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Colorado Corporate Income Tax Guide
Enlarge image | Colorado Corporate Income Tax Guide |
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Colorado Corporate Income Tax
Colorado imposes a tax on the income of any This publication is designed to provide taxpayers with
C corporation that is doing business in Colorado. The general guidance regarding the imposition of Colorado
tax applies generally to every C corporation that is income tax on C corporations, the calculation of the
organized or commercially domiciled in Colorado and to tax, filing of returns, and other related requirements.
every C corporation that has property, payroll, or sales Nothing in this publication modifies or is intended to
in Colorado in excess of certain thresholds. modify the requirements of Colorado’s statutes and
regulations. Taxpayers are encouraged to consult their
Any C corporation that is subject to Colorado income tax advisors for guidance regarding specific situations.
tax is required to file an annual Colorado income tax
return. If certain criteria are met, affiliated
C corporations may be required to file a combined Table of Contents
return, may elect to file a consolidated return, or may
file a combined/consolidated return. Part 1: Corporations Subject to Tax . . . . . . . . . . 2
Colorado income tax is based generally on federal Part 2: Combined & Consolidated Returns . . . . . . 5
taxable income, although various modifications and Part 3: Calculation of Tax . . . . . . . . . . . . . . . 9
adjustments are made in the calculation of Colorado
income tax. Colorado law requires certain additions, Part 4: Additions to Taxable Income . . . . . . . . . 11
and permits certain subtractions, from federal taxable
Part 5: Subtractions from Taxable Income . . . . . 14
income.
Part 6: Apportionment and Allocation . . . . . . . . 18
C corporations that have income from business activity
outside of Colorado must apportion and allocate their Part 7: Foreign Source Income Exclusion . . . . . . . 24
income to determine the share of their income
Part 8: Estimated Tax Payments . . . . . . . . . . . . 26
attributable to Colorado. Apportionment is based
generally on the location of the market for the Part 9: “New” Investment Tax Credit . . . . . . . . . 30
C corporation’s sales. Additionally, a C corporation that
has foreign source income will exclude a portion of Part 10: Filing and Recordkeeping . . . . . . . . . . 33
such income from the calculation of the apportioned Part 11: Refunds and Assessments . . . . . . . . . . . 37
Colorado income.
C corporations are generally required to make quarterly
estimated payments. A C corporation that fails to make
required quarterly estimated payments is subject to a
penalty for such failure. However, the penalty
generally will not apply if the C corporation’s net tax
liability for the tax year is less than $5,000.
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Part 1: Corporations Subject to Tax
The State of Colorado imposes tax upon the net income Foreign corporations
of each domestic C corporation and each foreign
C corporation doing business in Colorado. A For Colorado income tax purposes, a foreign
C corporation is doing business in Colorado if either it is corporation is any corporation not organized under
organized or commercially domiciled in Colorado or its Colorado law. Any foreign C corporation that is doing
property, payroll, or sales in Colorado for the tax year business in Colorado, pursuant to 1 CCR 201-2, Rule 39-
exceed certain thresholds. This Part 1 provides 22-301(1) and as described below, is subject to
information about the conditions that subject Colorado income tax.
C corporations to Colorado income tax.
Doing business in Colorado
Corporations, foreign and domestic
For Colorado corporate income tax purposes, a
C corporations that may be subject to Colorado corporate C corporation is doing business in Colorado whenever
income tax include any organization taxed as a the minimum standards of Public Law 86-272 are
corporation for federal income tax purposes. Generally, a exceeded and the C corporation has substantial nexus
business entity is taxed as a corporation if it is organized with the State of Colorado. Public Law 86-272, codified
under a state or federal law that describes or refers to in sections 381 through 384 of title 15 of the U.S. Code,
the entity as incorporated or as a corporation, body can be accessed online at:
corporate, or body politic. Please see IRS Publication 542, govinfo.gov/content/pkg/USCODE-2021-
Corporations for more information about businesses title15/pdf/USCODE-2021-title15-chap10B-subchapI.pdf
generally taxed as corporations.
Substantial nexus
Any corporation or other entity that has made a valid
election to be an S corporation for the tax year by filing
C corporations that are organized or commercially
IRS Form 2553 is not subject to Colorado corporate
domiciled in Colorado have substantial nexus with
income tax. Instead, the shareholders of any
Colorado. Additionally, a corporation organized outside
S corporation are liable in their individual capacities for
of Colorado has substantial nexus with Colorado for any
any Colorado income tax incurred on income produced
tax period in which the corporation’s property, payroll,
through the activities of the S corporation.
or sales within Colorado exceed any of the following
thresholds:
Limited liability companies (LLC) and certain other
entities may make an election by filing IRS Form 8332 ➢ $50,000 of property;
to be classified as a C corporation for federal income
tax purposes. Any LLC or other entity that has made ➢ $50,000 of payroll; or
such an election will be similarly classified as a
C corporation for Colorado income tax purposes. ➢ $500,000 of sales.
Furthermore, a C corporation has substantial nexus
Domestic corporations
with Colorado for any tax period in which 25% or more
For Colorado income tax purposes, a domestic of the C corporation’s total property, total payroll, or
corporation is any corporation organized under total sales are in Colorado. Guidance for determining a
Colorado law. Every domestic C corporation is subject C corporation’s property, payroll, and sales in Colorado
to Colorado income tax. is presented below.
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Part 1: Corporations Subject to Tax
Payroll Property rented by the taxpayer is valued at eight
times the net annual rental rate. Net annual rental rate
Payroll counting toward the $50,000 threshold for is the annual rental rate paid by the taxpayer less any
establishing substantial nexus is the total amount paid annual rental rate received by the taxpayer from
by the taxpayer for compensation in Colorado during subrentals.
the tax year. Compensation includes wages, salaries,
commissions, and any other form of remuneration paid Sales
to employees and defined as gross income under
section 61 of the Internal Revenue Code. Compensation Sales counting toward the $500,000 threshold for
is paid in Colorado if: establishing substantial nexus in Colorado include the
total dollar value of the taxpayer’s gross receipts from:
➢ the individual's service is performed entirely
➢ the sale, lease or license of real property located
within Colorado;
in Colorado;
➢ the individual's service is performed both within ➢ the lease or license of tangible personal property
and outside Colorado, but the service performed
located in Colorado;
outside of Colorado is incidental to the individual's
service within Colorado; or ➢ the sale of tangible personal property other than
software or digital products received in Colorado
➢ some of the service is performed in Colorado and as indicated by receipt at a business location of
the base of operations or, if there is no base of the seller in Colorado or by instructions, known to
operations, the place from which the service is the seller, for delivery or shipment to a purchaser
directed or controlled is either: (or to another at the direction of the purchaser) in
Colorado;
> in Colorado, or
➢ the sale of software or digital products for primary
> not in any state in which some part of the use by a purchaser known to the seller to be in
service is performed, but the individual's Colorado; and
residence is in Colorado.
➢ the sale, lease or license of services and
Property intangibles for primary use by a purchaser known
to the seller to be in Colorado.
Property counting toward the $50,000 threshold for
establishing substantial nexus is the average value of the Please see 1 CCR 201-2, Rule 39-22-301(1) for
taxpayer's real property and tangible personal property additional guidance if a service or intangible will be
owned or rented and used in Colorado during the tax used in multiple states or if the seller does not know
year. The average value of property is determined by where a service or intangible will be used or where a
averaging the values at the beginning and ending of the tangible will be received.
tax year. However, the Department may require the
averaging of monthly values during the tax year if such
method is reasonably required to properly reflect the
average value of the taxpayer's property.
Property owned by the taxpayer is valued at its original
cost basis.
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Part 1: Corporations Subject to Tax
Tax-exempt organizations Additional resources
Any organization that is exempt from federal income The following is a list of statutes, regulations, forms,
taxation under the provisions of the Internal Revenue and guidance pertaining to the imposition of income
Code for any tax year is also exempt from Colorado tax on C corporations in Colorado. This list is not, and
income tax for the same tax year. Organizations that is not intended to be, an exhaustive list of authorities
are exempt from federal income tax generally include, that govern the tax treatment of every situation.
but are not limited to, those organizations that meet Taxpayers with specific questions should consult their
the requirements of section 501(c)(3) of the Internal tax advisors.
Revenue Code.
Statutes and regulations
If any tax-exempt organization has unrelated business
taxable income (UBTI) that is subject to federal ➢ § 39-22-103, C.R.S. Definitions –construction of
taxation, the tax-exempt organization is subject to terms.
Colorado income taxation with respect to the UBTI in
➢
the same manner as a C corporation. Any tax-exempt § 39-22-112, C.R.S. Persons and organizations
organization that has UBTI and is doing business in exempt from tax under this article.
Colorado is required to file a Colorado C Corporation
➢
Income Tax Return. Please see IRS Publication 598, Tax § 39-22-301, C.R.S. Corporate tax imposed.
on Unrelated Business Income of Exempt Organizations ➢ § 39-22-302, C.R.S. S corporations.
for additional information regarding UBTI.
➢ § 39-22-322, C.R.S. Taxation of an S corporation
Insurance companies that are subject to the insurance
and its shareholders.
premiums tax imposed pursuant to section 10-3-209,
C.R.S., are exempt from Colorado income tax. The ➢ Rule 39-22-301(1). Doing business in Colorado.
exemption from Colorado income tax does not apply to
any disqualified insurance company. A disqualified ➢ 15 U.S.C. § 381. Imposition of net income tax.
insurance company is any company licensed as a
captive insurance company under the laws of either ➢ 26 U.S.C. § 7701. Definitions.
this state or another jurisdiction with gross receipts for
➢
the taxable year that consist 50% or less of premiums 26 CFR § 301.7701-2. Business entities; definitions.
from arrangements that constitute insurance for
➢ 26 CFR § 301.7701-3. Classification of certain
federal income tax purposes. Disqualified insurance
business entities.
companies may be subject to Colorado income tax in
the same manner as any other C corporation.
Forms and guidance
➢ IRS Publication 542, Corporations
➢ IRS Publication 598, Tax on Unrelated Business
Income of Exempt Organizations
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Part 2: Combined & Consolidated Returns
Under certain circumstances, the Colorado income tax Affiliated groups for combined returns
for multiple affiliated C corporations may be
determined collectively, with the filing of a combined, For the purpose of combined returns, an affiliated
consolidated, or combined/consolidated return. group consists of one or more C corporations connected
C corporations are required to file a combined return if directly or indirectly through stock ownership with a
certain conditions are met. Additionally, C corporations common parent C corporation. The common parent
that meet certain qualifying criteria may elect to file a C corporation must directly or indirectly own stock
consolidated return. A combined/consolidated return is possessing more than 50% of the voting power of all
filed if certain C corporations are required to file a classes of stock and more than 50% of each class of the
combined return and elect to participate in a nonvoting stock of at least one of the other C
consolidated filing with other C corporations. This Part corporations included in the group. A C corporation,
2 includes information regarding combined, other than the parent C corporation, is included in the
consolidated, and combined/consolidated returns. affiliated group if stock possessing more than 50% of
the voting power of all classes of stock and more than
50% of each class of the nonvoting stock of such C
Combined returns corporations is owned directly or indirectly by one or
more of the C corporations included in the group.
