Workforce shortage tax credit - tax preference performance statement - report - legislative declaration - definitions - repeal

(a) The general legislative purposes of the tax credit allowed by this section are:

(I) To induce certain designated behavior by taxpayers; and

(II) To provide tax relief for certain businesses or individuals.

(b) The specific legislative purpose of the tax credit allowed by this section is to encourage workforce development in industries that are facing worker shortages by providing financial assistance for facility improvement and equipment acquisition costs associated with training programs designed to alleviate worker shortages.

(c) The general assembly and the state auditor shall measure the effectiveness of the tax credit in achieving the purposes specified in subsections

(1)(a) and (1)(b) of this section based on the information required to be maintained and reported by the office pursuant to subsection (12) of this section.

(2) Definitions. As used in this section, unless the context otherwise requires:

(a) Applicant means a person subject to tax pursuant to this article 22, an entity that is exempt from taxation pursuant to section 39-22-112 (1), or a political subdivision of the state.

(b) Application means an application in the form and manner approved by the office for the tax credit allowed in this section.

(c) Department means the department of revenue.

(d) Federal investments means the federal Infrastructure Investment and Jobs Act, Pub.L. 117-58, the federal Inflation Reduction Act of 2022, Pub.L. 117-169, and the federal CHIPS and Science Act of 2022, Pub.L. 117-167.

(e) Office means the Colorado office of economic development created in section 24-48.5-101.

(f) Potential qualified asset means an asset that may be a qualified asset upon the determination of the office.

(g) Qualified applicant means an applicant that makes a qualified investment to train individuals in a qualified industry and that is selected pursuant to subsection (5) of this section.

(h) (I) Qualified asset means:

(A) Land in this state;

(B) Buildings, fixtures, and other structural components of buildings in this state for which the applicant is allowed a deduction for depreciation pursuant to section 167 of the internal revenue code, including purchasing or constructing a facility, renovating a facility, making tenant improvements, and funding a capital lease with capitalized labor, construction, and installation costs;

(C) Tangible personal property acquired for use exclusively in this state for which the applicant is allowed a deduction for depreciation pursuant to section 167 of the internal revenue code; and

(D) Computer software acquired for use exclusively in this state for which the applicant is allowed a deduction for depreciation under section 167 of the internal revenue code.

(II) For purposes of this subsection (2)(h), if an applicant is not subject to federal income tax, the applicant is deemed to be allowed a deduction for depreciation if such a deduction would have been allowed were the applicant subject to federal income tax.

(i) Qualified industry means an industry affected by federal investments that has a demonstrated workforce shortage, as determined by the office as specified in the policies and procedures developed by the office pursuant to subsection (13) of this section.

(j) Qualified investment means the amount paid by a qualified applicant to acquire, construct, reconstruct, or erect a qualified asset to the extent the amount paid reflects new activity and to the extent the amount is required to be capitalized pursuant to the internal revenue code or the amount is allowed to be deducted under section 179 of the internal revenue code.

(k) Selection committee means a selection committee appointed by the office consisting of members who have expertise and experience as employers, in education, or in other relevant areas.

(3) Tax credit allowed. (a) Except as provided in subsection (3)(c) of this section, a qualified applicant is allowed to use a tax credit certificate issued by the office pursuant to subsection (8) of this section against the income taxes imposed by this article 22 in the income tax year that the qualified applicant places a qualified asset in service in the amount specified on the tax credit certificate issued by the office; except that the tax credit certificate may not be used in an income tax year commencing before January 1, 2026, and may not be used in an income tax year commencing on or after January 1, 2033.

(b) In order to claim the tax credit allowed pursuant to this section, the qualified applicant must submit an application as specified in subsection (5) of this section, place the qualified asset into service before January 1, 2033, obtain a tax credit certificate from the office as specified in subsection (8) of this section, and, once issued by the office, file the tax credit certificate with the qualified applicant's income tax return as specified in subsection (9) of this section.

(c) A tax credit is not allowed pursuant to this section if:

(I) The amount refunded pursuant to subsection (10) of this section is used to supplant local, state, or federal money that would otherwise be appropriated; or

(II) The qualified applicant expends money received from the state to offset at least half of a qualified investment, not including the amount refunded pursuant to subsection (10) of this section.

