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July 22, 2024 HB 24-1325
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Final Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 24-0997
Rep. Valdez; Soper
Sen. Bridges; Baisley
Date:
Bill Status:
Fiscal Analyst:
July 22, 2024
Signed into Law
Emily Dohrman | 303-866-3687
emily.dohrman@coleg.gov
Bill Topic: TAX CREDITS FOR QUANTUM INDUSTRY SUPPORT
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☒ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill creates two income tax credits to support the quantum industry. The bill
conditionally: increases expenditures beginning in FY 2024-25; increases revenue in
FY 2024-25; and decreases revenue beginning in FY 2025-26.
Appropriation
Summary:
For FY 2024-25, the bill includes and may require an appropriation of $90,255 to the
Office of Economic Development and International Trade. See State Appropriations
section.
Fiscal Note
Status:
The final fiscal note reflects the enacted bill.
Table 1
Conditional State Fiscal Impacts Under HB 24-1325
Budget Year
FY 2024-25
Out Year
FY 2025-26
Out Year
FY 2026-27
Revenue General Fund - (up to $3.9 million) (up to $7.8 million)
Cash Fund $0.1 million $0.1 million $0.1 million
Total Revenue $0.1 million (up to $3.8 million) (up to $7.7 million)
Expenditures General Fund $90,255 $80,529 $135,757
Cash Fund $90,254 $92,032 $92,033
Centrally Approp. $26,599 $33,249 $28,815
Total Expenditures $207,108 $205,810 $256,605
Total FTE 1.2 FTE 1.5 FTE 1.3 FTE
Transfers - - -
Other Budget
Impacts
GF Reserve $13,538 $12,079 $20,364
TABOR Refund $0.1 million (up to $3.8 million) not estimated Page 2
July 22, 2024 HB 24-1325
Summary of Legislation
The bill creates two tax credits related to the quantum industry, each of which may only be
administered if a Colorado-based entity receives a multimillion dollar federal grant from the
Regional Technology and Innovation Program or a comparable federal grant program.
Fixed capital assets investments tax credit. Applicants may receive the fixed capital assets
investments tax credit if they invest in fixed capital (such as land, buildings, tangible personal
property, or computer software) for the purpose of creating a shared quantum facility. The tax
credit amount may be up to the amount of the qualified investment.
Applicants may apply for a tax credit reservation from the Office of Economic Development and
International Trade (OEDIT) and, if granted, receive a tax credit certificate when the project is
placed in service. OEDIT may not issue more than $44 million in reservations. The tax credits may
be claimed in tax years 2026 through 2032.
Quantum business loan loss reserve income tax credit. Applicants, such as banks or other
lenders, may receive the quantum business loan loss reserve income tax credit if they incur
losses on a loan that was issued to an early stage quantum company in Colorado. The tax credit
is equal to the loss incurred on the loan, up to the amount of the tax credit certificate.
Applicants may apply for a tax credit certificate and request that the loan be registered with
OEDIT before the loan has incurred any losses. The amount of tax credit certificate can be up to
15 percent of the size of the loan, but being issued a tax credit certificate is not sufficient to
claim the tax credit. OEDIT may charge an issuance fee of up to 8 percent of the size of the tax
credit certificate. Revenue from the fee is deposited into the newly created Quantum Business
Loan Loss Reserve cash fund, which is continuously appropriated to the office to administer the
tax credit. OEDIT may not issue more than $30 million in tax credit certificates.
Once the applicant has incurred a loss on the registered loan, they may apply for a registered
loan loss certificate. The registered loan loss certificate amount is equal to the amount of the
losses incurred on the loan, except that it may not exceed the tax credit certificate amount. The
size of the tax credit is equal to the registered loan loss certificate amount. Tax credits may be
claimed in tax years 2026 through 2045.
Background
The Regional Technology and Innovation Program is administered by the U.S. Economic
Development Administration with the stated goal of strengthening the nation’s economic and
national security. In phase 1 of the program, 31 Tech Hubs Designees were announced
nationwide, including one in Colorado. Colorado’s designee, Elevate Quantum Colorado, aims to
advance the quantum hardware supply chain and improve infrastructure.
