2023 Colorado Revised Statutes › Title 39 - TAXATION (§§ 39-1-101 — 39-37-301) › SPECIFIC TAXES (§§ 39-20-101 — 39-37-301) › INCOME TAX (§§ 39-22-101 — 39-22-5508) › Article 22 - Income Tax (§§ 39-22-101 — 39-22-5508) › Part 5 - SPECIAL RULES (§§ 39-22-501 — 39-22-570) › Section 39-22-568 - Quantum business loan loss reserve income tax credit - tax preference performance statement - definitions - repeal

(1)
Tax preference performance statement.
In accordance with section 39-21-304 (1), which requires each bill that creates a new tax expenditure to include a tax preference performance statement as part of a statutory legislative declaration, the general assembly finds and declares that:
(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 improve industry competitiveness;
(b)
The specific legislative purpose of the tax credit allowed by this section is to support and facilitate the development of the quantum business ecosystem and high quality jobs in the state by encouraging qualified applicants to make loans that the qualified applicants might not otherwise make or at more favorable terms than they would otherwise make to borrowers that have limited access to capital; and
(c)
The general assembly and state auditor shall measure the effectiveness of the credit in achieving the purposes specified in subsections (1)(a) and (1)(b) of this section based on the information reported by the administrator pursuant to subsection (11) of this section.
(2)
Definitions.
As used in this section, unless the context otherwise requires:
(a)
"Administrator" means the office, a third party selected by the Office, or the third party working in combination with the office to administer the tax credit created in this section.
(b)
"Borrower" means a quantum company doing business in Colorado that is an early-stage or growth-stage company at the time a qualified applicant makes a loan to the company and that, except as otherwise provided in subsection (12)(c) of this section, had an annual revenue of less than one hundred million dollars in the year prior to the year in which a qualified applicant made a loan to the company.
(c)
"Department" means the Colorado department of revenue.
(d)
"Eligible loan" means a loan made by a qualified applicant to a borrower.
(e)
"Office" means the Colorado office of economic development created in section 24-48.5-101.
(f)
"qualified applicant" means a commercial bank, depository institution, private lending fund, or other entity that makes loans for commercial purposes and makes a loan to a borrower.
(g)
"Quantum company" means a private for-profit or nonprofit organization that has quantum technology as a key part of its business model, including but not limited to manufacturing, testing, production, research and development, or enhancement of hardware or software to perform or use quantum technology as a key input or output of its business model, and companies that produce goods or services that are key inputs for other quantum companies.
(h)
"Registered loan" means an eligible loan made to a borrower that is registered with the administrator pursuant to subsection (7)(a) of this section.
(3)
Credit allowed.
(a)
Subject to the provisions of subsection (3)(c) of this section, for income tax years commencing on or after January 1, 2026, but prior to January 1, 2046, a qualified applicant is allowed a credit against the income taxes imposed by this article 22 to offset losses incurred in connection with one or more registered loans in an amount specified on the registered loan loss certificate issued by the administrator pursuant to subsection (8) of this section; except that, if a qualified taxpayer claims more than one registered loan loss, in no event may the aggregate registered loan losses claimed by the qualified taxpayer exceed the total amount specified on the tax credit certificates issued pursuant to subsection (7) of this section.
(b)
To claim the credit allowed pursuant to this section, the qualified applicant must submit an application as specified in subsection (5) of this section, make an eligible loan and register the eligible loan prior to June 30, 2036, obtain a tax credit certificate from the administrator as specified in subsection (7) of this section, incur a loss in connection with a registered loan and obtain a registered loan loss certificate from the administrator as specified in subsection (8) of this section prior to January 1, 2045, and, once issued by the administrator, file the tax credit certificate and the registered loan loss certificate with the qualified applicant's income tax return as specified in subsection (9) of this section.
(c)
The administrator shall determine the method it will use to distribute tax credit certificates to qualified applicants pursuant to subsection (7) of this section. In selecting the distribution method used to distribute the tax credit certificates, the administrator may consult with quantum industry participants. The distribution method may be:
(I)
On a first-come, first-served basis to qualified applicants who apply to the administrator for a tax credit pursuant to subsection (5) of this section for one or more eligible loans each, after the qualified applicant has made the loan;
(II)
Based on a competitive lender selection process where the administrator chooses which lenders are eligible to apply for the tax credit allowed by this section in advance of accepting applications and requests to register loans and in advance of issuing tax credits. In selecting lenders to be allowed a tax credit pursuant to this section, the administrator may allocate some or all of the credits solely to selected lenders. If the administrator uses this distribution method, the selected lenders are the only qualified applicants that are allowed to apply to the administrator, request registration of the loan, and be issued a tax credit certificate and registered loan loss certificate pursuant to this section.
