State lawmakers are considering a bill that would give entrepreneurs tax breaks in their first few years of operation in Arizona.
PHOENIX — There just might be more incentive for entrepreneurs to launch a startup business in Arizona.
On March 14, the Arizona Senate voted to pass bill SB1559 to reduce taxes for startups and new businesses with an attenuated tax reduction over the course of the first three years in operation, starting with full exemption in the first year, 50% in the second year and 25% in the third year. In the startup phase of a new venture, especially the first year, there is little to no revenue generated in a business, which means there would not be much taxable income. But, by year three it is presumed a company can gauge whether its business is financially viable, and if so, it would be able to pay taxes by year four.
Gregg Scoresby, founder and managing partner of PHX Ventures, an early-stage Arizona venture capital firm, said he is not an expert on the bill but he did agree most startups aren't making money when they first begin. “Very few tech startups are profitable in the early years," he said."Most tech startups building software, for example, don't even have revenue in their first year of operation, let alone profits.”
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