Tuition and fee tax incentive for qualifying students - tax preference performance statement - report - legislative declaration - definitions - repeal

(c) The tax incentive provides a yearly refundable credit to students against the tuition and fee costs paid to a public two-year or four-year institution, area technical college, or local district college in their first two years of higher education. Eligible students are those who are classified as in-state students, enroll in at least six credit hours in a semester or term, have at least a 2.5 grade point average in a semester or term, matriculated in college within two years of high school graduation, and have a federal adjusted gross household income of ninety thousand dollars or less as indicated on the free application for federal student aid or Colorado application for state financial aid.

(d) The 2022 American community survey conducted by the United States census bureau found that the median household income in Colorado is eighty-nine thousand three hundred two dollars. A ninety-thousand-dollar income threshold ensures that all Colorado households at or below median income will be able to benefit from this incentive.

(e) The general assembly and the state auditor shall measure the effectiveness of the incentive in achieving the purposes specified in subsection

(1)(b) of this section based on the number of incentives that are claimed.

(2) As used in this section, unless the context otherwise requires:

(a) Academic year means the period beginning with a Colorado public institution of higher education's fall semester or term and ending the following calendar year at the conclusion of the Colorado public institution of higher education's summer semester or term.

(b) Colorado public institution of higher education means:

(I) A public, postsecondary institution that is governed by the board of governors of the Colorado state university system, the board of regents of the university of Colorado, the board of trustees of the Colorado school of mines, the board of trustees of the university of northern Colorado, the board of trustees of Adams state university, the board of trustees of Western Colorado university, the board of trustees of Colorado Mesa university, the board of trustees of Fort Lewis college, the board of trustees of Metropolitan state university of Denver, or the state board for community colleges and occupational education;

(II) An area technical college, as defined in section 23-60-103 (1); or

(III) Colorado mountain college and AIMS community college.

(b.5) Dependent student means a student who is not an independent student.

(c) Eligible student means an individual who:

(I) Completed high school graduation or an equivalent on or after January 1, 2024, or is currently enrolled as of fall 2024;

(I.5) Has matriculated at a Colorado public institution of higher education within two academic years after completion of high school graduation or an equivalent;

(II) Is designated as a degree- or credential-seeking undergraduate student at a Colorado public institution of higher education for the semester or term for which an incentive is claimed;

(III) Qualifies for in-state tuition, as described in article 7 of title 23, for the semester or term for which the incentive is claimed;

(IV) Has completed a free application for federal student aid (FAFSA) or Colorado application for state financial aid (CASFA) for the semester or term for which an incentive is claimed; and

(V) Has a household adjusted gross income for the second preceding income tax year that is ninety thousand dollars or less.

(c.5) (I) Household adjusted gross income means:

(A) In the case of a dependent student, the sum of the student's and the parent's or parents', as applicable, adjusted gross incomes to the extent that the parent's or parents' income is taken into account for purposes of 20 U.S.C. sec. 1087oo (f);

(B) In the case of a single independent student, the student's adjusted gross income; and

(C) Except as otherwise provided in subsection (2)(c.5)(II) of this section, in the case of a married independent student, the sum of the student's and the spouse's adjusted gross incomes.

(II) In the case of a student who is divorced or separated, or whose spouse has died, the spouse's adjusted gross income is disregarded.

(d) Incentive means the refundable credit allowed by this section.

(d.5) Independent student has the same meaning as set forth in 20 U.S.C. sec. 1087vv (d), as amended.

(e) Qualifying semester or term means a semester or term that the eligible student:

(I) Begins with fewer than sixty-six credit hours accumulated, including all credits transferred to the Colorado public institution of higher education, except those credits earned through prior learning assessment, concurrent enrollment, advanced placement, the international baccalaureate program, military credits, or any other credits accumulated prior to matriculation at any institution of higher education; and

(II) Completes earning at least six credit hours or equivalent with a grade point average of 2.5 or higher.

(f) Scholarships or grants means the sum of any amount paid for the benefit of an eligible student that are required to be taken into account pursuant to section 25A (g)(2) of the internal revenue code.

(g) Tuition and fees has the same meaning as qualified tuition and related expenses as defined in section 25A (f)(1) of the internal revenue code that are paid by or for the benefit of an eligible student..

(3) (a) (I) For the income tax year commencing on or after January 1, 2025, but prior to January 1, 2026, an eligible student is allowed an incentive against the income taxes imposed by this article 22 for every qualifying semester or term completed during the academic year ending during the income tax year and any other qualifying semester or term completed during the income tax year.

(II) For each income tax year commencing on or after January 1, 2026, but prior to January 1, 2033, an eligible student is allowed an incentive against the income taxes imposed by this article 22 for every qualifying semester or term completed during the income tax year.

