The Colorado Economic Development Commission on Thursday approved the first two awards under a program the legislature passed in May to boost semiconductor and other advanced manufacturing capacity in the state, opening the door for more federal dollars to flow into the state.

The CHIPS and Science Act authorizes $280 billion to help boost the country’s competitiveness in semiconductors and other key technologies vital to national security, including a 25% federal tax credit for the capital investments made to build a chip plant or expand capacity domestically.

But for companies to qualify for federal tax breaks, they must show that state and local governments have stepped forward with financial support as well. If companies can’t claim the tax breaks a state is offering, say because they are losing money as production gets ramped up, the federal government won’t consider that a genuine local contribution.

The Colorado legislature in May passed House Bill 23-1260 to boost advanced manufacturing in the state. The legislation created the CHIPS Refundable Tax Credit program to allow companies to convert tax credits from the existing Enterprise Zone and the Job Growth Incentive Tax Credits programs, which aren’t refundable, into hard cash via tax refunds.

The program allows up to $50 million in refundable tax credits to be issued per year over five years, with requests vetted by the Colorado Office of Economic Development and International Trade. The first two years of the program will focus on boosting semiconductor capacity with other advanced manufacturers eligible in the following years.

Project Hydrogen, the code name for a public company with 1,000 employees in Colorado Springs making chips with applications in aerospace and defense, received approval for $10 million in refundable tax credits, of which 80% or $8 million can be claimed in cash.

The Colorado Economic Development Commission on Thursday approved the first two awards under a program the legislature passed in May to boost semiconductor and other advanced manufacturing capacity in the state, opening the door for more federal dollars to flow into the state.

The CHIPS and Science Act authorizes $280 billion to help boost the country’s competitiveness in semiconductors and other key technologies vital to national security, including a 25% federal tax credit for the capital investments made to build a chip plant or expand capacity domestically.

But for companies to qualify for federal tax breaks, they must show that state and local governments have stepped forward with financial support as well. If companies can’t claim the tax breaks a state is offering, say because they are losing money as production gets ramped up, the federal government won’t consider that a genuine local contribution.

The Colorado legislature in May passed House Bill 23-1260 to boost advanced manufacturing in the state. The legislation created the CHIPS Refundable Tax Credit program to allow companies to convert tax credits from the existing Enterprise Zone and the Job Growth Incentive Tax Credits programs, which aren’t refundable, into hard cash via tax refunds.

The program allows up to $50 million in refundable tax credits to be issued per year over five years, with requests vetted by the Colorado Office of Economic Development and International Trade. The first two years of the program will focus on boosting semiconductor capacity with other advanced manufacturers eligible in the following years.

Project Hydrogen, the code name for a public company with 1,000 employees in Colorado Springs making chips with applications in aerospace and defense, received approval for $10 million in refundable tax credits, of which 80% or $8 million can be claimed in cash.

The company is expecting to invest $869 million to expand its existing plant capacity and build new production lines, generating an estimated 371 jobs in the process. The new jobs are expected to pay around $75,000 a year on average, said Dan Salvetti, semiconductor industry manager at OEDIT.

Project Hydrogen expects to receive $22.6 million in Enterprise Zone Tax Credits from the state over eight years, plus another $15 million in local incentives from Colorado Springs and other local groups for those expansions.

Project Hydrogen requested the full amount of its state Enterprise Zone award in refundable credits, but received approval for 44% of its request.

Salvetti said the refundable credits open the door for Project Hydrogen to receive 16 times as much assistance in federal funding under the CHIPS Act for the investments it plans to make. The award works out to $109 in capital investment by the company for every $1 Colorado is extending, $3 in wage impacts per dollar extended and translates into $21,563 in state spending per job created.

“We really appreciate the state for this new incentive,” said Rodney, a representative for Project Hydrogen, who only provided his first name.

A second refundable tax credit worth $3.3 million, including $2.64 million that can be claimed in cash refunds, was extended to another Colorado Springs company known as Project Helium. The company has been in Colorado Springs for three decades and has 300 employees there making equipment and providing materials used in semiconductor manufacturing.

The company is seeing strong demand as more chip production comes back into the U.S. and is looking to invest $720 million to build a new plant in Colorado Springs and create 600 new jobs paying an average annual wage of $69,100.

The company received approval for $10.7 million in Enterprise Zone Tax Credits earlier and about 31% of that amount was converted into refundable tax credits, in part because the commission had extended $2.8 million from the state’s Strategic Fund back in 2022.

Between the refundable tax credit just awarded and the Strategic Fund award, the state is opening the door to $17 in federal funding for every $1 extended in state cash. It is receiving $111 per dollar extended in capital spending and $6 in wage impacts. The two incentives work out to $10,668 per job created, Salvetti said.

Depending on how many other refundable tax credit awards are extended and how much of the program’s cap is used up, OEDIT and the EDC could in future years go back and boost the awards to the two companies up to the initial amount they requested, Salvetti said.

“We still have several other companies looking at this program. We have been trying to find a balance between getting this funding out and making sure we are incentivizing the project we want to incentivize,” he told commissioners.

By: DocMemory
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