SB 1845

Senate Engrossed
taxation omnibus
State of Arizona
Senate
Fifty-seventh Legislature
Second Regular Session
2026
SENATE BILL 1845
AN
ACT
amending sections 20-224 and 20-224.01,
Arizona Revised Statutes; repealing SECTION 20-224.03, Arizona Revised
Statutes; amending sections 20-837, 20-1010, 20-1060, 20-1097.07,
28-2154.01 and 41-1520, Arizona Revised Statutes; repealing section
41-1525, Arizona Revised Statutes; amending sections 42-1001, 42-2003,
42-5009 and 42-5029, Arizona Revised Statutes; repealing section 42-5031,
Arizona Revised Statutes; amending sections 42-5061 and 42-5071,
Arizona Revised Statutes; amending section 42-5159, Arizona Revised
Statutes, as amended by Laws 2025, chapter 135, section 2 and chapter 247,
section 2; repealing section 42-5159, Arizona Revised Statutes, as
amended by laws 2025, chapter 251, section 13; amending sections 42-6009,
43-105, 43-222, 43-301, 43-323 and 43-1022, arizona
revised statutes; amending title 43, chapter 10, article 3, Arizona Revised
Statutes, by adding section 43-1030; amending sections 43-1041, 43-1042
and 43-1073.01, Arizona Revised Statutes; repealing section 43-1074,
Arizona Revised Statutes; amending section 43-1074.01, Arizona Revised
Statutes; repealing sections 43-1083 and 43-1083.02, Arizona
Revised Statutes; amending sections 43-1083.03, 43-1121 and 43-1122,
Arizona Revised Statutes; repealing sections 43-1161 and 43-1164.03,
Arizona Revised Statutes; amending sections 43-1164.04, 43-1164.05
and 43-1168, Arizona Revised Statutes; repealing section 43-1170,
Arizona Revised Statutes; amending title 43, Arizona Revised Statutes, by
adding chapter 18; amending sections 48-4203, 48-4204, 48-4231.01,
48-4231.02 and 48-4237, Arizona Revised Statutes; relating to
taxation.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it
enacted by the Legislature of the State of Arizona:
Section 1. Section 20-224, Arizona Revised Statutes,
is amended to read:
START_STATUTE20-224. Premium tax; reports
A. On or before March 1 of each year, each
authorized domestic insurer, each other insurer and each formerly authorized
insurer referred to in section 20-206, subsection B shall file with the
director a report in a form prescribed by the director showing total direct
premium income including policy membership and other fees and all other
considerations for insurance from all classes of business whether designated as
a premium or otherwise received by it during the preceding calendar year on
account of policies and contracts covering property, subjects or risks located,
resident or to be performed in this state, after deducting from such total
direct premium income applicable cancellations, returned premiums, the amount
of reduction in or refund of premiums allowed to industrial life policyholders
for payment of premiums direct to an office of the insurer and all policy
dividends, refunds, savings coupons and other similar returns paid or credited
to policyholders within this state and not reapplied as premiums for new,
additional or extended insurance. No deduction shall be made of the
cash surrender values of policies or contracts. �Considerations received on
annuity contracts, as well as the unabsorbed portion of any premium deposit,
shall not be included in total direct premium income, and neither shall be
subject to tax. The report shall separately indicate the total direct
fire insurance premium income received from property located in the
incorporated cities and towns certified by the office of the state fire marshal
pursuant to section 9-951, subsection B, as procuring the services of a
private fire company.
B. Coincident with the filing of the tax report,
each insurer shall pay to the director for deposit, pursuant to sections 35-146
and 35-147, a tax on such net premiums at the following rates:
1. For fire insurance:
(a) On property located in a city or town certified
by the office of the state fire marshal pursuant to section 9-951,
subsection B, as procuring the services of a private fire company, .66 percent.
(b) On all other property, 2.2 percent.
2. For disability insurance, 2.0 percent.
3. For health care service plans, the rates
prescribed under sections 20-837, 20-1010 and 20-1060.
4. For other insurance:
(a) For premiums received in calendar year 2016,
1.95 percent.
(b) For premiums received in calendar year 2017,
1.90 percent.
(c) For premiums received in calendar year 2018,
1.85 percent.
(d) For premiums received in calendar year 2019,
1.80 percent.
(e) For premiums
received in calendar year 2020, 1.75 percent.
(f) For premiums
received in calendar year 2021 and for each subsequent calendar year, 1.70
percent.
C. Any payments of tax pursuant to subsection F of
this section shall be deducted from the tax payable pursuant to subsection B of
this section. Each insurer shall reflect the cost savings
attributable to the lower tax in fire insurance premiums charged on property
located in an incorporated city or town certified by the office of the state
fire marshal pursuant to section 9-951, subsection B, as procuring the
services of a private fire company.� No insurer shall be liable to the state or
to any other person, or shall be subject to regulatory action, relating to the
calculation or submittal of fire insurance premium taxes based in good faith on
the office of the state fire marshal's certification.
D. Eighty-five percent of the tax paid under
this section by an insurer on account of premiums received for fire insurance
shall be separately specified in the report and shall be apportioned in the
manner provided by sections 9-951, 9-952 and 9-972, except
that all of the tax so allocated to a fund of a municipality or fire district
that has no volunteer firefighters or pension obligations to volunteer
firefighters shall be appropriated to the account of the municipality or fire
district in the public safety personnel retirement system and all of the tax so
allocated to a fund of a municipality or fire district that has both full-time
paid firefighters and volunteer firefighters or pension obligations to full-time
paid firefighters or volunteer firefighters shall be appropriated to the
account of the municipality or fire district in the public safety personnel
retirement system where it shall be reallocated by actuarial procedures
proportionately to the municipality or fire district for the account of the full-time
paid firefighters and to the municipality or fire district for the account of
the volunteer firefighters. A municipality or fire district shall
provide to the public safety personnel retirement system all information that
the system deems necessary to perform the reallocation prescribed by this
section.� A full accounting of the reallocation shall be forwarded to the
municipality or fire district and its local boards.
E. This section does not apply to title insurance.
Title insurers shall be taxed as provided in section 20-1566.
F. Any insurer that paid or is required to pay a tax
of $50,000 or more on net premiums received during the preceding calendar year,
pursuant to subsection B of this section and sections 20-224.01, 20-837,
20-1010, 20-1060 and 20-1097.07, shall file on or before the
fifteenth day of each month from March through August a report for that month,
on a form prescribed by the director, accompanied by a payment in an amount
equal to fifteen percent of the amount paid or required to be paid during the
preceding calendar year pursuant to subsection B of this section and sections
20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07.�
The payments are due and payable on or before the fifteenth day of each month
and shall be made to the director for deposit, pursuant to sections 35-146
and 35-147.
G. Except for the tax paid on fire insurance
premiums pursuant to subsections B and D of this section, an insurer may claim
a premium tax credit if the insurer qualifies for a credit pursuant to section 20-224.03, 20-224.04, 20-224.06 or 20-224.07.
H. On receipt of a properly documented claim, a
refund shall be provided to an insurer from available funds for the excess
amount of any fire insurance premium improperly paid by the
insurer. The insurer shall reflect the refund in the fire insurance
premiums charged on the property that was charged the excessive amount.
I. On or before September 30 of each year, the
director of the department of insurance and financial institutions shall report
to the directors of the joint legislative budget committee and the governor's
office of strategic planning and budgeting on the amount of insurance premium
tax credits established by sections 20-224.03, 20-224.04,
20-224.05, 20-224.06 and 20-224.07 that were used during the
previous fiscal year.