In phase 2 of the program, Tech Hubs Designees may apply for implementation grants. About
5 to 10 Tech Hubs Designees are expected to receive funding, with each hub expected to receive
between $50 and $75 million. The deadline to apply for these grants was February 29, 2024. The
date by which the federal government will announce the recipients of the grants is not known. Page 3
July 22, 2024 HB 24-1325
State Revenue
Conditional upon receipt of a multimillion dollar federal grant, the bill is expected to increase
state revenue by $100,000 in FY 2024-25, and decrease state revenue by up to $3.7 million in
FY 2025-26 (half-year impact) and up to $7.6 million in FY 2026-27.
Table 2
Revenue Changes Under HB 24-1325
Fund FY 2024-25 FY 2025-26 FY 2026-27
Fixed Capital Assets
Investments Tax Credit
General Fund - ($3.1 million) ($6.3 million)
Loan Loss Reserve
Income Tax Credit
General Fund - (up to $0.8 million) (up to $1.5 million)
Issuance Fee Cash Fund $0.1 million $0.1 million $0.1 million
Total Revenue $0.1 million (up to $3.8 million) (up to $7.7 million)
Fixed capital assets investments tax credit. A maximum of $44 million of tax reservations may
be issued for this credit, and the corresponding tax credits may be claimed in tax years 2025
through 2032 as the capital assets are placed into service. The fiscal note assumes that the tax
credits will start being claimed in tax year 2026, as it will take time receive the results of the
grant program, review applications and issue reservations, and place the assets in service. The
fiscal note also assumes that the total amount of credits issued will equal the maximum of
$44 million, and they will be claimed in equal amounts in tax years 2026 through 2032.
The fixed capital assets investments tax credit is conditionally expected to reduce General Fund
revenue by $3.1 million in FY 2025-26 (half-year impact) and $6.3 million in FY 2026-27 through
FY 2031-32.
Quantum business loan loss reserve income tax credit. A maximum of $30 million in tax
credit certificates may be issued between 2025 and 2036. Only applicants whose loan results in a
loss will receive a registered loan loss certificate, and therefore are able to claim the credit. No
data are available on default rates for loans to businesses in the quantum industry, so a default
rate is not estimated here. The amount of tax credits claimed is expected to be between $0 and
$30 million depending on the number of loans that incur losses over the span of the tax credit. If
losses were incurred equally in each tax year, then General Fund revenue would be reduced by
up to $1.5 million per tax year.
The quantum business loan loss reserve income tax credit is expected to reduce General Fund
revenue by up to $750,000 in FY 2025-26 (half-year impact) and up to $1.5 million in FY 2026-27
through FY 2045-46. The actual timing and amount of any revenue reduction is unknown.
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July 22, 2024 HB 24-1325
Quantum business loan loss issuance fee. The bill allows OEDIT to charge an issuance fee of
up to 8 percent of the amount on the tax credit certificate, due at the time the loan is registered.
Colorado law requires legislative service agency review of measures which create or increase any
fee collected by a state agency. These fee amounts are estimates only, actual fees will be set
administratively by OEDIT based on cash fund balance, program costs, and the amount of the
loan registrations subject to the fee.
The fiscal note assumes OEDIT will charge a fee of 8 percent in FY 2024-25 and a fee of about
4 percent in future years to approximate the cost of administering the loan loss reserve income
tax credit. The issuance fee is expected increase cash fund revenue subject to TABOR by
$100,000 per year beginning in FY 2024-25.
State Expenditures
Conditional upon receipt of a multimillion dollar federal grant, the bill increases state
expenditures in OEDIT by $207,108 in FY 2024-25, $205,810 in FY 2025-26, and $173,368 in
FY 2026-27, paid from the General Fund and the Quantum Business Loan Loss Reserve cash
fund, and in the DOR by $78,237 in FY 2026-27 paid from the General Fund. Expenditures are
shown in Table 3 and detailed below. Page 5
July 22, 2024 HB 24-1325
Table 3
Expenditures Under HB 24-1325
FY 2024-25 FY 2025-26 FY 2026-27
Office of Economic Development and International Trade
Personal Services $136,513 $170,641 $147,889
Operating Expenses $1,536 $1,920 $1,664
Capital Outlay Costs $13,340 - -
Salesforce $29,120 - -
Centrally Appropriated Costs
1
$26,599 $33,249 $28,815
FTE – Personal Services 1.2 FTE 1.5 FTE 1.3 FTE
OEDIT Subtotal $207,108 $205,810 $178,368
Department of Revenue
GenTax Programming - - $37,080
Systems Support Office - - $21,035
Office of Research and Analysis - - $7,392
User Acceptance Testing - - $9,632
Document Management - - $3,098
DOR Subtotal - - $78,237
Total Cost $207,108 $205,810 $256,605
Total FTE 0.8 FTE 1.5 FTE 1.3 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
Office of Economic Development and International Trade. OEDIT requires staff and
computer programming to manage the tax credit programs.
