HB 24-1125

HB 24-1125, which has been signed into law, introduces a new refundable tax credit in Colorado for converting commercial buildings into residential ones. This means that people who want to turn old office spaces or other commercial properties into homes can apply for financial help from the state starting January 1, 2026. The application process involves submitting plans and cost estimates to the Governor's Office of Economic Development, which will review them and decide if they qualify for up to $3 million in tax credits per project. To receive the credit, applicants must start their projects within 18 months and complete them by December 31, 2035. This bill aims to encourage more residential housing by repurposing existing commercial buildings, benefiting developers and potentially increasing affordable housing options.

Official Summary

The bill creates a new refundable tax credit to be claimed in tax years commencing on or after January 1, 2026, and before January 1, 2036. The credit may be claimed for certain costs related to the conversion of a commercial structure to a residential structure. In order to claim the credit, a person must submit an application, a conversion plan, and an estimate of the qualified conversion expenditures under the conversion plan (documents) to the governor's office of economic development (office). Within 90 days of receiving documents, the office shall review the documents, determine whether to reserve a tax credit for the applicant, and provide written notice to an applicant for whom the office determines to reserve a tax credit. The office may not reserve a tax credit in excess of $3 million for any one project and may not reserve more than $5 million of tax credits during any calendar year. If the office reserves less than $5 million in a calendar year, the office may reserve a total of $5 million plus the amount less than $5 million that the office did not reserve in the previous calendar year. An applicant for whom the office reserves a tax credit shall commence a conversion plan and incur 20% or more of the estimated qualified conversion expenditures (expenditures) within 18 months of receiving notice from the office that it is reserving a tax credit for the applicant. Such an applicant shall place in service the conversion set forth in a conversion plan on or before December 31, 2035. After an applicant has placed a conversion in service, the applicant shall notify the office and provide the office with documentation of the applicant's certification of the expenditures and a certified public accountant's review of the expenditures. Within 90 days of receiving this documentation, the office shall review this documentation and issue a tax credit certificate to the applicant in an amount equal to 25% of the expenditures. If, as of the last day of any taxable year within 15 taxable years from when the applicant placed a conversion in service, the structure that is the subject of the conversion plan is not a qualified residential structure, the qualified applicant shall add the full amount of the credit to its return as a recaptured credit for that taxable year. The bill requires the office, in consultation with the department of revenue, to submit an annual report to the general assembly on the impact of the tax credit and to promulgate any policies and procedures necessary to implement the tax credit. (Note: This summary applies to this bill as introduced.)

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