Correct four Colorado income tax provisions (QBI Schedule F, 2026 deduction addback, 2026 CDCC, low-income CDCC sunset)

changelog.d/co-tax-accuracy.fixed.md

@@ -0,0 +1 @@
+Corrected four Colorado income tax provisions: the section 199A addback Schedule F farming exception, the 2026 federal deduction addback exemptions ($1,000 single / $2,000 joint), the 2026 child and dependent care credit (70% of the federal credit before the section 26 liability limitation, AGI up to $60,000), and the low-income child care credit statutory sunset after 2025.

policyengine_us/parameters/gov/states/co/tax/income/additions/federal_deductions/exemption.yaml

@@ -7,6 +7,16 @@ metadata:
   # 2023 values only appear in the Individual Income Tax Guide
   - title: C.R.S. 39-22-104 . Income tax imposed on individuals, estates, and trusts - section (3)(p)
     href: https://casetext.com/statute/colorado-revised-statutes/title-39-taxation/specific-taxes/income-tax/article-22-income-tax/part-1-general/section-39-22-104-effective-upon-official-proclamation-by-governor-income-tax-imposed-on-individuals-estates-and-trusts-single-rate-report-legislative-declaration-definitions-repeal
+  # 2023-2025: C.R.S. 39-22-104(3)(p.5)(I)(A)-(B) ($12,000 single / $16,000 joint)
+  - title: C.R.S. 39-22-104(3)(p.5)(I) (Colorado Revised Statutes 2025, official compilation, p. 382)
+    href: https://olls.info/crs/crs2025-title-39.pdf
+  # 2026+: C.R.S. 39-22-104(3)(p.7)(I)(A)-(B) ($1,000 single / $2,000 joint),
+  # added by HB25-1274 SECTION 18, effective because Proposition MM passed in
+  # November 2025.
+  - title: C.R.S. 39-22-104(3)(p.7)(I) (Colorado Revised Statutes 2025, official compilation, pp. 383-384)
+    href: https://olls.info/crs/crs2025-title-39.pdf
+  - title: HB25-1274 SECTION 18 (Session Laws of Colorado 2025, Chapter 402)
+    href: https://leg.colorado.gov/bills/hb25-1274
   - title: 2022 Colorado Individual Income Tax Filing Guide, 104 Book - Additions - Line 4
     href: https://tax.colorado.gov/sites/tax/files/documents/DR_104_Book_2022.pdf#page=5
   - title: 2023 Colorado Individual Income Tax Filing Guide, 104 Book - Additions - Line 4
@@ -19,18 +29,25 @@ metadata:
     href: https://tax.colorado.gov/sites/tax/files/documents/Book104_2025.pdf#page=9
   breakdown:
     - filing_status
+# (3)(p.7) names only "single return" and "joint return"; non-joint statuses
+# follow the existing convention of using the single-return amount.
 JOINT:
   2022-01-01: 60_000
   2023-01-01: 16_000
+  2026-01-01: 2_000
 SINGLE:
   2022-01-01: 30_000
   2023-01-01: 12_000
+  2026-01-01: 1_000
 SEPARATE:
   2022-01-01: 30_000
   2023-01-01: 12_000
+  2026-01-01: 1_000
 HEAD_OF_HOUSEHOLD:
   2022-01-01: 30_000
   2023-01-01: 12_000
+  2026-01-01: 1_000
 SURVIVING_SPOUSE:
   2022-01-01: 30_000
   2023-01-01: 12_000
+  2026-01-01: 1_000

policyengine_us/parameters/gov/states/co/tax/income/credits/cdcc/low_income/available.yaml

