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November 19, 2020
2020-2730

Colorado voters approve a retroactive reduction to the state's income tax rate; Governor Jared Polis must issue a proclamation concerning the effective date

With 100% of Colorado counties reporting in, voters have approved by a margin of 58% to 42% a retroactive reduction in the state's flat income tax rate for individuals and corporations from 4.63% to 4.55%, effective with taxable years commencing on or after January 1, 2020. (Proposition 116, Colorado secretary of state website, last updated November 9, 2020.)

Proposition 116 also reduces the state's withholding tax rate to 4.55%. (EY Tax Alert 2020-2597, 10-30-2020.)

While the measure shows that the change is effective for taxable years commencing on or after January 1, 2020, measure language also specifies that the law change only takes effect upon proclamation by Governor Jared Polis.

The secretary of state website shows that, although 100% of Colorado counties have reported election results, results are still unofficial. According to the website, that state has until November 30, 2020 to certify the election results. Accordingly, it could be sometime in December 2020 that the governor proclaims the effective date of Proposition 116. The Colorado Department of Revenue will then need to clarify if the withholding rate will apply in December 2020 or if is delayed to January 1, 2021. As of the of time this Alert, nothing has been posted to the Department's website.

Colorado residents saw a reduction to their 2019 income taxes as a result of TABOR

Under the state's Taxpayer Bill of Rights (TABOR), Colorado's flat income tax rate of 4.63% was reduced to 4.5% for calendar year 2019 due to a state budget surplus.

See the state's TABOR website for more information. For more onColorado's 2020 ballot results,see the Colorado Chamber of Commerce blogand the Colorado Secretary of Statewebsite.

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Debera Salam (debera.salam@ey.com)
   • Kristie Lowery (kristie.lowery@ey.com)
   • Kenneth Hausser (kenneth.hausser@ey.com)

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