C.R.S.
Section 24-48.5-112
Advanced industry investment tax credit
- administration
- legislative declaration
- definitions
- repeal
(1)
As used in this section, unless the context otherwise requires:(a)
“Advanced industry” has the same meaning as set forth in section 24-48.5-117 (2)(a).(b)
“Advanced industry investment tax credit” or “tax credit” means the credit against income tax created in section 39-22-532, C.R.S.(c)
“Affiliate” means any person or entity that controls, is controlled by, or is under common control with another person or entity. For purposes of this paragraph (c), “control” means the power to determine the policies of an entity whether through ownership of voting securities, by contract, or otherwise.(d)
“Office” means the Colorado office of economic development created in section 24-48.5-101.(e)
“Qualified investment” means an investment made at any time on or after July 1, 2014, but before January 1, 2027, in an equity security that meets all of the following requirements:(I)
The equity security is common stock, preferred stock, an interest in a partnership or limited liability company, a security that is convertible into an equity security, a convertible debt investment, or other equity security as determined by the office;(II)
The investment is at least ten thousand dollars;(III)
The qualified investor and its affiliates do not hold, of record or beneficially, immediately before making an investment, equity securities possessing more than thirty percent of the total voting power of all equity securities of the qualified small business; and(IV)
The qualified investor and its affiliates hold, of record or beneficially, immediately after making the investment, equity securities possessing less than fifty percent of the total voting power of all equity securities of the qualified small business.(f)
“Qualified investor” means an individual, limited liability company, partnership, S corporation, as defined in section 39-22-103 (10.5), C.R.S., or other business entity that makes a qualified investment in a qualified small business. “Qualified investor” does not include a C corporation, as defined in section 39-22-103 (2.5), C.R.S.(g)
“Qualified small business” means a corporation, limited liability company, partnership, or other business entity that:(I)
Is in an advanced industry;(II)
Has its headquarters located in Colorado or has at least fifty percent of its employees based in Colorado;(III)
Has received less than ten million dollars from third-party investors, not including grants, since the business was formed; and(IV)
Has annual revenues of less than five million dollars or has been actively operating and generating revenue for less than five years.(V)
Repealed.(1.5)
In accordance with section 39-21-304 (1), which requires each bill that extends an expiring tax expenditure to include a tax preference performance statement as part of a statutory legislative declaration, the general assembly hereby finds and declares that:(a)
The general legislative purposes of the tax credit allowed by this section are:(I)
To induce certain designated behavior by taxpayers;(II)
To improve industry competitiveness; and(III)
To provide tax relief for certain businesses or individuals;(b)
The specific legislative purpose of the tax credit allowed by this section is to encourage investment in small businesses located in Colorado in advanced industries, including in quantum fields, and in particular in small businesses in advanced industries, including in quantum fields, located in a rural area or economically distressed area of the state; and(c)
The statement required by an applicant on the application for an advanced industry investment tax credit set forth in subsection (2)(e) of this section, and the reports that the office is required to submit pursuant to subsection (6) of this section, will allow the general assembly and the state auditor to measure the effectiveness of the tax expenditure.(2)
Intentionally left blank —Ed.(a)
The office shall receive and evaluate applications that are submitted by qualified investors to receive an advanced industry investment tax credit for qualified investments made in a qualified small business.(b)
To be eligible for an advanced industry investment tax credit, a qualified investor must file a completed application with the office within ninety days after making a qualified investment. The office shall prescribe the manner and form of the application. The office shall note the time and date of each application received. In addition to any other requirements established by the office, the application must include the name, address, and federal income tax identification number of the applicant, the number of new employees hired by the qualified small business as a result of the qualified investment, and any additional information that the office requires.(c)
A business may request the office to determine whether it is a qualified small business. Upon receiving the request or upon receipt of an application for an advanced industry investment tax credit from a qualified investor, the office shall determine whether the business that is named in the application or written request is a qualified small business. After determining the qualifications, the office shall certify the qualified small business as being eligible to receive qualified investments for purposes of this section. The certification for a qualified small business that is certified after July 1, 2014, is valid until January 1, 2027; except that the certification is revoked if the business no longer meets the qualifications. A business shall notify the office within thirty business days from the date that it no longer meets the qualifications. If the certification is revoked, the office may assess a penalty against the business that is equal to the amount of the advanced industry investment tax credits authorized after the date that the business no longer meets the qualifications. The state treasurer shall deposit the penalty into the state general fund. If the certification is revoked, subsequent investments in the business do not qualify for a tax credit. All tax credits issued before the revocation of the certification remain valid. The office shall not deny any application for a tax credit on the basis of the revocation of the certification if the investment was made before the date of the revocation.(d)
