Regulation 39-35-104 –– Aircraft Manufacturer New Employee Income Tax Credit.
1) Credit. 
a) For tax years beginning on or after January 1, 2006, but prior to January 1, 2017, an income tax credit of $1,200 per employee is available to aircraft manufacturers located in a Colorado aviation development zone for hiring qualified new aviation zone employees. 
b) The excess credit is not refundable but may be carried forward for a period of up to five years. 
2) New Aviation Zone Employee. 
a) "Aviation zone employee" is a person who is employed by the taxpayer and whose primary place of work is in the operation of an aircraft manufacturer’s facility that is located in an aviation development zone. 
b) "New aviation zone employee" means an aviation zone employee who is hired by an aviation manufacturer at the manufacturer’s facility that employs ten or more employees, and such hire increases the overall employment at the facility above previous employment levels. 
c) A person shall be deemed to be so employed if he or she performs duties at the aviation manufacturer’s facility on a regular, full-time basis. Full-time is defined as working at least 35 hours per week. Part-time employees do not qualify as aviation zone employees. 
d) Leased employees.
i)	Prior to August 3, 2007, leased employees or employees from a temporary service do not qualify as aviation zone employees. 
ii)	On or after August 3, 2007, leased employees will qualify as aviation zone employees if the work-site employer withholds social security, Medicare, and income taxes under the work-site employer’s own federal and state taxpayer identification numbers.

3) Credit Computation.
a) The number of aviation zone employees at an aircraft manufacturer’s facility during a year is the average of the number of employees at the facility on the last business day of each month during the tax year. 
b) If an aircraft manufacturer relocates to an aviation development zone after January 1, 2006, the number of qualifying new aviation zone employees shall not include the average number of individuals employed in the operation of the previous facility during the two taxable years preceding the taxable year in which the move was made by the manufacturer. 
c) In the case of an aviation development zone facility that is already in operation on January 1, 2006, the number of qualifying new aviation zone employees shall not include the average number of individuals employed in the operation of the facility during the two taxable years preceding tax year 2006. 
d) In the case of an aviation development zone facility that is sold or otherwise transferred to a new owner, the number of qualifying new aviation zone employees shall not include the base number of employees utilized for the purposes of this credit by the previous owner. 
e) The aircraft manufacturer new employee credit is $1,200 times the increase in the average number of aviation zone employees for the tax year from the previous base number of employees at that facility. The base number will be the largest of: 
I) The highest average number of aviation zone employees in any previous tax year beginning on or after January 1, 2006; 
II) For a replacement facility, the average number of individuals employed in the operation of the previous facility during the two taxable years preceding the taxable year in which commercial operations begin at the new facility; 
III) For an existing facility, the average number of individuals employed in the operation of the facility during the two taxable years preceding tax year 2006. 
f) Example: 
I) Airmaker Company begins operations in an aviation zone in 2007. The average employment for 2007 is 8.4 employees. They do not qualify for a credit in 2007 because the number of new aviation zone employees for the year is less than ten. 
II) Airmaker Company’s average employment in the aviation zone increases to 13.5 in 2008. The 2008 credit is $6,120, computed by taking the difference between the 2008 average employment (13.5) and the base number of employees (8.4) times the $1,200 credit amount. 
III) Airmaker Company’s average employment in the aviation zone increases to 16.1 in 2009. The 2009 credit is $3,120, computed by taking the difference between the 2009 average employment (16.1) and the base number of employees (13.5) times the $1,200 credit amount. 
IV) Airmaker Company’s average employment in the aviation zone decreases to 15.4 in 2010. There is no credit for 2010 because the average number of aviation zone employees is less than the base number of employees. 
V) Airmaker Company’s average employment in the aviation zone increases to 17.5 in 2011. The 2011 credit is $1,680, computed by taking the difference between the 2011 average employment (17.5) and the base number of employees (16.1) times the $1,200 credit amount. Note that the base number of employees did not change as a result of the decrease in employment in 2010. 
g) Example: 
I) Wrongway Inc. moves an existing facility to an aviation development zone in March 2008. The number of full-time employees at the facility is as follows: 
	2006	2007	2008	2009	
Jan	23	26	31	37	
Feb	23	27	30	38	
Mar	24	25	30	36	
Apr	24	27	35	38	
May	23	28	35	39	
Jun	25	29	35	39	
Jul	25	30	33	39	
Aug	26	30	35	39	
Sep	26	30	36	39	
Oct	26	30	37	40	
Nov	26	30	37	39	
Dec	26	33	37	39	
TOTAL	297	345	411	462	
II) Wrongway Inc.’s average number of employees during the two tax years preceding the relocation is 26.75 [(297+345)/24], which becomes the base number of employees for the facility. The average number of aviation zone employees for 2008 is 29.17, the total number of employees on the last day of March through December (350) divided by 12. Note that the employment numbers for January and February 2008 are not included in this computation because the facility was not located in the aviation development zone during those months. The credit available for 2008 is $2,904, (29.17 – 26.75) X $1,200. 
III) Wrongway Inc.’s average number of aviation zone employees for 2009 is 38.5 (462/12). The credit available for 2009 is $11,196, [(38.5 – 29.17) X $1,200]. 
4) Pass-Through Entities. 
Enterprise zone new business facility employee credits can be passed through to partners, shareholders or members of a pass-through entity in any ratio agreed upon subject only to that entity’s allocation and distribution requirements.
5) Documentation.
a) Any aircraft manufacturer that claims an aircraft manufacturer new employee credit must file the "Aircraft Manufacturer New Employee Credit Progress Report" within 90 days of the end of its income tax year. 
b) The report is a public record and available for inspection by any person at the Office of Economic Development. 
c) The progress report will include all information required by §39-35-105, C.R.S. and any other information deemed necessary by the Office of Economic Development or the Department of Revenue. 
d) A separate schedule listing the names of the partners, shareholders or members, the social security number or Colorado account number, and the credit allocated to each will be attached to the Progress Report submitted to the Department of Revenue by a pass-through entity. This separate schedule is considered confidential tax information and is not part of the public record. 
e) The aircraft manufacturer new employee income tax credit may not be claimed on a Colorado income tax return prior to the filing of the required documentation. 
6) Mixed Use Facility. 
If a facility performs both manufacturing and maintenance functions, only employees working exclusively in the manufacturing portion of the business may qualify for the credit. [§39-35-102(1) C.R.S.]