(d) The general assembly and the state auditor, in consultation with the department of revenue, shall measure the effectiveness of the exemption allowed by this section by determining the number of Colorado families who, after claiming a credit or credits in this section, no longer fall below the federal poverty level in the tax year in which they claimed the credit or credits.
(2) As used in this section, unless the context otherwise requires:
(a) Eligible child means a qualifying child, as defined in section 152 (c) of the Internal Revenue Code of 1986; except that the age requirements are as set forth in subsections (3)(a)(I), (3)(a)(II), (3)(b)(I), and (3)(b)(II) of this section.
(b) (I) Estimated adjustment factor means, for a given income tax year, the CAGR for nonexempt revenue that is calculated according to the following formula, as adjusted pursuant to subsection (2)(b)(IV) of this section: [Insert 39-22-123.5(3.5)(a)(V) and 39-22-130(2)(b)(I).pdf here]
(II) As used in this subsection (2)(b):
(A) Applicable forecast means either the quarterly December revenue forecast prepared by legislative council staff or the quarterly December revenue forecast prepared by the office of state planning and budgeting in the December immediately preceding the applicable state fiscal year, as determined by which immediately preceding March forecast the joint budget committee of the general assembly used in the preparation of the state budget.
(B) Applicable state fiscal year means the fiscal year that begins in the income tax year for which the credit is allowed.
(C) BV means the estimate of the state's nonexempt revenue for state fiscal year 2024-25 included in the 2024 office of state planning and budgeting March revenue forecast.
(D) CAGR means the estimated compound annual growth rate.
(E) EV means the estimate of the state's nonexempt revenue for the applicable state fiscal year included in the applicable forecast excluding the projected aggregate amount of the tax credit allowed pursuant to this section and the projected aggregate amount of the increased portion of the earned income tax credit allowed pursuant to section 39-22-123.5 (3.5), created in House Bill 24-1134, enacted in 2024, for the given income tax year.
(F) n means, for the applicable state fiscal year, the number of state fiscal years that have passed since the 2024-25 state fiscal year.
(G) Nonexempt revenue means, for the applicable state fiscal year, the revenue that is identified as nonexempt TABOR revenues in the annual comprehensive financial report published by the office of the state controller.
(H) TABOR means section 20 of article X of the state constitution.
(III) The executive director shall calculate the estimated adjustment factor in accordance with this section.
(IV) The estimated adjustment factor must be increased by one-tenth of one percentage point if the Colorado unemployment rate, as calculated by the United States bureau of labor statistics, reaches five percent and must be increased by an additional one-tenth of one percentage point for every one percentage point increase in the Colorado unemployment rate above five percent.
(c) Federal poverty level means the poverty line that is required to be updated annually within the federal poverty guidelines adopted by the United States department of health and human services pursuant to 42 U.S.C. sec. 9902
(2).
(d) Inflation means the annual percentage change in the United States department of labor bureau of labor statistics consumer price index for Denver-Aurora-Lakewood for all items paid by all urban consumers, or its applicable successor index.
(3) (a) In addition to the child tax credit allowed by section 39-22-129, for income tax years commencing on or after January 1, 2024, but before January 1, 2034, a resident individual who files a single return is allowed a family affordability tax credit against the income taxes due under this article 22 for:
(I) Each eligible child of the resident individual who is five years of age or younger at the close of the income tax year in the amount of three thousand two hundred dollars, adjusted for inflation and as modified by subsections (4), (5), and
(6) of this section; and
(II) Each eligible child of the resident individual who is six years of age or older but less than seventeen years of age at the close of the income tax year in an amount that is seventy-five percent of the amount allowed in subsection (3)(a)(I) of this section, as modified by subsections (4), (5), and (6) of this section.
(b) In addition to the child tax credit allowed by section 39-22-129, for income tax years commencing on or after January 1, 2024, but before January 1, 2034, two resident individuals who file a joint return are allowed a family affordability tax credit against the income taxes due under this article 22 for:
(I) Each eligible child of the resident individuals who is five years of age or younger at the close of the income tax year in the amount of three thousand two hundred dollars, adjusted for inflation and as modified by subsections (4), (5), and
(6) of this section; and
(II) Each eligible child of the resident individuals who is six years of age or older but less than seventeen years of age at the close of the income tax year in an amount that is seventy-five percent of the amount allowed in subsection (3)(b)(I) of this section, as modified by subsections (4), (5), and (6) of this section.
(4) For income tax years commencing on or after January 1, 2024, but before January 1, 2025, the credit amounts in:
(a) Subsection (3)(a)(I) of this section are reduced, but not below zero, by an amount equal to six and eight hundred seventy-five one-thousandths percent for each five thousand dollars by which a resident individual's adjusted gross income exceeds fifteen thousand dollars; and
(b) Subsection (3)(b)(I) of this section are reduced, but not below zero, by an amount equal to six and eight hundred seventy-five one-thousandths percent for each five thousand dollars by which two resident individuals' adjusted gross income exceeds twenty-five thousand dollars.
