Training Incentives The Colorado Springs Regional Business Alliance will package private and public incentives for relocating or expanding companies that are responsive to the specific investments of the company. A typical package may include the following: Vocational Training Funding Customized training may be provided for new employees of eligible companies through funding from the State of Colorado s Colorado FIRST program. Training may be provided for permanent, nonseasonal jobs being created by non-retail companies newly locating to, or undertaking a significant expansion in Colorado. All direct training program costs are eligible for reimbursement. Pikes Peak Community College is the lead local agency for delivery of training funded under Colorado FIRST. Funding may be provided for up to $800 per new employee. The State of Colorado provides a tax credit of 10% of employer investment in a qualified school-to-work program. Pikes Peak Workforce Center Training Dollars Companies moving to Colorado Springs may be eligible for training dollars to hire and train new, local employees. The Pikes Peak Workforce Center (PPWFC) is federally funded to provide training opportunities for laid off workers and other eligible individuals looking for work in demand occupations and industries. Individuals must be determined eligible for these funds, and companies must sign a contract with PPWFC before training may be funded. PPWFC generally maintains a cap on the amount of training dollars that may be spent per trainee. If a company relocating to Colorado Springs has laid off any employees in another part of the country, the company must be established in Colorado Springs for 120 days prior to requesting federal funds for training. On-the-job training (OJT) contracts may be developed on an individual basis or for several workers. PPWFC may reimburse up to 90% of the wages of eligible, newly-hired employees for a limited training period. The trainees must be retained as full-time, permanent employees after successful completion of training. A contract must be signed and a training plan developed with PPWFC prior to any training taking place. Customized training is for eligible individuals who are not yet employees of the company. Training for the specific skill sets required by the company is developed by the company or another training entity, such as a community college. The company must agree to hire any trainees as full-time, permanent employees once they have successfully completed the training. The company must pay for at least half of the training costs. Again, a contract with PPWFC must be in place before the individuals receive training. In determining if a company is appropriate for OJT or customized training, PPWFC will consider wages and benefits, including health care, as well as, the projected demand for the goods and services produced by the company. In addition to OJT and customized training, PPWFC works with other, industry specific grants, aimed at training and education within demand occupations, as funds are available to the region. To assist new and relocating companies, PPWFC is able to host, at no-cost, large-scale hiring and screening events. Source: Pikes Peak Workforce Center, 02/13 Colorado Springs Regional Business Alliance www.coloradospringsbusinessalliance.com 719.471.8183 info@springsbusinessalliance.com 1
Colorado State Incentives Job Growth Incentive Tax Credit Program The Job Growth Incentive Tax Credit (JGITC) provides a state income tax credit to businesses undertaking job creation projects that would not occur in Colorado without this program and have met certain requirements. A business may not start the proposed project in Colorado (including locating or expanding in the state, hiring employees related to this project, or making material expenditures for this project) until a final application has been submitted to the EDC and approved. Businesses must create at least 20 net new jobs (FTE) in Colorado during the credit period (defined as 60 consecutive months where the business may qualify for an annual tax credit) with an average yearly wage of at least 110% of the county average wage rate based on where the business is located. All net new jobs must be maintained for at least one year after the positions are hired to qualify for the minimum amount of tax credits that may be available to a business. Businesses receiving an incentive from the EDC s Strategic Fund or Performance Incentive Fund may not receive an incentive from the JGITC Program for the same net new jobs. The maximum tax credit is calculated by taking 50% (approximately 3.83%) of the FICA paid by the business on the net job growth for each year in the credit period. Although the maximum tax credit authorized by the EDC is calculated by projected information submitted by the business, the actual tax credits issued will be based on actual performance. Net new jobs or net job growth is calculated by taking the number of FTE employees at the end of each calendar year of the credit period (through one year after the credit period) and netting out the number of FTE s at the beginning of the credit period. If the issued tax credits exceed the taxpayer s income tax for the income tax year in which the business is first authorized to use the credit, the amount of the tax credit not used shall not be allowed as a refund, but may be carried forward and