Colorado ~ Corporate Income Tax: Certain Economic Development Income Tax Credits Allowed Different Treatment

CCH Tax Day Report

Colorado Gov. John Hickenlooper has signed legislation authorizing the Colorado Economic Development Commission (EDC) to allow certain business that make a strategic capital investment in the state to treat several existing corporate income tax credits as transferable, beginning July 1, 2017, and lasting through June 30, 2020. Once the income tax credits are approved by the EDC as transferable, the business can apply the credit to any tax liability, carry forward the credit for up to five years, or transfer the income tax credit. Under the legislation, the existing credits that are eligible for different treatment include, the Colorado job growth incentive credit; the Enterprise Zone credit for investment in certain property; the credit for new enterprise zone business employees; and the Enterprise Zone credit for expenditures for research and experimental activities. In order to qualify, a business is required to make at least $100 million capital investment for each precertification that the EDC finds will be significant to the state and be productive over time.

Precertified tax credits cannot be transferred until tax year 2019 and the business has five years from when the EDC approved the credits to transfer them. Additionally, if the business chooses to transfer its allowed tax credits, then the income tax credits are freely transferable and assignable, subject to the preapproved amount. The transferee may use all or a portion of transferred income tax credits to offset any tax liability or they may transfer any unused portion to a secondary transferee. The unused portion of the tax credit can be transferred on multiple occasions for three subsequent tax years from when the income tax credit was first transferred. The legislation allows the EDC to precertify $10 million in transferable credits in each fiscal year. Any portion of the $10 million not precertified by the EDC in any of the fiscal years may not be certified in a future year. The EDC may precertify transferable credits for the same business in all three fiscal years.

H.B. 1356, Laws 2017, effective May 24, 2017

AUTHOR

CCHTaxGroup

All stories by: CCHTaxGroup

Leave a Reply

Your email address will not be published.