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Bills aim to crack down on tax evasion, tax breaks for corporations and would help fill $1 billion revenue hole created by Congressional Republicans’ budget
DENVER, CO – The House Appropriations Committee today passed two bills that would protect core services and close corporate tax loopholes after Republicans in Congress created a $1 billion hole in Colorado’s budget with massive corporate tax cuts.
HB25B-1002 would crack down on foreign tax havens and offshore bank accounts, and HB25B-1001 would limit tax breaks for higher-earning business owners by permanently decoupling from a federal tax giveaway.
“This bill cracks down on corporate tax evasion and offshore tax cheats to ensure that billionaires can’t dodge the taxes they owe to pay for Colorado roads, schools and health care,” said Rep. Yara Zokaie, D-Fort Collins, sponsor of HB25B-1002. “Offshore tax loopholes help companies hoard wealth and avoid paying their fair share. With this legislation, we’re keeping Colorado dollars in Colorado and taking a stand against Trump's handouts to giant corporations."
“With Trump’s tax bill offering massive tax breaks to corporations, it is only fair that they aren’t able to dodge Colorado taxes by using tax loopholes the Republicans in Congress put into the federal tax code that Colorado never agreed to accept under our rolling conformity tax system,” said Rep. Bob Marshall, D-Highlands Ranch, sponsor of HB25B-1002. “This bill would help prevent US companies from hiding their income in tax havens like the Netherlands and Singapore. Our legislation would also decouple the state from a federal tax credit to ensure Colorado taxpayers aren’t subsidizing corporations that operate outside of our state.”
HB25B-1002, which passed by a vote of 7-4, would crack down on foreign tax havens, offshore bank accounts and other tax loopholes for US companies that dodge Colorado taxes with foreign assets. Unless they can prove legitimate operations in the foreign country, Colorado requires companies incorporated in common tax havens, like Cayman Islands and Panama, to pay Colorado taxes to prevent international tax avoidance. For tax years beginning on or after January 1, 2026, the bill would expand the list of countries to include Hong Kong, Ireland, Liechtenstein, the Netherlands and Singapore.
In 2017, President Trump created a special tax break, now known as the Foreign-Derived Deduction Eligible Income (FDDEI) deduction, for multi-national businesses that kept their intangible assets in the US. The bill would decouple the state from the FDDEI to prevent companies from benefiting from larger Colorado tax breaks for investments and assets that are based outside of the state.
President Trump’s 2017 tax cuts also allowed pass-through businesses, like S corporations and real estate investment trusts, to avoid paying taxes on up to 20-percent of qualified business income. In 2020, the Colorado legislature passed the “Tax Fairness Act”, decoupling from this federal tax cut by creating an add-back for this deduction for high-income business owners with an income over $500,000 per year for single filers or $1 million per year for joint filers.
“Trump’s tax bill blew a billion-dollar hole in our state budget while padding the pockets of billionaires, forcing the legislature into this special session,” said Rep. Emily Sirota, D-Denver, sponsor of HB25B-1001. “This legislation would close this corporate tax loophole in Colorado and prevent cuts to education, health care and core services that people rely on. The people who deserve tax relief are the hardworking people of Colorado - not corporations.”
The legislature extended the decoupling and add-back through 2025. HB25B-1001 would make Colorado’s decoupling permanent, responding to the action by Republicans in Congress to make the tax giveaway permanent at the federal level in HR 1. The bill passed by a vote of 7-3.