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How to Apply for the Colorado Brownfields Tax Credit

Brownfields Tax Credit

In 1994, the Colorado General Assembly passed the Voluntary Cleanup and Redevelopment Act (the Act or 25-16-301 et seq. CRS) (Exit to Michie's Legal Resources).  The Act was designed to provide owners wishing to develop property with a timely state review of site characterization data and proposed cleanup plans. The state’s determination that either the cleanup plan was adequate, or that no cleanup was necessary, could then be used by the owner to bound the environmental liability at the site. Since its inception, over 250 properties have received state approval under the program. The “Voluntary Cleanup Roadmap”, which is available from the Colorado Department of Public Health and Environment, provides guidance on the application procedure and requirements of the program.

As part of Governor Owens’ smart growth initiative, the Colorado General Assembly passed a Brownfields Tax Credit (this has been extended to the end of 2010) as an added incentive to develop formerly used and possibly contaminated properties (Brownfields). The bill provided an income tax credit of up to $100,000 to offset cleanup costs and make the redevelopment of such properties more financially viable. In summary, the bill:

  • Provides a Colorado income tax credit for companies that redevelop contaminated property.

  • Is especially important for marginal redevelopment opportunities, where the tax credit will hopefully provide sufficient incentive to develop these formerly used properties, rather than contribute to urban sprawl by developing new areas. 

  • Provides a maximum credit of $100,000 per property, broken down as 50 percent of the first $100,000 spent on cleanup, 30 percent of next $100,000 and 20 percent of third $100,000.

  • Requires the property be located in a municipality with a population of 10,000 or more persons. 

  • Requires that the property be eligible for inclusion under the state’s Voluntary Cleanup and Redevelopment Act (C.R.S. 25-16-303(3)(b)).

How Do I Apply for the Tax Credit?

The following multi-step process includes everything from beginning to end that would be necessary to obtain the tax credit.

  1. Submit a cleanup application to the Colorado Department of Public Health and Environment’s Voluntary Cleanup Program.

  • The “Roadmap” guidance document will provide you with a copy of the statute, and information about what needs to be contained in the application.

  • The State has 45 days to perform its review.

  • The applicant receives an approval letter for the proposed plan.

  1. Perform Cleanup

  • The applicant has 1 year to start the cleanup action, and a total of 2 years to complete the action.

  1. Submit Completion Report and Request for Tax Credit

  • The applicant includes all cost information related to the cleanup portion of the development project, including invoices as verification of these expenses. Group the invoices by the phase of the overall cleanup project (i.e. assessment, cleanup, governmental interaction) and provide a short narrative of each phase (e.g. number of wells, type of cleanup, meeting dates with government).

  • The Department has 45 days to review the report. For purposes of the tax credit, the date the completion report is received by the Department may be used to determine the tax year for which the credit can be applied.

  1. Receive Certification from the Department of Public Health and Environment

  • The Department will provide a letter certifying that the cleanup has been completed, and stating the amount of costs that are approved to calculate the tax credit.

  1. File Colorado income tax return

  • The applicant files a Colorado income tax return and includes the Brownfield tax credit on Form 104CR, line 6(k) (individuals), Form 112CR, line 83 (corporations), or Form 106CR, line 40 (partnerships).

The applicant must include the certification document with the tax return.

See Department of Revenue “FYI” for Income Tax, No.42 for more information about this tax credit

What Costs Are Eligible?

- Only cost incurred after January 1, 2000

- Direct cleanup costs

- Permitting costs specifically required as a result of the cleanup actions

- Other administrative costs related to cleanup (i.e. implementation of a Health and Safety plan)

- Cleanup monitoring and verification.

What Costs are Not Allowed?

- Costs incurred before January 1, 2000

- Overhead

- Costs of permits that would have been required even if the site was clean

- Costs to prepare completion and tax credit application report

Can I split the cleanup costs and apply over multiple years?

No. The tax credit can only be applied to eligible project costs at the completion of the cleanup plan. It is a one-time application. However, if your total tax credit exceeds the amount of your taxes, the residual credit may be rolled forward into the next tax year(s).

For More Information:

If you have any other questions or need additional information about the Voluntary Cleanup Program or the Brownfields income tax credit, contact Jeff Deckler at (303) 692-3387, Dan Scheppers at (303) 692-3398, or Fonda Apostolopoulos at (303) 692-3411. Or send an email to comments.hmwmd@state.co.us .