Colorado Partnership Tax Return: Filing, Deadlines, and Composite Rules

A Colorado partnership tax return is filed on Form DR 0106, the Colorado Partnership and S Corporation Income Tax Return, and it is due to the Colorado Department of Revenue on the fifteenth day of the fourth month after the partnership’s tax year closes. The return reports Colorado-source income, allocates it to partners on Colorado K-1s (Form DR 0106K), and, for tax years beginning in 2024 and later, either includes a mandatory composite return for nonresident individual partners or reflects a SALT Parity Act election to pay tax at the entity level. The old nonresident withholding form, DR 0108, no longer exists.

Who Has to File

Any partnership doing business in Colorado must file a DR 0106 for each tax year it operates in the state, and that includes LLCs taxed as partnerships federally. “Doing business” is defined broadly under CDOR Rule 39-22-301(1) to cover any entity earning income from Colorado sources or conducting transactions within the state.¹

The partnership also prepares a Colorado K-1 for every partner, reporting that partner’s share of income, deductions, credits, and Colorado-specific modifications. Copies of every K-1 go to the CDOR with the return, and each partner must receive their K-1 no later than the filing due date, including any extension.²

Filing Deadline and Extensions

For a calendar-year partnership, the DR 0106 is due April 15. Any tax owed must be paid by that date.¹

Colorado grants an automatic six-month extension to file, moving the deadline to October 15 for calendar-year filers. No separate state extension form is needed if the partnership has filed a federal Form 7004.³ The extension only covers filing, not payment. Interest and penalties still start running on any unpaid balance from the original due date.

Figuring Colorado-Source Income

A partnership that operates entirely in Colorado reports all of its income as Colorado-source. Multi-state partnerships have to apportion business income using a single-factor formula built on receipts.

The receipts factor is Colorado sales divided by total sales everywhere, and that fraction is applied to total apportionable business income to determine the Colorado share.⁴ “Sales” means gross receipts, except that sales of intangible property count only for the gain rather than the full proceeds. The math lives in Part V of the DR 0106, which every partnership with both in-state and out-of-state income must complete.¹ Non-business income, such as rental income from a single property or gain from a specific asset sale, is allocated directly to the state where the property sits, not run through apportionment.

Adjustments to Federal Income

Colorado starts from federal taxable income and requires specific additions and subtractions before arriving at Colorado taxable income. The most common addition is the business meals deduction taken under Internal Revenue Code Section 274(k), which Colorado requires partnerships to add back.¹ Partnerships that make the SALT Parity Act election also add back the federal Section 199A qualified business income deduction.

On the subtraction side, Colorado-licensed marijuana and natural medicine businesses can subtract expenditures that would qualify as federal deductions but are disallowed under Section 280E because those substances remain federally controlled.¹ Other modifications flow through the K-1 and depend on the partnership’s activities. Partners apply their share when they file their own Colorado returns.

Nonresident Partners: The Mandatory Composite Return

Starting with tax year 2024, Colorado eliminated Form DR 0108 and replaced individual nonresident withholding with a mandatory composite return built into the DR 0106.⁵ Every partnership that files a DR 0106 without making a SALT Parity Act election must complete Part II of the return and pay composite tax covering all nonresident partners who are individuals, estates, or trusts. It is not an option.⁶

Corporate and partnership partners are not included; those entities handle their Colorado obligations on their own returns. Composite partners are taxed at the Colorado income tax rate (currently 4.25%) on their share of Colorado-source income, and once the partnership pays, those partners are generally relieved of filing their own Colorado return for that income. They still receive a K-1 showing what was reported for them.

Letting a Partner File on Their Own: Form DR 0107

A nonresident partner who prefers to file individually signs a Nonresident Partner or Shareholder Agreement (Form DR 0107), agreeing to report their Colorado-source income and pay the tax on their own return.⁷ The partnership submits the signed form with its DR 0106. It only needs to be filed for the first year of the agreement. A partner covered by a timely DR 0107 is excluded from the composite return.

