State-of-the-art technology is no longer reserved for high-end corporations, secret government agencies, and sci-fi movies. Invisible “clouds” and “streams” of data have enveloped our analog world; virtual reality has blurred the border of actual reality; and lifeless, nonhuman eyes watch us wherever we go. Every day, many of us interact with the ‘latest and greatest’ technology, with devices and processes that even a few years ago weren’t yet possible.
And technology’s development continues to advance at an unprecedented speed as the industry grows. Just check out these stats:
- Tech jobs are expected to grow 13.1% by 20261
- In 2018, the tech industry delivered an estimated $1.8 trillion economic impact1
- It contributed an approximate 10% direct economic value of the U.S. economy1
A booming economy, with 2.9 percent growth in 2018 has helped nourish the tech industry’s proliferation. Low 3.6 percent unemployment, favorable tax rates, and an educated workforce also deserve some thanks.
At the Peak
And Colorado, particularly Denver, appears to be at the peak of this tech boom. The Milken Institute’s 2018 State Technology and Science Index ranked Colorado at number two in a survey that evaluates states’ “science and technology capabilities that contribute to firm expansion, high-skills job creation, and economic growth.” The geographically small state of Massachusetts secured first ranking, California pushed in at number four.
Fresh Powder
But what is Denver’s particular appeal, an appeal powerful enough to divert tech startups away from the archetype of Silicon Valley? For starters, tech businesses haven’t saturated the city like in San Francisco.
In Denver, you’re likely to find a microbrew pub and ski shop flanking a software development suite. Colorado’s capital also offers an inviting quality of life; mountains of young, educated tech talent; plentiful resources; a collaborative atmosphere; and business-accommodating infrastructure.
Mile High City, Really Low Taxes
But Denver isn’t the only city attracting tech companies in Colorado. The businesses are flocking to Colorado Springs, Fort Collins, and Boulder, to name a few.
Perhaps they’re also descending upon the state for its alluring business-friendly tax credits, incentives, a low corporate tax rate of 4.63 percent, and the fourth-lowest flat income tax rate in the country, also 4.63 percent.
For contrast on the corporate tax, some states appropriate as much as $9.38 for every $1,000 of corporate income, CO taxed just $2.17 as of fiscal year 2016.
Learn More about Decreasing Small Business Tax Liability with the R&D Tax Credit
Not Their First Rodeo
In the land of the world’s first rodeo, the job growth incentive program grants income tax credits to businesses that create jobs in enterprise zones and economically hindered areas, and for jobs the state wouldn’t otherwise hold. It also offers tax credits for new business development, relocation, and expansion.
And there’s another, perhaps lesser-employed, tax incentive that tech companies can saddle up for significant savings: The Federal Credit for Increasing Research Activities – or commonly, the R&D tax credit.
The government awards a dollar-for-dollar reduction in federal tax liability to businesses that increase research and development activities and spending to invent or advance products, process, techniques, inventions, formulas, or software.
The state itself also offers a 3 percent R&D tax credit for companies that pursue increased R&D and spending in designated enterprise zones.
Roping It In
As Colorado technology companies continue to evolve technology and strive to discover the next greatest process, device, or solution, they shouldn’t forget about the Rockies-sized bounty of tax credits incentives and credits to help fund their quest.
Seeking the help of a tax professional, who is well-versed in specific tax issues, such as the R&D tax credit, is a great way to ensure they don’t miss out on optimal tax savings, increased revenue, and thus more money to invest into the business.
1. Denver’s Tech Boom: How One City is Building the Next-Generation of Thriving Businesses, WeWork, 2019