Arizona Incentives and Workforce Development Guide
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Arizona Innovation Accelerator Fund: An $18.2 million loan participation program to stimulate financing to small businesses and manufacturers, in collaboration with private finance partners, to foster business expansion and job creation in Arizona.
Arizona Innovation Challenge (AIC): Bi-annual business plan competition awarding $3 million annually to talented entrepreneurs that are solving today’s most challenging problems with technology-based solutions. In the spring and fall, AIC winners receive up to $250,000 each in capital to grow their businesses, advancing innovation and technology commercialization opportunities in Arizona.
AZ Fast Grant: A competitive grant program that provides Arizona-based technology companies with training and assistance to commercialization their innovations.
AZ State Trade and Export Promotion (STEP): Assists Arizona small businesses to enter export markets for the first time or to expand into new markets.
Quality Jobs Tax Credit: $9,000 income tax credit for each qualifying new job. It is a credit equal to $3,000 per year for three years for each new qualifying job.
- Metro: Capital investment of at least $5 million and at least 25 new jobs.
- Rural: Capital investment of at least $1 million and at least 5 new jobs.
Research and Development Tax Credit: Income tax credit for investing in R&D in Arizona. The 2011 through 2017 R&D tax credit will be equal to 24% of the first $2.5 million in qualifying expenses plus 15% of the qualifying expenses in excess of $2.5 million. For 2018 and thereafter, the tax credit rates will be 20% of the first $2.5 million in qualifying expenses plus 11% of the qualifying expenses in excess of $2.5 million. It is equal to 34% of qualifying expenses when made in conjunction with an Arizona public university. Companies with fewer than 150 employees worldwide can apply to the Arizona Commerce Authority for approval of a refund of 75% of the current year’s excess credit amount in lieu of carrying the excess credit forward.
Qualified Facility Tax Credits: Refundable income tax credit for a manufacturing facility or a manufacturing-related research or headquarter facility. Credit is equal to 10% of the capital investment in a new facility or $20,000 per qualified new job created, whichever is less. 51% of new jobs must pay wages of at least 125% of the state median and the company must offer to pay at least 80% of health insurance costs for the employee.
Sales Tax Exemptions are available for:
- Machinery/Equipment used directly in manufacturing.
- Equipment or transmission lines used directly in producing or transmitting electrical power, but not including distribution.
- Machinery or equipment used in research and development.
- Electricity and natural gas used by businesses principally engaged in manufacturing operations.
Computer Data Center (CDC) Tax Exemptions: The CDC Program provides tax relief, consisting of exemptions from transaction privilege tax (“TPT”) and use tax at the state, county and local levels, in connection with purchases of qualifying equipment by owners, operators and co-location tenants of computer data centers certified by the Arizona Commerce Authority. Exemptions are available on purchases of CDC equipment for up to 20 years for qualifying CDCs. Investment requirements at a new or expanding CDC:
- $50 million in new investment if the CDC is located in Maricopa or Pima county; or
- $25 million in new investment if the CDC is located in any other county.
Angel Investment Tax Credit: An income tax credit of up to 35% is available for investments of at least $25,000 in an Arizona Commerce Authority-certified small business. Beginning 2014, any capital gains income derived from a qualified investment under the Angel program will be exempt from taxation in Arizona.
Military Reuse Zone (MRZ): A Program established to lessen the impact of military base closures. Currently there are two MRZs in Arizona. In 2001 the MRZ designation was renewed for the former Williams Air Force Base, now known as Williams Gateway Airport. In December 2002, the former U.S. Naval Air Facility in Goodyear, now known as Phoenix/Goodyear Airport, was designated as an MRZ. An applicant for the MRZ program must be located within an MRZ to qualify for the benefits. The program offers three types of benefits:
- Transaction Privilege Tax Exemption – Exemption from transaction privilege tax on contracts for certain types of construction at an MRZ.
- Tax Credits – Arizona income/premium tax credits for up to five years for each net new job created, totaling up to $7,500 per non-dislocated employee and up to $10,000 per dislocated employee.
- Property Reclassification – Both real and personal property can be reclassified from class one (20% assessment ratio) to class six (5% assessment ratio), which may result in property tax savings of up to 75% for a period of five years.
Foreign Trade Zone (FTZ): Up to a 73% reduction in state real and personal property taxes for businesses located in an FTZ. Other benefits include: duty free zone, no time constraints on storage, shorter transit time (direct delivery), and weekly entries.
