{"id":186,"date":"2026-05-13T10:03:09","date_gmt":"2026-05-13T10:03:09","guid":{"rendered":"https:\/\/coloradorelocationreport.com\/?p=186"},"modified":"2026-05-13T10:03:09","modified_gmt":"2026-05-13T10:03:09","slug":"democrats-abandon-rollback-of-business-tax-breaks-to-fund-family-tax-credit-after-colorado-governors-veto-threat","status":"publish","type":"post","link":"https:\/\/coloradorelocationreport.com\/?p=186","title":{"rendered":"Democrats abandon rollback of business tax breaks to fund family tax credit after Colorado governor\u2019s veto threat"},"content":{"rendered":"
\n

A group of Democratic state lawmakers said a veto threat from Gov. Jared Polis led them to abandon their effort to roll back some tax breaks for businesses and raise hundreds of millions of dollars each year to expand a tax credit for lower-income families with children.\u00a0<\/p>\n

Read more Colorado lawmakers reject environmentalist-backed effort to regulate data centers<\/a><\/p>\n

House Bills 1221 and 1222 were killed in the Senate Finance Committee on Monday at their sponsors\u2019 request.\u00a0<\/p>\n

\u201cThe overarching goal was to get at this problem that we have in our state, and actually across our country, of people who are at the bottom not really being able to make it and people who are at the top having a lot,\u201d said state Sen. Judy Amabile, a Boulder Democrat and lead sponsor of House Bill 1221.<\/p>\n

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Amabile, who noted that her bill didn\u2019t have enough support to clear the Senate Finance Committee, said the measures represented \u201cone little thing to get at income inequality.\u201d\u00a0<\/p>\n

State Sen. Cathy Kipp, a Fort Collins Democrat and sponsor of House Bill 1222, said the governor wanted a state income tax reduction to accompany any rollback of the business tax breaks.<\/p>\n

The measures were part of a yearslong attempt by Democrats at the Capitol to reshape Colorado\u2019s tax code. Many of the business tax breaks targeted under the bills were created or expanded by Republicans in Congress through their One Big Beautiful Bill Act, formally known as H.R. 1, which President Donald Trump signed into law last year.\u00a0<\/p>\n

House Bill 1221 would have reduced the amount of CEO pay that can be deducted by businesses from their tax burden and shortened how long businesses can carry a loss forward on their tax returns. Nonpartisan fiscal analysts estimated it would raise about $124 million annually.<\/p>\n

House Bill 1222 would have ended state tax write-offs for businesses on equipment and machinery, as well as on research and development costs. The legislation would have also limited how much debt businesses could write off on their taxes. The measure was expected to generate up to $329 million annually.<\/p>\n

Together, the bills would have allowed families earning up to $95,000 to claim a tax credit of up to roughly $1,000 per child, depending on the child\u2019s age. It would have been fully refundable, meaning the government would have sent families the money even if they had no tax burden to deduct the amount from.\u00a0<\/p>\n

The measures passed the House before they were killed in the Senate. The House Democrats who sponsored the bills were livid at the result.\u00a0<\/p>\n

\u201cThe governor threatened to veto and senators forgot that the legislature is a separate but equal branch,\u201d said state Rep. Lorena Garcia, an Adams County Democrat.<\/p>\n

State Rep. Yara Zokaie, D-Fort Collins, said she was \u201cextremely disappointed that the Senate failed to protect kids from falling back into poverty.\u201d<\/p>\n

Read more Democrats abandon attempt to blunt ballot measure giving Coloradans \u201cright to natural gas\u201d<\/a><\/p>\n

In a written statement, Eric Maruyama, a spokesperson for the governor, said Polis \u201cwants to save Coloradans money and of course supports income tax cuts as a great way of reducing the burden on everyone and boosting the economy.\u201d\u00a0<\/p>\n

\u201cThe governor has long supported providing tax relief, including income tax relief for Colorado families,\u201d he said. \u201cColorado\u2019s Family Affordability Tax Credit helped cut child poverty rates by nearly 41% and the governor supported strengthening this credit to help families while also saving every Coloradan money on taxes by reducing the income tax.\u201d\u00a0<\/p>\n

The sponsors of House Bills 1221 and 1222 brought the measures with hopes to make up for the temporary end of the state\u2019s Family Affordability Tax Credit as a result of state tax revenue reductions caused by H.R. 1.\u00a0<\/p>\n

Colorado\u2019s link to the federal tax code meant that state tax revenues dropped precipitously \u2014 by an estimated $1.2 billion in the current fiscal year\u00a0\u2014 when the federal legislation was signed by Trump. That triggered a temporary shut-off of Colorado\u2019s Family Affordability Tax Credit in 2026.\u00a0<\/p>\n

The credit, known as FATC, was created by Democrats in the legislature in 2024 and is available to families earning up to $95,000. It provides up to $3,200 per child depending on the age of the children and how much their parents earn.<\/p>\n

But the credit is reduced or goes away entirely when state tax revenues aren\u2019t projected to increase year over year at a fast enough clip. H.R. 1 dropped state tax revenues so much that the credit was turned off in 2026. It\u2019s likely to be pared back or turned off altogether in 2027, too.<\/p>\n

Democrats hoped to make up for that reality with the creation of a new family affordability credit funded by House Bills 1221 and 1222.<\/p>\n

Part of the Democrats\u2019 plan to make up for the paused tax credit was still successful.\u00a0<\/p>\n

Starting next year, downloadable software \u2014 with some exceptions \u2014 would no longer be exempt from state sales and use taxes under House Bill 1223, which is about to be sent to the governor. The revenue generated by the measure, estimated to be more than $92 million annually, would go primarily toward the effort \u2014\u00a0albeit at a much smaller scale.\u00a0<\/p>\n

State fiscal analysts estimate the change will let those eligible to claim the Family Affordability Tax Credit to collect a maximum of about $250 per child.<\/p>\n

Read more Colorado voters will be asked to give up billions in TABOR refunds to boost K-12, other programs for kids<\/a><\/p>\n

Colorado\u2019s 2026 legislative session ends Wednesday.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

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