As part of the August 2025 special legislative session, Colorado enacted HB25B-1004, which allows Colorado to sell future tax credits. The intent of the bill is to raise funds to close the budget shortfall the state is facing in its 2026 budget. For qualified taxpayers, this creates an opportunity to purchase tax credits for potentially only 80 cents on the dollar.
Program details
The tax credit program is open to qualified taxpayers that are insurance companies subject to the insurance premium tax and corporations subject to corporate income tax. The program essentially allows companies to prepay tax liabilities for future years, shifting revenue to the current year from the next two years according to budget estimates. To qualify, companies must have or be expected to have a tax liability. The program allows the sale of up to $125 million in tax credits.
The Colorado Department of the Treasury is tasked with forming the application and bidding process. The law states the following requirements must be included on the application:
- The requested amount of the tax credit.
- The proposed purchase amount, which must be the greater of:
- The credit’s fair market value as of the offer date.
- 80% of the requested tax credit.
The application must be filed timely and is irrevocable. The Department of the Treasury hasn’t provided guidance yet on the program or additional requirements that it may impose as part of the application process.
Companies will be informed in writing whether their application was accepted and the date by which payment must be made, once accepted. After which, the Department of the Treasury will issue the company a tax credit certificate, including the following information:
- The amount of the tax credit.
- The amount paid for the credit.
- The date the credit becomes available for use.
- Any penalties or remedies for noncompliance.
- Procedures for transferring the credit.
- Serial number of the credit.
Start planning now
While the Department of the Treasury hasn’t officially stated when the credits can first be used, based on the legislation’s fiscal notes, the expectation is the credits will be available to use for the tax year ending on or after July 1, 2026. Credits from the program are nonrefundable. If the credit exceeds the amount of tax due in the first eligible year the credit can be used, then the credit will be carried forward each succeeding year through Dec. 31, 2033.
