A simplified tax system lowers your cost of doing business. Arizona's pro-business environment has resulted in corporate and individual income tax rates that are among the lowest in the nation. By 2017, corporate income tax will decline by 30% for a final rate of just 4.9%. In addition, the state has created a variety of tax programs that benefit companies located within Arizona.
There's no franchise tax, no business inventory tax, and no estate tax. In fact, the state recently reduced long-term capital gains tax by as much as 25% for property acquired after 2011. Businesses with multi-state operations will appreciate the transition to a 100% sales factor income appointment formula, which will be completely phased-in by 2017.
Continuing a 10-year trend of property tax reduction, business property taxes have been reduced by up to 10% and an enhanced accelerated depreciation program for real and personal property of businesses can dramatically reduce operating costs. The Arizona Competitiveness package enhances the state's additional depreciation allowance for property tax, and substantially reduces liability for most personal property devoted to commercial, industrial, and agricultural uses during its first five years of use.
Manufacturing, R&D and Investment
For taxpayers expanding or locating a qualified manufacturing facility -- which includes manufacturing-related research & development or headquarters facilities -- in Arizona, the state legislature established the Qualified Facility Tax Credit Program.
The pro-business environment also led to the Angel Investment Program, which provides tax credits to investors who make capital investment in small businesses certified by the Arizona Commerce Authority. For a qualified bioscience or rural company, an investor's income tax credit may total up to 35% of the investment amount over three years; for any other qualified business, the three-year total is 30%. Any unused tax credit amount may be carried forward for up to three taxable years.
Jobs and Training Credits
The Quality Jobs Tax Credit program encourages business investment and the creation of high-quality employment opportunities in Arizona by providing tax credits to employers creating a minimum number of net new quality jobs and making a minimum capital investment in the state.
In addition, the Quality Jobs tax credit -- earned over a three-year period for each new employee trained -- provides income tax credits of up to $9,000 for each new quality job created.
R&D and Computer Benefits
Companies focused on improving their research and computer equipment can take advantage of the Research and Development Tax Credit program, which provides an Arizona income tax credit for increased in-state R&D activities. That includes research conducted at a state university and research funded by the company.
The Computer Data Center Program provides Transaction Privilege Tax (TPT) and Use Tax exemptions at the state, county and local levels on qualifying purchases of computer data center equipment.
Energy and Other Tax Advantages
For businesses concerned with energy, the Renewable Energy Tax Incentives Program provides tax incentives to companies in the solar, wind, geothermal and other renewable energy industries which are expanding or locating in Arizona. This program offers up to a 10% refundable income tax credit. Additionally, the Commercial/Industrial Solar Energy Tax Credit Program provides a state income tax credit for the installation of solar energy devices in Arizona business facilities.
Other specialized benefits in the simplified tax system include the Government Property Lease Excise Tax Program, which reduces a project's operating costs by replacing the real property tax with an excise tax on land and improvements conveyed to a government entity and leased back for private use; and the Military Reuse Zone program, with tax benefits for airport authorities and aviation or aerospace companies that locate in the vicinity of a former Arizona military base.