The Qualified Facility tax credit (A.R.S. § 41-1512) was established by the Arizona legislature in 2012, and amended in 2016, 2020 and 2021, to promote the location and expansion of headquarters facilities or manufacturing facilities, including manufacturing-related research & development. The goal of the program is to encourage business investment that will produce high-quality employment opportunities for citizens of Arizona and enhance Arizona’s position as a center for corporate headquarters, commercial research, and manufacturing. The Program accomplishes this goal by providing a refundable tax credit to taxpayers who are expanding or locating a Qualified Facility in Arizona.
The Arizona Commerce Authority (ACA) may authorize up to $125 million per calendar year in tax credits to qualified companies beginning January 2013 through December 2030. The tax credits will be authorized on a first-come, first-served basis, according to a priority placement number assigned by the ACA at the time of Pre-Approval. Download the Tax Credit Allocation Table to view the amount of tax credits available this year.
Subject to eligibility requirements, the Qualified Facility tax credit offers a refundable income tax credit equal to the lesser of:
- 10% of the qualifying capital investment or
- $20,000 per net new job at the facility if the total qualifying investment is less than $2,000,000,000, or $30,000 per net new full-time employment position associated with the facility if the total qualifying investment is more than $2,000,000,000, or
- $30,000,000 per taxpayer per year.
BASIC ELIGIBILITY REQUIREMENTS
A company may be eligible for tax credits if it:
- Makes a Capital Investment of at least $250,000 to establish or expand a Qualified Facility that devotes at least 80% of the property and payroll to qualified manufacturing, manufacturing-related research & development, or any headquarters.
- Creates net new full-time employment positions for the project, of which at least 51% are paid at least 125% of the state’s annual median production wage if located in an urban area or 100% of the state’s annual median production wage if located in a rural area.
- Has at least 65% of the project’s sales/revenues from outside of Arizona.
- Offers to pay at least 65% of the health insurance premiums for all net new full-time employment positions.
APPLICATION PROCESS (PRE-APPROVAL)
To receive Pre-Approval for tax credits, eligible applicants must follow the process below:
- Prior to submittal of an application to the ACA, a company must request a letter of good standing from the Arizona Department of Revenue (Revenue) by submitting form Tax Clearance Application to Revenue.
- Apply for tax credits by completing a Request for Pre-Approval and submitting it to the ACA. To apply electronically for program incentives, click here.
- Upon receipt of Request for Pre-Approval the ACA will assign a priority placement number for receipt of tax credits.
- Within 30 days of receipt of a complete Request for Pre-Approval, ACA will notify the company of Pre-Approval or denial. If a company is eligible, ACA will issue Pre-Approval to the company and transmit a copy to Revenue.
Note: Pre-Approval does not guarantee receipt of tax credits under this program because it is issued before the ACA determines final eligibility. The final determination of eligibility will be made after a company applies for Post-Approval.
AFTER THE FACILITY IS OPERATIONAL (POST-APPROVAL)
- Once the facility begins operations, the company must enter into a written managed review agreement with ACA. At the company’s expense, the company will select a certified public accountant, who is licensed in Arizona and who is approved by Commerce, to conduct the written managed review.
- After the certified public accountant furnishes its findings in writing to the ACA, the company must submit an Application for Post-Approval to the ACA. To apply electronically for program incentives, click here.
- The ACA may issue Post-Approval to the company after reviewing the application and verifying the company’s eligibility. Once Post-Approval is received, a company must claim the tax credits in five equal annual installments on an original Arizona tax return along with the Revenue Form 349.
Within 12-months of the Pre-Approval date, if the company has not applied to ACA for Post-Approval, the company must demonstrate it has made additional expenditures in the qualifying investment and submit an Interim Report to the ACA. “Additional Expenditures” are defined in the Program Guidelines. No Interim Report is required if Post-Approval is achieved within 12-months of Pre-Approval.
- Complete the Interim Report and attach documentation of expenditures. To report electronically for program incentives, click here.
For more detailed information please see below or direct questions to the Program Manager.
*Please note, as of August 25, 2020 the following change will be effective to the Program Guidelines:
32. "Qualifying Investment" means investment in land, buildings, machinery, equipment and fixtures for expansion of an existing Qualified Facility or establishment of a new Qualified Facility in Arizona MADE NOT MORE THAN 36 MONTHS BEFORE SUBMITTING AN APPLICATION FOR PRE-APPROVAL. If the Qualified Facility is a build-to-suit facility leased to the Taxpayer, Qualifying Investment includes the costs prescribed in this paragraph that are spent by the third-party developer with respect to the Qualified Facility. Qualifying Investment does not include relocating an existing Qualified Facility in this state to another location in this state without additional capital investment of at least two hundred fifty thousand dollars.
To receive updates about the program as they become available, click here to add your name to the stakeholders list. Please be sure to identify the Qualified Facility Tax Credit Program as the program for which you would like notification.