Traditional tax planning is a great start for companies looking for tax saving opportunities, but it typically can only do so much.
That’s where additional tax credits and incentive programs, like the Colorado Enterprise Zone (EZ) Program, can make a major impact on tax liabilities. This program is designed to encourage economic development in challenged areas of the state by offering various credits and incentives for hiring new employees, launching a new location and many other activities. The good news is that various EZ’s are assigned to areas across the state, including Adams County, Denver County and the North and South Metro area, so there is opportunity abound. To help clients, prospects and others learn about the EZ program opportunities available, Hanson & Co. has provided key details below.
EZ Tax Incentives & Program
Below is a brief summary of the major tax benefits available to Colorado companies through the Enterprise Zone Program:
Investment Tax Credit – This is an incentive credit provided to companies located within the enterprise zones offering a 3% credit for qualifying equipment purchases.
Job Training Program – A company that creates a qualified job training program for employees who live or work within an enterprise zone can claim a 12% state tax credit against their eligible training costs.
Research & Development Tax Credit – This incentive provides a tax credit for qualifying businesses of up to 3% based on the increase in qualifying research and development programs occurring within enterprise zone areas during the prior two income tax years.
Vacant Building Rehabilitation Credit – The credit provides an opportunity for companies that own or are tenants in an EZ building that has been completely vacant for two years or more to receive a credit for rehabilitation expenses. The business may claim a credit of 25% of the cost of the rehabilitation work, assuming it’s for commercial use, with a limit of $50,000.
New Employee Credits – Companies that create new qualifying jobs within an EZ can receive a credit of $1,100 per new job. There are additional benefits if the company is an agricultural manufacturing or processing business. In this case, they would be eligible for a credit of $500 per new employee. For companies located in a rural enterprise zone, there is a $2,000 credit per new job created.
Commercial Vehicle Investment Credit – This incentive offers a state income tax credit of up to 1.5% on the purchase of new commercial trucks, tractors and semi-trailers. The credit also applies to the purchase of qualifying associated parts.
Unlike other tax incentives which can simply be claimed when filing the business tax return, the incentives available through the Colorado Enterprise Zone Program requires a company to submit an application and receive both pre-certification and certification (depending on the credit applied for).
Pre-Certification – Any business that wants to claim an EZ credit must receive pre-certification authorization with their EZ administration. It’s important to note that the pre-certification process can be initiated up to three months in advance of the business’s new tax year. Without certification, it is not possible to claim most EZ benefits.
Certification – A pre-certified business must complete a certificate application and gain approval from the local administrator once the qualifying activity is completed. In order to receive the benefits, all certification documents should be submitted with the company’s state tax return.
To determine whether your company falls into an enterprise zone, click here to view the Colorado Enterprise Zone Program map. Note that the various colors indicate the administrative district of the various geographies and not a variation of benefits available.
There are many opportunities to receive state tax credits for business activities you may already have planned. Exploring the EZ program can lead to new incentives and savings not previously leveraged. If you are interested in learning more about the Colorado EZ program, Hanson & Co wants to help. For additional information, call us at (303) 388-1010, or click here to contact us. We look forward to speaking with you soon.