Arizona Business Tax Credits: The Grand Canyon State Offering Incentives for Business Relocations (Part I)

The state of Arizona is strategically located right next door to the world’s 12th largest economy (California). In recent years, Arizona lawmakers have taken a number of steps to attract businesses from the Golden State that are looking for a better place to conduct operations. By 2017, Arizona will have a corporate tax rate of 4.9%, among the lowest in the country. But this is only the beginning. The Grand Canyon State also offers a wide range of tax credits and incentives for moving here.

Here is a list of some of the major tax savings opportunities and incentives companies can receive if they choose to call relocate in Arizona:

Quality Jobs Tax Credit: The quality jobs credit is just like it sounds; it offers an incentive for employers that create a certain number of net quality jobs in the state (up to a maximum of 10,000 jobs per applicant), as well as making a minimum capital investment (ranging from $1 million to $5 million depending on the population of the county) into the state. For a company to qualify, they must create a minimum of 25 jobs in a county with a population of 800,000 or higher or a minimum of 5 jobs in a county with a population of less than 800,000.

A “quality” job is defined as follows; a new net full time or permanent position that pays at least 100% of the county median wage and covers at least 65% of the health care costs of the employee. Arizona also encourages companies to make these jobs available for a longer period of time. For this reason, the credit of $9,000 per qualified employee is available over the course of 3 years ($3,000 per year).

Qualified Facility Tax Credit: The Qualified Facility Tax Credit was created in 2012 primarily to attract manufacturing and research and development (R&D) companies to build facilities and/or corporate headquarters in Arizona. To qualify, a company must make a capital investment for the establishment or expansion of a facility devoting a minimum of 80% of its payroll and square footage to manufacturing, manufacturing-related R&D, or a corporate headquarters.

Of the new net full time positions created from the investment, at least 51% must be 125% of the median state wage and cover 80% of the employee’s health care costs. The available refundable tax credit is lesser of 10% of the capital investment, $20,000 per net job, or $30 million per taxpayer.

Research & Development (R&D) Tax Credit: Arizona provides further incentives for R&D in the state under the Research and Development Tax Credit. This program offers both refundable and non-refundable tax credits ranging from 24% to 34% of qualified R&D expenses.

Arizona Job Training Program: The Arizona Job Training Program provides a reimbursement grant to qualified employers for necessary employee job training. Grants of up to $5,000 are available for employers in urban areas, and up to $8,000 for employers in rural areas.

In Part II of this series, we will discuss different programs, credits, and incentives including angel investment program, renewable energy tax incentive, and commercial solar tax credit.

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