Renewable Energy Tax Incentive Program: Refundable income tax credit for companies primarily engaged in the business of or headquarters for manufacturers of systems and components that are used in manufacturing renewable energy equipment.
- Tax credit of up to 10% of qualifying expenses.
- At least 51% of net new jobs must pay wages of at least 125% of the state median and offer 80% health insurance coverage.
Renewable Energy Investment and Production for Self-Consumption by Manufacturers Tax Credit: The renewable energy investment and production for self-consumption by manufacturers tax credit provides nonrefundable income tax credits for manufacturer-taxpayers that invest at least $300 million in new renewable energy facilities in Arizona that generate energy for self-consumption using renewable energy resources.
- The taxpayer must invest at least $300 million in new renewable energy facilities in Arizona that produce energy for self-consumption using renewable energy resources. The investment must be completed within a three-year period beginning on the earlier of the date an application for pre-approval or December 31, 2017.
- Each renewable energy facility must have at least 20 megawatts generating capacity or a minimum typical annual generation of 40,000 megawatt hours and must be located at least one mile from any other renewable energy facility of the taxpayer for which a credit is claimed.
- The energy generated must be used primarily for manufacturing.
- At least 90% of the energy produced at each facility must be used for self-consumption in Arizona. A facility that transfers the power it generates to a utility qualifies if at least 90% of the power is transferred back for self-consumption in Arizona.
Renewable Energy Production Tax Credit: Income tax credit awarded to utility-scale generation systems based on the amount of electricity produced annually for a 10-year period using solar light, solar heat, wind or certain types of biomass. The income tax credits established are intended to promote investment in renewable energy production using low-emission and zero-emission electricity generation technologies. The credits are only for qualified energy generators with at least 5 megawatts generating capacity.
- For wind or biomass derived qualified energy resource the amount of the income tax credit is:
* 1¢ per kilowatt-hour (kWh) of the first 200,000 megawatt-hours of electricity produced. (200,000 megawatt-hours of electricity equals 200 million kWh which, when multiplied by 1¢ per kWh, equals $2 million in credit.)
The tax credit cannot exceed $2 million dollars per year per facility that produces electricity.
- For solar light derived or solar heat derived qualified energy resource the income tax credit is:
* 4¢ per kWh in the 1st and 2nd calendar years in which the qualified energy generator produces electricity, 3.5¢ per kWh in the 3rd and 4th years, 3¢ per kWh in the 5th and 6th years, 2¢ per kWh in the 7th and 8th years, 1.5¢ per kWh in the 9th year, and 1¢ per kWh in the 10th calendar year in which the qualified energy generator produces electricity. The tax credit cannot exceed $2 million dollars per year per facility that produces electricity.
Commercial and Industrial Solar Tax Credit: Income tax credit for companies installing a solar energy device at an Arizona facility. The tax credit is equal to 10% of the installed cost of the solar energy device not to exceed $25,000 in credits for one building in a single tax year and $50,000 total credits per business per tax year. Tax credits can be used to offset Arizona income tax liability; any unused credit amounts can be carried forward for a five-year period.
Solar Liquid Fuel Tax Credit: A credit is allowed for increased research and development activity related to solar liquid fuel, the amount of the credit is equal to 40% of the amount exceeding the excess, if any, of the qualified research expenses for the taxable year over the base amount as defined in section 41(c) of the internal revenue code.
Private Activity Bond: Issued to finance construction and equipment purchases associated with industrial and manufacturing facilities, residential rental projects, facilities for the furnishing of water, sewage and solid waste facilities and more. Interest on private activity bonds may be exempt from federal income tax for most bondholders.
Robust Workforce Development Assistance: No-cost workforce assistance:
- Immediate access to job-ready talent pools
- Skill assessments and talent screening
- Human Resource consulting on Arizona’s labor laws
- Custom recruiting services
- Transition and retention services
- Training grants for new hires and incumbent employees
Job Training Grants: Reimbursable grant eligible to employers implementing job-specific training to full-time employees for a period up to 2 years. The maximum grant is $1.5 million per taxpayer, not to exceed $5,000 per new employee trained in metro areas and $8,000 per new employee trained in rural areas or small businesses. Incumbent worker training grants are limited to $2,500 per employee in metro areas and $4,000 per employee trained in rural areas or small businesses.
- New employees: reimbursement of up to 75% of approved training expenses.
- Current employees: reimbursement of up to 50% of approved training expenses.