Colorado AI Act FAQ

Colorado SB 24-205, also known as the Colorado AI Act, is landmark legislation that regulates the use of artificial intelligence in consequential decisions affecting Colorado residents. Signed into law in May 2024, it requires businesses using "high-risk AI systems" to implement specific safeguards, conduct regular bias audits, and maintain transparency with consumers. The law takes effect June 30, 2026, making Colorado the first U.S. state with comprehensive AI governance requirements.

The Colorado AI Act (SB 24-205) takes effect on June 30, 2026. Businesses should begin compliance preparations immediately, as implementing proper governance frameworks, conducting initial bias audits, and establishing required documentation takes considerable time. Companies that wait until 2026 risk non-compliance and penalties.

Any business that deploys or develops "high-risk AI systems" that make or substantially contribute to consequential decisions about Colorado residents must comply. This includes companies based outside Colorado if they serve Colorado customers. Covered entities include "deployers" (businesses using AI systems) and "developers" (companies creating AI systems). The law applies regardless of company size if the AI affects consequential decisions in areas like employment, education, financial services, healthcare, housing, insurance, or legal services.

A high-risk AI system under SB 24-205 is any artificial intelligence that makes or substantially contributes to a "consequential decision" affecting Colorado residents. This includes AI used for: hiring and employment decisions, credit and lending determinations, insurance underwriting and claims, educational admissions and opportunities, housing decisions, healthcare treatment recommendations, and legal services. Voice agents, chatbots, RAG systems, and prediction models in these areas all qualify as high-risk.

A consequential decision is any decision that has a material legal or similarly significant effect on access to or the cost, terms, or availability of: education and vocational training, employment or employment opportunities, essential government services, financial or lending services, healthcare services, housing, insurance, and legal services. If your AI influences any of these areas for Colorado residents, it likely falls under the law's requirements.

The Colorado AI Act requires deployers to: (1) Implement a risk management policy and program, (2) Complete annual impact assessments, (3) Conduct regular bias audits to detect algorithmic discrimination, (4) Provide consumer disclosures when AI is used in consequential decisions, (5) Establish human oversight mechanisms for high-risk decisions, (6) Maintain records for at least 3 years, (7) Report certain incidents to the Attorney General within 90 days. CO-AIMS automates most of these requirements, reducing compliance burden by up to 90%.

The Colorado AI Act requires regular testing to detect algorithmic discrimination. Best practices and the law's intent suggest conducting bias audits at minimum annually, though monthly audits are recommended for high-risk systems with frequent updates. CO-AIMS provides automated monthly bias audits that test your AI systems across all protected classes, generating compliance reports and remediation recommendations automatically.

An impact assessment is a documented evaluation of your AI system's potential risks, including discrimination risks, privacy impacts, and transparency measures. Under SB 24-205, deployers must complete impact assessments before deploying a high-risk AI system and update them annually or whenever significant changes occur. The assessment must be retained for 3 years and provided to the Attorney General upon request. CO-AIMS generates compliant impact assessments automatically based on your system registry.

When using AI in consequential decisions, you must disclose to consumers: (1) That AI is being used in the decision, (2) The purpose of the AI system, (3) How to request human review of the decision, (4) How to appeal adverse decisions, and (5) How to contact the deployer with questions. These disclosures must be clear, conspicuous, and provided before or at the time of the decision. CO-AIMS provides compliant disclosure templates for each registered AI system.

The Colorado AI Act requires "meaningful human oversight" of high-risk AI systems. This means: (1) Human-in-the-loop (HITL) review points for consequential decisions, (2) Ability for humans to override AI recommendations, (3) Trained staff who understand the AI's limitations, (4) Documented appeal processes for adverse decisions. CO-AIMS helps you document HITL gates for each AI system and tracks compliance with human oversight requirements.

