Colorado – Enterprise Zone Tax Incentives

SALT Report 1282 – The Colorado Department of Revenue has updated its guidance regarding corporate income tax credits and sales and use tax incentives relating to enterprise zones.  An enterprise zone is an economically distressed area of Colorado in which tax incentives are offered to businesses that expand or locate in the zone.

The purpose of the tax incentives is to create new jobs and investments in these zones. Most changes take effect January 2012.

Pre-Certifying Credits

For any credit generated after 2011, most enterprise zone credits must be pre-certified by the zone administrator prior to any business activity that would generate the enterprise zone credit. Precertification must be applied for online or by submitting Form DR 0074, DR 0076 or DR 0077 to the zone administrator.

Electronic Certification Process

The enterprise zone certification is now available online and taxpayers are encouraged to use this new system, which is more accurate and secure than the paper certification process. This online system will be used for both the precertification process and the final certification of the tax credits.

Electronic Notification

For tax years beginning on or after January 1, 2012, the Office of Economic Development and International Trade will electronically notify the Department of Revenue of any credits generated in 2012 or later. Enterprise Zone credits cannot be claimed on a tax return filed prior to this notification.

The department strongly recommends that taxpayers use the online certification process to ensure that the credit data is accurately and timely transmitted to the Department of Revenue. This is particularly important for pass-through entities that must provide the name, ID number and the amount of the distributed credit of each partner/shareholder/member of the entity. Failure to accurately provide this information will result in the tax credit being denied until the information is corrected with the Enterprise Zone administrator.

Tax Credits and Incentives Available

The sales and use tax exemption for manufacturing and mining equipment used in an enterprise zone may be used for equipment used directly in the manufacturing or mining (including oil and gas) process. It applies to state sales and use tax and some state-collected local sales tax.

For Further Information:

Colorado Department of Revenue – FYI General 6