1 CCR 201-13
DEPARTMENT OF REVENUE ENTERPRISE ZONE REGULATIONS 1 CCR 201-13 [Editor’s Notes follow the text of the rules at the end of this CCR Document.] _________________________________________________________________________ Rule 39-30-103.5. Credit for Enterprise Zone Contributions. Basis and Purpose. The statutory bases for this rule are sections 39-21-112, 39-30-103.5, and 39-30- 108, C.R.S. The purpose of the rule is to provide clarification regarding the credit for contributions to certified enterprise zone programs, projects, or organizations.
(1) General Rule. Subject to the limitations prescribed by paragraph (3) of this rule, any taxpayer who makes a qualifying contribution is allowed a credit against Colorado income tax equal to twenty-five percent of the total value of the contribution as certified by the enterprise zone administrator.
(2) Qualifying Contributions. A qualifying contribution is a monetary or in-kind contribution made for the purpose of implementing the economic development plan for the enterprise zone to an enterprise zone administrator or to a project, program, or organization certified by an enterprise zone administrator. As used in this rule and section 39-30-103.5, C.R.S.:
(a) “Monetary contribution” means a contribution of U.S. currency in any form, including cash and payment made by check, electronic funds transfer (EFT), debit card, or credit card.
(b) “In-kind contribution” means a contribution that is not a monetary contribution, including contributions of property, services, stocks, bonds, and other intangible property.
(3) Credit Limitations. Pursuant to section 39-30-103.5(1)(b), the credit allowed and determined pursuant to section 39-30-103.5(1)(a), C.R.S. and paragraph (1) of this rule is reduced by:
(a) the amount by which the credit determined pursuant to section 39-30-103.5(1)(a), C.R.S. and paragraph (1) of this rule exceeds $100,000; and (b) the amount by which the credit for in-kind contributions, calculated in accordance with section 39-30-103.5(1)(a), C.R.S. and paragraph (1) of this rule, and reduced by the amount calculated pursuant to paragraph (3)(a) of this rule, exceeds fifty percent of the total credit calculated pursuant to section 39-30-103.5(1)(a), C.R.S. and paragraphs (1) and (3)(a) of this rule.
(4) Donor Advised Funds. A donor who contributes to a donor advised fund, as defined in I.R.C. section 4966(d)(2)(A), cannot claim the enterprise zone contribution credit for such contribution, even if the donor instructed the donor advised fund to contribute the funds to a Certified Program. Rule 39-30-104. Enterprise Zone Investment Tax Credit.
Basis and Purpose. The statutory bases for this rule are sections 39-21-112(1), 39-30-103(7)(a), 39-30- 104, 39-30-108(1), 39-22-507.5, and 39-22-507.6, C.R.S. The purpose of this rule is to clarify the application of the enterprise zone investment tax credit.
(1) Depreciation Expense Required. For the purpose of section 39-30-104, C.R.S., “qualified property” includes only property to which section 168 of the Internal Revenue Code would have applied, or any other property with respect to which depreciation would have been allowable pursuant to section 167 of the Internal Revenue Code, that has a useful life of 3 years or more. If a taxpayer fully expenses the acquisition of any property pursuant to section 179 of the Internal Revenue Code and recovers its full cost in one year, then depreciation is not allowable and the property does not qualify for the credit. References in this paragraph (1) to sections of the Internal Revenue Code are to those sections as they existed immediately prior to the enactment of the federal “Revenue Reconciliation Act of 1990.”
(2) Limit on Amount of Credit. Pursuant to section 39-30-104(2)(c)(I)(B), C.R.S., the amount of credit a taxpayer may claim for a tax year is limited to seven hundred fifty thousand dollars; except that any credits carried forward from a tax year commencing prior to January 1, 2014 are not subject to this limit. For the purpose of this limitation, any refund of the credit that a taxpayer receives for the tax year pursuant to section 39-30-104(2.6), C.R.S., is included in the amount of credit the taxpayer claims for that tax year. Therefore, a taxpayer who receives a refund of seven hundred fifty thousand dollars cannot claim for the same tax year any additional credit from any tax year commencing on or after January 1, 2014 to offset tax.
(3) Related Investment Tax Credits. A taxpayer cannot claim both the credit allowed pursuant to section 39-30-104, C.R.S., and the credit allowed pursuant to section 39-22-507.5, C.R.S., (the “old” investment tax credit) for the same qualified investment property. A C corporation may claim both the credit allowed pursuant to section 39-30-104, C.R.S., and the credit allowed pursuant to section 39-22-507.6, C.R.S., (the “new” investment tax credit) for the same qualified investment property.
