States around the USA are competing over tax breaks for businesses that bring valuable assets with them. To be sure jobs are valuable but not all jobs are created equally. States have begun offering better tax incentives for better jobs. Likewise, if a company brings jobs that company can, later, take those jobs with them to another state. That is more difficult to do if the company has also invested in infrastructure. Therefore states have also begun incentivizing investment in their own business infrastructure.
Arizona, for instance, offers benefits to companies that bring computer data centers and other qualified facilities to the state. There are a number of tax incentives offered to companies in Arizona. We will highlight three of these: Quality Jobs tax credit, Quality Facilities tax credit and the Computer Data System Program’s providing Transaction Privilege Tax (TPT) and Use Tax exemptions.
Each of these has its own requirements and benefits.
The Quality Jobs tax credit provides tax credits for high-quality jobs (as the name implies). Qualifying jobs are capped at 10,000 per year. This tax credit offers up to $9,000 of Arizona income or premium tax credits spread over three years for each “net new qualifying job.” If the tax credit in a given year exceeds the income or premium tax liability it can be carried forward for up to five consecutive years.
The Qualified Facility tax credit has been around since 2012 and amended three times, to encourage businesses to bring, or expand, their headquarters and/or manufacturing facilities in Arizona. Obviously, when you spend money on a manufacturing hub or a headquarters there will be quality jobs attached. It is also indicative of an intention to remain in the state.
Up to $125 million per year in tax credits are potentially available to qualifying companies. The Arizona Commerce Authority (ACA) may authorize up to that amount. The credits are first-come, first-served according to a priority placement number businesses receive when they are pre-approved for the credit.
The refundable credit is equal to the lesser of 10% of the qualifying capital investment, $20,000 per net new full-time jobs at the facility if the total qualifying investments are less than $2 billion or $30,000 per new set of new full-time jobs if the investment is more than $ 2 billion or, $30 million per taxpayer per year.
The Computer Data System Program, as noted above, provides Transaction Privilege Tax and Use Tax exemptions. These are provided at state, county and local levels on qualifying purchases of computer data system equipment. An owner, operator or certain co-location tenants of a computer data center may receive exemptions for up to ten years following the year they certify with Arizona. If they qualify as a Sustainable Redevelopment Project the number of years of the exemptions goes up to 20.
The TPT and Use Tax exemptions are only available if all of the following qualifications are met. They must submit an application for CDC certification and receive a letter of certification from the ACA. They must collectively satisfy the Capital Investment Threshold in a timely manner and must show evidence of one of several specific location-related requirements (more on this HERE), they must pay all required processing fees and all parties must comply with employer requirements detailed in A.R.S. § 23-214(B).
If your business needs assistance in pursuing these, or other credits at the state level, in Arizona or other states? Please contact Hito.