applied in each of the 10 succeeding income tax years. Strategic Fund The Strategic Fund provides a commitment to businesses that have met certain requirements under the Economic Development Commission s (EDC) Strategic Fund. A business may receive funding consideration if it creates net new full-time permanent jobs in Colorado that are maintained for at least one year. A business must materially meet the circumstances noted below: Potential for economic spinoff benefits, such as attracting suppliers, generating tourism/travel activity, high prestige, or a large expansion initiative. Capital investment, relative to the number of jobs (significant capital investment is $100,000 or > per employee) Responds to a special local economic event, such as replacing recent lay offs Inter-state competitive factors Headquarters in Colorado Level of local matching commitments Other unique conditions The business will need to demonstrate feasibility and financial capability along with the ability to create the number of jobs committed. Business decisions clearly moving forward without assistance from the EDC will not be considered for funding if an announcement is made prior to an introduction to the EDC. Businesses already receiving an incentive from the EDC may not receive an incentive from the Strategic Fund for the same net new full-time permanent jobs. The table on the following page reflect potential incentive levels based on the annual average wage rate of a businesses committed creation of net new full-time permanent jobs compared to the county average wage rate (based on information provided by the Dept. of Labor and Employment). The annual average wage rate calculation does not include benefits. Colorado Springs Regional Business Alliance www.coloradospringsbusinessalliance.com 719.471.8183 info@springsbusinessalliance.com 2
Colorado State Incentives (continued) Strategic Fund (con t) EZ Non-EZ Average Wage $ Incentive/ Average Wage $ Incentive/ Rate % Eligible Job Rate % Eligible Job 100% $2,000 110% $2,500 110% $3,000 130% $3,500 120% $4,000 150% or > $5,000 130% or > $5,000 *The average wage in El Paso County during 2011 was $43,628. EZ = Enterprise Zone Businesses that are considering multiple sites within the State will be provided several options based on the incentive tables. Additional consideration may be given to businesses that do not meet the EDC s minimum 100% annual average wage rate requirement if the following criteria are met: The business is located in (or will be located in) a designated Enhanced Rural EZ at the time of its introduction to the EDC; The local community provides rationale to the EDC outlining the businesses economic importance to the community; and The local community requests consideration for use of an alternative wage rate source and provides documentation that supports that the businesses annual average wage rate is higher than the annual average wage rate paid by private employers within their jurisdiction. Aircraft Manufacturer New Employee Credit Aircraft manufacturers located in a Colorado aviation development zone may qualify for a state income tax credit of $1,200 per new employee. The credit applies to full-time employees (working at least 35 hours per week). The number of aviation zone employees at an aircraft manufacturer s facility during a year is calculated as the average of the number of employees at the facility on the last business day of each month during the tax year. The facility must employ 10 or more employees. The credit is $1,200 times the increase in the average number of aviation zone employees for the tax year over the previous base number of employees at that facility. Biotechnology Sales and Use Tax Refund Colorado promotes its biotechnology industries by providing them with a taxpayer-friendly means to recover the sales and use taxes paid in the preceding year on equipment and supplies purchased to conduct biotechnology research and development. Qualified taxpayers may seek a refund every year for all Colorado sales and use taxes they paid on purchases of tangible personal property used directly and predominately in research and development of biotechnology. This includes property such as microscopes, chemical reagents, and software. The refund helps promote the biotechnology industry in the state, aiding both start-up and established companies. Additional consideration may be given to businesses within targeted industries (Renewable Energy, Aerospace, Bioscience, Information Technology) on a case-by-case basis. The EDC reserves the right to approve, deny or vary from these guidelines as necessary and appropriate and delay any decision due to budgetary constraints. For further information on either of the programs, please contact: Colorado Office of Economic Development and International Trade Business Finance Division Phone: 303-892-3840 Web site: www.advancecolorado.com Colorado Springs Regional Business Alliance www.coloradospringsbusinessalliance.com 719.471.8183 info@springsbusinessalliance.com 3
