DEPARTMENT OF AGRICULTURE RULES PERTAINING TO THE SMALL FOOD BUSINESS RECOVERY AND RESILIENCY TAX CREDIT 8 CCR 1204-10 [Editor’s Notes follow the text of the rules at the end of this CCR Document.] _________________________________________________________________________ 1. Definitions 1.1. “Amount Certain Spent by the Member of the Consortium on Completing its Duties and Responsibilities of the Consortium” or “Amount Certain” means the amount spent on pallet, pallet break, distribution, and delivery fees that is eligible for a subsidy from the Consortium but is not otherwise covered by the Consortium.

1.2. “Community Food Access Program (CFA Program or Program)” means the program created in section 35-1-117, C.R.S., to improve access to and lower prices for healthy foods in low-income and underserved areas of the state.

1.3. “Community Food Consortium (Consortium)” means the community food consortium created in section 35-1-117(8)(a), C.R.S.

1.4. “Department” or “CDA” means the Colorado Department of Agriculture created in section 35-1- 103, C.R.S.

1.5. “Duties and Responsibilities” means the duties and responsibilities of the members of the consortium pursuant to section 35-1-117(2)(a), C.R.S.

1.6. “Farm Direct Operation” means a farm or ranch that produces and sells Colorado grown or raised grocery products directly to consumers that serves as a critical business offering food for purchase in a federal, state, or locally defined low income, low access area. 1.7. “Farmers Market” means a public and recurring assembly of farmers and ranchers or their representative selling the food that they produced directly to consumers in a federal, state, or locally defined low income, low access area.

1.8. “Grant Award” means a contractual award of funds through the Small Food Business Recovery and Resilience Grant Program.

1.9. “Grant Program” or “CFA Grant Program” means the Small Food Business Recovery and Resilience Grant Program created in section 35-1-117(3)(a), C.R.S. 1.10. “Healthy Foods” means fresh, frozen or minimally processed produce, locally grown or raised products, other food items that may or may not normally be present in a particular location but that serve the culinary and health needs of a particular population, nutrient dense proteins and grains, other foods meeting a local definition of “healthy” and that provide nutritional value for human health. “Healthy Foods” does not include sugar sweetened beverages, candy, alcoholic beverages, tobacco, hot and ready to eat or prepared foods, or non-food products. 1.11. “Limited Supermarket Access Area” means an area where households have inadequate and inequitable access to supermarkets, based on income, distance to existing stores, and car ownership rates.

1.12. “Member of the Consortium” means any member of the community food consortium for small food retailers and Colorado-owned and Colorado-operated farms created in section 35-1-117(2)(a), C.R.S.

1.13. “Purchase” means to acquire for consideration and take possession of small food business recovery and resilience grant program equipment, whether the purchaser paid for the items in a lump sum, by means of financing, or through a “lease-to-own” agreement. 1.14. “Purchase Price” means the amount actually paid by the purchaser for the small food business recovery and resilience grant program equipment, including charges for sales tax and freight, but not including any charges for assembly, installation, other construction services, or permit fees. 1.15. “Purchaser” means a small food retailer or small family farm that purchases small food business recovery and resilience grant program equipment.

1.16. “Rural” means any population, housing, or territory not in an urban area as defined in this rule. 1.17. “Small Family Farm” has the same meaning as set forth in section 35-1-117(8)(d), C.R.S. 1.18. “Small food business recovery and resilience grant program equipment” or “Equipment” means the items listed in section 35-1-117(3)(a)(II) and(3)(a)(IV), C.R.S. 1.19. “Small Food Retailer” has the same meaning as set forth in section 35-1-117(8)(e), C.R.S. 1.20. “SNAP” means the supplemental nutrition assistance program established in part 3 of article 2 of title 26 of the Colorado Revised Statutes.