(4) Used Solely and Exclusively in an Enterprise Zone for at Least One Year. The credit authorized by section 39-30-104, C.R.S., is allowed for the tax year in which the investment is first placed in service, as determined by the applicable sections of the Internal Revenue Code. The credit is allowed only with respect to qualified property used solely and exclusively in an enterprise zone for at least one year. The one-year period commences on the date the investment is first placed into service. If a taxpayer files an income tax return claiming the credit within the one-year period, the taxpayer must file an amended income tax return to fully rescind the credit claim if the property is used anywhere outside of an enterprise zone before the conclusion of the one-year period.
(5) Pre-certification. No credit is allowed pursuant to section 39-30-104, C.R.S., with respect to any property acquired by the taxpayer, or with respect to which the taxpayer paid or incurred any expense, prior to the taxpayer’s submission of a pre-certification form to the enterprise zone administrator pursuant to section 39-30-103(7)(a), C.R.S. Cross Reference 1. Ball Corporation v. Fisher, 51 P.3rd 1053 (Colo. 2001). Rule 39-30-105.1. Enterprise Zone Business Facility Employee Credits. Basis and Purpose. The statutory bases for this rule are sections 39-21-112(1), 39-30-102(1)(b) and (2), 39-30-103(7)(a), 39-30-105.1, and 39-30-108(1), C.R.S. The purpose of this rule is to clarify the calculation of enterprise zone business facility employee credits.
(1) Business Facilities. The term “business facility” as defined in section 39-30-105.1(6)(b) and (e), C.R.S., does not include any temporary structures or mobile units, except where such temporary structures or mobile units are used in association with one or more permanent structures defined as a “business facility” by section 39-30-105.1(6)(b) and (e), C.R.S.
(2) Calculation of Total Business Facility Employees for the Tax Year. The provisions of this paragraph (2) apply to the calculation of business facility employees pursuant to section 39 30 105.1(5), C.R.S.
(a) Except as provided in paragraph (2)(b) of this rule, the number of business facility employees for any taxable year is determined by dividing by twelve the sum of the number of business facility employees employed by the taxpayer at the business facility on the last business day of each month of the taxable year.
(b) If the business facility is in operation for less than the entire taxable year, the number of business facility employees is determined by dividing the sum of the number of business facility employees employed by the taxpayer at the business facility on the last business day of each full calendar month of the taxable year during which the business facility was in operation by the number of such full calendar months of operation. If the business facility’s period of operation commences or ceases during a calendar month, and the business facility is therefore not in operation for the full calendar month, such partial month of operation is not considered in the calculation of business facility employees.
(i) A business facility is “in operation for less than the entire taxable year” only if all business activities conducted at the facility cease temporarily for a period of not less than one full calendar month during the taxable year. Business activities are not deemed to have ceased at a facility in any month during which any employee performs work at or in the facility or during which the generation of any gross revenue can be attributed to the facility.
(c) In the case of a taxable year that is less than twelve months, the number of business facility employees is determined pursuant to paragraph (2)(a) of this rule, unless the business facility is operation for less than the entire taxable year as determined pursuant to paragraph (2)(b) of this rule.
(d) Pre-certification.
(i) Calculating Employees for the Tax Year. For the purpose of section 39-30- 105.1(5), C.R.S., and this rule, if a taxpayer does not pre-certify pursuant to section 39-30-103(7)(a), C.R.S, prior to the commencement of the tax year, the number of employees for any month that commences prior to pre-certification during such tax year shall be deemed not to exceed the highest number of business facility employees calculated for any prior tax year pursuant to section 39-30-105.1(5)(a), C.R.S.
(ii) Calculating Employees for Prior Years. In calculating the number of business facility employees for any prior year, in order to determine the increase in employees in the current tax year, the number of business facility employees employed by the taxpayer at the business facility on the last business day of each month of the prior year(s) shall be included in the calculation, regardless of whether the taxpayer pre-certified pursuant to section 39-30-103(7)(a), C.R.S, prior to or during such prior year(s).
(e) For the purpose of applying the provisions of section 39-30-105.1(5)(b), C.R.S., “replacement business facility” means a business facility at which the taxpayer (or a related taxpayer) operates a revenue-producing enterprise substantially similar to a revenue-producing enterprise that was operated by the taxpayer (or a related taxpayer) at another business facility in this state that discontinued operating on or before the close of the first taxable year in which commercial operations commenced at the new business facility.
