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Senate extends state add‑back of federal QBI deduction to prevent new tax break for high earners
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Summary
On Aug. 25, 2025, the Senate approved House Bill 25B‑1001 to extend Colorado’s add‑back of the federal qualified business income (QBI) deduction so that smaller businesses retain existing relief and higher-income filers do not automatically gain a new break under federal HR1; the bill passed 23–12.
The Senate passed House Bill 25B‑1001, a measure that preserves Colorado’s current treatment of the federal qualified business income deduction (QBI) for state tax purposes and prevents an unintended extension of richer federal deductions to wealthier filers in Colorado.
Senator Harris, who moved the bill, said the measure keeps the state’s targeted relief for small businesses with incomes below specified thresholds and prevents a $100 million‑a‑year revenue drop that would otherwise occur if the state did nothing after the federal HR1 action. "Let's continue the relief that exists in state statute today for those with incomes below $500,000," Harris said on the floor.
Opponents argued the measure represents a tax‑policy change that effectively raises revenue and, under Colorado’s Taxpayer Bill of Rights (TABOR), should be referred to voters. Senator Pelton B. urged referring the change to the ballot, citing constitutional concerns.
After extended floor debate — which included detailed references to fiscal‑note estimates and how rolling conformity to federal changes functions — the Senate adopted the bill on third reading with a 23–12 vote. The clerk read a list of named no votes and confirmed the passage.