1.21. “Urban” means an area that is identified in the 2020 “Census Qualifying Urban Areas and Final Criteria Clarifications,” adopted by reference herein (87 Federal Register Vol. 87, No. 249, 80114; effective December 29, 2022). Material incorporated by reference does not include any later amendments or editions of the incorporated material. Copies of material incorporated by reference are available for public inspection during regular business hours and may be obtained at a reasonable charge or examined by contacting the Markets Division, Colorado Department of Agriculture, 305 Interlocken Parkway, Broomfield, CO 80021. Further, the incorporated material may be examined at no cost on the Internet at:

1. https://www.federalregister.gov/documents/2022/12/29/2022-28286/2020-census-qualifying- urban-areas-and-final-criteria-clarifications.

1.22. “WIC” has the meaning set forth in section 35-1-117(8)(g), C.R.S.

2. Tax Credit Certificates Annual Allocation 2.1. The Department may issue up to $10 million annually in Tax Credits Certificates commencing on or after January 1, 2024, but before January 1, 2031, in accordance with section 39-22-549 (3)(a), C.R.S.

2.2. At least once during each application period, the Department will post on the Community Food Access Program website, www.ag.colorado.gov/CFA, the total aggregate amount of Tax Credit Certificates issued for each calendar year and the total amount of aggregate tax credit applications currently under review. Applicants are encouraged to check the availability of tax credits for each calendar year frequently and before incurring any Amounts Certain or expenses for Equipment.

3. Tax Credit Letter of Eligibility — Submission, Review, and Issuance 3.1. A Member of the Consortium or a Purchaser may submit an application to the Department for a letter of eligibility for a tax credit certificate to determine whether any proposed expense would qualify before incurring that expense.

3.2. The application must include a certification that the applicant is either: 3.2.1. a Purchaser who is a small food retailer or small family farm that will purchase small food business recovery and resilience grant program equipment; or 3.2.2. a Member of the Consortium that will spend an Amount Certain on completing its duties and responsibilities.

3.3. The application must also include detailed information regarding: 3.3.1. the Purchase Price that would be incurred by a Purchaser and the date on which the purchase would be made, including any portion covered by a Grant Award received through the Small Food Business Recovery Resilience Grant Program or other grant, loan, or funding source; and 3.3.2. the percentage of the equipment’s use that is related to advancing the goals of the Community Food Access program; or 3.3.3. an itemized total of the Amount Certain that a Member of the Consortium would spend on completing its Duties and Responsibilities, minus any amount already provided by the Consortium, and the date or dates on which the Member of the Consortium would spend the amounts.

3.4. Interested individuals will find applications for a Letter of Eligibility on the Community Food Access Program website at www.ag.colorado.gov/CFA.

3.5. A Letter of Eligibility does not guarantee that an applicant for a Tax Credit Certificate will receive a Tax Credit Certificate. Applicants must submit a full application for a tax-credit certificate separately, pursuant to Part 4 of this rule, for the Department’s review and consideration after the applicant has incurred the proposed expense.

3.6. An applicant must submit a complete Letter of Eligibility application and provide all required supporting documentation before the Department may determine if the Duties and Responsibilities or Equipment purchased would qualify for a tax credit certificate if purchased. The Department will notify applicants in writing if their application is incomplete. 3.7. The Department will review the Letter of Eligibility application and issue a decision in writing to approve, deny, or seek additional clarification from the applicant. If the Department requests additional clarification or documentation, the applicant will have 7 business days to provide the requested information, after which the Letter of Eligibility application will be deemed abandoned by the applicant and denied. Applicants can request an extension of this deadline in writing or submit a revised application for a Letter of Eligibility at a later date. Any such request must be made in writing (by e-mail or post) and received by the Department no later than three business days before the deadline to provide the requested information. 3.8. Decisions based on statutory requirements are not appealable.

4. Tax Credit Certificate Application – Submission, Review, and Issuance 4.1. The Department will post the application for a Tax Credit Certificate on the Community Food Access Program website: www.ag.colorado.gov/CFA.

4.2. There will be three application periods in each calendar year, as determined by the Department and announced on the Department’s website: ag.colorado.gov/CFA upon the effective date of this rule and thereafter no later than January 1 of each calendar year. 4.3. This section 4.3 sets forth the order in which the Department will issue Tax Credit Certificates within each application period.

