Legislation to Crack Down on Foreign Tax Havens Passes Senate

Bills aim to help protect critical services and help to fill the $1 billion budget shortfall created by Congressional Republicans’ budget 

DENVER, CO – The Senate Appropriations Committee today approved two bills to crack down on corporate tax loopholes to help fill the $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. 

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

HB25B-1002 would crack 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 bill would expand the list of countries to include Hong Kong, The Republic of 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. HB25B-1002 would decouple 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.

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.

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

“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,” Hinrichsen said. “Legislation like HB25B-1001 will help us stop these corporate giveaways and continue life-saving food assistance and health care programs for 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,” Cutter said. “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 bill, we’re permanently decoupling from these unfair tax breaks to ensure corporations pay their fair share to hardworking Coloradans.”

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