The Colorado House of Representatives is considering a bill (HB 1105) sponsored by Representative Kefalas (D - Larimer) that will create financial incentives for investment into small companies involved in specific markets. I believe the bill is currently in the House Appropriations Committee. This post summarizes key aspects of the bill.
“Qualified Small Business”: Must be in the “Clean Energy Technology”, “Information Technology”,
“Aerospace” or “Bioscience” industry. Be a corporation, LLC, partnership or other business entity that (1) maintains its principle place of business in Colorado; (2) has >50% of its gross assets and >50% of its employees in CO; (3) has at least 2 nonadministrative, FTE employees who are CO residents; (4) has been in operation for less than 5 years; and (5) total yearly revenues less than $2M and total assets <$5M.
The small business may apply to be identified as a Qualified Small Business prior to an actual investment, essentially, pre-qualified. Pre-qualification certification lasts for 12 months. Companies must notify the Office if it no longer meets the above qualifications within 5 days. Companies can be penalized if they do not notify the Office.
“Qualified Investment”: “Equity” investment that occurs after January 1, 2010, where “Equity” includes common, preferred and convertible notes. Minimum investment is $25K. Investor and its affiliates ownership prior to new investment is less than 30% of voting securities. Investor must apply for the Investment Tax Credit within 30 days of the investment.
Investors receive a tax credit of 15% of their investment for the first two tax years after the Qualified Investment. The first tax year may be the partial tax year of the investment.
The maximum tax credits issued by the Office is $3M per year. First come, first served. The last year tax credits can be used is tax year 2014.
The Office is the Office of Economic Development.