State & Local Tax Impacts of COVID-19 for Colorado – 2021

Thoughtware Alert Published: May 03, 2021 | Updated: Sep 09, 2021
SALT GOV COVID TW - 1

Information current as of August 31, 2021.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to Colorado

  • Colorado issued information on Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Paycheck Protection Program (PPP) loans for income tax purposes. The exclusion of covered loans from gross income under the federal CARES Act was a prospective provision in effect during the tax year. As such, the covered loans excluded from federal taxable income are similarly excluded from Colorado taxable income. The COVID-Related Tax Relief Act of 2020 changed the Small Business Act to prevent the denial of deductions and basis increases, and the reduction of tax attributes, because of the exclusion of covered loan forgiveness from gross income. This act became law on December 27, 2020, and retrospectively applied to taxable years ending after the enactment of the CARES Act. The retrospective amendments don’t affect the Colorado tax liability of taxpayers whose tax years ended before December 27, 2020.
    • Colorado DOR, CARES Act PPP Loans; March 11, 2021.
  • Colorado will extend the individual income tax payment and filing deadline to May 17, 2021. Individuals will have the option to pay any 2020 income tax payments that would normally be due on April 15, 2021, by May 17, 2021, without penalty or interest. This extension applies to money owed by individual taxpayers only for the 2020 income tax year. The extension won’t apply to estimated payments for the 2021 income tax year due from individuals and corporations on April 15, 2021. The extension also doesn’t apply to returns and payments for other tax types and taxpayers, including income tax for C corporations, partnerships, S corporations, fiduciaries, and severance tax. Individual taxpayers don’t need to file any forms or call the DOR to qualify for this automatic state tax payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline are automatically granted a filing extension until October 15, but that doesn’t grant an extension of time to pay taxes due.
    • Colorado DOR, News Release; March 18, 2021.
    • Governor’s Executive Order No. D 2021 075, March 30, 2021.
    • Colorado Code Emergency Regs. §§39-22-608-2 and 39-22-609-1, effective April 1, 2021.
    • Governor’s Executive Order No. D 2021 091, April 28, 2021. 
  • Colorado issued information that taxpayers must add back to their 2020 state income tax return the amount of unemployment compensation excluded from their federal taxable income per the American Rescue Plan Act of 2021.
    • Colorado DOR, News Release; April 1, 2021.
  • Colorado COVID-19 relief legislation allows qualifying Colorado retailers in the bar, restaurant, catering, and mobile food services industries to temporarily deduct up to $70,000 in net taxable sales from their monthly state sales tax return and retain the resulting sales tax revenue. One deduction is permitted per month for up to five licensed locations per retailer for sales made in June, July, and August 2021. 
    • Colorado H.B. 1265, effective June 14, 2021.
  • Colorado issued guidance on the individual income tax effect of federal economic recovery legislation. The American Rescue Plan Act of 2021 will not affect state income tax returns for the year 2020, including the taxation of unemployment compensation. The 2020 economic impact payments do not count as income for property tax/rent/heat credit rebate purposes. PPP loans under the CARES Act are excluded from state taxable income. 
    • Colorado DOR, Website Release; July 1, 2021.
  • Colorado issued information regarding the CARES Act’s effect on state individual income, trust income, and corporate income taxes. Colorado adopts the Internal Revenue Code on a rolling basis and doesn’t incorporate federal statutory changes that are enacted after the last day of a tax year. Therefore, amended returns reporting only CARES Act adjustments for tax years ending before March 27, 2020, shouldn’t be filed unless the original return reflected federal adjustments allowed by the act. The publication also includes information on 1) net operating losses; 2) the business interest expense limitation; 3) the excess loss limitation; 4) qualified improvement property and residential rental property depreciation; and 5) the state subtraction for certain retroactive provisions of the CARES Act. The DOR also discussed state tax treatment of Paycheck Protection Program forgivable loans and emergency grants. 
    • Colorado DOR, CARES Act Impact; August 1, 2021.
       

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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