This bill makes adjustments to how income tax benefits are provided to individuals engaged in military service. Here are the key points:
State Income Tax Subtraction:
Starting in 2027, the bill removes the state income tax subtraction for compensation received by individuals for active duty service in the U.S. Armed Forces if the compensation is already included in federal taxable income. This change will apply only to individuals who have reacquired residency in the state.
Tuition Assistance for Colorado National Guard Members:
From 2027 to 2032, the bill introduces a refundable income tax credit as a form of tuition assistance for eligible members of the Colorado National Guard who are participating in an existing program administered by the Department of Veterans and Military Affairs (DVMA).
To claim the credit, National Guard members must apply for and use all available federal tuition assistance, which is not required to be repaid.
The eligible member will need a tax credit certificate for each academic semester or quarter for which they receive tuition assistance.
The total tuition assistance a member can receive under the program, including this tax credit, will remain capped by the existing program limits. Additionally, the DVMA may issue no more than $1 million in tax credit certificates per year.
Conforming Amendments:
Section 1 adjusts the bill to align with other relevant provisions.
Summary
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.
