Can a partner claim Colorado's affordable housing tax credit allocated by a pass-through entity if the partner joins the partnership before the tax return claiming the credit is filed?

Plain-English summary

Colorado's affordable housing tax credit can be earned by an owner of a "qualified development." When that owner is a pass-through entity — a partnership, LLC, S corporation, or similar — it may allocate the credit among its partners, members, or shareholders, who then claim their shares. The statute says a partner may claim the allocated credit if the partner was admitted before the filing of the return claiming the credit. The question here: does a partner admitted before the return is filed qualify? The Department said yes.

There's a wrinkle. The statute's actual words, in the last sentence of § 39-22-2102(3), say a partner admitted "prior to the filing of a credit claiming the credit." Read literally, that's nonsense — you can't "file a credit" to claim a credit; you file a return to claim a credit. The Department applied ordinary rules of statutory construction (give effect to the legislature's intent; don't adopt a reading that produces an absurd result or defeats the law's purpose) and concluded the phrase must mean "prior to the filing of a return claiming the credit." It pointed to a parallel affordable housing credit, § 39-22-5503(5), which uses the corrected wording "prior to the filing of a tax return claiming the credit," and to § 39-22-2104, which requires filing a return to claim the credit.

Bottom line: a partner of a pass-through entity that received this credit allocation may claim the allocated amount as long as the partner was admitted before that partner's tax return claiming the credit is filed.

What this means for you

Affordable housing developers and pass-through investors

If your project entity (a partnership or LLC) is allocated the affordable housing credit, you can bring in investor-partners and they can still claim their allocated credit — provided they are admitted before the tax return claiming the credit is filed. The timing benchmark is the return-filing date, not some earlier event. Don't be thrown by the statute's garbled "filing of a credit" language; the Department reads it as "filing of a return."

Accountants and tax professionals

This is a useful published reading of a drafting error in § 39-22-2102(3). The Department harmonized it with § 39-22-2104 (return required) and the identical-but-correctly-worded § 39-22-5503(5) of the companion credit. Practically: confirm each partner's admission date precedes the filing of the return claiming the credit. Remember a GIL isn't binding — but it signals how the Department will administer the provision.

Common questions

Q: Can a newly admitted partner claim the affordable housing credit?
A: Yes, if the partner is admitted before the partner's tax return claiming the credit is filed, and the credit was properly allocated to the partner by the pass-through entity.

Q: The statute says "filing of a credit claiming the credit" — what does that mean?
A: The Department treats that as a drafting error. Read sensibly (and consistent with the parallel credit), it means "filing of a return claiming the credit."

Q: Who can receive an allocation of the credit?
A: When the owner of a qualified development is a partnership, LLC, S corporation, or similar pass-through entity, it may allocate the credit among its partners, members, shareholders, or other qualified taxpayers.

Q: Can I rely on this letter?
A: No. It's a General Information Letter — general guidance only, not binding on the Department and not something any taxpayer can rely on. A binding answer requires a private letter ruling.

Citations and references

Statutes and cases:
- § 39-22-2101(11) and § 39-22-2102, C.R.S. (affordable housing credit; pass-through allocation)
- § 39-22-2102(3), C.R.S. (partner admitted before filing the return may claim); § 39-22-2104 (return required)
- § 39-22-5503(5), C.R.S. (companion credit with corrected "tax return" wording)
- Colo. Dep't of Revenue v. Creager Mercantile Co., 395 P.3d 741 (Colo. 2017); UMB Bank, N.A. v. Landmark Towers Ass'n, 408 P.3d 836 (Colo. 2017); Town of Erie v. Eason, 18 P.3d 1271 (Colo. 2001) (statutory construction)

