| Summary |
Currently, the advanced industry investment tax credit (credit)
expires on December 31, 2026. The bill extends the credit until December
31, 2031. The credit is currently available to a qualified investor that
makes a qualified investment in a qualified small business that is in an
advanced industry. On and after January 1, 2028, the credit is also
available to a qualified investor that makes a qualified investment in a
qualified small business that is not an advanced industry business,
operates in the manufacturing sector, generates revenue from operations,
is a primary employer, is producing a product that is distributed outside
of Colorado, and, in the judgment of the Colorado office of economic
development (office), is a commercially scalable and capital-intensive
business that will bring incremental income to the local economy.
The bill changes the definition of qualified investment by
eliminating the current prohibition against a qualified investor having
more than 30% of the voting power in the qualified small business before
the investor makes a qualified investment and more than 49% of the
voting power in the qualified small business after making a qualified
investment.
The bill changes the definition of qualified investor by clarifying
that an entity subject to income tax may qualify as an investor, except that
a C corporation, including any limited liability or other legal entity treated
as a C corporation for federal and state income tax purposes, is not a
qualified investor. A qualified investor may include a partner,
shareholder, or beneficiary that is allocated a credit. A qualified investor
does not include a person that had control of a qualified small business
for 6 months preceding or following the date of the investment in the
qualified small business. A founder, employee, or contractor or a spouse
of a founder, employee, or contractor of a qualified small business is not
a qualified investor. A person that has invested more than $50,000 in the
qualified small business or owns more than 10% of the qualified small
business on a fully diluted basis is not a qualified investor.
The office administers the credit. The office may certify a small
business as a qualified small business until October 1, 2031. A small
business certified as a qualified small business must report to the office
as requested to confirm the certified small business's status as a qualified
small business. The office may require a qualified small business to
provide information to confirm that a qualified investment has been made
in the qualified small business, the intended use of the qualified
investment, and the expected number of new employees that will be hired
by the qualified small business as a result of the qualified investment. A
qualified small business that receives a qualified investment is required
to report data relevant to the impact of the credit and development of the
qualified small business annually to the office for 5 years following a
qualified investment. The office may assess a penalty against a qualified
small business that does not meet this reporting requirement.
The office may issue $4 million in credits per calendar year for the
years through the 2026 calendar year for which the credit is currently
available. The bill decreases the cap to $2.5 million per calendar year
beginning with the 2027 calendar year through the 2031 calendar year.
If the qualified investor receiving a credit is a trust, the qualified
investor may allocate the credit between the trust and its beneficiaries in
any manner determined by the trust. The office shall issue a credit
certificate to a trust beneficiary and a trust beneficiary may claim the
amount indicated on the credit certificate.
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