HB 23-1272, Tax Policy That Advances Decarbonization

Concerning tax policy that advances decarbonization, and, in connection therewith, extending tax credits for the purchase or lease of electric vehicles; creating tax credits for industrial facilities to implement greenhouse gas emissions reduction improvements, for expenditures made in connection with geothermal energy projects, for production of geothermal electricity generation, for the deployment of heat pump technology, for retail sales of electric bicycles, and for construction of sustainable aviation fuel production facilities; creating a temporary specific ownership tax rate reduction on a portion of the sale of electric medium- and heavy-duty trucks; temporarily decreasing the severance tax credit for oil and gas production, requiring the revenue that is attributable to the decrease be deposited in the decarbonization tax credits administration cash fund, and creating the cash fund; and making an appropriation.

The State of Colorado passed HB23-1272 Tax Policy That Advances Decarbonization. This bill creates a new, refundable income tax credit for tax years 2024 through 2032 for costs incurred to construct or reconstruct a sustainable aviation fuel production facility. This tax credit is called the Aviation Emission Reduction Offering (AERO). To remain eligible for the full credit, sustainable aviation fuel (SAF) must make up at least 60 percent of total fuel production at the facility or in distribution. Such facilities or distribution projects will provide airline carriers, who have demonstrated a strong demand for such fuels, with a steady supply of SAF for utilization at Denver International and other airports throughout the region.


Aviation Emission Reduction Offering

The Colorado Energy Office (CEO) will provide refundable, merit-based tax credits to support eligible geothermal projects in Colorado,  including developing and producing geothermal electricity, installing a thermal energy network, or conducting a thermal energy network study. CEO will award the Geothermal Energy Tax Credit Offering (GETCO) through a competitive process, providing a total of $35 million in state investment tax credits (ITC). A production tax credit (PTC) is also available for electricity production.

Geothermal Energy Tax Credit Offering

The Colorado Industrial Tax Credit Offering (CITCO) is a competitive, refundable tax refund administered through Colorado Energy OFfice. A total of $168 million in tax credits will be available over the program’s nine-year duration, through December 31, 2032.

Industrial facilities may apply for this refundable tax credit to conduct industrial studies, such as energy and emissions audits, feasibility studies, or front-end engineering and design studies; or implement improvements that reduce emissions, such as electrification, carbon management, hydrogen utilization, and waste heat recovery. CEO will award up to 30% of approved costs for selected projects, not to exceed $1 million for studies or $5 million for improvements.

Colorado Industrial Tax Credit Offering

Coloradans can get $450 off a qualified e-bike purchase at a participating retailer (limited to one discount per calendar year). Reach out to your local e-bike retailer to confirm whether they are participating and offering the discount.

The state e-bike tax credit discount will decrease to $225 on January 1, 2026.

E-bikes Tax Credit

Colorado taxpayers are eligible for a state tax credit of $5,000 for the purchase or lease of a new EV on or after July 1, 2023 with a manufacturer’s suggested retail price (MSRP) up to $80,000. Lease agreements must have an initial term of at least two years. Beginning January 1, 2024, Coloradans purchasing an EV with an MSRP up to $35,000 will be eligible for an additional $2,500 tax credit.

Aviation Emission Reduction Offering

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