A C corporation must be included in a combined return if
all three of the following conditions apply: For the purpose of evaluating the minimum stock
ownership requirements described above, the term
1) the C corporation is a member of an affiliated "stock" does not include
group of C corporations, as described in Affiliated
➢
groups for combined returns, later in this nonvoting stock that is limited and preferred as to
publication; dividends;
➢
2) less than 80% of the C corporation’s property and employer securities, within the meaning of section
payroll, as determined by averaging the property 409(1) of the Internal Revenue Code, while such
and payroll factors as determined in accordance securities are held under a tax credit employee
with section 24-60-1301, C.R.S., is assigned to stock ownership plan; or
locations outside the United States; and
➢ qualifying employer securities, within the meaning
3) the C corporation satisfies at least three of the six of section 4975(e)(8) of the Internal Revenue
tests of unity, described in the table on the Code, while such securities are held under an
following page, for the current and two preceding employee stock ownership plan which meets the
tax years. requirements of section 4975(e)(7) of the Internal
Revenue Code.
Section 39-22-303(8)(b), C.R.S., requires certain
business entities incorporated in a foreign jurisdiction The criteria described above for defining an affiliated
to be included in a combined Colorado income tax group apply only for the purpose of determining
return. For additional information, please see combined return requirements and not for the purpose
Department publication Income Tax Topics: Section of determining eligibility for a consolidated return.
303(8)(b) Entities, available online at
Tax.Colorado.gov/corporate-income-tax-guidance-
publications.
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Part 2: Combined & Consolidated Returns
Six Tests of Unity for Combined Reporting
A combined return for an affiliated group must include any member that satisfies at least three of the six tests of unity
for the current and two preceding tax years:
1) Gross receipts: 50% or more of the affiliated C corporation’s gross operating receipts is from sales or leases to
another affiliated C corporation; or 50% or more of the affiliated C corporation’s cost of goods purchased and/or
leased is paid to another affiliated C corporation.
2) Services: The affiliated C corporation receives 50% or more of five or more of the following services from one or
more affiliated C corporations without an arm’s length charge:
➢ advertising and public relations services;
➢ accounting and bookkeeping services;
➢ legal services;
➢ personnel services;
➢ sales services;
➢ purchasing services;
➢ research and development services;
➢ insurance procurement and servicing exclusive of employee benefit programs; and
➢ employee benefit programs including pension, profit-sharing, and stock purchase plans.
3) Long-term debt: 20% of the affiliated C corporation’s long-term debt (debt due more than one year after
incurred) is owed to or guaranteed by another affiliated C corporation.
4) Intangible property: The affiliated C corporation substantially uses the patents, trademarks, service marks, logo-
types, trade secrets, copyrights, or other proprietary materials owned by another affiliated C corporation; or the
affiliated C corporation owns patents, trademarks, service marks, logo-types, trade secrets, copyrights, or other
proprietary materials substantially used by another affiliated C corporation.
5) Board of Directors: 50% or more of the members of the affiliated C corporation’s board of directors are members
of the board of directors or are corporate officers of another affiliated C corporation; or the affiliated
C corporation’s board members or corporate officers make up 50% of the members of the board of directors for
another affiliated C corporation.
6) Officers: 25% or more of the 20 highest ranking officers of the affiliated C corporation are members of the board
of directors or are corporate officers of an affiliated C corporation.
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Part 2: Combined & Consolidated Returns
Domestic holding companies Affiliated groups for consolidated returns
A domestic holding company that is a member of an An affiliated group that is eligible to file a consolidated
affiliated group and has less than 80% of its property and return consists of one or more chains of includible
payroll assigned to locations outside the United States is corporations (as defined in section 1504(a) of the
deemed to satisfy the tests of unity and must be included Internal Revenue Code) connected through stock
in a combined report. The 80% threshold is determined by ownership with a common parent corporation. The
averaging the property and payroll factors for the common parent must own directly stock that
company, as determined in accordance with section 24- represents at least 80% of the total voting power and at
60-1301, C.R.S., and all rules thereunder. least 80% of the total value of the stock of at least one
of the other includible corporations. A C corporation,
A domestic holding company is any C corporation other than the parent C corporation, is included in the
formed under the laws of any state or the United States affiliated group if stock in the C corporation that
that has less than $100,000 of property and payroll, represents at least 80% of the total voting power and at
combined, as determined by factoring pursuant to least 80% of the total value of the stock is owned
section 24-60-1301, C.R.S. For example. a C directly by one or more of the other includible
corporation has $70,000 of property and $0 of payroll. corporations.
That C corporation has de minimis property and payroll
and is therefore deemed to satisfy the tests of unity and For the purpose of the minimum stock requirements
must be included in a combined report. described above, the term “stock” generally does not
include any stock that:
➢
Consolidated returns is nonvoting;
➢ is nonconvertible;
Members of an affiliated group of C corporations, as
defined in section 1504 of the Internal Revenue Code, ➢ is limited and preferred as to dividends and does
may elect to make a consolidated Colorado income tax not participate significantly in corporate growth;
return, instead of filing separate returns. A and
consolidated return can include only those
C Corporations that are doing business in Colorado as ➢ has redemption and liquidation rights that do not
defined in 1 CCR 201-2, Rule 39-22-301(1). Please see exceed the issue price of the stock (except for a
Part 1 of this publication for criteria used in reasonable redemption or liquidation premium).
determining whether a C corporation is doing business
in Colorado. The criteria described above for defining an affiliated
group apply only for the purpose of determining
A consolidated return can be filed only if all eligibility for consolidated filing and not for the
C corporations which at any time during the taxable purpose of determining any requirement to file a
year have been members of the affiliated group combined return.
consent to be included in the return. Such consent is
conveyed through the filing of the consolidated return
(Form DR 0112) and checking the appropriate box on
the form to designate it as a consolidated return. The
return must be filed on or before the due date for filing
the return, including extensions.
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Part 2: Combined & Consolidated Returns
Effect of election to file consolidated return Additional resources
The election to file a consolidated return is binding for The following is a list of statutes, regulations, forms,
four years, including the election year and the next and guidance pertaining to combined, consolidated,
three tax years, unless the Department of Revenue and combined/consolidated returns. This list is not,
grants the taxpayer permission, in writing, to and is not intended to be, an exhaustive list of
discontinue consolidated filing earlier. After the fourth authorities that govern the tax treatment of every
year of consolidated filing, the taxpayer’s election to situation. Taxpayers with specific questions should
file consolidated returns remains in effect unless the consult their tax advisors.
taxpayer revokes the election for any subsequent tax
year. Revocation of the election is made by filing Statutes and regulations
separate, non-consolidated returns for the members of
the affiliated group, prior to the filing due date, ➢ § 39-22-303, C.R.S. Dividends in a combined report –
including any extensions. foreign source income – affiliated groups –definitions.
➢ § 39-22-305, C.R.S. Consolidated returns.
Combined/consolidated returns
➢ Rule 39-22-303(11)(a). Combined returns
If an affiliated group is required to file a combined
➢
return, it may elect to file a combined/consolidated Rule 39-22-303(12)(a). An affiliated group.
return to include other affiliated C corporations. In the ➢ Rule 39-22-305. Consolidated returns.
case of a combined/consolidated return, the
requirement to be included in the combined return is ➢ 26 U.S.C. § 1504. Definitions.
determined and eligibility to be included in the
consolidated return are determined independently Forms and guidance
under the separate rules for combined returns and
consolidated returns described in this Part 2. ➢ Tax.Colorado.gov/business-income-tax-forms
➢ Tax.Colorado.gov/corporate-income-tax-guidance-
publications
➢ Colorado C Corporation Income Tax Return (DR 0112)
➢ Schedule C –Colorado Affiliations Schedule
➢ Income Tax Topics: Section 303(8)(b) Entities
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Part 3: Calculation of Tax
In general, Colorado imposes an income tax on the net Taxable income for certain foreign entities
income of each C corporation that is subject to
Colorado income tax as described in Part 1 of this For income tax years commencing on or after January
publication. This Part 3 provides information regarding 1, 2022, section 39-22-304(1)(b), C.R.S., prescribes
the calculation of net income, temporary adjustments specific rules for determining the federal taxable
to the tax rate, and the election to calculate tax income of a C corporation that is not incorporated in
alternately on the basis of gross receipts. the United States or included in a consolidated federal
corporate income tax return. For additional
information, please see Department publication Income
Net income Tax Topics: Section 303(8)(b) Entities, available online
at Tax.Colorado.gov/corporate-income-tax-guidance-
A C corporation’s net income is its federal taxable publications.
income modified by the additions and subtractions
required or permitted under Colorado law and, if
applicable, apportioned and allocated as prescribed by Colorado income tax rate
Colorado law. Part 4 of this publication discusses
required additions to taxable income. Allowable Colorado income tax is calculated as a percentage of
subtractions are described in Part 5. A brief Colorado taxable income. The Colorado income tax rate
explanation of apportionment and allocation varies based on the date the tax year commences. In
requirements appears in Part 6. the case of a 52-53 week tax year that actually begins in
December, but is deemed to have commenced January 1
Combined and consolidated returns of the following year for Colorado income tax purposes,
the tax rate is determined based on the January 1 date
The net income of the affiliated C corporations on which the tax year is deemed to begin. The tax rates
included in any combined, consolidated, or for recent tax years are shown below.
combined/consolidated return is determined pursuant
to the rules and regulations promulgated pursuant to
Tax Year 2018 2019 2020 2021
section 1502 of the Internal Revenue Code and
modified by the additions and subtractions required or Tax Rate 4.63% 4.5% 4.55% 4.5%
permitted by Colorado law, as discussed in Part 4 and
Part 5 of this publication.
For tax years 2022 and later, the Colorado income tax
Dividends that a C corporation includible in a combined rate is set at 4.4%.
report receives from another C corporation also
includible in the combined report are excluded from
taxable income.
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Part 3: Calculation of Tax
Gross receipts tax Additional resources
For income tax years commencing prior to January 1, The following is a list of statutes, regulations, forms,
2023, in lieu of paying an income tax, calculated in the and guidance pertaining to the calculation of Colorado
manner described above, any C corporation that meets corporate income tax. This list is not, and is not
all of the following conditions may elect to pay a tax of intended to be, an exhaustive list of authorities that
½% of its annual gross receipts derived from sales in or govern the tax treatment of every situation. Taxpayers
into Colorado: with specific questions should consult their tax
advisors.
➢ the C corporation is required to file a Colorado
return; Statutes and regulations
➢ the C corporation’s only activities in Colorado ➢ § 39-22-103, C.R.S. Definitions –construction of terms.
consist of making sales;
➢ § 39-22-301, C.R.S. Corporate tax imposed.
➢ the C corporation does not own or rent real estate
within the State of Colorado; and ➢ § 39-22-303, C.R.S. Dividends in a combined report –
foreign source income – affiliated groups –definitions.
➢ the C corporation’s annual gross sales in or into
Colorado are $100,000 or less. ➢ § 39-22-304, C.R.S. Net income of corporation –
legislative declaration –definitions –repeal.
In the case of affiliated C corporations filing a
combined, consolidated, or combined/consolidated ➢ § 39-22-305, C.R.S. Consolidated returns.
return, the $100,000 limit on annual gross sales in or
➢
into Colorado applies to the aggregate sales of all § 39-22-627, C.R.S. Temporary adjustment of rate
C corporations included in the return. of income tax –refund of excess state revenues –
authority of executive director.
➢ Rule 39-22-104(5). Gross receipts tax.
➢ Rule 39-22-301(2).
