C.R.S. § 39-22-131: Family affordability credit - tax preference performance statement - legislative declaration - definitions.

(1) (a) In accordance with section 39-21-304 (1), which requires each bill that creates a new tax expenditure to include a tax preference performance statement as part of a statutory legislative declaration, the general assembly hereby finds and declares that the purposes of the income tax credit created in this section are the same as the family affordability tax credit: To substantially reduce child poverty, make Colorado more affordable for families, and help families afford expenses associated with having children by providing tax relief for certain individuals.

(b) The general assembly and the state auditor, in consultation with the department, shall measure the effectiveness of the income tax credit created in this section in combination with the family affordability tax credit and, in the same manner as the general assembly and the state auditor measure the effectiveness of the family affordability tax credit by determining the number of Colorado families that, after claiming a credit pursuant to this section and the family affordability tax credit, no longer fall below the federal poverty level in the tax year in which they claimed the credits.

(2) As used in this section, unless the context otherwise requires:

(a) "Credit" means the credit against income tax created in this section.

(b) "Department" means the department of revenue.

(c) "Eligible child" means a qualifying child, as defined in section 152 (c) of the "Internal Revenue Code of 1986"; except that the age requirements are as set forth in subsections (3)(a)(I), (3)(a)(II), (3)(b)(I), and (3)(b)(II) of this section.

(d) "Federal poverty level" means the poverty line that is required to be updated annually within the federal poverty guidelines adopted by the United States department of health and human services pursuant to 42 U.S.C. sec. 9902 (2).

(e) "Inflation" means the annual percentage change in the United States department of labor bureau of labor statistics consumer price index for Denver-Aurora-Lakewood for all items paid by all urban consumers, or its applicable successor index.

(f) "Joint filer adjusted base income" means, for income tax years commencing before January 1, 2034, an amount of adjusted gross income equal to the amount of adjusted gross income determined by the department pursuant to section 39-22-130 (7) to be necessary for two resident individuals who file a joint return to qualify for the family affordability tax credit pursuant to section 39-22-130 for the income tax year commencing on January 1, 2027.

(g) "Single filer adjusted base income" means, for income tax years commencing before January 1, 2034, an amount of adjusted gross income equal to the amount of adjusted gross income determined by the department pursuant to section 39-22-130 (7) to be necessary for a single resident individual who files a single return to qualify for the family affordability tax credit pursuant to section 39-22-130 for the income tax year commencing on January 1, 2027.

(3) (a) In addition to the child tax credit allowed by section 39-22-129 and the family affordability tax credit allowed by section 39-22-130, for income tax years commencing on or after January 1, 2027, a resident individual who files a single return is allowed a credit against the income taxes imposed pursuant to this article 22 for:

(I) Each eligible child of the resident individual who is five years old or younger at the close of the income tax year in an amount determined by staff of the legislative council pursuant to subsection (5)(b) of this section; and

(II) Each eligible child of the resident individual who is six years old or older but less than seventeen years old at the close of the income tax year in an amount that is seventy-five percent of the amount allowed in subsection (3)(a)(I) of this section.

(b) In addition to the child tax credit allowed by section 39-22-129 and the family affordability tax credit allowed by section 39-22-130, for income tax years commencing on or after January 1, 2027, two resident individuals who file a joint return are allowed a credit against the income taxes due imposed pursuant to this article 22 for:

(I) Each eligible child of the resident individual who is five years old or younger at the close of the income tax year in an amount determined by staff of the legislative council pursuant to subsection (5)(b) of this section; and

(II) Each eligible child of the resident individual who is six years old or older but less than seventeen years old at the close of the income tax year in an amount that is seventy-five percent of the amount allowed in subsection (3)(b)(I) of this section.

(4) (a) Notwithstanding subsection (3) of this section, for income tax years commencing on or after January 1, 2027, the credit amounts in:

(I) Subsection (3)(a)(I) of this section are reduced, but not below zero, by an amount equal to six and eight hundred seventy-five one-thousandths percent for each five thousand dollars by which a resident individual's adjusted gross income exceeds the single filer adjusted base income; and

(II) Subsection (3)(b)(I) of this section are reduced, but not below zero, by an amount equal to six and eight hundred seventy-five one-thousandths percent for each five thousand dollars by which two resident individuals' adjusted gross income exceeds the joint filer adjusted base income.

(b) For income tax years commencing on or after January 1, 2028, the department shall adjust the joint filer adjusted based income and single filer adjusted base income to reflect inflation for each income tax year in which the credit described in this section is allowed if cumulative inflation since the last adjustment, when applied to the current limits, results in an increase of at least one thousand dollars when the adjusted limits are rounded to the nearest one thousand dollars.

(5) Beginning with the quarterly June revenue forecast that legislative council staff presents in June of 2027, and for each June revenue forecast thereafter, as part of the quarterly June revenue forecast, legislative council staff shall determine:

(a) For the current calendar year, a projection of the change in state revenue directly attributable to the changes made in this House Bill 26-1223, notwithstanding the credit created in this section;

(b) A dollar amount of the credit available pursuant to subsections (3)(a)(I) and (3)(b)(I) of this section, which dollar amount must be the same for both subsections (3)(a)(I) and (3)(b)(I) of this section, such that the staff of the legislative council projects, for the current calendar year, that the total dollar amount of credits claimed pursuant to subsection (3) of this section will equal the dollar amount that staff of the legislative council determines pursuant to subsection (5)(a) of this section.

(6) In the case of a part-year resident, the credit is apportioned in the ratio determined under section 39-22-110 (1).

(7) The credit is not considered to be income or resources for the purpose of determining eligibility for the payment of public assistance benefits and medical assistance benefits authorized under state law or for a payment made under any other publicly funded program.

(8) The amount of the credit that exceeds the resident individual's income taxes due is refunded to the individual.

(9) The department is authorized and encouraged to develop a means of refunding the credits to resident individuals who qualify for the credits in twelve equal monthly refunds rather than annually.

(10) Notwithstanding section 39-21-304 (4), the credit does not repeal after a specified period of tax years.