United States

Arizona enacts taxpayer-favorable credit and incentive modifications

TAX ALERT  | 

On May 22, 2017, Arizona Gov. Doug Ducey signed Senate Bills 1416 and 1292 and House Bill 2191, making taxpayer-favorable changes to a number of the state’s credits and incentives. Following is a summary of the changes.

Senate Bill 1416

Senate Bill 1416 modifies various requirements of the Quality Jobs Tax Credit, including extending the credit from July 2017 through 2025. Minimum capital investment requirements for both urban and rural locations have been expanded to allow for a smaller minimum investment depending on the percent of county median wage paid as compensation for the new positions. The following table illustrates the expanded investment requirements:

Minimum Capital Investment

Minimum Number of New Jobs

Percent of County Median Wage

Urban Location

$5,000,000

25

100%

$2,500,000

25

125%

$1,000,000

25

150%

$500,000

25

200%

Rural Location

$1,000,000

5

100%

$500,000

5

125%

$100,000

5

150%

 

Additionally, Senate Bill 1416 makes the following miscellaneous changes:

  • Maintains the current research and development tax credit amounts through tax year 2022
  • Allows for accelerated depreciation of ‘class six personal property’ (located within a foreign trade zone or a military reuse zone) as long as all of the following apply: (1) the property is acquired during or after tax year 2017, (2) the property is initially classified as Class Six property during or after tax year 2018, and (3) the property is used in a manufacturing application pursuant to statute
  • Exempts aircraft sold to persons who enter the aircraft into a fractional ownership program that meets FAA regulations from the state sales and use tax

House Bill 2191

House Bill 2191 provides that the Arizona Commerce Authority (ACA) may authorize an additional $10 million in Angel Investment Tax Credits beginning July 1, 2017, through June 30, 2021, limited to $2.5 million, plus any unused credit carried forward, in any fiscal year.

The Angel Investment Credit provides tax credits for investments in small businesses certified by the ACA. In order to qualify for a tax credit, a taxpayer must submit an application within 30 days after making an investment of at least $25,000. A tax credit granted under the program may equal as much as 35 percent of the original investment if the investment is made in a bioscience or rural company and may equal as much as 30 percent of an investment made in any other qualified small business. 

Senate Bill 1292

Senate Bill 1292 expands the Arizona Competes Fund incentives to include ‘microenterprises,’ or Arizona-based businesses that employ 10 or fewer employees. Microenterprises also include a start-up business, a home-based business and self-employed business. The incentives include reserving up to 30 percent, up to $1 million, of the Arizona Competes Fund for grants to advance microenterprise development. Senate Bill 1292 also extends the repeal date of the Arizona Competes Fund from July 1, 2018, to July 1, 2026.

Takeaways

Together, Senate Bills 1416 and 1292 and House Bill 2191 are aimed to further enhance and strengthen Arizona’s existing credits and incentives programs. Taxpayers doing business in Arizona that may qualify for any of the above credit programs, or have never considered reviewing eligibility for Arizona credits and incentives, should contact their tax advisors to discuss how these programs can help grow their business.

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