(f) If any or all of a business facility employee’s duties are not in connection with the operation of the business facility or are performed outside of the enterprise zone, the employee is included in the calculation of business facility employees pursuant to section 39-30-105.1(5), C.R.S., only to the extent of the employee’s duties performed both in connection with the operation of the business facility and within the enterprise zone. However, in accordance with section 39-30-105.1(6)(c)(II), C.R.S., an employee is fully included in the calculation of business facility employees pursuant to section 39-30- 105.1(5), C.R.S., if the employee customarily performs duties within the zone and in connection with the operation of the business facility for at least twenty hours per week throughout the taxable year, regardless of whether the employee also performs duties unconnected with the business facility or outside the enterprise zone. Except as provided in paragraph (2)(g) of this rule, an employee’s duties are performed in connection with the operation of a business facility only if and to the extent that such duties:
(i) are performed in or at the business facility, including the land on which the facility is located; and (ii) contribute materially to the operation of a revenue-producing enterprise conducted in or at the business facility.
(g) For the purpose of section 39-30-105.1, C.R.S., and paragraph (2)(f) of this rule, an employee whose primary duties consist of operating a commercial motor vehicle with a commercial driver's license:
(i) shall be deemed to be working one hundred percent within the zone if the employee spends no more than five percent of his or her total time at any business of the employer other than the business within the zone; and (ii) performs duties in connection with the operation of a business facility only if and to the extent that such duties contribute materially to the operation of a revenue- producing enterprise conducted in or at the business facility, regardless of whether those duties are performed in or at the business facility.
(3) Calculation of New or Additional Business Facility Employees.
(a) First Tax Year of Operation. In determining the credit for the business facility’s first year of operation, the number of business facility employees is calculated pursuant to section 39-30-105.1(5)(a), C.R.S., and paragraph (2) of this rule.
(b) Subsequent Tax Years. In determining the credit for each tax year subsequent to the business facility’s first year of operation, the credit is allowed for each additional business facility employee calculated pursuant to section 39-30-105.1(5)(a), C.R.S., and paragraph (2) of this rule over the highest number of business facility employees calculated for any prior tax year pursuant to section 39-30-105.1(5)(a), C.R.S., and paragraph (2) of this rule.
(i) The credit allowable for any tax year subsequent to the business facility’s first year of operation is determined pursuant to section 39-30-105.1(1)(a)(III), C.R.S., and this paragraph (3)(b), regardless of whether the taxpayer claimed any credit for the first year of operation.
(ii) A taxpayer who acquires a business facility that was operated by another party prior to the acquisition and continues operating the business facility in a substantially similar revenue-producing enterprise is allowed a credit for only the number of additional business facility employees, calculated pursuant to section 39-30-105.1(1)(a)(III), C.R.S., and this paragraph (3)(b), in excess of the highest total number of business facility employees employed at the facility in any prior tax year.
(4) Rules for Specific Additional Credits.
(a) Credits for Business Facilities in Enhanced Rural Enterprise Zones and Business Facilities That Add Value to Agricultural Commodities Through Manufacturing or Processing.
(i) The additional credits authorized by section 39-30-105.1(1)(a)(II), (3)(a), and (3)(b), C.R.S., are allowed only with respect to employees for which the taxpayer claims credit for the same tax year pursuant to section 39-30-105.1(1)(a)(I) or (III), C.R.S.
(ii) For the purpose of section 39-30-105.1(3), C.R.S., a business “adds value through manufacturing or processing to agricultural commodities” if it engages directly in an activity that substantially transforms an agricultural commodity into a form other than that which enters the normal agricultural commodity marketing channels. Harvesting, cleaning, packaging, storing, transporting, wholesaling, retailing, or otherwise distributing commodities without substantially changing the form of the commodity do not qualify.
(b) Credit for Employee Health Insurance.
Rule 39-30-105.6. Credit for Rehabilitation of Vacant Buildings. Basis and Purpose. The statutory bases for this rule are sections are 39-21-112(1), 39-30-103(7)(a), 39- 30-105.6, and 39-30-108(1), C.R.S. The purpose of the rule is to clarify the term “building,” as used in statute and this rule; requirements for the credit related to vacancy, commercial use, and pre-certification; and the application of the limitation on the amount of credit allowed.
(1) Building. For the purpose of section 39-30-105.6, C.R.S., and this rule, the term “building” includes the entire physically contiguous structure, regardless of whether it has been legally divided into separate units.
(2) Building Vacancy. For the purpose of section 39-30-105.6(1), C.R.S., a building is not considered to be unoccupied at any time during which the building is actively utilized by the owner, a lessor, or any other party in the operation of a trade or business including, but not limited to, any storage within the building of inventory, equipment, or other property for an operating business. However, the mere presence of tangible personal property in an otherwise unoccupied building does not disqualify the building for the credit.
