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In special session, Dems eliminated corporate tax loopholes and protected access to services to responsibly close budget deficit caused by GOP’s corporate tax cuts
DENVER, CO – After Republicans in Congress blasted a billion dollar hole in Colorado’s state budget, Democrats responsibly picked up the pieces with a balanced approach that closed corporate tax loopholes and established a framework to cut spending where possible and use some of the state’s budget reserve to protect the core services people rely on.
“Colorado Democrats have responsibly picked up the pieces from Trump and Washington Republicans’ big ugly budget, which any one of the GOP members of our Congressional delegation could have stopped,” said Speaker Julie McCluskie, D-Dillon. “Their bill gave corporations massive tax cuts that blew a billion dollar hole in our budget. We took a balanced approach that closed corporate tax loopholes, established a process to cut some spending, and used some of our rainy-day savings to protect funding for health care, roads and education. I’m especially proud that we were able to blunt some of the massive health care premium increases we expect to see on the Western Slope as a result of the Congress’s failure to act.”
“The GOP’s federal budget handed out a billion dollars of corporate tax breaks while making life more expensive for everyone else through higher health costs, energy costs, and grocery costs,” said Senate President James Coleman, D-Denver. “That’s why we returned to the Capitol: to stand up for Colorado families, listen to those on the frontlines of providing services, and work to maximize every dollar. I’m proud that we're leaving this special session having achieved a balanced, responsible response to the budget shortfall that closes corporate tax loopholes and protects services that Coloradans rely on rather than the interests of corporations.”
“Trump’s budget bill handed out massive tax cuts to corporations at the expense of working people while raising costs on everyone, which is why it’s only fair that we closed corporate tax loopholes and preserved funding for education, health care and public safety,” said House Majority Leader Monica Duran, D-Wheat Ridge. “Coloradans shouldn't lose out to protect corporations who just got $1 billion in tax cuts from Trump and the GOP Congress. In the special session we cracked down on offshore tax havens, eliminated special interest tax breaks, and protected the core services Coloradans rely on to get ahead and thrive.”
“Trump and the Congressional Republicans’ big tax bill let corporations dodge nearly $1 billion in taxes that they owe Colorado to help pay for essentials like health care, schools, and roads,” said Senate Majority Leader Robert Rodriguez, D-Denver. “While they put corporations and the wealthiest Americans first, we chose the hardworking people of Colorado by closing corporate tax loopholes and protecting essential services.”
Closing Corporate Tax Loopholes
HB25B-1003 repeals special corporate tax breaks for insurance companies with a “Regional Home Office”: Under current law, insurance companies with a headquarters/regional home office (RHO) in Colorado can take a special tax break that allows them to pay a lower tax rate. To qualify, 2.5 percent of an insurer’s domestic workforce must be located in Colorado. While intended to incentivize job creation in the insurance industry in Colorado, the State Auditor found in March 2025 that the tax credit is not achieving this goal, and most insurance companies have actually eliminated jobs while claiming this special interest tax break that only exists for them. The bill repealed this corporate tax break.
HB25B-1002 cracks down on foreign tax havens, offshore bank accounts, and tax loopholes for US companies that dodge Colorado taxes with foreign assets:
Expand the list of foreign tax havens: Colorado applies extra scrutiny to companies incorporated in common tax havens like the Cayman Islands and Panama, requiring these companies to still pay Colorado taxes unless they can prove they are legitimately operating in the foreign country (see HB21-1311). Updated information about international tax avoidance has indicated additional countries used for this purpose, and the bill applies the extra scrutiny to these countries.
No Colorado tax breaks for companies investing in other states: Trump’s 2017 tax cuts for the wealthy created a special tax break for multinational businesses that keep their intangible assets in the US, including patents, software, and trademarks. As a federal credit, the majority of claims are from corporations whose assets aren’t even located in Colorado. If the state allows the changes to apply to Colorado taxes as well, it would give a larger Colorado tax break to corporations for investments in other states. The bill decoupled the state from this federal credit entirely.
