Tax insight

Colorado expands tax haven list, requires FDDEI addition

Insight
5 minute read
September 03, 2025

What happened?

Legislation enacted in a Colorado special session includes Hong Kong, the Republic of Ireland, Liechtenstein, the Netherlands, and Singapore as listed jurisdictions (i.e., “tax havens”) for purposes of combined filing group inclusion, effective for income tax years commencing on or after January 1, 2026. The legislation also requires an addition to federal taxable income in an amount equal to the federal deduction claimed for foreign-derived deduction eligible income (FDDEI), effective for the same tax years. [H.B. 25B-1002, signed by Governor, 8/28/2025]

Why is it relevant?

The legislation represents the first substantive state legislative reaction to the federal enactment of H.R. 1, the One Big Beautiful Bill Act (the Act). Colorado, a rolling conformity state, has chosen to decouple from the new FDDEI provision (it previously conformed to the foreign-derived intangible income (FDII) provision), but sought to address foreign income inclusion in a unique way for the states: expanding its tax haven list to include certain large US trading partners.

Actions to consider

Taxpayers should consider the Colorado-specific foreign income inclusion and group composition rules and how they may work alongside this tax haven list expansion. This is also an opportunity to consider the overall Colorado tax liability now that the Act has passed, by applying Colorado’s rolling conformity, its previous conformity posture, and these latest Colorado legislative changes.