(3) Rehabilitation for Commercial Use. For the purpose of section 39-30-105.6(4), C.R.S., a building is rehabilitated for commercial use only if:
(a) the taxpayer’s primary use of the building is for commercial purposes; and (b) the taxpayer does not use any part of the building as their residence, either full-time or part-time.
(4) Credit Limitation. The aggregate amount of credit allowed to each taxpayer with respect to any given building is limited to $50,000. The limit applies to the aggregate amount of the credit, whether allowed in one or more tax years, and to the building as a whole, whether the taxpayer is the owner or tenant of the entire building or one or more separate units therein. The limit applies to each individual, estate, trust, or C corporation who is the owner or tenant of a building, either directly or indirectly as the partner or shareholder in a partnership or S corporation, as well as to each partnership or S corporation that is the owner or tenant of a building or any separate unit or units therein.
(a) Example 1. A taxpayer who is the owner of a vacant building makes qualified expenditures for the purpose of rehabilitating the building in each of three consecutive years. In the first year, the taxpayer makes qualified expenditures totaling $100,000 and is allowed a credit of $25,000 (25% of the qualified expenditures). In the second year, the taxpayer makes qualified expenditures totaling $80,000 and is allowed a credit of $20,000 (25% of the qualified expenditures). Because the aggregate amount of the credit allowed is limited to $50,000 and the taxpayer was allowed credits totaling $45,000 in the two prior years, the amount of credit the taxpayer is allowed in the third year cannot exceed $5,000. In the third year, the taxpayer makes qualified expenditures totaling $60,000 and is allowed a credit of $5,000, rather than $15,000 (25% of the qualified expenditures).
(b) Example 2. A taxpayer owns three units in the same vacant building and makes qualified expenditures for the purpose of rehabilitating each of the three units. The taxpayer makes qualified expenditures of $100,000, $200,000, and $300,000 for the three units, respectively, for a total of $600,000. The total credit the taxpayer is allowed for qualified expenditures for the three units is $50,000, rather than $150,000 (25% of the qualified expenditures).
(c) Example 3. Three unrelated taxpayers own three separate units in the same vacant building. Each of the three taxpayers make qualified expenditures for the purpose of rehabilitating the unit they own. The three taxpayers make qualified expenditures of $80,000, $160,000, and $240,000, respectively. The first taxpayer is allowed a credit of $20,000 (25% of their $80,000 in qualified expenditures). The second taxpayer is allowed a credit of $40,000 (25% of their $160,000 in qualified expenditures). The third taxpayer is allowed a credit of $50,000, rather than $60,000 (25% of their $240,000 in qualified expenditures).
(d) Example 4. A partnership consisting of five partners owns several units within a single building and makes $400,000 in qualified expenditures. A credit of $50,000 is allowed for the qualifying expenditures made by the partnership, rather than $100,000 (25% of the $400,000 in qualified expenditures). Each of the five partners is allowed their distributive share of the $50,000 credit allowed for the qualifying expenditures made by the partnership.
(e) Example 5. An individual is a partner in two different partnerships that separately own units in the same vacant building. Each partnership makes qualified expenditures for the purpose of rehabilitating the units. The two partnerships pass through credits of $25,000 and $40,000, respectively, to the individual partner. However, the total credit the partner is allowed for the rehabilitation of the building is limited to $50,000.
(5) Pre-certification.
(a) No credit is allowed pursuant to section 39-30-105.6, C.R.S., with respect to any expenditure either paid or incurred prior to the taxpayer’s submission of a pre-certification form to the enterprise zone administrator pursuant to section 39-30-103(7)(a), C.R.S.
(b) If expenditures are made in multiple tax years for the rehabilitation of the same building, the taxpayer must submit a separate pre-certification form for each year, prior to making any expenditures for that year.
__________________________________________________________________________ Editor’s Notes History Regulation 39-30-105 eff. 01/01/2009.
Regulation 39-30-104 eff. 03/02/2011.
Regulation 39-30-103.5 eff. 05/15/2019. Regulations 39-30-104(4), 39-30-105.5, 39-30-105.6, 39-30-106, 39-30-108 repealed eff. 05/15/2019.
Rules 39-30-103.5, 39-30-104, 39-30-105.6 eff. 10/15/2021. Rule 39-30-105 repealed eff. 10/15/2021. Rule 39-30-105.1 eff. 03/30/2022.