This story by Sara Wilson appeared on Colorado Newsline on March 10, 2026.
A trio of Colorado bills that would roll back corporate tax breaks to fund a new tax credit for low- and middle-income families, following the expected shutoff of the Family Affordability Tax Credit this year, passed a state House committee Monday, an initial step in the bills’ passage.
“This isn’t just about fairness in our tax code,” said Rep. Emily Sirota, a Denver Democrat. “It’s about ensuring that the most important investments we make are in our children and our working families. This legislation reflects our values: fairness, responsibility and a commitment to Colorado’s future.”
Put together, the bills would raise over $320 million in revenue for the 2026 fiscal year and close to $590 million in the next one, to head back to families that are eligible for the existing tax credit, known as FATC. That credit, created in 2024, uses revenue over the constitutional cap set by the Taxpayer’s Bill of Rights and is turned on by certain revenue conditions. Last year, families claimed over $865 million using the credit, and one analysis found that it cut childhood poverty by 20% in the state.
But Colorado’s tax revenue sharply dropped, partially due to the Republican-backed tax bill that Congress passed last summer known as H.R.1 or the One Big Beautiful Bill Act, and FATC will therefore not be triggered for at least the current fiscal year. Colorado’s tax code mostly mirrors the federal one.
“We are in a situation where we have families that have just made it out of poverty and are at risk of being thrown right back in,” said Rep. Yara Zokaie, a Fort Collins Democrat.
Lawmakers now want to limit corporate tax write-offs, some of which were created by H.R.1, to funnel money into a new affordability credit that families would receive, even in years FATC isn’t available. That would help those families, supporters said, as well as local economies.
“Folks at the lower end of the income scale — when they get money, they spend it,” said Rep. Steven Woodrow, a Denver Democrat. “They don’t have savings. When you live paycheck to paycheck, whatever money you get goes back immediately to recirculate into the economy.”
The bills are sponsored by Democrats, who control majorities in both chambers of the state Legislature.
House Bill 26-1221 would limit a corporation’s ability to deduct part of the salaries of their highest-paid executives. In federal law, that amount is up to $1 million, but the bill would limit it to $250,000 in Colorado. It originally eliminated the deduction entirely, but it was amended to the quarter-million figure in committee.
The bill would also tweak the state’s deduction level for net operating losses — when a company’s deductions for the year are more than its gross income — from 80% of taxable income over 20 years to 70% over 10 years.
Objections from Republicans
Rep. Bob Marshall, a Highlands Ranch Democrat, joined Republicans in voting against the bill in committee. He said that the operating loss deduction is particularly important for startup companies that may not be profitable for many years.
“I am concerned about the increasing complexity we’re putting into our code,” he said. “We are not doing just an offset of what H.R.1 did to us, but we’re trying to go farther. What is concerning is the flippancy about the net operating loss.”
Federal decoupling
House Bill 26-1222 would decouple Colorado from corporate tax breaks created in H.R.1, such as business interest expense deductions, expensing for research and development and expensing for some properties. Businesses could still claim those deductions on federal taxes. The bill would result in the bulk of the money that would fund the new credit.
“Let’s say Suncor wants to build a new refinery,” said Rep. Karen McCormick, a Longmont Democrat, referring to a corporation that operates an oil refinery in Commerce City. “They can use (the federal property deduction) to deduct the full cost of that real estate and construction for the new refinery in the first year they put it into service. This bill will have that business add that back in for state tax purposes.”
Alicia Gelinas, the president of the Colorado Association of CPAs, argued that the changes proposed in the bill will make taxes significantly more complex and increase compliance costs.
“We understand the desire to support Colorado families, and I don’t think you have to pit Colorado businesses against families,” she told lawmakers. “This bill risks undermining that goal by making the businesses that our families run more complicated and more costly to manage, and — for them — more difficult to plan for their future.”
That bill passed committee on a party-line vote.
‘Burdens on businesses’
House Bill 26-1223 would repeal a Colorado sales tax exemption for software people purchase online and download, yielding about $90 million per year. Eight states exempt electronically-delivered software.
“The tax code shouldn’t treat the same product differently based solely on whether it is downloaded or delivered on a disc,” said Rep. Andrew Boesenecker, a Fort Collins Democrat.
Several large Colorado cities have already gotten rid of the exemption.
Marshall joined Republicans again to vote against the bill.
In a statement, Republican Rep. Anthony Hartsook, a Douglas County Republican who sits on the House Finance Committee, criticized the Democrats’ plan to “increase burdens on businesses and expand government programs.”
“Instead of creating another Family Affordability Tax Credit, that has pulled well over $2 billion out of the Taxpayer Bill of Rights surpluses in 2024 and 2025 that would otherwise have gone back to the taxpayers, the Legislature should focus on policies that actually lower costs and strengthen our economy,” he said.
All three bills now head to the House Appropriations Committee and, if they pass the second committee, the entire House chamber.
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