(5) For income tax years commencing on or after January 1, 2025, but before January 1, 2026, if the estimated adjustment factor is:
(a) Greater than or equal to two percent:
(I) The full credit amount set forth in subsection (3)(a)(I) of this section is allowed for a resident individual who files a single return with an adjusted gross income of fifteen thousand dollars or less, and the full credit amount set forth in subsection (3)(b)(I) of this section is allowed for two resident individuals who file a joint return with an adjusted gross income of twenty-five thousand dollars or less;
(II) The credit amount in subsection (3)(a)(I) of this section is reduced, but not below zero, by an amount equal to six and eight hundred seventy-five one-thousandths percent for each five thousand dollars by which a resident individual's adjusted gross income exceeds fifteen thousand dollars; and
(III) The credit amount in subsection (3)(b)(I) of this section is reduced, but not below zero, by an amount equal to six and eight hundred seventy-five one-thousandths percent for each five thousand dollars by which two resident individuals' adjusted gross income exceeds twenty-five thousand dollars; or
(b) Less than two percent, no credit is allowed pursuant to this section.
(6) For income tax years commencing on or after January 1, 2026, but before January 1, 2034, if the estimated adjustment factor for the income tax year is:
(a) Greater than or equal to three and seventy-five one-hundredths percent:
(I) The full credit amount set forth in subsection (3)(a)(I) of this section is allowed for a resident individual who files a single return with an adjusted gross income of fifteen thousand dollars or less, and the full credit amount set forth in subsection (3)(b)(I) of this section is allowed for two resident individuals who file a joint return with an adjusted gross income of twenty-five thousand dollars or less;
(II) The credit amount in subsection (3)(a)(I) of this section is reduced, but not below zero, by an amount equal to six and eight hundred seventy-five one-thousandths percent for each five thousand dollars by which a resident individual's adjusted gross income exceeds fifteen thousand dollars; and
(III) The credit amount in subsection (3)(b)(I) of this section is reduced, but not below zero, by an amount equal to six and eight hundred seventy-five one-thousandths percent for each five thousand dollars by which two resident individuals' adjusted gross income exceeds twenty-five thousand dollars;
(b) Greater than or equal to three and fifty-six one-hundredths percent, but less than three and seventy-five one-hundredths percent, then:
(I) The full credit amount set forth in subsection (3)(a)(I) of this section is allowed for a resident individual who files a single return with an adjusted gross income of fifteen thousand dollars or less, and the full credit amount set forth in subsection (3)(b)(I) of this section is allowed for two resident individuals who file a joint return with an adjusted gross income of twenty-five thousand dollars or less;
(II) The credit amount in subsection (3)(a)(I) of this section is reduced, but not below zero, by an amount equal to nine and six one-hundredths percent for each five thousand dollars by which a resident individual's adjusted gross income exceeds fifteen thousand dollars; and
(III) The credit amount in subsection (3)(b)(I) of this section is reduced, but not below zero, by an amount equal to nine and six one-hundredths percent for each five thousand dollars by which two resident individuals' adjusted gross income exceeds twenty-five thousand dollars;
(c) Greater than or equal to three and thirty-seven one-hundredths percent, but less than three and fifty-six one-hundredths percent, then:
(I) The full credit amount set forth in subsection (3)(a)(I) of this section is allowed for a resident individual who files a single return with an adjusted gross income of fifteen thousand dollars or less, and the full credit amount set forth in subsection (3)(b)(I) of this section is allowed for two resident individuals who file a joint return with an adjusted gross income of twenty-five thousand dollars or less;
(II) The credit amount in subsection (3)(a)(I) of this section is reduced, but not below zero, by an amount equal to thirteen and fifty-nine one-hundredths percent for each five thousand dollars by which a resident individual's adjusted gross income exceeds fifteen thousand dollars; and
(III) The credit amount in subsection (3)(b)(I) of this section is reduced, but not below zero, by an amount equal to thirteen and fifty-nine one-hundredths percent for each five thousand dollars by which two resident individuals' adjusted gross income exceeds twenty-five thousand dollars;
(d) Greater than or equal to three and eighteen one-hundredths percent, but less than three and thirty-seven one-hundredths percent, then:
(I) The credit amount set forth in subsection (3)(a)(I) of this section is reduced to two thousand six hundred dollars, adjusted for inflation, for a resident individual who files a single return with an adjusted gross income of fifteen thousand dollars or less, and the credit amount set forth in subsection (3)(b)(I) of this section is reduced to two thousand six hundred dollars, adjusted for inflation, for two resident individuals who file a joint return with an adjusted gross income of twenty-five thousand dollars or less;
(II) The credit amount in subsection (3)(a)(I) of this section, as modified by subsection (6)(d)(I) of this section, is reduced, but not below zero, by an amount equal to nineteen and twenty-three one-hundredths percent for each five thousand dollars by which a resident individual's adjusted gross income exceeds fifteen thousand dollars; and
(III) The credit amount in subsection (3)(b)(I) of this section, as modified by subsection (6)(d)(I) of this section, will be reduced, but not below zero, by an amount equal to nineteen and twenty-three one-hundredths percent for each five thousand dollars by which two resident individuals' adjusted gross income exceeds twenty-five thousand dollars;
