The Colorado Enterprise Zone Program

The Colorado Enterprise Zone program is a state initiative designed to stimulate economic growth and development in distressed areas. The program offers a range of tax credits to businesses that meet certain criteria and undertake specific activities within designated enterprise zones. However, to claim these credits, taxpayers must satisfy certain certification and filing requirements.

Certification and Filing

Before a taxpayer engages in any activity for which they intend to claim any enterprise zone credit, they must apply for pre-certification online. This process involves identifying their business location within the enterprise zone and attesting that enterprise zone credits are a contributing factor to the start-up, expansion or relocation of their business in the enterprise zone. The pre-certification applies only to activities that commence after the date that pre-certification is issued by the enterprise zone administrator and before the end of the taxpayer’s current income tax year. There is a total of 16 Enterprise Zones across the state including several around the Denver metropolitan area. Furthermore, companies located in one of the rural enterprise zones can qualify for enhanced credits.

Before filing an income tax return claiming any credit covered by pre-certification, the taxpayer must obtain final certification from the enterprise zone administrator. The final certification affirms that the taxpayer’s business address is within the boundaries of the enterprise zone, that the taxpayer satisfied the applicable pre-certification requirements and, in the case of the vacant building rehabilitation credit, that the expenditures are of a qualified nature. However, the final certification does not establish the taxpayer’s eligibility for the credit or the amount of the credit claimed. Any enterprise zone credits a taxpayer claims are subject to examination, audit and adjustment by the Department of Revenue.

Tax Credit Benefits

The Colorado Enterprise Zone program offers several specific tax credit benefits. These include:

• Job Training Tax Credit, which offers a state income tax credit for 12 percent of eligible job-training costs for employees working within the enterprise zone.
• New Employee Tax Credit provides a state income tax credit of $1,100 per net new employee.
• Employer-Sponsored Health Insurance Tax Credit offers $1,000 per net new employee insured under a qualified health plan for which the employer pays at least 50 percent of the cost.
• Research and Development Tax Credit provides a 3 percent tax credit for an increase in annual research and development expenses.
• Vacant Commercial Building Rehabilitation Tax Credit offers a state income tax credit for 25 percent of rehabilitation costs.
• Commercial Vehicle Investment Tax Credit provides a state income tax credit for 1.5 percent of the price of new commercial trucks, truck tractors, tractors, semi-trailers and associated parts registered in Colorado and used in an enterprise zone.
• Investment Tax Credit offers a state income tax credit for 3 percent of an investment in business personal property.
• Enterprise Zone Sales and Use Tax Exemption for Manufacturing and Mining provides a sales and use tax exemption for purchases of manufacturing equipment.

Navigating the certification and filing requirements of the Colorado Enterprise Zone program can be complex. Alvarez & Marsal Tax can provide expert guidance and support throughout this process, ensuring that businesses maximize their potential tax credits while remaining compliant with all requirements. By hiring A&M, businesses can take full advantage of the program’s benefits, while ensuring they adhere to all requirements, ultimately contributing to the economic growth and development of Colorado’s distressed areas.

For more information about this incentive, please contact an A&M representative. You can subscribe to our Tax Compass Credits and Incentives blog here.

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