CO HB1289

Colorado HB 26-1289: Modification of Tax Expenditures

• Repeals or reduces multiple vendor/distributor allowances effective January 1, 2027: eliminates the 3% cigarette wholesaler deduction, 0.4% cigarette stamp discount, 1.6% tobacco products discount, 1.1% nicotine products discount, and 0.5% fuel tax collection allowance; reduces fuel loss deduction from 2% to 1%

• Creates new tax credits and expands existing ones: establishes sustainable aviation fuel purchase credit ($1.50/gallon, capped at $3 million/year); creates geothermal energy project credit (up to $5 million per project, $35 million total cap through 2033); extends electric lawn equipment credit through January 1, 2030; increases innovative motor vehicle credit from $1,000 to $2,000 for 2027 and $500 to $1,000 for 2028

• Modifies enterprise zone tax credits beginning January 1, 2027: limits new employee health insurance credit to businesses with fewer than 50 employees; requires $150,000 minimum expenditure for research and experimental activities credit; restricts vacant building rehabilitation credit to buildings unoccupied for 183 days with $200,000 per building cap

• Repeals or restricts several sales/use tax exemptions: eliminates precious metal bullion and coins exemption (January 1, 2027); repeals property used in space flight exemption (January 1, 2027); reinstates beetle-killed wood exemption from July 1, 2027 through June 30, 2032; creates new exemption for rail carrier construction materials used in public passenger rail service contracts

• Converts property tax/heat assistance grants to income tax credit for seniors beginning January 1, 2027: individuals 65+ or surviving spouses 58+ with income below thresholds ($20,000 single/$32,000 joint) eligible for refundable credits ranging from $400 to $1,200; updates water's-edge combined reporting election rules for corporate taxation