The Renewable Energy Tax Incentives Program (A.R.S. §41-1511) was established by the Arizona legislature in 2009 to promote the renewable energy industry in the state. During the 2010 legislative session, technical corrections were proposed through Senate Bill 1201. These amendments became effective on July 29, 2010 and are retroactive to September 30, 2009.
The goal of the program is to encourage business investment that will produce high quality employment opportunities and enhance Arizona’s position as a center for production and use of renewable energy products. The program accomplishes this goal by providing tax incentives to companies in the solar, wind, geothermal and other renewable energy industries who are expanding or locating in Arizona. The program offers two benefits; up to a 10% refundable income tax credit and up to a 75% reduction on real and personal property taxes.
For more detailed information please see below or direct questions to the Program Manager.
Basic Eligibility Requirements
A company may be eligible for tax incentives, if it:
- Is primarily (more than 50%) engaged in the manufacturing of or headquarters for producing systems and components that are used or useful in manufacturing renewable energy equipment
- Is expanding or locating either a renewable energy manufacturing or headquarters facility in Arizona
- Creates full-time employment positions of which at least 51% are paid at least 125% of the state’s annual median wage
- Offers to pay at least 80% of the health insurance costs for all net new full-time employment positions
- Spends at least $250,000 in qualifying investments during each twelve-month period
Income Tax Credits: Arizona Commerce Authority (Commerce) may authorize up to $70 Million per calendar year in tax credits to qualified companies beginning January 2013 through December 2019. The tax credits will be authorized on a first come, first served basis, according to a priority placement number assigned by Commerce at the time of Pre-Approval. It is important to note that the program cap ($70MM) is shared between the Qualified Facility program and the Renewable Energy Tax Incentive program. Download the Tax Credit Allocation Table to view the amount of tax credits available this year.
Businesses making new qualifying investments in manufacturing and/or headquarter operations in Arizona in renewable energy industries are eligible for a tax credit if they meet the following requirements:
- At least 51% of the net new full-time employment positions are paid 125% or more of the state’s annual median wage; and
- The company offers to pay at least 80% of the employee’s health insurance costs for all net new full-time employment positions at the facility.
The tax credit amount is based on the total qualifying investment made and the number of jobs being created by the company. To generate tax credits a renewable energy manufacturing companies must create 1.5 new full-time jobs for every $500,000 of capital investment. Alternatively a renewable energy headquarters operation must create 1 new full-time job for every $200,000 of capital investment.
Property Tax Reduction: Businesses making new qualifying investment of $25 million or more in Arizona in manufacturing and/or headquarter operations in renewable energy industries are eligible for:
- 10 years of property tax savings, if the company pays at least 51% of the net new full-time employment positions between 125% and 199% of the annual median wage.
- 15 years of property tax savings, if the company pays at least 51% of the net new full-time employment positions 200% or more of the annual median wage.
Both the real and personal property can be reclassified to Class 6 property for both primary and secondary property tax purposes.
To become a qualified company and receive pre-approval for tax incentives, eligible applicants must follow the process below:
- Note: Prior to submittal of an application to ACA, a company may request a letter of good standing from the Arizona Department of Revenue (Revenue) by submitting form Tax Clearance Application to Revenue. Further, a company must also request a letter of good standing from the County Treasurer of the county in which the project is located.
- Apply for program incentives by completing an Initial Application and submit it to ACA.
- Upon receipt of an initial application ACA will assign a priority placement number for receipt of tax incentives.
- Within 30 days of receipt of a complete application, ACA will notify the company of pre-approval or denial. If a company is pre-approved, ACA will issue a Letter of Qualification to the company and transmit a copy to the Arizona Department of Revenue and the County Assessor.
Note: Pre-approval does not guarantee receipt of tax incentives under this program because pre-approval is issued before ACA determines final eligibility. The final determination of eligibility will be made after a company applies for post-approval.
Within 12-months of the pre-approval date a company must demonstrate it has spent at least $250,000 in qualified expenses.
- Complete the 12-month Interim Report and attach documentation of qualified expenditures.
After the Facility is Operational
- 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 ACA, to conduct the written managed review.
- After the certified public accountant furnishes it findings in writing to ACA; the company must submit an Application for Post-Approval (link to:retippostalapproval pdf) to ACA.
- ACA may issue post-approval to the company after reviewing the application for post-approval and verifying the company’s eligibility. Once post-approval is received a qualified company may claim the tax credits and begin receiving property tax reductions.
Supplemental Application Materials
Commerce will soon begin the process of drafting permanent rules for the Renewable Energy Tax Incentive Program and will seek public comment. If you would like to be notified as this process takes place, please placed you email address on our list, please click here to send an email requesting notification. Please be sure to identify the renewable energy program as the program for which you would like notification.