First Regular Session
Seventy-fifth General Assembly
STATE OF COLORADO
INTRODUCED
LLS NO. 25-0507.01 Jed Franklin x5484
HOUSE BILL 25-1157
House Committees Senate Committees
Finance
A BILL FOR AN ACT
C
ONCERNING THE EXTENSION OF THE ADVANCED INDUSTRY101
INVESTMENT TAX CREDIT .102
Bill Summary
(Note: This summary applies to this bill as introduced and does
not reflect any amendments that may be subsequently adopted. If this bill
passes third reading in the house of introduction, a bill summary that
applies to the reengrossed version of this bill will be available at
http://leg.colorado.gov
.)
Currently, the advanced industry investment tax credit (credit)
expires on December 31, 2026. The bill extends the credit until December
31, 2031. The credit is currently available to a qualified investor that
makes a qualified investment in a qualified small business that is in an
advanced industry. On and after January 1, 2028, the credit is also
available to a qualified investor that makes a qualified investment in a
HOUSE SPONSORSHIP
Titone and Lindstedt,
SENATE SPONSORSHIP
Snyder and Baisley,
Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
Capital letters or bold & italic numbers indicate new material to be added to existing law.
Dashes through the words or numbers indicate deletions from existing law. qualified small business that is not an advanced industry business,
operates in the manufacturing sector, generates revenue from operations,
is a primary employer, is producing a product that is distributed outside
of Colorado, and, in the judgment of the Colorado office of economic
development (office), is a commercially scalable and capital-intensive
business that will bring incremental income to the local economy.
The bill changes the definition of "qualified investment" by
eliminating the current prohibition against a qualified investor having
more than 30% of the voting power in the qualified small business before
the investor makes a qualified investment and more than 49% of the
voting power in the qualified small business after making a qualified
investment.
The bill changes the definition of "qualified investor" by clarifying
that an entity subject to income tax may qualify as an investor, except that
a C corporation, including any limited liability or other legal entity treated
as a C corporation for federal and state income tax purposes, is not a
qualified investor. A qualified investor may include a partner,
shareholder, or beneficiary that is allocated a credit. A qualified investor
does not include a person that had control of a qualified small business
for 6 months preceding or following the date of the investment in the
qualified small business. A founder, employee, or contractor or a spouse
of a founder, employee, or contractor of a qualified small business is not
a qualified investor. A person that has invested more than $50,000 in the
qualified small business or owns more than 10% of the qualified small
business on a fully diluted basis is not a qualified investor.
The office administers the credit. The office may certify a small
business as a qualified small business until October 1, 2031. A small
business certified as a qualified small business must report to the office
as requested to confirm the certified small business's status as a qualified
small business. The office may require a qualified small business to
provide information to confirm that a qualified investment has been made
in the qualified small business, the intended use of the qualified
investment, and the expected number of new employees that will be hired
by the qualified small business as a result of the qualified investment. A
qualified small business that receives a qualified investment is required
to report data relevant to the impact of the credit and development of the
qualified small business annually to the office for 5 years following a
qualified investment. The office may assess a penalty against a qualified
small business that does not meet this reporting requirement.
The office may issue $4 million in credits per calendar year for the
years through the 2026 calendar year for which the credit is currently
available. The bill decreases the cap to $2.5 million per calendar year
beginning with the 2027 calendar year through the 2031 calendar year.