As part of the application for an advanced industry investment tax credit, the applicant and the qualified small business that receives the investment must each provide written authorization to permit the department of revenue to provide tax information to the office for the purpose of determining if there are any misrepresentations on the application. The authorization is limited to disclosure of income tax information for the latest two years for which returns were filed with the department of revenue preceding the date the application is filed and for all tax years through the year in which the investment was made for which a return was not filed as of the date of the application. The applicant must also provide in the written authorization income tax information for all tax years in which the applicant actually claims a tax credit or carries forward a tax credit on a return filed with the department of revenue. An applicant that is a partnership, limited liability company, S corporation, or similar pass-through entity and that may allocate the credit among the partners, shareholders, members, or other constituent qualified investors pursuant to section 39-22-532 (7) must provide a written authorization with content similar to the authorization, and in the same manner, as any other applicant is required to provide. If an applicant or qualified small business fails to comply with this subsection (2)(d), an applicant is ineligible for a tax credit.(e)
As part of the application for an advanced industry investment tax credit, the applicant must state that the tax credit was a significant factor in the applicant’s decision to make the investment and that without the tax credit, the applicant would not have made the investment or would have made an investment at a substantially lower level.(f)
The office shall review and make a determination with respect to each application for an advanced industry investment tax credit within ninety days after receiving the application. The office may request additional information from the applicant in order to make an informed decision regarding the eligibility of the qualified investor or qualified small business.(3)
Intentionally left blank —Ed.(a)
Subject to the limitations set forth in subsection (3)(b) of this section, the office shall authorize an advanced industry investment tax credit for each qualified investor who makes a qualified investment in a qualified small business. The amount of the tax credit is twenty-five percent of the amount of the qualified investment or thirty-five percent of the qualified investment if the qualified small business is located in a rural area or economically distressed area of the state as determined by the office. The office shall issue a tax credit certificate to the qualified investor for each qualified investment stating the amount of the tax credit that is authorized for purposes of section 39-22-532. A tax credit certificate is nontransferable. The office shall certify to the department of revenue the name of each qualified investor who receives a tax credit certificate, the amount of the tax credit, and other relevant information relating to the tax credit.(b)
Intentionally left blank —Ed.(I)
The total amount of the advanced industry investment tax credits shall not exceed three hundred seventy-five thousand dollars for the 2014 calendar year; seven hundred fifty thousand dollars for each calendar year from 2015 through 2022; and four million dollars for each calendar year from 2023 through 2026; except that, if the total amount of the credits for 2018 or a later calendar year through 2022 is less than the maximum amount, then the maximum amount for the next year is increased by an amount equal to the remaining, unused tax credits from the prior year. The office shall authorize the tax credits in the order that applications are received by the office and shall deny any application received after the limit has been met. The office may partially authorize the last tax credit that is awarded up to the limit.(II)
The total amount of the tax credit for each qualified investment shall not exceed one hundred thousand dollars. A qualified investor may not claim more than one tax credit per qualified small business, but may be eligible for a tax credit for qualified investments in different qualified small businesses in the same or a different year.(c)
To claim an advanced industry investment tax credit, a qualified investor must submit a copy of each tax credit certificate as part of a tax return to the department of revenue in accordance with section 39-22-532 (3), C.R.S., by the due date of the return, including extensions, for the tax year during which the qualified investment was made. If the qualified investor fails to timely file the tax credit certificate, the tax credit expires for that taxable year and there is no carry forward of the expired tax credit. The office shall not reissue a tax credit certificate for a credit that expires or that otherwise is not timely used by the qualified investor.(4)
No later than April 30 of each year following a year during which the office authorizes an advanced industry investment tax credit, the office shall provide to the department of revenue an electronic report that includes the information set forth in paragraph (b) of subsection (2) and paragraph (a) of subsection (3) of this section and any other information required to administer section 39-22-532, C.R.S. If the office subsequently discovers that an applicant who received a tax credit misrepresented information on the application, the office shall immediately notify the department of revenue and provide the department of revenue all information that relates to that applicant.(5)
Repealed.(6)
On November 1, 2017, the office shall submit a first report to the finance and the business, labor, and economic and workforce development committees of the house of representatives; to the business, labor, and technology and the finance committees of the senate, or any successor committees; and to the joint budget committee summarizing all of the tax certificates issued since July 1, 2014. At a minimum, the report must include the amount of the capital invested by qualified investors and the tax credit that each qualified investor received, a description of the qualified businesses that received the qualified investment, a projection of the number of new employees hired by the qualified small businesses as a result of the qualified investment, the geographic distribution of the jobs, and any other economic impacts that resulted from the qualified investment. Notwithstanding section 24-1-136 (11), the office shall submit a second report on November 1, 2022, and a third report on November 1, 2027, to the same legislative committees summarizing, for the second report, all of the tax certificates issued after January 1, 2018, and, for the third report, all of the tax certificates issued after January 1, 2023. The second and third reports must include the same information as the first report.
Source:
Section 24-48.5-112 — Advanced industry investment tax credit - administration - legislative declaration - definitions - repeal, https://leg.colorado.gov/sites/default/files/images/olls/crs2023-title-24.pdf (accessed Oct. 20, 2023).
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