J. For the purposes of:
1. Subsection B of this section, fire insurance is
one hundred percent of fire lines, forty percent of commercial multiple peril
nonliability lines, thirty-five percent of homeowners' multiple peril
lines, twenty-five percent of farm owners' multiple peril lines and
twenty percent of allied lines.
2. Section 20-416, fire insurance is eighty-five
percent of fire and allied lines.
K. From and after December 31, 2017, the director
may require that reports and payments under this section be submitted
electronically.� If the director requires electronic submission, the director
shall include on the department's official website a list of one or more
acceptable third-party services through which an insurer must submit
reports and payments. END_STATUTE
Sec. 2. Section 20-224.01, Arizona Revised
Statutes, is amended to read:
START_STATUTE20-224.01. Additional premium tax; civil penalty
A. Coincident with the filing of the tax report as required in section 20-224, each
insurer shall pay to the director, for deposit, pursuant to sections 35-146
and 35-147, a tax of .4312 percent of such net premiums received from all
insurance carried for or on vehicles as defined in section 28-101, in
addition to other applicable taxes.
B. The tax of .4312 percent of such net premiums
received by the director and paid by an insurer on account of premiums received
for insurance on certain vehicles as defined in section 28-101 shall be
separately specified in the insurer's report required in section 20-224
and is appropriated to the public safety personnel retirement system and shall
be transferred by the state treasurer to the board of trustees of the public
safety personnel retirement system for deposit in the highway patrol
account. If the tax received is greater than the amount necessary to
fund the highway patrol account, beginning in the 1991-1992
fiscal year the state treasurer shall deposit the excess in the Arizona
highway patrol fund established by section 41-1752 in any amount required
by legislative appropriation.
C. An insurer shall report and pay the taxes
required by this section in the manner prescribed by section 20-224. An
insurer who that fails to pay the
tax on or before the prescribed payment dates is subject to a civil penalty
determined pursuant to section 20-225.
D. An insurer shall not claim a
premium tax credit pursuant to section 20-224.03 for the premium taxes
paid pursuant to this section.END_STATUTE
Sec. 3. Repeal
Section 20-224.03, Arizona Revised
Statutes, is repealed.
Sec. 4. Section 20-837, Arizona Revised
Statutes, is amended to read:
START_STATUTE20-837. Tax exemption; exceptions
A. Every corporation doing
business pursuant to this article is declared to be a nonprofit and benevolent
institution and to be exempt from state, county, district, municipal and school
taxes, including the taxes prescribed by this title, and excepting only the
fees prescribed by section 20-167 and taxes on real and tangible personal
property located within this state. Each corporation is subject to a
state tax of 2.0 percent on net premiums that are received to effect or
maintain the corporation's subscription contracts, except that the tax shall
not apply with respect to any coverage concerning which the corporation's
relationship is as administrative or fiscal agent for national, state or
municipal government or any political subdivision or body thereof, and such tax
shall not apply with respect to any premiums received from funds of national,
state or municipal government or any political subdivision or body
thereof. The tax shall be determined, filed and reported in the
manner prescribed in section 20-224. The failure by a
corporation to pay the tax on or before the prescribed payment dates results in
a civil penalty determined pursuant to section 20-225.
B. A corporation may claim a premium
tax credit if the corporation qualifies for a credit pursuant to section 20-224.03.END_STATUTE
Sec. 5. Section 20-1010, Arizona Revised
Statutes, is amended to read:
START_STATUTE20-1010. Taxes
A. On the tax payment dates prescribed in section 20-224,
each prepaid dental plan organization shall pay to the director for deposit,
pursuant to sections 35-146 and 35-147, in a form prescribed by the
director a tax for transacting a prepaid dental plan in the amount of 2.0
percent of prepaid net charges received from members.
B. The failure by an organization to pay the tax
imposed by this section results in a civil penalty determined pursuant to
section 20-225.
C. A prepaid dental plan organization
may claim a premium tax credit if the organization qualifies for a credit
pursuant to section 20-224.03. END_STATUTE
Sec. 6. Section 20-1060, Arizona Revised
Statutes, is amended to read:
START_STATUTE20-1060. Taxes; exemption
A. Except as provided in subsection C of this
section, on the tax payment dates prescribed in section 20-224, each
health care services organization shall pay to the director for deposit,
pursuant to sections 35-146 and 35-147, in a form prescribed by the
director a tax for transacting a health care plan in the amount of 2.0 percent
of net charges received from enrollees.
B. The failure by an organization to pay the tax
imposed by this section results in a civil penalty determined pursuant to
section 20-225.
C. Payments received by health care services
organizations from the United States secretary of health and human services
pursuant to a contract issued pursuant to 42 United States Code section
1395mm(g) are not taxable under this section.
D. A health care services organization
may claim a premium tax credit if the organization qualifies for a credit
pursuant to section 20-224.03. END_STATUTE
Sec. 7. Section 20-1097.07, Arizona Revised
Statutes, is amended to read:
START_STATUTE20-1097.07. Fees and taxes
A. Any prepaid legal insurance
corporation licensed pursuant to this article shall pay those fees prescribed
by section 20-167 and those taxes prescribed by section 20-224.
B. A prepaid legal insurance
corporation may claim a premium tax credit if the corporation qualifies for a
credit pursuant to section 20-224.03. END_STATUTE
Sec. 8. Section 28-2154.01, Arizona Revised
Statutes, is amended to read:
START_STATUTE28-2154.01. Special ninety day nonresident registration permits; procedures
A. A dealer or an authorized third party that issues
a special ninety day nonresident registration permit pursuant to section 28-2154
shall send an electronic record of the permit to the department through an
authorized third party or through the department's authorized third-party
electronic service provider.
B. The department, an
authorized third party or a dealer shall not:
1. Issue, assign or
deliver a special ninety day nonresident registration permit to any person
unless the person does all of the following:
(a) Obtains the special ninety day nonresident
registration permit pursuant to section 28-2154.
(b) Completes an affidavit in a form prescribed by
the director pursuant to section 28-2154 or completes a form prescribed
by section 42-5009, subsection H.
(c) Presents to the department, authorized third
party or motor vehicle dealer a current valid driver license issued by another
state indicating an address outside of this state.
(d) Provides any other information reasonably and
uniformly required by the department of transportation pursuant to section 28-2154
or the department of revenue pursuant to section 42-5009, subsection H.
2. Issue and affix, as prescribed in subsection C of
this section, a special ninety day nonresident registration permit unless the
permit is recorded in the electronic records of the department.
C. A person who issues a special ninety day
nonresident registration permit shall affix or insert, clearly and indelibly,
on the face of each permit the dates of issuance and expiration and the make
and vehicle identification number of the vehicle. The special ninety
day nonresident registration permit shall not bear the name or address of the
person who purchased the vehicle in a position that is legible from outside of
the vehicle.
D. A dealer or authorized third party who issues a
special ninety day nonresident registration permit shall maintain a record, in
a form prescribed by the director, of all special ninety day nonresident
registration permits issued by the dealer or authorized third party and a
record of other information pertaining to the issuance of special ninety day
nonresident registration permits that the department of transportation or the
department of revenue requires.
E. The dealer or authorized third party shall keep
each record for at least three years after the date of entry of the record.
F. A dealer or authorized third party shall allow
the director of the department of transportation or the director of the
department of revenue full and free access to the records during regular
business hours.
G. The electronic record is written notice of the
removal of the vehicle from this state for use in the purchaser's state of
residence and relieves the dealer or authorized third party of liability in
accordance with the requirements of section 42-5009.
