Colorado would add family tax credits and change sales taxes

Resident individuals filing single or joint returns would receive a refundable income tax credit for each eligible child. The credit would cover Colorado resident single filers and joint filers with eligible children who are younger than 17 at the end of the tax year. The credit would be added to, rather than replace, the child tax credit and family affordability tax credit. The amount for children age five or younger would be set through the June revenue forecast. The amount for children age six through 16 would be 75% of that amount. The credit would shrink as income rises above the applicable single-filer or joint-filer income limit, but not below zero. Any credit larger than the person's income tax due would be refunded. The credit would not count as income or resources for state public assistance or medical assistance eligibility. The credit would apply to income tax years beginning on or after January 1, 2027, if the required condition for section 1 is met.

Sales, storage, use, or consumption of software would be exempt from state sales and use tax when the software has a negotiated written license or was made for a particular user. The exemption would cover software under a written agreement individually negotiated and signed by authorized representatives of both parties, or software developed for a specific user. A standard click-through, browse-wrap, shrink-wrap, automated, or similar agreement would not count as a negotiated license. An electronic signature method authorized by law and department rules, such as an authenticated signing service, could qualify. The text would define computer software broadly to include software delivered by compact disc, download, or remote internet access, including mobile-device applications. The changes to the software definitions would apply to sales, storage, use, and consumption of tangible personal property on or after January 1, 2027. The supplied text does not state a separate delayed date for the exemption in section 6.

Retailers selling prepared food would be allowed to exclude some gas and electricity costs from tax or claim a sales tax credit. The rule would cover retailers whose sales include food or drinks subject to the prepared-food provisions, including restaurants and similar food businesses. If prepared-food sales exceed 25% of total sales, all gas and electricity purchases would be exempt under the stated rule. If prepared-food sales are 25% or less of total sales, the retailer would receive a credit equal to one-half of 1% of prepared-food sales. A retailer choosing the credit would claim it for the prior calendar year on the January sales tax return, or on the June return if it is seasonal. The deemed-use rules would apply beginning July 1, 2026, and before July 1, 2046.

Qualifying restaurants, food-service businesses, caterers, hotels, and mobile food vendors would be allowed to keep part of the state sales tax they collect during specified months. The deduction would cover qualifying businesses that timely file sales tax returns, including restaurants, drinking places, food-service contractors, hotel-operated food services, caterers, and mobile food vendors. For the specified months, the maximum deduction would be $14,000 per month instead of the otherwise stated $70,000 maximum. The specified months would be July, August, November, and December in 2027 and 2028. Mobile food and catering businesses would follow the same listed periods. The state treasurer would send specified portions of sales tax revenue to the housing development grant fund: 0.1629% monthly from January 1, 2027, through December 31, 2028, and 0.1625% beginning January 1, 2029. The retailer deductions would apply to the specified 2027 and 2028 sales periods, with related monthly returns due from August 2027 through January 2029. The housing-fund transfers would begin January 1, 2027, and change again January 1, 2029.