Local Tax Incentives Tax Incentives Tax incentives have been built into the tax codes of state and local taxing authorities. Examples include: no state or county sales tax on manufacturing equipment; no inventory tax, and others. Sales Tax Exemptions Each business assisted will be analyzed to determine the tax issues that are important and a presentation of available incentives will be provided. The City of Colorado Springs Sales and Use Tax Code provides for a declining sales tax rates as investment in machinery increases over 5 million dollars with a total exemption of sales and use taxes above a 20 million dollar annual investment. The City of Colorado Springs will also provide a sales tax exemption from manufacturing equipment if, in the acquisition of a manufacturing business, the purchaser maintains the employment present at the time of acquisition for 2 years. City and County Personal Property Tax Credit General: Primary employers, defined as those companies that sell 50 percent or more of their business goods or services outside of El Paso County, may be eligible for a credit of up to 50% of personal property taxes on city personal property tax liabilities for up to four years with opportunity for a six year extension. Standard agreements are four years with at least 10 new jobs and over $1 million in investment. For a ten-year agreement, a company must create at least 100 jobs in addition to investment criteria. Agreements up to 15 years are possible for companies meeting additional job creation and specific investment criteria. Once eligible, the company and the City enter into a standard agreement for a specified term, contingent upon performance. Personal property taxes are paid two years after the personal property is put into service. The credit is made after the tax is paid. The Personal Property Tax Credit program is ongoing and does not have an expiration date. EDC will assist with the application to the City. Credits on Large Personal Property Investment: City: - 50% credit above $1 million - 90% credit above $5 million County: - 100% credit (no tax) Note: As a business incentive, El Paso County no longer collects personal property tax from any business. Colorado Springs Regional Business Alliance www.coloradospringsbusinessalliance.com 719.471.8183 info@springsbusinessalliance.com 4
El Paso County Enterprise Zone Businesses locating within the El Paso County Enterprise Zone may be eligible for one or several Colorado Business Income Tax Credits related to hiring new employees, making investments in equipment, training employees and conducting research and development activities. A business that plans to earn an Enterprise Zone tax credit must receive Pre-certification each year prior to earning the credit and then must receive final Certification from their local EZ Administrator after earning the credit. These credits are more fully described below. The Colorado Springs Regional Business Alliance and the El Paso County Enterprise Zone Administrator will be able to elaborate on any of these credits. Investment Tax Credit Businesses making investments in equipment used exclusively in an Enterprise Zone for at least one year may claim a credit against their Colorado income taxes equal to three percent (3%) of the investment amount, subject to limitations on the amount that can be claimed in any one year. In general, only equipment purchases qualify for the investment tax credit. The credit is claimed on the state income tax return for the year it would have been claimed under federal law (the year the property was placed in service). Excess credits maybe carried back three years and forward twelve. Jobs Tax Credit Businesses hiring new employees in connection with a New Business Facility in an Enterprise Zone may claim a state income tax credit of $500 for each new job created. Qualifying new, expanding or replacement facilities may claim the jobs tax credit each year during the life of the Enterprise Zone for each new job created above the maximum number employed in the prior tax year. The taxpayer may prorate the credit based on the number of months the new facility is in operation at a rate of $41.67 per new employee per month of employment. If the credit exceeds the taxpayer s Colorado income tax liability, the balance may be carried forward up to five years. Employer-Sponsored Health Insurance Credit An Enterprise Zone taxpayer who qualifies for the New Business Facility (NBF) jobs credit can also qualify for a two-year credit of $200 (or $400 total) for each NBF employee who is insured under a health insurance plan or program provided through the employer. The employer must contribute 50% or more of the total cost of the plan. The taxpayer may only claim this credit for the first two full income tax years after the facility initially qualifies as a NBF. Research & Development Tax Credit Businesses involved in private expenditures on research and development activities in the Enterprise Zone qualify for an income tax credit. This credit equals three percent (3%) of the amount of the increase in the taxpayer s R&D expenditures within the Enterprise Zone for the current tax year above the average of R&D expenditures within the Enterprise Zone during the previous two tax years. The total amount of the credit must be divided equally over a four-year period. Qualified research must satisfy three criteria: it must be technological in nature, it must be useful in the development of a new or improved product or component of the business and it must utilize the process of experimentation. Credit for Rehabilitation of Vacant Buildings There is a credit of twenty-five percent (25%) of rehabilitation costs up to a maximum credit of $50,000 to rehabilitate buildings that are at least 20 years old and which have been completely vacant for at least two years. Qualified expenditures include exterior, structural, mechanical, and electrical improvements. Colorado Springs Regional Business Alliance www.coloradospringsbusinessalliance.com 719.471.8183 info@springsbusinessalliance.com 5