If the qualified investor receiving a credit is a trust, the qualified
investor may allocate the credit between the trust and its beneficiaries in
HB25-1157
-2- any manner determined by the trust. The office shall issue a credit
certificate to a trust beneficiary and a trust beneficiary may claim the
amount indicated on the credit certificate.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. Legislative declaration. (1) The general assembly2
finds and declares that:3
(a) Currently, the advanced industries tax credit is available to4
qualified small businesses in advanced industries but not in scalable5
manufacturing; and6
(b) Providing incentives for qualified angel investors to invest in7
qualified small businesses in scalable manufacturing will:8
(I) Create new jobs in Colorado;9
(II) Increase exports and competitiveness in national and global10
markets;11
(III) Attract investment in Colorado companies; and12
(IV) Expand access to capital for innovative and scalable13
Colorado startups.14
(2) Therefore, the general assembly further finds and declares that15
the advanced industries investment tax credit should be expanded to16
qualified small businesses in scalable manufacturing to encourage17
investment in scalable manufacturing.18
SECTION 2. In Colorado Revised Statutes, 24-48.5-112, amend19
(1)(e) introductory portion, (1)(e)(I), (1)(f), (1)(g)(I), (1.5)(b), (2)(a),20
(2)(b), (2)(c), (2)(d), and (3)(b); repeal (1)(c), (1)(e)(III), and (1)(e)(IV);21
and add (1)(h) as follows:22
24-48.5-112. Advanced industry investment tax credit -23
administration - legislative declaration - definitions - repeal. (1) As24
HB25-1157-3- used in this section, unless the context otherwise requires:1
(c) "Affiliate" means any person or entity that controls, is2
controlled by, or is under common control with another person or entity.3
For purposes of this paragraph (c), "control" means the power to4
determine the policies of an entity whether through ownership of voting5
securities, by contract, or otherwise.6
(e) "Qualified investment" means an A MONETARY investment7
made at any time on or after July 1, 2014, but before January 1, 20278
J
ANUARY 1, 2032, in an equity security that meets all of the following9
requirements:10
(I) The equity security is common stock, preferred stock, an11
interest in a partnership or limited liability company, a security that is12
convertible into an equity security, a convertible debt investment, or other13
equity security as determined by the office;
AND14
(III) The qualified investor and its affiliates do not hold, of record
15
or beneficially, immediately before making an investment, equity16
securities possessing more than thirty percent of the total voting power of17
all equity securities of the qualified small business; and18
(IV) The qualified investor and its affiliates hold, of record or19
beneficially, immediately after making the investment, equity securities20
possessing less than fifty percent of the total voting power of all equity21
securities of the qualified small business.22
(f) "Qualified investor" means an individual, limited liability23
company, partnership, S corporation, as defined in section 39-22-10324
(10.5), C.R.S., or other business entity that makes a qualified investment25
in a qualified small business. "Qualified investor" does not include a C26
corporation, as defined in section 39-22-103 (2.5), C.R.S. A PERSON27
HB25-1157
-4- SUBJECT TO TAX UNDER ARTICLE 22 OF TITLE 39 THAT MAKES A QUALIFIED1
INVESTMENT IN A QUALIFIED SMALL BUSINESS , EXCEPT THAT A C2
CORPORATION, AS DEFINED IN SECTION 39-22-103 (2.5), INCLUDING ANY3
LIMITED LIABILITY COMPANY OR OTHER LEGAL ENTITY TREATED AS A C4
CORPORATION FOR STATE AND FEDERAL INCOME TAX PURPOSES , IS NOT A5
QUALIFIED INVESTOR. A QUALIFIED INVESTOR MAY INCLUDE A PARTNER ,6
SHAREHOLDER, OR BENEFICIARY THAT IS ALLOCATED A CREDIT PURSUANT7