Forms and guidance
➢ Tax.Colorado.gov/business-income-tax-forms
➢ Tax.Colorado.gov/corporate-income-tax-guidance-
publications
➢ Colorado C Corporation Income Tax Return (DR 0112)
➢ Income Tax Topics: Section 303(8)(b) Entities
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Part 4: Additions to Taxable Income
Colorado income tax is based on federal taxable Deductions for taxes paid
income. However, Colorado law provides for a number
of modifications to federal taxable income that apply C corporations must add back on their Colorado returns
in the calculation of Colorado tax. Additions are several types of taxes that they may have deducted in
generally required to either (1) subject to Colorado the calculation of their federal taxable income. A
taxation certain types of income that are exempt from Colorado addition is required for any of the following
federal taxation or (2) eliminate a deduction that is taxes the C corporation deducted:
allowed under federal law, but not under state law
➢
(referred to as “addbacks” of the amount deducted). Colorado income taxes; and
This Part 4 provides information regarding the additions
➢
to federal taxable income that are required under income, war profits, or excess profits taxes paid or
Colorado law. accrued to any foreign country.
An addition is not required for Colorado severance
taxes or income taxes imposed by any other state.
Income exempt from federal tax
Interest on state and local bonds is generally exempt Federal net operating loss (NOL) deduction
from federal income tax and therefore not included in
federal taxable income. However, any state and local A C corporation must make an addition on its Colorado
bond interest, other than interest from the State of return for any net operating loss (NOL) deduction claimed
Colorado or any political subdivision thereof, is subject in the calculation of its federal taxable income. Under
to Colorado income tax and therefore must be added to federal law, C corporations may be allowed to claim a
federal taxable income. NOL deduction carried forward or carried back from a
prior or subsequent tax year. Colorado also allows a NOL
The required addition does not include any deduction that is calculated in the same manner as a
amortization of the bond premium and is reduced by federal NOL deduction. The amount of the NOL that may
the amount of the deductions required by the Internal be carried forward or carried back for Colorado income
Revenue Code to be allocated to the interest income. tax purposes is that portion of the federal NOL that is
allocated Colorado in the taxable year that the NOL is
sustained. Consequently, a C corporation that claims a
Addbacks of federal deductions federal NOL deduction must add back that federal
deduction on its Colorado return and then claim a
Colorado generally conforms to federal law and permits separate deduction for its Colorado NOL, if applicable.
in the calculation of Colorado tax the same deductions
that are allowed in calculating federal tax. However, Please see IRS Publication 542, Corporations for
Colorado law provides that certain federal deductions information about federal NOL deductions. See Part 5
are not allowed for Colorado purposes. C corporations for information about Colorado NOLs.
that claim any the following deductions in the
calculation of their federal taxable income must add
back such deductions in the calculation of their
Colorado tax.
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Part 4: Additions to Taxable Income
Deductions for certain business expenses Clubs that restrict membership
Certain business expenses, discussed below, that are C corporations must make an addition on their Colorado
deductible in the calculation of federal taxable income returns for any expenses deducted in the calculation of
pursuant to section 162 of the Internal Revenue Code federal taxable income that were incurred with respect
must be added back in the calculation of Colorado to expenditures made at, or payments made to, any
income tax. club that both:
➢
Unauthorized alien labor services is licensed pursuant to section 44-3-418, C.R.S., to
sell alcohol beverages by the drink only to
C corporations must make an addition on their Colorado members of the club and guests for consumption
returns for any expenses deducted in the calculation of on the premises of the club; and
federal taxable income for wages or remuneration paid ➢ has a policy to restrict membership on the basis of
to an unauthorized alien for the physical performance
sex, sexual orientation, gender identity, gender
of services in Colorado. A C corporation is not required
expression, marital status, race, creed, religion,
to make any addition if:
color, ancestry, or national origin.
➢ the C corporation did not know of the unauthorized
status of the worker at the time of hiring; or Gross conservation easement deduction
➢ the C corporation is domiciled in Colorado and is C corporations may be able to claim both a federal
exempt from compliance with federal employment charitable contribution deduction and a Colorado income
verification procedures under federal law that makes tax credit for the donation of a gross conservation
the employment of unauthorized aliens unlawful. easement on property located in Colorado. If a taxpayer
claims both a federal deduction and a Colorado credit
Furthermore, the addition is not required if the worker: for the same donation, the taxpayer must make an
addition on their Colorado return in the amount of the
➢ was lawfully admitted to the United States for federal deduction, subject to applicable limitations
permanent residence; described below. If the taxpayer carries part of the
federal deduction forward to subsequent tax years, the
➢ was authorized to work in the United States by
addition is required for any year in which the taxpayer
Chapter 12 of Title 8 of the U.S. Code or by the
claims the deduction to reduce federal taxable income.
U.S. Attorney General;
The addition is required regardless of whether all or part
of the credit is:
➢ was paid less than $600 in wages or remuneration
for the year; ➢ waitlisted by the Division of Conservation;
➢ was hired by the C corporation prior to December ➢ carried forward to a subsequent tax year; or
31, 2006;
➢ transferred to another taxpayer.
➢ was not directly compensated or employed by the
C corporation; or With respect to any single gross conservation easement
donation, the aggregate addition required for all tax
➢ holds and presents to the C corporation a valid years in which federal deductions are claimed is limited
license or identification card issued by the to the contribution amount upon which the gross
Colorado Department of Revenue. conservation easement credit claim is based.
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Part 4: Additions to Taxable Income
Business interest deduction Additional resources
For tax years beginning or ending between March 27, The following is a list of statutes, regulations, forms,
2020 and December 31, 2020, taxpayers who claim a and guidance pertaining to required additions to
business interest deduction on their federal income tax taxable income. This list is not, and is not intended to
return may be required to add back some portion of be, an exhaustive list of authorities that govern the tax
the deduction. For additional information, please see treatment of every situation. Taxpayers with specific
Department publication CARES Act Tax Law Changes & questions should consult their tax advisors.
Colorado Impact, available online at
Tax.Colorado.gov/corporate-income-tax-guidance-
Statutes and regulations
publications.
➢ § 39-22-301, C.R.S. Corporate tax imposed.
Food and beverage expense deduction ➢ § 39-22-304, C.R.S. Net income of corporation –
For tax year 2022, a taxpayer who claims a business legislative declaration –definitions –repeal.
deduction on their federal income tax return for food and ➢ § 39-22-529, C.R.S. Business expense deduction –
beverage expenses may be required to add back a portion
labor services –unauthorized alien –definitions.
of the deduction on their Colorado return. The required
addback is equal to the amount of the deduction claimed ➢ Rule 39-22-304(2)(f). Gross conservation easement
in excess of 50% of the expenses. In general, the
addition.
allowable federal deduction is limited to 50% of the total
expenses. However, for tax years 2021 and 2022, section ➢ Rule 39-22-504(2). C corporation net operating loss.
274(n)(2)(D) of the Internal Revenue Code generally
permits deduction of 100% of the expense for food and
beverages provided by a restaurant. Forms and guidance
➢ Tax.Colorado.gov/business-income-tax-forms
➢ Tax.Colorado.gov/corporate-income-tax-guidance-
publications
➢ Colorado C Corporation Income Tax Return (DR 0112)
➢ CARES Act Tax Law Changes & Colorado Impact
➢ IRS Publication 542, Corporations
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Part 5: Subtractions from Taxable Income
Colorado income tax is based on federal taxable Colorado income tax refunds
income. However, Colorado law provides for a number
of modifications to federal taxable income that apply A subtraction is allowed for the amount of any refund
in the calculation of Colorado tax. Subtractions are or credit for the overpayment of Colorado income taxes
generally allowed to: (1) fully or partially exempt from that is included in a C corporation’s federal taxable
state taxation an item of income that is subject to income. The subtraction is not allowed for refunds of
federal taxation, (2) provide a state-level tax Colorado severance taxes or income taxes imposed by
deduction for an expense that is not allowed in the any other state.
calculation of federal income tax, or (3) claim a
Colorado net operating loss deduction carried forward
Section 78 gross-up
from a previous tax year. Additionally, a subtraction is
allowed under House Bill 21-1002 for certain taxpayers A subtraction is allowed for any amount treated as a
whose federal return for tax year 2020 was affected by section 78 dividend under section 78 of the Internal
the CARES Act. This Part 5 provides information Revenue Code and included in a C corporation’s federal
regarding the subtractions from federal taxable income taxable income. Section 78 requires any C corporation
that are allowed under Colorado law. that claims a federal foreign tax credit for taxes
deemed paid on its behalf pursuant to section 960 to
The foreign source income exclusion is discussed
include in its federal taxable income as a dividend an
separately in Part 7 of this publication.
amount equal to such taxes deemed to be paid.
Tax-exempt income Gain from a “qualified sale”
Various types of income are subject to federal income A subtraction is allowed for any gain from a qualified
tax, and therefore included in federal taxable income, sale that is included in a C corporation’s federal taxable
but exempt from Colorado taxation. A subtraction is income. A "qualified sale" is a sale of real or personal
allowed for the following types of income, if included property that meets all of the following criteria:
in a taxpayer’s federal taxable income, in order to ➢ the sale is between a buyer and a seller who are
exempt this income from Colorado taxation.
not related in any manner described in section
267(b) of the Internal Revenue Code;
Income from U.S. government obligations
➢ the sale is made in good faith
A subtraction is allowed for certain types of income
from U.S. government obligations to the extent such ➢ the buyer initiates the transaction to purchase the
income is included in federal taxable income. The property;
subtraction applies to interest income on obligations of
➢
the United States and its possessions, as well as the buyer had or could have obtained the power to
interest or dividend income on obligations or securities condemn such property; and
of any authority, commission, or instrumentality of the ➢ the seller does not qualify under section 1033 of
United States. No subtraction is allowed for any
the Internal Revenue Code for deferral of the gain
obligation or payment from the U.S. government for
due to the absence of condemnation or the threat
services rendered or for income from instruments
or imminence thereof and the buyer of the
issued by private financial institutions and guaranteed
property purchased initiates the transaction.
by the U.S. government.
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Part 5: Subtractions from Taxable Income
Income taxed prior to 1965 Capital gain subtraction
For income tax years commencing prior to January 1, Qualifying taxpayers can claim a subtraction for qualifying
2023, a subtraction is allowed for the amount of any capital gains included in their federal taxable income. For
annuity, income, or gain included in a C corporation’s additional information, please see Department publication
federal taxable income if such income was properly Income Tax Topics: Colorado Capital Gain Subtraction,
included in taxable income in any tax year prior to available online at Tax.Colorado.gov/corporate-income-
1965 and therefore previously taxed by Colorado. The tax-guidance-publications.
subtraction is allowed if the tax imposed on the income
in a year prior to 1965 was incurred by:
Deductions for expenses
➢ the taxpayer claiming the subtraction;
Colorado allows subtractions for various types of
➢ a decedent by reason of whose death the taxpayer expenses that do not qualify for deduction in the
acquired the right to receive the income or gain; or calculation of federal taxable income. A subtraction is
allowed for the following types of expenses.
➢ a trust or estate from which the taxpayer received
the income or gain.
Wages not deductible due to IRC § 280C
Gain from assets acquired prior to 1965 A subtraction is allowed for any portion of wages or
salaries paid or incurred by a C corporation for the tax
A subtraction is allowed with respect to any gain or loss year, but which are not deductible in the calculation of
included in a C corporation’s federal taxable income federal taxable income due to section 280C of the
that is attributable to property that meets all of the Internal Revenue Code. Section 280C disallows or
following requirements: reduces deduction for wages or salaries for which a
C corporation claims certain federal credits, such as:
➢ the property was acquired prior to January 1, 1965;
➢ the Indian employment credit;
➢ the property was sold or disposed of in a transaction ➢ the credit for employer differential wages payments;
in which gain or loss was recognized and included
in federal taxable income for the tax year; and ➢ the employer credit for paid family and medical
leave;
➢ the property had a higher adjusted basis for Colorado
➢
income tax purposes than for federal income tax the work opportunity credit;
purposes on the date of the sale or disposition. ➢ the empowerment zone employment credit;
The subtraction is allowed for the difference in basis, ➢ the orphan drug credit;
but, if a gain is considered a long-term capital gain for
➢ the mine rescue team training credit; and
federal income tax purposes, the subtraction is limited
to the portion of the gain that is included in federal ➢ the credit for increasing research activities.
taxable income.
