Colorado Revised Statutes Title 39. Taxation § 39-22-304. Net income of corporation--legislative declaration--definitions--repeal

(1) The net income of a C corporation means the C corporation's federal taxable income, as defined in the internal revenue code, for the taxable year, with the modifications specified in this section.

(2) There shall be added to federal taxable income:

(a) Any income, war profits, or excess profits taxes paid or accrued to any foreign country or to any possession of the United States that were deducted on the federal income tax return;

(b) Interest income less amortization of premium on obligations of any state or any political subdivision thereof, other than interest income on obligations of this state or a political subdivision thereof which are issued on or after May 1, 1980.  Interest income on obligations of this state or a political subdivision thereof which were issued before May 1, 1980, shall be exempt from income tax to the extent that such interest is specifically so exempt under the laws of this state authorizing the issuance of such obligations.  The amount of such interest shall be the net amount after reduction by the amount of the deductions related thereto which are required by the internal revenue code to be allocated to such classes of interest.

(c) The federal net operating loss deduction;

(d) Income taxes imposed by this state to the extent deducted in determining federal taxable income, except the tax imposed by article 29 of this title;

(e)(I) Any expenses incurred by a taxpayer with respect to expenditures made at, or payments made to, a club licensed pursuant to section 44-3-418 that has a policy to restrict membership on the basis of sex, sexual orientation, marital status, race, creed, religion, color, ancestry, or national origin.  Any such club shall provide on each receipt furnished to a taxpayer a printed statement as follows:

The expenditures covered by this receipt are

nondeductible for state income tax purposes.

(II) The general assembly finds, determines, and declares that the people of the state of Colorado desire to promote and achieve tax equity and fairness among all the state's citizens and further desire to conform to the public policy of nondiscrimination.  The general assembly further declares that the provisions of this paragraph (e) are enacted for these reasons and for no other purpose.

(f) For the income tax years commencing on or after January 1, 2000, an amount equal to the charitable contribution deduction allowed by section 170 of the internal revenue code  1 to the extent such deduction includes a contribution of real property to a charitable organization for a conservation purpose for which an income tax credit is claimed pursuant to section 39-22-522 ;

(h) An amount equal to a business expense for labor services that is deducted pursuant to section 162(a)(1) of the internal revenue code but that is prohibited from being claimed as a deductible business expense for state income tax purposes pursuant to section 39-22-529 .

(3) There shall be subtracted from federal taxable income:

(a) Interest income on obligations of the United States and its possessions to the extent included in federal taxable income;

(b) Interest or dividend income on obligations or securities of any authority, commission, or instrumentality of the United States to the extent included in federal taxable income but exempt from state income taxes under the laws of the United States;

(c) The portion of any gain or loss from the sale or other disposition of property having a higher adjusted basis for Colorado income tax purposes than for federal income tax purposes on the date such property was sold or disposed of in a transaction in which gain or loss was recognized for purposes of federal income tax that does not exceed such difference in basis, but, if a gain is considered a long-term capital gain for federal income tax purposes, the modification shall be limited to the portion of such gain which is included in federal taxable income;

(d)(I) The portion of any gain received during the taxable year from a qualified sale.

(II) As used in this paragraph (d), “qualified sale” means a sale, in good faith, of real or personal property to a buyer who initiates the transaction to purchase real or personal property of the seller and who had or could have obtained the power to condemn such property, if the transaction was not between persons defined in section 267(b) of the internal revenue code .  2

(III) The purpose of this paragraph (d) is, for purposes of Colorado income tax, to accord a seller in a qualified sale the same treatment received by a taxpayer under section 1033 of the internal revenue code  3 relating to gains from involuntary conversion, even though said seller does not qualify under said section 1033 due to the absence of condemnation or the threat or imminence thereof and the buyer of the property purchased initiates the transaction.  The executive director shall promulgate such reasonable rules and regulations as are necessary to accomplish the purpose of this paragraph (d).

(e) The amount necessary to prevent the taxation under this article of any annuity or other amount of income or gain which was properly included in income or gain and was taxed under the laws of this state, for a taxable year prior to January 1, 1965, to the taxpayer, or to a decedent by reason of whose death the taxpayer acquired the right to receive the income or gain, or to a trust or estate from which the taxpayer received the income or gain;

(f) The amount of any refund or credit for overpayment of income taxes imposed by this state to the extent included in federal taxable income;

(g) The net operating loss deduction allowed under section 39-22-504 ;

(h) An amount equal to the difference between the depletion allowance permitted under the internal revenue code for oil shale and an amount which would be permitted as the depletion allowance for oil shale if:  The percentage depletion rate were twenty-seven and one-half percent;  and the crushing, retorting, condensing, and other processes by which oil, gas, or both oil and gas are removed from oil shale, were deemed to be treatment processes considered as mining;

