Colorado Industrial Tax Credit Offering

In May 2023, Governor Polis signed House Bill 23-1272 Tax Policy That Advances Decarbonization, which authorizes the Colorado Energy Office (CEO) to provide financial assistance through refundable tax credits for the exploration and implementation of eligible industrial greenhouse gas emission reduction projects in Colorado. The Colorado Industrial Tax Credit Offering (CITCO) will be a competitive, refundable tax refund administered through CEO. A total of $168 million in tax credits will be available over the program’s nine-year duration, through December 31, 2032.

Contact information
Wil Mannes, wil.mannes@state.co.us

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Type: Refundable tax credit

For: Industrial facilities (see Eligibility section below)

Amount: $168 million total

Match: Varies, amounts may be project and/or applicant-type specific

Program Length: Until funding is expended, or until December 31, 2032

RFA rounds: Semi-annual, closing on June 30 and December 31 of each year, with the first round expected to open in spring 2024

Eligible applicants

Industrial Facilities, as defined by the legislation:

“Any real property in the state, and the machinery or equipment on the real property, where the principal trade or business activity is the mechanical or chemical transformation of organic or inorganic substances into new products, characteristically using power-driven machines and materials handling equipment… Does not include a landfill, an electric utility subject to regulation by the Public Utilities Commission, or an upstream or mid-stream oil and gas operation.”

Eligible project types

  • Industrial Studies, including energy and emissions audits,  feasibility studies, or front-end engineering and design studies meeting CITCO’s standards (to be determined).
  • Improvements that help measurably reduce greenhouse gas emissions, including:
    • Replacing fossil-fuel-powered off road equipment, such as forklifts and construction equipment, with electric equipment
    • Replacing fossil-fuel-fired equipment for space or water heating or industrial process heating with high-efficiency electric equipment
    • Replacing fossil-fuel-fired or compressed air-driven industrial process equipment with high-efficiency electric equipment
    • Placing in service advanced refrigeration systems that reduce greenhouse gas emissions
    • Placing in service waste heat recovery technology
    • Upgrading or implementing energy monitoring systems
    • Installing high efficiency electric pumps, motors, compressors, and lighting
    • Installing variable volume or load efficiency equipment
    • Installing carbon capture equipment that demonstrates a net reduction in greenhouse gas emissions and provides a permanent durable carbon storage plan; the captured carbon may not be used for enhanced oil recovery
    • Installing equipment used for collection of biomethane
    • Replacing fossil-fuel-fired equipment with hydrogen fueled equipment
    • Installing hydrogen fueling stations for fuel cell vehicles at industrial facilities
    • Converting fossil-fuel-powered pumps, compressors, and controllers to compressed air-driven or electric-driven pumps, compressors, and controllers
    • Installing onsite energy storage
    • Installing or upgrading to utility service feed equipment to directly support the implementation of any of the electrification improvements
    • Placing in service carbon management systems including direct air capture and other forms of carbon dioxide removal
    • Material substitutions within industrial processes to reduce industrial process greenhouse gas emissions by a minimum of 15% percent when compared to existing production practices; and
    • Other similar improvements as established in CITCO’s standards (to be determined)

Please Note: The office may reserve credits for the current or any future tax year based on the anticipated completion or in-service date indicated in the entity's application. However, credits may not be reserved for studies or projects completed before the end of the application and approval process.

A total of $168 million in refundable tax credits is available to eligible entities over the next nine years. Each RFA round will outline a specific minimum amount of tax credits available to applicants during that RFA cycle.

Minimum & Maximum Funding Awards:

  • Industrial Study: up to 30% of approved costs, not to exceed $1 million
  • Improvements: up to 30% of approved capital costs, not to exceed $5 million (does not include design costs)
    • Applicant must request a tax credit of at least $75,000 for project capital costs
    • CEO may increase cost coverage to 50% in select cases based on innovation standards that have not yet been finalized

Applicants who meet program criteria and eligibility will submit applications and all required supporting documents during RFA cycles. The first request for application round is scheduled to open in April 2024.

An evaluation committee will review and score applications using formally established criteria. The criteria have not yet been determined.

CEO will notify awardees of the awarded tax credit amount and the income tax years when the awarded tax credit will be available. Awardees will report their associated study or improvement expenses to CEO through regular reporting methods. CEO will provide a tax credit certificate for the awardee to file with the Colorado Department of Revenue during their tax filing period. If the credit exceeds the income tax due for the taxpayer, the excess credit will be refunded.