Incentives

Established in 1992 by the state legislature to lessen the impact of military base closures, Military Reuse Zones (MRZ) provide tax incentives to aviation and aerospace companies within their boundaries. Gateway is one of two MRZs in Arizona. As such, it can offer businesses substantial benefits:

• Transaction Privilege Tax Exemption – Specified types of construction at an MRZ are exempt from the transaction privilege tax.
• Property Reclassification – Both real and personal property can be reclassified from Class 1 (18 percent assessment ratio) to Class 6 (5 percent assessment ratio), which may result in property tax savings of up to 72.2 percent over a five-year period.

Gateway is a Foreign Trade Zone (FTZ), a secured area under U.S. Customs’ supervision where merchandise is considered outside the United States for commerce purposes. As a business at Gateway, you’ll enjoy the many benefits of its status as FTZ #221, including:

• Duty Exemption – There are no duties or quota charges on re-exports.
• Duty Deferral – Duties and federal excise tax is deferred on imports.
• Inverted Tariff – The duty rates for imported components is higher than the duty rates for the finished product entering the United States, allowing you to sell your finished product for less.
• Property Tax Benefits – Arizona provides a lower assessment ratio for activated FTZs like Gateway. As a result, property taxes are reclassified from Class 1 to Class 6, resulting in a potential savings of approximately 72.2 percent.

Gateway is also an Opportunity Zone. Designed to spur economic development, Opportunity Zones allow investors to receive reductions on their capital gains taxes by reinvesting their capital gains in zone funds. Reductions are based on the length of investment:

Investments held 10 years: Reinvesting capital gains reduces the taxable amount by 15 percent while no tax is owed on appreciation. For example, if you reinvest $100 of capital gains into an Opportunity Zone fund for 10 years, the taxable amount is reduced to $85 ($100 minus $15) and not due until the end of the investment period. At that time, you would owe $20 tax on the original capital gains (23.8 percent of $85). No tax would be owed on the Opportunity Zone investment’s capital gain. Assuming a 7 percent annual growth rate, the after-tax value on the original $100 investment would be $176 be 2028.

Investments held seven years: Reinvesting capital gains also reduces the taxable amount by 15 percent when investments are held for seven years. If you reinvest $100 of capital gains into an Opportunity Zone fund and sell in 2025, the taxable amount is reduced to $85 ($100 minus $15). Again, you would owe $20 on the original capital gains (23.8 percent of $85). Assuming a 7 percent annual growth rate, you would owe $15 in tax (23.8 percent of $61) on the Opportunity Zone investment’s capital gain.

Investments held five years: Reinvesting capital gains for five years reduces the taxable by 10 percent. In this scenario, if you invest reinvest $100 of capital gains into an Opportunity Zone fund and sell in 2023, the taxable amount is reduced to $90 ($100 minus $10). You would owe $21 in tax on the original capital gains (23.8 percent of $90). Assuming a 7 percent annual growth rate, you would owe $10 in tax (23.8 percent of $40) on the Opportunity Zone investment’s capital gain.