Colorado will implement tax reforms, including decoupling from the federal 20% pass-through deduction and expanding tax haven jurisdictions, to address corporate tax loopholes and generate nearly USD 250 million in revenue.

Colorado, under Governor Jared Polis, has enacted tax reforms to address revenue losses caused by the federal “One Big Beautiful Bill Act” (OBBBA, H.R. 1), signed in July 2025.

The state will decouple from the federal 20% pass-through business income deduction, expand its list of tax haven jurisdictions, and implement other tax changes.

These measures aim to close corporate tax loopholes, generate nearly USD 250 million in new and redirected revenue, and counteract the USD 1.2 billion revenue shortfall projected for the current fiscal year due to reduced corporate income taxes under the OBBBA.

US President Donald Trump signed the “One Big Beautiful Bill” into law on 4 July 2025.

Meanwhile, Colorado’s Legislature approved two bills to crack down on corporate tax loopholes to help fill the USD 1 billion budget shortfall created by Congressional Republicans’ budget.

HB25B-1002, sponsored by Senator Matt Ball, D-Denver, would crack down on foreign tax havens and offshore bank accounts, and HB25B-1001, sponsored by Senators Nick Hinrichsen, D-Pueblo, and Lisa Cutter, D-Jefferson County, would limit tax breaks for higher-earning business owners by permanently decoupling from a federal tax giveaway.

HB25B-1002 would crack down on foreign tax havens, offshore bank accounts, and other tax loopholes for U.S. companies that evade Colorado taxes through foreign assets. Unless they can prove legitimate operations in the foreign country, Colorado requires companies incorporated in common tax havens, like the Cayman Islands and Panama, to pay Colorado taxes to prevent international tax avoidance.

For tax years beginning on or after 1 January 2026, the bill would expand the list of countries to include Hong Kong, Ireland, Liechtenstein, the Netherlands, and Singapore.

HB25B-1002 and HB25B-1001 now head to the Senate floor for further consideration.