy storage
system in a residential dwelling may claim an income tax
credit in an amount equal to 10% of the purchase price paid
by the purchaser for the energy storage system. Section 3
extends the credit to include subsequent income tax years
commencing before January 1, 2027, and extends the
repeal of the credit from January 1, 2028, to January 1,
2030.
  • Currently, the reducing emissions from lawn equipment
income tax credit is available until the tax year beginning
January 1, 2027, and the department of revenue is required
to issue a report on the credit for each income tax year from
January 1, 2025, through January 1, 2028. Section 4
extends the credit until the tax year beginning January 1,
2029, extends the reporting requirement through January 1,
2030, and extends the repeal date of the credit from
December 31, 2033, to December 31, 2035.
  • By amending a definition of agricultural compounds that
is incorporated into the definition of wholesale sale used
for purposes of the sales and use tax statutes, section 5
exempts from sales and use tax soil conditioners, plant
amendments, plant growth regulators, mulches, compost,
soil used for aboveground production of agricultural
commodities, manure, fish for non-stocking purposes, fish
embryos, and fish eggs beginning January 1, 2026;
  • Section 6 states that the purpose of the insolvency
assessments paid insurance premium tax credit is to offset
the cost for an insurer paying required assessments into the
life and health insurance protection association and that the
credit's effectiveness is measured by how many eligible
insurers claim the credit and the amount claimed relative to
payments into the life and health insurance protection
association;
  • Sections 7 and 8 state that the purpose of the state refund
income tax deduction is to avoid re-taxing a taxpayer's state
income tax refund when a state refund is required to be
included as income on the taxpayer's federal return
pursuant to the internal revenue code and that the
effectiveness of the deduction is measured by the number
of taxpayers claiming the deduction and the total amount of
state refunds claimed as deductions from Colorado taxable
income;
  • Section 9 states that the purpose of the dyed special fuels
and off-road fuel tax excise tax exemption is to entirely
exclude dyed diesel or kerosene from the special fuels
excise tax where the dyed fuel is used for specified
off-road purposes or by governmental entities and that the
effectiveness of the exemption is measured by the number
of taxpayers claiming the exemption and the amount of tax
that would have been paid without the exemption;
  • Section 10 states that the purpose of the off-road fuel use
refund is to compensate taxpayers who buy and pay the tax
on otherwise taxable fuels for the purpose of using the
fuels for specified non-taxable purposes under federal law
and that the effectiveness of the refund is measured by the
number of taxpayers claiming a refund and the amount of
tax that was already collected and is refunded; and
  • Section 11 states that the purpose of the wholesale sales
exemption from sales tax is to ensure that sales tax is levied
and collected only on a final end sale to a retail consumer
and not on wholesale sales and that the effectiveness of the
wholesale exemption from sales tax is measured by the
number of taxpayers claiming the wholesale exemption
from tax and the amount of tax liability not paid.

• Past bill versions
• Past fiscal notes
• Committee activity and documents
• Bill History