1. 4.3.1. Group 1: Members of the Consortium on the Amount Certain Spent by a Member of the Consortium on completing its Duties and Responsibilities when that amount is eligible for a subsidy from the Consortium but is not otherwise covered by the Consortium. 4.3.2. Group 2: Purchasers that have not received any other Small Food Business Recovery and Resilience tax credits as a result of purchasing small food business recovery and resilience grant program equipment.
   1. 4.3.2.1. When reviewing applications for this Group 2, the Department will order eligible expenses in accordance with the order of priority identified in section 7; and 4.3.2.2. The Department will further sub-order those prioritized expenses in a manner that prioritizes those applicants who can demonstrate the greatest improvement to access to and lower prices for healthy foods in low-income area underserved areas of the state, consistent with the methods set forth in Section 5 below to demonstrate improvement to access and lower prices for healthy foods in low- income and underserved areas of the state;

   4.3.3. Group 3: Purchasers that have not yet received a Small Food Business Recovery and Resilience tax credit as a result of purchasing small food business recovery and resilience grant program equipment in the calendar year for which the tax credit is sought.

   1. 4.3.3.1. When reviewing applications for this Group 3, the Department will order eligible expenses in accordance with the order of priority identified in section 7; and 4.3.3.2. The Department will further sub-order those prioritized expenses in a manner that prioritizes those applicants who can demonstrate the greatest improvement to access to and lower prices for healthy foods in low-income and underserved areas of the state, consistent with the methods set forth in Section 5 below to demonstrate improvements to access and lower prices for healthy foods in low- income and underserved areas of the state;

   4.3.4. Group 4: All other applications.

   1. 4.3.4.1. When reviewing applications for this Group 4, the Department will order eligible expenses in accordance with the order of priority identified in section 7; and 4.3.4.2. The Department will further sub-order those prioritized expenses in a matter that prioritizes those applicants who can demonstrate the greatest improvement to access to and lower prices for healthy foods in low-income and underserved areas of the state, consistent with the methods, set forth in section 5 below, to demonstrate improvement to access and lower prices for healthy foods in low- income and underserved areas of the state.

   4.3.5. Group 5: Any applicant that previously received a Small Food Business Recovery and Resilience Tax Credit Certificate but mis-used Equipment in a way that did not conform to the applicant’s intent as provided in its application or performed Duties and Responsibilities of the Consortium in a manner that did not conform to the actual Duties and Responsibilities of the Consortium.

4.4. Within each category listed in 4.3, applications will be reviewed in the order received, based on the date and time the Department receives a complete application. 4.5. An applicant must submit a complete Tax Credit Certificate application and provide all required supporting documentation before the application deadline. After the application deadline, the Department will notify applicants in writing if their application is incomplete. 4.5.1. An applicant will have 7 business days from the day the Department notifies the applicant that the applicant’s application is incomplete to correct any deficiencies, after which the Department will deny the application in full. An applicant must then resubmit the applicant’s application with complete documentation during the next application cycle, which will then be reviewed based on the new date and time received by the Department. 4.6. To receive a Tax Credit Certificate, an applicant must provide supporting documentation of the following:

1. 4.6.1. The income tax year in which the applicant will claim a tax credit; and 4.6.2. The price and date of any equipment purchased, including any portion covered by a Grant Award, received through the Small Food Business Recovery Resilience Grant Program, as well as proof of payment; or 4.6.3. An itemized total and date or dates of purchase of any amount spent by a Member of the Consortium on pallet, pallet break, distribution, or delivery fees that are not otherwise covered by the Consortium.
   1. 4.6.3.1. Costs related to pallet, pallet break, distribution and delivery fees must be verified with supporting documentation, such as an itemized invoice, price sheet, or contract with a distributor, as well as proof that each invoice was paid. 4.7. If applicable, an applicant may submit the applicant’s Letter of Eligibility along with a Tax Credit Certificate application.

4.8. The Department will inform an applicant of the Department’s decision to approve or deny a Tax Credit Certificate by email within 90 calendar days from the date a completed application is received.

