Colorado State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Colorado, with full citations and the original source on every page.
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When a partnership makes a one-off sale of Colorado real estate outside its regular business, do those gross receipts go into the apportionment factor that determines its owner's Colorado-source income?
No. Gross receipts from a partnership's infrequent, out-of-the-ordinary-course sale of Colorado real estate are not 'receipts' under § 39-22-303.6(1)(d), so they're excluded from the apportionment fac…
Can an electing Alaska Native Settlement Trust deduct its beneficiary distributions on its Colorado return, and must it withhold Colorado tax on distributions to nonresident beneficiaries from renting a Colorado building?
No to both. Because the trust elected out of the IRC § 661 distribution deduction federally, it can't claim that deduction on its Colorado return either (Colorado starts from federal taxable income). …
Can a partner claim Colorado's affordable housing tax credit allocated by a pass-through entity if the partner joins the partnership before the tax return claiming the credit is filed?
Yes. A pass-through entity may allocate the affordable housing credit to its partners, and a partner admitted before the partner's tax return claiming the credit is filed may claim the allocated amoun…
When figuring Colorado's 10% residential energy storage tax credit, does the purchase price include the cost of the on-site generation (like solar panels) paired with the batteries, or only the storage system itself?
Only the storage system itself. Colorado's 10% residential energy storage credit is based on the purchase price of the storage system and its batteries (including batteries paired with on-site generat…
If a Colorado manufacturer sells goods to the U.S. Government for delivery out of state but stores them in Colorado until the government is ready, are those sales sourced to Colorado for income tax apportionment?
No. The receipts are not Colorado receipts. Goods sold to the U.S. Government are sourced to where they're delivered or shipped to the purchaser — outside Colorado — regardless of f.o.b. point or othe…
Can a Colorado business subtract, from its federal taxable income, the wages that federal law disallowed as a deduction because it claimed the COVID-19 employee retention credit?
Yes — under the specific circumstances of this ruling. A taxpayer that reduced its federal wage deduction under IRC § 3134(e) because it claimed the COVID-19 employee retention credit may subtract tho…
Can a donor claim Colorado's child care contribution tax credit for a monetary gift to a licensed nonprofit child placement (adoption) agency?
Yes. A monetary contribution to a licensed nonprofit child placement (adoption) agency qualifies for Colorado's child care contribution credit — 50% of the qualifying contribution, capped at $100,000 …
Is a foreign student, intern, or trainee in Colorado on an F-1, M-1, or J-1 visa a Colorado resident for income tax purposes?
Generally no. A foreign student, intern, or trainee on a temporary F-1, M-1, or J-1 visa is not domiciled in Colorado, and ordinary student housing (dorms, hotels, or college-provided housing) is not …
What happens to excess child care contribution credit, how can an unlicensed organization accept qualifying contributions to build a child care facility, and what if a facility is used partly for other purposes?
Excess child care contribution credit is not refunded but carries forward up to five years (earliest years first), then is lost. An organization not yet licensed can accept qualifying contributions to…
Can an individual taxpayer claim Colorado's foreign source income exclusion if they claim the federal foreign tax credit?
No. Colorado's foreign source income exclusion under § 39-22-303(10), C.R.S., is available only to C corporations, not to individuals. It sits within the Colorado C Corporation Income Tax Act and is t…
When a real estate rental partnership makes an infrequent sale of Colorado property, are the sale proceeds included as 'receipts' in its income apportionment factor?
No. Although the gain on a rental partnership's infrequent sale of Colorado real estate is apportionable income, the sale proceeds are not 'receipts' under § 39-22-303.6(1)(d) because the sale isn't i…
If I claim a refund of Colorado's conservation easement tax credit, is there a cap—and how does it work when a partnership or S corporation made the donation?
Only when a refund is claimed. Under § 39-22-522(5)(b)(III), C.R.S., if you claim any refund of the conservation easement credit, your refund plus the credit you use to offset income tax cannot exceed…
Can a Colorado business subtract, from its federal taxable income, the wages that federal law disallowed as a deduction because it claimed the COVID-19 employee retention credit?
Yes — under the specific circumstances of this ruling. A taxpayer (here a restaurant S corporation) that reduced its federal wage deduction under IRC § 3134(e) because it claimed the COVID-19 employee…
Is a trust a Colorado 'resident trust' subject to Colorado income tax when its beneficiary lives in Colorado but the trust is administered by an out-of-state trustee?
No. A trust is a Colorado 'resident trust' only if it is administered in Colorado. Here the corporate trustee handles all day-to-day administration, books, and records from Delaware, so the trust is a…
Is a trust a Colorado 'resident trust' subject to Colorado income tax when its beneficiary lives in Colorado but the trust is administered by an out-of-state trustee?
No. A trust is a Colorado 'resident trust' only if it is administered in Colorado. Here the corporate trustee handles all day-to-day administration, books, and records from Delaware, so the trust is a…
Is a trust a Colorado 'resident trust' subject to Colorado income tax when its beneficiary lives in Colorado but the trust is administered by an out-of-state trustee?
No. A trust is a Colorado 'resident trust' only if it is administered in Colorado. Here the corporate trustee handles all day-to-day administration, books, and records from Delaware, so the trust is a…
If another state already taxed my Social Security or annuity contributions, does Colorado give a subtraction or credit when those benefits are later taxed on my Colorado return?
Not specifically. Colorado has no special break just because another state already taxed your Social Security or annuity contributions. As a Colorado resident you start from federal taxable income, bu…
When does an out-of-state partnership that provides investment-advisory services to mutual funds have Colorado income-tax nexus?
