The Arizona Investment in qualified small business credit, also known as Arizona Revised Statute (A.R.S.) § 43-1074.02., is a program for small businesses that allows taxpayers to claim a credit that is equal to 12% of the investment amount per year for the first and second taxable years after the investment year, and 11% for the third taxable year. Depending on the business, you may not quality for 12% or 11% and instead qualify for 10% credit for each of the three years.
Here are the essentials to determine if your small business qualifies and how to file:
Eligible small businesses include any taxpayer that has invested in a qualified small business in an amount determined by the Arizona Commerce Authority (azdor.gov PUB 570). The credit is only available to individuals meaning that a corporation, S corp, or partnership does not qualify. Exceptions are only available for S corps and partnerships that pass the credit through to it’s individual shareholders/partners.
The Arizona qualified small business credit is available for taxable years beginning from and after December 31, 2006 through December 31, 2034. Although a publication from the Arizona Department of Revenue states Decemeber 2024, the State Statute, which can be found here, states through December 234.
You can claim your credit throught the Arizona qualified small business credit by filing an Arizona Form 338. After completing the form, include it with your individual tax return when filed. If you are a partnership, you must must also complete a Form 338-P for each partner receiving a pass-through credit. S-coporations must file a Form 338-S for each shareholder receiving a passthrough credit in addition to their Form 388. Include a copy of all forms with the S-corp or Partnership when filing.
Financial decisions should be made based on your projections, qualifications, and what the small business credit could be used for. For an accurate explanation of why or why not, reach out to us at ModVentures for a personalized advisory session today.