Enterprise Zone (EZ)

Background

Colorado’s Enterprise Zone program was created by the Colorado Legislature to promote a business friendly environment in economically distressed areas by offering state income tax credits that incentivize businesses to locate and develop in – and non-profit organizations to assist with the needs of – the communities.  Taxpayers investing in Enterprise Zones can earn a credit on their Colorado income tax by planning and executing specific economic development activities. These tax incentives are designed to encourage businesses to locate and expand in designated economically distressed areas of the state – those having a high unemployment rate, low per capita income, or a low population growth rate. Private-sector business activity encouraged by these income tax incentives brings job opportunities and capital investment to economically distressed areas. The private investments result in tax revenue for school districts, cities, counties and the state, outweighing the cost of the tax credits granted.

Incentives

EZ tax credits can have a significant impact, from $1,000 to $500,000 per project. The following incentives can be earned if your project is located in the Enterprise Zone for the tax year beginning 1/1/2016 and after:

Business Income Tax Credits

  • Investment Tax Credit: This is the most widely used tax credit. It allows businesses to receive a credit against their state income tax of 3% of their capital investment in equipment.
  • Commercial Vehicle Investment Tax Credit: This allows businesses to receive a tax credit of 1.5% on qualified commercial vehicle purchases for vehicles that will be used in the EZ only.
  • Job Training Tax Credit: The Job Training Tax Credit encourages businesses to make a significant investment in human capital through a credit of 12% on qualified job training program expenses.
  • New Employee Tax Credit: If your business creates a new job in the EZ, then it could be eligible to receive a credit of $1,100 per new job created. (Existing jobs transferred from another Colorado location are not eligible.)
  • Employer Sponsored Health Insurance Credit: If your business pays more than 50% of your employees' health care benefits, there is an extra $1,000 per covered employee that can be claimed for the first two full income tax years while located in the EZ, in addition to the new job credit.
  • R&D Increase Tax Credit: If your business has increased expenditures on research and experimental activities in the EZ, it may qualify to receive a credit of 3% on these expenditures. To qualify, it must be technological in nature and be useful in the development of a new or improved product or service.
  • Vacant Building Rehabilitation Tax Credit: If you own or are a tenant of a building in the EZ that is at least 20 years old and has been completely vacant for at least 2 years, you may claim a tax credit of 25% of your rehab expenditures if the building will be for commercial use.

Additional EZ Incentives

  • Manufacturing/Mining Sales and Use Tax Exemptions: There is a state-wide sales tax exemption for companies purchasing manufacturing equipment. If your business is in the EZ, this is expanded and can include expensed items and materials used to repair equipment and mining equipment.
  • Contribution Tax Credit: If you make a monetary or in-kind contribution to an EZ project for the purpose of implementing the economic development plan in the EZ, you may claim an income tax credit of up to 25% cash of the value of the contribution.

Pre-Certification is REQUIRED

Each income tax year, if your business is located in the EZ, you must apply and must be Pre-Certified prior to beginning an activity to earn any of the business tax credits listed. At the end of the income tax year, you must Certify that the activities were performed. Pre-Certification and Certification can be easily applied for online at www.advancecolorado.com/ez.

Broomfield Enterprise Zone

Starting on January 1, 2016, businesses located in select areas in the City and County of Broomfield will be eligible to apply to participate in the EZ program. The map below shows the areas in Broomfield where projects will be eligible to apply for EZ incentives.