(III)
A combination of the methods described in subsections (3)(c)(I) and (3)(c)(II) of this section.
(d)
The tax credit created in this section is not allowed to any qualified applicant unless a Colorado-based entity receives a multi-million dollar federal grant from the economic development administration for the regional technology and innovation program or a comparable federal grant program.
(4)
Credit administration.
(a)
Except as otherwise provided in subsection (4)(b) of this section, the office is the administrator of the credit allowed pursuant to this section. The office may work with a third-party program administrator selected by the office to assist in administering the credit. In addition, the office may contract with the Colorado housing and finance authority created in section 29-4-704 without recourse to a competitive process to provide services to the office in its role as the administrator.
(b)
In lieu of the office serving as the administrator pursuant to subsection (4)(a) of this section, the office may contract with another entity to be the administrator. However, if the office contracts with another entity to be the administrator, then the office must select the third-party administrator using a competitive selection process.
(5)
Application submission and request for loan registration.
(a)
An applicant that has made a loan for the purposes of the tax credit allowed pursuant to this section may submit an application for a tax credit certificate described in subsection (7) of this section and request that the administrator register the loan pursuant to this subsection (5) on or after January 1, 2025, but no later than June 30, 2036.
(b)
(I)
The administrator shall review all submitted applications to:
(A)
Determine whether the applicant is a qualified applicant;
(B)
Determine whether the quantum company that is the loan recipient is a borrower;
(C)
Determine whether the application is complete and includes a description of the loan that the qualified applicant made or will make to a borrower and a description of the purposes for which the borrower will use the loan;
(D)
Make a determination of whether the loan is an eligible loan and whether the administrator may register the loan pursuant to subsection (5)(c) of this section; and
(E)
Determine whether, based on the eligible loan, the qualified applicant is entitled to a tax credit certificate as specified in subsection (7) of this section.
(II)
If the administrator determines that an application is incomplete or that it is unable to make the determinations specified in subsection (5)(b)(I) of this section, the administrator shall notify the applicant in writing of the administrator's decision and shall not review any loan to determine whether the loan may be registered pursuant to subsection (5)(c) of this section.
(c)
(I)
To be eligible to receive a tax credit certificate pursuant to subsection (7) of this section, a qualified applicant must request that the administrator register the loan for which the tax credit application was submitted pursuant to this subsection (5). To register a loan, a qualified applicant must provide the following information to the administrator:
(A)
The name of the borrower and the location where the borrower is doing business;
(B)
The amount and terms of the loan issued to the borrower by the qualified applicant;
(C)
The purposes for which the borrower will use the loan;
(D)
An affidavit regarding how the tax credit allowed pursuant to this section induced the qualified applicant to make the loan to the borrower or improve the terms of the loan beyond what normal market conditions would provide;
(E)
Certification from the borrower that the borrower will primarily use the proceeds of the loan from the qualified applicant to continue or expand the borrower's quantum business operations in Colorado;
(F)
An affidavit from the borrower confirming that the borrower will adhere to existing labor protection laws; and
(G)
Any other information that the administrator deems necessary.
(II)
The administrator shall review the information submitted pursuant to subsection (5)(c)(I) of this section and determine whether the loan is an eligible loan. If the administrator determines that the loan that is the basis of the application submitted pursuant to this subsection (5) is an eligible loan, the administrator shall determine the amount of the registration and issuance fee described in subsection (6)(a) of this section as up to eight percent of the amount that will be specified on the tax credit certificate as described in subsection (7)(d)(I) of this section, and shall collect the fee from the qualified applicant or the borrower to which a qualified applicant made an eligible loan. Once the registration and issuance fee is collected, the administrator shall register the loan, keep records of the loan pursuant to subsection (8)(a) of this section, and may issue the tax credit certificate as specified in subsection (7) of this section. If the administrator determines that the loan that is the basis of the application submitted pursuant to this subsection (5) is not an eligible loan, the administrator shall notify the qualified applicant and shall not register the loan.
(III)
The administrator may establish policies and procedures that specify additional requirements for loans to be designated as eligible loans and for loans to be registered pursuant to this subsection(5)(c).
