Tax Credits for Quantum Industry Support

The bill creates 2 tax incentives to support the development of the quantum technology ecosystem in the state. Neither of the tax credits created in the bill are allowed to any qualified applicant unless a Colorado-based entity receives a multi-million dollar federal grant from the economic development administration for the regional technology and innovation program or a comparable federal grant program.

Tax credit for investments in fixed capital assets to create a shared quantum facility. Section 2 of the bill creates a 100% refundable income tax credit for qualifying investments in fixed capital assets as part of a coordinated plan to create a shared quantum facility (facility credit) for income tax years commencing on or after January 1, 2025, but before January 1, 2033. The amount of the facility credit is equal to the amount of the qualifying investment made by a qualified applicant for an eligible project; except that the maximum aggregate amount of all facility credits is $44 million. In addition, the maximum aggregate amount of facility credits that may be claimed in the taxable year in which the eligible project is placed in service is $24 million. If qualified applicants are issued more than an aggregate of $24 million in facility credits, the qualified applicants may claim the credits in future taxable years, subject to a specified limit on the amount of the credit that may be claimed in a single taxable year.

A qualified applicant may be a consortium of entities that are jointly participating in creating a shared quantum facility. An eligible project is a project to create a shared quantum facility, which is a primary place in the state where an applicant performs activities and provides the economic benefits related to quantum business and that is approved as an eligible project by the office of economic development (office).

The bill details a process for claiming the facility credit that requires:

• The submission by a qualified applicant to the office of an application for a facility credit reservation;
• Preliminary and final review of the application and approval of the request for a facility credit reservation by the office;
• Issuance of a facility credit reservation to the qualified applicant by the office;
• Completion of the eligible project and certification by the qualified applicant of the qualified applicant's qualifying investments;
• Review of the eligible project and qualifying investments by the office;
• Issuance of a tax credit certificate by the office;
• Filing of the tax credit certificate with the department of revenue with the qualified applicant's tax return or informational return; and
• Recapture of the credit if the eligible project is not used for a use that makes it an eligible project during a specified compliance period.

Quantum business loan loss reserve tax credit. Section 3 creates a 100% refundable income tax credit to offset losses incurred by a qualified applicant in connection with a registered loan to a quantum company (loan loss credit) for income tax years commencing on or after January 1, 2026, but before January 1, 2046. A qualified applicant is a commercial bank, depository institution, private lending fund, or other entity that makes loans for commercial purposes to a quantum company that satisfies certain income and other criteria (eligible loan). The administrator of the loan loss credit (administrator) may be the office, or the office may contract with a third-party program administrator to administer the credit. The administrator is required to determine the method by which the loan loss credit will be distributed to qualified applicants. The distribution method may be on a first-come, first-served basis or based on a competitive lender selection process where the administrator chooses which lenders are eligible to apply for the loan loss credit.

A qualified applicant is required to register any loan that is the basis of a loan loss tax credit with the administrator and is not eligible to claim the loan loss credit until the qualified applicant has incurred a loss in connection with a registered loan. The amount of the loan loss credit is an amount up to 15 cents for every dollar of an eligible loan that the qualified applicant has made or will make; except that the maximum aggregate amount of all loan loss credits is $30 million. In addition, subject to specified requirements and, if the administrator is not the office, the approval of the office, the administrator may establish policies and procedures to set the amount of the loan loss credit below 15 cents for every dollar loaned, change the amount of the loan loss credit from time to time, or cap the total amount of loan loss credits issued to a qualified applicant.

Each qualified applicant that is issued more than one loan loss credit certificate is required to hold all the loan loss credit certificates that were issued to the qualified applicant in a pooled loan loss reserve. A qualified applicant may use all or any portion of the loan loss credit certificates issued to that qualified applicant to offset any loss incurred by that qualified applicant in connection with one or more registered loans.

The bill details a process for claiming the loan loss credit that requires:

• Submission of an application for a loan loss credit certificate and a request that the administrator register an eligible loan;
• Preliminary and final review of the application and registration of eligible loans by the administrator;
• Issuance of a loan loss tax credit certificate to a qualified applicant;
• Periodic updates to the administrator by a qualified applicant that was issued a loan loss credit certificate regarding the status of each of the qualified applicant's registered loans;
• Application to the administrator for a registered loan loss certificate after a qualified applicant incurs a loss in connection with a registered loan;
• Review of information regarding the loan by the administrator and issuance of a registered loan loss certificate to the qualified applicant; and
• Filing the loan loss credit certificate and the registered loan loss certificate with the department of revenue with the qualified applicant's tax return or informational return.

The administrator of the loan loss credit may impose a registration and issuance fee on a qualified applicant or on the borrower to which a qualified applicant made an eligible loan. The administrator is required to credit any fee revenue to the quantum business loan loss reserve cash fund, which is created in the bill and is exempted, in section 3 , from the restriction on the statutory amount of authorized cash fund reserves.

The office and the administrator are required to annually report to the general assembly regarding the facility credit and the loan loss credit and may, after soliciting advice from the department of revenue and quantum industry participants, create and modify policies and procedures as necessary to implement the facility credit or the loan loss credit, as applicable.

(Note: This summary applies to this bill as introduced.)