TO SECTION 39-22-532 (7). A QUALIFIED INVESTOR MAY BE A8
PARTNERSHIP, WHICH INCLUDES ANY LIMITED LIABILITY COMPANY OR9
OTHER LEGAL ENTITY TREATED AS A PARTNERSHIP FOR STATE AND10
FEDERAL INCOME TAX PURPOSES, OR AN S CORPORATION, WHICH INCLUDES11
ANY LIMITED LIABILITY COMPANY OR OTHER LEGAL ENTITY TREATED AS12
AN S CORPORATION FOR STATE AND FEDERAL INCOME TAX PURPOSES . A13
QUALIFIED INVESTOR DOES NOT INCLUDE A PERSON THAT HAS CONTROL OF14
A QUALIFIED SMALL BUSINESS FOR SIX MONTHS PRECEDING OR FOLLOWING15
THE DATE OF THE INVESTMENT IN THE QUALIFIED SMALL BUSINESS . FOR16
PURPOSES OF THIS SUBSECTION (1)(f), "CONTROL" MEANS THE POWER TO17
DETERMINE THE POLICIES OF THE QUALIFIED SMALL BUSINESS , WHETHER18
THROUGH OWNERSHIP OF VOTING SECURITIES , BY CONTRACT, OR19
OTHERWISE, INCLUDING INVOLVEMENT IN THE QUALIFIED SMALL20
BUSINESS'S OPERATIONS. A FOUNDER, EMPLOYEE, OR CONTRACTOR OR THE21
SPOUSE OF A FOUNDER, EMPLOYEE, OR CONTRACTOR OF A QUALIFIED22
SMALL BUSINESS IS NOT A QUALIFIED INVESTOR . A PERSON THAT HAS23
INVESTED MORE THAN FIFTY THOUSAND DOLLARS IN THE QUALIFIED SMALL24
BUSINESS OR OWNS MORE THAN TEN PERCENT OF THE QUALIFIED SMALL25
BUSINESS ON A FULLY DILUTED BASIS IS NOT A QUALIFIED INVESTOR .26
(g) "Qualified small business" means a corporation, limited27
HB25-1157
-5- liability company, partnership, or other business entity that:1
(I) Is in an advanced industry,
AS DEFINED IN SECTION 24-48.5-1172
(2)(a),
OR, ON OR AFTER JANUARY 1, 2028, IS IN SCALABLE3
MANUFACTURING, AS DEFINED IN SUBSECTION (1)(h) OF THIS SECTION;4
(h) "S
CALABLE MANUFACTURING " MEANS A BUSINESS THAT:5
(I) I
S NOT AN ADVANCED INDUSTRY BUSINESS ;6
(II) O
PERATES IN THE MANUFACTURING SECTOR ;7
(III) I
S GENERATING REVENUE FROM OPERATIONS ;8
(IV) I
S A PRIMARY EMPLOYER PRODUCING A PRODUCT THAT IS9
CURRENTLY SOLD OUTSIDE OF COLORADO; AND10
(V) I
S, IN THE JUDGMENT OF THE OFFICE , A COMMERCIALLY11
SCALABLE AND CAPITAL -INTENSIVE BUSINESS THAT WILL BRING12
INCREMENTAL INCOME TO THE LOCAL ECONOMY .13
(1.5) In accordance with section 39-21-304 (1), which requires14
each bill that extends an expiring tax expenditure to include a tax15
preference performance statement as part of a statutory legislative16
declaration, the general assembly hereby finds and declares that:17
(b) The specific legislative purpose of the tax credit allowed by18
this section is to encourage investment in small businesses located in19
Colorado in advanced
OR SCALABLE MANUFACTURING industries,20
including in quantum fields, and in particular in small businesses in21
advanced
OR SCALABLE MANUFACTURING industries, including in22
quantum fields, located in a rural area or economically distressed area of23
the state; and24
(2) (a) The office shall receive and evaluate applications that are25
submitted by qualified investors to receive an advanced industry26
investment tax credit for qualified investments made in a qualified small27
HB25-1157
-6- business THAT HAS BEEN EVALUATED AND CERTIFIED AS ELIGIBLE TO1
RECEIVE QUALIFIED INVESTMENTS FOR THE PURPOSES OF THIS SECTION .2
(b) To be eligible for an advanced industry investment tax credit,3
a qualified investor must file a completed application with the office4
within ninety days after making a qualified investment
IN A CERTIFIED5
AND QUALIFIED SMALL BUSINESS. The office shall prescribe the manner6
and form of the application. The office shall note the time and date of7
each application received. In addition to any other requirements8
established by the office, the application must include the name, address,9
and federal income tax identification number of the applicant, the number
10
of new employees hired by the qualified small business as a result of the11
qualified investment, and any additional information that the office12
requires. T
HE OFFICE MAY REQUIRE THE QUALIFIED INVESTOR TO PROVIDE13
INFORMATION TO CONFIRM THAT A QUALIFIED INVESTMENT HAS BEEN14
