C.R.S. § 39-22-557 — Clean hydrogen tax credit - qualified uses - tax preference performance statement - definitions - legislative declaration - repeal

(1) (a) In accordance with section 39-21-304 (1), which requires each bill that creates a new tax expenditure to include a tax preference performance statement as part of a statutory legislative declaration, the general assembly finds and declares that the purpose of the tax credit provided in this section is to induce certain designated behavior by taxpayers. Specifically, the tax expenditure is intended to provide tax relief for certain businesses or individuals for purposes of encouraging them to engage in certain qualified uses of clean hydrogen. (b) The general assembly and the state auditor shall measure the effectiveness of the credit in achieving the purpose specified in subsection (1)(a) of this section based on the information required to be maintained by and reported to the state auditor by the office pursuant to subsection (4)(b) of this section. (2) As used in this section, unless the context otherwise requires: (a) Clean hydrogen has the meaning set forth in section 40-2-138 (1)(a). (b) Department means the department of revenue. (c) Hard to decarbonize end use has the meaning set forth in section 40-2-138 (1)(e). (d) Lifecycle greenhouse gas emissions rate means lifecycle greenhouse gas emissions, as defined in 26 U.S.C. sec. 45V (c)(1)(A), as amended, measured in accordance with any applicable federal internal revenue service regulations or guidance, subject to the rules adopted by the public utilities commission pursuant to section 40-2-138 (3)(a)(II). (e) Office means the Colorado energy office created in section 24-38.5-101. (f) Qualified use has the meaning set forth in section 40-2-138 (1)(i). (g) Taxpayer means a person subject to tax pursuant to this article 22 or a person or political subdivision of the state that is exempt from tax pursuant to section 39-22-112 (1). (h) Tier one greenhouse gas emissions rate means a qualified use of hydrogen that results in lifecycle greenhouse gas emissions rates that are within the range set forth in 26 U.S.C. sec. 45V (b)(2)(D), as amended. (i) Tier two greenhouse gas emissions rate means a qualified use of hydrogen that results in lifecycle greenhouse gas emissions rates that are within the range set forth in 26 U.S.C. sec. 45V (b)(2)(C), as amended. (3) (a) Subject to the limitations set forth in subsection (3)(b) of this section, for income tax years commencing on or after January 1, 2024, but before January 1, 2033, a taxpayer is allowed a credit against the income taxes imposed by this article 22 in an amount equal to: (I) One dollar per kilogram of clean hydrogen used for a qualified use that results in a tier one greenhouse gas emissions rate in the income tax year; or (II) Thirty-three cents per kilogram of clean hydrogen used for a qualified use that results in a tier two greenhouse gas emissions rate in the income tax year. (b) In order to claim the credit, the taxpayer must annually apply for and receive a tax credit certificate from the office pursuant to subsection (4) of this section. If the office determines that an applicant is not entitled to a tax credit certificate under this section, the office shall notify the applicant of its disapproval in writing. (c) (I) For income tax years commencing on and after January 1, 2024, but before January 1, 2026, and not before the public utilities commission adopts rules pursuant to section 40-2-138 (3)(a)(II), the office shall not issue a tax credit certificate to a taxpayer indicating eligibility for a tax credit for an amount exceeding one million dollars in a tax year. (II) For income tax years commencing on and after January 1, 2026, but before January 1, 2029, the office shall not issue a tax credit certificate to a taxpayer indicating eligibility for a tax credit for an amount exceeding five hundred thousand dollars in a tax year. (III) For income tax years commencing on and after January 1, 2029, but before January 1, 2033, the office shall not issue a tax credit certificate to a taxpayer indicating eligibility for a tax credit for an amount exceeding two hundred fifty thousand dollars in a tax year. (4) (a) (I) A taxpayer shall submit an application to the office for a tax credit certificate to claim the credit allowed by this section on a form and in a manner prescribed by the office. The application must include information to allow the office to make a determination that the use is a qualified use and that the hydrogen used meets the definition of clean hydrogen pursuant to subsection (2)(a) of this section and to verify the amount for which the tax credit certificate is applied. A taxpayer is entitled to receive one tax credit certificate per income tax year. (II) The application described in subsection (4)(a)(I) of this section must also include verification from the hydrogen producer passed to the user at the point of sale that the hydrogen used meets the definition of clean hydrogen pursuant to subsection (2)(a) of this section. (b) (I) The office shall maintain a database of any information determined necessary by the office to evaluate the effectiveness of the income tax credit allowed in this section in meeting the purpose set forth in subsection (1)(a) of this section and shall provide such information, and any other information that may be needed, if available, to the state auditor as part of the state auditor's evaluation of this tax expenditure required by section 39-21-305. (II) The office shall, in a sufficiently timely manner to allow the department to process returns claiming the income tax credit allowed in this section, provide the department with an electronic report for the preceding tax year listing each taxpayer to which the office issued a tax credit certificate and that includes the following information: (A) The taxpayer's name; (B) The amount of the income tax credit that the certificate indicates the taxpayer is eligible to claim; and (C) The taxpayer's social security number or the taxpayer's Colorado account number and federal employer identification number. (III) The office shall develop standards for the qualified uses for which an income tax credit under this section is allowed. The office shall post the standards on the office's website. (5) In order to claim the credit authorized by this section, a taxpayer shall file the tax credit certificate with the taxpayer's state income tax return, and, if the taxpayer is exempt from tax pursuant to section 39-22-112 (1), the taxpayer shall file a return pursuant to section 39-22-601 (7)(b). The amount of the credit that the taxpayer may claim pursuant to this section is the amount stated on the tax credit certificate. (6) If an income tax credit authorized in this section exceeds the income tax due on the income of the taxpayer for the taxable year, the excess credit may not be carried forward and must be refunded to the taxpayer. (7) This section is repealed, effective December 31, 2036. Source: L. 2023: Entire section added, (HB 23-1281), ch. 237, p. 1279, § 3, effective August 7. L. 2024: (2)(d) and (3)(c)(I) amended, (SB 24-214), ch. 191, p. 1106, § 19, effective May 17. Cross references: For the legislative declaration in HB 23-1281, see section 1 of chapter 237, Session Laws of Colorado 2023.