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 39-22-560 - [Multiple versions] [Effective 8/7/2024] Tax credit for freight rail use - tax preference performance statement - legislative declaration - definitions - repeal

(1)
Tax preference performance statement.
(a)
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 the purposes of the tax credit provided in this section are to provide tax relief to certain businesses, specifically those businesses engaged in new or expanded manufacturing, repair or refurbishing, agriculture, recycling, distribution centers for consumer products, or energy production that will utilize freight rail that is in danger of going out of service due to coal production reductions and closures, and to induce certain designated behaviors by taxpayers, specifically expenditures on freight rail transportation service in a coal transition community.
(b)
The general assembly and the state auditor shall measure the effectiveness of the tax credits awarded pursuant to this section in achieving the purposes specified in subsection (1)(a) of this section based on the number and value of tax credits claimed pursuant to this section.
(2)
Definitions.
As used in this section, unless the context otherwise requires:
(a)
"Certified freight rail use" means the use of freight rail transportation:
(I)
Of freight either originating or terminating at a business located in a coal transition community; and
(II)
On a rail line in this state that the department of transportation has determined is at risk of inactivity or abandonment due to a lack of demand resulting from coal transition.
(b)
"Coal transition community" has the same meaning as set forth in section 8-83-502 (1).
(c)
"Department" means the department of revenue.
(d)
"Freight rail use plan" means a plan submitted by a qualified applicant to the office pursuant to subsection (4) of this section.
(e)
"Office" means the Colorado office of economic development created in section 24-48.5-101.
(f)
"Qualified applicant" means a person subject to tax under this article 22 whose engagement in manufacturing, agriculture, repairing or refurbishing, recycling, distribution centers for consumer products, or energy production with a regular demand for substantial new or expanded rail freight transportation causes the person to incur a qualified expenditure.
(g)
"Qualified expenditure" means the amount paid by a qualified applicant for certified freight rail use.
(3)
Reservation of tax credit and tax credit allowed.
(a)
On or after January 1, 2025, but prior to January 1, 2036, the office may reserve the allocation of a credit against the income taxes imposed by this article 22 for a qualified applicant pursuant to subsection (5) of this section.
(b)
In order to claim a tax credit reserved pursuant to subsection (5) of this section, a qualified applicant must, on or before December 31, 2038, execute the freight rail use plan that it submits to the office pursuant to subsection (4) of this section.
(c)
For income tax years commencing on or after January 1, 2026, and before January 1, 2039, a qualified applicant is allowed a credit against the income taxes imposed by this article 22 in the amount set forth in the tax credit certificate issued by the office pursuant to subsection (6) of this section.
(4)
Submission and review of application, freight rail use plan, and qualified expenditures estimate.
(a)
To receive a tax credit reservation pursuant to subsection (4)(b) of this section, a qualified applicant must submit an application, freight rail use plan, and qualified expenditures estimate to the office in accordance with policies and procedures created by the office. At a minimum, the application must include an estimate of the amount of qualified expenditures that the qualified applicant expects to incur for one or more future tax years for which the applicant is applying for the tax credit reservation.
(b)
The office shall review a qualified applicant's application, freight rail use plan, and qualified expenditures estimate to:
(I)
Determine whether such information is complete;
(II)
Make preliminary determinations of whether the applicant is a qualified applicant and whether the freight rail use plan will result in a certified freight rail use;
(III)
Make final determinations of whether the applicant is a qualified applicant and whether the freight rail use plan will result in a certified freight rail use; and
(IV)
Determine which freight rail use plans to approve in connection with the reservation of a tax credit as provided in subsection (5) of this section.
(c)
For any application, Freight rail use plan, and qualified expenditures estimate that the office determines pursuant to subsection (4)(b)(I) of this section is incomplete, the office shall notify the qualified applicant in writing of the office's determination and remove the application, freight rail use plan, and qualified expenditures estimate from the review process.
