Colorado Tax Law Update 2024 2025

2024-2025 Colorado Tax Law Update

12/16/2024|John R. Dundon II, EA|,

2024-2025 Colorado Tax Law Update

This post highlights changes in the sales, excise, lodging, and income taxes impacting Colorado taxpayers for 2024 and other tax and fee changes taking effect in 2024 and 2025. The following 4,300 words are ambitiously chalked full of essential updates.

Please refer to the statutes and session laws for full details on all changes made by recent legislation.

Sales, Excise, & Lodging Tax

House Bill 24-1041, Streamline Filing Sales & Use Tax Returns

  • This bill makes changes to sales tax filing frequencies.
  • As a reminder, sales tax filing frequency is determined by the monthly sales tax collected.
  • Current filing frequencies.
    • If you collect $15 or less monthly, your filing frequency is annual.
    • If you collect under $300 monthly, your filing frequency is quarterly.
    • If you collect $300 or more monthly, your filing frequency is monthly.
  • Beginning January 1st, 2025, filing frequencies change as follows.
    • If you collect $15 or less monthly, your filing frequency will remain annually.
    • If you collect under $600 monthly, your filing frequency is quarterly.
    • If you collect $600 or more monthly, you must file monthly.

As a reminder, the department will adjust a retailer’s filing frequency annually to increase the required filing frequency.

If you believe that your filing frequency should be adjusted to less frequent, contact the CDOR Taxpayer Services team.

HB24-1349 Firearms & Ammunition Excise Tax

  • If you are a retailer that sells ammunition, firearms, guns, or fire control components, an excise tax will apply to these goods beginning April 1st, 2025.
  • The tax is equal to 6.5% of the monthly net taxable sales from the retail sales in Colorado.
  • You must complete a new (not yet released as of this posting) form, DR-0556, Firearm and Ammunition Tax Return, and your DR-0100 Sales Tax Return.
  • Exemptions from this reporting and paying obligations apply to:
    • Vendor sales to active-duty military members, peace officers, and law enforcement agencies.
    • Vendors without a physical presence in the state of Colorado,
    • Vendors that make $20,000 or less in retail sales in the previous calendar year unless and until the vendor’s retail sales exceed $20,000 in a calendar year.
  • Procedural details:
  • Registration is required using Form CR0100 Colorado Sales Tax and Withholding Account Application.
  • Vendors will be required to file and pay this tax electronically.
  • Vendors registration must be renewed on or before January 1st of each even-numbered year.

SB24-230 Oil & Gas Production Fees

  • This law creates a new production fee for oil and gas producers beginning July 1st, 2025.
  • The first tax return is due by November 30th, 2025, for the July through September 2025.
  • Oil and gas producers must register with the Department of Revenue
  • Remit taxes to the department using the yet-to-be-released DR-1787 Oil and Gas production fee return.
  • This fee must be filed and paid electronically.

SB24-184 Support Surface Transportation Infrastructure Development

  • This applies to short-term vehicle rentals of 30 days or less.
  • Motor Vehicle Daily Rental Fee
  • This bill created a new congestion impact fee, impacting retailers who file the form DR-1777 Daily vehicle rental fee return.
  • Form DR-177 has been renamed and is now the Motor Vehicle Daily Rental Return.
  • If you are currently filing this form, include the new congestion impact fee in your fee collection and remittance to the department.
  • The new fee has been set at $3 a day for January 2025 through June 2025.
  • Although the new congestion impact fee is separate from the Motor Vehicle Daily Rental Fee, both fees will be combined on your return.
  • Both fees increase with inflation each July 1st.

HB23-1272 Tax Policy That Advances Decarbonization

  • This bill creates several new credits, including
    • Sustainable Aviation Fuel Production Credit.
    • Geothermal electricity production credit.
    • Geothermal Energy Expenditure credit.
    • Industrial Clean Energy Credit.
  • All credits listed here:
    • will be claimed with the clean hydrogen tax credit
    • are issued by the Colorado Energy Office, not the Colorado Department of Revenue.
      • Contact the Colorado Energy Office directly for information on the certification process.
      • An application must be submitted before starting a project to reserve credits.
      • Taxpayers must receive a credit certificate from the Colorado Energy Office and submit it with their return to claim the credit.

