The bill authorizes Colorado to sell up to $125 million in future tax credits to corporations and insurance companies. Businesses buy the credits now (giving the state immediate revenue) and then use them to reduce their tax bills between 2026 and 2033.
Why do it?
1. Quick Revenue Without Raising Taxes
Selling tax credits lets the state generate cash immediately without officially raising tax rates or creating a new tax.
Politically, it can be easier to pass than a tax hike.
2. Avoiding New Debt
Borrowing (through bonds) creates state debt obligations that must be repaid with interest.
Selling tax credits is not “debt” in the traditional sense—it’s a revenue trade-off (money up front now, but less tax revenue later).
This can help the state stay within statutory or constitutional limits on borrowing.
3. Budget Flexibility
By shifting revenue forward, the state can address short-term budget gaps or fund one-time initiatives without committing to long-term borrowing costs.
The Treasury and Budget Office can schedule when credits are claimed to smooth out the state’s future revenue impacts.
Drawbacks of This Approach1. Reduces Future Revenue
Every tax credit sold now reduces future tax collections (in this case, through 2033).
That means future lawmakers will have less budget flexibility when credits are redeemed.
2. Favors Large Taxpayers
Only corporations with significant insurance premium tax or income tax liabilities can buy these credits.
It can look like a “special deal” for big companies who can afford to purchase credits up front.
3. Less Transparent Than Borrowing
Borrowing shows up clearly as state debt.
Selling tax credits doesn’t count as debt but has the same effect: future revenues are spoken for.
This can obscure the long-term cost of today’s revenue boost.