Staffing. Starting in FY 2024-25, OEDIT requires 1.5 FTE to evaluate tax credit applications,
administer the credit, manage program continuation, develop program materials, and
communicate the tax incentive program. Staff costs and FTE are prorated in the first year,
assuming the new staff will begin in September 2024. OEDIT will only need 1.3 FTE
beginning on January 1, 2026, after applications for the fixed capital assets investments tax
credit have been reviewed.
Salesforce development. OEDIT uses the management software Salesforce to oversee
program applicants, analytics, and application development. In FY 2024-25, OEDIT requires
an estimated $29,000 to integrate the new tax credit program into Salesforce.
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July 22, 2024 HB 24-1325
Department of Revenue. Starting in FY 2026-27, expenditures will increase in DOR to update
existing tax forms, test programming changes, and evaluate the new tax credit.
Computer programming and testing. In FY 2026-27 only, this bill requires expenditures of
$67,747 to program, test, and update database fields in DOR’s GenTax software system.
Programming costs are estimated at $37,080, representing 160 hours of contract
programming at a rate of $231.75 per hour. Costs for testing at the department include
$21,035 for 601 hours of innovation, strategy, and delivery programming support at a rate of
$35 per hour, and $9,632 for 301 hours of user acceptance testing at a rate of $32 per hour.
Data reporting. Expenditures in the Office of Research and Analysis are required for
changes in the related GenTax reports so that the department can access and document tax
statistics related to the new tax policy. These costs are estimated at $7,392, representing
231 hours for data management and reporting at $32 per hour.
Document management. In FY 2026-27 only, workload in DOR will increase to update tax
forms for paper filings. Expenditures for form changes occur in the Department of Personnel
and Administration using reappropriated funds.
Centrally appropriated costs. Pursuant to a Joint Budget Committee policy, certain costs
associated with this bill are addressed through the annual budget process and centrally
appropriated in the Long Bill or supplemental appropriations bills, rather than in this bill. These
costs, which include employee insurance and supplemental employee retirement payments, are
shown in Table 3.
Other Budget Impacts
TABOR refunds. The bill is expected to decrease the amount of state revenue required to be
refunded to taxpayers by the amounts shown in the State Revenue section above. This estimate
assumes the December 2023 LCS revenue forecast. A forecast of state revenue subject to TABOR
is not available beyond FY 2025-26. Because TABOR refunds are paid from the General Fund,
decreased General Fund revenue will lower the TABOR refund obligation, but result in no net
change to the amount of General Fund otherwise available to spend or save.
General Fund reserve. Under current law, an amount equal to 15 percent of General Fund
appropriations must be set aside in the General Fund statutory reserve. Based on this fiscal note,
the bill is expected to increase the amount of General Fund held in reserve by the amounts
shown in Table 1, decreasing the amount of General Fund available for other purposes.
Effective Date
The bill was signed into law by the Governor and took effect on May 28, 2024.
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July 22, 2024 HB 24-1325
State Appropriations
Conditional upon the receipt of a multimillion dollar federal grant, the bill requires a FY 2024-25
General Fund appropriation of $90,255 to the Office of Economic Development and
International Trade, and 0.6 FTE. The bill includes this appropriation. Appropriations are for only
the General Fund portion of the expenditures shown in Table 2, as the Quantum Business Loan
Loss Reserve Cash Fund created in the bill is continuously appropriated.
State and Local Government Contacts
Office of Economic Development Personnel Revenue
State Auditor
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit the General Assembly website.