Under SB 24-205, you must maintain for at least 3 years: (1) Impact assessments, (2) Bias audit results and remediation documentation, (3) Consumer disclosure records, (4) Incident reports and responses, (5) Records of human oversight and appeals, (6) Documentation of your risk management program. CO-AIMS provides secure, compliant storage with full audit trails for all required documentation.

Algorithmic discrimination occurs when an AI system produces outcomes that unlawfully discriminate against individuals based on protected characteristics including: race, color, ethnicity, national origin, religion, sex, sexual orientation, gender identity, disability, age, genetic information, or veteran status. The Colorado AI Act requires proactive testing to detect and prevent such discrimination before it harms consumers.

Bias audits analyze your AI system's outputs across different demographic groups to identify disparate impact. CO-AIMS conducts automated testing that: (1) Evaluates decision rates across protected classes, (2) Calculates statistical measures like adverse impact ratios, (3) Identifies potential discrimination patterns, (4) Generates remediation recommendations, and (5) Documents compliance for regulatory review. Our audits align with NIST AI RMF and EEOC guidelines.

Bias audits under SB 24-205 should test for discrimination across all legally protected classes: race, color, national origin, ethnicity, religion, sex (including pregnancy), sexual orientation, gender identity and expression, disability, age (40+), genetic information, and military/veteran status. CO-AIMS automatically tests across all protected categories and generates individual findings for each.

If a bias audit identifies potential algorithmic discrimination, you must: (1) Document the finding, (2) Investigate the root cause, (3) Implement remediation measures, (4) Re-test to verify the issue is resolved, (5) Document all corrective actions. CO-AIMS tracks the entire remediation workflow, generates corrective action plans, and schedules follow-up audits to verify resolution.

Violations of SB 24-205 are enforced by the Colorado Attorney General under the Colorado Consumer Protection Act (CCPA). Penalties can include: (1) Civil penalties up to $20,000 per violation, (2) Injunctive relief requiring compliance changes, (3) Consumer restitution, (4) Investigation costs. The AG has broad discretion, and repeated or willful violations may result in significantly higher penalties. Implementing proper compliance measures like those provided by CO-AIMS demonstrates "reasonable care" which can mitigate penalties.

Yes. SB 24-205 includes an affirmative defense for deployers who can demonstrate "reasonable care" in compliance efforts. This includes: (1) Implementing a risk management policy, (2) Conducting regular bias audits, (3) Completing required impact assessments, (4) Maintaining proper documentation, (5) Responding appropriately to identified issues. Using CO-AIMS creates a documented compliance trail that demonstrates reasonable care.

The Colorado Attorney General has exclusive enforcement authority for SB 24-205. There is no private right of action, meaning individuals cannot sue businesses directly under this law. However, the AG can investigate complaints, conduct audits, and bring enforcement actions. Businesses must also report certain incidents to the AG within 90 days. CO-AIMS automates incident tracking and helps ensure timely reporting.

Yes, within 90 days of discovery. You must report to the Colorado AG any incident where your high-risk AI system caused or reasonably appears to have caused algorithmic discrimination. The report must include details about the incident, affected consumers, and remediation steps. CO-AIMS provides incident tracking with automated 90-day deadline alerts and report generation to ensure compliant notification.

Yes. Law firms using AI for client intake, case assessment, document review, or any decision affecting legal services must comply with SB 24-205. This includes: AI voice agents for intake calls, chatbots providing legal information, RAG systems for document analysis, and prediction models for case outcomes. CO-AIMS is specifically designed for legal technology compliance, helping firms document HITL review points and maintain required audit trails.

Healthcare organizations using AI for treatment recommendations, appointment scheduling, patient triage, or administrative decisions affecting care access must comply. This includes clinical decision support systems, AI chatbots, and patient engagement tools. CO-AIMS helps healthcare providers document clinical oversight requirements and maintain HIPAA-aligned audit records alongside AI compliance documentation.

