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New Arizona Tax Credits for Corporations

Posted Sep 24, 2015

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Starting in 2015 there are two new credits that both C and S Corporations can take advantage of for School Tuition Organizations (STO). Both credits require preapproval by the Arizona Department of Revenue (ADOR) and total contributions statewide for each of these credits are capped at a maximum amount by the state. Overall both of these credits are used to provide scholarships that assist students from preschool to 12th grade with disabilities.

Both of these credits have already reached their maximums for the year ended in June 2016. If you want to make a contribution for the year ending in 2017 you should make a contribution shortly after the forms are available in June of 2016 to not miss out before all the credits are claimed.

The first credit is the Low-Income Corporate Income Tax Credit. This credit is meant to assist low income families. The total amount available for this credit for the Arizona fiscal year of July 1, 2016-June 30, 2017 is $61.917 million.

The second credit is the Disabled/Displaced Corporate tax credit. This credit is meant to assist children that were in the Arizona foster care system. The total amount available for this credit for the fiscal year of July 1, 2016-June 30, 2017 is $5 million.

S Corps are required to make a minimum donation of at least $5,000 between the two credits while C Corps have no such minimum donation. There is no maximum that either C Corps or S Corps can make as long as the School Tuition Organization accepts the donation. Both C and S Corps can use the credit to reduce an Arizona tax liability. However instead of using the credit to reduce a tax liability, an S Corp can elect to pass its credit to the shareholders. A shareholder of an S Corporation who receives the pass through credit can also use the individual STO credits.

Again if you want to be able to make contributions for these credits you should do it shortly after the forms are available in June of 2016. If you are interested in the credit here are the basic steps. First the corporation needs to reach out to the STO it would like to make the donation to and will also need to let the STO how large of a donation they would like to make. At this point the STO will request approval for the credit from the ADOR. Once the STO receives approval, the corporation will have 20 days to make the donation to the STO.





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