Colo. Code Regs. 39-30.5-105

Current through Register Vol. 47, No. 19, October 10, 2024

Rule 39-30.5-105 - Rural Jump-Start Zones

Basis and Purpose. The bases for this rule are §§ 39-21-112(1), 39-22-104, 39-26-102(15), and 39 -30.5, C.R.S. The purpose of this rule is to clarify requirements relating to refunds and credits for the Rural Jump-Start Zone program.

(1)Definitions. Capitalized terms used in this rule have the same meaning as such terms are defined in § 39-30.5-103, C.R.S.

(2)Income Tax Credits.

(a)New Business Income Tax Credit. For any tax year for which it has received a Credit Certificate from the Commission, a New Business or, in the case of a partnership, limited liability company, S corporation, or similar pass-through entity, its partners, shareholders, members, or other constituent entities, is allowed an income tax credit in an amount equal to one hundred percent of the income taxes imposed by article 22, title 39, C.R.S. on income derived from the New Business's activities in the Rural Jump-Start Zone, as determined pursuant to this rule.

(i)Apportionment. If a New Business has income from operations both inside the Rural Jump-Start Zone and outside the Rural Jump-Start Zone, the New Business's income is apportioned by multiplying the New Business's income apportioned to Colorado pursuant to part 3, article 22, title 39, C.R.S. by a fraction, the numerator of which is the property factor plus the payroll factor, and the denominator of which is two.

(A)Property Factor. The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used exclusively in the Rural Jump-Start Zone during the tax period and the denominator of which is the average value of all the taxpayer's real and tangible personal property owned or rented and used during the tax period.

(I) Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is valued at eight times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from subrentals.

(II) The average value of property shall be determined by averaging the values at the beginning and ending of the tax period but the tax administrator may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the taxpayer's property.

(B)Payroll Factor. The payroll factor is a fraction, the numerator of which is the total amount paid in the Rural Jump-Start Zone during the tax period by the taxpayer for compensation and the denominator of which is the total compensation paid everywhere during the tax period. Compensation is paid in the Rural Jump-Start Zone if:

(I) the individual's service is performed entirely within the Rural Jump-Start Zone;

(II) the individual's service is performed both within and without the Rural Jump-Start Zone, but the service performed without the Rural Jump-Start Zone is incidental to the individual's service within the Rural Jump-Start Zone; or

(III) some of the service is performed in the Rural Jump-Start Zone and the base of operations from which the service is directed or controlled is in the Rural Jump-Start Zone.

(ii)New Business Income Tax Credit for C Corporations. The income tax credit allowed to a C corporation pursuant to paragraph (2)(a) of this rule is calculated by multiplying the C corporation's tax imposed by article 22, title 39, C.R.S. by a fraction, the numerator of which is the C corporation's apportioned Rural Jump-Start Zone income, determined pursuant to paragraph (2)(a)(i) of this rule, and the denominator of which is the C corporation's net income determined pursuant to § 39-22-304, C.R.S. and apportioned as prescribed by part 3, article 22, title 39, C.R.S.

(iii)New Business Income Tax Credit for Individuals. The income tax credit allowed to an individual pursuant to paragraph (2)(a) of this rule is calculated by multiplying the individual's tax imposed by article 22, title 39, C.R.S. by a fraction, the numerator of which is the individual's apportioned Rural Jump-Start Zone income, determined pursuant to paragraph (2)(a)(i) of this rule, and the denominator of which is the individual's "modified Colorado adjusted gross income" as defined in paragraph (2)(c) of this rule.

(b)New Hire Income Tax Credit. A New Hire of a New Business is allowed an income tax credit equal to one hundred percent of income taxes imposed by article 22, title 39, C.R.S. on the New Hire's wages paid by the New Business for work performed in a Rural Jump-Start Zone. The New Hire income tax credit is calculated by multiplying the tax imposed by article 22, title 39, C.R.S. by a fraction, the numerator of which is the New Hire's wages paid by the New Business for work performed in the Rural Jump-Start Zone and the denominator of which is the individual's "modified Colorado adjusted gross income" as defined in paragraph (2)(c) of this rule.

(c)Modified Colorado Adjusted Gross Income. For the purpose of paragraph (2) of this rule, "modified Colorado adjusted gross income" is:

(i) in the case of a part-year resident or nonresident, determined pursuant to §§ 39-22-109 or 110, C.R.S., as applicable or,

(ii) in the case of a resident individual, an individual's adjusted gross income as determined pursuant to I.R.C. § 62, modified by any applicable additions or subtractions permitted or required by Colorado law including, generally, those prescribed by § 39-22-104, C.R.S., but not:

(A) the state income tax addback prescribed by § 39-22-104(3)(d), C.R.S.,

(B) the gross conservation easement addback prescribed by § 39-22-104(3)(g), C.R.S., or

(C) the charitable contribution subtraction allowed pursuant to § 39-22-104(4)(m), C.R.S.

(d)Claiming the Credit. Any taxpayer claiming either a New Business or New Hire Income Tax Credit must submit both the Credit Certificate and a form prescribed by the Department with the Colorado income tax return upon which the credit is claimed. Each Credit Certificate applies only to the tax year for which it was issued.

(e)Limitations on Credits. Under no circumstance shall either the New Business or New Hire Income Tax Credit be allowed in an amount that exceeds the taxpayer's Colorado income tax liability for the applicable tax year. No part of any New Business or New Hire Income Tax Credit can be carried forward or carried back to any other tax year.

(3)New Business Sales and Use Tax Refund. A New Business that acquires tangible personal property and uses such property exclusively within the Rural Jump-Start Zone is eligible for a refund of the sales or use tax paid to purchase the property. This exemption from sales and use taxes does not include an exemption from special district taxes. Any New Business purchasing tangible personal property used exclusively within the Rural Jump-Start Zone must file forms prescribed by the Department to initiate the refund.

(4)Restrictions on Other Credits. A New Business that claims any Rural Jump-Start Zone Program benefits may not claim any other tax incentives otherwise available for establishing the New Business in Colorado, including, but not limited to the Job Growth Tax Incentive Credit in § 39-22-531, C.R.S. or the Enterprise Zone New Employee Credit in § 39-30-105, C.R.S.

39-30.5-105

41 CR 20, October 25, 2018, effective 11/14/2018

1. The Colorado Department of Revenue Rural Jump-Start Zone Credit Schedule is form DR 0113. 2. To claim a refund of sales tax, Colorado Department of Revenue Claim for Refund of Tax Paid to Vendors is form DR 0137B. 3. To claim a refund of use tax, Colorado Department of Revenue Claim for Refund is form DR 0137. 4. For common additions and subtractions permitted or required under Colorado law in the calculation of modified Colorado adjusted gross income, see §§ 39-22-104 and 39-22-518, C.R.S. 5. The Department does not collect sales taxes for home rule municipalities that collect and administer their own sales taxes. A New Business should consult the home rule municipality for further guidance on eligible incentive payments, exemptions, or refunds that may be offered.