BeachFleischman provides Written Managed Reviews for companies looking to adhere to the terms of the Arizona Qualified Facility Tax Credit Program. Before a qualified Applicant applies for Post-Approval, the Applicant must enter into a written managed review agreement with the Arizona Commerce Authority. At the Applicant’s expense, the Applicant will select a Certified Public Accountant, who is licensed in Arizona and who is approved by the Authority, to conduct the written managed review. To confirm the amount of credit, the managed review shall include an analysis of the Taxpayer’s invoices, checks, accounting records and other documents and information to verify its Qualified Investment and other requirements of A.R.S. §§ 41-1512, 43-1083.03 or 43-1164.04. The Certified Public Accountant shall furnish its findings in writing to the Authority; who will review the findings and may examine records and perform other reviews it considers necessary to verify that the managed review substantially conforms to the terms of the managed review agreement. The Authority shall accept or reject the findings of the managed review. If the Authority rejects all or part of the managed review, the Authority shall provide written reasons for the rejection.
(ESTABLISHED UNDER A.R.S. §41-1512)
The primary goal of the Qualified Facility Tax Credit program is to stimulate the creation or expansion of manufacturing facilities, including manufacturing-related research and development or headquarters facilities. The program accomplishes this goal by providing a refundable Arizona income tax credit to qualified applicants.
The tax credit is equal to the lesser of either:
- 10% of the total qualified investment made at the facility; or
- $20,000 per qualified job created at the facility; or
- $30,000,000 per taxpayer.
To qualify for program benefits, a company must:
- Invest in the location of or expansion of a Qualified Facility in Arizona. Measured by both the payroll and square footage of the facility, the qualified facility must be dedicated (80% or more) to manufacturing or manufacturing-related R&D or headquarters.
- Create net new full-time employment positions at the Facility of which at least 51% must be paid at least 125% of the Arizona median production wage if the Facility is in an urban area, or 100% of the median production wage if the Facility is in a rural area. Net new positions must be:
- Permanent with a minimum of 1,750 hours per year.
- Maintained for at least 90 days as of the date of Post-Approval and not be vacant for a cumulative period of time exceeding 150 days following the creation of the position.
- Filled by an employee who has NOT been previously employed by the company within 12 months before the current date of hire.
- Offer to pay at least 65% of employee’s health insurance premiums or membership cost.
A company who claims a credit under the Military Reuse Zone, Quality Jobs, Renewable Energy Tax Incentive or Healthy Forest Enterprise Incentives Program cannot claim a credit under the Qualified Facility program with respect to the same employment position.
Applying for Tax Credits
The Arizona Commerce Authority (ACA) may authorize up to $70 million per calendar year in tax credits to qualified companies beginning January 2013 through December 2022. 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.
If the company is eligible, the ACA will issue Pre-Approval and reserve tax credits for the applicant. Once the facility “begins operations,” an applicant will need to enter into a Written Managed Review with the ACA and a third-party CPA. Following the managed review, the applicant may apply to the ACA for Post-Approval. If the applicant receives Post-Approval from the ACA, tax credits must be claimed with the Arizona Department of Revenue in five equal annual installments.
Published with permission from Arizona Commerce Authority.
For information about additional tax relief programs, please visit the Arizona Commerce Authority at azcommerce.com.