(4) Tax credit administration. Except as otherwise provided in subsection (7) of this section, the office is the administrator of the tax credit allowed by this section.

(5) Application submission and review. (a) An applicant that intends to claim a tax credit pursuant to this section shall submit an application to the office.

(b) The office shall accept applications for annual application periods by deadlines established in the policies and procedures developed by the office pursuant to subsection (13) of this section; except that the office may only receive applications between January 1, 2025, and December 31, 2029.

(c) The office shall review all submitted applications to determine whether:

(I) The applicant is a qualified applicant; and

(II) The application is complete and includes a description of a potential qualified asset and the estimated qualified investment.

(d) If the office determines that the application is complete and in compliance, the office shall add the application to an evaluation pool for the application period. Within a reasonable period after the end of the application period, the office shall forward the evaluation pool to the selection committee for the merit-based review described in subsection (7) of this section.

(e) If the office determines that the application is incomplete or that it does not comply with the requirements of this section or the policies and procedures developed by the office pursuant to subsection (13) of this section, the office shall remove the application from the review process and notify the applicant in writing of its decision. An applicant may resubmit a disapproved application to be evaluated in a future application period.

(6) Application and issuance fees. (a) (I) For an application for which the amount of the tax credit requested by an applicant pursuant to this section is two hundred fifty thousand dollars or more, the office may impose a reasonable application fee on an applicant that does not exceed five hundred dollars.

(II) For an application for which the amount of the tax credit requested by an applicant pursuant to this section is less than two hundred fifty thousand dollars, the office may impose a reasonable application fee on an applicant that does not exceed two hundred dollars.

(b) The office may impose on a qualified applicant a reasonable issuance fee of up to three percent of the amount of the tax credit specified on the tax credit certificate issued by the office as specified in subsection (8) of this section, which must be paid before the tax credit certificate is issued to the qualified applicant.

(c) Any fee revenue collected pursuant to this subsection (6) must be applied to the administration of the tax credit created by this section.

(7) Merit-based review and tax credit reservation. (a) (I) For each application period, the selection committee shall conduct a merit-based review of the applications that have been placed in the evaluation pool pursuant to subsection (5)(d) of this section. The selection committee shall complete its review and award reservations within a reasonable period after the end of the application period, not to exceed ninety days.

(II) Except as provided in subsection (7)(a)(IV) of this section, based upon the totality of the factors set forth in subsection (7)(c) of this section, the selection committee may reserve for the benefit of a qualified applicant a tax credit in an amount to be determined by the selection committee not to exceed fifty percent of the estimated qualified investment; except that the aggregate amount of tax credits reserved for all qualified applicants in an annual application period may not exceed fifteen million dollars.

(III) The selection committee may reserve tax credits to be used by a qualified applicant for income tax years commencing on or after January 1, 2026, but before January 1, 2033, based upon the anticipated date the qualified asset is placed into service.

(IV) If the September 2025 revenue forecast, and each September revenue forecast through the September 2028 revenue forecast as prepared by either legislative council staff or the office of state planning and budgeting, projects that state revenues, as defined in section 24-77-201 (4), will not increase by at least four percent for the current fiscal year, the aggregate amount of tax credits reserved for all qualified applicants in the application period commencing in the calendar year that begins during the current fiscal year is reduced by fifty percent; except that, if the amount of a reduced tax credit reservation is equal to or less than five hundred dollars, then the selection committee shall not issue a tax credit reservation.

(b) (I) If the selection committee reserves tax credits for the benefit of a qualified applicant under subsection (7)(a) of this section, the selection committee shall notify the office of the reservation and the amount of tax credits reserved. The office shall notify the qualified applicant of the tax credit reservation. The reservation of a tax credit does not entitle the qualified applicant to an issuance of a tax credit certificate until the qualified applicant complies with all the requirements specified in this section, by the selection committee or by the office, for the issuance of a tax credit certificate pursuant to subsection (8) of this section.

(II) The office shall notify any qualified applicant in writing for which the selection committee reserved no tax credit under subsection (7)(a) of this section.