(d)
The administrator shall make the determinations specified in subsections (5)(b) and (5)(c) of this section within ninety days of the date the administrator receives the complete application and request for loan registration.
(e)
The administrator may develop a process that allows a potential applicant for a tax credit pursuant to this section to provide information to the administrator regarding a loan that it plans to make to a borrower and to request that the administrator advise the potential applicant regarding whether the loan, if made, is an eligible loan that can be registered pursuant to subsection (5)(c) of this section. Any potential applicant that requests advice from the administrator pursuant to this subsection (5)(e) and then makes a loan is required to submit an application and request that the loan be registered pursuant to this subsection (5) before the administrator issues a tax credit certificate pursuant to subsection (7) of this section.
(6)
Registration and issuance fee.
(a)
The administrator shall impose on and collect from a qualified applicant or the borrower to which a qualified applicant made an eligible loan a reasonable registration and issuance fee pursuant to subsection (5)(c)(II) of this section.
(b)
The administrator shall transfer any fee revenue collected or paid to the office pursuant to this subsection (6) to the quantum business loan loss reserve cash fund created in subsection (13) of this section.
(7)
Tax credit certificate - loan registration - pooled loan loss reserve.
(a)
To receive a tax credit certificate pursuant to this subsection (7), a qualified applicant must first apply to the administrator for the issuance of a tax credit certificate and register the loan for which the tax credit application was submitted pursuant to subsection (5) of this section.
(b)
(I)
On the basis of any loan that is registered pursuant to subsection (5)(c) of this section, the administrator may determine that a qualified applicant is entitled to a tax credit certificate in accordance with the provisions of this section. The administrator shall issue the tax credit certificate subject to the limitations set forth in this subsection (7) and in accordance with the policies and procedures established pursuant to subsection (12) of this section. The administrator shall not issue tax credit certificates after September 30, 2036.
(II)
The administrator may, before issuing a tax credit certificate pursuant to this subsection (7), establish additional policies or procedures for a qualified applicant to be eligible for the issuance of a tax credit certificate.
(c)
If the administrator issues a tax credit certificate to a qualified applicant, the administrator shall notify the qualified applicant in writing of the certificate and the amount of the certificate. The issuance of a tax credit certificate by the administrator for a qualified applicant does not entitle the qualified applicant to claim the credit until the qualified applicant has been issued a registered loan loss certificate pursuant to subsection (8) of this section.
(d)
(I)
Subject to the limitations in this subsection (7)(d), if approved, the administrator may issue a tax credit certificate to a qualified applicant for one or more eligible loans in an amount up to fifteen cents for every dollar of an eligible loan that the qualified applicant has made or will make.
(II)
The aggregate amount of all tax credit certificates that the administrator may issue pursuant to this section must not exceed thirty million dollars.
(III)
The administrator may establish policies and procedures to set the amount of the tax credit certificate issued on the basis of a registered loan at or below fifteen cents for every dollar of the registered loan or change the amount of the credit allowed from time to time for credit certificates that have not yet been issued. The administrator may also cap the total amount of any tax credit certificates issued to a qualified applicant pursuant to this subsection (7), determine a cap on the total amount of a tax credit certificate allowed to a qualified applicant for a single eligible loan to a single borrower or in the aggregate for multiple eligible loans to one or more borrowers, or determine any other caps deemed necessary by the administrator. The administrator shall make the policies and procedures specified in this subsection (7)(d)(III) based on market conditions and other factors determined to be relevant by the administrator. If the office is not the administrator, the office shall approve the administrator's final decisions on policies and procedures.
(e)
The administrator shall distribute the tax credit certificates in the manner that the administrator determines pursuant to subsection (3)(c) of this section.
(f)
Each qualified applicant that is issued more than one tax credit certificate pursuant to this subsection (7) shall hold the credit certificates issued to the qualified applicant in a pooled loan loss reserve of all tax credit certificates issued to that qualified applicant. A qualified applicant may use all or any portion of the credit certificates issued to that qualified applicant to offset any loss incurred by that qualified applicant in connection with one or more registered loans, Subject to the provisions of subsection (8) of this section.
(g)
The administrator may allow a qualified applicant to register an eligible loan pursuant to subsection (5)(c) of this section after the administrator has issued the total amount of tax credit certificates allowed pursuant to subsection (7)(d)(II) of this section or the amount of credits allowed pursuant to any other cap determined by the administrator pursuant to subsection (7)(d)(III) of this section. the administrator shall not issue a credit certificate for any loan registered pursuant to this subsection (7)(g), but the qualified lender may use any amount of tax credit certificates already issued to the qualified lender and not already claimed pursuant to subsection (9) of this section to offset any loss incurred in connection with the registered loan pursuant to subsection (8) of this section.
