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HB 25B-1020

Additions to Definition Federal Taxable Income

2025 First Extraordinary Session Introduced by Jarvis Caldwell and 3 co-sponsors

HB 25B-1020 repeals the requirement for Colorado taxpayers to add overtime pay to taxable income, easing tax burdens but reducing state revenue by up to $118 million.

Introduced In House - Assigned to State, Civic, Military, & Veterans Affairs
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Bill Summary · HB 25B-1020

Summary of HB 25B-1020: Additions to Definition of Federal Taxable Income

Bill Information:
- Bill Number: HB 25B-1020
- Title: Additions to Definition Federal Taxable Income
- Status: Introduced in House - Assigned to State, Civic, Military, & Veterans Affairs
- Introduced: August 21, 2025
- Classification: Bill

Purpose and Intent

HB 25B-1020 aims to amend the state income tax code by repealing the requirement for Colorado taxpayers to add back certain overtime compensation to their state taxable income. Additionally, it establishes a requirement for voter approval for any future additions to state income tax that would result in a net revenue gain.

Key Provisions

  1. Repeal of Overtime Compensation Addition:

    • The bill repeals the current law that mandates taxpayers add any overtime compensation excluded from federal taxable income when calculating their Colorado taxable income. This change is effective for tax years beginning January 1, 2026.

  2. Voter Approval Requirement:

    • The bill stipulates that any future additions to state income tax, specifically regarding overtime compensation and qualified business income, will require voter approval. This is in accordance with the Taxpayer's Bill of Rights (TABOR) which mandates voter consent for tax policy changes that lead to increased revenue.

  3. Impact on State Revenue:

    • The repeal of the overtime compensation addition is projected to decrease state revenue significantly over the fiscal years 2025-26 through 2028-29, with estimates showing reductions of $48 million in FY 2025-26 and up to $118 million by FY 2027-28.

Fiscal Impact

  • State Revenue:

    • The bill is expected to reduce state revenue by approximately:
    • FY 2025-26: -$48 million
    • FY 2026-27: -$106 million
    • FY 2027-28: -$118 million
    • FY 2028-29: -$59 million

  • State Expenditures:

    • The Department of Revenue anticipates a decrease in expenditures due to the elimination of the requirement to implement and administer the overtime compensation addition, with projected savings of:
    • FY 2026-27: -$1.8 million
    • FY 2027-28: -$2.0 million
    • FY 2028-29: -$2.0 million

Affected Parties

  • Taxpayers: Colorado taxpayers who receive overtime compensation will benefit from the repeal, as they will no longer need to add this income back when calculating their state taxes.
  • State Budget: The state budget will be impacted due to the projected decrease in revenue, which may affect funding for various state programs.

Procedural Aspects

  • The bill was introduced and assigned to the House Committee on State, Civic, Military, & Veterans Affairs on August 21, 2025. However, it was postponed indefinitely on the same day, meaning it will not advance further in the legislative process.

Conclusion

HB 25B-1020 represents a significant change in Colorado's tax policy regarding overtime compensation and introduces a mechanism for voter involvement in future tax policy changes. While it aims to relieve taxpayers, it also poses challenges for state revenue and budget planning.

Compiled from official sources — confirm details with the bill’s official record.

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