SB056 changes Colorado’s individual income tax treatment of overtime compensation. Under current law, if a taxpayer excludes or deducts overtime compensation from federal gross income, that amount must be added back when calculating Colorado taxable income. This bill limits that add-back rule so it applies only for the 2026 income tax year.
In practical terms, the bill creates a one-year-only modification to state taxable income for overtime pay. It does not create a new tax rate or a new credit; instead, it narrows the duration of an existing state income tax adjustment tied to overtime compensation. The bill also includes a repeal date for the subsection, effective December 31, 2032, which appears to be a standard sunset provision for the statutory language.
Impact
The bill amends Colorado Revised Statutes section 39-22-104, which governs the state income tax base for individuals, estates, and trusts. Its effect is to make the overtime compensation add-back applicable only in tax year 2026, thereby changing how certain taxpayers report overtime-related income for Colorado tax purposes. The measure would affect individual taxpayers who receive overtime compensation and whose federal taxable income treatment differs from Colorado’s current add-back requirement.
Sentiment
The available voting history suggests the bill received some support but was not unanimous in committee, passing a Senate State, Veterans, & Military Affairs vote 3-1 to refer it to Appropriations. No committee transcript is available, so there is no recorded debate to indicate broader arguments for or against the bill. Overall, the bill appears to have been treated as a targeted tax-policy adjustment rather than a highly controversial measure, though the split vote indicates at least some disagreement.
Contention
The main point of contention is likely the policy choice to limit the overtime income tax adjustment to a single year, which could be viewed either as a temporary tax relief measure for workers or as an unnecessary narrowing of the tax base. Because no transcript is available, the specific objections are not documented, but the 3-1 committee vote indicates at least one member opposed advancing the bill. Any debate would likely center on revenue effects, fairness to taxpayers who work overtime, and whether the state should continue or discontinue the add-back rule after 2026.