Note: The Economic Development Commission provides approval and oversight of this program; program requirements and definitions are subject to change, and the EDC may require additional contingencies for projects upon approval.
The CHIPS Zone Program was created through House Bill 23-1260 to maximize incentives available to eligible semiconductor companies in Colorado. Municipalities, counties, and groups of the two may apply through the Colorado Office of Economic Development and International Trade to the Economic Development Commission (EDC) to designate a geographical area within its governance as a CHIPS Zone. Applying entities must provide the boundaries of the area to be designated, along with estimated benefits and an economic justification of the zone. The preference for CHIPS Zone applications is for project based proposals that are delimited by a specific parcel of land or a building; larger areas will be considered based on the strategic advantages as explained by the applicant. Once approved, taxpayers engaged in semiconductor manufacturing in the CHIPS Zone can access the following state income tax credits from the Enterprise Zone program:
- Qualified investment tax credit
- Job training Tax Credit
- Commercial Vehicle Investment Tax Credit
- Business facility new employee tax credit
- Research and development tax credit
A company must have a precertification that is submitted and approved by the CHIPS Zone administrator before any credits may be earned. All such credits may be used to offset a taxpayer's liability or carried forward for a period not to exceed 12 years.
Note: If a business is already located in an Enterprise Zone, they do not need to be incorporated into a CHIPS Zone and should follow the guidelines to receive EZ tax credits. However, businesses must separately and additionally apply for any CHIPS Refundable Tax Credits whether they are located in an Enterprise Zone or a CHIPS Zone. Businesses must obtain EDC approval for any refundable tax credits prior to precertification.
For: Municipalities and counties
Application period: Rolling
OEDIT division: Global Business Development
Local governments seeking CHIPS Zone designations must reach out to the Semiconductor Industry Manager to obtain an application, which will be accepted on a rolling basis.
CHIPS Zones minimum application elements:
- Applicant Information (C.R.S. 39-36-104(1)(a))
- Governments involved in application
- Point of contact
- Boundaries of the Proposed Zone (C.R.S. 39-36-104(1)(b)(I))
- Qualitative description
- Attached copy of deed description
- Attached copy of property line map
- Potential for Business Development & Job Growth (C.R.S. 39-36-104(1)(b)(II))
- Qualitative description
- Affected companies
- Anticipated expansion estimates (capex, sq ft, output, etc)
- Anticipated net new jobs
- Support & Consistency with Area Economy (C.R.S. 39-36-104(1)(b)(III))
- Qualitative description
- Attachment supporting vision (optional)
- Other Information (C.R.S. 39-36-104(1)(b)(IV))
- Resolution(s) from all affected governments
Each zone must have economic development objectives with outcomes that can be measured and documented for future reporting.
Upon receipt of the application, an OEDIT representative will present the proposed zone to EDC. OEDIT has the statutory authority to provide recommendations to that effect. The EDC has statutory authority to approve or deny the application.
The CHIPS Zone Administrator will review all CHIPS Zones every five years to evaluate CHIPS Zones to assess any zones in which no companies have precertified or claimed credits and recommend whether or not these Zones should expire in consultation with the EDC.
Communities may request a renewal of the Zones for an additional five-year period on the condition that they provide documentation or evidence to establish the necessity of the Zone’s continued existence for their economy or community.
CHIPS zones may be modified or terminated at the discretion of the EDC between income tax years 2023 and 2040; however, all CHIPS zones will terminate as a matter of law on December 31, 2040.
Taxpayers in semiconductor manufacturing - defined as “the fabrication, assembly, testing, advanced packaging, production, or research and development of semiconductors, materials used to manufacture or enhance semiconductors, or semiconductor manufacturing equipment” - can claim the EZ tax credits listed in the next section.
Enterprise Zone New Employee Tax Credit
$1,100 or more per net new employee
Businesses can earn a state income tax credit of $1,100 per net new employee. Businesses can earn more tax credits if the business is an agricultural processor or is in an enhanced rural enterprise zone. This tax credit encourages businesses to hire and expand employment opportunities, thus reducing unemployment rates. State and local governments benefit from income and sales tax revenue generated from these employees.
Enterprise Zone Research and Development Tax Credit
3% of an increase in research and development expenses
Businesses can earn a 3% tax credit for an increase in annual research and development expenses compared to what they spent the prior two years. Investment in research and experimentation supports an innovative economy. A research and development focused business that sells products, services, or intellectual property will bring outside dollars to the local economy.
Enterprise Zone Investment Tax Credit
3% of business personal property investment
Businesses can earn a state income tax credit for 3% of an investment in business personal property. New business personal property increases a company’s capacity. The taxes a business pays on these purchases far exceed all tax credits under the enterprise zone program.
- Commercial Vehicle Investment Tax Credit which provides a credit of 1.5% on commercial truck, truck tractor, tractor, or semitrailer with a gross vehicle weight rating of fifty-four thousand pounds or greater that is model year 2010 or newer and is designated as Class A personal property.
- Job Training Tax Credit which provides a 12% tax credit of the total investment made during the taxable year in a qualified job training program.
OEDIT is working to deploy additional resources in support of the semiconductor ecosystem, including assistance programs, directories, and informational materials. These resources will soon be available on a dedicated website.