Enterprise zone credits
The Enterprise Zone program provides incentives for new and established businesses to locate and expand in economically distressed areas of the Colorado. Businesses in the Enterprise Zone may save thousands of dollars on their Colorado income tax bill each year for any or all of the following:
Making capital investments / Hiring new employees / Providing training for employees / Rehabilitating old buildings / Conducting Research & Development
Any business located in the Enterprise Zone is eligible to receive these tax credits. In Colorado Springs, from I-25 and N Nevada exit, to east side of I-25 to Fountain. The enterprise zone includes downtown and Old Colo City between Route 24 and Colorado Ave.
Enterprise Zone New Business Facility Employee Credits
• The new business facility employee credit
• The new business facility agricultural processing employee credit
• The employer-sponsored health insurance credit
Any taxpayer who establishes a new business facility in an enterprise zone can claim an income tax credit of $500 for each new business facility employee who is working within the zone, prorated according to the number of months of employment during the tax year. For subsequent tax years, a credit of $500 shall be allowed for any increase in the average number of new business facility employees working in the zone in excess of the maximum number employed in any prior tax year. The credit is not refundable but a credit can be carried forward. For tax years beginning on or after January 1, 1993, the excess credit is not refundable but may be carried forward for a period of up to five years.
For tax years beginning on or after January 1, 2003, an additional $2,000 credit for each new business facility employee is available to businesses located in an enhanced rural enterprise zone. The enhanced portion of the new business facility employee credit not used to offset tax can be carried forward for a period of up to seven years.
THE EMPLOYER SPONSORED HEALTH INSURANCE CREDIT
For the first two full income tax years while located in an enterprise zone, taxpayers are allowed a credit of $200 for each new business facility employee insured under a health insurance plan or program at least 50% of the cost of which is paid by the taxpayer. Such plan or program may be any health insurance, health maintenance organization or pre-paid health plan that is approved by the State Insurance Commissioner for sale in Colorado or it may be a selfinsurance program. The program must be reduced to writing and it must be legally enforceable against the taxpayer.
WHAT QUALIFIES AS A NEW BUSINESS FACILITY?
A new business facility is a newly acquired, constructed or leased facility used by the taxpayer to operate a revenue-producing enterprise. This includes any factory, mill, plant, refinery, warehouse, feedlot, building or complex of buildings, including land, buildings, machinery and equipment located at the facility and used in connection with the operation of the facility.
Purchase of an existing business facility
If a business that is not yet qualified as a new business facility is purchased or leased and the business continues the same or substantially identical revenue producing enterprise at such facility, then there is no "new business facility" as there is no "new business." However, if a business is closed for reasons other than the sale of the business and a new owner revives the business, it may qualify as a new business facility as there is not a continuation of the old business.
In general, once a business facility qualifies as a "new business facility" it never loses that classification.
HOW AN EXISTING BUSINESS FACILITY CAN BECOME A NEW BUSINESS FACILITY
Qualified Replacement Facility
A “qualified replacement facility” is a replacement business facility located in an enterprise zone in which the taxpayer's investment exceeds $3 million or, if less, 300% of the investment in the old facility.
Expansion by investment.
If a facility, which is not a new business facility is expanded by the taxpayer, the expansion shall be a new business facility if the expansion otherwise meets the definition of a new business facility and the taxpayer's investment in the expansion exceeds $1,000,000 or, if less, 100% of its investment in the original facility prior to expansion. The investment in the original facility shall be the total investment in the facility not reduced by depreciation, and not including inventory, as of the close of business of the day preceding the designation of the enterprise zone. The investment in the expansion shall be the total investment in the expansion not reduced by depreciation, and not including inventory, beginning with the date of designation of the enterprise zone.
Expansion by number of employees.
An expansion facility can be created by the employment of ten or more new business facility employees over and above the average number of employees employed in the enterprise zone by the taxpayer during the twelve months immediately prior to the expansion.
Get your Free 30 day trial of PADGETT CONNECT.
Click here to compare PADGETT CONNECT to other business software applications.
© 2010 PADGETT BUSINESS SERVICES