(i) That portion of wages or salaries paid or incurred for the taxable year, the deduction for which is disallowed by section 280C of the internal revenue code ;  4

(j) Any amount treated as a section 78 dividend under section 78 of the internal revenue code ;  5

(k) Any amount contributed to a medical savings account pursuant to section 39-22-504.7(2)(e) , to the extent such amount is not claimed as a deduction on the taxpayer's federal tax return;

(m) For income tax years commencing on or after January 1, 2014, if a taxpayer is licensed under the “Colorado Medical Marijuana Code”, article 11 of title 44, an amount equal to any expenditure that is eligible to be claimed as a federal income tax deduction but is disallowed by section 280E of the internal revenue code because marijuana is a controlled substance under federal law;

(n) For income tax years commencing on or after January 1, 2014, if a taxpayer is licensed under the “Colorado Retail Marijuana Code”, article 12 of title 44, an amount equal to any expenditure that is eligible to be claimed as a federal income tax deduction but is disallowed by section 280E of the federal internal revenue code because marijuana is a controlled substance under federal law;

(o)(I) The general assembly hereby finds and declares that:

(A) The state is seeing a continued trend of aging farmers and ranchers;

(B) The current average age of a family farm or ranch operator in Colorado is fifty-nine;

(C) There is a national and local focus on the benefits of local foods, and at the same time a new generation of farmer is emerging, but the beginning farmers or ranchers are having trouble finding land to lease;  and

(D) The income tax deduction allowed in this paragraph (o) is intended to be an incentive for aging farmers or ranchers to lease their agricultural assets to beginning farmers or ranchers in order to give the beginners a chance to get started in the industry.

(II) For income tax years beginning on or after January 1, 2017, but before January 1, 2020, if a qualified taxpayer enters into a qualified lease with an eligible beginning farmer or rancher, an amount specified in a deduction certificate issued by the Colorado agricultural development authority that is equal to twenty percent of the lease payments received from an eligible beginning farmer or rancher as specified in the qualified lease, not to exceed the amount specified in subparagraph (III) of this paragraph (o).

(III) The Colorado agricultural development authority may issue more than one deduction certificate to each qualified taxpayer if such qualified taxpayer enters into more than one qualified lease with more than one eligible beginning farmer or rancher;  except that the total amount specified in all deduction certificates issued to a qualified taxpayer may not exceed twenty-five thousand dollars per income tax year for a maximum of three income tax years, and except that the Colorado agricultural development authority shall not issue more than the number of deduction certificates per income tax year set forth in section 35-75-107(1)(u), C.R.S .

(IV) For purposes of this paragraph (o):

(A) “Agricultural asset” means land, crops, livestock and livestock facilities, farm equipment and machinery, grain storage, or irrigation equipment.

(B) “Colorado agricultural development authority” means the Colorado agricultural development authority created in section 35-75-104, C.R.S .

(C) “Deduction certificate” means a certificate issued by the Colorado agricultural development authority certifying that a qualified taxpayer qualifies for the income tax deduction authorized in this section and specifying the amount of the deduction allowed.

(D) “Eligible beginning farmer or rancher” means a farmer or rancher residing in the state who has a net worth of less than two million dollars, will provide the majority of the daily physical labor and management on the qualified taxpayer's agricultural asset or will use the qualified taxpayer's agricultural asset the majority of the time, has plans to farm or ranch full-time, has not been engaged in farming or ranching for more than ten years, has farming or ranching experience or education, and has participated in a financial management educational program approved by the Colorado agricultural development authority.

(E) “Qualified lease” means a lease entered into between a qualified taxpayer and an eligible beginning farmer or rancher for the qualified taxpayer's agricultural asset that is approved by the Colorado agricultural development authority and has a duration of at least three years.

(F) “Qualified taxpayer” means a taxpayer who owns an agricultural asset located in the state.

(V) To claim the deduction allowed in this paragraph (o), the qualified taxpayer shall attach a copy of the deduction certificate issued by the Colorado agricultural development authority to the taxpayer's return.  No tax deduction is allowed under this paragraph (o) unless the taxpayer provides the copy of the deduction certificate.

(VI) The Colorado agricultural development authority shall, in a sufficiently timely manner to allow the department of revenue to process returns claiming the deduction allowed by this section, provide the department of revenue with an electronic report of the qualified taxpayers receiving a deduction certificate as allowed in this section for the preceding calendar year that includes the following information:

(A) The qualified taxpayer's name;

(B) The qualified taxpayer's Colorado account number;  and

(C) The amount of the deduction allowed in this section.

(VII) This paragraph (o) is repealed, effective December 31, 2023.

1 26 U.S.C.A. § 170.
2 26 U.S.C.A. § 267(b).
3 26 U.S.C.A. § 1033.
4 26 U.S.C.A. § 280C.
5 26 U.S.C.A. § 78.

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