Senator Weisman discusses impact of Colorado's Regional Home Office tax provision on jobs

In a significant move during the Colorado Senate's 2025 1st Extraordinary Session, lawmakers are considering adjustments to the insurance premium tax rate, particularly focusing on the Regional Home Office (RHO) provision. Senator Weisman introduced House Bill 1003, which aims to address the longstanding tax policy that has been in place since 1935, where insurance companies are taxed based on premiums written rather than income.

The RHO provision currently allows for a 50% reduction in tax owed, dropping the rate from 2% to 1% if certain conditions are met. However, recent evaluations from the Office of the State Auditor (OSA) have raised concerns about the effectiveness of this tax break. Reports from 2020 and 2025 indicate that the provision may not be fostering job growth as intended. In fact, data shows that 15 out of 18 insurance groups benefiting from the RHO reported a loss of approximately 4,300 jobs while receiving $17.5 million in tax benefits.

Senator Weisman emphasized that the correlation between tax incentives and job growth is weak, citing examples from other states where no comparable provisions led to significant job increases. He argued that the current tax structure does not align with the realities of the insurance market in Colorado, where demand for products like auto and homeowners insurance remains strong regardless of tax incentives.

The discussion also highlighted the need for a thorough review of tax expenditures, with bipartisan support for modifying or curtailing ineffective provisions. While some tax laws, such as the wholesale sales tax exemption, are deemed effective and beneficial, the RHO provision appears to be an outlier that warrants reevaluation.

As the Senate continues to deliberate on this bill, the implications for Colorado's insurance industry and job market remain a focal point. The outcome of these discussions could lead to significant changes in how insurance companies are taxed, potentially reshaping the economic landscape for the sector in the state.