DENVER, Colo. — Governor Jared Polis has approved two significant pieces of legislation aimed at mitigating the impact of a $1 billion budget shortfall created by corporate tax cuts enacted by Congress. The new laws are designed to protect essential state services while addressing loopholes that have allowed corporations to significantly reduce their tax burdens.
One of the measures, House Bill 25B-1002, targets foreign tax havens and offshore accounts, making it more difficult for U.S. companies to evade paying taxes on assets held abroad. The second piece of legislation, House Bill 25B-1001, restricts tax incentives for high-earning business owners by decoupling state tax benefits from a federal tax provision that previously favored wealthy individuals.
“These laws ensure corporations can no longer shelter their profits in other countries to escape their fair share of taxes,” said Rep. Yara Zokaie, a co-sponsor of HB25B-1002. Zokaie emphasized the necessity of closing these loopholes to safeguard funding for schools, healthcare, and public transportation services.
Critics of the federal tax reforms, particularly those initiated during the Trump administration, argue that they disproportionately benefit large corporations at the expense of the average taxpayer. Senator Matt Ball, also a co-sponsor of HB25B-1002, expressed concern regarding the increased flexibility granted to corporations for offshore profit-shifting, stating, “Colorado shouldn’t reward such behavior.”
The legislation comes in response to what lawmakers described as an “irresponsible” tax policy that has placed a substantial burden on Colorado’s budget. Rep. Bob Marshall, another supporter of HB25B-1002, remarked that it is vital to address the loopholes exploited by multinational corporations, which he characterized as “tax scams.”
HB25B-1002 specifically requires companies incorporated in typical tax havens, including the Cayman Islands and Panama, to prove legitimate operations in those countries or face state taxes on their foreign profits. The law will also extend to additional jurisdictions like Hong Kong, Ireland, and Singapore starting in 2026.
House Bill 25B-1001 solidifies Colorado’s separation from the federal Foreign-Derived Deduction Eligible Income (FDDEI) deduction, a tax break favoring multinational operations. This measure aims to prevent businesses from capitalizing on tax advantages for income earned outside of Colorado.
Senator Nick Hinrichsen, who sponsored HB25B-1001, criticized previous tax cuts as being geared towards enriching the wealthy while undermining vital state services. “We need to ensure that our tax laws reflect the priorities of hardworking Coloradans,” he asserted.
The Colorado legislature previously mandated certain tax regulations until 2025; however, these new laws make those provisions permanent, a response prompted by the federal government’s decision to solidify similar tax cuts.
As state lawmakers strive to reinforce fiscal responsibility, the new legislation represents a concerted effort to ensure that corporations contribute equitably to the state’s economy and the well-being of its residents.
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