4.9. The Department will deny applications for a Tax Credit Certificate in any tax year in which the Department has committed ten million dollars. An eligible business may only receive a tax credit in the year in which the applicant incurred the eligible expense. 4.10. Upon approval, the Department will issue a Tax Credit Certificate with a designated reference number, which the applicant must attach to the applicant’s state tax filing return for the applicable tax year. An applicant is responsible for submitting all necessary documents to the Colorado Department of Revenue to receive a tax credit. Tax Credit Certificates are not transferable. 4.11. Decisions based on statutory requirements are not appealable. 4.12. The deadline to submit an application for a previous income tax year is December 31 of the subsequent income tax year, e.g., December 31, 2025, for eligible expenses incurred during the 2024 income tax year.

5. An applicant may demonstrate improvement to access and lower prices for healthy foods in low-income and underserved areas of the state by:

5.1. Demonstrating that the geographical area the applicant serves either: 5.1.1. Has no access to a grocery store at less than half-mile intervals in an urban area; or 5.1.2. Has no access to a grocery store at less than 10 miles in a rural area and is within a United States census tract whose poverty rate is 20 percent or greater; and either 5.1.3. Is within a United States census tract where the median family income is less than or equal to 80 percent of Colorado’s state-wide median family income; or 5.1.4. Is within a United States census tract in a metropolitan area where the median family income is less than or equal to 80 percent of that metropolitan area’s median family income.

5.2. Demonstrating whether the applicant operates or serves areas located in a census tract adjacent to a census tract meeting the above criteria with median family income less than or equal to 120 percent of area median family income;

5.3. Demonstrating whether the applicant operates or serves areas located in a Limited Supermarket Access Area;

5.4. Demonstrating whether the applicant operates or serves an area operated by a Tribal government or on Tribal Lands; or 5.5. Providing a narrative explanation to establish any other factors that the applicant believes should qualify as operating or serving in a low-income, low-access community, including by use of locally aggregated data.

6. Tax Credit Certification Requirements 6.1. At the time of application for a tax credit, a Purchaser or Member of the Consortium must certify that the applicant is either:

1. 6.1.1. A Member of the Consortium that spent an Amount Certain on completing its duties and responsibilities; or 6.1.2. A Purchaser who is a small food retailer or small family farm that purchased Equipment.

7. Eligible and non-eligible costly small food business recovery and resilience grant program equipment purchases include:

7.1. Eligible Equipment Expenses used primarily to advance the sale of healthy food in low income and underserved areas of the state by small food retailers, in Order of Priority: 7.1.1. Cold Storage: Refrigeration and freezer units (consumer-facing or storage); 7.1.2. New POS systems or upgrades to existing POS systems, including hardware, monitors, and printers that are directly related to implementing or improving SNAP, WIC, or other food incentive programs;

1. 7.1.3. Display shelving and display cases; calibrated and certified produce scales, food preservation equipment needed to extend the availability of healthy food for customers beyond the local harvest or slaughter calendar; dry storage containers; deli slicers and meat grinders for fresh meat;

   7.1.4. Power generators ensuring the proper temperature control of healthy food in areas that lose power for more than four hours at least once per year; 7.1.5. Refrigerated or commercial delivery vehicles and trailers; 7.1.6. Equipment the Commissioner determines will contribute to the state’s effort to improve access to and lower prices for healthy foods in low-income and underserved areas of the state by supporting small food retailers and small family farms; 7.1.7. Tractors, tractor implements, greenhouses, tunnels, solar equipment, poultry housing, farmers market tents, storage equipment, produce washing equipment, costly irrigation equipment, product sorting equipment, produce processing equipment or harvesters. 7.2. Non-Eligible Equipment Purchases:

   7.2.1. Storage or retail display equipment for alcoholic beverages, soft drinks, sports and energy drinks or cannabis products;

   7.2.2. Vending machines that do not offer healthy food; 7.2.3. Storage or equipment for prepared foods.

8. General Provisions 8.1. Applicants are responsible for complying with any applicable local, state, or federal food safety standards and for operating within the scope of any necessary license, registration, or permit. Applicants are responsible for obtaining any necessary local, state, or federal regulatory review for any improvements made to any existing facilities.

