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Senate extends state treatment of federal QBI deduction after TABOR fight
Summary
After contested floor debate and a failed referendum amendment, the Senate adopted House Bill 1001 to maintain Coloradopolicy that limits state conformity with the federal Qualified Business Income (QBI) deduction, averting a large automatic revenue cut tied to federal HR1.
On Aug. 24 the Colorado Senate adopted House Bill 1001 to continue existing state treatment of the federal Qualified Business Income (QBI) deduction after federal legislation (HR1) extended and modified that deduction.
Sponsor Senator Hendrickson said the bill does not change state policy but removes a sunset date so the states existing approach to QBI conformity continues rather than allowing a large, automatic revenue reduction to take effect. "Continuation of existing policy is a continuation of existing policy," he said, arguing the legislature was preserving the long-standing single-rate approach while protecting the fiscal balance against an unanticipated federal-induced cut.
Opponents argued that because HR1 extended and broadened federal QBI permanently, the states action to continue conformity effectively produces a net revenue gain and therefore constitutes a change in tax policy that should be referred to the voters under TABOR. Senator Kirkmire moved a referendum amendment (L001) to send the question to the ballot; the amendment failed on the floor.
The sponsor and majority argued the measure maintains Colorados existing tax posture rather than creating new policy and that failure to act would hand a large tax cut to high-income business owners and shrink state revenue by tens of millions in coming years. The measure was adopted and ordered to third reading and final passage.
What happens next: HB1001 will appear for final passage; opponents signaled potential legal and constitutional challenges and a possible ballot initiative if they continue to disagree with the legislatures characterization.
