Home > Incentives > Small Business Capital Investment Tax Incentive Program (Angel Investment Program)
Small Business Capital Investment Tax Incentive Program
(Angel Investment Program)
The main objective of the Angel Investment program is to expand early stage investments in targeted Arizona small businesses. The program accomplishes this goal by providing tax credits to investors who make capital investment in small businesses certified by the Arizona Commerce Authority (ACA). To view the list of businesses that have been certified under this program please click here.
An investor seeking an income tax credit must document to the ACA the investment was made in either a qualified rural or bioscience company or any other qualified small business. For a qualified bioscience or rural company, the tax credit may total up to 35% of the investment amount over three years; for any other qualified business, the tax credit may total up to 30% over three years. If the tax credits exceed the investor’s income tax liability, any unused tax credit amount may be carried forward for up to three taxable years as long as the investor timely claims the credits with Revenue.
The ACA may authorize up to $20 million in tax credits to qualified investors beginning July 1, 2006 through June 30, 2016. The tax credits will be authorized on a first come, first served basis, which is established by the date and time the investor files an application with the ACA. Download the Angel Tax Credit Allocation Table Angel Tax Credit Allocation Table to view the remaining amount of tax credits available.
For more detailed information please see below or direct questions to the Program Manager.
The Angel Investment program is established under A.R.S. §41-1518
In early 2011, Governor Jan Brewer signed into law HB2001 - Arizona's Competitiveness Package. This legislation marks a new level of Arizona commitment; making it easier for existing Arizona companies to be more prosperous and it establishes Arizona as one of the most desirable places for expanding companies to do business. HB2001 made the following changes to the Angel Investment Program:
- The program was extended through June 30, 2016.
- Beginning in 2012, a qualified small business can be qualified if it does not have assets exceeding $10 million, exclusive of intellectual property and any qualified investment.
- Beginning in 2014, the program will also offer the elimination of capital gains tax on income derived from investments in companies certified by ACA. (A.R.S. §43-1022(36))
- Pursuant to A.R.S. §41-1504(C)(1), the ACA is authorized to begin assessing and collecting fees for processing applications and administering tax incentive programs. The fee schedule will be posted once adopted.
All the following criteria must be met at the time of investment for the investor to receive an allocation of tax credits.
An investor may be a "qualified investor" eligible for tax credits if it:
- Is an individual, limited liability company, sub-chapter S corporation, partnership or a family or grantor trust. Excluded entities are corporations subject to tax under title 43, chapter 11, such as C corporations, and certain trusts, such as irrevocable trusts and IRA's or similar retirement accounts.
- Submits an application to the ACA within 30 calendar days after making a qualified investment. If an application is submitted more than 30 calendar days after making an investment, it will be rejected and the investor notified.
- Makes qualified investments in one or more qualified small businesses. The investor and its affiliates may earn tax credits on investments of up to $250,000 in a single year; investment amounts over $250,000 do not generate tax credits.
- Does not possess, along with its affiliates, more than 30% of the total voting power of all equity securities of the qualified small business immediately before making an investment.
An investment may be a "qualified investment" if it:
- Is made on or after July 1, 2006
- Is an equity security
- Is at least $25,000 cash or cash equivalent
- Is not made with funds in an IRA or similar retirement account
- Is reported to the ACA within 30 calendar days after the investment is made
A small business may be a "qualified small business" if it:
- Is a corporation, limited liability company, partnership or other business entity (Sole proprietors are ineligible)
- Maintains a portion of its operations in Arizona
- Has at least two principal non-administrative full-time equivalent employees who are Arizona residents
- Is in the early stage of development and is not principally engage in activities precluded by ACA or statutorily as provided in A.R.S. §41-1518(K)(6)
- Does not engage in activities that involve human cloning or embryonic stem cell research
- Does not have assets exceeding $10 million (companies certified on or before 12/31/11 are limited to $2 million), exclusive of intellectual property and qualified investments
- Has not received aggregated qualified investments in excess of $2 million by all qualified investors in all years
To view the list of businesses that have been certified under this program please click here.
To download the appropriate forms and instructions to apply for Angel Investment Program, click on the applicable link below:
The ACA will soon begin the process of drafting rules for the Angel Investment Program and will seek public comment. As soon as rules are adopted, the ACA will place an update on this website and will notify companies and others who have requested information. If you have not yet placed your e-mail address on our list, please click here to send an e-mail requesting notification. Please be sure to identify angel investment as the program for which you would like notification.