Governor Jared Polis convened state legislators for a special session that began on August 21, 2025 and concluded on August 26, 2025 that focused on key areas around the state budget and AI regulation reform. The conclusion of the session resulted in several notable outcomes from the brief session that affect local businesses through development and deployment of AI, the roll back of several established business tax breaks, and new tax measures that sought to close $153 million of the current budget deficit.
AI Regulation Reform
Two bills were introduced to make changes to the Colorado Artificial Intelligence Act (SB24-205), a 2024 law passed and signed by the Governor that marks the first state-level AI regulatory law. The current law is set to go into effect on February 1, 2026 with both developers of AI systems and deployers (users) of AI systems concerned about how to follow the regulation requirements set in this bill in a short timeline. The following two bills were introduced in the special session seeking to amend the Colorado Artificial Intelligence Act:
Increase Transparency for Algorithmic Systems (SB25b-004)
This first proposal, sponsored by original bill sponsor Senator Robert Rodriguez and new sponsor Representative Jennifer Bacon, sought to repeal and reenact the state’s AI law to regulate a broader category of algorithmic decision systems with enhanced transparency. This bill included new disclosure obligations, reduced requirements for agencies, and shifting liability and regulatory burdens to AI developers instead of deployers. While this bill does not create a new private right of action, it does continue to allow filing of private lawsuits against algorithmic discrimination. This bill also added a new liability clause not included in the original bill that sought to make developers and deployers of algorithmic decision systems jointly and severely liable for any violations of civil rights or consumer protection laws resulting from the deployer’s use of the developer’s system.
Consumer Protections for Artificial Intelligence Interactions (HB25b-1008)
This second proposal, sponsored by Representative William Lindstedt, Representative Michael Carter, Senator Judy Amabile, and Senator Lisa Frizell, sought to change regulatory obligations for deployers and developers of AI systems and limit filing private lawsuits by consumers. This bill also delayed enactment of the Colorado Artificial Intelligence Act until 2027.
With a fierce discussion from state leaders and a breakdown in negotiations, the only AI-related bill approved was a severely amended version of SB25b-004 which now just postpones enforcement of the original Colorado AI law (SB24-205) from February 1, 2026 to June 30, 2026. This delay was approved by the House 48-14 and Senate 32-2 in hopes of reaching a decision in the 2026 legislative session. This delay gives lawmakers and stakeholders more time to reach a compromise and adapt to the rapid evolution of AI technologies and regulation before the new implementation date of June 30, 2026.
Major Tax Breaks Ended
Insurance Company Regional Home Office Credit (HB25B-1003):
The longstanding tax break letting insurance companies pay a reduced premium tax rate (1%) if they maintained a “regional home office” or at least 2.5% of their national staff in Colorado was repealed. Now, all companies pay the standard 2% premium tax, which hopes to generate an estimated $44 million in state funds this fiscal year. Sponsors state that this tax break did not increase local jobs and had drained the state’s revenue.
State Sales Tax Vendor Fee (Hb25B-1005):
Before the session, businesses collecting state sales tax could keep a small percentage (4% or up to $1,000 monthly) as a “vendor fee” to offset admin costs. This bill eliminates the “vendor” fee stating that electronic payment systems now automate most of this work. This is estimated to raise $28 million a year beginning in 2026. The vendor fee funds, which were previously returned to businesses, will now go to the Housing Development Grant Fund, aiming to offset housing cost pressures.
New Tax Measures and Provisions
Premium and Income Tax Credit Sales (HB25b-1004):
The Treasurer’s Office is newly permitted to sell as much as $125 million in premium and income tax credits for insurers and C corporations at a discount rate (75-90 cents on the dollar). Companies that buy the credits will be able to redeem them in future tax years to offset costs to the state.
Governor Jared Polis is set to present plans for an additional $252 million in budget cuts that target Medicaid, affordable housing, higher education, etc., to the Joint Budget Committee for approval in hopes of decreasing the $783 million budget shortfall.
Resources, including The Sum & Substance, SummitDaily, and The Colorado Sun provide additional insight into outcomes from the 2025 Special Session.
The Greater Arvada Chamber of Commerce’s Advocacy Initiative seeks to foster a healthy business through advocacy at the local, regional, and state levels, and inform local business and community leaders about new policies and regulatory reform. Join other business and community leaders in the Chamber’s Advocacy Network to stay informed of critical state and local advocacy updates, resources, and events as we prepare for the 2026 Legislative Session and 2025 local elections.
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