A Trio of Bills at the Legislature Raise Serious Concerns

COCPA is working to oppose a trio of bills advancing through the Colorado legislature — HB 26-1221, HB 26-1222, and HB 26-1223. These measures would impose roughly $580 million in new taxes on businesses while creating compliance headaches that will ripple far beyond the statehouse

The bills were introduced in reaction to the federal "One Big Beautiful Bill," which contributed to a roughly $1.5 billion hole in the state budget. The legislative response decouples Colorado from the federal tax system and rolls back key business tax breaks to fund new programs and credits. 

HB 26-1221 cuts the net operating loss (NOL) deduction from 80% to 70% and slashes the carry-forward period from 20 years to 10. When state and federal rules diverge on multi-year items, businesses must maintain entirely separate reconciliation schedules — year after year, compounding. At roughly $300 per hour, even one additional hour of annual tracking per NOL can exceed $6,000 over the life of that deduction.

HB 26-1222 compounds the damage by decoupling Colorado's tax code from four federal provisions: bonus depreciation, accelerated depreciation for manufacturing, R&D cost deductions, and the business interest deduction. Depreciation on some assets must be tracked for up to 27 years. 

HB 26-1223 adds a third layer by eliminating a 15-year-old sales-and-use-tax exemption on downloadable software, costing purchasers an estimated $90.7 million annually.

Colorado Society of CPAs President and CEO Alicia Gelinas, CPA, testified in opposition to both HB 26-1221 and HB 26-1222. These may sound like minor tweaks, but as Gelinas explained in testimony, these bills create enormous "complexity debt — using future compliance costs to solve today's policy problem."

An Already Strained Profession

Colorado's accounting profession is already facing a significant workforce shortage. Every additional hour spent on state-federal reconciliation is an hour not spent helping families access the very tax credits these bills aim to create — an irony that fiscal notes won't capture.

The Bottom Line

Colorado has spent decades aligning its tax code with federal law. Unwinding that alignment in multiple directions simultaneously sends a troubling signal to businesses considering where to invest and hire. Something is definitely brewing under the gold dome — and lawmakers should reckon with the full cost before these bills become law. COCPA will continue to work to stop these problematic measures as we advocate on behalf of our members, their clients, and our profession.