El Paso County Enterprise Zone (continued) Enterprise Zone Credits (con t) Job Training Credit Employers located in an Enterprise Zone are allowed to claim a credit of 10% of their eligible training investment in a qualified job training program, defined as a structured training or basic education program conducted on site or off site by the taxpayer or another entity to improve the job skills of employees who are employed by the taxpayer. These employees must be working predominately within Enterprise Zone. On the job training is not a qualified job training program. Manufacturing and Mining Equipment Exemption Purchases of manufacturing machinery or machine tools and parts thereof are exempt from state sales and use tax (3%) when the machinery is to be used in manufacturing. Those purchases are also exempt from El Paso County s sales and use tax (1%). For businesses in an Enterprise Zone, this exemption is further expanded to include the purchase of machinery and machine tools used in certain mining or oil and gas operations and to the purchase of materials for the construction of machinery and machine tools, as long as the machinery is used exclusively in the Enterprise Zone. Manufacturers within the Enterprise Zone may claim this exemption whether the purchases are capitalized or expensed for accounting purposes. At the time of purchase, a Purchases of Machinery and Machine Tools form DR 1191 must be filed with the vendor from whom the item is purchased and with the Colorado Department of Revenue. Source: Colorado Department of Local Affairs, El Paso County Financial Services Department Division of Economic Development 01/12 http://adm.elpasoco.com/budgetadministration/ EconomicDevelopment/Pages/EnterpriseZone.aspx Colorado Springs Regional Business Alliance www.coloradospringsbusinessalliance.com 719.471.8183 info@springsbusinessalliance.com 6
Foreign Trade Zone There is a Foreign Trade Zone (FTZ) located in Colorado Springs. The FTZ provides for deferral or reduction of customs duties paid for the transfer, use and storage of imported materials. Import duties are deferred until the materials physically leave the FTZ or reduced if used in a product with a lower duty rate. There is no import duty if the materials, or products in which imported materials are used, are re-exported. Employers located in an Enterprise Zone are allowed to claim a credit of 10% of their eligible training investment in a qualified job training program, defined as a structured training or basic education program conducted on site or off site by the taxpayer or another entity to improve the job skills of employees who are employed by the taxpayer. These employees must be working predominately within Enterprise Zone. On the job training is not a qualified job training program. Colorado Springs Regional Business Alliance www.coloradospringsbusinessalliance.com 719.471.8183 info@springsbusinessalliance.com 7
Other City / County Incentives Rapid Response Team (RRT) Provide primary employers with expedited development plan review and permitting for both: existing companies expansions; new employers locating a facility in Colorado Springs. Reduce by about half the typical approval process time. Early in the project design phase and prior to preparing final plans, company representatives should contact the city s Economic Vitality (EV) manager. The EV manager will invite representatives from the company and the reviewing agencies to a RRT meeting to discuss the company s development / building plans. The RRT meeting is designed to accomplish the following objectives: 1. Company s group meets plan reviewers 2. Company s group hears requirements for plans to be approved 3. RRT members suggest ways to reduce the time involved in plan approval or project construction 4. RRT members are familiar with, and will be watching for, the company s plans When the company is ready to submit formal plans, the company notifies the city s EV manager to initiate the following RRT services: RRT plans will be moved to high priority at each reviewing agency RRT reviewers will forward plans with comments to the next reviewer Online tracking: Available on the Internet to check status of the plans: www.pprbd.org Issue resolution: City s EV manager is the contact for centralized responses Private Activity Bond (PABs) Bond financing for investing in qualified projects; Offered at a lower interest rate and provide significant savings over conventional financing; Exempt from federal and state income tax; and Repaid from the revenues of the entity on whose behalf the City has issued the bonds. Thus, the City assumes no financial risk since PABs do not constitute a debt for the City of Colorado Springs. Qualified PAB projects, typically from $1 million - $10 million, can be used for: new facilities; existing facilities that are rehabilitated; purchasing new equipment; facility infrastructure; higher education facilities; health care facilities; other types of eligible projects which promote the public good; essentially, PAB projects should include components that create jobs, improve