Colorado AI Act (SB24-205): Complete Compliance Guide
First comprehensive state AI law. High-risk AI definitions, impact assessments, consumer rights. Avoid $20,000 per violation penalties.
High-Risk AI Categories
Employment & Education
- AI resume screening
- Candidate ranking algorithms
- Performance evaluation AI
- Student admissions AI
Impact assessment, bias testing, human review option
Financial Services
- Credit scoring AI
- Loan approval algorithms
- Insurance underwriting AI
- Fraud detection systems
Explainability, adverse action notices, appeal process
Healthcare
- Diagnostic AI
- Treatment recommendation systems
- Patient triage algorithms
- Insurance claim AI
Clinical validation, HIPAA compliance, physician oversight
Housing
- Tenant screening AI
- Rental application scoring
- Property valuation algorithms
- Eviction prediction AI
Fair housing compliance, discrimination testing, transparency
Legal Services
- Bail recommendation AI
- Sentencing algorithms
- Legal research AI
- Contract analysis tools
Human oversight, explainability, audit trails
6-Step Compliance Roadmap
Determine if Your AI is High-Risk
AI making consequential decisions about employment, credit, housing, education, healthcare, insurance, or legal services
Conduct Impact Assessment
Document: purpose, data sources, known limitations, bias testing results, safeguards implemented
Implement Risk Management Program
Policies for: governance, testing, monitoring, human oversight, incident response
Provide Consumer Disclosures
Notify consumers: AI is being used, purpose, how to opt out, how to appeal decisions
Enable Opt-Out Rights
Consumers can opt out of AI profiling and request human review of AI decisions
Maintain Documentation
Impact assessments, testing results, consumer complaints, opt-out requests, incident reports
Colorado AI Act FAQ
When does the Colorado AI Act take effect?
February 1, 2026. However, you should start compliance now: conduct impact assessments, implement risk management programs, and prepare consumer disclosures. The Attorney General can begin enforcement on the effective date.
Does the Colorado AI Act apply to companies outside Colorado?
Yes, if you deploy high-risk AI systems that impact Colorado consumers. Similar to GDPR and CCPA, the law has extraterritorial reach. If you serve Colorado customers and use AI for consequential decisions, you must comply regardless of where your company is located.
What is an "impact assessment" under the Colorado AI Act?
A documented evaluation of your high-risk AI system covering: (1) Purpose and intended use, (2) Data sources and categories, (3) Known limitations and risks, (4) Bias testing methodology and results, (5) Safeguards to prevent discrimination, (6) Post-deployment monitoring plan. Must be updated annually and when material changes occur.
How do I know if my AI system is "high-risk"?
Your AI is high-risk if it makes or substantially assists in making consequential decisions about: employment, education, financial services, healthcare, housing, insurance, or legal services. Examples: AI resume screening (employment), credit scoring (financial), tenant screening (housing), diagnostic AI (healthcare). If unsure, err on the side of caution and conduct an impact assessment.
What are the penalties for violating the Colorado AI Act?
$20,000 per violation. Each instance of non-compliance is a separate violation. Examples: Using high-risk AI without impact assessment, failing to provide consumer disclosures, not honoring opt-out requests, inadequate bias testing. Violations can accumulate quickly - 100 consumers without disclosure = $2M in potential penalties.
Can I use the same impact assessment for multiple AI systems?
No. Each high-risk AI system requires its own impact assessment. However, you can use a template approach: create a master framework, then customize for each system's specific purpose, data sources, risks, and safeguards. HAIEC provides impact assessment templates to streamline this process.
What is the difference between Colorado AI Act and EU AI Act?
Colorado AI Act: State law, applies to Colorado consumers, $20K per violation, effective Feb 2026. EU AI Act: EU regulation, applies to EU market, up to 6% revenue fines, phased implementation 2024-2027. Both require impact assessments for high-risk AI, but EU AI Act has stricter requirements and broader scope. If you serve both markets, comply with the stricter EU requirements.
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