Yes. Financial institutions using AI for credit decisions, loan underwriting, fraud detection affecting consumers, investment recommendations, or insurance underwriting must comply with the Colorado AI Act. These are specifically listed as "consequential decision" areas. CO-AIMS provides bias audit frameworks aligned with both SB 24-205 and existing fair lending regulations.

Absolutely. AI used in hiring, promotion, performance evaluation, termination decisions, or workforce management affecting Colorado workers must comply. This includes: resume screening tools, interview analysis AI, employee chatbots affecting work conditions, and performance prediction models. CO-AIMS helps HR departments document required human oversight and maintain EEOC-aligned bias testing.

Yes. AI systems used in tenant screening, rental pricing, property valuations affecting lending, or housing availability decisions must comply with SB 24-205. These are "consequential decisions" under the law. CO-AIMS helps property managers and real estate companies implement required fair housing bias testing and documentation.

With CO-AIMS, registering AI systems takes minutes: (1) Log into your dashboard, (2) Click "Register AI System", (3) Enter system details (name, type, purpose), (4) Select data categories processed, (5) Document HITL gates and kill switch procedures, (6) Save. CO-AIMS automatically begins tracking compliance requirements and schedules initial bias audits. You can register voice agents, chatbots, RAG systems, prediction models, and other AI types.

A kill switch procedure is a documented plan for immediately stopping your AI system in an emergency—such as detecting serious discrimination, security breach, or malfunction. SB 24-205 requires deployers to maintain "reasonable control" over AI systems. CO-AIMS requires you to document kill switch procedures for each registered system and provides emergency response tracking to demonstrate compliance.

CO-AIMS works alongside your existing AI infrastructure without requiring code changes: (1) Register your systems in our dashboard, (2) Connect via our API for automated audit data collection (optional), (3) Link to n8n workflows for real-time monitoring (optional), (4) Use our manual audit tools if automated integration isn't feasible. We support voice agents (Retell, Vapi), chatbots, RAG systems, and custom AI applications.

CO-AIMS is built on industry-standard frameworks: (1) NIST AI Risk Management Framework (AI RMF) for comprehensive risk assessment, (2) ISO/IEC 42001 for AI management systems, (3) EEOC Uniform Guidelines for employment discrimination testing, (4) Colorado SB 24-205 specific requirements. Our bias audit methodology meets or exceeds all these standards, providing comprehensive compliance documentation.

Most businesses can achieve initial compliance within 1-2 weeks using CO-AIMS: Day 1-2: Register AI systems and document existing controls. Day 3-5: Complete initial impact assessments. Day 5-7: Run first bias audits. Day 7-14: Address any findings and finalize documentation. After initial setup, CO-AIMS automates ongoing compliance with monthly audits, annual assessment reminders, and continuous monitoring.

Our 14-day free trial includes: (1) Full platform access, (2) 1 AI system registration, (3) 2 bias audit runs, (4) Impact assessment generation, (5) Incident tracking, (6) Email notifications. No credit card required. This gives you enough time to evaluate the platform, run your first compliance cycle, and see exactly how CO-AIMS reduces your compliance burden.

After 14 days, you can choose a paid plan to continue: Starter ($199/month) for up to 3 AI systems, Professional ($499/month) for up to 10 systems, or Enterprise ($999/month) for unlimited systems. Your trial data is preserved when you upgrade. If you don't upgrade, you'll lose access to the dashboard but we retain your data for 30 days in case you return.

Yes. Professional and Enterprise plans include onboarding support to help you: register existing AI systems, configure bias audit parameters, integrate with your n8n workflows, set up team access, and customize reporting. Enterprise customers also receive dedicated compliance consultation and priority support.

Absolutely—and you should. Starting early allows you to: (1) Identify compliance gaps before enforcement begins, (2) Build documentation history demonstrating reasonable care, (3) Refine AI systems based on audit findings, (4) Train staff on new procedures. Companies that wait until 2026 will be scrambling while early adopters demonstrate established compliance programs.