(c) (I) In conducting the merit-based review pursuant to subsection (7)(a) of this section, the selection committee shall consider the factors set forth in this subsection (7)(c) in addition to any other factors the selection committee may request the office to include in its policies and procedures developed pursuant to subsection (13) of this section. The selection committee may weigh the factors equally or differently.

(II) The selection committee shall consider:

(A) Whether the qualified applicant's qualified investment will influence competitiveness in a qualified industry;

(B) Whether the qualified applicant's qualified investment will result in increased job placements in qualified industries or increased job placements with a living wage in qualified industries;

(C) The type, scope, and quality of the qualified applicant's qualified asset and the resulting training of individuals in a qualified industry; and

(D) Whether the qualified applicant's qualified investment will result in increased training and workforce development in a qualified industry.

(d) The selection committee may impose additional requirements on the qualified applicant as a condition of awarding the tax credit reservation pursuant to this subsection (7).

(8) Proof of compliance - audit of eligible expenditure certification - issuance of tax credit certificate. After a qualified applicant places a potential qualified asset in service, the qualified applicant shall notify the office that the potential qualified asset has been placed in service and shall certify the qualified investment, after which the office shall make a final determination whether the potential qualified asset is a qualified asset. The qualified applicant shall include a review of the certification by a licensed certified public accountant that is not affiliated with the qualified applicant and that aligns with office policies for certification of a qualified investment. The qualified applicant shall also certify and provide documents demonstrating that the qualified applicant satisfied any additional requirements imposed by the selection committee pursuant to subsection (7) of this section. Within a reasonable time after receipt of such documentation from the qualified applicant, the office shall review the qualified applicant's documentation of certified qualified investment and determine whether the documentation satisfies the requirements of the office, and, if the office determines that the documentation satisfies the requirements of the office, the office shall issue a tax credit certificate in the amount specified in the tax credit reservation, not to exceed fifty percent of the certified qualified investment, issued to the qualified applicant pursuant to subsection (7) of this section; except that a tax credit certificate may not be issued for an income tax year commencing before January 1, 2026, or for an income tax year commencing on or after January 1, 2033.

(9) Filing tax credit certificate with income tax return. (a) In order to claim the tax credit authorized by this section, a qualified applicant shall file the tax credit certificate issued by the office pursuant to subsection (8) of this section with the qualified applicant's state income tax return. If the qualified applicant is a political subdivision of the state or is exempt from tax pursuant to section 39-22-112 (1), the qualified applicant shall file a return pursuant to section 39-22-601

(7)(b). The amount of the tax credit that a qualified applicant may claim pursuant to this section is the amount stated on the tax credit certificate.

(b) A tax credit certificate issued to a partnership, a limited liability company taxed as a partnership, or multiple owners of a property must be passed through to the partners, members, or owners, including any nonprofit entity that is a partner, member, or owner, respectively, on a pro rata basis or pursuant to an executed agreement among the partners, members, or owners documenting an alternate distribution method.

(10) Refundability. If the amount of the tax credit allowed pursuant to this section exceeds the amount of income taxes otherwise due on the income of the qualified applicant in the income tax year for which the tax credit is being claimed, or the qualified applicant is a political subdivision of the state or a person who is exempt from taxation pursuant to section 39-22-112 (1), the amount of the tax credit not used as an offset against income taxes in the income tax year is refunded to the qualified applicant.

(11) Compliance monitoring and recapture. (a) Except as provided in subsection (11)(b) of this section, if, as of the last day of any taxable year during the compliance period, the equipment, building, structure, or facility that was deemed a qualified asset is not being used as a qualified asset, the office shall notify the qualified applicant and the department that the tax credit allowed in this section is disallowed. The qualified applicant shall add the full amount of the tax credit that was actually used to offset the qualified applicant's income tax or refunded to the qualified applicant to its return as a recaptured tax credit for the taxable year in which the tax credit is disallowed pursuant to this subsection (11).

(b) The potential increase in tax required pursuant to subsection (11)(a) of this section does not apply:

(I) If a building, structure, or facility is not a qualified asset as a result of a casualty loss if the loss is restored by reconstruction or replacement within a reasonable period established by the office;

(II) Solely by reason of the disposition of a building, structure, or facility, or an interest therein, if it is reasonably expected that the building, structure, or facility will continue to be operated as a qualified asset for the remainder of the compliance period; or

(III) If a qualifying asset is replaced or upgraded in the normal course of its use.