@@ -0,0 +1,21 @@
+description: Colorado allows the low-income child care expenses credit only for the income tax years within this statutory window.
+values:
+  # Credit first available for income tax years beginning on or after 2014-01-01.
+  2014-01-01: true
+  # Not available for income tax years beginning on or after 2017-01-01 ...
+  2017-01-01: false
+  # ... and again available for income tax years beginning on or after 2018-01-01 ...
+  2018-01-01: true
+  # ... but not for income tax years beginning on or after 2026-01-01.
+  2026-01-01: false
+metadata:
+  period: year
+  unit: bool
+  label: Colorado low-income child care expenses credit available
+  reference:
+    - title: C.R.S. 39-22-119.5(3)(a) (window narrowed to before 2026-01-01 by HB24-1134, SECTION 2)
+      href: https://leg.colorado.gov/sites/default/files/2024a_1134_signed.pdf#page=3
+    - title: "Colorado Revised Statutes 39-22-119.5(3)(a). Child care expenses tax credit"
+      href: https://law.justia.com/codes/colorado/title-39/specific-taxes/income-tax/article-22/part-1/section-39-22-119-5/
+    - title: "Income Tax Topics: Child and Dependent Care Expenses Credit (Revised January 2026)"
+      href: https://tax.colorado.gov/sites/tax/files/documents/ITT_Child_and_Dependent_Care_Expenses_Credit_Jan_2026.pdf

policyengine_us/parameters/gov/states/co/tax/income/credits/cdcc/max_agi.yaml

@@ -0,0 +1,19 @@
+description: Colorado allows the child and dependent care credit only to filers with federal adjusted gross income at or below this amount, for tax years beginning in 2026 or later. The limit is adjusted for inflation beginning in tax year 2027.
+values:
+  2026-01-01: 60_000
+metadata:
+  period: year
+  unit: currency-USD
+  uprating:
+    parameter: gov.irs.uprating
+    rounding:
+      type: nearest
+      interval: 1_000
+  label: Colorado child and dependent care credit maximum AGI
+  reference:
+    - title: C.R.S. 39-22-119(1.7)(b) and (1.7)(c) (as amended by HB24-1134, SECTION 1)
+      href: https://leg.colorado.gov/sites/default/files/2024a_1134_signed.pdf#page=3
+    - title: "Colorado Revised Statutes 39-22-119. Expenses related to child care - credits against state tax"
+      href: https://law.justia.com/codes/colorado/title-39/specific-taxes/income-tax/article-22/part-1/section-39-22-119/
+    - title: "Income Tax Topics: Child and Dependent Care Expenses Credit (Revised January 2026) - Income limits"
+      href: https://tax.colorado.gov/sites/tax/files/documents/ITT_Child_and_Dependent_Care_Expenses_Credit_Jan_2026.pdf

policyengine_us/parameters/gov/states/co/tax/income/credits/cdcc/rate.yaml

@@ -0,0 +1,14 @@
+description: Colorado matches this fraction of the federal child and dependent care credit for tax years beginning in 2026 or later, when the income-graduated match schedule no longer applies.
+values:
+  2026-01-01: 0.70
+metadata:
+  period: year
+  unit: /1
+  label: Colorado child and dependent care credit rate
+  reference:
+    - title: C.R.S. 39-22-119(1.7)(b) (as amended by HB24-1134, SECTION 1)
+      href: https://leg.colorado.gov/sites/default/files/2024a_1134_signed.pdf#page=3
+    - title: "Colorado Revised Statutes 39-22-119. Expenses related to child care - credits against state tax"
+      href: https://law.justia.com/codes/colorado/title-39/specific-taxes/income-tax/article-22/part-1/section-39-22-119/
+    - title: "Income Tax Topics: Child and Dependent Care Expenses Credit (Revised January 2026)"
+      href: https://tax.colorado.gov/sites/tax/files/documents/ITT_Child_and_Dependent_Care_Expenses_Credit_Jan_2026.pdf

policyengine_us/parameters/gov/states/co/tax/income/credits/cdcc/uses_federal_credit_before_liability_limitation.yaml