Colorado uses the same nexus standards for partnerships and other pass-through entities as for corporations. The partnership measures its sales, property, and payroll at the entity level, and exceedin…
Over how many years can a taxpayer claim the refundable enterprise-zone renewable energy investment tax credit, and how much per year?
The taxpayer may take the enterprise-zone renewable energy investment tax credit as a cash refund instead of a credit, but only by reducing the credit by 20% (so the refund equals 80% of the credit) a…
Is a corporation's gain from selling its LLC interest business income, and is that gain (or the LLC's sales) included in the Colorado apportionment factor?
On these facts: (1) the gain is business income, because the corporation's LLC interest was intangible property used in its trade or business (and a corporation can elect to treat all income as busine…
When an affiliated group's members must use different apportionment formulas (trucking, airlines, financial institutions, general), how does the group compute its combined Colorado income tax?
The affiliated group may use the subgroup methodology from the Department's prior rulings PLR-11-002 and PLR-15-005: financial and non-financial members eliminate all intercompany transactions, each s…
After an out-of-state buyer restructures the ownership, is a holding company's gain from selling its partnership interest included in Colorado's apportionment factor?
On these facts, no. The gain is business income (the holding company's whole business was buying, holding, and selling the investment), and the company includes its distributive share of the partnersh…
Does an out-of-state franchisor have Colorado sales- or income-tax nexus, and which of its franchise revenues count toward the income-tax thresholds?
The Department wouldn't decide sales-tax nexus—too fact-intensive for a general letter. For income tax, a company has nexus if it exceeds Public Law 86-272 and meets any one threshold ($50,000 propert…
Do donations to a fund that grants money to licensed child care centers—rather than to a child care facility directly—qualify for Colorado's child care contribution credit?
Yes, in part. Donations to an intermediary fund qualify for the § 39-22-121 child care contribution credit when the fund ultimately uses them 'for the establishment or operation of a child care facili…
When a Colorado resident sells an interest in a multistate pass-through and another state taxes the gain, how is Colorado's credit for taxes paid to another state figured?
The resident gets a credit, but Colorado uses its own sourcing rules, not the other state's. To find the gain 'derived from sources' in the other state, the seller applies a three-year average of the …
Does an out-of-state company owe Colorado income tax just because one of its sales representatives lives in Colorado?
Not necessarily. The company is an LLC taxed as an S corporation, so the entity itself owes no Colorado income tax, but its shareholders must file Colorado returns if the company does business here—me…
How should a debt-collection company that buys charged-off receivables apportion its income when it fits none of Colorado's standard receipt categories?
As a service provider. The company isn't a 'financial institution' (it doesn't handle financial transactions or provide financial services, isn't a bank, and doesn't earn over 50% from finance leases)…
Can I subtract from my Colorado taxable income the dividends and capital gain distributions a mutual fund pays me from U.S. and Colorado government obligations?
Only true interest income qualifies—not dividends or capital gain distributions. Colorado lets you subtract interest from U.S. obligations and doesn't add back interest from Colorado state/local oblig…
Does a nonresident who buys Colorado tax lien certificates owe Colorado income tax on the interest the property owner pays to redeem them?
Yes. A nonresident is taxed on Colorado-source income, and interest on Colorado tax lien certificates qualifies under any of three independent provisions of § 39-22-109(2)(a): it's income from an owne…
Can a company use separate accounting instead of Colorado's single-sales-factor formula to apportion its income—and what does it have to prove?
The Department denied this request. Colorado (like most states) abandoned separate accounting long ago: it conflicts with the single-sales-factor method the legislature adopted in 2010, it's administr…
Does an out-of-state S corporation that does IT consulting remotely for a Colorado client have to file a Colorado income tax return?
Probably not on these facts. An S corporation's shareholders must file Colorado returns only if the company does business in Colorado—i.e., it has substantial nexus by exceeding any one threshold ($50…
For Colorado income tax apportionment, is digital imagery delivered electronically tangible personal property, and how is it sourced?
It's tangible personal property, sourced to where it's delivered. For Colorado income tax apportionment, a static digital image delivered electronically is treated as a sale of tangible personal prope…
Does an out-of-state S corporation owe Colorado tax when an employee works remotely from Colorado, even if that employee is a non-resident military spouse exempt from Colorado tax?
Yes. An out-of-state S corporation that performs services through an employee working in Colorado has Colorado-source income, because service income is apportioned to where the cost of performing the …
Can a financial institution use an alternative, deposits-based apportionment instead of the financial-institution rule that sources investment income to where decisions are made?
Yes. The financial-institution special regulation (Special Regulation 7A) sources receipts from investment and trading assets to the location of the day-to-day decisions—a cost-of-performance approach…
Can the members of a Colorado LLC claim the Colorado source capital gain subtraction on the gain from selling all the LLC's business assets, mostly goodwill?
No. The members cannot use the Colorado source capital gain subtraction (§ 39-22-518) for gain on the sale of all of the LLC's business assets. The subtraction covers gain on (A) real or tangible pers…
Do nonresident directors of a nonresident corporation owe Colorado income tax on their director pay because they held one board meeting in Colorado?
Yes, on a day-apportioned share. Nonresident directors who attend a board meeting in Colorado are carrying on their occupation in Colorado, so that income is Colorado-source. The Colorado portion is t…
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These are official tax letter rulings and advisory opinions issued by Colorado's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.