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DENVER-The Colorado Department of Revenue has announced a significant change that will allow many developers to realize substantially larger tax credits. With the change, companies that develop property in enterprise zones will qualify for a credit against Colorado taxes. The tax credit is determined based on a percentage of the investment with a maximum credit of $50,000 per year for in-kind development contributions and $100,000 per year for cash contributions.
An executive with accounting firm CBIZ played a substantial role in the new tax structure. Jerome Gienger, an accounting, tax and advisory services director for the company, was the one to convince officials with the Colorado Department of Revenue to revise the books.
Until now, if a partnership invested in an enterprise zone, all the partners were only allowed to divide a single $50,000 or $100,000 tax credit between them.Gienger, however, thought each partner should be eligible for up to a $50,000 or $100,000 tax credit. A tax credit is a dollar-for-dollar write-off, and therefore more valuable.
"One of my clients was involved in an enterprise zone development project," Gienger says. "Their investment qualified them for close to $1 million in credit. Under the old way of computing the credit, the partners would have divided a $50,000 credit among themselves. Under the new computation, they each qualify for up to $50,000 in tax credit, depending on their level of ownership. Now, a 10% partner gets a $50,000 credit instead of a $5,000 credit, and a smaller partner gets a $15,000 tax credit instead of a $1,000 credit."
Gienger worked with the Colorado Enterprise Zone, Jefferson County Enterprise Zone, and Colorado Department of Revenue to implement the changes. Gienger believes that the change in how tax credits are applied may entice investors to develop property in enterprise zones.
"When potential investors see the additional tax credits that are now available, it may pique their interest in investing in enterprise zones area where they might not have considered them in the past," Gienger says. "I think it will open investors' eyes to the possibilities of credits they could receive from an investment standpoint. When you look at rates of return, it's an additional positive."
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