Colo. Code Regs. 39-22-504-1

Current through Register Vol. 47, No. 19, October 10, 2024

Rule 39-22-504-1 - Colorado Net Operating Losses for Individuals, Estates, and Trusts

Basis and Purpose. The bases for this rule are sections 39-21-112(1), 39-22-103 (5.3), 39-22-104(3)(l), 39-22-104(4)(z), and 39-22-504, C.R.S. The purpose of this rule is to provide guidance regarding the portion of any net operating losses deducted in the calculation of federal taxable income for an individual, estate, or trust that is allocated to Colorado and any required addition for any portion of a net operating loss that is not allocated to Colorado.

(1)General Rule. Except as provided in sections 39-22-104(3)(l), 39-22-104(4)(z), and 39-22-504, C.R.S., and this rule, a net operating loss deduction is allowed for Colorado income tax purposes in the same manner that it is allowed under the Internal Revenue Code. An individual, estate, or trust that has claimed a net operating loss deduction pursuant to section 172 of the Internal Revenue Code is neither required nor allowed to make any further modification to federal taxable income related to the net operating loss deduction in the calculation of Colorado income tax, except as provided by law and this rule.

(2)Addition Required for Loss Not Allocated to Colorado. In the calculation of Colorado income tax pursuant to section 39-22-104, C.R.S., an addition to federal taxable income is required in the amount determined pursuant to section 39-22-504, C.R.S., and this rule. The amount of the addition is equal to the amount of any federal net operating loss deducted pursuant to section 172 of the Internal Revenue Code in the calculation of federal taxable income, minus the portion of such deducted loss that is allocated to Colorado in the taxable year that the net operating loss was sustained.

(a)Full-year Colorado Residents. In the case of an individual, estate, or trust that is a Colorado resident pursuant to section 39-22-103, C.R.S., for the entirety of the taxable year in which the net operating loss was sustained, the entire loss is allocated to Colorado.

(b)Colorado Nonresidents. In the case of an individual, estate, or trust that is not a Colorado resident pursuant to section 39-22-103, C.R.S., for any part of the taxable year in which the net operating loss was sustained, the loss is allocated to Colorado to the extent that it is derived from sources within Colorado as determined pursuant to section 39-22-109 or 39-22-403, C.R.S., as applicable.

(c)Part-year Colorado Residents. In the case of an individual, estate, or trust that is a Colorado resident pursuant to section 39-22-103, C.R.S., for only part of the taxable year in which the net operating loss was sustained, the loss shall be allocated to Colorado pursuant to this paragraph (2)(c).

(i) The net operating loss shall first be allocated to Colorado pursuant to paragraph (2)(b) of this rule.

(ii) Any part of the net operating loss that is not allocated to Colorado pursuant to paragraph (2)(c)(i) of this rule, shall be allocated to Colorado by multiplying that part of the net operating loss by a fraction, the numerator of which is number of days during the tax year that the taxpayer was a Colorado resident and the denominator of which is the total number of days in the tax year.

39-22-504-1

46 CR 09, May 10, 2023, effective 5/30/2023