You can also visit the Climate-Friendly Tax Credits and Exemptions, which contains helpful information for 12 different credits, including links to the Colorado Energy Office’s website.

The Sustainable Aviation Fuel Production Credit

  • The Sustainable Aviation Fuel Production Credit equals 30% of the cost paid to construct, reconstruct, or erect a facility for construction beginning January 1st, 2024, through January 1st, 2027.
  • This credit is allowed for construction that begins after January 1st, 2020
  • Construction from January 1st, 2027, through 2033 is also allowed and will decrease in size over time.
  • The credit percentages will also decrease over time.
  • Sustainable aviation fuels are subject to recapture if they do not meet the credit requirements.

Innovative Motor Vehicle and Innovative Truck Credits

  • The qualifying criteria for the innovative motor vehicle and truck credit are mostly the same and distinguished primarily by gross vehicle weight rating.
    • The Innovative Motor Vehicle Credit is available for vehicles with a gross weight rating (GVWR) of 8,500 pounds or less.
    • A vehicle with a gross vehicle weight rating over 8,500 pounds will qualify for the innovative truck credit.
  • Motor vehicle dealers were able to start accepting assignments in 2024, and advance payments will begin in 2025.
  • Motor vehicle dealers and financing entities that accept advanced payments of these credits can request payment of a refund every quarter.
  • Dealerships must file a quarterly report electronically to the Department of Revenue.
  • They’ll do this using a quarterly spreadsheet, which can be found next to form DR-0618, Innovative Motor Vehicle Tax Credit election statement.
  • Let’s look at the details.
    • The $5,000 credit for category one vehicles in 2024 will decrease to $3,500 beginning in 2025.
    • There is an additional $600 for assigning credit to the dealer or financing entity allowed for qualifying motor vehicles purchased or leased in 2024 or 2025.
    • An additional $2,500 is allowed for qualifying motor vehicles purchased or leased in 2024 or 2025 with a manufacturer’s suggested retail price (MSRP) below $35,000.
    • There is a $5,000 credit for Category 7 light-duty passenger vehicles with a gross vehicle weight rating of 8,500 pounds or light-duty electric trucks for 2024.
      • This credit will decrease to $3,500 beginning in 2025.
    • The credit is $12,000 for medium and heavy-duty trucks for tax years 2024 and 2025.
      • Some consumer electric pickup trucks will qualify for this credit.
      • For example, Hummer’s gross vehicle weight rating is over 10,000, qualifying for a $12,000 credit as a medium-duty truck.

Electric Bicycle Tax Credit

  • I encourage you to view that recording on the CDOR YouTube channel for a deeper dive into the topic.
  • House Bill 23-1272 created a new e-bike credit, which began in 2024, with an option for advanced payment for retailers beginning in 2025.
  • Retailers must offer a discount to the purchaser.
  • Retailers will claim the credit on (yet to be released) Colorado tax form DR-0619, which is assigned innovative motor vehicle and truck credits and an electric bicycle credit reconciliation schedule.
  • Retailers may request quarterly advanced tax credit payments to supplement their revenue loss when selling electric bicycles at a reduced price.
  • Retailers will use the quarterly reporting schedule listed on form DR-0619.
  • These dates align with the due dates for estimated payments: April 15th, June 15th, September 15th, and January 15th.
  • For fiscal year filings, the due dates are the 15th day of the 4th, 6th, 9th, and 12th months of the tax year.
  • A retailer must be qualified by satisfying the following five criteria.
    • Make retail sales of qualified electric bicycles.
    • Hold a current Colorado sales tax license.
    • File monthly Colorado sales tax returns on time, showing a tax liability for at least 12 months.
    • Pay taxes promptly due to the monthly Colorado sales tax return.
    • Register with the department via Revenue Online.

CDOR Registration details

  • To qualify for the credit, sales must be made to a qualified purchaser.
  • A qualified purchaser is a Colorado resident who has not previously purchased a qualified electric bicycle that a qualified retailer discounted during the same calendar year.
  • To verify that the purchaser is qualified, qualified retailers must collect from the purchasers either a signed and completed form, DR-0514, Qualified purchaser of an electric bicycle affidavit, or the information included on Form DR-0514, which they then enter into a DR-0514 Excel spreadsheet.