(8)
Status of registered loans - proof of registered loan loss - issuance of registered loan loss certificate.
(a)
(I)
A qualified applicant that was issued a tax credit certificate pursuant to subsection (7) of this section shall provide periodic updates to the administrator, in a form, manner, and frequency to be determined by the administrator, regarding the status of the registered loan that is the basis of the credit certificate. In addition to periodic updates, the qualified applicant shall notify the administrator when any registered loan is paid off, extended, renewed, restructured or refinanced, or has become past due or non-performing. A qualified applicant that incurs a loss associated with a registered loan shall notify the administrator and comply with the requirements of subsection (8)(b) of this section before the qualified applicant is eligible to receive a loan loss certificate pursuant to subsection (8)(d) of this section.
(II)
The administrator shall keep a record of the status of all registered loans made by each qualified applicant for which the administrator issued a credit certificate pursuant to subsection (7) of this section.
(b)
(I)
A qualified applicant that incurs a loss in connection with one or more registered loans may apply to the administrator for issuance of a registered loan loss certificate pursuant to subsection (8)(d) of this section. Before applying for a registered loan loss certificate, A qualified applicant that has incurred a loss associated with one or more registered loans shall charge off all or a portion of the outstanding balance of the registered loan in accordance with the qualified applicant's customary policies and procedures and in accordance with the requirements of federal or state regulatory agencies. the qualified applicant shall cease to assess interest on the registered loan in accordance with generally accepted accounting principles and as required by federal and state regulatory agencies and shall take reasonable actions, as determined by the administrator, to obtain partial payments and recovery, including accessing collateral and loan guarantors.
(II)
A qualified applicant shall submit to the administrator, with the qualified applicant's application for a registered loan loss certificate, evidence of the qualified applicant's compliance with the provisions of subsection (8)(b)(I) of this section and evidence of the amount of the loss incurred in connection with one or more registered loans, including out-of-pocket expenses incurred by the qualified applicant in pursuing recovery of the registered loan. The applicant shall also provide documents to the administrator demonstrating that the qualified applicant satisfied any additional requirements imposed by the administrator pursuant to subsection (12) of this section.
(c)
(I)
Within ninety days after receipt of the complete application from the qualified applicant submitted pursuant to subsection (8)(b) of this section, the administrator shall review the qualified applicant's documentation of the loss incurred in connection with a registered loan and determine whether the documentation satisfies the requirements of subsection (8)(b) of this section. If the administrator determines that a qualified applicant has failed to comply with the requirements of subsection (8)(b) of this section, the administrator shall promptly notify the qualified applicant in writing and shall not issue a registered loan loss certificate to the qualified applicant.
(II)
If the administrator determines that the documentation provided by the qualified applicant satisfies the requirements of subsection (8)(b) of this section, the administrator shall determine the total amount of the loss incurred in connection with the registered loan and certify the amount of the registered loan loss. The amount of the certified loan loss determined by the administrator shall be an amount equal to the total of the outstanding and unrecovered principal and accrued interest on the registered loan or loans and the amount of reasonable out-of-pocket expenses incurred by the qualified applicant in pursuing recovery under the registered loan or loans; except that the amount of the certified loan loss determined by the administrator shall not exceed the original principal amount of the registered loan as stated in the documentation provided when the qualified applicant registered the eligible loan. The amount of the certified loan loss shall not include any amount attributable to damages paid by the qualified applicant as a result of a legal claim against the qualified applicant for negligence, misconduct, or any other allegation of wrongdoing or any amount of late charges or unpaid default interest charges imposed on the borrower by the qualified applicant.
(d)
The administrator shall issue a registered loan loss certificate to any qualified applicant that has satisfied the requirements of subsection (8)(b) of this section in the amount of the certified loan loss calculated pursuant to subsection (8)(c) of this section; except that the administrator shall not issue a registered loan loss certificate that exceeds the total amount of unclaimed tax credit certificates issued to the qualified applicant pursuant to subsection (7) of this section. The administrator shall not issue a registered loan loss certificate before January 1, 2026, or after December 31, 2045.
(9)
Filing tax credit certificate and registered loan loss certificate with income tax return.
