Colorado R&D Tax Credit Overview for Businesses

Colorado and the R&D Tax Credit

The Colorado R&D credit is generated from qualified research activities (QRAs) performed within the state.

State Credit Name: Research and Development Income Tax Credit for Enterprise Zones

Expiration Date: Permanent

Who Can Apply? Corporations and flow-through entities

Credit Carry Forward: Unlimited carry forward, but no carry back.

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Special Notes: The credit rate is 3% and the dollar limit that is imposed on the amount of expenses that can qualify is 25% of the amount of the credit. Taxpayers can claim the remaining 75% in 25% increments over the next 3 years. Unlike most state research credits, the qualifying research activities do not have to be performed within Colorado.

The Colorado research credit only adopts one of the requirements in the federal definition of qualified research activities, being that the expenses meet the definition of research and experimental expenditures. The credit does not require taxpayers to be able to currently deduct their R&E expenditures, which allows taxpayers to claim the credit for research activities that would not qualify for the federal research credit.

The R&D Tax Credit is a credit that is available across various industries, such as:

Agriculture
Automotive
Aviation
Biotechnology
Engineering
Farming
Food and Beverage
Logistics
Manufacturing
Oil and Gas
Software
Transportation

Process improvement activities include:

Identifying uncertainty concerning the development or improvement of a business component;
Identifying one or more alternatives intended to eliminate that uncertainty; and
Identifying and conducting a process of evaluating the alternatives (e.g., through modeling, simulation, or a systematic trial-and-error methodology).

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Swanson Reed is one of the only companies in the United States to exclusively focus on R&D tax credit preparation. Swanson Reed’s office location at 10180 East Colfax Avenue, Aurora, Colorado provides R&D tax credit consulting and advisory services to Denver, Colorado Springs, Aurora, Fort Collins, Lakewood, Thornton, Arvada, Westminster, Pueblo and Centennial.

If you have any questions or need further assistance, please call or email our local Colorado Partner on (720) 808-0229.
Feel free to book a quick teleconference with one of our Colorado R&D tax credit specialists at a time that is convenient for you. Click here for more information about R&D tax credit management and implementation.

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Colorado R&D Tax Credit Filing instructions

To claim the Research and Development (R&D) tax credit in Colorado, businesses must generally be located within an Enterprise Zone (EZ). The process involves a multi-step approach through the Colorado Office of Economic Development and International Trade (OEDIT) portal. First, businesses must pre-certify their eligible activities annually on the OEDIT application portal, ideally in advance of the tax year or at least within the tax year for which the credit is sought. After the eligible activities have taken place, a certification application must be completed and approved by the local Enterprise Zone Administrator through the same portal. Once the certification is approved, OEDIT will issue a tax credit certificate. This certificate, along with Colorado Department of Revenue Form DR 1366, “Enterprise Zone Credit and Carryforward Schedule,” must then be submitted with your Colorado income tax return. Note that for tax years beginning on or after January 1, 2012, original or amended income tax returns claiming an enterprise zone credit must generally be filed electronically.

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Colorado Patent of the Year – 2024/2025

Maybell Quantum Industries Inc. has been awarded the 2024/2025 Patent of the Year for their groundbreaking work in quantum cooling. Their invention, detailed in U.S. Patent No. 11946680, titled ‘Integrated dilution refrigerators’, promises to revolutionize the way ultra-low temperatures are achieved in quantum computing and other cutting-edge technologies.

The integrated dilution refrigerator technology allows for more efficient and compact cooling systems, which are crucial for the operation of quantum computers. These refrigerators are used to cool components to near absolute zero, a critical temperature range for quantum systems to function. Maybell Quantum’s design integrates the cooling process into a single system, reducing the complexity and size of existing solutions, while improving energy efficiency.

This innovation is expected to make quantum computing more accessible and affordable by lowering costs and streamlining cooling infrastructure. Researchers and developers in the field of quantum information processing will benefit from this advancement, as it eliminates the need for bulky, multi-component refrigeration units.

Maybell Quantum’s invention could also have broader implications beyond computing, potentially influencing fields like cryogenics and medical research, where precise low temperatures are essential. With this new patent, Maybell Quantum Industries is setting the stage for significant strides in the future of quantum technology.