HB 26-1223

HB 26-1223, a Colorado bill that has been signed into law, introduces a new tax credit for families based on the number and age of their children as well as the family's income. This credit will be adjusted annually and is meant to provide financial support to taxpayers with children. Additionally, starting in 2027, the bill removes an exemption for certain types of downloaded software, meaning that most downloaded software will now be subject to sales tax. However, it still exempts software governed by a negotiable license agreement or developed specifically for one user from this tax. The bill also slightly reduces how much sales and use tax revenue is allocated to the housing development grant fund starting in 2027. Since the bill has been signed, these changes will take effect as scheduled unless further action is taken.

Official Summary

Section 2 of the bill creates a new tax credit. The new tax credit allows taxpayers to claim a refundable tax credit, in addition to the child tax credit and the family affordability tax credit, in an amount determined by the amount and age of the taxpayer's children and the taxpayer's income. The total amount of the new tax credit is adjusted annually based on legislative council staff projections, such that the total amount of the new tax credit claimed in an income tax year is projected to be the same as the amount of revenue raised in sections 3 and 4.     Beginning January 1, 2027, the bill also repeals the downloaded software sales and use tax exemption so that all software that is available for repeated sale and license qualifies as tangible property and thus is subject to sales and use tax. The bill exempts from sales and use tax downloaded software governed by a negotiable license agreement or developed for use by a particular user.      Currently, 15% of the net revenue collected as sales and use tax is credited to the general fund, less 1.655% (allocation percentage), which is credited to the housing development grant fund. Beginning January 1, 2027, the bill reduces the allocation percentage to 1.625%.      The bill allows a county, a municipality, the regional transportation district, and the scientific and cultural facilities district (district) to maintain the taxable status of tangible personal property as downloaded computer software, as those terms are defined on December 31, 2026, unless the district elects to define computer software as tangible personal property, as those terms are defined on January 1, 2027, pursuant to an election that complies with the state constitution.(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)

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