(a)
To claim the credit authorized by this section, A qualified applicant shall file the tax credit certificate issued by the administrator pursuant to subsection (7) of this section and the registered loan loss certificate issued by the administrator pursuant to subsection (8) of this section with the qualified applicant's state income tax return for the income tax year in which the registered loan loss occurs. If the qualified applicant 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 registered loan loss certificate.
(b)
A qualified applicant may not claim a credit pursuant to this section for any income tax year commencing before January 1, 2026, or after December 31, 2045. Any tax credit certificates and registered loan loss certificates that the administrator issued, but for which a tax credit has not been claimed pursuant to subsection (9)(a) of this section before the tax year commencing on January 1, 2046, expire and no longer have value.
(c)
A qualified applicant may claim an income tax credit allowed pursuant to this section more than once, so long as the qualified applicant has remaining tax credit certificates that it has not yet filed with the department pursuant to this subsection (9), incurs an additional loss in connection with a registered loan, and is issued a registered loan loss certificate for the additional loss pursuant to subsection (8) of this section.
(d)
A registered loan loss 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.
The entire tax credit to be issued pursuant to this section may be claimed by the qualified applicant in the taxable year in which the qualified applicant incurs a loss in connection with a Registered loan. If the amount of the 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 credit is being claimed, or the qualified applicant is a person who is exempt from taxation pursuant to section 39-22-112 (1), one hundred percent of the amount of the credit not used as an offset against income taxes in the income tax year is refunded to the qualified applicant.
(11)
Reporting.
(a)
No later than November 1, 2027, and, notwithstanding the requirement in section 24-1-136 (11)(a)(I), No later than November 1 of each year thereafter through 2046, the administrator shall provide a written report to the general assembly about the activity in connection with the tax credit allowed pursuant to this section in the previous fiscal year and shall further make the report available to the public. In connection with tax credits issued pursuant to this section, the report must include, but need not be limited To:
(I)
The number of eligible loans that have been registered pursuant to subsection (7)(a) of this section;
(II)
The number of registered loans for which a qualified applicant notified the administrator of a loan loss pursuant to subsection (8)(a) of this section;
(III)
A list of each quantum business in the state that is a borrower pursuant to this section; and
(IV)
A summary of the borrower's use or uses of each registered loan and the impact that the loans have had on the development of quantum businesses in this state.
(b)
The administrator 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 and a registered loan loss certificate for the preceding tax year that includes the following information:
(I)
The qualified applicant's name;
(II)
The amount of the credit as stated in the registered loan loss certificate; and
(III)
The qualified applicant's social security number or the qualified applicant's Colorado account number and federal employer identification number.
(12)
Policies and procedures.
(a)
The administrator may create and modify policies, procedures, and guidelines and specify additional requirements as necessary to further implement the tax credits to be claimed for making eligible loans pursuant to this section and shall solicit advice from the department and from quantum industry participants in creating and modifying such policies, procedures, and guidelines.
(b)
The administrator shall develop standards to:
(I)
Make the determination of whether a loan is an eligible loan pursuant to subsection (5)(c) of this section;
(II)
Determine whether an eligible loan may be registered with the administrator and whether the administrator may issue a tax credit certificate pursuant to subsection (7) of this section; and
(III)
Determine the amount of a certified loan loss pursuant to subsection (8)(c)(II) of this section.
(c)
The administrator may clarify the definition of quantum company when needed based on input from quantum industry companies, researchers, trade associations, and other sector participants. In addition, the administrator may waive the annual income requirement for a quantum company to be a borrower if the administrator determines that waiving that requirement is in the best interest of this state.
(13)
Quantum business loan loss reserve cash fund - creation.
(a)
The quantum business loan loss reserve cash fund is created in the state treasury. The fund consists of money credited to the fund pursuant to subsection (6)(b) of this section and any other money that the general assembly may appropriate or transfer to the fund.
(b)
The state treasurer shall credit all interest and income derived from the deposit and investment of money in the quantum business loan loss reserve cash fund to the fund.
(c)
Money in the quantum business loan loss reserve cash fund is continuously appropriated to the office for the administration of the quantum business loan loss reserve tax credit created in this section.
(d)
The state treasurer shall transfer all unexpended and unencumbered money in the fund on January 1, 2051, to the general fund.
(14)
Repeal.
This section is repealed, effective December 31, 2050.
Added by 2024 Ch. 273,§ 2, eff. 5/28/2024.