Military Reuse Zones are sparking a lot of discussion in the Arizona business community. Businesses are growing curious about how their companies could benefit from being located within one and how they can go about buying or leasing property.
According to the Arizona Commerce Authority (ACA), “The Military Reuse Zone (MRZ) was established by the state legislature in 1992 to lessen the impact of military base closures.” Because of the way military bases are designed, with an open layout and expansive grounds, they are an especially useful space for aerospace and aviation companies to relocate.
In Arizona, there are only two designated MRZs, and one of them is the Phoenix-Mesa Gateway Airport. This airport is gaining major attention from some of the most notable aerospace companies in the world, like Able Aerospace Services, Aerocircular, and Aviation Performance Solutions. The population in Maricopa County is growing rapidly. In fact, Maricopa County is the fastest-growing county in the US, holding 75 percent of Arizona’s population, and it's projected to grow by 21 percent in the next 10 years. Gateway Airport is in the perfect location to reap the benefits of that growth.
With only two MRZs in the state, this designation is coveted and comes with special perks for businesses located on the grounds. The ACA accepts applications to be a part of the MRZ program year-round, and only those located within an MRZ are eligible for these money-saving incentives. Here are a few of the benefits that come with operating a business in a Military Reuse Zone:
Transaction Privilege Tax Exemption
If you have a business operating on an MRZ, you’re eligible to apply for a transaction privilege tax exemption. This can be filed on construction contracts resulting in the provision of aerospace or aviation services and also in the fabricating, assembling, or manufacturing of aviation or aerospace (A&A) products. So long as the construction is performed at the MRZ, aerospace and aviation companies are offered this tax exemption.
Both state and county taxes are included in this tax exemption, while the city will impose its own personal taxes. In order to be considered for this tax exemption, the contractor will have to apply for a letter of qualification from the Arizona Department of Revenue prior to starting the work.
The transaction privilege tax exemption savings is given to the company by the prime contractor and is received through a reduced construction contract price. After that’s done, the aerospace or aviation company has to submit a completion report to the ACA in order to maintain eligibility for the transaction privilege tax exemption.
Property Tax Reclassification
A&A businesses operating on MRZs are also able to apply for a Property Tax Reclassification. All of the A&A companies located within the MRZ are eligible for a minimum assessment ration of five percent, for secondary and primary tax purposes. The reclassification can range from class one, which is an 18 percent assessment ratio, to a class six, which is a 5 percent ratio.
This reclassification can run for a maximum of five years as long as the A&A business follows a number of protocols, such as remaining in the MRZ and submitting annual reports. If any additions or improvements are made to the property, you can qualify for a reclassification separately under the program and be eligible for its own five-year period.
The central location of the Gateway Airport is one of the biggest benefits of being in an Arizona Military Reuse Zone. Gateway Airport is located in the greater Phoenix metropolitan area, which is comprised of 27 cities and towns, one being the capital of Arizona, and two counties.
This specific area generates an impressive 75 percent of Arizona’s gross domestic product, which is roughly $198 billion, and is home to 4.8 million people. As the city grows rapidly, it provides a readily available workforce of highly skilled candidates and a large population of consumers. The low cost of living in the area, paired with over 300 days of sunshine and many outdoor activities to enjoy makes for a quality of life in the area that’s unmatched.
With large tax incentives, investment opportunities, and a prime location, operating your business out of an MRZ can come with benefits that are well worth the move. Companies are seeking out the MRZs of Arizona to base their first North American locations, and the companies already working out of MRZs like Gateway Airport are investing in expanding their sites.
An aerospace or aviation company must apply separately for each transaction privilege tax exemption but only needs to apply once for the Property Reclassification benefits. You can learn more about applying for the benefits that come with having your business on an MRZ like Phoenix-Mesa Gateway Airport from the Arizona of Commerce Authority.