No subtraction is allowed for any federal deduction
disallowed because a C corporation claimed a credit for
employer social security and Medicare taxes paid on
certain employee tips.
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Part 5: Subtractions from Taxable Income
MSA contributions Net operating losses (NOL)
A subtraction is allowed for any contribution a Colorado allows a net operating loss (NOL) deduction to
C corporation makes to an employee’s medical savings C corporations. In general, the Colorado NOL deduction
account (MSA) during the tax year, unless the is allowed in the same manner as a federal NOL
C corporation has claimed a deduction for the deduction. The amount of the NOL that may be carried
contribution on its federal income tax return. If a forward or carried back for Colorado income tax
C corporation claims a deduction for the contribution purposes is that portion of the federal NOL that is
on its federal income tax return, no subtraction may be allocated Colorado in the taxable year that the NOL is
claimed on the Colorado return. The contribution must sustained. Please see IRS Publication 542, Corporations
meet the requirements of sections 39-22-504.6 and for information about federal NOL deductions.
39-22-504.7, C.R.S., to qualify for the subtraction.
Carryforward period for Colorado NOLs
Marijuana business expenses
The allowable carryforward period for a Colorado NOL
A subtraction is allowed to any C corporation licensed depends upon the tax year in which the NOL originated.
under the Colorado Marijuana Code for an amount A Colorado NOL may be carried forward for up to 20
equal to any expenditure that would be eligible to be years if it originated in:
claimed as a federal income tax deduction, but for ➢ a tax year commencing prior to January 1, 2018; or
which deduction is disallowed by section 280E of the
Internal Revenue Code because marijuana is a ➢ a tax year commencing on or after January 1, 2021.
controlled substance under federal law.
Colorado NOLs originating in tax years commencing on
Oil shale depletion or after January 1, 2018, but prior to January 1, 2021
may be carried forward an unlimited number of years.
A subtraction for oil depletion is allowed to any
C corporation that is allowed a deduction for oil A Colorado NOL may not be carried back to any prior
tax year.
depletion pursuant to section 611 of the Internal
Revenue Code in the calculation of its federal taxable
Limitations on the amount of an NOL that may be
income. The allowable subtraction is an amount equal
carried over where such loss was obtained by the
to the difference between the depletion allowance
acquisition of one C corporation by another as
permitted under the Internal Revenue Code for oil contained in section 382 of the Internal Revenue Code
shale and an amount which would be permitted as the also apply for Colorado income tax purposes.
depletion allowance for oil shale if:
➢ the percentage depletion rate were 27.5%; and Deduction of losses arising in 2018 or later
➢ the crushing, retorting, condensing, and other The deduction of any Colorado NOLs arising in any tax
processes by which oil, gas, or both oil and gas are year beginning after December 31, 2017 is subject to
removed from oil shale, were deemed to be certain limitations. For additional information, please
treatment processes considered as mining. see Department publication CARES Act Tax Law
Changes & Colorado Impact , available online at
Tax.Colorado.gov/corporate-income-tax-guidance-
publications.
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Part 5: Subtractions from Taxable Income
Subtraction related to CARES Act Forms and guidance
➢
For income tax years beginning on or after January 1, Tax.Colorado.gov/business-income-tax-forms
2021, but before January 1, 2022, a subtraction from ➢ Tax.Colorado.gov/corporate-income-tax-guidance-
federal taxable income is allowed for taxpayers who
publications
added back on their Colorado return for a prior year all
or part of the business interest deducted on their ➢ Colorado C Corporation Income Tax Return (DR 0112)
federal return. For additional information, please see
Department publication CARES Act Tax Law Changes & ➢ Income Tax Topics: Colorado Capital Gain
Colorado Impact, available online at
Subtraction
Tax.Colorado.gov/corporate-income-tax-guidance-
publications. ➢ CARES Act Tax Law Changes & Colorado Impact
➢ IRS Publication 542, Corporations
Additional resources
The following is a list of statutes, regulations, forms,
and guidance pertaining to subtractions allowed in the
calculation of Colorado income tax. This list is not, and
is not intended to be, an exhaustive list of authorities
that govern the tax treatment of every situation.
Taxpayers with specific questions should consult their
tax advisors.
Statutes and regulations
➢ § 39-22-301, C.R.S. Corporate tax imposed.
➢ § 39-22-304, C.R.S. Net income of corporation –
legislative declaration –definitions –repeal.
➢ § 39-22-504.6, C.R.S. Definitions.
➢ § 39-22-504.7, C.R.S. Medical savings accounts –
establishment –contributions –distributions –
restrictions –taxation –portability.
➢ § 39-22-509, C.R.S. Mass transit and ridesharing
arrangements –employer deductions.
➢ § 39-22-518, C.R.S. Tax modification for net
capital gains.
➢ Rule 39-22-504(2). C corporation net operating loss.
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Part 6: Apportionment and Allocation
Any C corporation that has income from business This Part 6 includes introductory information regarding
activity that is taxable both within and outside of the requirement to apportion, criteria for distinguishing
Colorado must apportion and allocate its net income in apportionable income from nonapportionable income,
accordance with Colorado statute and regulation. This calculation of the apportionment fraction, and rules
Part 6 provides general information about corporate governing the allocation of nonapportionable income.
income tax apportionment, but does not, and is not
intended to, provide comprehensive guidance regarding
corporate apportionment. Please consult
section 39-22-303.6, C.R.S., and the rules listed below
for more specific direction.
Colorado Corporate Income Tax Apportionment Rules
➢ Rule 39-22-303.6–1. Apportionment and Allocation Definitions
➢ Rule 39-22-303.6–2. Apportionable and Nonapportionable Income
➢ Rule 39-22-303.6–3. Apportionment and Allocation of Income
➢ Rule 39-22-303.6–4. Taxable in Another State
➢ Rule 39-22-303.6–5. Calculating the Receipts Factor
➢ Rule 39-22-303.6–6. Sales of Tangible Personal Property in Colorado
➢ Rule 39-22-303.6–7. Sales Other Than Sales of Tangible Personal Property in Colorado
➢ Rule 39-22-303.6–8. Sale, Rental, Lease, or License of Real Property
➢ Rule 39-22-303.6–9. Rental, Lease, or License of Tangible Personal Property
➢ Rule 39-22-303.6–10. Sale of a Service
➢ Rule 39-22-303.6–11. License or Lease of Intangible Property
➢ Rule 39-22-303.6–12. Sale of Intangible Property
➢ Rule 39-22-303.6–13. Special Rules
➢ Rule 39-22-303.6–14. Nonapportionable Income
➢ Rule 39-22-303.6–15. Election to Treat All Income as Apportionable Income
➢ Rule 39-22-303.6–16. Alternative Apportionment
➢ Rule 39-22-303.6–17. Apportioning Gross Receipts of Taxpayers with De Minimis or No Receipts
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Part 6: Apportionment and Allocation
Requirement to apportion Apportionable income
Whether a C corporation must apportion its income A C corporation may have both income that is subject
depends generally on whether it engages in any to apportionment and income that is not apportioned,
business activity outside of Colorado. A C corporation but is directly allocated instead. Income that is subject
that has no income from business activity outside of to apportionment (“apportionable income”) includes:
Colorado for the tax year may not apportion its income.
➢
A C corporation generally must apportion its income if any income that would be allocable to Colorado
it has income from business activity that is taxable by under the United States constitution, but that is
both Colorado and any of the following political apportioned rather than allocated pursuant to
entities: Colorado law; and
➢
➢ any state of the United States, all income that is apportionable under the United
States constitution and is not allocated under
➢ the District of Columbia, Colorado law, including (1) income arising from
transactions and activity in the regular course of a
➢ the Commonwealth of Puerto Rico, taxpayer's trade or business and (2) income arising
from tangible and intangible property if the
➢ any territory or possession of the United States, or
acquisition, management, employment,
development, or disposition of the property is or
➢ any foreign country or political subdivision thereof.
was related to the operation of the taxpayer's
In determining apportionment requirements, a C trade or business.
corporation’s income is considered taxable by one of
See section 39-22-303.6(10), C.R.S., for special rules
the political entities listed above if:
applicable to banks, savings and loans, credit unions,
➢ the C corporation is subject to any of the following and, under certain conditions, other C corporations
taxes imposed by the political entity: a net income making or purchasing loans.
tax, a franchise tax measured by net income, a
franchise tax for the privilege of doing business, a Non-apportionable income
corporate stock tax, or any similar tax; or
If a C corporation has any income that is not
➢ the political entity has jurisdiction to subject the apportionable income, as described above, that income
taxpayer to a net income tax regardless of is not subject to apportionment and is instead directly
whether, in fact, the state subjects the taxpayer allocated, unless the C corporation has made an
to such tax. election to apportion all of its income for the tax year.
The election must be made by the extended due date
of the tax return in accordance with 1 CCR 201-2, Rule
39-22-303.6-15. Once made, the election is irrevocable
for the tax year.
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Part 6: Apportionment and Allocation
Apportionment For income tax years commencing before January 1,
2022, the numerator of the apportionment fraction is
In calculating its Colorado tax, a C corporation’s the sum of the sales of the affiliated C corporations
included in the return that are doing business in
apportionable income must be apportioned by
Colorado as described in Part 1 of this publication.
multiplying it by a fraction representing the proportion
of its total sales that were derived from Colorado
For income tax years commencing on or after January
sources. The numerator in the fraction is the total
1, 2022, the numerator of the apportionment fraction
receipts of the taxpayer in Colorado during the tax year
includes all amounts sourced to Colorado, regardless of
and the denominator is the total receipts of the
the separate entity to which those amounts may be
taxpayer everywhere during the tax year.
attributed.
The receipts that are considered in the calculation of
Receipts from tangible personal property
the fraction for apportionment generally include all of
the C corporation’s gross receipts, as defined in 1 CCR Receipts from the sales of tangible personal property
201-2, Rule 39-22-303.6-1(1)(g), received during the are derived from Colorado sources and included in the
tax year, but excluding: numerator if the property is delivered or shipped to a
purchaser in Colorado, regardless of the f.o.b. point
➢ receipts from non-apportionable income;
and any other conditions of the sale. Receipts from the
sales of tangible personal property are also included in
➢ receipts from hedging transactions;
the numerator if the property is shipped from an
➢ receipts from the maturity, redemption, sale, office, store, warehouse, factory, or other place of
exchange, loan, or other disposition of cash or storage in Colorado and the taxpayer is not taxable in
securities; the state to which the property is shipped.
➢ receipts from the sale of certain types of Receipts from the rental, lease, or license of tangible
intangible property including, but not limited to, personal property are derived from Colorado sources
the sale of a partnership interest, the sale of and included in the numerator to the extent the
business “goodwill,” or the sale of an agreement tangible personal property is located in Colorado.
not to compete; and
Receipts from sales of services
➢ intercompany transactions among affiliated
Receipts from the sale of services are included in the
C corporations included in a combined,
numerator of the apportionment fraction if and to the
consolidated, or combined/consolidated return.
extent that the service is delivered to a location in
Colorado. In general, the location to which a service is
Numerator of the apportionment fraction
delivered is the location of the C corporation’s market
for the service, which may not be the location of
The following sections provide general information for
C corporation’s employees or property.
determining whether various types of receipts are
derived from Colorado sources and therefore included
Receipts from real property
in the numerator in fraction used to in apportioning
income. Notwithstanding any provision of law, a Receipts from the sale, rental, lease, or license of real
C corporation’s foreign source income is not included in property are included in the numerator of the
the numerator of the fraction used to apportion apportionment fraction if and to the extent that the
income. real property is located in Colorado.
