Summary

Corrects four Colorado income tax provisions surfaced by Axiom's Colorado RuleSpec encodings of Title 39. Each was verified against the Colorado Revised Statutes 2025 official compilation, the enacting bills, and current Colorado DOR guidance before any code changed.

Fixes #8754
Fixes #8755
Fixes #8544
Fixes #8756
Fixes #8757

Per-issue verdicts and evidence

#8754 — QBI addback Schedule F exception (CONFIRMED gap, fixed)

C.R.S. 39-22-104(3)(o) adds back the IRC §199A deduction for high-AGI filers "except that this subsection (3)(o) does not apply to a taxpayer who is required to file a schedule F, profit or loss from farming, or successor form." PE modeled only the AGI threshold and omitted the exception.

• The addback was continued indefinitely by HB25B-1001 (2025 special session B, SECTION 2), which struck the "but before January 1, 2026" end date. The Schedule F exception is retained.
• Fix: new federal variable tax_unit_files_schedule_f (derived from farm_operations_income, which PE documents as Schedule F income; farm rental income is excluded). The CO addback-required predicate now excludes tax units that file Schedule F.
• Verified: joint filer, AGI $1.1M, §199A deduction $30,000, Schedule F required → addback $0; same filer without farm income → addback $30,000.

#8755 / #8544 — 2026 federal deduction addback exemptions (CONFIRMED gap, fixed; these two issues duplicate each other — #8544 is still open, not merged)

C.R.S. 39-22-104(3)(p.7)(I) (added by HB25-1274 SECTION 18, effective because Proposition MM passed in November 2025) sets, for tax years beginning on or after January 1, 2026, at the $300,000 AGI threshold: single-return exemption $1,000, joint-return exemption $2,000. The predecessor (3)(p.5)(I) ($12,000 / $16,000) was amended to end "before January 1, 2026", so the single exemption parameter transitions cleanly from $12k/$16k (2023–2025) to $1k/$2k (2026+).

• Fix: added 2026 values to federal_deductions/exemption.yaml. The $300,000 AGI threshold and the itemized-or-standard scope were already correct from 2023.
• Also corrected the AGI-threshold comparison in co_federal_deduction_addback_required from > to >=: (3)(p), (3)(p.5), and (3)(p.7) all apply to filers "equal to or exceeding" the threshold, so a filer with AGI exactly at the threshold (e.g. $300,000) is subject. This is a pre-existing off-by-one at the boundary, corrected for all years.
• Verified: single, deduction $1,500 → addback $500; joint, deduction $3,500 → addback $1,500; AGI exactly $300,000 → subject; AGI $299,999 → not subject.
• Note: (3)(p.7) self-terminates if the healthy school meals for all program is repealed. PE does not model that contingency (the program is not repealed); documented in the parameter reference.

#8756 — 2026 CDCC 70% rate and pre-§26 base (CONFIRMED gap, fixed; bill citation corrected)

C.R.S. 39-22-119(1.7)(b) (added by HB24-1134 SECTION 1 — not HB24-1311 as the RuleSpec/issue stated) provides that for tax years beginning on or after January 1, 2026 the credit is "seventy percent of the federal credit allowed pursuant to section 21 of the internal revenue code and calculated without regard to the limitation imposed by section 26." Eligibility is federal AGI ≤ $60,000 (inflation-adjusted from 2027), with no federal-credit-claimed requirement, and the credit is refundable. DOR's Income Tax Topics: Child and Dependent Care Expenses Credit (Revised January 2026) confirms: "the Colorado credit is based on the full federal credit the taxpayer was eligible for, even if they could not claim the entire federal credit because they did not have sufficient federal tax liability."

• The pre-§26 base is PE's cdcc_potential (the §21 amount before the liability cap); capped_cdcc/cdcc apply the cap.
• Fix: new parameters cdcc/rate.yaml (0.70 from 2026), cdcc/max_agi.yaml ($60,000 from 2026, uprated), and cdcc/uses_federal_credit_before_liability_limitation.yaml; co_cdcc branches on the flag. Pre-2026 behavior (income-graduated match of the post-cap federal credit) is unchanged.
• Verified: 2026 joint, two earners, ample liability → 70% × $1,050 = $735; 2026 low-income (no federal liability) → 70% × $1,350 = $945 (was $0 before); AGI $61,000 → $0 (cliff at $60,000).

#8757 — Low-income CDCC statutory window/sunset (CONFIRMED gap, fixed)

C.R.S. 39-22-119.5(3)(a) (amended by HB24-1134 SECTION 2) makes the low-income credit available for tax years 2014–2016 and 2018–2025, and repealed for tax years beginning on or after January 1, 2026. PE had no sunset.

• Fix: new cdcc/low_income/available.yaml window (true 2014, false 2017, true 2018, false 2026); co_low_income_cdcc_eligible now gates on it. The four statutory eligibility conditions — AGI ≤ $25,000, insufficient §39-22-119 liability, dependent under 13, would-qualify-under-§21 — are already modeled or applied in the amount; the provider/dependent identification and due-diligence requirements are administrative inputs PE does not model and are now documented as assumed satisfied.
• Verified: same low-income filer eligible in 2025, ineligible in 2026; co_low_income_cdcc = $500 in 2025, $0 in 2026.

Tests

• New: tax_unit_files_schedule_f.yaml (4), co_qualified_business_income_deduction_addback.yaml (2).
• Extended with boundary cases: QBI addback-required (+2 Schedule F), federal-deduction addback amount (+4 for 2026), federal-deduction addback-required (+3 threshold boundary), co_cdcc (+3 for 2026), co_low_income_cdcc (+2 sunset), co_low_income_cdcc_eligible (+2 sunset).
• Full CO baseline tree + new federal variable: 524 passed. Federal CDCC + tax_unit: 89 passed. Parameter/structure validation: 11 passed. National microsimulation for 2026 computes all changed variables with no NaNs; the 2026 CDCC fires at exactly 0.70 × the pre-liability federal base for qualifying units.

References (primary sources)

• Colorado Revised Statutes 2025 official compilation, Title 39 (39-22-104 pp. 382–384; 39-22-119; 39-22-119.5).
• HB24-1134 (2024) SECTIONS 1–2; HB25-1274 (2025, Ch. 402) SECTION 18 + Proposition MM; HB25B-1001 (2025 special session B) SECTION 2.
• Colorado DOR, Income Tax Topics: Child and Dependent Care Expenses Credit (Revised January 2026).

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