The state of Colorado has created an enterprise zone program designed to encourage economic growth and development in key areas.
The newly created enterprise zone is focused on bringing economic renewal to key areas of Denver. The zone, known as the Denver Enterprise Zone (Denver EZ), allows qualifying businesses the opportunity to leverage generous state tax incentives. This is an opportunity for companies looking to move to or expand operations in Denver to realize additional savings. To help clients, prospects and others understand more about the Denver EZ and the tax credits available, Hanson & Co. has provided a brief summary below.
What Are Tax Credits?
A tax credit is a dollar for dollar reduction on the taxes you owe, as opposed to a tax deduction that reduces the gross income on which your taxes are calculated. The tax credit program you choose determines the credit amount. The state of Colorado offers 10 tax credits within the 30 square miles that make up the Denver EZ.
Summary of Tax Programs
There are numerous tax incentives available, but we have provided a summary of just a few below. They include:
- New Business or Expansion Business Facility Jobs Credit A new business or an existing business expanding its employee base in the Denver Enterprise Zone may receive up to a $1,100 State tax credit for each new job created. This means that a company in the Denver EZ which hires 50 full-time employees for a full fiscal year could receive a tax credit of $1,100 for each employee. This would result in a total benefit of $55,000 for that year.
- Three Percent Investment Tax Credit Businesses located in the Denver EZ making purchases of what the Federal government deems as Section 38 Property (equipment, computers, furniture, vehicles, etc.) used exclusively in the EZ for at least one year may claim a tax credit equal to 3% of the investment amount. The credit cannot exceed 100% of the taxpayer’s State income tax liability up to $5,000 and 50% of the tax liability above $5,000. The unused portion of the credit may be carried forward for 12 years and back three years.
- Job Training Credit – Employers in the Denver EZ who provide a qualified job-training program for their EZ employees may claim a tax credit of 12% of their eligible training “investment.” A qualified job-training program means a structured training or basic education program to improve the job skills of the taxpayer’s employees.
- Manufacturing Equipment State Sales Tax Exemption Manufacturing businesses in the Denver EZ are exempt from State sales and use tax on purchases of $500 or more of machinery used for production. The exemption also applies to machine tools and replacement parts as well.
- Employer-Sponsored Health Insurance Tax Credit A Denver EZ taxpayer who qualifies for the New Business Facility or Expansion Facility Jobs Tax Credit as mentioned above can also qualify for an additional credit of $1,000 for the first two full tax years of operation. The credit is available for each employee who is insured under a health insurance plan provided by the employer where the employer pays at least 50% of the insurance premium.
Denver EZ Locations
To determine if your current or proposed business address is located within the Denver EZ, use this locator map. Enter your full address in the box. If your address falls within one of the shaded areas, you are within an enterprise zone.
Enterprise Zone: Eligibility and Pre-Certification
If your business will perform an activity that could earn an EZ tax credit, the city of Denver requires pre-certification to determine program eligibility, which is conducted by the Enterprise Zone Administrator. For more information on this process, click here.
These tax incentives are designed to encourage privately held companies to expand their operations and hire new employees in the City of Denver. It’s possible your company can benefit from these incentives if you meet the proper criteria. Even if you meet the criteria listed above it’s essential to work with seasoned advisors who can guide you through the process for the greatest benefit possible. For additional information please contact us by phone at (303) 388-1010, or click here for email. We look forward to speaking with you soon.