MADE IN A QUALIFIED SMALL BUSINESS , THE INTENDED USE OF THE15
QUALIFIED INVESTMENT, AND THE EXPECTED NUMBER OF NEW EMPLOYEES16
THAT WILL BE HIRED BY THE QUALIFIED SMALL BUSINESS AS A RESULT OF17
THE QUALIFIED INVESTMENT.18
(c) A business may request
SHALL SUBMIT AN APPLICATION TO the19
office to determine whether it is a qualified small business. Upon20
receiving the request or upon receipt of an application for an advanced21
industry investment tax credit from a qualified investor, the office shall22
determine whether the business that is named in the application or written23
request is a qualified small business. After determining the qualifications,24
the office shall certify the qualified small business as being eligible to25
receive qualified investments for purposes of this section. A
CERTIFIED26
SMALL BUSINESS MUST REPORT TO TH E OFFICE AS REQUESTED BY THE27
HB25-1157
-7- OFFICE TO CONFIRM THE CERTIFIED SMALL BUSINESS 'S STATUS AS A1
QUALIFIED SMALL BUSINESS. THE OFFICE MAY CERTIFY A SMALL BUSINESS2
THROUGH OCTOBER 1, 2031. The certification for a qualified small3
business that is certified after July 1, 2014, is valid until January 1, 2027;4
except that the certification is revoked if the business no longer meets the5
qualifications. A business shall notify the office within thirty business6
days from the date that it no longer meets the qualifications. A
QUALIFIED7
SMALL BUSINESS THAT RECEIVES A QUALIFIED INVESTMENT SHALL REPORT8
DATA RELEVANT TO THE IMPACT OF THE TAX CREDIT AND DEVELOPMENT9
OF THE QUALIFIED SMALL BUSINESS ANNUALLY TO THE OFFICE FOR A10
FIVE-YEAR PERIOD FOLLOWING AN INITIAL QUALIFIED INVESTMENT . If the11
certification is revoked
OR A BUSINESS FAILS TO MEET ITS REPORTING12
REQUIREMENTS, the office may assess a penalty against the business that13
is equal to the amount of the advanced industry investment tax credits14
authorized after the date that the business no longer meets the15
qualifications. The state treasurer shall deposit the penalty into the state16
general fund. If the certification is revoked, subsequent investments in the17
business do not qualify for a tax credit. All tax credits issued before the18
revocation of the certification remain valid. The office shall not deny any19
application for a tax credit on the basis of the revocation of the20
certification if the investment was made before the date of the revocation.21
(d) As part of the application for an advanced industry investment22
tax credit, the applicant and the qualified small business that receives the23
investment must each provide written authorization to permit the24
department of revenue to provide tax information to the office for the25
purpose of determining if there are any misrepresentations on the26
application. The authorization is limited to disclosure of income tax27
HB25-1157
-8- information for the latest two years for which returns were filed with the1
department of revenue preceding the date the application is filed and for2
all tax years through the year in which the investment was made for3
which a return was not filed as of the date of the application. The4
applicant must also provide in the written authorization income tax5
information for all tax years in which the applicant actually claims a tax6
credit or carries forward a tax credit on a return filed with the department7
of revenue. An applicant that is a partnership, limited liability company,8
S corporation, or similar pass-through entity and OR TRUST that may9
allocate the credit among the ITS partners, shareholders, members, or10
other constituent qualified investors BENEFICIARIES pursuant to section11
39-22-532 (7) must provide a written authorization with content similar12
to the authorization, and in the same manner, as any other applicant is13
required to provide. If an applicant or qualified small business fails to14