H. If a purchaser registers the vehicle in this
state within three hundred sixty-five days after the issuance of the
special ninety day nonresident registration permit, the purchaser is liable in
an amount equal to any tax, penalty and interest that the motor vehicle dealer
or authorized third party would have been required to pay under title 42,
chapter 5 and under articles IV and VI of the model city tax code as defined in
section 42-6051.� At the time of issuing the special ninety day
nonresident registration permit, a motor vehicle dealer or authorized third
party shall inform the purchaser in writing of the purchaser's liability
described in this section. Subsequent registration or use of the
vehicle in this state does not create a cause of action against a dealer or
authorized third party that complies with section 28-2154, subsection A,
this section and section 42-5009, subsection H.
I. The department of transportation and the
department of revenue shall jointly develop and prescribe forms for the motor
vehicle dealer, the authorized third party and the purchaser to complete for
the proper administration and enforcement of this section.
J. Compliance with this section and section 28-2154
allows delivery of the vehicle to a nonresident purchaser in this state and
retains the applicable deductions pursuant to section 42-5061, subsection
A, paragraph 28 and subsection V  U.
END_STATUTE
Sec. 9. Section 41-1520, Arizona Revised
Statutes, is amended to read:
START_STATUTE41-1520. International operations centers; utility relief; certification;
revocation; definitions
A. Utility relief is allowed for the owner or
operator of an international operations center that is certified pursuant to
this section.
B. To qualify for the utility relief, the owner or
operator must submit to the authority an application in a form prescribed by
the authority that includes all of the following:
1. The owner's or operator's name, address and
telephone number.
2. The address of the site where the facility is or
will be located, including, if applicable, information sufficient to identify
the specific portion or portions of the facility comprising the international
operations center.
3. An estimate of the total investment the owner or
operator or an affiliated entity, including investments made by a third-party
entity on behalf of and for the benefit of the owner, operator or affiliated
entity, will make, over a three-year period beginning on the date the
application is received, in new renewable energy facilities in this state that
produce energy for self-consumption by the international operations
center using renewable energy resources.
4. The expected location of each of the renewable
energy facilities that comprise the total investment estimated in paragraph 3
of this subsection and the earliest date that each facility is expected to be
operational.
5. A statement that a portion of the power generated
by each renewable energy facility, as required by subsection D, paragraph 4 of
this section, is for self-consumption and will be used for international
operations center use.
C. Within sixty days after receiving a complete and
correct application, the authority shall review the application and either
issue a written certification that the international operations center
qualifies for the utility relief or provide written reasons for its
denial. A failure to approve or deny the application within sixty
days after the date of submittal constitutes certification of the international
operations center, and the authority shall issue written certification to the
owner or operator within fourteen days. The authority shall send a
copy of the certification to the department of revenue.
D. The owner or operator of the international
operations center must achieve all of the following requirements after taking
into account the combined investments made by the owner or operator:
1. A minimum annual investment of $100,000,000 in
new capital assets, including costs of land, buildings and international
operations center equipment in each of ten consecutive taxable years of the
owner or operator. Investments greater than $100,000,000 in any taxable year
may be carried forward as a credit toward the investment requirement in future
years.
2. On or before the tenth anniversary of
certification, a minimum investment of at least $1,250,000,000 in new capital
assets, including costs of land, buildings and international operations center
equipment.
3. An investment by the owner or operator or an
affiliated entity, or a third-party entity on behalf of or for the direct
benefit of the owner, operator or affiliated entity, of at least $100,000,000
in one or more new renewable energy facilities in this state that produce
energy for self-consumption using renewable energy
resources. The minimum investment must be completed within a
three-year period beginning on the date the initial application is received or
by December 31, 2030, whichever is earlier. Construction of the
renewable energy facilities shall begin not later than six months after the
receipt of the application.
4. The use of a portion of the energy produced at
each renewable energy facility for self-consumption in this
state. By the fifth year a renewable energy facility is in
operation, at least fifty-one percent of the energy produced must be used for
self-consumption in this state.� Self-consumption includes the
power used by related entities if the related entities are directly or
indirectly under the same ownership interests that collectively own more than
eighty percent. Power that a renewable energy facility transfers to
a utility qualifies as self-consumption if the utility is the same
utility that provides power to the owner's or operator's international
operations center in this state, regardless of whether the owner or operator or
an affiliated entity owns or leases the renewable energy facility or the land
on which it is located at the time of transfer.
5. The use of power for self-consumption under
paragraph 4 of this subsection is for an international operations center in
this state. A lessor of an international operations center facility
that uses power for self-consumption under paragraph 4 of this subsection
satisfies the requirements of this paragraph if the lessee is an international
operations center and the power is transferred as part of the lease to the
lessee.
E. Within thirty days after the end of each taxable
year following certification, and within thirty days after the tenth
anniversary of certification, the owner or operator shall furnish the authority
written information demonstrating whether the certified international
operations center has or has not satisfied the requirements prescribed in
subsection D of this section. Until the requirements prescribed in
subsection D of this section are met, the owner or operator shall keep detailed
records of all capital investment in the international operations center,
including costs of land, buildings and international operations center
equipment, and all utility relief directly received by the owner or operator.
F. If the authority determines that the requirements
of this section have not been satisfied, the authority may revoke the
certification of the international operations center and notify the department
of revenue in writing. The owner or operator may appeal the
revocation. The authority may give special consideration or allow a
temporary exception if there is extraordinary hardship due to factors beyond
the owner's or operator's control. If certification is revoked, the
department of revenue shall order the owner or operator to forfeit further
entitlement to utility relief. If the owner or operator fails to
make a minimum capital investment of $100,000,000 in a taxable year, taking
into account any excess investment amounts carried forward from previous years,
the owner or operator may avoid revocation of its certification by paying to
the department of revenue within sixty days after the end of the taxable year
the amount of the utility relief provided pursuant to this section in that year.
G. Each year after initial certification, on or
before the anniversary date of the application specified in subsection B of
this section, the owner, operator or affiliated entity must submit to the
authority:
1. Documentation of the owner's, operator's or
affiliated entity's progress toward the investment required by subsection D,
paragraph 3 of this section. This documentation is not required
after the authority receives a report stating that the required investment
threshold has been reached.
2. Documentation for each renewable energy facility
that demonstrates that the required portion of the power generated by each
facility is for self-consumption as required by subsection D, paragraph 4
of this section.
H. The authority and the department of revenue shall
prescribe forms and procedures as necessary for the purposes of this section.
I. Proprietary business information contained in the
application form described in subsection B of this section and the written
notice described in subsection F of this section are confidential and may not
be disclosed to the public, except that the information shall be transmitted to
the department of revenue. The authority or the department of
revenue may disclose the name of an international operations center that has
been certified pursuant to this section.
J. Except as provided in subsection F of this
section, on certification, the international operations center remains
certified unless ownership of the international operations center is sold,
conveyed, transferred or otherwise directly or indirectly disposed of to
another entity in which the original owner holds less than a controlling
interest.� For the purposes of this subsection, "controlling
interest" means at least eighty percent of the voting shares of a
corporation or of the interests in a noncorporate entity.
K. An owner or operator may be composed of a single
entity or affiliated entities.
L. If the information required by subsection B,
paragraphs 3, 4 and 5 of this section and the documentation required by
subsection G of this section were already provided to the department of revenue
for the purposes of the credit provided by section 43-1164.05, the owner
or operator is not required to provide the information or documentation a
second time under this section.
M. For the purposes of this section:
1. "Affiliated entity" means any of the
following:
(a) An entity that is included in the same Arizona
income tax return as the owner or operator of the international operations
center.
