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). Regulation 39-30-104(4). [Repealed eff. 05/15/2019] Rule 39-30-105. [Repealed eff. 10/15/2021] Regulation 39-30-105.5 [Repealed eff. 05/15/2019] 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.

Regulation 39-30-106. [Repealed eff. 05/15/2019] Regulation 39-30-108 [Repealed eff. 05/15/2019] __________________________________________________________________________ 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.