comply with this subsection (2)(d), an applicant is ineligible for a tax15
credit.16
(3) (b) (I) The total amount of the advanced industry investment17
tax credits shall not exceed three hundred seventy-five thousand dollars18
for the 2014 calendar year; seven hundred fifty thousand dollars for each19
calendar year from 2015 through 2022; and four million dollars for each20
calendar year from 2023 through 2026;
AND TWO MILLION FIVE HUNDRED21
THOUSAND DOLLARS FOR EACH CALENDAR YEAR FROM 2027 THROUGH22
2031; except that, if the total amount of the credits for 2018 or a later23
calendar year through 2022 is less than the maximum amount, then the24
maximum amount for the next year is increased by an amount equal to the25
remaining, unused tax credits from the prior year. The office shall26
authorize the tax credits in the order that
COMPLETE applications are27
HB25-1157
-9- received by the office and shall deny any application received after the1
limit has been met. The office may partially authorize the last tax credit2
that is awarded up to the limit.3
(II) The total amount of the tax credit for each qualified4
investment
IN A QUALIFIED SMALL BUSINESS shall not exceed one hundred5
thousand dollars. T
HE AGGREGATE AMOUNT OF THE CREDIT ALLOWED TO6
THE PARTNERS OR SHAREHOLDERS OF A PARTNERSHIP OR S CORPORATION7
THAT MAKES A QUALIFIED INVESTMENT MUST NOT EXCEED ONE HUNDRED8
THOUSAND DOLLARS. A qualified investor may not claim more than one9
tax credit per qualified small business, but
REGARDLESS OF WHETHER THE10
QUALIFIED INVESTMENT IS MADE DIRECTLY BY THE QUALIFIED INVESTOR11
OR INDIRECTLY THROUGH ANOTHER ENTITY . A QUALIFIED INVESTOR may12
be eligible for a tax credit for qualified investments in different qualified13
small businesses in the same or a different year.14
SECTION 3. In Colorado Revised Statutes, 39-22-532, amend15
(7) as follows:16
39-22-532. Advanced industry investment tax credit -17
definitions. (7) If a qualified investor receiving a credit allowed in this18
section is a partnership limited liability company, OR S corporation, or19
similar pass-through entity, the qualified investor may allocate the credit20
among its partners
OR shareholders members, or other constituent
21
qualified investors in any manner agreed to by such partners OR22
shareholders. members, or other constituent qualified investors. IF THE23
QUALIFIED INVESTOR RECEIVING THE CREDIT ALLOWED BY THIS SECTION24
IS A TRUST, THE QUALIFIED INVESTOR MAY ALLOCATE THE CREDIT25
BETWEEN THE TRUST AND ITS BENEFICIARIES IN ANY MANNER DETERMINED26
BY THE TRUST. The qualified investor shall certify to the Colorado office27
HB25-1157
-10- of economic development the amount of the credit allocated to each1
partner, shareholder, member, or other constituent qualified investor, OR2
BENEFICIARY and the office shall issue credit certificates in the3
appropriate amounts to each partner, shareholder, member, or other4
constituent qualified investor, OR BENEFICIARY. Each partner, shareholder,5
member, or other constituent qualified investor OR BENEFICIARY shall be6
allowed to claim such amount subject to any restrictions set forth in this7
section and section 24-48.5-112.8
SECTION 4. Act subject to petition - effective date. This act9
takes effect at 12:01 a.m. on the day following the expiration of the10
ninety-day period after final adjournment of the general assembly; except11
that, if a referendum petition is filed pursuant to section 1 (3) of article V12
of the state constitution against this act or an item, section, or part of this13
act within such period, then the act, item, section, or part will not take14
effect unless approved by the people at the general election to be held in15
November 2026 and, in such case, will take effect on the date of the16
official declaration of the vote thereon by the governor.17
HB25-1157
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