Legal Outlook 2026

Colorado's Artificial Intelligence Act (SB 24-205), effective June 30, 2026, establishes the nation's first comprehensive regulatory framework for high-risk AI systems used in consequential decisions affecting consumers. The law applies to both developers and deployers of AI systems in employment, financial services, housing, insurance, and education.

Compliance Requirements

• Risk Management Program: Implement reasonable risk management policies proportionate to enterprise size and AI system nature
• Impact Assessments: Complete and document impact assessments for all high-risk AI systems before deployment and annually thereafter
• Consumer Disclosure: Provide clear notice to consumers before AI makes or substantially contributes to consequential decisions
• Adverse Action Process: Establish procedures to notify consumers of AI-driven adverse decisions with factor explanations
• Documentation: Maintain records of AI deployments, risk assessments, and consumer disclosures for at least three years

Enforcement & Safe Harbor

Enforcement authority rests exclusively with the Colorado Attorney General. Businesses can establish an affirmative defense by demonstrating compliance with recognized AI risk management frameworks such as NIST AI RMF. Private right of action is excluded.

Colorado House Bill 24-1137, effective July 1, 2025, modernizes registered agent requirements and introduces new periodic report obligations for business entities.

Key Changes

• Enhanced Agent Standards: Registered agents must maintain a physical address in Colorado (P.O. boxes no longer sufficient)
• Periodic Report Fee: New $25 annual periodic report filing fee for all business entities, effective with 2026 filings
• Updated Deadlines: Periodic reports now due within 90 days of anniversary of entity's formation date
• Digital Service: Secretary of State now accepts electronic service of process for entities in good standing

The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, repealed beneficial ownership information (BOI) reporting requirements for domestic reporting companies, eliminating a significant compliance burden for millions of small businesses.

What Changed

• Domestic Companies Exempt: U.S.-formed entities no longer required to file beneficial ownership reports with FinCEN
• Foreign Entities Still Subject: Foreign reporting companies (formed under foreign law, registered in U.S.) remain subject to BOI reporting
• No Retroactive Filings: Domestic companies that filed BOI reports are not required to update or maintain those filings
• Database Maintained: FinCEN will maintain existing BOI database but will not accept new domestic company filings

The FTC announced annual Hart-Scott-Rodino Act threshold adjustments on January 14, 2026, effective February 17, 2026.

2026 Threshold Changes

Colorado's restrictive covenant framework continues to narrow circumstances for enforceable non-compete and non-solicitation agreements. Updated compensation thresholds published for 2026.

2026 Compensation Thresholds

Enhanced Enforcement (HB 25-1001)

• CDLE Jurisdiction: Expanded to $7,500 through June 30, 2026; increases to $13,000 through December 31, 2027
• Penalty Increases: Employers face penalties up to $5,000 per violation for unenforceable agreements
• Healthcare Provider Ban: SB 25-083 prohibits non-compete agreements for healthcare providers

Virginia Senate Bill 1218, effective July 1, 2025, substantially expands the Commonwealth's prohibition on non-compete agreements to cover all FLSA non-exempt employees regardless of wage level.

Key Provisions

• Covered Employees: All employees classified as non-exempt under FLSA, regardless of earnings
• Prohibited Agreements: Employers may not enter into, enforce, or threaten to enforce non-compete covenants
• Civil Penalty: $10,000 per violation, enforceable by Virginia Attorney General
• Private Right of Action: Employees may bring civil actions and recover liquidated damages plus attorney's fees

Important Distinctions

The law does not prohibit confidentiality agreements, invention assignment agreements, or non-solicitation agreements that do not otherwise operate as non-compete covenants.

All three states have implemented minimum wage increases effective January 1, 2026, with corresponding adjustments to overtime exemption thresholds.

Minimum Wage Rates (Effective January 1, 2026)

Overtime Exemption Thresholds

House Bill 1213, effective January 1, 2026, extends job protection rights under Washington's PFML program to employees who have worked 180 days, reduced from the previous 12-month requirement.

Key Changes

• Reduced Employment Threshold: Job protection available after 180 days (previously 12 months)
• Same Employer Requirement: The 180 days must be with the same employer
• Small Employer Exemption: Employers with fewer than 50 employees retain modified obligations
• Reinstatement Rights: Protected employees must be restored to same or equivalent position

The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, permanently elevated the federal estate and gift tax exemption to approximately $15 million per person, eliminating sunset provisions that would have reduced exemptions to ~$7 million in 2026.

Key Provisions

• Exemption Amount: $15 million per individual, $30 million per married couple (with portability)
• Permanent Status: No sunset provision—exemptions continue to adjust for inflation indefinitely
• Tax Rate: 40% top rate on estates exceeding exemption (unchanged)
• Step-Up in Basis: Preserved for inherited assets
• Portability: Deceased spousal unused exemption (DSUE) remains available

QSBS Enhancement

• Holding Period: Reduced to 3 years (from 5 years) for full exclusion
• Exclusion Cap: Increased to $15 million or 15× adjusted basis
• Asset Threshold: Issuing corporation must have $75 million or less in gross assets

OBBBA made the Section 199A qualified business income (QBI) deduction permanent for pass-through entities, eliminating the December 31, 2025, sunset while adding features benefiting smaller businesses.

Key Features

• Deduction Rate: Remains at 20% of qualified business income
• Permanent Status: No sunset—deduction available indefinitely for qualifying income
• $400 Minimum Deduction: Taxpayers with at least $1,000 in QBI receive minimum $400 deduction
• Expanded Phase-In: Taxable income thresholds expanded to $75,000 (single) / $150,000 (joint)
• SSTB Treatment: Specified service trade or business limitations continue to apply

ESSB 5813, signed May 20, 2025, significantly reformed Washington's estate tax effective for deaths on or after July 1, 2025. The filing threshold increased to $3 million with new graduated rates reaching 35%.

Key Changes (Effective July 1, 2025)

• Filing Threshold & Exclusion: Increased to $3,000,000
• QFOBI Deduction: Qualified family-owned business interest deduction increased to $3,000,000
• Farm Deduction: Expanded to include tangible personal property used by non-familial qualified heirs

New Graduated Tax Rates

Washington Secretary of State now requires all business entities to maintain a current email address on file and accept electronic communications. Effective January 20, 2026, failure to maintain a valid email may result in administrative dissolution.

Requirements

• Email Address: All registered entities must provide and maintain a current email address
• Electronic Notice: Annual report notices sent exclusively via email beginning January 2026
• Update Obligation: Entities must update email addresses within 30 days of any change
• Consequences: Entities without valid email may face administrative dissolution after missed filings

Senate Bill 5006, effective July 1, 2025, permits Washington corporations to establish board committees with a single director, eliminating the previous two-director minimum.

Key Provisions

• Single-Director Committees: Board committees may now consist of one director
• Governance Flexibility: Smaller corporations can establish audit, compensation, or other committees without expanding board
• Fiduciary Duties: Single-director committees remain subject to all applicable fiduciary duties
• Bylaws Update: Review and update bylaws if they specify minimum committee sizes

The FTC's proposed nationwide ban on non-compete agreements will not take effect. Following the August 2024 ruling in Ryan LLC v. FTC and subsequent Fifth Circuit affirmance, the regulatory approach to non-competes remains with individual states.

Current Landscape

• No Federal Ban: The FTC rule banning most non-competes has been permanently vacated
• State Law Controls: Non-compete enforceability continues to be governed by state law
• Varied Approaches: States range from near-total bans (California) to enforcement with reasonableness limits
• Multi-State Complexity: Employers with employees in multiple states must navigate different frameworks