Small Business Recovery Loan Program Premium Tax Credits
The state treasurer is authorized to enter into a contract or contracts to establish a small business recovery loan program (loan program). The purpose of the loan program is to assist the state's recovery from the COVID-19 pandemic by leveraging private investment for loans to Colorado small businesses recovering from the COVID-19 crisis. The treasurer is authorized to contract with the Colorado housing and finance authority or a private entity selected through an open and competitive process.
Subject to the availability of proceeds from insurance premium tax credit purchases, the state treasurer may invest up to $30 million in first loss capital from the small business recovery fund established in the act in fiscal year 2020-21, and up to $30 million in first loss capital in fiscal year 2021-22; except that the total invested across both fiscal years may not exceed $50 million. The investments must be made in tranches of no more than $10 million each. Each tranche must be matched at a 4-to-1 ratio by money invested from other sources before it is committed or deployed. Once the money in a tranche is matched, it must be used to make loans of working capital to Colorado businesses with between 5 and 100 employees that meet eligibility criteria. The loans must be between $30,000 and $500,000, with a maturity of up to 5 years. The state treasurer may not invest a new tranche of state money until the prior tranche is at least 90% invested in small business loans.
When each tranche is deployed, it is subject to an initial period of time in which a portion of the money is allocated to each county on a basis proportionate to the county's share of small businesses or small business employees relative to the state, or a similar metric, or based on a formula that accounts for how affected each county has been by the COVID-19 pandemic. During this time period, the money allocated to the county is reserved for eligible borrowers located in that county. After the initial period of time passes, the money remaining in the tranche is available on a statewide basis.
The small business recovery loan program oversight board (oversight board) is created in the department of the treasury (department). The oversight board consists of the state treasurer, the director of the minority business office on behalf of the office of economic development, a member appointed by the speaker of the house of representatives, a member appointed by the president of the senate, and a member appointed by the governor. The oversight board consults with the treasurer on the selection of a loan program manager, establishes certain terms and criteria applicable to the loan program in consultation with lending industry leaders and small business representatives, and provides oversight and guidance to the loan program to ensure it complies with statutory requirements and fulfills the purpose of assisting Colorado small businesses recovering from the COVID-19 crisis. The loan program manager must report on a quarterly basis to the oversight board. The oversight board must file written reports with the joint budget committee twice each fiscal year, and must report once each fiscal year for the first 2 years to the business committees of the house and senate.
The department is authorized to issue insurance premium tax credits to insurance companies that are authorized to do business in Colorado and incur premium tax liability, subject to procedures established by the department. The department may contract or consult with an independent third party to manage the bidding process. The department is required to issue a tax credit certificate to each successful purchaser. The department is authorized to issue up to $40 million in tax credit certificates in fiscal year 2020-21. The department is authorized to issue up to an additional $28 million in tax credits in fiscal year 2021-22, unless an equivalent amount of federal money is appropriated or allocated to the program.
A qualified taxpayer may claim the tax credit against its premium tax liability. For a tax credit certificate issued in fiscal year 2020-21, the qualified taxpayer may claim up to 50% of the credit in calendar year 2026, and may claim the remaining amount of the credit beginning in calendar year 2027. For a tax credit certificate issued in fiscal year 2021-22, the qualified taxpayer may claim the credit beginning in calendar year 2028. The amount of the credit claimed cannot exceed the taxpayer's premium tax liability for a given year. The unused amount carries forward and may be claimed in subsequent years; except that a credit cannot be claimed for premium tax liability incurred in a taxable year that begins after December 31, 2031.
The act creates the small business recovery fund in the treasury. The fund consists of tax credit sale proceeds, any revenues, disbursements, or money returned to the state from the loan program, and any other money the general assembly appropriates or transfers to the fund. The money in the fund is continuously appropriated to the department to implement the loan program and to pay for the department's direct and indirect costs in administering the loan program and in issuing the tax credits. Beginning in fiscal year 2025-26, the treasurer must credit any unexpended and unencumbered money remaining in the fund at the end of a fiscal year to the general fund. The fund is repealed on July 1, 2029, and all unexpended and unencumbered money remaining in the fund is transferred to the general fund.
(Note: This summary applies to this bill as enacted.)