On June 1, Colorado Gov. Jared Polis signed into law House Bill 23-1277, which includes updates to several state corporate and partnership income tax provisions.
For tax years beginning before Jan. 1, 2024, partnerships and S corporations are required to take one of the following actions with respect to each nonresident owner:
House Bill 23-1277 revises the reporting and payment requirements for nonresident owners to combine the withholding and composite return options into a composite filing option and maintains the option to collect nonresident agreements from owners. Additionally, House Bill 23-1277 provides detailed rules for calculating the tax due with a composite return and provides more details on the responsibilities of owners that are included and excluded from the composite filing.
The new composite return requirements are effective for tax years beginning on or after Jan. 1, 2024.
Crowe observation
Consolidating the withholding and composite return options should alleviate some administrative burdens on pass-through entities that, under prior law, might have been subject to both the withholding and composite reporting regimes for different owners.
Generally, when federal taxable income is adjusted by the IRS or by the taxpayer through an amended federal return, Colorado requires the taxpayer to report that change to the state. For final federal determinations before Jan. 1, 2024, federal adjustments are required to be reported within 30 days of the final determination. There were no rules to specifically address adjustments under the new federal centralized partnership audit procedures.
House Bill 23-1277 provides additional time for reporting federal tax adjustments to Colorado. The bill also allows pass-through entities to report federal adjustments at the entity level on behalf of their owners.
These changes apply to final determinations made on or after Jan. 1, 2024.
House Bill 23-1277 moves the state’s due date for calendar year C-corporation income tax returns from April 15 to May 15. The bill also moves the extended due date from Oct. 15 to Nov. 15. These changes are effective for tax years beginning on or after Jan. 1, 2024.
Prior to 2017, the federal income tax return due date for calendar year C corporations was March 15, and the extended due date was Sept. 15. This meant that Colorado’s April 15 due date and Oct. 15 extended due date were one month after the federal due date. In 2017, the federal due date for calendar year C corporations moved from March 15 to April 15, and the extended due date moved from Sept. 15 to Oct. 15.
House Bill 23-1277 restores the one-month lag between federal and Colorado calendar year C-corporation return due dates by changing the state due date to May 15, with a Nov. 15 extended due date.
Crowe observation
The one-month lag from the federal filing date will give taxpayers additional time to prepare their Colorado income tax return(s) after filing the corresponding federal return rather than both being due at the same time.
