.png){kind=logo}
Colorado Dems put hardworking people over corporations by closing corporate tax loopholes to lower taxes for hardworking people and lift families out of poverty
DENVER, CO - The House today advanced 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.
“We have a choice to make: we can protect tax loopholes for the wealthiest corporations and billionaires, or we can reduce taxes for hardworking families and lift children out of poverty. For Democrats, the choice is clear, but today House Republicans sided with special interests and corporations over Coloradans and small businesses,” said Rep. Lorena García, D-Unincorporated Adams County, sponsor of HB26-1222 and HB26-1289. “If we do not pass these bills, the largest corporations will see new and expanded tax handouts while hardworking families are stripped of a state tax credit that has reduced poverty by over 40 percent in Colorado in one year. These bills prioritize hardworking families and small businesses so we can build an economy that works for everyone, not just mega-corporations and billionaires who just got a massive tax cut from Republicans in Congress.”
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.
The House also advanced a bill that would modernize and simplify the tax code by repealing ineffective or unnecessary special tax exemptions and deductions to expand and extend tax credits for wildfire and beetle kill mitigation, job creators, and investments in clean energy.
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 closing these loopholes.
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 thousands 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, specifying that pay over that amount cannot be deducted as ‘expenses.’
“This bill reflects our values - giving families the support they need to thrive while ensuring that top earners pay their fair share,” said Rep. Yara Zokaie, D-Fort Collins, sponsor of HB26-1221. “We should not be giving tax breaks to millionaire CEOs and giant corporate interests while Colorado families struggle to put food on the table. We are making our priorities clear with this bill by reducing corporate tax breaks to create the Family Affordability Credit, which will lift children out of poverty and give hardworking families more stability.”
“Today, House Republicans chose tax cuts for corporations and billionaires over tax credits for families and children in poverty. The bill we advanced ensures that we are prioritizing children and hardworking families, not corporations and the ultra-wealthy,” said Rep. Emily Sirota, D-Denver, sponsor of HB26-1221. “Colorado Democrats believe that corporations should not receive tax breaks on million-dollar salaries while working families struggle to put food on the table. We’re limiting a corporate tax loophole and directing those benefits back to families to continue the progress we have made at driving down child poverty rates.”
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 on their state taxes. Importantly, this bill holds state taxes where they were before H.R. 1 created new tax breaks for corporations, and does not increase taxes relative to tax year 2025.
“Colorado Democrats believe in investing in hardworking people, and that means pushing back against Trump’s corporate tax breaks,” said Rep. Karen McCormick, D-Longmont, sponsor of HB26-1222. “When the federal GOP passed Trump’s H.R. 1, it stopped the Family Affordability Tax Credit, which had successfully slashed child poverty by 37 percent. This bill is one of many policy changes that Colorado Democrats are making to protect hardworking people from the impacts of H.R. 1. Let me be clear, this bill simply restores state taxes to where they were before Congress slashed corporate taxes.”
Updating and Simplifying the Tax Code: HB26-1289 would modernize and simplify the tax code by repealing ineffective or unnecessary special tax exemptions and deductions to expand and extend tax credits for food access, wildfire and beetle kill mitigation, job creators, and investments in clean energy. This bill would repeal ineffective or unnecessary tax exemptions and deductions and modify others to make Colorado’s tax code more consistent and efficient.
“We’re making necessary changes to create a tax code that focuses on hardworking Coloradans, affordability and climate resilience,” said Rep. Kyle Brown, D-Louisville. “Our bill repeals tax loopholes and tax breaks to strengthen our economy and provide tax credits to small businesses, renewable energy and economic development to lower costs for consumers and businesses. While Congressional Republicans put corporations first, Colorado Democrats are finding every opportunity to restructure Colorado’s tax code to create jobs, fund essential services and save hardworking Coloradans and small businesses money.”
HB26-1289 would repeal ineffective tax exemptions for purchases regarding space flight and eliminate vendor discounts for cigarettes, nicotine and tobacco products.
It also makes changes to existing tax credits, including:
Increasing access to the Community Food Access Tax Credit that offers small food retailers and family farms a refundable tax credit,
Renewing the Renewable Energy Enterprise Zone Investment Tax Credit to reward businesses that invest in projects that generate renewable energy,
Expanding the Wildfire Mitigation Tax Credit by allowing it to be carried forward to count against future tax liability and increasing eligibility to boost wildfire mitigation efforts, and
Expanding a tax credit for businesses that rehabilitate vacant properties.
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.
“Colorado Democrats are making tax policy changes to lift families out of poverty,” said Rep. Steven Woodrow, D-Denver, sponsor of HB26-1223. “Taxes on downloadable software should be applied the same, regardless of how it is purchased. This will help create a more equitable tax code that puts hardworking people first.”
“We’re repealing a tax exemption to ensure Colorado law is being equally applied, no matter your zip code,” said Speaker Pro Tempore Andy Boesenecker, D-Fort Collins, sponsor of HB26-1223. “The Family Affordability Tax Credit was wildly successful at driving down child poverty. With H.R. 1 turning off this tax credit to fund corporate tax breaks, our bill will help create a replacement for this tax credit to put money back into the pockets of hardworking Coloradans.”
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.
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.