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Part 6: Apportionment and Allocation
Receipts from intangible property Alternative apportionment
The inclusion of receipts from intangible property in The Department has established special rules for
the calculation of the apportionment fraction depends certain industries in which the allocation and
on various criteria. Intangible property generally is apportionment provisions prescribed by law do not
property that is not physical or whose representation fairly represent the extent of business activity in
by physical means is merely incidental. Colorado of taxpayers. Such special rules are included
in the Colorado Code of Regulations at 1 CCR 201-2.
Receipts from the rental, lease, or license of intangible
property are included in the numerator of the Additionally, if the apportionment and allocation
apportionment fraction if the intangible property is provisions prescribed by law do not fairly represent the
used in Colorado. Intangible property utilized in extent of the taxpayer's business activities in Colorado,
marketing a good or service to a consumer is deemed the taxpayer may petition for, or the Executive
to be used in Colorado if that good or service is Director of the Department may require, with respect
purchased by a consumer who is in Colorado. Receipts to all or any part of the taxpayer's business activities, if
from intangible property sales that are contingent on reasonable:
the productivity, use, or disposition of the intangible
property are treated as receipts from the rental, lease, ➢ separate accounting;
or licensing of the intangible property for the purpose
of apportionment. ➢ the inclusion of one or more additional factors
that will fairly represent the taxpayer's business
Sales of contract rights, government licenses, or similar activity in Colorado;
intangible property that authorize the holder to
conduct a business activity in a specific geographic ➢ the inclusion of any receipts of a taxpayer
area are included in the numerator of the otherwise excluded under
apportionment fraction if and to the extent that they section 39-22-303.6(1)(d), C.R.S., from the
are used or are authorized to be used within Colorado. apportionment fraction; or
Receipts from other sales of intangible property that
➢
are not specifically described in the employment of any other method to
section 39-22-303.6(6)(d)(II), C.R.S., and 1 CCR 201-2, effectuate an equitable apportionment or
Rule 39-22-303.6-12 are excluded from both the allocation of the taxpayer's income, fairly
numerator and denominator of the apportionment calculated to determine the net income derived
fraction. from or attributable to sources in Colorado.
Reasonable approximation
If the state or states of assignment cannot be
determined for any receipt other than receipts from
sales of tangible personal property, the state or state of
assignment must be reasonably approximated. If the
state of assignment for any receipt cannot, under the
applicable statute and rule, be either determined or
reasonably approximated, such receipt is excluded from
the denominator of the apportionment fraction.
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Part 6: Apportionment and Allocation
Allocation of nonapportionable income Real property
Net rents and royalties from real property located in
Unless a C corporation has made an election to treat all
Colorado are allocated to Colorado. Capital gains and
of its income as apportionable income, the C
losses from sales of real property located in Colorado
corporation must allocate all of its nonapportionable are allocated to Colorado.
income or loss in accordance with Colorado statute and
rules.
Intangible property
Tangible personal property Capital gains and losses from sales of intangible
property, interest, and dividends are allocated to
Net rents and royalties from tangible personal property
Colorado if the taxpayer's commercial domicile is in
are allocated to Colorado if and to the extent that the
Colorado.
property is utilized in Colorado. Additionally, net rents
and royalties from tangible personal property are Patent and copyright royalties are allocated to
allocated to Colorado in their entirety if the Colorado if and to the extent that the patent or
C corporation's commercial domicile is in Colorado and copyright is utilized by the payer in Colorado.
the C corporation is not organized under the laws of, or Additionally, patent and copyright royalties are
the C corporation's income is not taxable in, the state allocated to Colorado if and to the extent that the
in which the property is utilized. For the purpose of patent or copyright is utilized by the payer in a state in
allocating net rents and royalties from tangible which the taxpayer is not taxable and the taxpayer's
personal property, the location of utilization of the commercial domicile is in Colorado. For the purpose of
property is determined in accordance with allocating patent and copyright royalties, the location
section 39-22-303.6(7)(b)(II), C.R.S. of utilization of the patent or copyright is determined
in accordance with section 39-22-303.6(7)(g)(II) and
Capital gains and losses from sales of tangible personal
(III), C.R.S.
property are allocated to Colorado if the property had
a situs in Colorado at the time of the sale. Tangible
personal property has a situs in Colorado at the time of
the sale if it is physically located in Colorado
immediately prior to the sale of the property. The
movement of property in anticipation of sale or as part
of the sale transaction is not considered in determining
its situs immediately prior to the time of sale.
Additionally, capital gains and losses from sales of
tangible personal property are allocated to Colorado if
the taxpayer's commercial domicile is in Colorado and
the taxpayer's income is not taxable in the state in
which the property had a situs.
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Part 6: Apportionment and Allocation
Additional resources
The following is a list of statutes, regulations, forms,
and guidance pertaining to apportionment and
allocation in the calculation of Colorado corporate
income tax. This list is not, and is not intended to be,
an exhaustive list of authorities that govern the tax
treatment of every situation. Taxpayers with specific
questions should consult their tax advisors.
Statutes and regulations
➢ § 39-22-303, C.R.S. Dividends in a combined report –
foreign source income – affiliated groups –definitions.
➢ § 39-22-303.6, C.R.S. Market-based apportionment of
the income of a taxpayer engaged in business –
allocation of nonapportionable income – rules –
definitions.
➢ See the beginning of this Part 6 for a list of relevant
rules.
Forms and guidance
➢ Tax.Colorado.gov/business-income-tax-forms
➢ Apportionment Schedule (Schedule RF)
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Part 7: Foreign Source Income Exclusion
If a C corporation is required to apportion its income as C corporations deducting foreign tax
discussed in Part 6 and has income from sources outside
of the United States, Colorado law limits the amount of If a C corporation claims a deduction on its federal
foreign source income that is considered in the income tax return for foreign taxes paid or accrued,
calculation of the C corporation’s Colorado tax liability. that deduction is reflected in the C corporation’s
This Part 7 discusses the method for determining the federal taxable income and no additional deduction for
amount of foreign source income that is considered in from federal taxable income is allowed on the Colorado
calculating Colorado corporate income tax. return for foreign source income. The amount of the
foreign taxes deducted in the calculation of federal
taxable income is also deducted from the denominator
Foreign source income of C corporation’s apportionment fraction.
For the purpose of determining the amount of the
C corporations claiming a foreign tax credit
foreign source income exclusion, “foreign source
income” is a C corporation’s taxable income from If a C corporation claims a federal credit for foreign
sources without the United States, determined in taxes paid or accrued, the amount of the foreign
accordance with section 862 of the Internal Revenue source income exclusion is determined according to the
Code. Pursuant to section 862, “foreign source income” formula illustrated and explained on the following
is gross income from sources without the United States, page. The foreign source income exclusion calculated
less expenses, losses, and other deductions properly in accordance with this formula is deducted from both
apportioned or allocated thereto and a ratable part of federal taxable income and the denominator of the
any other expenses, losses, or deductions that cannot apportionment fraction. However, in no event may the
be allocated to some item or class of gross income. amount deducted exceed the foreign source income
otherwise included in both federal taxable income and
The foreign source income from a foreign C corporation
the denominator of the apportionment fraction.
within an affiliated group of C corporations is
determined without regard to section 882(a)(2) of the The amount included in federal taxable income
Internal Revenue Code and does not include any income pursuant to section 78 of the Internal Revenue Code
that is derived from the conduct of a trade or business (the “Section 78 gross up”)-is included in the formula
within the United States. for calculating the foreign source income, but is
separately deducted from federal taxable income in
the determination of Colorado tax. See Part 5 of this
Foreign source income exclusion publication for additional information.
The foreign source income exclusion is applied as a
deduction from the amount of foreign source income
included in both federal taxable income and the
denominator of the apportionment fraction. The
amount deducted depends, in part, on whether the
C corporation claimed a federal deduction or a federal
credit for foreign taxes paid.
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Part 7: Foreign Source Income Exclusion
Foreign Source Income Exclusion if Federal Foreign Tax Credit Claimed
Formula:
Foreign taxes paid or accrued
Foreign Source Foreign Section
= source
Income Exclusion - 78 X Federal income tax Foreign source
income gross-up X
Federal taxable income income
Explanation of terms:
The terms used in the preceding formula have the following meanings.
Gross income from sources without the United States, determined in accordance with section 862 of
Foreign
the Internal Revenue Code, less expenses, losses, and other deductions properly apportioned or
Source
allocated thereto and a ratable part of any other expenses, losses, or deductions that cannot be
Income:
allocated to some item or class of gross income.
Total of taxes paid or accrued to foreign countries and United States possessions by or on behalf of
Foreign
the C corporation pursuant to section 901 or 902 of the Internal Revenue Code, deemed paid pursuant
taxes paid
to section 902 or 960 of the Internal Revenue Code for the tax year, or carried over or carried back to
or accrued:
such tax year pursuant to section 904(c) of the Internal Revenue Code.
Federal The taxpayer's federal corporate income tax calculated in accordance with section 11 (a) and (b) of
income tax: the Internal Revenue Code for such tax year
Section 78 The amount required to be included in federal taxable income pursuant to section 78 of the Internal
gross up: Revenue Code.
Additional resources Statutes and regulations
➢
The following is a list of statutes, regulations, forms, § 39-22-303, C.R.S. Dividends in a combined report –
and guidance pertaining to the foreign source income foreign source income – affiliated groups –definitions.
exclusion. This list is not, and is not intended to be, an ➢ Rule 39-22-303(10). Foreign source income.
exhaustive list of authorities that govern the tax
treatment of every situation. Taxpayers with specific ➢ 26 U.S.C. § 862. Income from sources without the
questions should consult their tax advisors.
United States.
Forms and guidance
➢ Tax.Colorado.gov/business-income-tax-forms
➢ Colorado C Corporation Income Tax Return (DR 0112)
➢ Apportionment Schedule (Schedule RF)
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Part 8: Estimated Tax Payments
In general, a C corporation must remit Colorado Net Colorado tax liability
estimated tax payments if its net Colorado tax liability
for the tax year exceeds $5,000. This Part 8 discusses For the purpose of calculating required estimated tax
the calculation of required quarterly estimated payments, a C corporation’s net Colorado tax liability is
payments, the remittance of estimated payments, and the total tax determined on the C corporation’s return
the estimated tax penalty imposed for failure to remit or by any subsequent amendment or assessment, minus
required estimated payments. any credits allowed. For this calculation, total tax
includes Colorado income tax and any recapture of
prior year credits. The credits subtracted in calculating
Calculating required quarterly payments net Colorado tax liability consist of all refundable and
nonrefundable credits allowed to the taxpayer, but not
The required quarterly estimated tax payments a any payments remitted by the taxpayer.
C corporation must make depend on various factors.
The general rules for calculating required quarterly
Large corporations
estimated payment appear below. Special rules
applicable to large corporations, the annualized income In general, a C corporation is a “large corporation” if it
installment method, and short tax years are discussed (or any predecessor corporation) had a federal taxable
in the sections that follow. income of $1,000,000 of more for any of the three
immediately preceding tax years.