(b) The amount of incentive allowed to an eligible student for each qualifying semester or term is equal to the amount paid by or for the benefit of the eligible student in tuition and fees to a Colorado public institution of higher education minus any scholarships or grants for the qualifying semesters or terms.

(c) With regard to whether an individual is an eligible student or whether a semester or term is a qualifying semester or term, a Colorado public institution of higher education shall take into account the facts and circumstances determined on or before January 15 following the income tax year and shall disregard any change in facts or circumstances occurring thereafter.

(4) (a) Each Colorado public institution of higher education is required by January 31, 2026, and every January 31 thereafter until 2033, to electronically report each eligible student, unless prohibited by federal law, in which case each Colorado public institution of higher education shall instead report each student who satisfies the qualifications for being an eligible student set forth in subsections

(2)(c)(I) to (2)(c)(IV) of this section without regard to whether the student's household adjusted gross income exceeds the limit set forth in subsection (2)(c)(V) of this section, for any qualifying semester or term for which an incentive is allowed pursuant to this section for the prior calendar year to the department of higher education in a format prescribed by the department of higher education that includes:

(I) The student's tax identification number or social security number; and

(II) The amount of tuition and fees paid minus any scholarships or grants.

(b) By January 31, 2026, and every January 31 thereafter through 2033, the Colorado public institution of higher education shall provide each eligible student, unless prohibited by federal law, in which case each Colorado public institution of higher education shall instead provide each student who satisfies the qualifications for being an eligible student set forth in subsections (2)(c)(I) to (2)(c)(IV) of this section without regard to whether the student's household adjusted gross income exceeds the limit set forth in subsection (2)(c)(V) of this section, with a statement containing the information pertaining to that student's eligibility and the amount reported to the department of higher education pursuant to subsection (4)(a)(II) of this section. A Colorado public institution of higher education may provide the statement electronically and is not required to provide it in physical form.

(c) The department of higher education is required by February 15, 2026, and every February 15 thereafter through 2034, to electronically report the information received pursuant to subsection (4)(a) of this section along with any later corrections or additions to the department of revenue in a format prescribed by the executive director.

(5) The amount of the incentive allowed under this section that exceeds the eligible student's income taxes due is refunded to the taxpayer.

(6) (a) The department of higher education, in consultation with Colorado public institutions of higher education, shall determine each institution's average percentage of state and institutional financial aid allocated to the resident student population who have a family income of ninety thousand dollars or less in each year of the three years prior to 2025.

(b) Each Colorado public institution of higher education shall maintain a percentage of state and institutional financial aid to resident students who have an adjusted gross household income of ninety thousand dollars or less that is equal to or greater than the average percentage of state and institutional financial aid calculated by the department of higher education in each of the three academic years prior to the academic year 2024-25.

(c) If an institution does not maintain the percentage, the institution shall notify the department of higher education by a date determined by the department of higher education and must include in the notification a description of changes to institutional finances or the student population that prevented the institution from maintaining the state and institutional financial aid allocation percentage. The department of higher education shall include this information in its report described in subsection (6)(d) of this section.

(d) (I) On or before December 1, 2026, the department of higher education, in consultation with the department of revenue, shall submit a report to the joint budget committee and the house of representatives and senate education committees, or any successor committees, that describes the implementation of the tax incentive and includes an estimate of the total amount of tax incentives claimed pursuant to this section for income tax years that commence in 2025.

(II) On or before December 1, 2027, and each year thereafter until 2037, the department of higher education shall submit a report to the joint budget committee and the house of representatives and senate education committees, or any successor committees, including, for each institution, the average percentage of state and institutional financial aid allocated to the resident student population who have a family income of ninety thousand dollars or less in the three academic years prior to the academic year 2024-25, and in each academic year thereafter until 2034. The department of higher education shall include in the report available data on student enrollment information for incentive recipients, eligible nonrecipients, and noneligible students, disaggregated by income unless prohibited by federal law, and shall include, once the data are available, disaggregated outcome measures by income, unless prohibited by federal law, for incentive recipients, eligible nonrecipients, and noneligible students, including but not limited to student retention rates, completion rates, and student loan debt. Each Colorado public institution of higher education shall annually report student level financial aid, tuition and fees, student eligibility, and incentive eligibility information to the department of higher education that the department of higher education deems necessary to calculate the costs of the incentive, to provide to the department of revenue for incentive administration or for inclusion in the report.

(III) To allow the department of higher education to complete the report that it annually submits as required by subsection (6)(d)(II) of this section, the department of revenue shall annually provide to the department of higher education data that indicates whether an eligible student has claimed the incentive.

(7) This section is repealed, effective December 31, 2037.