39-22-119 Child Care Expenses Tax Credit. Basis and Purpose. The bases for this rule are sections 39-21-112(1) and 39-22-119,

C.R.S. The purpose of this rule is to clarify that the child care expenses tax credit must be adjusted if the federal credit on which it is based is adjusted, and to describe the proper apportionment of the credit allowed to part-year Colorado residents. (1) The allowable Colorado child care expenses tax credit is equal to a percentage of the federal tax credit allowed for child care expenses. If the federal tax credit a taxpayer claims for child care expenses is disallowed, in whole or in part, or otherwise adjusted, the allowable Colorado child care expenses tax credit shall be adjusted accordingly based on the amount of the federal credit that is allowed. (2) Part-Year Residents. In the case of a part-year Colorado resident, the allowable child care expenses tax credit shall be apportioned by multiplying the credit otherwise calculated pursuant to section 39-22-119, C.R.S., by the ratio determined under section 39-22-110(1), C.R.S.; except that the ratio for apportioning the child care expenses tax credit may not exceed 100%, even if the ratio determined under section 39-22-110(1), C.R.S., exceeds 100%. (a) Example 1. Taxpayer A is a part-year Colorado resident in tax year 2020. Their apportionment ratio determined pursuant to section 39-22-110(1), C.R.S., is 60%. Taxpayer A is allowed a credit of $1,000 on their 2020 federal income tax return for child care expenses. Taxpayer A satisfies the requirements for the child care expenses tax credit pursuant to section 39- 22-119, C.R.S. The Colorado child care expenses tax credit allowed to Taxpayer A is calculated first by multiplying the $1,000 federal credit by 50%, pursuant to section 39-22-119(1.7), C.R.S., and then multiplying the result ($500) by the 60% apportionment ratio, pursuant to section 39-22- 119(4), C.R.S. Taxpayer A is allowed a Colorado child care expenses tax credit of $300. (b) Example 2. Taxpayer B is a part-year Colorado resident in tax year 2020. Their apportionment ratio determined pursuant to section 39-22-110(1), C.R.S., is 110%. Taxpayer B is allowed a $1,000 credit on their 2020 federal income tax for child care expenses. Taxpayer B satisfies the requirements for the child care expenses tax credit pursuant to section 39- 22-119, C.R.S. The Colorado child care expenses tax credit allowed to Taxpayer B is calculated first by multiplying the $1,000 federal credit by 50%, pursuant to section 39-22-119(1.7), C.R.S., and then multiplying the result ($500) by the 100%, pursuant to section 39-22-119(4), C.R.S., and paragraph (2) of this rule, because the apportionment ratio determined pursuant to section 39-22-110(1), C.R.S., exceeds 100%. Taxpayer B is allowed a Colorado child care expenses tax credit of $500.