neighborhoods, and/or increase the wealth in Colorado Springs. A prospective borrower is required to demonstrate the financial soundness of the business and the project, similar to the requirements for securing a privately-funded loan. Proforma balance sheets, income statements, audited financial statements, and cash flow projections are examples of the types of documents required. The borrower pays fees to the City associated with the City s issuance of PAB financing. There are non-refundable fees of $1,000 and $5,000 for application and inducement resolution, respectively. In addition, the borrower also pays all City Attorney expenses related to the bond issuance, and bond services fees of up to.5% / $1,000 of bonds issued. Some not-for-profit organizations may also be eligible for tax-exempt financing of capital projects under a different form of PAB, and the 501(c)(3) bonds. Colorado Springs Regional Business Alliance www.coloradospringsbusinessalliance.com 719.471.8183 info@springsbusinessalliance.com 8
Small Business Support El Paso County Revolving Loan Fund The El Paso County Revolving Loan Fund (RLF) is a federallyfunded loan pool created by the US Department of Housing and Urban Development (HUD). The funds, Community Development Block Grant (CDBG) monies, are provided by the State of Colorado and administered locally. El Paso County, through its Office of Economic Development, contracts with the Pikes Peak Regional Development Corporation to administer the program for the County. GOALS - The primary goals of the RLF are to create and retain jobs and to expand and diversify the economic base of El Paso County. Highest priority will be given to manufacturing operations that create new investment in El Paso County. To ensure job creation and retention, the business receiving the loan will be required to create or retain at least one job for every $20,000 in RLF assistance. At least sixty percent (60%) of new jobs created must be filled by employees who, upon hiring, have a family income below El Paso County s moderate income limits provided by HUD (family income may exceed the County s moderate income limits after hiring). ELIGIBILITY - The RLF monies are available to private, forprofit businesses within unincorporated El Paso County and its incorporated cities and towns. The City of Colorado Springs maintains a separate loan pool; therefore, businesses within the city limits of Colorado Springs are only eligible for monies from the City s pool. FUNDS - The RLF is primarily for financing fixed assets, including land, buildings, machinery, and equipment. Working capital and inventory are also eligible uses of loan funds. Minimum and maximum dollar amounts available for each loan are $10,000 and $100,000, respectively. Priority will be given to projects that exhibit the greatest public benefit. Generally, the RLF assistance may not exceed forty percent (40%) of the total project cost, and the borrower s equity contribution will be at least ten percent (10%) of the total project cost. El Paso County Revolving Loan Fund (con t) TERMS - With the RLF program, loan terms are flexible and are determined on a case-by-case basis depending on the life of the asset being financed. Real estate loans will usually have a term ranging from seven to ten years; capital equipment loan terms usually range from three to five years; and working capital loan terms usually range from one to three years. All loans are fully collateralized and personal guarantees are required of all borrowers. Interest rates will be fixed at a rate that is below market rates at the time of closing. Pikes Peak Regional Development Corporation The PPRDC is a Certified Development Company (CDC) that has funds available for small loans to credit-worthy companies at favorable rates. Through the SBA 504 loan program, PPRDC arranges funding for 40% of the project cost, up to a maximum of $2,000,000. The first 50% of the project comes from a bank or other private lender, leaving a 10% equity injection by the borrower. Eligible purposes or project costs for the funds are: (1) purchase of land, building, machinery and equipment; (2) land improvements; (3) renovation or major addition to existing building; (4) construction of new buildings; and (5) the project financed should stimulate economic development and create new jobs. Eligible businesses: (1) are for-profit corporations, partnerships or proprietorships; (2) have net worth less than $8.5 million; (3) average net profit after tax of less than $3 million dollars for the past two years; and (4) must be the user of the financed fixed assets with the expansion ranging from $250,000 to several million dollars. These assets can include real estate acquisition, new construction, renovation or expansion. Proceeds can also be used for land and site improvements such as parking lots, utility connections, and landscaping. Machinery and equipment can also be financed. Examples of other project costs that can be included are professional fees directly attributable and essential to the project such as surveying, engineering, architectural fees, legal fees, recording and title fees, and points on interim financing. Construction interest can be financed as well. Source: El Paso County Financial Services Department Colorado Springs Regional Business Alliance www.coloradospringsbusinessalliance.com 719.471.8183 info@springsbusinessalliance.com 9