To Claim the credit

  • All qualified retailers must file the required quarterly reports and an annual Colorado income tax return for all retail sales of newly qualifying electric bicycles sold in Colorado during their tax year.
  • For income tax years beginning on or after January 1st, 2025, a qualified retailer will receive payment of the income tax credit after filing their Colorado income tax return.
  • Any credit that exceeds the income tax liability for the tax year will be refunded to the qualified retailer, or a qualified retailer may elect to receive four advance payments of the credit
  • Qualified retailers must make this election when filing their required quarterly reports and specifying how much advance payments they would like to claim for which they are eligible.
  • The CDOR ‘hopes’ that because the reporting schedule and schedule for requesting quarterly advanced payments align with the due dates for estimated payments, retailers will offset their estimated and advanced payments against each other.
  • Now, that’s a tax mouthful. So, let’s look at some examples of how this works in real life.
    • If a retailer earns $20,000 in credit in the first quarter and owes an estimated payment of $12,000, the retailer may elect to remit no estimated payment and request only $8,000 as an advance payment.
      • The remaining $12,000 of credits will be available for the retailer to claim and apply toward their tax liability on their return.
    • If the situation were reversed and a retailer earned $80,000 in credit in the first quarter. Their required estimated payment was $100,000, so the retailer could request no advance payment and remit an estimated payment of only $20,000.
      • The $80,000 credit will be available for the retailer to claim and apply toward their tax liability on their return.
    • Please note that this is a suggestion that the retailers are not required to follow.

HB24-1050 Simplify Processes Regarding Certain Local Government Taxes

  • Local jurisdictions that impose a local lodging tax or applicable sales or use tax must file a copy of the resolution or ordinance and any amendments to these taxes to the Department of Revenue.
  • So, if you are a local jurisdiction that imposes a lodging tax, you must begin reporting this information before June 15th, 2025.

HB24-1234 Sunset Review of High-Cost Support Mechanism

  • These sunsets the review and report on the high-cost support mechanism established by the Public Utilities Commission (PUC).
  • This means that the high-cost support mechanism will continue indefinitely, and the computation of fees for the Public Utilities Commission Fixed utility fund and telecommunications utility fund will be modified.

Income Tax Bills

HB24-1311 Family Affordability Tax Credit

  • This bill creates a new family affordability tax credit for income-qualified taxpayers with a qualifying child aged 16 or younger.
  • It can be stacked with the Colorado Child Tax Credit.
  • If your federal adjusted gross income is $15,000 or less, or you jointly file with an AGI of $25,000 or less, you are eligible for a tax credit of:
    • up to $3,200 per qualifying child aged five or younger and
    • up to $2,400 per qualifying child aged 6 to 16.
  • These per-child credit amounts are reduced for those with AGI incomes above these thresholds.
  • The credit is fully phased out above $85,000 AGI for single or $95,000 for joint filers.

Please be advised that:

  • The Colorado Department of Revenue is consolidating dependent information into one place.
  • The new family affordability tax credit calculation is being added to form DR-0104CN, which was used previously to claim only the child tax credit.
  • It helps to think of the family affordability credit as an expansion of the existing child tax credit because that is how it is framed on the form.
  • The two credits have enough similarities and differences to be confusing, so it might help to compare them side by side for a better understanding.
    • The child tax credit is for income tax year 2022 and later
    • The Family Affordability Tax Credit is for 2024, and its availability for additional years will be contingent on state revenues.
    • The thresholds for the two credits are different.
      • The AGI limit for the Child Tax Credit is $75,000 for a single filer and $85,000 for joint filers.
      • The AGI limit for Family Affordability Tax Credit is $85,000 or less for a single filer and $95,000 or less for joint filers.
      • Regarding age limits:
        • The Child Tax Credit is allowed only for children under six
        • The Family Affordability Credit is for children under age 17.
      • Both credits phase out as the taxpayer’s AGI increases at different rates and intervals.
      • The Family Affordability Credit is $2,400 for children aged 6 to 16 and $3,200 for children aged five and under.
      • The calculation for this credit will be made on the DR-0104CN and then carried over to the DR-0104 CR.