@@ -0,0 +1,13 @@
+description: Whether Colorado bases its child and dependent care credit on the federal credit allowed under IRC section 21 before the section 26 tax-liability limitation. Before 2026 the credit is based on the federal credit the taxpayer actually claimed and was allowed (after the liability limitation); beginning in 2026 it is based on the full federal credit the taxpayer was eligible for.
+values:
+  2018-01-01: false
+  2026-01-01: true
+metadata:
+  period: year
+  unit: bool
+  label: Colorado child and dependent care credit uses pre-liability-limitation federal base
+  reference:
+    - title: C.R.S. 39-22-119(1.7)(b) (as amended by HB24-1134, SECTION 1) - "seventy percent of the federal credit allowed pursuant to section 21 ... calculated without regard to the limitation imposed by section 26"
+      href: https://leg.colorado.gov/sites/default/files/2024a_1134_signed.pdf#page=3
+    - title: "Income Tax Topics: Child and Dependent Care Expenses Credit (Revised January 2026) - Credit calculation"
+      href: https://tax.colorado.gov/sites/tax/files/documents/ITT_Child_and_Dependent_Care_Expenses_Credit_Jan_2026.pdf

policyengine_us/tests/policy/baseline/gov/irs/tax_unit_files_schedule_f.yaml

@@ -0,0 +1,49 @@
+- name: No farm operations income means no Schedule F
+  period: 2026
+  input:
+    people:
+      person1:
+        farm_operations_income: 0
+    tax_units:
+      tax_unit:
+        members: [person1]
+  output:
+    tax_unit_files_schedule_f: false
+
+- name: Positive farm operations income requires Schedule F
+  period: 2026
+  input:
+    people:
+      person1:
+        farm_operations_income: 40_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+  output:
+    tax_unit_files_schedule_f: true
+
+- name: Farm operations loss still requires Schedule F
+  period: 2026
+  input:
+    people:
+      person1:
+        farm_operations_income: -5_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+  output:
+    tax_unit_files_schedule_f: true
+
+- name: Farm operations income of one spouse counts for the tax unit
+  period: 2026
+  input:
+    people:
+      person1:
+        farm_operations_income: 0
+      person2:
+        farm_operations_income: 12_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+  output:
+    tax_unit_files_schedule_f: true

policyengine_us/tests/policy/baseline/gov/states/co/tax/income/additions/federal_deduction/co_federal_deduction_addback.yaml

@@ -324,3 +324,49 @@
     taxable_income_deductions: 20_000
   output:
     co_federal_deduction_addback: 1_850
+
+# C.R.S. 39-22-104(3)(p.7): for 2026+, the exemption drops to $1,000 (single)
+# and $2,000 (joint).
+- name: In 2026, single filer, deduction 1_500, exemption 1_000, addback 500.
+  period: 2026
+  input:
+    state_code: CO
+    co_federal_deduction_addback_required: true
+    filing_status: SINGLE
+    tax_unit_itemizes: false
+    standard_deduction: 1_500
+  output:
+    co_federal_deduction_addback: 500
+
+- name: In 2026, joint filer, deduction 3_500, exemption 2_000, addback 1_500.
+  period: 2026
+  input:
+    state_code: CO
+    co_federal_deduction_addback_required: true
+    filing_status: JOINT
+    tax_unit_itemizes: false
+    standard_deduction: 3_500
+  output:
+    co_federal_deduction_addback: 1_500
+
+- name: In 2026, single filer at the exemption, no addback.
+  period: 2026
+  input:
+    state_code: CO
+    co_federal_deduction_addback_required: true
+    filing_status: SINGLE
+    tax_unit_itemizes: false
+    standard_deduction: 1_000
+  output:
+    co_federal_deduction_addback: 0
+
+- name: In 2026, head of household uses the single-return exemption of 1_000.
+  period: 2026
+  input:
+    state_code: CO
+    co_federal_deduction_addback_required: true
+    filing_status: HEAD_OF_HOUSEHOLD
+    tax_unit_itemizes: false
+    standard_deduction: 2_000
+  output:
+    co_federal_deduction_addback: 1_000

policyengine_us/tests/policy/baseline/gov/states/co/tax/income/additions/federal_deduction/co_federal_deduction_addback_required.yaml