8.2. A Purchaser of Equipment that receives a Tax Credit Certificate understands and agrees that the Department may conduct a site inspection to confirm that the Purchaser’s use of the Equipment conforms to the Purchaser’s intent, as provided in its application.

9. Statements of Basis, Specific Statutory Authority, and Purpose

9.1 Adopted January 17, 2024; Effective March 16, 2024

The Commissioner of Agriculture adopts these rules pursuant to the authority granted the Department of Agriculture at 39-22-549(4)(a), (5)(e), and (9), C.R.S. HB 23-1008, created a tax credit to induce designated tax-payer behavior, specifically: purchasing and use of small food business recovery and resilience grant program equipment and increasing the activities of the community food consortium for small food retailers and Colorado-owned and Colorado-operated farms. This tax credit is designed to contribute to the state’s efforts to improve access to and lower prices for healthy foods in low-income and underserved areas of the state by supporting small food retailers and small family farms. See 3-22-549(1)(a)(I) and (1)(a)(II), C.R.S. These rules establish the deadlines both for applications for letters of eligibility and for applications for tax credit certificates. A letter of eligibility permits those who may incur costs to determine, in advance, whether such costs would qualify for a tax credit. A tax-credit certificate is an approval issued by the Department after any eligible equipment purchase has been made and which may be applied by the applicant as a credit against that person’s income taxes for the tax year in which the purchase was made. Section 39-22-549(4)(a) and (5)(a), C.R.S.

These rules identify the order in which the Department will issue tax credits, identifying an order that will permit the Department to organize its awards based on factors that prioritize Duties and Responsibilities of Consortium members; rural- over urban-related expenses; applicants who have not received any previous tax credits; and applicants who can demonstrate the greatest improvement to and lower prices for healthy foods in low-income and underserved areas of the state, consistent with the state’s efforts to improve access to and lower prices for healthy foods in low-income and underserved areas of the state by supporting small food retailers and small family farms. Finally, these rules provide general direction to applicants for both letters of eligibility and tax credit certificates related to deadlines, required documentation, and methods of demonstrating effects on improving lower prices for healthy foods in low-income and underserved areas of the state. In its final review, the Department noticed that the tenses of the verb conjugations in parts 3.1.1 and 3.1.2 were inconsistent with the intent of part 3. The Department, therefore, amended the verb conjugation to harmonize it with the intent of part 3 overall.

9.2 Adopted January 15, 2025; Effective March 17, 2025

The Commissioner of Agriculture adopts these rules pursuant to the authority granted the Department of Agriculture at 39-22-549(4)(a), (5)(a) and (c), and (9), C.R.S. These changes to the rule serve to clarify the focus of the program as to better align with the intent of the legislation, reduce the possibility of mis-use of tax credits, and improve administrative processes and increase efficiency.

Specifically, these changes refine critical definitions related to eligible businesses, healthy foods, low income and underserved areas of the state, and what it means to purchase equipment. They clarify usage requirements for eligible equipment and change the order in which the department will review and award applications to better align with the intent of this program as described in legislation. Some general categories of equipment have been removed or clarified to reduce the risk of awarding tax credits for purchases that do not fully align with the intent of the legislation. General categories of equipment were more specifically described to reduce confusion. Based on stakeholder feedback, power generators were added as an explicitly eligible piece of equipment.

Additionally, these changes reduce the number of days applicants have to complete an incomplete submitted application, which will reduce complications related to filing taxes and receiving the credit and reduce the amount of time all applicants will need to wait to file their taxes. The changes also give more flexibility for the department to publish the remaining amount of funds when figures are most accurate, instead of once per month.

Post publication, three additional changes were proposed to clarify definitions and improve administrative processes. The first change is a clarification of the term “purchase” to better align with how the term is used in the rule. The second change is to the term “purchase price” to ensure this definition aligns with the definition in statute. The third change is the addition of section 4.12 to allow eligible businesses to apply for a tax credit in the year after the year it was purchased. _________________________________________________________________________ Editor’s Notes History New rule eff. 03/16/2024.

Rules 1-5, 7, 9.2 eff. 03/17/2025.