Arizona Qualified Facility Tax Program

If your client wants to establish themselves or expand operations in Arizona, the Arizona Qualified Facility Tax Credit Program should be on their radar. The program was established to support the growth of headquarters, manufacturing, and manufacturing-related research and development companies. It’s a refundable tax credit that helps with economic growth and job creation on a first-come, first-served basis at the time of pre-approval. The refundable tax credits a company may receive are offered at 10% of the qualifying capital investment or $20,000, whichever equals the lesser amount.

To be eligible for this program, a company needs to make a capital investment of at least $250,000. The project facility must allocate at least 80% of the property and payroll to the qualified manufacturing, manufacturing-related research & development, or headquarters entity. Additionally, the project location must create new full-time jobs above the base employment level. Of these new jobs, more than half (51%) must be paid at least 125% of the state’s annual median production wage in urban areas or 100% of the state’s median production wage in rural areas. Moreover, the company must generate 65% of the project’s sales/revenues from outside Arizona and cover 65% of the health insurance premiums for all new full-time employees.

We have extensive experience working with clients in Arizona. Our team of Location Advisory experts can ensure the company is well-informed about every process within the pre-application, interim reporting, and post-approval for the Qualified Facility Tax Credit program. For the pre-application, it’s essential to receive a letter of good standing from the Arizona Department of Revenue and complete the application to receive the pre-approval letter. From there, the company will have 12 months from the pre-approval letter to complete the hiring process or capital investment; the company can then move forward with the post-approval application.

If the project location did not meet their hiring or capital investment within the 12 months, we would complete interim reporting to show the progress of the project location. Once the company reaches its hiring or completes the capital investment of the project, we would complete a site visit inspection with a CPA (within the Arizona Commerce Authority approval list of firms) to certify the site operates above 80% of manufacturing, manufacturing related research & development, or headquarters facility. In the final step, we assist with the post-application process, where we would receive the approval and the certified amount of incentives approved by the ACA for us.

Once we receive the post-approval letter, the company can claim the tax credits in five equal annual installments. The company could claim the credit for the tax year the project became operational. To claim the credit, the company must file on the original unamended Arizona Tax Return to offset income tax.

McGuire Sponsel partners with CPAs, real estate professionals, and private equity groups to help bring value to their clients. Our goal is to provide expertise and connections and help clients realize the benefits of state and local incentives. If your client wants to establish or expand in Arizona, please do not hesitate to contact our Location Advisory team to help bring value to your clients.