C corporations required to make estimated payments
typically must make four quarterly estimated A large corporation must base its estimated payments
payments, each of which is 25% of the total required on its tax liability for the current year. A large
annual payment. The total required annual payment is corporation can initially base its first quarter estimated
the lesser of either 70% of the C corporation’s net tax tax payment on 25% of the previous year’s tax liability,
liability for the current year or, if the C corporation but must subsequently recalculate the required amount
meets certain qualifications, 100% of the based upon its current year liability and include with
C corporation’s net tax liability for the preceding year. its second quarter payment any additional amount due
A C corporation can base its estimated payments on its for the first quarter. The large corporation must
preceding year’s liability only if all of the following calculate the required estimated payments for the
conditions are met: second, third, and fourth quarters based upon the
current year net tax liability.
1) the C corporation’s preceding tax year was
12-months;
2) the C corporation filed a Colorado return for the
preceding tax year; and
3) the C corporation does not meet the IRS definition
of a “large corporation” for estimated tax purposes.
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Part 8: Estimated Tax Payments
Annualized income installment method the taxpayer must calculate their Colorado taxable
income for the annualization period, which runs from
The annualized income installment method allows the first day of the tax year through the end of the
taxpayers who do not receive income evenly month preceding the due date of the payment.
throughout the year to calculate the amount of each Generally, a taxpayer must first complete the federal
quarterly estimated payment separately, based upon annualized installment schedule (Part II of Schedule A
the income actually received in the months preceding of either Form 1120-W or Form 2220) in order to
the payment due date. Taxpayers may use the calculate their Colorado taxable income for each
annualized income installment method only if they also annualization period. Taxpayers with business activity
use the annualized income installment method to both inside and outside Colorado must calculate
compute their federal estimated tax payments. apportionment fractions for each annualization period
and may not use estimated apportionment fractions or
C corporations can use the following schedule, which apportionment fractions from a prior year. Taxpayers
also appears in from Part 4 of Colorado Form 205, to must retain records detailing the calculation of their
calculate their required quarterly estimated payments quarterly estimated payments and provide those
using the annualized income installment method. In records to the Department upon request.
determining each required quarterly payment amount,
Annualized Installment Method Schedule
15 thday of 15 thday of 15 thday of 15 thday of
Quarterly payment due date (within tax year) th 6 thmonth 9 thmonth 12 thmonth
4 month
Months 1 Months 1 Months 1 Months 1
Annualization period (within tax year)
through 3 through 5 through 8 through 11
1. Colorado taxable income during annualization 1.
period …………………………………………………………………
2. Annualization factor ………………………………………… 2. 4 2.4 1.5 1.091
3. Annualized taxable income (line 1 times line 2) 3.
4. Annualized Colorado tax (line 3 times 4.63%) …… 4.
5. Applicable percentage ……………………………………… 5. 17.5% 35% 52.5% 70%
6. Installment payment amount due (line 4 times 6.
line 5, minus any amounts entered on line 6 for
any earlier quarters) …………………………………………
Short tax years depending on the length of the short tax year. The
amount of each required payment is an equal share of
In the case of a short tax year (a tax year of less than the total required annual payment. For example, a
12 months), estimated payments are due on the 15 th taxpayer with an eight-month tax year must remit
day of the fourth, sixth, and ninth months of the year, three estimated payments, each equal to 33% of the
if the year is of sufficient length to include such total required annual payment, by the 15 daythof the
months, and the 15 thday of the final month of the tax fourth, sixth, and eighth months of the short tax year.
year. Consequently, taxpayer filing for a short tax year See the following table for details regarding the
may not be required to remit a full four estimated amounts and due dates for estimated payments for
payments, but rather only one, two, or three, short tax years.
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Part 8: Estimated Tax Payments
Payment amounts and due dates for short tax years
Tax years consisting Tax years consisting Tax years consisting Tax years consisting
of 4 months or less of 5 or 6 months of 7, 8, or 9 months of 10 or 11 months
No. of required
1 2 3 4
estimated payments
100% of total
Required amount of 50% of total required 33% of total required 25% of total required
required annual
each payment annual payment annual payment annual payment
payment
Due date of 1 st 15 thday of final 15 thday of fourth 15 thday of fourth 15 thday of fourth
estimated payment month of tax year month of tax year month of tax year month of tax year
Due date of 2 nd 15 thday of final 15 thday of sixth 15 thday of sixth
N/A
estimated payment month of tax year month of tax year month of tax year
Due date of 3 rd 15 thday of final 15 thday of ninth
N/A N/A
estimated payment month of tax year month of tax year
Due date of 4 th 15 thday of final
N/A N/A N/A
estimated payment month of tax year
Remitting estimated payments For estimated tax purposes, all C corporations included
in a combined and/or consolidated return are
Taxpayers must remit any required quarterly estimated considered a single taxpayer. Estimated payments
payments by the applicable due dates. Estimated tax should be remitted using the same parent account
payments are due on 15 th day of the fourth, sixths, number under which they will ultimately be claimed. If
ninth, and twelfth months of the tax year. See the a taxpayer remits payments using a different account
table to the right for due dates for both calendar year number, such as the account number for a subsidiary
filers and fiscal year filers. If a required payment is not company, the taxpayer must notify the Department in
remitted or is underpaid, the Department will first writing prior to the filing of the tax return upon which
credit any subsequent payments to resolve the the payment will be claimed.
underpayment, regardless of when the payment is
Due dates for quarterly estimated payments*
received.
Calendar year
Taxpayers may remit estimated payments through Quarter Fiscal year filers
filers
Revenue Online or via EFT. Taxpayers remitting st April 15 th 15 thday of fourth month
1
estimated payments by check must include a Corporate
Estimated Income Tax Payment Form (DR 0112EP) with 2 nd June 15 th 15 thday of sixth month
their payment to ensure proper crediting of their rd September 15 th 15 thday of ninth month
3
account. Forms and instructions are available online at
Tax.Colorado.gov/business-income-tax-forms. 4 th December 15 th 15 daythof twelfth month
* If any due date listed here falls on a Saturday,
Sunday, or legal holiday, the payment will be due on
the next business day.
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Part 8: Estimated Tax Payments
Estimated tax penalty Additional resources
If a C corporation fails to remit required estimated The following is a list of statutes, regulations, forms,
payments or underpays its required estimated tax, the and guidance pertaining to estimated payments for
C corporation will owe an estimated tax penalty. The C corporations. This list is not, and is not intended to
penalty is actually an assessment of interest, be, an exhaustive list of authorities that govern the tax
calculated on the unpaid or underpaid amount, from treatment of every situation. Taxpayers with specific
the due date of the payment until the date of payment questions should consult their tax advisors.
is made or the date the annual income tax return is
due, whichever is later. Annual interest rates may vary
Statutes and regulations
from year to year and are listed in the table below. C
corporations can calculate the estimated tax penalty ➢ § 39-22-606, C.R.S. Failure by corporation to pay
they owe using Form 205. estimate income tax.
➢
Annual Interest Rates Rule 39-22-606. Estimated corporate income tax.
➢ 26 U.S.C. § 6655. Failure by corporation to pay
Calendar year Interest rate
estimate income tax.
2019 8%
➢
2020 9% 26 CFR § 301.6655-1. Failure by corporation to pay
estimate income tax.
2021 6%
2022 6%
Forms and guidance
2023 8%
➢ Tax.Colorado.gov/business-income-tax-estimated-
No estimated tax penalty is due if a C corporation’s net payments
tax liability for the tax year is less than $5,000.
➢ Tax.Colorado.gov/business-income-tax-forms
➢ Colorado.gov/RevenueOnline
➢ Corporate Estimated Tax Payment Form (DR 0112EP)
➢ Computation of Penalty Due Based on Underpayment
of Colorado Corporate Estimated Tax (DR 0205)
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Part 9: “New” Investment Tax Credit
For tax years commencing prior to January 1, 2023, When property is placed in service
C corporations may claim the “new” investment tax
credit based upon provisions of the Internal Revenue Code For the purpose of determining a taxpayer’s qualified
(“IRC”) as it existed immediately prior to the enactment investment, qualified property is placed in service in
of the federal Revenue Reconciliation Act of 1990. All the earlier of the following tax years:
references in this Part 9 regarding the “new” investment
tax credit to sections of the IRC are to those sections as ➢ the tax year in which, under the taxpayer's
they existed immediately prior to the enactment of the depreciation practice, the period for depreciation
federal Revenue Reconciliation Act of 1990. with respect to such property begins; or
The “new” investment tax credit is equal to 10% of the ➢ the tax year in which the property is placed in a
federal investment tax credit that would have been condition or state of readiness and availability for
allowed under section 46 of the IRC for the tax year for a specifically assigned function.
property used in Colorado. Since the federal investment
tax credit was generally allowed for 10% of the qualified See 26 CFR § 1.46-3(d) for additional rules in
investment made during the tax year, the “new” determining the tax year during which qualified
investment tax credit is generally equal to 1% of the property is placed in service.
qualified investment made during the tax year.
Qualified property
Qualified investment
Qualified property is property defined as “section 38
The qualified investment is a percentage of the basis or property” in section 48 of the IRC. Section 38 property
cost of qualified property placed into service by the generally includes tangible personal property that is
taxpayer during the tax year. The applicable used in a trade or business and depreciable under
percentage may be based on various factors, including section 168 of the IRC. Any property expensed pursuant
the type of property, the useful life of the property, to IRC section 179 is not qualified property.
whether the property is new or used when the taxpayer
acquires it, and whether section 168 of the IRC applies
to the property. Section 168 of the IRC provides
generally for the accelerated cost recovery system for
depreciable business assets.
The applicable percentage for property to which
IRC section 168 applies is:
➢ 60% for property classified as 3-year property in
section 168(e) of the IRC; and
➢ 100% for property classified as anything other than
3-year property in section 168(e) of the IRC.
See IRC section 46(c)(2) for the applicable percentage
for section 38 property to which IRC section 168 does
not apply.
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Part 9: “New” Investment Tax Credit
Several other types of property may also qualify as Used property
section 38 property if they are (1) depreciable under
IRC section 168 (without regard to useful life) or (2) In the case of used property, the qualified investment
otherwise eligible for depreciation (or amortization in that may be considered in the calculation of the credit
lieu of depreciation) and have a useful life of 3 years or is limited to $150,000.
more. See section 48 of the IRC and the associated
federal regulations for information regarding specific
Leased property
rules for the following types of property:
Under certain conditions, the lessor of qualified
➢ air conditioning and heating units;
property can elect to treat the lessee as having
acquired the property for the purpose of the credit.
➢ tangible property used as an integral part of
See section 48(d) of the IRC and 26 CFR § 1.48-4 for
manufacturing or extraction;
additional information regarding leased property.
➢ tangible property used as an integral part of
furnishing transportation, communications, Property used inside and outside of Colorado
electrical energy, gas, water, or sewage disposal
services; In the case of tangible personal property used both
within and without Colorado, the credit shall be
➢ tangible property that constitutes a research apportioned based on the time the property was used
facility or bulk storage facility; in Colorado during the tax year compared to the time
of total usage of such property during the tax year
➢ elevators and escalators;
unless the taxpayer can justify a more equitable
apportionment method.
➢ single purpose agricultural or horticultural
structures;
➢ qualified rehabilitation expenditures;
➢ qualified timber property;
➢ a storage facility used in connection with
distribution of petroleum products;
➢ property used in lodging;
➢ livestock;
➢ boilers fueled by oil or gas;
➢ movie and television films;
➢ energy property; and
➢ sound recordings.