(b) Any entity in which the owner or operator of the
international operations center is entitled to a distributive share of the
entity's income or loss.
(c) Any entity, including a single-member
limited liability company, that is disregarded for federal income tax purposes
and is directly or indirectly owned wholly or in part by the owner or operator
of the international operations center.
2. "Biomass" means organic material that
is available on a renewable or recurring basis, including:
(a) Forest-related materials, including mill
residues, logging residues, forest thinnings, slash, brush, low-commercial
value materials or undesirable species, salt cedar and other phreatophyte or
woody vegetation removed from river basins or watersheds and woody material
harvested for the purpose of forest fire fuel reduction or forest health and
watershed improvement.
(b) Agricultural-related materials, including
orchard trees, vineyard, grain or crop residues, including straws and stover,
aquatic plants and agricultural processed coproducts and waste products,
including fats, oils, greases, whey and lactose.
(c) Animal waste, including manure and
slaughterhouse and other processing waste.
(d) Solid woody waste materials, including landscape
or right-of-way tree trimmings, rangeland maintenance residues,
waste pallets, crates and manufacturing, construction and demolition wood
wastes, but excluding pressure-treated, chemically treated or painted
wood wastes and wood contaminated with plastic.
(e) Crops and trees planted for the purpose of being
used to produce energy.
(f) Landfill gas, wastewater treatment gas and
biosolids, including organic waste by-products generated during the
wastewater treatment process.
3. "International operations center" means
a facility or connected facilities under the same ownership that are subject to
the investment thresholds under subsection D of this section and that self-consume
renewable energy from a qualified facility pursuant to subsection D of this
section.
4. "Renewable energy facility" means a
facility in which the owner, operator or affiliated entity, or a third-party
entity on behalf of and for the benefit of the taxpayer, owner, operator or
affiliated entity, invested at least $30,000,000, that has at least twenty
megawatts of generating capacity or a minimum typical annual generation of
forty thousand megawatt hours, that is located on land in this state and that
produces electricity using a renewable energy resource.
5. "Renewable energy resource" means a
resource that generates electricity by using only the following energy sources:
(a) Solar light.
(b) Solar heat.
(c) Wind.
(d) Biomass, including fuel cells supplied directly
or indirectly with biomass generated fuels.
(e) Battery storage that is independent from or
coupled with other sources.
6. "Utility relief" means the mitigation
of the tax burden on the retail purchaser of electricity or natural gas through
the application of section 42-5063, subsection C, paragraph 7, section 42-5159,
subsection G  F, paragraph
2 and section 42-6012, paragraph 2.END_STATUTE
Sec. 10. Repeal
Section 41-1525, Arizona Revised
Statutes, is repealed.
Sec. 11. Section 42-1001, Arizona Revised Statutes, is amended to read:
START_STATUTE42-1001. Definitions
In this title, unless the
context otherwise requires:
1. "Board" or "state board"
means either the state board of tax appeals or the state board of equalization,
as applicable.
2. "Court" means the tax court or superior
court, whichever is applicable.
3. "Department" means the department of
revenue.
4. "Director" means the director of the
department.
5. "Electronically send" or "send
electronically" means to send by either email or the use of an electronic
portal.
6. "Electronic portal" means a secure
location on a website established by the department that requires the receiver
to enter a password to access.
7. "Email" means:
(a) An electronic transmission of a message to an
email address.
(b) If the message contains confidential
information, the electronic transmission of a message to an email address using
encryption software that requires the receiver to enter a password before the
message can be retrieved and viewed.
8. "Internal revenue code" means the
United States internal revenue code of 1986, as amended and in effect as of
January 1, 2025 2026, including
those provisions that became effective during 2024 2025 with the specific adoption of their retroactive effective
dates but excluding all changes to the code enacted after January 1, 2025 2026. END_STATUTE
Sec. 12. Section 42-2003, Arizona Revised
Statutes, is amended to read:
START_STATUTE42-2003. Authorized disclosure of confidential information
A. Confidential information relating to:
1. A taxpayer may be disclosed to the taxpayer, its
successor in interest or a designee of the taxpayer who is authorized in
writing by the taxpayer. A principal corporate officer of a parent
corporation may execute a written authorization for a controlled
subsidiary. If a taxpayer elects to file an Arizona small business
income tax return under section 43-302, a written authorization by the
taxpayer to allow the department to disclose personal income tax information to
a designee includes the corresponding Arizona small business income tax return.
2. A corporate taxpayer may be disclosed to any
principal officer, any person designated by a principal officer or any person
designated in a resolution by the corporate board of directors or other similar
governing body. If a corporate officer signs a statement under
penalty of perjury representing that the officer is a principal officer, the
department may rely on the statement until the statement is shown to be false.�
For the purposes of this paragraph, "principal officer" includes a
chief executive officer, president, secretary, treasurer, vice president of
tax, chief financial officer, chief operating officer or chief tax officer or
any other corporate officer who has the authority to bind the taxpayer on
matters related to state taxes.
3. A partnership may be disclosed to any partner of
the partnership.� This exception does not include disclosure of confidential
information of a particular partner unless otherwise authorized.
4. A limited liability company may be disclosed to
any member of the company or, if the company is manager-managed, to any
manager.
5. An estate may be disclosed to the personal
representative of the estate and to any heir, next of kin or beneficiary under
the will of the decedent if the department finds that the heir, next of kin or
beneficiary has a material interest that will be affected by the confidential
information.
6. A trust may be disclosed to the trustee or
trustees, jointly or separately, and to the grantor or any beneficiary of the
trust if the department finds that the grantor or beneficiary has a material
interest that will be affected by the confidential information.
7. A government entity may be disclosed to the head
of the entity or a member of the governing board of the entity, or any employee
of the entity who has been delegated the authorization in writing by the head
of the entity or the governing board of the entity.
8. Any taxpayer may be disclosed if the taxpayer has
waived any rights to confidentiality either in writing or on the record in any
administrative or judicial proceeding.
9. The name and taxpayer identification numbers of
persons issued direct payment permits may be publicly disclosed.
10. Any taxpayer may be disclosed during a meeting
or telephone call if the taxpayer is present during the meeting or telephone
call and authorizes the disclosure of confidential information.
B. Confidential information may be disclosed to:
1. Any employee of the department whose official
duties involve tax administration.
2. The office of the attorney general solely for its
use in preparation for, or in an investigation that may result in, any
proceeding involving tax administration before the department or any other
agency or board of this state, or before any grand jury or any state or federal
court.
3. The department of liquor licenses and control for
its use in determining whether a spirituous liquor licensee has paid all
transaction privilege taxes and affiliated excise taxes incurred as a result of
the sale of spirituous liquor, as defined in section 4-101, at the
licensed establishment and imposed on the licensed establishments by this state
and its political subdivisions.
4. Other state tax officials whose official duties
require the disclosure for proper tax administration purposes if the
information is sought in connection with an investigation or any other
proceeding conducted by the official.� Any disclosure is limited to information
of a taxpayer who is being investigated or who is a party to a proceeding
conducted by the official.
5. The following agencies, officials and
organizations, if they grant substantially similar privileges to the department
for the type of information being sought, pursuant to statute and a written
agreement between the department and the foreign country, agency, state, Indian
tribe or organization:
(a) The United States internal revenue service,
alcohol and tobacco tax and trade bureau of the United States treasury, United
States bureau of alcohol, tobacco, firearms and explosives of the United States
department of justice, United States drug enforcement agency and federal bureau
of investigation.
(b) A state tax official of another state.
