Taxes
With a favorable tax environment, Arizona relies on a combination of taxes assessed on income, sales, and property valuations to meet expenditures. For nine consecutive years, Arizona has reduced taxes and passed legislation favorable to business.
Some Notable Aspects of Arizona’s Tax Code:
No Corporate Franchise Tax.
No Business Inventory Tax.
No Income Tax on dividends from out-of-state subsididaries.
No Worldwide Unitary Tax.
Virtually All Services Exempt from Sales Tax.
100% of Net Operating Loss may be carried forward for five subsequent years.
Source: www.azcommerce.com
Corporate Income Taxes
Arizona’s corporate income tax rate is 6.968% of taxable income, or $50, whichever is greater. In 2001, the state’s corporate income tax rate was reduced from 8.0%. There was another decrease in 2002, which brought the tax to the current rate. There is no local corporate income tax.
Source: www.azcommerce.com
Incentives
Currently, there is not a formal local incentive program that exists for the City of Eloy but each community maintains certain capabilities for each project. These capabilities could reflect key requirements needed per project. The City of Casa Grande has enacted an Economic Development Incentive Ordinance. Should the cities choose to offer incentives to new or existing companies, the potential incentives would typically be based upon the specific project criteria and needs. Since each project is different in scope, the potential incentives would be on a case by case basis and established on the project’s particular needs and specifications including investment levels, employment levels, average wages and the benefits package offered. As a project moves forward in the location feasibility study process, the Pinal Alliance for Economic Growth and communities would be pleased to discuss this item in more depth.
Opportunity Zones
Investors who reinvest capital gains monies in Opportunity Zone funds will receive reductions on capital gains taxes relative to the years of their investment:
Investments held 10 years: taxable amount of the capital gains reinvested is reduced by 15% and no tax is owed on appreciation. For example: $100 of capital gains is reinvested into an Opportunity Zone fund and held for 10 years. Tax owed on the original $100 is deferred until 2026, and taxable amount is reduced to $85 ($100 minus $15). Investor will owe $20 of tax on the original capital gains (23.8% of $85). No tax is owed on Opportunity Zone investment’s capital gain. Assuming a 7% annual growth rate, the after-tax value of the original $100 investment is $176 by 2028.
Investments held 7 years: taxable amount of the capital gains reinvested is reduced by 15%. For example: $100 of capital gains is reinvested into an Opportunity Zone fund and held for 7 years, selling in 2025. Taxable amount is reduced to $85 ($100 minus $15). Investor will owe $20 of tax on the original capital gains (23.8% of $85). Assuming a 7% annual growth rate, the investor will owe $15 in tax (23.8% of $61) on the Opportunity Zone investment’s capital gain.
Investments held 5 years: taxable amount of the capital gains reinvested is reduced by 10%. For example: $100 of capital gains is reinvested into an Opportunity Zone fund and held for 5 years, selling in 2023. Taxable amount is reduced to $90 ($100 minus $10). Investor will owe $21 in tax on the original capital gains (23.8% of $90). Assuming a 7% annual growth rate, the investor will owe $10 in tax (23.8% of $40) on the Opportunity Zone investment’s capital gain.
Special Rules for Capital Gains Invested in Opportunity Zones
Source: www.azcommerce.com/arizona-opportunity-zones
New Market Tax Credit:
The NMTC Program attracts private capital into low-income communities by permitting individual and corporate investors to receive a tax credit against their federal income tax in exchange for making equity investments in specialized financial intermediaries called Community Development Entities (CDEs).
The program helps businesses with access to financing that is flexible and affordable. Investment decisions are made at the community level, and typically 90 to 97 percent of NMTC investments into businesses involve more favorable terms and conditions than the market typically offers. Terms can include lower interest rates, flexible provisions such as subordinated debt, lower origination fees, higher loan-to-values, lower debt coverage ratios and longer maturities.
Pinal Alliance welcomes the opportunity to show you developable properties along Interstates 8 and 10 that are within NMTC boundaries and to provide other information to support your search.
Source: www.nmtccoalition.org
Local Programs:
Pinal Alliance Build to Suit/Incentive Lease Rate Program
Private Activity Bonds/IDA Bonds