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ColoradoHB25-10212025 Regular SessionHouseWALLET

Tax Incentives for Employee-Owned Businesses

Sponsored By: Jeff Bridges (Democratic), Mark Baisley (Republican), Rick Taggart (Republican), William Lindstedt (Democratic)

Signed by Governor

Fiscal Policy & TaxesState Revenue & Budget

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Bill Overview

Analyzed Economic Effects

6 provisions identified: 5 benefits, 1 costs, 0 mixed.

Bigger credits for employee ownership costs

The law extends business conversion and expansion credits to tax years starting before January 1, 2032, instead of 2027. For tax years 2026–2031, credits can cover up to 75% of eligible conversion or expansion costs. Expansion credits have a $25,000 annual limit per business. Businesses must reserve credits with Colorado's Office of Economic Development, obtain certification, and attach the certificate to their state return. Businesses can claim one conversion or expansion credit per year, with any amount above income taxes owed refunded.

Lower state taxes for worker cooperatives

For tax years 2027–2037, worker-owned cooperatives subject to Colorado income tax get a new taxable-income subtraction. They can subtract their federal taxable income, up to $1 million each tax year. This lowers Colorado taxable income; it is not a $1 million tax credit or payment.

Tax relief for owners selling to employees

For tax years 2027–2037, individual and corporate owners can subtract qualifying net capital gains from sales converting businesses to employee ownership. Each ownership transfer must cover at least 20% of the business. Colorado's Office of Economic Development sets the annual subtraction limits; this reduces taxable income, not taxes dollar for dollar. The office must post the initial statewide limit by June 30, 2026, and can adjust it through June 30, 2036. Adjustments apply the following tax year, and the office must report its adjustment method and track subtraction use.

More businesses qualify for ownership credits

Eligible structures include employee ownership trusts, employee stock ownership plans, worker-owned cooperatives, and alternate employee equity arrangements. Businesses must be subject to Colorado income tax and have Colorado headquarters meeting the majority-staff and majority-business-functions test. A trust needs at least 20% of fully diluted securities—counting potential shares—not control of the business. It must benefit all employees equally and meet the alternate-equity rules. The state can adjust specified alternate-equity percentage requirements through guidelines, but cannot set them below 20%.

New credits for employee ownership helpers

For tax years 2027–2031, certified support organizations get credits covering up to 75% of eligible costs, capped at $167,000 annually. They must have Colorado headquarters and exist for at least 12 months before January 1 of the claim year. They must support one successful conversion or expansion that year, or at least three businesses intending to convert or expand. Eligible costs include specified staff pay and benefits, education and outreach, and proportional overhead—not conversion or expansion costs themselves. Organizations must reserve the credit, get state approval, and attach the certificate to their state return. Each organization gets one credit per year, with any amount above income taxes owed refunded.

Lower statewide cap on ownership credits

For tax years 2026–2031, Colorado's Office of Economic Development can reserve no more than $2 million in employee-ownership credits annually. The reservation cap for tax years 2022–2025 is $10 million per year. The $2 million limit covers the whole program, not each applicant, and limits the credits available statewide.

Sponsors & Cosponsors

Sponsors

  • Jeff Bridges

    Democratic • Senate

  • Mark Baisley

    Republican • Senate

  • Rick Taggart

    Republican • House

  • William Lindstedt

    Democratic • Senate

Cosponsors

  • Andrew Boesenecker

    Democratic • House

  • Amy Paschal

    Democratic • House

  • Brianna Titone

    Democratic • House

  • Chad Clifford

    Democratic • House

  • Jamie Jackson

    Democratic • House

  • Julie McCluskie

    Democratic • House

  • Katie Stewart

    Democratic • House

  • Michael Carter

    Democratic • House

  • Monica Duran

    Democratic • House

  • Meghan Lukens

    Democratic • House

  • Matt Soper

    Republican • House

  • Naquetta Ricks

    Democratic • House

  • Regina English

    Democratic • House

  • Ryan Gonzalez

    Republican • House

  • Rep. S. Bird

    Affiliation unavailable

  • Sean Camacho

    Democratic • House

  • Sheila Lieder

    Democratic • House

  • Dafna Michaelson Jenet

    Democratic • Senate

  • Dylan Roberts

    Democratic • Senate

  • Sen. F. Winter

    Affiliation unavailable

  • Iman Jodeh

    Democratic • Senate

  • Judy Amabile

    Democratic • Senate

  • Kyle Mullica

    Democratic • Senate

  • Lindsey Daugherty

    Democratic • Senate

  • Larry Liston

    Republican • Senate

  • Marc Catlin

    Republican • Senate

  • Marc Snyder

    Democratic • Senate

  • Mike Weissman

    Democratic • Senate

  • Nick Hinrichsen

    Democratic • Senate

  • Tony Exum

    Democratic • Senate

Roll Call Votes

All Roll Calls

Yes: 253 • No: 23

Senate vote • 5/5/2025

Third reading: Bill

Yes: 34 • No: 1

House vote • 5/5/2025

Senate amendments: Concur

Yes: 61 • No: 3

House vote • 5/5/2025

Senate amendments: Repass

Yes: 57 • No: 7

Senate vote • 5/2/2025

Refer House Bill 25-1021 to the Committee of the Whole and with a recommendation that it be placed on the consent calendar.

Yes: 7 • No: 0

Senate vote • 5/1/2025

Refer House Bill 25-1021, as amended, to the Committee on Appropriations.

Yes: 7 • No: 0

House vote • 4/28/2025

Third reading: Bill

Yes: 56 • No: 8

House vote • 4/25/2025

Refer House Bill 25-1021 to the Committee of the Whole.

Yes: 9 • No: 1

House vote • 3/3/2025

Refer House Bill 25-1021, as amended, to the Committee on Appropriations.

Yes: 10 • No: 2

House vote • 2/19/2025

Refer House Bill 25-1021, as amended, to the Committee on Finance.

Yes: 12 • No: 1

Actions Timeline

  1. Governor Signed

    5/30/2025House

  2. Signed by the Speaker of the House

    5/19/2025House

  3. Signed by the President of the Senate

    5/19/2025Senate

  4. Sent to the Governor

    5/19/2025House

  5. Senate Third Reading Passed - No Amendments

    5/5/2025Senate

  6. House Considered Senate Amendments - Result was to Concur - Repass

    5/5/2025House

  7. Senate Committee on Appropriations Refer Unamended - Consent Calendar to Senate Committee of the Whole

    5/2/2025Senate

  8. Senate Second Reading Special Order - Passed with Amendments - Committee

    5/2/2025Senate

  9. Senate Committee on Finance Refer Amended to Appropriations

    5/1/2025Senate

  10. Introduced In Senate - Assigned to Finance

    4/29/2025Senate

  11. House Third Reading Passed - No Amendments

    4/28/2025House

  12. House Committee on Appropriations Refer Unamended to House Committee of the Whole

    4/25/2025House

  13. House Second Reading Special Order - Passed with Amendments - Committee, Floor

    4/25/2025House

  14. House Committee on Finance Refer Amended to Appropriations

    3/3/2025House

  15. House Committee on Business Affairs & Labor Refer Amended to Finance

    2/19/2025House

  16. Introduced In House - Assigned to Business Affairs & Labor

    1/8/2025House

Bill Text

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