HB25B-1004 allows companies to pre-pay taxes at a discount: This bill allows an auction of a limited amount of future tax credits. Companies that buy the tax credits can effectively pre-pay a portion of their future taxes now, at a small discount, creating savings and flexibility for them while helping to fill the revenue hole created by H.R. 1 for the state. This was done in HB20-1413 to raise money for CLIMBER small business loans.
Several of the tax giveaways in H.R. 1, such as the changes to business depreciation rules, are retroactive or front-loaded to have a much bigger impact in the current fiscal year (2025-26) than future years; allowing companies to pre-pay future taxes now partially offsets this effect.
HB25B-1001 limits tax breaks for higher-earning business owners: Trump’s 2017 tax cuts for the wealthy allowed certain business owners to deduct (not pay taxes on) 20 percent of “qualified business income” (QBI) through 2025. The QBI deduction applies to pass-through businesses, such as partnerships, S corporations, and real estate investment trusts. H.R. 1 made this deduction permanent and made some modifications.
In 2020, Colorado decoupled from this federal tax change for business owners with incomes over $500,000 per year (or $1 million per year for joint filers), maintaining that they still needed to pay taxes on all of their business income (HB20-1420 and HB21-1311). The bill for the special session makes Colorado’s decoupling permanent; without taking action, the decoupling is currently scheduled to expire after 2025.
HB25B-1005 ends subsidies for collecting sales taxes by modernizing sales tax collection: Retailers and other companies that collect sales tax are currently allowed to retain a portion of that state sales tax, which was originally intended to cover the costs of collecting and remitting the tax. Currently, vendors can retain 4 percent of the sales tax they collect. Nowadays, electronic point-of-sale technology is ubiquitous even for small vendors, and it cheaply and easily automates the collection and payment of state sales tax. Since this burden has gone away, the bill repeals this subsidy – about one cent on every $10 of sales.
Preserving Access to Services
HB25B-1006 blunts large health insurance premium increases: With Congressional Republicans failing to extend the enhanced premium tax credits for people who purchase health insurance through the Affordable Care Act marketplace, average statewide premiums are projected to increase by 28 percent. In the Eastern Plains, premiums are expected to rise more than 33 percent. The Western Slope will see premium increases of about 38 percent. This bill invests in reinsurance to keep premium increases to a statewide average of 20 percent.
SB25B-002 restores access to health care for Medicaid recipients at Planned Parenthood: H.R. 1 immediately removed Planned Parenthood from the federal Medicaid program, forcing PPRM providers to cancel thousands of appointments. Weeks later, a Temporary Restraining Order reversed this federal prohibition, though the issue is still working its way through the courts. This bill authorizes state-funded reimbursement to Planned Parenthood for certain services, including cancer screenings, birth control consultations, and STI checks.
SB25B-003 preserves SNAP funding by adjusting Healthy School Meals for All ballot question: The GOP budget cuts the Supplemental Nutrition Assistance Program (SNAP), and hundreds of thousands of recipients may now lose access to food. This bill amends the language of a ballot measure (HB25-1274) that will be put before the voters this November. If it passes, it will allow funds raised for the Healthy School Meals for All (HSMA) program to be used to support SNAP, so long as the HSMA program is fully funded first.
Making Responsible Decisions for Colorado’s Fiscal Future
SB25B-001 updates spending reduction processes during revenue shortfalls: Under current law, the Governor has broad unilateral authority to suspend programs and services during a revenue shortfall via executive order. The bill requires the Governor to notify the Joint Budget Committee (JBC) of executive orders to reduce spending and requires the JBC to promptly meet to discuss the plan. The bill balances the authority between the Governor and the General Assembly by ensuring the JBC is involved in decision-making processes early on and by adding guardrails to the executive branch’s existing authority to help ensure that they continue to meet and implement legislative directives.
The bill also updates the triggers requiring spending reductions to more accurately reflect economic pressures and the current status of the reserve, which Democrats have worked to build up to 15 percent since the COVID pandemic when it fell below four percent. In addition to the triggers in existing law, the bill adds that if a revenue estimate indicates that the state is on track to use an amount of the reserve equal to three percent of the general fund appropriations for that fiscal year (e.g. around $490 million for FY26), the Governor must take action to reduce spending.