State legislators pass extension of angel investor tax credit

state legislators

Last week, Arizona state legislators passed SB 1124, which includes an extension of the Small Business Capital Investment Incentive.

The incentive, more commonly known as the angel investor tax credit, encourages investment in early-stage companies and tech startups in Arizona.

The tax credit has made a $1.38 billion economic impact over the last six years.

The bill says the Arizona Commerce Authority “may certify additional tax credits under this section not exceeding $2,500,000 each fiscal year, plus any unused credit capacity that carries over from the preceding fiscal year or years” for the next ten years.

The $2.5 million in tax credits issued annually results in an estimated $10.5 million in state and local tax revenue as a direct result of the program. Arizona taxpayers, in addition to investors and entrepreneurs, benefit from this incentive.

Steven G. Zylstra, the Arizona Technology Council president and CEO, thanked the legislators who worked with the Council to extend the tax credit.

“This program serves as an economic engine and has more than paid back the state’s investment through tax credits by generating more than three times the revenue than the amount of credits approved,” Zylstra said in a statement. 

Jamie Baxter, the co-founder and CEO of Qwick, wrote in the Phoenix Business Journal last week that early investments are needed for startups to succeed.

“Because most startups fail, many investors hesitate to put their money into building new companies,” Baxter wrote. “Arizona’s tax credit incentive minimizes that risk and makes investors more comfortable getting involved.”

Baxter also wrote that 14 investors passed on a recent investment in Qwick because angel investor tax credits had run out for the year. He warned that investors will take their money to other states. 

Now, barring Gov. Ducey not signing the bill, this tax credit program can continue supporting small businesses in Arizona.