SB23-016 Greenhouse Gas Emission Reduction Measures

  • You may remember this bill from last year, as it went into effect in 2024. It created a refundable income tax credit for qualified retailers of electric-powered lawn equipment.
  • This bill aims to incentivize purchasing and using electric lawn equipment to replace comparable gas-powered equipment and reduce greenhouse gas emissions.
  • This credit is available for the 2024, 2025, and 2026 tax years.
  • For more details, see the Electric-Powered Lawn Equipment Tax Credit

HB23-1008 Food Accessibility

  • This bill creates a new add-back for business meal deductions.
  • If you’re an individual or corporation and claimed the business meals deduction on your federal tax return, you must add this amount to your net state income.
  • The additional tax collected from this add-back will be used to fund food accessibility programs for items not covered by the Community Food Consortium, which is certified by the Department of Agriculture
  • This is for members of the Community Food Consortium for Small Food Retailers and Colorado-owned and Colorado-operated farms.
  • The credit is a percentage of the amount spent on specific items and fees. For tax year 2024, the tax credit can be 85% of the amount paid and 75% for tax years 2025 through 2030.
  • This bill also allows the Department of Agriculture to certify Small Food Business Recovery and Resilience Grant program grants.
  • This is for small food retailers or small family farms and allows them to purchase equipment from the small food business recovery and resilience grant program.
  • The credit is a percentage of the amount paid by the purchaser for qualifying equipment.
  • For more detail, see the Colorado Department of Agriculture: Community Food Access Program

SB23-290 Natural Medicine Regulations and Legalization

  • This bill amends the regulatory framework for natural medicine and natural medicine products in Colorado.
  • Natural medicine under this act includes psilocybin, psilocin, dimethyltryptamine, Ibogaine, and mescaline.
  • Like the Colorado Marijuana Code, this bill creates the Colorado Natural Medicine Code process.
    • Taxpayers licensed under the Colorado Natural Medicine Code can subtract expenses disallowed under section 280E of the Internal Revenue Code on their state income tax.
    • This subtraction applies to tax years beginning on or after January 1st, 2024.
    • This subtraction will be included on income tax forms on the same line as the Colorado Marijuana business deduction.

SB24-228 TABOR Refund Mechanisms

  • This bill created new refund mechanisms and changed how the state refunds Tabor surplus revenues to taxpayers.
  • The Department of Revenue is responsible for administering the new refund mechanisms and changes in the bill.
  • The first refund mechanism will fund senior and veteran property tax exemptions.
  • This bill established the second mechanism as a temporary state income tax rate reduction.
    • The state income tax rate is reduced to 4.25% for income tax year 2024 only.
    • Future income tax rate reductions may occur depending on the surplus amount.
  • After the state income tax reduction, the remaining excess revenue will be refunded in the familiar six-tier state sales tax refund.
    • This mechanism grants taxpayers a refund according to where their AGI falls among six tiers.
  • The deadlines for claiming the six-tier state sales tax refund were amended by this bill.
    • All qualified individuals may now claim the refund on a return filed on or before the October 15th extension deadline.
  • TABOR

HB23-1277 Reporting Adjustments to Taxable Income

  • You may remember this bill from last year. 2024 is the first tax year it applies to.
  • The withholding payment made on Form DR-0108 has been eliminated for partnerships, S corporations, and pass-through entities.
  • Instead, all non-resident partners and shareholders must be included in a composite return unless they opt out by filing the form DR-0107, Non-resident partner or shareholder agreement.
  • House Bill 23-1277 also impacts filing due dates.
    • For C corporations, the due date for tax years beginning on and after January 1st, 2024, has been changed to the 15th day of the fifth month after the close of the taxable year.
    • For calendar-year filers, this changes the due date from April 15th to May 15th, restoring the one-month lag between federal and state filing deadlines.
    • The Colorado Extension deadline is also pushed back one month.