(c) An organization of states, federation of tax
administrators or multistate tax commission that operates an information
exchange for tax administration purposes.
(d) An agency, official or organization of a foreign
country with responsibilities that are comparable to those listed in
subdivision (a), (b) or (c) of this paragraph.
(e) An agency, official or organization of an Indian
tribal government with responsibilities comparable to the responsibilities of
the agencies, officials or organizations identified in subdivision (a), (b) or
(c) of this paragraph.
6. The auditor general, in connection with any audit
of the department subject to the restrictions in section 42-2002,
subsection D.
7. Any person to the extent necessary for effective
tax administration in connection with:
(a) The processing, storage, transmission,
destruction and reproduction of the information.
(b) The programming, maintenance, repair, testing
and procurement of equipment for purposes of tax administration.
(c) The collection of the taxpayer's civil
liability.
8. The office of administrative hearings relating to
taxes administered by the department pursuant to section 42-1101, but the
department shall not disclose any confidential information without the
taxpayer's written consent:
(a) Regarding income tax or withholding tax.
(b) On any tax issue relating to information
associated with the reporting of income tax or withholding tax.
9. The United States treasury inspector general for
tax administration for the purpose of reporting a violation of internal revenue
code section 7213A (26 United States Code section 7213A), unauthorized
inspection of returns or return information.
10. The financial management service of the United
States treasury department for use in the treasury offset program.
11. The United States treasury department or its
authorized agent for use in the state income tax levy program and in the
electronic federal tax payment system.
12. The Arizona commerce authority for its use in:
(a) Qualifying renewable energy operations for the
tax incentives under section 42-12006.
(b) Qualifying businesses with a qualified facility
for income tax credits under sections 43-1083.03 and 43-1164.04.
(c) Fulfilling its annual reporting responsibility
pursuant to section 41-1512, subsections U and V and section 41-1517,
subsection L.
(d) Certifying computer data centers for tax relief
under section 41-1519.
(e) Certifying applicants for the tax credit for
motion picture production costs under sections 43-1082 and 43-1165.
13. A prosecutor for purposes of section 32-1164,
subsection C.
14. The office of the state fire marshal for use in
determining compliance with and enforcing title 37, chapter 9, article 5.
15. The department of transportation for its use in
administering taxes, surcharges and penalties prescribed by title 28.
16. The Arizona health care cost containment system
administration for its use in administering nursing facility provider
assessments.
17. The department of administration risk management
division and the office of the attorney general if the information relates to a
claim against this state pursuant to section 12-821.01 involving the
department of revenue.
18. Another state agency if the taxpayer authorizes
the disclosure of confidential information in writing, including an
authorization that is part of an application form or other document submitted
to the agency.
19. The department of economic security for its use
in determining whether an employer has paid all amounts due under the
unemployment insurance program pursuant to title 23, chapter 4.
20. The department of health services for its use in
determining the following:
(a) Whether a medical marijuana dispensary is in
compliance with the tax requirements of chapter 5 of this title for the
purposes of section 36-2806, subsection A.
(b) Whether a marijuana establishment, marijuana
testing facility or dual licensee licensed under title 36, chapter 28.2 is in
compliance with the tax obligations under this title or title 43.
21. The Arizona department of agriculture for the
purpose of ascertaining compliance with the licensing provisions in title 3.
22. The office of economic opportunity for the
purpose of performing the duties and obligations to or on behalf of this state
prescribed by title 41, chapter 53.
C. Confidential information may be disclosed in any
state or federal judicial or administrative proceeding pertaining to tax
administration pursuant to the following conditions:
1. One or more of the following circumstances must
apply:
(a) The taxpayer is a party to the proceeding.
(b) The proceeding arose out of, or in connection
with, determining the taxpayer's civil or criminal liability, or the collection
of the taxpayer's civil liability, with respect to any tax imposed under this
title or title 43.
(c) The treatment of an item reflected on the
taxpayer's return is directly related to the resolution of an issue in the
proceeding.
(d) Return information directly relates to a
transactional relationship between a person who is a party to the proceeding
and the taxpayer and directly affects the resolution of an issue in the
proceeding.
2. Confidential information may not be disclosed
under this subsection if the disclosure is prohibited by section 42-2002,
subsection C or D.
D. Identity information may be disclosed for
purposes of notifying persons entitled to tax refunds if the department is
unable to locate the persons after reasonable effort.
E. The department, on the request of any person,
shall provide the names and addresses of bingo licensees as defined in section
5-401, verify whether or not a person has a privilege license and number,
a tobacco product distributor's license and number or a withholding license and
number or disclose the information to be posted on the department's website or
otherwise publicly accessible pursuant to section 42-1124, subsection F
and section 42-3401.
F. A department employee, in connection with the
official duties relating to any audit, collection activity or civil or criminal
investigation, may disclose return information to the extent that disclosure is
necessary to obtain information that is not otherwise reasonably
available. These official duties include the correct determination
of and liability for tax, the amount to be collected or the enforcement of
other state tax revenue laws.
G. Confidential information relating to transaction
privilege tax, use tax, severance tax, jet fuel excise and use tax and any
other tax collected by the department on behalf of any jurisdiction may be
disclosed to any county, city or town tax official if the information relates
to a taxpayer who is or may be taxable by a county, city or town or who may be
subject to audit by the department pursuant to section 42-6002. Any
taxpayer information that is released by the department to the county, city or
town:
1. May be used only for internal purposes, including
audits and communication with taxpayers for the purposes of the notice required
by section 9-499.15, subsection C. If there is a legitimate
business need relating to enforcing laws, regulations and ordinances pursuant
to section 9-500.39 or 11-269.17, a county, city or town tax
official may redisclose transaction privilege tax information relating to a
vacation rental or short-term rental property owner or online lodging
operator from the new license report and license update report, subject to the
following:
(a) The information redisclosed is limited to the
following:
(i) The transaction privilege tax license number.
(ii) The type of organization or ownership of the
business.
(iii) The legal business name and doing business as
name, if different from the legal name.
(iv) The business mailing address, tax record
physical location address, telephone number, email address and fax number.
(v) The date the business started in this state, the
business description and the North American industry classification system
code.
(vi) The name, address and telephone number for each
owner, partner, corporate officer, member, managing member or official of the
employing unit.
(b) Redisclosure is limited to nonelected officials
in other units within the county, city or town. The information may
not be redisclosed to an elected official or the elected official's staff.
(c) All redisclosures of confidential information
made pursuant to this paragraph are subject to paragraph 2 of this subsection.
2. May not be disclosed to the public in any manner
that does not comply with confidentiality standards established by the
department. The county, city or town shall agree in writing with the
department that any release of confidential information that violates the
confidentiality standards adopted by the department will result in the
immediate suspension of any rights of the county, city or town to receive
taxpayer information under this subsection.
H. The department may disclose statistical
information gathered from confidential information if it does not disclose
confidential information attributable to any one taxpayer.� The department may
disclose statistical information gathered from confidential information, even
if it discloses confidential information attributable to a taxpayer, to:
1. The state treasurer in order to comply with the
requirements of section 42-5029, subsection A, paragraph 3.
2. The joint legislative income tax credit review
committee, the joint legislative budget committee staff and the legislative
staff in order to comply with the requirements of section 43-221.
I. The department may disclose the aggregate amounts
of any tax credit, tax deduction or tax exemption enacted after January 1,
1994. Information subject to disclosure under this subsection shall not be
disclosed if a taxpayer demonstrates to the department that such information
would give an unfair advantage to competitors.
J. Except as provided in section 42-2002,
subsection C, confidential information, described in section 42-2001,
paragraph 1, subdivision (a), item (ii), may be disclosed to law enforcement
agencies for law enforcement purposes.
