Colorado Small Business Recovery Tax Credits
Information on the Sale of $68 Million of Premium Tax Credits
General Information & Purpose
The Colorado Small Business Recovery Loan Program is legislation that was signed into law by Colorado Governor Polis in 2020. The program authorizes the Colorado Department of the Treasury (“Treasury”) to issue and sell up to $68 million of state insurance premium tax credits (the “Tax Credits”) to Qualified Taxpayers (insurance companies authorized to do business in Colorado with premium tax liability due to the State), with an initial tranche of $40 million in credits for sale in FY 2020-2021, and a possible additional $28 million tranche of credits for sale in FY 2021-2022.
Proceeds from the sale of the Tax Credits will be used to assist the State’s recovery from the Coronavirus 2019 (COVID-19) pandemic through issuance of loans to Colorado small businesses.
- The Colorado Department of Treasury is immediately soliciting purchase commitments from premium taxpayers through its transaction advisor, State Credit Strategies.
- Purchaser application form, draft purchase agreement, and credit certificate form will be available soon.
- Closing targeted for December 29, 2020.
The Colorado Department of Treasury is looking to partner with insurance companies selling policies in Colorado to efficiently raise capital for program investments that will have a positive economic impact upon Colorado small businesses.
Treasury, through its advisor team, will negotiate the price and terms of the tax credits with insurance companies able to commit to the purchase at least $500,000 of tax credits. If oversubscribed, the tax credits will be allocated to all requesting taxpayers on a pro rata basis.
- Purchasers will receive tax credits in certificated form. There are no recapture provisions and the credits are not subject to retaliatory tax.
- The Tax Credits will be offered in two tranches of $40 million and $28 million respectively. Purchasers of the initial $40 million tranche can utilize 50% of the tax credits in both tax years 2025 and 2026.
- Tax credits can be carried forward through 2031 and may not be carried forward beyond any taxable year that begins after December 31, 2031.
- The Tax Credits are only transferable in the event of a change in control or an exchange among Affiliates.
- Payment due dates for the tax credits will be announced by Treasury prior to accepting firm commitments and may be tranched to approximate program investment needs.