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Part 9: “New” Investment Tax Credit
Limitations on credit use Additional resources
The amount of “new” investment tax credit that a The following is a list of statutes, regulations, forms,
C corporation may apply to offset income tax for any and guidance pertaining to the “new” investment tax
tax year is limited to the lesser of: credit. This list is not, and is not intended to be, an
exhaustive list of authorities that govern the tax
➢ $1,000 minus any “old” investment tax credit the treatment of every situation. Taxpayers with specific
C corporation claims to offset tax for the tax year; or questions should consult their tax advisors.
➢ the C corporation’s tax liability for the tax year
Statutes and regulations
minus any “old” investment tax credit the
C corporation claims to offset tax for the tax year. ➢ § 39-22-507.6. Credit against corporate tax –
investment in certain property.
In the case of a "controlled group of corporations", as
defined in section 1563(a) of the IRC, the $1,000 limit ➢ Rule 39-22-507.6. The new Colorado investment
shall be apportioned among the members of the
tax credit.
controlled group as they may elect. The election
applies to the income tax year of the members of the
Federal law
controlled group ending with or including a common
December 31. Should such members fail to agree on an The federal laws listed here, that apply to the Colorado
allocation of the $1,000 limit, the $1,000 limit shall be “new” investment tax credit, are those laws as they
divided equally among all members of the controlled existed immediately prior to the enactment of the
group. federal Revenue Reconciliation Act of 1990.
If the credit a taxpayer may apply to offset tax is ➢ 26 U.S.C. § 38. General business credit.
limited, as described above, the taxpayer can generally
➢
carry forward the excess credit to the next tax year. 26 U.S.C. § 46. Amount of credit.
The excess credit may be carried forward to up to ➢ 26 U.S.C. § 47. Certain dispositions, etc. of section
three subsequent tax years. Any credit that has not
38 property.
been used within the carryforward period expires and is
no longer available to the C corporation to offset tax. ➢ 26 U.S.C. § 48. Definitions; special rules.
➢ 26 U.S.C. § 167. Depreciation.
➢ 26 U.S.C. § 168. Accelerated cost recovery system.
Any federal regulations promulgated under these
sections may also apply to the Colorado “new”
investment tax credit.
Forms and guidance
➢ Tax.Colorado.gov/business-income-tax-forms
➢ Credit Schedule for Corporations (DR 0112CR)
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Part 10: Filing and Recordkeeping
Colorado law imposes both filing and recordkeeping Original returns
requirements on C corporations. Every C corporation
that is subject to Colorado income tax must file an Every C corporation that is subject to Colorado income
annual income tax return and make timely payment of taxation is required to file a Colorado C Corporation
any tax due. Additionally, an amended return must be Income Tax Return (DR 0112). The return must be
filed to correct any errors in, or report any changes to, signed by the president, vice-president, treasurer,
the original return. Finally, C corporations are required assistant treasurer, chief accounting officer, or other
to retain any and all records necessary in order to officer duly authorized to act on the C corporation’s
determine the correct amount of tax they owe. behalf. In any case where a receiver, trustee in
bankruptcy, or assignee is operating the property or
This Part 10 outlines filing and recordkeeping business of a C corporation, such receiver, trustee, or
requirements applicable to C corporations. assignee must file a return for the C corporation.
Filing Colorado C Corporation Income Tax Returns are due on
the 15 thday of the fourth month following the close of
In general, C corporations are required to file original the tax year. For calendar year filers, returns are due
income tax returns annually, as well as amended April 15 thof the next year. All C corporations are
returns to correct any errors in, or report any changes allowed an automatic six-month extension for filing of
to, their original returns. Returns may be filed their income tax returns.
electronically either directly through the Department’s
RevenueOnline filing system or through the IRS’s If either the regular or extended due date falls on a
Modernized e-File (MeF) Program. C corporations may Saturday, Sunday, or legal holiday, the due date will be
also elect to file a paper, rather than electronic return. extended to the next business day.
Please visit Tax.Colorado.gov and IRS.gov for additional
If a C corporation fails or refuses to file any required
information about filing options.
return, the executive director of the Department may
file a return on the C corporation’s behalf with such
Filing periods information as may be available. The assessment of tax
based on the executive director’s filing is as good and
A C corporation’s taxable year for Colorado income tax sufficient as an assessment based on a return filed by a
purposes is the same as the C corporation’s taxable year C corporation.
for federal income tax purposes, regardless of whether
such taxable year is a calendar year, fiscal year, or short
year. If a C corporation’s taxable year is changed for
federal income tax purposes, its taxable year for Colorado
income tax purposes will be similarly changed.
In the application of any provision of Colorado income tax
law to a C corporation whose tax year is a 52-53 week tax
year, the tax year is deemed to have commenced on the
first day of the calendar month beginning nearest to the
first day of the 52-53 week year.
See IRS Publication 538, Accounting Periods and Methods
for additional information regarding filing periods.
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Part 10: Filing and Recordkeeping
Amended returns Listed and reportable transactions
A C corporation is required to file a Colorado Amended Any C corporation that files or is required to file a
C corporation Income Tax Return (DR 0112X) to report Colorado income tax return must disclose to the
any change made to the federal taxable income Department any listed or reportable transactions that
originally reported by the C corporation. An amended may result in a Colorado tax benefit. A Colorado tax
Colorado return is required whether the change benefit includes a tax benefit applied at the federal
resulted from the filing of an amended federal income level or to another state’s income tax or other similar
tax return or from any final determination made by the tax, but the consequence of which flows through to
Internal Revenue Service (IRS). reduce Colorado income tax liability. Listed
transactions, reportable transactions, and Colorado tax
A final determination of federal income tax
benefits, are defined in section 39-22-652, C.R.S., and
necessitating the filing of an amended Colorado return
1 CCR 201-2, Rule 39-22-652.
is the first of the following to occur:
The disclosure requirement applies regardless of
➢ the C corporation's execution of a Waiver of
whether the C corporation files or is required to file a
Restrictions on Assessment and Collection of
Colorado income tax return separately or as a member
Deficiency in Tax and Acceptance of
of an affiliated group included in a combined,
Overassessment (IRS Form 870) with acceptance by
consolidated or combined consolidated return.
the IRS;
A C corporation that is required to disclose a listed or
➢ the acceptance by the IRS of an Offer of Waiver of
reportable transaction must submit such disclosure
Restrictions on Assessment and Collection of
along with the C corporation’s Colorado income tax
Deficiency in Tax and Acceptance of
return and check the appropriate box on the return to
Overassessment (IRS Form 870) executed by the
indicate the disclosure is being made. In the case of
C corporation;
listed or reportable transaction the C corporation is
required to report to the Internal Revenue Service, the
➢ the payment of any additional tax by the
C corporation must submit with its Colorado income tax
C corporation; or
return a complete copy of the entire federal Form
➢ any judgment becoming final, whether by stipulation 8886, along with any amendments thereto. In the case
or otherwise, in any judicial proceeding affecting of listed or reportable transaction the C corporation is
such change in reported federal taxable income. not required to report to the Internal Revenue Service,
the C corporation must submit with its Colorado income
The C corporation must file the amended Colorado tax return a complete copy of Form DR 1831, Taxpayer
return within 30 days of the filing of the amended Disclosure Statement for Colorado Listed Transaction.
federal return or the final determination, whichever
applies. If a C corporation fails to file an amended A C corporation that fails to disclose a reportable
return within the prescribed 30-day period, the period transaction is subject to a penalty of up to $15,000. A
provided for assessment will be extended. See Part 11 C corporation that fails to disclose a listed transaction
for additional information regarding the period is subject to a penalty of up to $50,000. These
provided for assessment. penalties are in addition to any other penalties the
C corporation incurs.
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Part 10: Filing and Recordkeeping
Penalties and interest due date, the C corporation will owe a late payment
penalty. The late payment penalty is the greater of five
Full payment of Colorado income tax for C corporations is dollars or 5% of the unpaid tax, plus an additional 0.5%
due on the 15 th day of the fourth month following the for each month the tax remains unpaid, not to exceed
close of the tax year. For calendar year filers, full a total of 12%. However, the penalty is waived if all of
payment of tax is due April 15 thof the next year. Interest the following conditions are met:
is due on any tax not paid by the applicable due date,
➢
along with penalty, unless certain conditions, described the C corporation has paid at least 90% of the tax
below, are met. due by the original due date, not including any
extensions;
Interest accrues on any late payment of tax from the
➢
original due date of the tax, not including any extension, the C corporation files a return by the extended
to the date the tax is paid. An extension of the time to due date; and
file a return does not similarly extend the time to pay
➢
the tax. Interest accrues from the original due date until the C corporation pays any tax balance reported
the any tax balance reported on the return is paid. on the return at the time of filing.
Interest also accrues on any additional tax assessed as
the result or an audit or the filing of an amended return. In addition to the late payment penalty, statute
authorizes a number of other penalties for:
The rate of interest accrual depends on the calendar
➢
year(s) over which the deficiency continues. failure to pay a notice and demand for payment
Additionally, a discounted rate is allowed if: (collection penalty);
➢
➢ the C corporation pays the tax in full prior to the fraudulent or willful failure to file;
issuance of a notice of deficiency;
➢ filing a fraudulent, frivolous, or willfully false
➢ the C corporation pays the tax in full within 30 return;
days of the issuance of a notice of deficiency; or
➢ fraudulent failure to pay tax when due or willful
➢ within 30 days of the issuance of a notice of
attempt to evade tax;
deficiency, the C corporation enters into an
agreement to pay the tax in monthly installments. ➢ negligence or disregard for laws, rules, or
regulations, without intent to defraud; and
The discounted and non-discounted, regular interest
rates for recent years are listed in the following table. ➢ a tax preparer’s penalty for willful or reckless
disregard for applicable laws or rules.
Calendar year Discounted rate Regular rate
2019 5% 8%
2020 6% 9%
2021 3% 6%
2022 3% 6%
2023 5% 8%
If a C corporation fails to pay any tax by the applicable
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Part 10: Filing and Recordkeeping
Recordkeeping requirements Statutes and regulations
Every C corporation that is subject to Colorado income ➢ § 39-21-109, C.R.S. Interest on underpayment, non-
tax or otherwise required to file a return must keep payment, or extensions of time for payment of tax.
and preserve such books, accounts, and records as may
be necessary to determine the correct amount of tax. ➢ § 39-21-110.5, C.R.S. Rate of interest to be fixed.
Such books, accounts, and records must be kept and
➢
preserved for a period of four years following the due § 39-21-113, C.R.S. Reports and returns –rule.
date of the return or the payment of the tax. All such ➢ § 39-21-119, C.R.S. Filing with executive director –
books, accounts, and records shall be open for
when deemed to have been made.
examination by the Department at any time.
➢ § 39-22-111, C.R.S. Accounting periods and methods.
Additional resources ➢ § 39-22-306, C.R.S. Accounting periods and methods.
The following is a list of statutes, regulations, forms, ➢ § 39-22-601, C.R.S. Returns.
and guidance pertaining to filing and recordkeeping
➢
requirements. This list is not, and is not intended to § 39-22-608, C.R.S. Form, place, and date of filing
be, an exhaustive list of authorities that govern the tax return –extension –electronic filing.
treatment of every situation. Taxpayers with specific
➢
questions should consult their tax advisors. § 39-22-609, C.R.S. Payment of tax –applicable
when.
Forms and guidance ➢ § 39-22-621, C.R.S. Interest and penalties.
➢ Tax.Colorado.gov ➢ § 39-22-626, C.R.S. Applicability of amendments to
this article to income tax years.
➢ Tax.Colorado.gov/business-income-tax-forms
➢ § 39-22-652, C.R.S. Definitions.
