This testimony was delivered to the Colorado House Finance Committee on March 9, 2026.
You can watch video of the testimony here (Marco starts around the 6:12:40 PM mark).
My name is Marco Guzman, and I am a Senior Analyst at the Institute on Taxation and Economic Policy (ITEP). ITEP is a non-profit, non-partisan tax policy organization, conducting analyses of tax and economic proposals and providing recommendations to shape equitable tax systems at the federal, state, and local levels. Thank you for the opportunity to submit testimony in support of HB26-1222, which would decouple Colorado from several business-related tax breaks that have recently been increased following the passage of the 2025 federal tax law, commonly known as HR 1, and create an enhanced refundable tax credit that will help cut child poverty in the state.
Regardless of your view of the new federal tax rules at the national level, remaining coupled to tax changes concerning business interest, depreciation, and research and development expenses at the state level would be misguided. Because states only tax a share of the nationwide profit of multistate corporations, these provisions are very poorly targeted when applied at the state level.1 In Colorado, this would result in the state giving up much-needed revenue to subsidize investment, research, and other activities that occur largely or even entirely in other states.
The add-back requirements created in this bill – like the one for business interest – will help prevent corporations from excessively leveraging debt to reduce their tax bills, which is a hallmark of private equity deals, in particular. Decoupling from new bonus depreciation rules for machinery and equipment and the temporary rule for manufacturing plants would prevent highly profitable corporations from making it appear as if they do not have any taxable profits at all, so long as they are buying up equipment and building factories. Furthermore, returning to the previous, five-year approach for writing off research and development expenses – as opposed to allowing them to be immediately written-off – makes sense because it matches economic reality, as these investments pay off over multiple years.
Finally, the alternative use for those resources, a permanent, refundable tax credit that mirrors the Family Affordability Tax Credit will improve the overall fairness of Colorado’s tax system, help families make ends meet, improve outcomes for children, and reduce child poverty.
These decision points provide an opportunity to do what is right for Colorado. Reinvesting the revenue saved from the poorly targeted conformity changes outlined in this bill allows you to prioritize your constituents and everyday families over multistate or multinational corporations.
For these reasons, I urge you to support HB26-1222.
Thank you for your consideration.