Source

• Landing page: Colorado Letter Rulings
• Original PDF: GIL-25-006.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL 25-006
October 21, 2025
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
Via Electronic Mail: XXXXXXXXX
Re: Admittance of a Partner to a Partnership When Claiming the Affordable Housing Tax Credit
Dear XXXXXXXXX:
You submitted a request for a general information letter on behalf of your client, XXXXXXXXXX,
regarding the admittance of a partner to a partnership when claiming the affordable housing tax
credit. The Colorado Department of Revenue (“Department”) issues general information letters
and private letter rulings. A general information letter provides a general overview of the
relevant tax issues but is not binding on the Department. A private letter ruling provides a
specific determination for a specific set of facts, is binding on the Department, and requires
payment of a fee. For more information about general information letters and private letter
rulings, please see 1 CCR 201-1, Rule 24-35-103.5.
Issue
Whether partners in a partnership may claim an affordable housing tax credit when the partner
is admitted to the partnership prior to the filing of the partner’s tax return claiming the credit.
Discussion
Colorado allows an income tax credit to qualified taxpayers who own an interest, direct or
indirect, in a qualified development.1 If an owner of a qualified development receiving an
allocation of a credit is a partnership, limited liability company, S corporation, or similar passthrough entity, the owner may allocate the credit among its partners, shareholders, members, or
other qualified taxpayers. Each partner, shareholder, member, or other qualified taxpayer
admitted as a partner, shareholder, member, or other qualified taxpayer of the owner prior to the
filing of a tax credit claiming the credit is allowed to claim such allocated amount.2

1
2

Sections 39-22-2101(11), and 39-22-2102, C.R.S.
Section 39-22-2102(3), C.R.S.

GIL 25-006
October 21, 2025
Page 2
In interpreting a statute, we must ascertain and give effect to the legislature's intent.3 To do so,
“we look to the entire statutory scheme in order to give consistent, harmonious, and sensible
effect to all of its parts, and we apply words and phrases in accordance with their plain and
ordinary meanings.”4 However, we “must not follow statutory construction that leads to an
absurd result” and “consider whether the resulting interpretation is inconsistent with the
purposes of the legislation.”5
When we give the words used in the phrase “prior to the filing of a credit claiming the credit” in
the last sentence of section 39-22-2102(3), C.R.S., their plain and ordinary meaning, we can
see that reading does not make sense in the context of tax administration because a taxpayer
may not file a credit to claim a credit. Instead, a taxpayer may file a return to claim a credit.
Such a reading “is inconsistent with the purposes of the legislation” since it would impose a
requirement that literally cannot be followed, denying the use of the credit altogether.6 Instead, a
taxpayer may file a return to claim a credit. Specifically for the credit set forth in section 39-222102(3), C.R.S., the statute sets forth that a taxpayer that has been allocated an amount of the
credit must file a state income tax return in order to claim the corresponding credit.7 As a result,
in order to give consistent, harmonious, and sensible effect to all of parts of the statute, the
phase “prior to the filing of a credit claiming the credit” cannot be read by its plain and ordinary
meaning, but should be read to mean “prior to the filing of a return claiming the credit.” This is
further supported in subsection (5) of section 39-22-5503, C.R.S., which is another affordable
housing income tax credit. That subsection contains identical language as set forth in section
39-22-2102(3), C.R.S., except the phrase in question states, “prior to the filing of a tax return
claiming the credit.”
Therefore, if the owner of a qualified development receiving an allocation of this credit is a passthrough entity, then each partner, shareholder, member, or other qualified taxpayer that is
admitted as such prior to the filing of the partner’s, shareholder’s, member’s, or other qualified
taxpayer’s tax return claiming the credit is allowed to claim an allocation of the credit.8
Miscellaneous
This letter represents the good-faith opinion of Department personnel who are knowledgeable
on state taxes issues. However, the Department does not make a specific determination on any
of the issues raised, and the Department is not bound by this general information letter.
Thank you for your request.
Sincerely,
Office of Tax Policy
Colorado Department of Revenue

3

Colo. Dep't of Revenue v. Creager Mercantile Co., 395 P.3d 741 (Colo. 2017).
UMB Bank, N.A. v. Landmark Towers Ass'n, 408 P.3d 836 (Colo. 2017).
Town of Erie v. Eason, 18 P.3d 1271, 1276 (Colo. 2001).
6
Id.
7
Section 39-22-2104, C.R.S.
8
Section 39-22-2102(3), C.R.S.
4
5