➢ Colorado.gov/RevenueOnline
➢ § 39-22-653, C.R.S. Taxpayer disclosure of
➢ Colorado C Corporation Income Tax Return (DR 0112) reportable or listed transactions.
➢ Amended Colorado C Corporation Income Tax Return ➢ § 39-22-655, C.R.S. Penalty for failure to disclose a
(DR 0112X) reportable or listed transaction.
➢ Taxpayer Disclosure Statement for Colorado Listed ➢ Rule 39-22-608. Due date for filing income tax
Transaction (DR 1831) returns and payments.
➢ IRS Publication 538, Accounting Periods and ➢ Rule 39-22-621(2)(j).
Methods
➢ Rule 39-22-652. Definitions.
➢ Rule 39-22-653. Taxpayer disclosure of reportable
or listed transactions.
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Part 11: Refunds and Assessments
State law prescribes the period of time for a Refunds claimed with original returns
C corporation to claim a refund for an overpayment of
tax or for the Department to issue an assessment for an A C corporation may file an original return to claim a
underpayment of tax. However, statute also provides refund any time within four years of the due date of
for the extension of the period for refund or the return, not including any extension of the time to
assessment under various circumstances. file. The claim may include any estimated payments
made prior to the due date of the return and any other
allowable credits, to the extent either exceed the tax
Refund claims due. No refund is allowed to any taxpayer who fails to
file an original income tax return within four years of
A C corporation must file any claim for refund for any the due date of the return, not including any extension
year not later than the period provided for filing a claim of the time to file.
for refund of federal income tax plus one year. The
period provided for filing a claim for refund of federal
Refunds claimed with amended returns
income tax is affected by various factors, including the
date the original return is filed, the date any payment A C corporation generally must file an amended return
of tax was made, any agreement for extension between to claim a refund within four years of the date the
the taxpayer and the taxing authority, and a number of original return was filed. If the C corporation did not
other factors not discussed in this publication. The file its original return timely (by the original due date,
period for filing a claim for refund of Colorado income including extensions), the refund claim allowable with
tax is similarly affected by these factors. the amended return is generally limited to payments
made within the four years immediately preceding the
In general, the period provided for claiming a refund of
filing of the amended return. In determining the
federal income tax is three years. Consequently, the
timeliness of a refund claim, any estimated payments
period provided for claiming a refund of Colorado
remitted for the tax year are deemed to have been
income tax is generally four years. The application of
paid on the due date of the original return, not
this time period in various circumstances, as well as
including any extensions.
other factors that may affect the period provided for
claiming a refund of Colorado income tax, are Any refund claim made with an amended return filed
discussed in the following sections. more than four years after the C corporation’s original
return is limited to payments made in the three years
A claim for refund of Colorado corporate income tax is
immediately preceding the filing of the amended
made with the filing of either an original Colorado
return.
C Corporation Income Tax Return (DR 0112) or an
Amended Colorado C Corporation Income Tax Return
(DR 0112X).
Any request made by a C corporation to apply an
overpayment toward the estimated tax due for the
following tax year is a claim for refund subject to the
limitations discussed in this Part 11. If the period for
claiming a refund has expired and no refund may be
claimed, the crediting of any overpayment toward the
following year’s estimated tax is similarly prohibited.
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Part 11: Refunds and Assessments
Example #1 Extensions of the period for claiming refunds
A C corporation files an original return late, on June If a C corporation and the Internal Revenue Service
20, 2018 for tax year 2015. The return reports $12,000 enter into an agreement to extend the period provided
of tax, claims $10,000 in estimated payments, and is for claiming a refund of federal income tax, the period
accompanied by a payment of $2,000 for the remaining for claiming a refund of Colorado income tax is
tax balance. The C corporation files an amended return extended by the same amount of time. The
on August 15, 2020 reporting a $6,000 decrease in tax C corporation may file a claim for refund of Colorado
and claiming a refund for the $6,000 reduction in tax. income tax at any time within one year following the
expiration of the period agreed upon by the
Since the amended return was filed within four years of
C corporation and the IRS for the claiming of a refund
the original return, but the original return was not filed
of federal income tax.
timely, the refund that may be claimed with the
amended return is limited to payments made in the The period provided for claiming a refund for Colorado
four years preceding the filing of the amended return. income tax may also be extended by agreement
The estimated payments were made more than four between the C corporation and the Colorado
years prior to the filing of the amended return. Department of Revenue. Any agreement to extend the
Therefore, no refund is allowed for any part of the period provided for assessment will extend the period
estimated payments and the refund allowed to the provided for filing a claim for refund by the same
C corporation is limited to the $2,000 of tax paid with amount of time. Unless the C corporation fails to file a
the original return within the four years preceding the return or files a false or fraudulent return with intent
filing of the amended return. to evade tax, the time allowed for claiming a refund
for any tax year will not expire prior to the expiration
Example #2
of the time allowed for the assessment of any
deficiency for the same tax year.
A C corporation files an original return under extension,
on October 15, 2016 for tax year 2015. The return
reports $10,000 of tax and claims $6,000 in estimated Refund rejections
payments. The C corporation does not remit payment
of the remaining $4,000 tax balance until May 10, 2019. In the event that Department has, upon review of any
The C corporation files an amended return November return, rejected either in whole or in part a claim for
20, 2020 reporting a $5,000 decrease in tax and refund made therewith, the Department will mail to
claiming a refund for the $5,000 reduction in tax. the taxpayer a notice of refund rejection. The taxpayer
may submit a protest or request a hearing with respect
Since the amended return was not filed within four to the rejected refund claim. See the section titled
years of the original return, the refund that may be Protests and appeals for additional information.
claimed with the amended return is limited to
payments made in the three years preceding the filing
of the amended return. The estimated payments were
made more than three years prior to the filing of the
amended return. Therefore, no refund is allowed for
any part of the estimated payments and the refund
allowed to the C corporation is limited to the $4,000 of
tax paid within the three years preceding the filing of
the amended return.
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Part 11: Refunds and Assessments
Assessments Assessments resulting from adjustments
An assessment may be made either by the filing of a At any time within four years of the filing of an original
return reporting tax due or by the mailing or issuance return, whether filed timely, under extension, or
by the Department of a notice and demand for otherwise, the Department may examine the return,
payment for any additional tax due. determine the correct amount of tax, and issue a notice
of deficiency for any additional tax due. Following the
In general, any assessment of tax, penalties, and resolution of any protest and request for hearing or, if
interest must be made within one year after the the C corporation files no protest or request within the
expiration of the time provided for assessing a prescribed time, the Department will issue a notice of
deficiency in federal income tax. The period provided final determination for any additional tax due.
for the assessment of federal income tax is generally
three years from the time of filing of the taxpayer’s The period allowed for the Department to assess
original return. Consequently, the period provided for additional tax may be extended if there is any change
assessment of Colorado income tax is generally four made to the C corporation’s federal taxable income. A
years from the filing of the taxpayer’s original return. C corporation is required, as described in Part 11 of
If the original return was filed prior to the due date, this publication, to file an amended return to report
not including any extensions, the original return is any change to the C corporation’s federal taxable
considered to be filed on the due date. income. The Department may assess additional tax any
time within one year after the C corporation files the
In the case of the filing of a false or fraudulent return required amended return or the Department discovers
with intent to evade tax, the tax due may be assessed the change to federal taxable income, whichever
and collected at any time. occurs first.
Assessments based on a return Extensions of the period for assessment
The filing of a return by a C corporation constitutes an Under various circumstances, the period for assessment
assessment with respect to the tax, penalty, and may be extended.
interest reported on the return. If a C corporation has
not previously filed an original return for the tax Written agreements with the Department
period, the tax due may be assessed at any time the
The period allowed for assessment may be extended by
C corporation files a return. If a C corporation fails or
written agreement between a C corporation and the
refuses to file any required return, the Department
Department made prior to the expiration of the period
may, at any time, file a return on the C corporation’s
otherwise prescribed by law for assessment. The period
behalf with such information as may be available, and
established in the written agreement may be further
assess the resulting tax. The assessment based on the
extended by subsequent agreements in writing made
executive director’s filing is as good and sufficient as
before the expiration of the period previously agreed
an assessment based on a return filed by a
upon.
C corporation.
In general, an amended return that reports and
assesses any additional tax due must be filed within
four years of the filing of the original return.
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Part 11: Refunds and Assessments
Extension of the period for assessment of federal Protests and appeals
tax
A C corporation that receives a notice of deficiency or
Any extension of the period allowed for the assessment
notice of refund rejection may submit a written protest
of federal income tax will similarly extend the period
and request a hearing to dispute the notice. Any
for the assessment of Colorado income tax. The period
protest or request for hearing must be submitted within
for the assessment of federal tax may be extended by:
30 days of the date of the notice. The protest or
➢ an agreement between the taxpayer and the request for hearing must contain at least the following
Internal Revenue Service (IRS) for an extension, or information:
renewals thereof; ➢ the taxpayer’s name, address, and account
➢ a taxpayer ’sfiling of a federal income tax refund number;
claim; or ➢ the tax period(s) involved;
➢ a taxpayer’s initiation of an administrative or ➢ the type and amount of tax in dispute; and
judicial proceeding which has the effect of
extending the period allowed for assessment. ➢ a summary statement of the findings with which
the taxpayer does not agree and the grounds upon
If the federal period for assessment is extended, the
which the taxpayer relies for the purpose of
period within which the Department may issue a notice
showing the tax is not due.
of deficiency for the same tax year is four years after
the applicable Colorado return was filed or one year The protest or request for hearing must be signed by
after the expiration of the extended period for the the taxpayer. A protest or request for hearing may be
assessment of federal income tax, whichever is later. submitted online at Colorado.gov/RevenueOnline or by
mail, fax, or email in accordance with instructions
Bankruptcy and other court proceedings
included in the notice.
The period for assessment is extended during and for
six months after any period during which either:
➢ the taxpayer's assets are in the control or custody
of a court in any proceeding before any court of
the United States or any state; or
➢ the Department is prohibited from collecting by
reason of a bankruptcy case under title 11 of the
United States Code.
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Part 11: Refunds and Assessments
Additional resources Forms and guidance
➢
The following is a list of statutes, regulations, forms, Tax.Colorado.gov
and guidance pertaining to refunds and assessments. ➢ Tax.Colorado.gov/business-income-tax-forms
This list is not, and is not intended to be, an exhaustive
list of authorities that govern the tax treatment of ➢ Colorado.gov/RevenueOnline
every situation. Taxpayers with specific questions
should consult their tax advisors. ➢ Colorado C Corporation Income Tax Return
(DR 0112)
Statutes and regulations ➢ Amended Colorado C Corporation Income Tax
➢ § 39-21-103, C.R.S. Hearings. Return (DR 0112X)
➢ § 39-21-104, C.R.S. Rejection of claims.
➢ § 39-21-107, C.R.S. Limitations.
➢ § 39-21-108, C.R.S. Refunds.
➢ § 39-22-103, C.R.S. Definitions –construction of
terms.
➢ § 39-22-601, C.R.S. Returns.
➢ § 39-22-602, C.R.S. Failure to make return –
director may make.
➢ Rule 39-21-103. Hearings.
➢ Rule 39-21-108. Refunds.
➢ Rule 39-22-103(1). Assessment.
➢ 26 U.S.C. § 6402. Authority to make credits or
refunds.
➢ 26 U.S.C. § 6501. Limitations on assessment and
collection.
➢ 26 U.S.C. § 6511. Limitations on credit or refund.
➢ 26 U.S.C. § 6513. Time return deemed filed and
tax considered paid.
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