(d)
The office shall make the preliminary determinations, pursuant to subsection (4)(b)(II) of this section, of whether the applicant is a qualified applicant and whether the freight rail use plan is a certified freight rail use within ninety days of receiving the application, freight rail use plan, and qualified expenditures estimate pursuant to subsection (4)(b) of this section.
(e)
The office shall develop standards in consultation with the just transition office created in section 8-83-503 (1) and the department of transportation to inform the office's determinations, pursuant to subsection (4)(b)(III) of this section, of whether the applicant is a qualified applicant and whether the freight rail use plan will result in a certified freight rail use.
(f)
In making the determination, pursuant to subsection (4)(b)(IV) of this section, of which freight rail use plans to approve for the reservation for the benefit of the qualified applicant of an allocation of a tax credit, the office shall prioritize freight rail use plans that:
(I)
Specify regular, frequent, ongoing, and substantial long-term freight rail use;
(II)
Provide substantial economic development benefits;
(III)
Demonstrate financial viability;
(IV)
Incorporate environmentally responsible and sustainable use of resources; and
(V)
Incentivize a diverse group of businesses and sectors to use targeted rail lines.
(5)
Reservation of tax credits.
Subject to subsection (7) of this section, the office may reserve a tax credit for the benefit of a qualified applicant for any future tax year in an amount not to exceed seventy-five percent of the qualified applicant's qualified expenditure estimate submitted by the qualified applicant pursuant to subsection (4)(a) of this section. If the office reserves a tax credit for the benefit of a qualified applicant, the office shall notify the qualified applicant in writing of the reservation and the amount reserved. The reservation of a tax credit by the office for a qualified applicant does not entitle the qualified applicant to the issuance of a tax credit certificate until the qualified applicant complies with all the requirements specified in this section for the issuance of the tax credit certificate. When the office approves a reservation of tax credits, the office may also impose additional requirements that a qualified applicant shall satisfy as part of executing a freight rail use plan before the office issues a tax credit certificate to the applicant. The office may use the reservation of a tax credit in support of business recruitment and expansion.
(6)
Deadline for incurring qualified expenditures - proof of compliance - audit of freight rail use plan execution - issuance of tax credit certificate.
(a)
A qualified applicant receiving a reservation of tax credits pursuant to subsection (5) of this section shall incur the qualified expenditures described in the qualified expenditures estimate submitted by the qualified applicant pursuant to subsection (4)(a) of this section in the tax years set forth in the qualified expenditures estimate and in the reservation made by the office pursuant to subsection (5) of this section.
(b)
After executing a freight rail use plan, the qualified applicant shall notify the office that it has done so and shall annually certify the relevant qualified expenditures. In this notice, the applicant shall include a review of the certification that aligns with office policies for certification of qualified expenditures by a licensed certified public accountant that is not affiliated with the qualified applicant. The applicant shall also certify and provide documents demonstrating that the applicant satisfied any requirements imposed by the office pursuant to subsection (5) of this section. Within one hundred eighty days after receipt of such documentation from the qualified applicant, the office shall review the qualified applicant's documentation of qualified expenditures, determine whether the documentation satisfies the freight rail use plan and other requirements, and, if the office determines that the documentation satisfies the freight rail use plan and other requirements, the office shall issue a tax credit certificate in an amount equal to seventy-five percent of the amount of the actual qualified expenditures incurred by the qualified applicant, Subject to subsection (6)(d) of this section.
(c)
If the office determines that a qualified applicant has failed to comply with the requirements of subsection (6)(a) or (6)(b) of this section, the office shall promptly notify the qualified applicant and may rescind the issuance of the written notice it previously gave the qualified applicant granting the reservation of a tax credit in whole or in part. If the office so rescinds an issuance of the written notice, the qualified applicant may submit a new application, Freight rail use plan, and qualified expenditures estimate in accordance with the requirements of subsection (4) of this section and the total amount of tax credits made available for reservation in the calendar year during which the office rescinds the issuance of the written notice must increase by the amount of the tax credit reserved in the written notice.