The SALT Parity Act Alternative

Colorado’s SALT Parity Act (SB 22-124) lets a partnership elect to pay Colorado income tax at the entity level instead of pushing the full liability out to partners. The election exists mainly to help individual partners work around the $10,000 federal cap on state and local tax deductions: when the partnership pays, the tax becomes a business expense rather than an individual state tax payment.⁸

The election is made annually by checking the box on the DR 0106, or in advance of filing by submitting Form DR 1705.⁹ Once made, it is irrevocable for that tax year and binds every partner.⁸ Partners that are unitary C corporations with the electing partnership are excluded from the election. All other partners add back any federal Section 199A deduction they claimed and receive a credit on their Colorado returns for their share of the entity-level tax to avoid double taxation.¹ An electing partnership does not have to file a separate nonresident composite return, because the entity is already paying on behalf of everyone.⁶

Quarterly Estimated Payments

A partnership that will owe more than $5,000 in Colorado tax for the year through a composite return or a SALT Parity Act election must make quarterly estimated payments. The $5,000 threshold looks at the total tax due, not any individual partner’s share.¹⁰

Calendar-year installments are due:¹¹

First quarter: April 15
Second quarter: June 15
Third quarter: September 15
Fourth quarter: December 15

Fiscal-year filers use the fifteenth day of the fourth, sixth, ninth, and twelfth months of their tax year. If a due date lands on a weekend or state holiday, the payment is due the next business day. Each installment is 25% of the required annual payment, made using Form DR 0106EP.¹⁰

Colorado offers a safe harbor against underpayment penalties: the required annual payment is the lesser of 70% of the actual current-year liability or 100% of the prior year’s liability. The prior-year option is only available if the partnership filed a Colorado return for a full twelve-month prior year and did not have taxable income of $1,000,000 or more in any of the three preceding tax years.

How to File and Pay

The CDOR pushes electronic filing for all partnership returns, either through Revenue Online or through approved third-party tax software. E-filing gives immediate confirmation and faster processing. Colorado has been phasing in mandatory electronic filing for partnership returns under authority granted to the executive director of the Department of Revenue, starting with larger filers.¹² Paper returns go to the address in the DR 0106 instructions.

Payments can be made by ACH debit through Revenue Online or by check noting the tax year and form number. The return isn’t really done until every partner has their K-1 in hand, because they need it to meet their own Colorado deadlines.²

Late Filing, Interest, and Records

A late-filed return draws a penalty of 5% of the unpaid tax plus 0.5% for each month or partial month the return stays unfiled, with a $5 minimum. Interest on any unpaid balance runs from the original due date until the tax is paid.¹³

For 2026, the underpayment interest rate is 8% if the partnership pays before receiving a notice of deficiency or within 30 days of receiving one. Miss that window and the rate becomes 11%.¹³

Colorado’s general assessment statute of limitations is three years from the date the return was filed, but for partnerships it extends to one year past the federal assessment window whenever the IRS adjusts federal partnership income. There is no time limit at all if a partnership never files, or files a fraudulent return with intent to evade tax.¹⁴ Keep supporting records for at least four years after filing to cover the standard period plus any federal-adjustment overlap.

1
Colorado Department of Revenue. Colorado Partnership and S Corporation Income Tax Return
2
Department of Revenue – Taxation. Filing Requirement Changes for Partnerships and S Corporations
3
Department of Revenue – Taxation. Partnership and S Corporation Filing Information
4
Justia Law. Colorado Revised Statutes 39-22-303.5 – Rules
5
Colorado Department of Revenue. Elimination of Form DR 0108
6
Department of Revenue – Taxation. Changes to Composite Filing
7
Colorado Department of Revenue – Taxation. DR 0107 – Nonresident Partner or Shareholder Agreement
8
Department of Revenue – Taxation. SALT Parity Act Election
9
Department of Revenue – Taxation. Income Tax Topics: SALT Parity Act
10
Colorado Department of Revenue. Colorado Partnership and S Corporation Estimated Income Tax Instructions
11
Department of Revenue – Taxation. Business Income Tax Estimated Payments
12
Justia Law. Colorado Revised Statutes 39-21-119.5
13
Department of Revenue – Taxation. Tax Topics: Penalties and Interest
14
FindLaw. Colorado Revised Statutes Title 39 Taxation 39-21-107 – Limitations