(c) (I) The office shall establish reporting requirements to monitor compliance with this subsection (11) that shall include:

(A) A disposition of a qualified asset by the qualified applicant;

(B) The number of annual trainees who have used a qualified asset;

(C) The geographic distribution of trainees who have used a qualified asset;

(D) Demographic information about the trainees who have used a qualified asset;

(E) The location and disposition of assets displaced by a qualified asset, if any; and

(F) To the extent a qualified asset is used to expand or create a training facility, an assessment of training capacity prior to implementation of the qualified asset.

(II) If a dispute arises about whether a potential qualified asset is a qualified asset, the office shall adjudicate the dispute and notify the department of the resolution.

(III) Notwithstanding section 39-21-107 (2), if a qualified asset is disposed of during any taxable year during the compliance period, and thereafter the asset is not a qualified asset:

(A) The qualified applicant shall add the full amount of the tax credit to its return as a recaptured tax credit for the taxable year in which the tax credit is disallowed pursuant to this subsection (11) notwithstanding the disposition of the qualified asset;

(B) The statutory period for the assessment of any deficiency with respect to the disallowed tax credit must not expire before the expiration of three years from the date the office is notified, in such a manner as the office determines, that the structure is not a qualified asset; and

(C) The department shall assess any deficiency before the expiration of such three-year period together with any applicable interest and penalty imposed pursuant to this article 22.

(d) As used in this subsection (11), unless the context otherwise requires, compliance period means the period of fifteen years following the taxable year in which the qualified applicant placed the qualified asset in service.

(12) Reporting. (a) No later than December 31, 2025, and, notwithstanding the requirement in section 24-1-136 (11)(a)(I), no later than December 31 of each year thereafter through 2033, the office shall provide a written report to the general assembly and shall further make the report available to the public. In connection with tax credits issued pursuant to this section, the report must include:

(I) The number of qualified assets placed in service;

(II) A description of the use or uses of each qualified asset and a statewide summary of the number of qualified assets for each use; and

(III) The amount of any disallowed tax credit recaptured pursuant to subsection (11) of this section.

(b) The office shall, in a sufficiently timely manner to allow the department to process returns claiming the income tax credit allowed in this section, provide the department with an electronic report of each qualified applicant to which the office issues a tax credit certificate for the preceding tax year that includes the following information:

(I) The qualified applicant's name;

(II) The amount of the tax credit; and

(III) The qualified applicant's social security number or the qualified applicant's Colorado account number and federal employer identification number.

(c) The office, the office of the state auditor, or the office of the state controller may review the qualified applicant's finances, expenses, equipment, employment, and training documentation relating to a qualified investment in a qualified asset.

(13) Policies and procedures. (a) The office may create and modify policies, procedures, and guidelines as necessary to further administer the tax credits allowed pursuant to this section and shall solicit advice from the department in creating and modifying such policies, procedures, and guidelines.

(b) The office shall develop standards for determining which industries are included as a qualified industry for which a tax credit under this section is allowed to a qualified applicant.

(c) Any standards developed by the office pursuant to this subsection (13) must be posted on the office's website. The office may annually review and update as necessary standards developed pursuant to this subsection (13).

(d) The office shall determine the annual application period.

(14) Workforce development tax credit program cash fund. (a) The workforce development tax credit program cash fund is created in the state treasury. The fund consists of gifts, grants, donations, and fee revenue credited to the fund pursuant to subsection (6) of this section and any other money that the general assembly may appropriate, transfer, or require by law to be credited to the fund.

(b) The state treasurer shall credit all interest and income derived from the deposit and investment of money in the workforce development tax credit program cash fund to the fund.

(c) Money in the fund is continuously appropriated to the office for the purpose of administering the tax credit issued pursuant to this section.

(d) The state treasurer shall transfer all unexpended and unencumbered money in the fund on December 31, 2050, to the general fund.

(15) Repeal. This section is repealed, effective December 31, 2050.