@@ -42,3 +42,32 @@
     tax_unit_itemizes: false
   output:
     co_federal_deduction_addback_required: false
+
+# C.R.S. 39-22-104(3)(p.5)/(3)(p.7): the addback applies to AGI "equal to or
+# exceeding" the threshold, so AGI exactly at the threshold is included.
+- name: In 2023, AGI exactly at the 300_000 threshold is subject to the addback.
+  period: 2023
+  input:
+    state_code: CO
+    adjusted_gross_income: 300_000
+    tax_unit_itemizes: false
+  output:
+    co_federal_deduction_addback_required: true
+
+- name: In 2023, AGI one dollar below the threshold is not subject.
+  period: 2023
+  input:
+    state_code: CO
+    adjusted_gross_income: 299_999
+    tax_unit_itemizes: false
+  output:
+    co_federal_deduction_addback_required: false
+
+- name: In 2026, AGI exactly at the 300_000 threshold is subject to the addback.
+  period: 2026
+  input:
+    state_code: CO
+    adjusted_gross_income: 300_000
+    tax_unit_itemizes: false
+  output:
+    co_federal_deduction_addback_required: true

policyengine_us/tests/policy/baseline/gov/states/co/tax/income/additions/qualified_business_income_deduction/co_qualified_business_income_deduction_addback.yaml

@@ -0,0 +1,41 @@
+# C.R.S. 39-22-104(3)(o). The addback equals the section 199A deduction for
+# high-AGI filers, except that it does not apply to a taxpayer required to
+# file Schedule F (Profit or Loss From Farming).
+
+- name: High-AGI joint filer with no farm income adds back the 199A deduction
+  period: 2026
+  input:
+    people:
+      person1:
+        farm_operations_income: 0
+    tax_units:
+      tax_unit:
+        members: [person1]
+        adjusted_gross_income: 1_100_000
+        filing_status: JOINT
+        qualified_business_income_deduction: 30_000
+    households:
+      household:
+        members: [person1]
+        state_code: CO
+  output:
+    co_qualified_business_income_deduction_addback: 30_000
+
+- name: Schedule F exception blocks the 199A addition for a farmer
+  period: 2026
+  input:
+    people:
+      person1:
+        farm_operations_income: 250_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+        adjusted_gross_income: 1_100_000
+        filing_status: JOINT
+        qualified_business_income_deduction: 30_000
+    households:
+      household:
+        members: [person1]
+        state_code: CO
+  output:
+    co_qualified_business_income_deduction_addback: 0

policyengine_us/tests/policy/baseline/gov/states/co/tax/income/additions/qualified_business_income_deduction/co_qualified_business_income_deduction_addback_eligible.yaml

@@ -42,3 +42,41 @@
     filing_status: SURVIVING_SPOUSE
   output:
     co_qualified_business_income_deduction_addback_required: false
+
+# C.R.S. 39-22-104(3)(o): the addback does not apply to a taxpayer required
+# to file Schedule F (Profit or Loss From Farming).
+- name: Above AGI limit but files Schedule F, addback not required
+  period: 2026
+  input:
+    people:
+      person1:
+        farm_operations_income: 200_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+        adjusted_gross_income: 1_100_000
+        filing_status: JOINT
+    households:
+      household:
+        members: [person1]
+        state_code: CO
+  output:
+    co_qualified_business_income_deduction_addback_required: false
+
+- name: Above AGI limit with no farm income, addback required
+  period: 2026
+  input:
+    people:
+      person1:
+        farm_operations_income: 0
+    tax_units:
+      tax_unit:
+        members: [person1]
+        adjusted_gross_income: 1_100_000
+        filing_status: JOINT
+    households:
+      household:
+        members: [person1]
+        state_code: CO
+  output:
+    co_qualified_business_income_deduction_addback_required: true