SB 1265 Summary

• Establishes a rural capital investment tax credit program administered by the Arizona Commerce Authority for investments in rural funds, effective for taxable years beginning after December 31, 2024.

• Creates a 15% tax credit (0% for first two credit allowance dates, then 15% for next four dates) for insurers, individuals, and corporate entities that make certified capital investments to rural funds.

• Requires rural funds to be licensed as Rural Business Investment Companies or Small Business Investment Companies with prior $100 million investment experience in low-population counties, and mandates 60% investment in qualified rural businesses within 2 years and 100% within 3 years.

• Limits total annual capital investment certifications to $15 million per calendar year and implements compliance monitoring with recapture provisions if funds fail to meet investment requirements or maintain 90% of capital invested from years 3-6.

• Allows unused tax credits to carry forward for up to 5 consecutive years and permits proportional sharing of credits among co-owners and partners based on ownership interests.