Colorado Dems Put Hardworking People Over Corporations and the Very Wealthy

Three bills would close corporate tax loopholes to lower taxes for hardworking people and lift families out of poverty

DENVER, CO - The House Finance Committee today passed three bills to rebalance Colorado’s tax code and put working people first after Congress passed H.R. 1, which granted massive tax breaks to corporations and the ultra-wealthy while raising taxes on working families in Colorado. 

The bills would create a new tax credit for hardworking families. The Family Affordability Credit (FAC) is modeled after the highly successful Family Affordability Tax Credit.

In recent years, Democrats in Colorado have expanded the state Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) and created the Family Affordability Tax Credit (FATC) to boost the incomes of hardworking Colorado families and lift children out of poverty. A 2026 report found that the EITC, CTC and FATC cut child poverty by 37-percent and family poverty by 32-percent. These tax credits were entirely turned off for the next tax year due to H.R. 1, raising taxes on families, and forecasts show H.R. 1’s revenue impacts may reduce the credits in future years, too

“Corporations and the very wealthy shouldn’t get massive tax cuts in Colorado while families are plunged into poverty, but that’s exactly what’s happening because of the Republican budget Congress passed last year. Our package of bills will put money back into the pockets of hardworking people by closing special interest corporate tax loopholes,” said Rep. Lorena García, D-Unincorporated Adams County, sponsor of HB26-1222. “The Family Affordability Tax Credit is one of the most powerful tools that we have to drive down child poverty, but when the federal GOP passed H.R. 1, that tax relief was completely shut off. Colorado Democrats are fighting back with these tax policies to ensure that Colorado’s tax code works for Colorado children and families.”

Beginning for 2026 taxes, HB26-1221, HB26-1222 and HB26-1223 would create a new Family Affordability Credit that could be taken in addition to the CTC, EITC and FATC. The bills are revenue neutral – the credit will adjust based on available revenue, so that families receive all the benefits from modernizing the tax code.

HB26-1221 prioritizes working families and ensures corporations and high-earners pay their fair share by closing tax loopholes that offer deductions for top executives’ salaries. HB26-1222 mitigates the harm of H.R. 1 and would decouple Colorado’s tax code from four new federal tax deductions to rein in these corporate tax breaks at the state level only, especially for out-of-state investments. HB26-1223 would tax software the same, regardless of how it is acquired. 

The new credit is projected to provide a substantial benefit for families, with initial estimates of hundreds of dollars per child under the age of six for each of the bills. 

Prioritizing Working Families: HB26-1221 would limit a tax loophole that allows corporations to deduct the salaries of their CEO, CFO and the next eight highest-paid executives—up to $1 million each—as ‘operating expenses,’ even if the executive doesn’t reside in Colorado. The bill limits this deduction to $250,000 per salary. HB26-1221 passed by a vote of 6-4.

“Colorado Democrats are closing a corporate tax giveaway on million-dollar salaries to rebalance Colorado’s tax code toward hardworking Coloradans,” said Rep. Yara Zokaie, D-Fort Collins, sponsor of HB26-1221. “Last year, Trump and the federal GOP passed H.R. 1, giving a free lunch to CEOs by gutting the most successful anti-poverty tool in our state’s history. We have a choice to make– protect tax breaks for corporations or lower taxes for working families. The choice is clear for us. We’re demanding corporations pay their fair share to put money back into the pockets of Colorado families and cut child poverty.”

“Colorado Democrats believe in an economy where working people have a fair shot, but Congress’s H.R. 1 raised taxes on families and plunged children into poverty,” said Rep. Emily Sirota, D-Denver, sponsor of HB26-1221. “We’re limiting a tax loophole to ensure that the biggest corporations are not getting tax breaks on top-earners’ salaries while the federal GOP just shut off FATC. Our legislation will rein in this loophole to create a tax code that puts working people first.”

HB26-1221 would also lower the percentage of net operating loss deductions that corporations can deduct from their Colorado taxable income and shorten the length of time that they can carry those losses forward before claiming them, a technique that corporations use to avoid paying taxes year after year, even while making significant profits.

Mitigating the Harm of H.R. 1: HB26-1222 would de-couple Colorado’s tax code from four new federal business tax breaks created or expanded by H.R. 1, including certain write-offs and deductions for interest expenses on debt, especially for multi-national corporations. The bill would essentially deny these new tax cuts for corporations at the state level. HB26-1222 passed by a vote of 7-3.

“H.R. 1 not only offered corporate handouts to the wealthiest earners and corporations, but it also shut off a tax credit that reduced child poverty by 40-percent,” said Rep. Karen McCormick, D-Longmont, sponsor of HB26-1222. “Colorado Democrats believe that the people in our state deserve a tax code that rewards hardworking people. This bill mitigates some of the harms caused by H.R. 1 by limiting these new corporate tax breaks at the state level and instead deliver tax relief for lower- and middle-income Coloradans.”

Downloadable Software: HB26-1223 would repeal the downloadable software exemption to ensure taxes on these products are consistent, no matter how or where they are purchased. HB26-1223 passed by a vote of 6-5.

“We’re making Colorado’s tax code consistent and fair,” said Rep. Steven Woodrow, D-Denver, sponsor of HB26-1223. “The tax exemption on downloadable software has not been evenly applied, with consumers being taxed differently depending on the way that they purchase the product. We’re eliminating confusion around this tax exemption to create a more equitable tax code.”

“This bill makes Colorado’s tax code more equitable so everyone can expect to be taxed equally on downloadable software,” said Speaker Pro Tempore Andy Boesenecker, D-Fort Collins, sponsor of HB26-1223. “The same product should be taxed the same regardless of how it is purchased, and making this change can also put hundreds of dollars back into the pockets of middle and lower income families.”

The Colorado Office of the State Auditor reported that the antiquated sales tax exemption for certain downloadable software was being applied unevenly across the state, with 14-percent of vendors not applying the exemption at all.