Tax Savings Opportunity: Claiming Arizona’s Quality Jobs Credit in 2024

Tax Savings Opportunity: Claiming Arizona’s Quality Jobs Credit in 2024

July 9, 2024

While attracting talent and retaining employees are two of the most difficult challenges faced by today’s business owners, one Arizona tax benefit can help with both. Yet, surprisingly, over 97% of the tax credits made available by the Arizona Quality Jobs Tax Credit (QJTC) program remain unclaimed, as of mid-May.

Arizona Quality Jobs Credit 101

The Arizona Legislature established the Quality Jobs Tax Credit in 2011 to encourage business development and to attract more higher-income jobs to the state. This ongoing program has done much to improve the state’s economy, but its current low usage rate suggests that many employers (and would-be employers) are unaware of the program.

The QJTC provides funding for Arizona-located businesses to expand their footprint and works to offset some of the expense of employing a high-quality workforce. It offers participants who also make a minimum capital investment in Arizona up to $9,000 of Arizona income, or premium tax credits per net new qualifying job.

Benefits of the Arizona Jobs Tax Credit

Bringing high-quality jobs to Arizona provides a number of benefits to employees, employers, and the economic community where they work:

  • A reduced tax burden for the employer enables them to offer higher wages to their employees.
  • Providing higher-quality jobs attracts higher-quality talent to the employer and State, and can increase retention rates.
  • High-quality jobs enhance the quality of life for higher-earning employees and their families.
  • The community receives economic enrichment when wages are spent on housing and taxes and in retail establishments.
  • The required capital investment can strengthen companies and further their growth and value to their stakeholders.

It’s also worth noting that the QJTC is open to businesses in all industries, rather than being restricted to specific sectors.

Participation Requirements

The Arizona Commerce Authority administers the Quality Jobs Credit program, which offers a tax credit per net new employee over a three-year period. The program is capped at funding 10,000 new jobs each calendar year for all participants and differentiates the eligibility by locations in Rural and Urban areas.

The thresholds to participate in the QJTC consider the minimum capital investment made by employers having added 5 net new jobs in Rural communities or 25 in Urban areas, as well as their county’s median wage.

Rural areas are defined as those within the boundaries of tribal lands, a city, or town with a population of less than 50,000, or a county with a population of less than 800,000.

Additional eligibility requirements include:

  • Participation in the E-verify program—required of all employers in the state.
  • Owning a business located in Arizona with regular operating hours.
  • Submission of a Request for Pre-Approval and receipt of a Pre-Approval Letter from the State.
  • Health insurance coverage for employees, among other administrative expectations.

How does the Arizona quality jobs credit work?

The $9,000 per net new job tax credit is technically ‘up to $9,000’ due to the tax credit assignment being spread over three years at $3,000 of credit per year. The sum of tax credits received for any specific employee may be lower if the employee separates from employment with the registrant before the full three years is completed.

If the allowable tax credit exceeds the income tax liability for the employer, any unused amount can be carried forward for up to five consecutive years.

Are you leaving money on the table?

The Arizona’s Quality Jobs Tax Credit is a tremendous opportunity for Arizona organizations to offset some of the financial burden of providing high quality jobs to employees and their community.

The REDW professional State and Local tax (SALT) advisors welcome the opportunity to help you strengthen your organization by learning about additional resources available to you.

If you would like assistance with navigating the complexities of the QJTC, please contact REDW’s State and Local Tax team today.

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