Making the SALT Parity PTET election without modeling the mandatory federal §199A QBI addback. The election is irrevocable and binds every shareholder, and each one must add back their entire QBI deduction on their Colorado return — for many owner-operators that addback costs more Colorado tax than the federal SALT deduction is worth. Run the math per shareholder before checking the box on the DR 0106.
Recognized automaticallyPTET available
S-corp election in Colorado
In short
No franchise tax, no net-worth tax and no minimum tax. The only entity-level Colorado income tax is voluntary, via the SALT Parity Act PTET election.
Does Colorado recognize the federal S election?
Colorado automatically follows the federal S election — there is no separate Colorado S-corp election form or filing. Once the IRS accepts Form 2553, the entity files Colorado Form DR 0106 ("Colorado Partnership and S Corporation Income Tax Return") and income flows through to shareholders' Colorado individual returns. The company must issue a Colorado K-1 (DR 0106K) to every shareholder AND file copies of those K-1s with the Department — that K-1 filing obligation is separate from the DR 0106 itself and is frequently missed. Note Colorado's pass-through return is due April 15, not the federal March 15 date.
Tax the entity still owes
Colorado imposes no corporate franchise tax, no minimum tax and no entity-level income tax on an S corporation by default — the corporation itself owes $0 in state income tax unless it elects into the SALT Parity Act PTET. Colorado's flat income tax rate (which is also the PTET rate) is confirmed by the CDOR Individual Income Tax Guide rate table as 4.25% for 2024 and 4.40% for 2025. The published table stops at 2025; the statutory rate is 4.40% and any temporary TABOR-driven reduction for tax year 2026 is not determinable until after the state fiscal year closes, so treat 4.40% as the 2026 planning rate and re-verify. The only mandatory recurring entity-level cost is the Secretary of State Periodic Report fee of $25 (a fee, not a tax). Colorado FAMLI premiums (0.88% of wages for 2026) are a genuine entity-level payroll cost triggered the moment the owner goes on W-2.
Registering for payroll
Three separate registrations once the owner takes W-2 wages: (1) Colorado wage withholding account with the Colorado Department of Revenue (via Revenue Online or MyBizColorado); (2) unemployment insurance (SUTA) with the Colorado Department of Labor and Employment (CDLE), Division of Unemployment Insurance; (3) Colorado FAMLI (Family and Medical Leave Insurance) — this is the one owners miss. Per famli.colorado.gov/employers (fetched 2026-07-30): the premium is 0.88% of wages, split 0.44% employer / 0.44% employee, assessed on wages up to the federal Social Security wage cap, with a statutory ceiling of 1.2%. Businesses with NINE OR FEWER employees are exempt from the EMPLOYER share but must still withhold and remit the 0.44% employee share — a one-owner S corp is not exempt from registering. Colorado SecureSavings (state retirement mandate) also applies to employers without a qualifying plan.
Annual filings
DR 0106 (Partnership and S Corporation Income Tax Return) — calendar-year returns due April 15; automatic six-month extension to October 15, but at least 90% of the tax must be paid by the original April 15 date to avoid penalty. DR 0106K (Colorado K-1) — furnished to each shareholder and filed with the Department by the same 15th-day-of-4th-month deadline. DR 1705 — only if pre-electing PTET. DR 0106EP — PTET/composite estimated payments. Colorado Secretary of State Periodic Report — $25, due in the entity's assigned "periodic report month"; it may be filed two months before or two months after that month with no penalty, after which the entity goes Delinquent. Quarterly/periodic wage withholding returns (CDOR), quarterly UI reports (CDLE) and quarterly FAMLI wage reports and premiums.
Pass-through entity tax
Yes — the SALT Parity Act (HB21-1327, SB22-124; § 39-22-340 et seq., C.R.S.). Elect by checking the box on the DR 0106, or pre-elect by filing Form DR 1705 before the return. The election is ANNUAL, IRREVOCABLE and BINDING ON ALL shareholders (the only carve-out is a C-corp partner unitary with a partnership). Tax = Colorado taxable income x the year's rate (4.40% for 2025). For tax years beginning on/after 1/1/2023 an electing entity must make four quarterly estimated payments if its net Colorado tax liability exceeds $5,000, on the same schedule as C corporations. An electing entity may NOT file a composite return and need not file the DR 0107 nonresident agreement. Owners claim a REFUNDABLE credit for their share of the entity tax on the DR 0106K. Critical cost: every shareholder must add back to Colorado taxable income the FULL federal §199A QBI deduction they claimed, plus their share of state income tax the entity deducted federally. The CDOR SALT Parity publication fetched 2026-07-30 shows no sunset or federal-SALT-cap contingency.
The mistake owners make most often in Colorado
Filing your federal Form 2553
Businesses operating in Colorado send Form 2553 to the IRS Ogden service center — fax 855-214-7520. Full address and filing checklist for Colorado.
Frequently asked questions
Does Colorado require a separate S-corporation election?
No. Colorado does not require a separate state election. Colorado automatically follows the federal S election — there is no separate Colorado S-corp election form or filing. Once the IRS accepts Form 2553, the entity files Colorado Form DR 0106 ("Colorado Partnership and S Corporation Income Tax Return") and income flows through to…
What tax does an S corporation pay in Colorado?
No franchise tax, no net-worth tax and no minimum tax. The only entity-level Colorado income tax is voluntary, via the SALT Parity Act PTET election.
Where do I file Form 2553 from Colorado?
With the IRS Ogden service center. Fax 855-214-7520, or mail to Department of the Treasury, Internal Revenue Service, Ogden, UT 84201.
What is the most common S-corp mistake in Colorado?
Making the SALT Parity PTET election without modeling the mandatory federal §199A QBI addback. The election is irrevocable and binds every shareholder, and each one must add back their entire QBI deduction on their Colorado return — for many owner-operators that addback costs more Colorado tax than the federal SALT deduction is worth. Run the math per shareholder before checking the box on the DR 0106.
Compare with other states: Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii.
Sources
- https://tax.colorado.gov/income-tax-topics-salt-parity-act
- https://tax.colorado.gov/individual-income-tax-guide
- https://tax.colorado.gov/partnership-s-corporation-filing-information
- https://famli.colorado.gov/employers
- https://www.coloradosos.gov/pubs/business/FAQs/reports.html
- https://tax.colorado.gov/TABOR
File your Form 2553 correctly
Scorply completes your federal election and includes a Colorado guide in your packet, so you know exactly what else you owe here.
Start my Form 2553Researched from official Colorado sources and verified July 30, 2026. State tax rules change. This is general information, not tax advice — confirm with the state or a CPA before you rely on it.