Bills to Crack Down on Foreign Tax Havens, Close Tax Breaks for Corporations and Protect Critical Services Become Law

New laws aim to crack down on tax avoidance, tax breaks for corporations and helps fill $1 billion revenue hole created by Congressional Republicans’ budget

DENVER, CO – Governor Jared Polis on Thursday signed two bills into law. These new laws will protect core services and close corporate tax loopholes after Republicans in Congress created a $1 billion hole in Colorado’s budget with massive corporate tax cuts.  

HB25B-1002 cracks down on foreign tax havens and offshore bank accounts, and HB25B-1001 limits tax breaks for higher-earning business owners by permanently decoupling from a federal tax giveaway. 

“This legislation prevents corporations from hiding money overseas so they can dodge paying their fair share of taxes,” said Rep. Yara Zokaie, D-Fort Collins, sponsor of HB25B-1002. “Congressional Republicans’ budget handed billions of dollars in tax breaks to the wealthiest people and corporations, and it’s only fair that we close these loopholes and protect funding for teachers, health care and transportation. Everyday people can’t stash their income overseas to avoid taxes, and neither should billionaires and corporations.”

“In both terms, Donald Trump has given large corporations more leeway to dodge taxes by shifting profits overseas,” said Senator Matt Ball, D-Denver, sponsor of HB25B-1002. “Colorado shouldn’t reward that behavior, and this law makes sure those companies pay their fair share towards Colorado's schools, health care, and roads.”

“The irresponsible Republican tax bill not only runs the largest deficit since World War II to give massive tax giveaways to large corporations, it also undermines the strength of our country and blasts a billion-dollar hole in Colorado's balanced budget,” said Rep. Bob Marshall, D-Highlands Ranch, sponsor of HB25B-1002. “I sponsored this law to close loopholes used by large multinational corporations to shield and hide their income in foreign tax havens, including those that Trump's own Secretary of Commerce has called ‘tax scams’. It is disappointing that some colleagues chose to vote to protect these tax scams used by large multinational companies and ultra-wealthy individuals with access to sophisticated tax planning to avoid paying taxes, which increases the burden upon small businesses and individuals to fund the state's essential services, from roads to schools.”  

HB25B-1002 cracks down on foreign tax havens, offshore bank accounts and other tax loopholes for US companies that dodge Colorado taxes with foreign assets. Unless they can prove legitimate operations in the foreign country, Colorado requires companies incorporated in common tax havens, like Cayman Islands and Panama, to pay Colorado taxes to prevent international tax avoidance. For tax years beginning on or after January 1, 2026, the law expands the list of countries to include Hong Kong, Ireland, Liechtenstein, the Netherlands and Singapore.

In 2017, President Trump created a special tax break, now known as the Foreign-Derived Deduction Eligible Income (FDDEI) deduction, for multi-national businesses that kept their intangible assets in the US. The law decouples the state from the FDDEI to prevent companies from benefiting from larger Colorado tax breaks for investments and assets that are based outside of the state.

President Trump’s 2017 tax cuts also allowed pass-through businesses, like S corporations and real estate investment trusts, to avoid paying taxes on up to 20-percent of qualified business income. In 2020, the Colorado legislature passed the “Tax Fairness Act”, decoupling from this federal tax cut by creating an add-back for this deduction for high-income business owners with an income over $500,000 per year for single filers or $1 million per year for joint filers. 

“These corporate tax breaks show loud and clear that Trump and Congressional Republicans care more about helping their wealthy friends hoard more wealth than providing essential government services to hardworking Americans,” said Senator Nick Hinrichsen, D-Pueblo, sponsor of HB25B-1001. “Legislation like HB25B-1001 will help us stop these corporate giveaways and continue life-saving food assistance and health care programs for Coloradans.”

“Congressional Republicans passed a budget that adds even more tax breaks to high-earning business owners while kicking Coloradans off of their health insurance coverage and raising costs for all Coloradans,” said Rep. Emily Sirota, D-Denver, sponsor of HB25B-1001. “When Trump passed tax breaks in his first term that allowed high-earners to lop 20-percent off their taxable income, Colorado Democrats took action and decoupled from this federal giveaway for the wealthy. This law makes Colorado’s decoupling permanent and prioritizes hardworking Coloradans.”

“In 2021, the Colorado legislature took major strides toward reversing Trump’s corporate tax breaks in order to protect essential services for Coloradans who depend on them,” said Senator Lisa Cutter, D-Jefferson County, sponsor of HB25B-1001. “This year, Trump and Congressional Republicans made those tax breaks permanent, so we're fighting to continue prioritizing the basic services that benefit hardworking Coloradans the most. With this new law, we’re permanently decoupling from these unfair tax breaks to ensure corporations pay their fair share to hardworking Coloradans.”

The legislature previously extended the decoupling and add-back through 2025. HB25B-1001 makes Colorado’s decoupling permanent, responding to the action by Republicans in Congress to make the tax giveaway permanent at the federal level in HR 1.