HB23-1189 Employer Assistance for Home Purchase Tax Credit

  • This bill creates a tax credit that employers may claim for contributions to their employee’s qualifying home savings accounts.
  • Employers who establish savings accounts for an employee to pay eligible expenses in connection with a qualifying home purchase are eligible for 5% of the amount contributed.
  • The employer may claim no more than $5,000 per employee and $500,000 per tax year.
  • If an employee leaves or uses the money for an ineligible expense, the employer must pay the employee any employee contributions and repay the credit as a recaptured credit.
  • Any credit over the employer’s tax liability may be carried forward for up to five years.
  • There is considerable nuance with this tax credit. Eligibility and tax treatment will depend on specific situations.
  • Employers may request a private Letter Ruling for specific guidance from the department on this credit.

HB24-1052 Senior Housing Income Tax Credit

  • This bill reinstates the income tax credit available for 2022.
  • Like tax year 2022, you’ll qualify for this credit at the end of 2024 if:
    • you are 65 or older
    • have a federal adjusted gross income of less than or equal to $75,000 for a single filer or less than $125,000 if filing a joint return
    • did not claim the partial senior property exemption for the 2024 property tax year.
  • One of the most common errors made in 2022 was that taxpayers claimed this credit even though they also claimed the partial senior property tax exemption for the same year.
  • Taxpayers made this error for three common reasons.
    • First, the senior property tax exemption is only a partial exemption, and some people do not realize that they received the exemption because they still have property tax liability.
    • Second, once an application for the senior property tax exemption is approved, it remains effective for future property tax years.
    • Third, some people forgot that they applied for the exemption several years ago.
  • The credit amount is $800 for a qualifying senior filing a single return with a federal AGI less than or equal to $25,000.
    • For every $500 of AGI above $25,000, the credit amount is reduced by 8%.
  • If two taxpayers who share the same primary residence and may legally file a joint return but file separate returns claim the credit, the amount is $400.
    • The AGI must still be less than or equal to $25,000; for every $500 of AGI above $25,000, the credit amount is reduced by 4%.
    • The credit amount is $800 for two taxpayers filing a joint return.
    • The federal AGI must be less than or equal to $25,000; for every $500 AGI above $25,000, the credit amount is reduced by $4.
  • A taxpayer who qualifies for a property tax and rent assistance or heat assistance grant during 2024 is eligible for the full credit amount.
  • Residency status impacts the amount of credit you’ll receive.
    • This version of the bill or credit program apportions the amount of credit available if you are a part-year resident of Colorado versus a full-year resident.
    • Before the 22 version, the credit wasn’t subject to an apportionment factor, so both full-year and part-year residents received the same credit amount.
    • Now, part-year residents will calculate their full-year amount and then multiply it by the apportionment percentage from their DR0104PN.

HB24-1434 Expand Affordable Housing Tax Credit

  • This bill allocates additional credit funding from 2024 through 2031, beginning with income tax year 2024.
  • Any credits awarded from this additional funding pool use an accelerated allocation schedule, which allows the taxpayer to use 70% of the total allocated credit during the first year and 6% after until your total allocated amount has been redeemed.
  • This redemption schedule is allowed on top of the existing one for this credit, but only if the Colorado Housing and Finance Authority (CHFA) or CHFA awards the credit out of the new funding source.
  • Beginning in tax year 2025, developers can receive an income tax credit for building affordable housing development in a transit-oriented community.
  • You must obtain certification from the Colorado Housing and Finance Authority.
  • This credit is also claimed at 70% during the first year, then 8% for years two and three, and 7% for years four and five.
  • This credit is subject to recapture should the qualified development no longer meet compliance requirements.

HB24-1036 Adjusting Certain Tax Expenditures

  • Beginning January 1st of 2025, House Bill 24-1036 repeals 13 infrequently used tax expenditures.
  • I’ll highlight critical upcoming changes and encourage you to review the bill for any expenditure that may directly impact you.
  • One crucial item that has been repealed is the cigarette and Tobacco bad debt tax credit for cigarette and tobacco wholesalers, distributors, and retailers.

HB23-1260 Advanced Industry and Semiconductor Manufacturing Incentives

For more information on any Colorado tax law updates, contact me today.

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