K. The department may provide transaction privilege
tax license information to property tax officials in a county for the purpose
of identification and verification of the tax status of commercial property.
L. The department may provide transaction privilege
tax, luxury tax, use tax, property tax and severance tax information to the
ombudsman-citizens aide pursuant to title 41, chapter 8, article 5.
M. Except as provided in section 42-2002,
subsection D, a court may order the department to disclose confidential
information pertaining to a party to an action.� An order shall be made only on
a showing of good cause and that the party seeking the information has made
demand on the taxpayer for the information.
N. This section does not prohibit the disclosure by
the department of any information or documents submitted to the department by a
bingo licensee.� Before disclosing the information, the department shall obtain
the name and address of the person requesting the information.
O. If the department is required or allowed to
disclose confidential information, it may charge the person or agency
requesting the information for the reasonable cost of its services.
P. Except as provided in section 42-2002,
subsection D, the department of revenue shall release confidential information
as requested by the department of economic security pursuant to section 42-1122
or 46-291. Information disclosed under this subsection is
limited to the same type of information that the United States internal revenue
service is authorized to disclose under section 6103(l)(6) of the internal
revenue code.
Q. Except as provided in section 42-2002,
subsection D, the department shall release confidential information as
requested by the courts and clerks of the court pursuant to section 42-1122.
R. To comply with the requirements of
section 42-5031, the department may disclose to the state treasurer, to
the county stadium district board of directors and to any city or town tax
official that is part of the county stadium district confidential information
attributable to a taxpayer's business activity conducted in the county stadium
district.
S. R. The
department shall release to the attorney general confidential information as
requested by the attorney general for purposes of determining compliance with
or enforcing any of the following:
1. Any public health control law relating to tobacco
sales as provided under title 36, chapter 6, article 14.
2. Any law relating to reduced cigarette ignition
propensity standards as provided under title 37, chapter 9, article 5.
3. Sections 44-7101 and 44-7111, the
master settlement agreement referred to in those sections and all agreements
regarding disputes under the master settlement agreement.
T. S. For
proceedings before the department, the office of administrative hearings, the
state board of tax appeals or any state or federal court involving penalties
that were assessed against a return preparer, an electronic return preparer or
a payroll service company pursuant to section 42-1103.02, 42-1125.01
or 43-419, confidential information may be disclosed only before the
judge or administrative law judge adjudicating the proceeding, the parties to
the proceeding and the parties' representatives in the proceeding prior to its
introduction into evidence in the proceeding. The confidential
information may be introduced as evidence in the proceeding only if the
taxpayer's name, the names of any dependents listed on the return, all social security
numbers, the taxpayer's address, the taxpayer's signature and any attachments
containing any of the foregoing information are redacted and if either:
1. The treatment of an item reflected on such a
return is or may be related to the resolution of an issue in the proceeding.
2. Such a return or the return information relates
or may relate to a transactional relationship between a person who is a party
to the proceeding and the taxpayer that directly affects the resolution of an
issue in the proceeding.
3. The method of payment of the taxpayer's
withholding tax liability or the method of filing the taxpayer's withholding
tax return is an issue for the period.
U. T. The
department and attorney general may share the information specified in
subsection S  R of this section
with any of the following:
1. Federal, state or local agencies located in this
state for the purposes of enforcement of the statutes or agreements specified
in subsection S  R of this
section or for the purposes of enforcement of corresponding laws of other
states.
2. Indian tribes located in this state for the
purposes of enforcement of the statutes or agreements specified in subsection S  R of this section.
3. A court, arbitrator, data clearinghouse or
similar entity for the purpose of assessing compliance with or making
calculations required by the master settlement agreement or agreements
regarding disputes under the master settlement agreement, and with counsel for
the parties or expert witnesses in any such proceeding, if the information
otherwise remains confidential.
V. U. The
department may provide the name and address of qualifying hospitals and
qualifying health care organizations, as defined in section 42-5001, to a
business that is classified and reporting transaction privilege tax under the
utilities classification.
W. V. The
department may disclose to an official of any city, town or county in a current
agreement or considering a prospective agreement with the department as
described in section 42-5032.02, subsection G any information relating to
amounts that are subject to distribution and that are required by section 42-5032.02. Information
disclosed by the department under this subsection:
1. May be used only by the city, town or county for
internal purposes.
2. May not be disclosed to the public in any manner
that does not comply with confidentiality standards established by the
department. The city, town or county must agree with the department
in writing that any release of confidential information that violates the
confidentiality standards will result in the immediate suspension of any rights
of the city, town or county to receive information under this subsection.
X. W. Notwithstanding
any other provision of this section, the department may not disclose
information provided by an online lodging marketplace, as defined in section 42-5076,
without the written consent of the online lodging marketplace, and the
information may be disclosed only pursuant to subsection A, paragraphs 1
through 6, 8 and 10, subsection B, paragraphs 1, 2, 7 and 8 and subsections C,
D and G of this section.� Such information:
1. Is not subject to disclosure pursuant to title
39, relating to public records.
2. May not be disclosed to any agency of this state
or of any county, city, town or other political subdivision of this state. END_STATUTE
Sec. 13. Section 42-5009, Arizona Revised
Statutes, is amended to read:
START_STATUTE42-5009. Certificates establishing deductions; liability for making false
certificate; tax exclusion; definitions
A. A person who conducts any business classified
under article 2 of this chapter may establish entitlement to the allowable
deductions from the tax base of that business by both:
1. Marking the invoice for the transaction to
indicate that the gross proceeds of sales or gross income derived from the
transaction was deducted from the tax base.
2. Obtaining a certificate executed by the purchaser
indicating the name and address of the purchaser, the precise nature of the
business of the purchaser, the purpose for which the purchase was made, the
necessary facts to establish the appropriate deduction and the tax license
number of the purchaser to the extent the deduction depends on the purchaser
conducting business classified under article 2 of this chapter and a
certification that the person executing the certificate is authorized to do so
on behalf of the purchaser. The certificate may be disregarded if
the seller has reason to believe that the information contained in the
certificate is not accurate or complete.
B. A person who does not comply with subsection A of
this section may establish entitlement to the deduction by presenting facts
necessary to support the entitlement, but the burden of proof is on that
person.
C. The department may prescribe a form for the
certificate described in subsection A of this section.� Under such rules as it
may prescribe, the department may also describe transactions with respect to
which a person is not entitled to rely solely on the information contained in
the certificate provided for in subsection A of this section but must instead
obtain such additional information as required by the rules in order to be
entitled to the deduction.
D. If a seller is entitled to a deduction by
complying with subsection A of this section, the department may require the
purchaser that caused the execution of the certificate to establish the
accuracy and completeness of the information required to be contained in the
certificate that would entitle the seller to the deduction. If the
purchaser cannot establish the accuracy and completeness of the information,
the purchaser is liable in an amount equal to any tax, penalty and interest
that the seller would have been required to pay under this article if the
seller had not complied with subsection A of this section. Payment
of the amount under this subsection exempts the purchaser from liability for
any tax imposed under article 4 of this chapter.� The amount shall be treated
as tax revenues collected from the seller in order to designate the
distribution base for purposes of section 42-5029.
E. If a seller is entitled to a deduction by
complying with subsection B of this section, the department may require
the purchaser to establish the accuracy and completeness of the information
provided to the seller that entitled the seller to the deduction.� If the
purchaser cannot establish the accuracy and completeness of the information,
the purchaser is liable in an amount equal to any tax, penalty and interest
that the seller would have been required to pay under this article if the
seller had not complied with subsection B of this section. Payment
of the amount under this subsection exempts the purchaser from liability for
any tax imposed under article 4 of this chapter. The amount shall be
treated as tax revenues collected from the seller in order to designate the
distribution base for purposes of section 42-5029.
