SPOTLIGHT PROGRAMS

Quality Jobs Tax Credit: Corporate income or premium tax credits of up to $9,000 per job (spread over a three-year period) are available to businesses that make capital investments and create jobs that meet specific wage requirements.  The program was modified in 2017 to allow businesses that make lower capital investments but create higher paying jobs to be eligible for the incentive.

Businesses that locate or expand in urban areas must meet one of the following capital investment, job creation, and wage requirements to participate in the program:

• Make a minimum capital investment of $5 million and create at least 25 jobs with wages at 100% of the county median wage where the project is to be located
  
  OR
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• Make a minimum capital investment of $2.5 million and create at least 25 jobs with wages at 125% of the county median wage where the project is to be located
  
  OR
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• Make a minimum capital investment of $1 million and create at least 25 jobs with wages at 150% of the county median wage where the project is to be located
  
  OR
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• Make a minimum capital investment of $500,000 and create at least 25 jobs with wages at 200% of the county median wage where the project is to be located

Businesses that locate or expand in rural areas must meet one of the following capital investment, job creation, and wage requirements to participate in the program:

• Make a minimum capital investment of $1 million and create at least 5 jobs with wages at 100% of the county median wage where the project is to be located
  
  OR
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• Make a minimum capital investment of $500,000 and create at least 5 jobs with wages at 125% of the county median wage where the project is to be located
  
  OR
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• Make a minimum capital investment of $100,000 and create at least 5 jobs with wages at 150% of the county median wage where the project is to be located
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Tax credits are non-refundable and non-transferrable. Unused credits can be carried forward for up to 5 consecutive tax years. The credits program is capped at 10,000 jobs being claimed by all applicants each year and are allocated on a first-come, first-served basis.‍

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Qualified Facility Tax Credit: Refundable tax credits are available to qualified businesses that make a minimum $250,000 of capital investment to establish or expand a manufacturing, corporate headquarters or R&D-related manufacturing facilities (devoting at least 80% of the facility’s property and payroll to such activities). To qualify for the incentive, at least 51% of the net new full-time jobs must have wages at or above 125% of the Arizona median wage for production occupations (reduced to 100% of the median wage if the project is located in a rural area) and the company must pay at least 65% of employee’s health insurance premiums or membership costs. The project must also have 65% of its sales from outside Arizona. The Arizona Commerce Authority may authorize up to $125 million per year through 2030.  Tax credits are authorized on a first-come, first-served basis with the maximum credit amount equal to the lesser of: 10% of the total qualified investment made at the facility; or $20,000 per qualified job created if the qualifying investment is below $2 billion, if the project exceeds $2 billion $30,000 per net new job; or $30 million per taxpayer, per year. Tax credits are claimed in 5 equal installments over 5 consecutive taxable years. Tax credits are refundable.

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TAX CREDITS

Research and Development Income Tax Credit: Provides refundable and non-refundable state income tax credits for qualified R&D activity in Arizona. The credit is equal to 24% of the first $2.5 million of qualifying expenses plus 15% of the qualifying expenses in excess of $2.5 million. A company that is qualified and has fewer than 150 full-time employees can apply for a partial refund of 75% of the excess credit amount.  An additional credit equal to 10% of the basic research payments made to an Arizona state university is available.

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Angel Investment Tax Credit: Provides a tax credit of 30% or 35% of eligible investment in a qualified small bioscience or rural business. The statute provides an annual limitation of $2.5 million in tax credits, with applications reviewed on a first-come-first-served basis. Tax credits can be claimed over a three-year period. Unused credits can be carried forward for three years.

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TAX EXEMPTIONS/ABATEMENTS

Sales Tax Exemption: Machinery and equipment used directly in manufacturing or research and development are exempt from the state sales tax. Purchases of electricity and natural gas used by qualified manufacturing or smelting businesses are exempted from state and county sales taxed.  To qualify a business must export out-of-state 51% or more of its product; or derive at least 51% of Arizona gross income from manufacturing or smelting; or use at least 51% of its Arizona facility for manufacturing or smelting operations; or employ at least 51% of its Arizona workforce in manufacturing or smelting.

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Computer Data Center Tax Exemption: A capital investment made in the establishment or expansion of a data center that exceeds $25 million ($50 million in Maricopa and Pima counties) is eligible for Transaction Privilege Tax (TPT) and Use Tax exemptions for up to 20 years. The definition of eligible capital investment was recently expanded to include leased land, buildings, modular data centers, and computer data center equipment.

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DIRECT FINANCIAL ASSISTANCE

Arizona Competes Fund: Deal closing fund that awards discretionary grants to businesses that create new jobs with wages at or above the median county wage. At least 25% of funding appropriated each year is restricted to business attraction and expansion projects located on tribal lands or outside of Maricopa County (Phoenix), or both. Businesses that locate or expand in counties along the Arizona-Mexico border, counties with military facilities, and on tribal lands are given priority consideration for funding.

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JOB TRAINING

Incumbent Workforce Training Program: The program is a public-private partnership designed to help existing workforce obtain skills to avoid layoffs. Training is carried out by local workforce development boards with the help of employers.

Customized Training Program: The program is designed for specific requirements of an employer or group of employers. The employee training must be related to new production or service procedures, upgrading to new jobs requiring new skills, workplace literacy, or other purposes approved by the workforce board. Employers must commit to employ individuals who complete the training.

Job Training Program: The program is a customized curriculum to meet workforce needs and supplement short-term training costs. The job training program is a job-specific reimbursable grant program. An employer can receive a “net new” grant which reimburses up to 75% of their eligible training cost.

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Last updated: April 2023