The Enterprise Zone Employer-Sponsored Health Insurance Tax Credit encourages businesses in economically distressed communities to offer health insurance coverage to their employees.
If your business offers a qualified health insurance plan and you contribute at least 50% of the total cost of the health plan, your business can earn a tax credit of $1,000 per employee. This tax credit is available for only the first two full income tax years that your business is operating in an enterprise zone.
The Colorado legislature created the Enterprise Zone (EZ) Program to encourage development in economically distressed areas of the state. The 16 designated enterprise zones have high unemployment rates, low per capita income, or slow population growth.
Local enterprise zone administrators manage their respective enterprise zones.
We recommend reviewing the Enterprise Zone Income Tax Credit Guide for the complete eligibility requirements.
Type: Tax credit
For: New businesses during their first two year of operating within an enterprise zone
Amount: $1,000 per net new employee
Application deadline: Rolling
OEDIT division: Business Funding and Incentives
To use this map, type in your address in the top left-hand corner. You may need to scroll out to identify whether or not you are located within an enterprise zone. If your location is highlighted in a color, you are located in an enterprise zone. If your location is in a checkered colored area, it is located in an enhanced rural enterprise zone.
Both new and existing businesses located in enterprise zones may qualify for the credit. For businesses that open in the middle of a tax year, you will need to prorate the credit based on the number of full calendar months during the year that the business operated in the zone.
Businesses need to be legal under both state and federal law. For example, businesses in the marijuana industry do not qualify for this tax credit.
If your business has a facility and expands, you can claim the credit for the first two full income tax years that you operate in the enterprise zone – the credit is only available for qualified new employees and does not include employees who worked at the facility before any expansion
New employees qualify for this tax credit after you establish your business in an enterprise zone.
Your business is not eligible for this tax credit if you relocated a business operation from elsewhere in Colorado to the enterprise zone, even if you moved from one enterprise zone to another.
Your business can claim an income tax credit of $1,000 per net new employee for two full income tax years if your business:
- insures each new employee on your business’s health insurance plan or program
- contributes at least 50% of the total cost of the health insurance plan or program
Once you determine that your business is in an enterprise zone, there are three steps to claim this tax credit.
1. Complete the pre-certification application on the OEDIT application portal. You will need to pre-certify each business location. You will need to apply for pre-certification in advance of the activity that is eligible for the credit.
- Log in to your account or create a new account. To protect your personal information, we manually add new users to the portal, so it may take several days to activate your account. Review this Enterprise Zone Pre-certification How-To Guide (PDF).
- Pre-certify each year. You can pre-certify up to three months before the start of the business’ tax year. You can pre-certify at any time during the tax year; however the business is only eligible to earn enterprise zone tax credits for the period certified.
- The local enterprise zone administrator will review and approve your pre-certification application.
2. Complete the certification application on the OEDIT application portal.
- Log in to your account and fill out the certification application. Review this Enterprise Zone Certification How-To Guide (PDF).
- Activity conducted during the covered pre-certification period is eligible for enterprise zone tax credits.
- The local enterprise zone administrator will review and approve your certification application.
3. File Colorado income taxes and include certification documents.
- Once the certification application is approved by the local enterprise zone administrator, you will receive via email a tax credit certificate that you need to submit with your Colorado income tax return. You can also access the certificate in the OEDIT application portal. This certificate replaces Colorado Department of Revenue forms DR0074, DR0076, and DR0077.
- Complete and submit the Colorado Department of Revenue form DR1366 and the EZ Tax Credit Certificates with your Colorado income tax return.
- Partnerships need to also complete and submit the DR0078a for distribution of the credits.
Amend your enterprise zone record
If you misreported or need to modify your enterprise zone certification application, you can amend or reset your certification by submitting the amendment form. To amend or submit certification applications for years 2014 or earlier (formatted YY-XXXXXX) you need to use the Enterprise Zone Legacy Application System.
Transfer ownership of your enterprise zone record
If your business changed accounting firms, you will need to transfer your pre-certification and certification records. A business owner or authorized company official will need to submit the transfer form.
The number of employees is calculated by adding together the number of employees on the last business day of each month of the tax year and dividing the total by 12. The credit amount is available for all employees covered by a qualified health plan for two years only.
If the business is in operating for only part of its initial year of operations, the credit is not available for that partial year. The credit may be claimed the following two years when the business is operating for the full tax year.