F. The department may prescribe a form for a
certificate used to establish entitlement to the deductions described in
section 42-5061, subsection A, paragraph 46 and section 42-5063,
subsection B, paragraph 3.� Under rules the department may prescribe, the
department may also require additional information for the seller to be
entitled to the deduction. If a seller is entitled to the deductions
described in section 42-5061, subsection A, paragraph 46 and section
42-5063, subsection B, paragraph 3, the department may require the
purchaser who executed the certificate to establish the accuracy and
completeness of the information contained in the certificate that would entitle
the seller to the deduction. If the purchaser cannot establish the
accuracy and completeness of the information, the purchaser is liable in an
amount equal to any tax, penalty and interest that the seller would have been
required to pay under this article. Payment of the amount under this
subsection exempts the purchaser from liability for any tax imposed under
article 4 of this chapter.� The amount shall be treated as tax revenues
collected from the seller in order to designate the distribution base for
purposes of section 42-5029.
G. If a seller claims a deduction under section 42-5061,
subsection A, paragraph 25 and establishes entitlement to the deduction
with an exemption letter that the purchaser received from the department and
the exemption letter was based on a contingent event, the department may
require the purchaser that received the exemption letter to establish the
satisfaction of the contingent event within a reasonable time. If
the purchaser cannot establish the satisfaction of the event, the purchaser is
liable in an amount equal to any tax, penalty and interest that the seller
would have been required to pay under this article if the seller had not been
furnished the exemption letter. Payment of the amount under this
subsection exempts the purchaser from liability for any tax imposed under
article 4 of this chapter. The amount shall be treated as tax
revenues collected from the seller in order to designate the distribution base
for purposes of section 42-5029. For the purposes of this
subsection, "reasonable time" means a time limitation that the
department determines and that does not exceed the time limitations pursuant to
section 42-1104.
H. The department shall prescribe forms for
certificates used to establish the satisfaction of the criteria necessary to
qualify the sale of a motor vehicle for the deductions described in section 42-5061,
subsection A, paragraphs 14, 28 and 44 and subsection V  U. Except as provided in subsection J of this
section, to establish entitlement to these deductions, a motor vehicle dealer
shall retain:
1. A valid certificate as prescribed by this
subsection completed by the purchaser and obtained before the issuance of the
nonresident registration permit authorized by section 28-2154.
2. For the purposes of the deductions provided by
section 42-5061, subsection A, paragraph 14, subdivision (b) and section
42-5061, subsection V  U,
a copy of the nonresident registration permit authorized by section 28-2154.
3. A legible copy of a current valid driver license
issued to the purchaser by another state or foreign country that indicates an
address outside of this state. For the sale of a motor vehicle to a
nonresident entity, the entity's representative must have a current valid
driver license issued by the same jurisdiction as that in which the entity is
located.
4. For the purposes of the deduction provided by
section 42-5061, subsection A, paragraph 14, subdivision (a), a
certificate documenting the delivery of the motor vehicle to an out-of-state
location.
I. Notwithstanding subsection A, paragraph 2 of this
section, if a motor vehicle dealer has established entitlement to a deduction
by complying with subsection H of this section, the department may require the
purchaser who executed the certificate to establish the accuracy and
completeness of the information contained in the certificate that entitled the
motor vehicle dealer to the deduction. If the purchaser cannot
establish the accuracy and completeness of the information, the purchaser is
liable in an amount equal to any tax, penalty and interest that the motor
vehicle dealer would have been required to pay under this article and under
articles IV and V of the model city tax code as defined in section 42-6051. Payment
of the amount under this subsection exempts the purchaser from liability for
any tax imposed under article 4 of this chapter and any tax imposed under
article VI of the model city tax code as defined in section 42-6051. The
amount shall be treated as tax revenues collected from the motor vehicle dealer
in order to designate the distribution base for purposes of section 42-5029.
J. To establish entitlement to the deduction
described in section 42-5061, subsection A, paragraph 44, a public
consignment auction dealer as defined in section 28-4301 shall retain a
copy of the certificate prescribed by subsection H of this section for its
records.
K. Notwithstanding any other law, compliance with
subsection H of this section by a motor vehicle dealer entitles the motor
vehicle dealer to the exemption provided in section 42-6004, subsection
A, paragraph 4.
L. The department shall prescribe a form for a
certificate to be used by a person that is not subject to tax under section 42-5075
when the person is engaged by a contractor that is subject to tax under section
42-5075 for a project that is taxable under section 42-5075. The
certificate permits the person purchasing tangible personal property to be
incorporated or fabricated by the person into any real property, structure,
project, development or improvement to provide documentation to a retailer that
the sale of tangible personal property qualifies for the deduction under
section 42-5061, subsection A, paragraph 27,
subdivision (b). A prime contractor shall obtain the
certificate from the department and shall provide a copy to any such person
working on the project. The prime contractor shall obtain a new certificate
for each project to which this subsection applies. For the purposes
of this subsection, the following apply:
1. The person that is not subject to tax under
section 42-5075 may use the certificate issued pursuant to this
subsection only with respect to tangible personal property that will be
incorporated into a project for which the gross receipts are subject to tax
under section 42-5075.
2. The department shall issue the certificate to the
prime contractor on receiving sufficient documentation to establish that the
prime contractor meets the requirements of this subsection.
3. If any person uses the certificate provided under
this subsection to purchase tangible personal property to be used in a project
that is not subject to tax under section 42-5075, the person is liable in
an amount equal to any tax, penalty and interest that the seller would have
been required to pay under this article if the seller had not complied with
subsection A of this section. Payment of the amount under this
section exempts the person from liability for any tax imposed under article 4
of this chapter. The amount shall be sourced under section 42-5040,
subsection A, paragraph 2.
M. Notwithstanding any other law, compliance with
subsection L of this section by a person that is not subject to tax under
section 42-5075 entitles the person to the exemption allowed by section
465, subsection (k) of the model city tax code when purchasing tangible
personal property to be incorporated or fabricated by the person into any real
property, structure, project, development or improvement.
N. The requirements of subsections A and B of this
section do not apply to owners, proprietors or tenants of agricultural lands or
farms who sell livestock or poultry feed that is grown or raised on their lands
to any of the following:
1. Persons who feed their own livestock or poultry.
2. Persons who are engaged in the business of
producing livestock or poultry commercially.
3. Persons who are engaged in the business of
feeding livestock or poultry commercially or who board livestock
noncommercially.
O. A vendor who has reason to believe that a
certificate prescribed by this section is not accurate or complete will not be
relieved of the burden of proving entitlement to the exemption. A
vendor that accepts a certificate in good faith will be relieved of the burden
of proof and the purchaser may be required to establish the accuracy of the
claimed exemption. If the purchaser cannot establish the accuracy
and completeness of the information provided in the certificate, the purchaser
is liable for an amount equal to the transaction privilege tax, penalty and
interest that the vendor would have been required to pay if the vendor had not
accepted the certificate.
P. Notwithstanding any other law, an online lodging
operator, as defined in section 42-5076, shall be entitled to an
exclusion from any applicable taxes for any online lodging transaction, as
defined in section 42-5076, facilitated by an online lodging marketplace,
as defined in section 42-5076, for which the online lodging operator has
obtained from the online lodging marketplace written notice that the online
lodging marketplace is registered with the department to collect applicable
taxes for all online lodging transactions facilitated by the online lodging
marketplace, and transaction history documenting tax collected by the online
lodging marketplace, pursuant to section 42-5005, subsection L.