(d)
Notwithstanding subsection (6)(b) of this section, the total amount of the tax credit certificate issued for any particular freight rail use plan must not exceed the amount of the tax credit reserved by the office pursuant to subsection (5) of this section.
(e)
To the extent that the actual qualified expenditures incurred by a qualified applicant are less than the amount described in the relevant reservation issued by the office for a tax year pursuant to subsection (5) of this section, the total amount of tax credits made available for reservation in the calendar year in which the qualified applicant filed the certification required by subsection (6)(b) of this section must increase by the difference between actual qualified expenditures incurred by the qualified applicant and the amount described in the relevant reservation issued by the office for a tax year pursuant to subsection (5) of this section.
(f)
The office 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 for the preceding tax year listing each taxpayer to which the office issued a tax credit certificate and that includes the following information:
(I)
The taxpayer's name;
(II)
The amount of the income tax credit that the certificate indicates the taxpayer is eligible to claim; and
(III)
The taxpayer's social security number or the taxpayer's Colorado account number and federal employer identification number.
(7)
Limit on aggregate amount of all tax credits that the office may reserve.
(a)
The aggregate amount of all tax credits that the office may reserve pursuant to this section must not exceed five million dollars in any calendar year, in addition to the amount of any previously reserved tax credits that were rescinded or not utilized pursuant to subsections (6)(c) and (6)(e) of this section during the calendar year and the amount described in subsection (7)(c) of this section. In the case of a tax credit reserved for the benefit of a qualified applicant that files an income tax return for a tax year other than a calendar year, the amount reserved must count against the limit for the calendar year in which the qualified applicant's income tax year begins.
(b)
The amount of each tax credit that the office may reserve is determined pursuant to subsection (5) of this section; except that if the office determines that reserving each tax credit certificate in an amount determined pursuant to subsection (5) of this section will cause the total amount of tax credits reserved by the office for a calendar year to exceed the limit set forth in subsection (7)(a) of this section, the office shall proportionally reduce the amount of each tax credit reservation so that the total amount of tax credits reserved by the office for that calendar year equals the limit set forth in subsection (7)(a) of this section.
(c)
If the aggregate amount of all tax credits reserved by the office for any calendar year is less than the amount available as calculated pursuant to subsection (7)(a) of this section, then the aggregate amount of all tax credits that the office may reserve in the next calendar year is increased by the unreserved amount.
(8)
Filing tax credit certificate with income tax return.
In order to claim the tax credit authorized by this section, a qualified applicant shall file the tax credit certificate issued by the office pursuant to subsection (6) of this section with the qualified applicant's state income tax return. The amount of the tax credit that a qualified applicant may claim pursuant to this section is the amount stated on the tax credit certificate.
(9)
Refundability.
The entire tax credit to be issued pursuant to this section may be claimed by the qualified applicant for the qualified expenditures made in the taxable year in which the qualified applicant executes a freight rail use plan. If the amount of the tax 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 tax credit is being claimed, the entire amount of the tax credit not used as an offset against income taxes in the income tax year is refunded to the qualified applicant.
(10)
Policies and procedures.
The office may create and modify policies and procedures as necessary to further implement this section and shall solicit advice from the department in creating and modifying such policies and procedures.
(11)
Insufficient taxpayer interest.
Notwithstanding any law to the contrary, for calendar years beginning on or after January 1, 2031, the office may determine that there is insufficient taxpayer interest to continue offering the tax credit pursuant to this section. After the office makes such a determination, it shall not accept any more applications for tax credits pursuant to this section and it shall inform the department that it has discontinued the credit.
(12)
Repeal.
This section is repealed, effective December 31, 2045.
Added by 2024 Ch. 280,§ 5, eff. 8/7/2024.
2024 Ch. 280, was passed without a safety clause. See Colo. Const. art. V, § 1(3).
This section is set out more than once due to postponed, multiple, or conflicting amendments.