SecondHB1203_H_FIN.001 RegularHOUSE SessionCOMMITTEE Seventy-secondOF GeneralREFERENCE AssemblyREPORT STATE_______________________________ OFMarch COLORADO2, PREAMENDED2020 ThisChair Unofficialof VersionCommittee IncludesDate Committee Amendments Not Yet Adopted on SecondFinance. Reading LLS NO.

20-0595.01After Edconsideration DeCeccoon x4216the HOUSEmerits, BILLthe 20-1203Committee HOUSErecommends SPONSORSHIPthe Sirotafollowing: and Gray, SENATE SPONSORSHIP Gonzales, House Committees Senate Committees Finance Appropriations A BILL FOR AN ACT C ONCERNING AN INCOME TAX POLICY CHANGE NOT DIRECTLY CAUSING A NET TAX REVENUE GAIN THAT EXPANDS ENACTED REFUNDABLE INDIVIDUAL STATE INCOME TAX CREDITS THAT AREAPERCENTAGEOFSIMILARFEDERALINCOMETAXCREDITS TO BE OFFSET BY EXPANDING REVENUE THROUGH DISTINGUISHINGC OLORADO TAXABLEINCOMEFROMFEDERAL TAXABLEINCOME AND ,INCONNECTIONTHEREWITH ,ENACTING THE "HELPING C OLORADO F AMILIESG ETA HEAD ACT ".

BillHB20-1203 Summarybe (Note:amended as follows, and as so amended, be referred to the Committee on Appropriations with favorable recommendation:

ThisAmend summaryprinted appliesbill, topage this4, billline as26, introducedafter and" does" notreflectanyamendmentsthatmaybesubsequentlyadopted.IfthisbillinserANDTWELVE passesONE third-HUNDREDTHS reading". in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at Shading denotes HOUSE amendment.

DoublePage5,line8,strike"andrepeal(4)"andsubstitute"repeal(4);andadd underlining(3)(d)". denotes SENATE amendment.

CapitalPage letters5, orafter boldline &14 italicinsert: numbers indicate new material to be added to existing statute.

Dashes"(d) throughI theN wordsTHE indicateCASE deletionsOF fromTWO existingRESIDENT statute.INDIVIDUALS WHO MAY LEGALLY FILE A JOINT RETURN BUT ACTUALLY FILE SEPARATE RETURNS , ONLY ONE OF THE RESIDENT INDIVIDUALS MAY CLAIM A CREDIT UNDER THIS SECTION.".

http://leg.colorado.gov.)** The*** starting** point*** for** determining*HB1203_H_FIN.001* state income tax liability is federal taxable income.

This number is adjusted for additions and subtractions that are used to determine Colorado taxable income, which amount is multiplied by the state's income tax rate.

Section 3 of the bill requires an individual to add to his or her federal taxable income an amount equal to the federal income tax deduction that he or she took for his or her combined qualified business income amount.

The federal deduction may be claimed for income tax years commencing prior to January 1, 2026.

Theearnedincometaxcreditisequaltoapercentageofthefederal earned income tax credit.

Section 4 increases the percentage from 10% to 20% beginning in 2021.

Thestatechildtaxcredit,whichisalsoapercentageof the federal child tax credit based on the taxpayer's income, is only allowed after the United States Congress enacts a version of the "Marketplace Fairness Act".

Section 5 repeals this condition and instead allows the credit to be claimed beginning in 2021.

Be it enacted by the General Assembly of the State of Colorado:

SECTION1.

Shorttitle.Theshorttitleofthisactisthe"Helping Colorado Families Get Ahead Act".

SECTION2.Legislativedeclaration.(1) Thegeneralassembly hereby finds and declares that:

(a) Whilethestate is constitutionallyrequired to taxallincomeat thesamerate,thegeneralassemblyhasenactedchangestotheincometax code;

(b) These changes are defined as "tax expenditures" and they include credits, deductions, and additions or subtractions to taxable income and theyreflect legislative priorities about the distribution of the tax burden among various taxpayers;

(c) Thestateincometaxiscoupledwiththeinternalrevenuecode, and so federal income tax deductions automaticallychange state taxable -2- 1203 income;

(d) When Congress enacted the "Tax Cuts and Jobs Act" in 2017 it enacted a deduction for certain pass-through entities that reduced taxable income for some Colorado taxpayers;

(e) Thischangehastheeffectofbeingastatetaxexpenditurethat reduces total Colorado taxable income;

and (f) Under section 20 (4)(a) of article X of the state constitution, the state needs prior voter approval for any tax policy change directly causing a net revenue gain to the state.

(2) Now,therefore,itistheintentofthegeneralassemblytoenact a single, unified tax policy that:

(a) Restores the state's preferences for calculating state taxable income;

(b) Creates an income tax that provides tax expenditures for working families and individuals with lower income;

(c) Eliminates the indirect state deduction for qualified business income;

(d) Implements a state tax system, which includes state and local taxes, that is more equitable;

(e) Is revenue neutral or results in a modest decrease ietsta revenue;

and (f) Does not directlycause a net tax revenue gain to the state and, therefore, does not require prior voter approval.

SECTION3.

InColoradoRevisedStatutes,39-22-104,add(3)(l) as follows:

39-22-104.

Income tax imposed on individuals, estates, and trusts - single rate - legislative declaration - definitions - repeal.

-3- 1203 (3) There shall be added to the federal taxable income:

(l) FR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY 1,2021,ANAMOUNTEQUALTOTHEDEDUCTIONALLOWEDUNDERSECTION 199A OF THE INTERNAL REVENUE CODE.

SECTION4.

InColoradoRevisedStatutes,39-22-123.5,amend (1)(h) and (2);