House committee rewrites military tax break into tuition tax credit for National Guard

The House Finance Committee on a voice vote amended and advanced House Bill 1012 on a bipartisan basis to convert a long-unused income tax exemption for returning military residents into a targeted tax credit to help Colorado National Guard members cover non‑tuition education costs.

Representative Robert Marshall, sponsor, told the committee the bill repurposes a roughly $1 million tax exemption that was being claimed by very few people and redirects the money into a credit tied to the state’s tuition assistance program for the National Guard. "This first bill we're presenting today, HB 25,1012 comes from the tax oversight interim committee...there is a tax expenditure out there that has been in place for more than a decade," Marshall said during his presentation.

Why it matters: Committee members and staff said the original exemption was being claimed by only a handful of taxpayers and yielded little state benefit. The amended bill creates a refundable tax credit intended to top off federal and state tuition benefits so Guard members can pay room, board and other educational expenses not covered by the GI Bill or existing tuition assistance. Sponsors said the change is designed to support Guard recruitment, retention and morale.

Details and fiscal effect: Committee staff and the Department of Military and Veterans Affairs told members roughly 180 Guard members currently use state tuition assistance and about 90 would immediately qualify under the revised credit. Sponsors said they expect increased utilization (they estimated a 30–40% uptick in participation as awareness grows). Marshall and fiscal staff described a roughly $1 million pool tied to the prior exemption; the proposal would cap and reprogram that amount and reduce the set‑aside used for the older exemption.

David Henson of Legislative Council staff explained the fiscal note mechanics: because of accrual accounting and the way tax year timing is modeled, the fiscal note shows a 1½‑year effect; the full‑year net effect on the top line is shown as $830,000 in the first full year after enactment, reflecting the reprogramming of the prior exemption and the new credit’s cap. Committee members discussed TABOR refund interactions: staff said if the state receives more revenue because an exemption ends, TABOR refund expectations change, and the bill’s structure sends the reclaimed revenue back out as the targeted credit.

Administration and verification: Members questioned verification and administration. Sponsors and staff said the fiscal note included a 0.6 FTE to issue tax credit certificates and perform eligibility checks; the bill as amended seeks to minimize extra burdens by leveraging existing tuition assistance eligibility and by requiring applicants to document federal tuition benefits (VA/GI Bill) and state tuition assistance when applicable.

Witnesses and public comment: The Office of the State Auditor and one neutral witness (Fatima Fernandez) provided brief testimony; the auditor’s office said it issued a recent report on the original deduction and was available for technical questions.

Outcome and next steps: The committee adopted the sponsor’s amendment (L Tac001) that focuses the program on non‑tuition educational expenses and sent HB 1012 to appropriations with a favorable recommendation as amended. The committee’s roll call recorded unanimous approval on the motion to advance the bill.

What’s next: The bill will go to the Joint Budget Committee/appropriations for funding decisions and final drafting of administrative details.