HB 25-1021: Tax Incentives for Employee-Owned Businesses

Official summary

Abstract published by the legislature (via Open States). Text as published by the legislature; reproduced verbatim.

The act creates 2 income tax subtractions for income tax years commencing on or after January 1, 2027, but before January 1, 2038. The first subtraction is for an amount equal to state capital gains that are realized by a taxpayer, who is the owner of a qualified business, during the taxable year for the conversion by an increment of at least 20% ownership to a qualified employee-owned business. The taxpayers that are eligible for this subtraction are the same taxpayers that would be eligible for the tax credit for conversion costs for employee business ownership. The total amount of capital gains that a taxpayer may subtract is set by and may be annually adjusted by the Colorado office of economic development (office), and is required to be posted on the office's website. The second subtraction is allowed to worker-owned cooperatives in an amount equal to the worker-owned cooperative's federal taxable income for the tax year not to exceed $1 million. The act also makes changes to the tax credit for conversion or expansion costs for employee business ownership (credit), which has been available through income tax year 2026. The act extends the credit through income tax years commencing in 2031. The act also specifies that the aggregate amount of credits that can be claimed for each income tax year commencing on or after January 1, 2026, but before January 1, 2032, is $3 million. The act also increases the percentage of conversion or expansion costs that are eligible to be claimed for the credit from 50% to 75% beginning in tax year 2026 while maintaining the existing dollar caps for the different methods of conversion. Additionally, the act revises several definitions to expand eligibility for the credit and allows for qualified support entities, which are businesses or nonprofit organizations that provide services to businesses that qualify under the credit so that those businesses can convert or expand to employee ownership, to be eligible to receive the credit for up to 75% of the costs incurred for providing such support, not to exceed $167,000, including for staff salaries and benefits, marketing and outreach, and consulting and technical assistance. Support costs exclude any costs that are considered conversion or expansion costs that can be claimed in the credit for employee business ownership. (Note: This summary applies to this bill as enacted.)

Sponsors

Sponsors by party (alphabetical): Democratic 25 · Republican 6

“Support” is shown only as formal sponsorship recorded by the legislature. Roll-call votes are available on the official bill page.

Recent official actions

1. May 30, 2025Governor Signed
2. May 19, 2025Signed by the Speaker of the House
3. May 19, 2025Signed by the President of the Senate
4. May 19, 2025Sent to the Governor
5. May 5, 2025Senate Third Reading Passed - No Amendments
6. May 5, 2025House Considered Senate Amendments - Result was to Concur - Repass
7. May 2, 2025Senate Committee on Appropriations Refer Unamended - Consent Calendar to Senate Committee of the Whole
8. May 2, 2025Senate Second Reading Special Order - Passed with Amendments - Committee
9. May 1, 2025Senate Committee on Finance Refer Amended to Appropriations
10. April 29, 2025Introduced In Senate - Assigned to Finance
11. April 28, 2025House Third Reading Passed - No Amendments
12. April 25, 2025House Committee on Appropriations Refer Unamended to House Committee of the Whole

Showing 12 most recent of 16 actions. Full history