The Advanced Industry Investment Tax Credit
The Advanced Industry Investment Tax Credit program (C.R.S. 24-48.5-112) was created to grow high-potential advanced industry businesses with the objective of stimulating the State’s economy and creating high-paying jobs. The Advanced Industry Investment Tax Credit (AITC) aims to improve access to capital for Colorado’s early-stage advanced industry businesses by reducing investor risk. The AITC links Colorado investors to Colorado businesses.
Current Program Status
New funding was made available on January 1st, 2020. Investor applications cannot be submitted or approved until the company they are investing in has been fully approved.
The State Legislature has authorized an annual allowance for program tax credits. The AI Tax Credit is made available at the beginning of each calendar year to investors in qualified Advanced Industry businesses on a first-come-first-served basis.
- Businesses (Investees) are eligible to certify year round by accessing the “AI Tax Credit Investee Pre-Certification 2018-2022.”
- Investors must apply for the AITC within 90 days of a qualified investment. Check our table for current Available Funding
- Here is a list of businesses that have qualified for the program. Click here
Investee (Qualified Small Business) Requirements and Eligibility
- Business must be headquartered in Colorado or have at least 50% of employees in the State
- Business must meet the statutory early-stage requirements:
- Third-party investment less than $10M (all debt and equity since formation)
- Annual revenue less than $5M
- Operating and Generating Revenue for less than 5 years
- The business must operate in one of the State’s identified Advanced Industries:
- Advanced Manufacturing
- Energy and Natural Resources
- Infrastructure Engineering
- Information Technology
- Documents Required:
- A business/investee may have multiple investors, each of whom can apply for the tax credit.
Investor Requirements and Eligibility
- Investor must attest that the AITC was the incentive for making the investment
- Qualified Investments are:
- Common stock
- Preferred stock
- Interest in partnership
- Interest in LLC
- Equity security
- Convertible debt instrument
- Investment Amount must be at least $10,000, with the potential maximum tax credit amount of $50,000
- The Tax Credit is meant to encourage new 3rd party investment.
- Investor must hold less than 30% of voting power prior to the investment, and less than 50% following the investment
- Investor must have a different FEIN/Tax Payer ID from investee company
- A qualified investor may earn only one Advanced Industry Tax Credit per investment in a qualified small business (in the same or different years)
- An Application must be submitted in the calendar year and within 90 days from the initial date of investment (if tranched, all investment payments must be made within a 90 day period and in the same calendar year). Tax credits are issued and must be claimed on the Income Tax form for the same year that the investment is made.
- Investor cannot be a C-Corp
- Financial Transaction Document
- Investment Worksheet (documenting the investment submitted in collaboration with the Investee Business)
Note: though an investor may currently apply for the AITC prior to certification of the investee/business; the process is expedited for investment in certified businesses.
The Tax Credit
Investors in a qualified business may earn a State Income Tax Credit calculated at 25% of the qualified investment, with a maximum tax credit of $50,000.
If the business receiving the investment operates in a rural or economically distressed area per Enterprise Zone standards, the tax credit to the investor is 30% of the qualified investment, up to the $50,000 maximum allowable tax credit amount (per investment). The business must obtain an Enterprise Zone Pre-Certification number to qualify.
- An investor can only claim one tax credit for an investment in a business for the lifetime of the program. However, an investor may apply for separate credits for investments in different companies.
- Advanced Industry Investment Tax Credits are a credit against Colorado state income tax liability. These credits are issued to the investor, not the investee. Credits must be used by the investor; they are not transferable or salable. Credits may be carried forward five years. Credits are not refundable.
Application Process and Tax Credit Funding
Applications must be submitted online via the OEDIT Application Portal.
Businesses/investees begin with filling out the AI Tax Credit Investee Pre-Certification 2018-2022.
Investors begin with filling out the AI Tax Credit Investor Eligibility Check 2018-2022. Applications can only be submitted after the investment transaction has taken place. Al Tax Credits are processed on a first come, first served basis; therefore, investors are encouraged to submit their applications as soon as possible. If the statutory limit on tax credits for the program is reached, the program will suspend accepting tax credit applications until the first business day of the following year.
Investors and the Investees must have unique accounts in the OEDIT Application Portal (Create an account)
This online grant application system is only compatible with certain web browsers: Google Chrome, Mozilla Firefox,Safari and Internet Explorer 10
Learn more about other OEDIT Advanced Industry initiatives and Co-invest.co for high-growth businesses and investors.
Businesses located in Opportunity Zones may tap into additional funding.