Q. The department shall prescribe the form of a
certificate to be used by a person purchasing an aircraft to document
eligibility for a deduction pursuant to section 42-5061, subsection B,
paragraph 8, subdivision (a), item (v) or an exemption pursuant to section 42-5159,
subsection B, paragraph 8, subdivision (a), item (v), relating to
aircraft. The person must provide this certificate and documentation
confirming that the operational control of the aircraft has been transferred or
will be transferred immediately after the purchase to one or more persons
described in section 42-5061, subsection B, paragraph 8, subdivision (a),
item (i), (ii), (iii) or (iv) or section 42-5159, subsection B, paragraph
8, subdivision (a), item (i), (ii), (iii) or (iv).� Operational control of the
aircraft must be transferred for at least fifty percent of the aircraft's
flight hours. If such operational control is not transferred for at
least fifty percent of the aircraft's flight hours during the recapture period,
the owner of the aircraft is liable for an amount equal to any tax that the
seller or purchaser would have been required to pay under this chapter at the
time of the sale, plus penalty and interest. The recapture period
begins on the date that operational control of the aircraft is first
transferred and ends on the later of the date the aircraft is fully depreciated
for federal income tax purposes or five years after operational control was
first transferred. For the purposes of this subsection, operational control of
the aircraft must be within the meaning of federal aviation administration
operations specification A008, or its successor, except that:
1. If it is determined that operational control has
been transferred for less than fifty percent but more than forty percent of the
aircraft's flight hours, the owner of the aircraft is liable for an amount
equal to any tax that the seller or purchaser would have been required to pay
under this chapter at the time of the sale, plus interest.
2. If the aircraft is sold during the recapture
period, the seller is not liable for the amount determined pursuant to this
subsection unless the operational control of the aircraft had not been
transferred for at least fifty percent of the aircraft's flight hours at the
time of the sale.
R. Notwithstanding any other law, a shared vehicle
owner is entitled to an exclusion from any applicable taxes for a shared
vehicle transaction that is facilitated by a peer-to-peer car
sharing program and for which the peer-to-peer car sharing program has
collected and remitted applicable taxes.
S. A qualifying community health center, qualifying
health care organization or qualifying hospital or any other entity that is
recognized as nonprofit under section 501(c) of the United States internal
revenue code and that is required to obtain an exemption letter from the
department shall:
1. Apply to the department for the exemption letter
and fully answer any eligibility questions required by the department for the
purposes of the exemption letter. If the department approves the
exemption letter application, the exemption letter is valid until the entity is
no longer qualified for the exemption letter.
2. Notify the department in writing if the entity no
longer qualifies for the exemption letter. Regardless of whether the entity
notifies the department as required by this paragraph, if the entity no longer
qualifies for the exemption letter, the entity is liable in an amount equal to
any tax, penalty and interest that the seller would have been required to pay
under this article if the seller had not been furnished the exemption
letter. Payment of the amount under this paragraph exempts the
entity from liability for any tax imposed under article 4 of this chapter.� The
amount shall be treated as tax revenues collected from the seller in order to
designate the distribution base for the purposes of section 42-5029.
T. For the purposes of this section, "peer-to-peer
car sharing program", "shared vehicle owner" and "shared
vehicle transaction" have the same meanings prescribed in section 28-9601.
END_STATUTE
Sec. 14. Section 42-5029, Arizona Revised
Statutes, is amended to read:
START_STATUTE42-5029. Remission and distribution of monies; withholding; definition
A. The department shall deposit, pursuant to
sections 35-146 and 35-147, all revenues collected under this
article and articles 4, 5 and 8 of this chapter pursuant to section 42-1116,
separately accounting for:
1. Payments of estimated tax under section 42-5014,
subsection D.
2. Revenues collected pursuant to section 42-5070.
3. Revenues collected under this article and article
5 of this chapter from and after June 30, 2000 from sources located on Indian
reservations in this state.
4. Revenues collected pursuant to section 42-5010,
subsection G and section 42-5155, subsection D.
5. Revenues collected pursuant to section 42-5010.01
and section 42-5155, subsection E.
6. Revenues collected pursuant to section 42-5061
from a remote seller.
B. The department shall credit payments of estimated
tax to an estimated tax clearing account and each month shall transfer all
monies in the estimated tax clearing account to a fund designated as the
transaction privilege and severance tax clearing account.� The department shall
credit all other payments to the transaction privilege and severance tax
clearing account, separately accounting for the monies designated as
distribution base under sections 42-5010, 42-5164 and 42-5205. Each
month the department shall report to the state treasurer the amount of monies
collected pursuant to this article and articles 4, 5 and 8 of this chapter.
C. On notification by the department, the state
treasurer shall distribute the monies deposited in the transaction privilege
and severance tax clearing account in the manner prescribed by this section and
by sections 42-5164 and 42-5205, after deducting warrants drawn
against the account pursuant to sections 42-1118 and 42-1254.
D. Of the monies designated as distribution base,
the department shall:
1. Pay twenty-five percent to the various
incorporated municipalities in this state in proportion to their population to
be used by the municipalities for any municipal purpose, except a municipality
shall use monies paid from revenues separately accounted for pursuant to
subsection A, paragraph 6 of this section and paid pursuant to this paragraph
for public safety before any other municipal purpose.
2. Pay 38.08 percent to the counties in this state
by averaging the following proportions:
(a) The proportion that the population of each
county bears to the total state population.
(b) The proportion that the distribution base monies
collected during the calendar month in each county under this article, section
42-5164, subsection B and section 42-5205, subsection B bear to the
total distribution base monies collected under this article, section 42-5164,
subsection B and section 42-5205, subsection B throughout the this state for the calendar month.
3. Pay an additional 2.43 percent to the counties in
this state as follows:
(a) Average the following proportions:
(i) The proportion that the assessed valuation used
to determine secondary property taxes of each county, after deducting that part
of the assessed valuation that is exempt from taxation at the beginning of the
month for which the amount is to be paid, bears to the total assessed
valuations used to determine secondary property taxes of all the counties after
deducting that portion of the assessed valuations that is exempt from taxation
at the beginning of the month for which the amount is to be paid.� Property of
a city or town that is not within or contiguous to the municipal corporate
boundaries and from which water is or may be withdrawn or diverted and
transported for use on other property is considered to be taxable property in
the county for purposes of determining assessed valuation in the county under
this item.
(ii) The proportion that the distribution base
monies collected during the calendar month in each county under this article,
section 42-5164, subsection B and section 42-5205, subsection B
bear to the total distribution base monies collected under this article,
section 42-5164, subsection B and section 42-5205, subsection B
throughout this state for the calendar month.
(b) If the proportion computed under subdivision (a)
of this paragraph for any county is greater than the proportion computed under
paragraph 2 of this subsection, the department shall compute the difference
between the amount distributed to that county under paragraph 2 of this
subsection and the amount that would have been distributed under paragraph 2 of
this subsection using the proportion computed under subdivision (a) of this
paragraph and shall pay that difference to the county from the amount available
for distribution under this paragraph. Any monies remaining after all payments
under this subdivision shall be distributed among the counties according to the
proportions computed under paragraph 2 of this subsection.
4. After any distributions required by sections 42-5030,
42-5030.01, 42-5031, 42-5032, 42-5032.01,
42-5032.02 and 42-5032.03 and after making any transfer to the
water quality assurance revolving fund as required by section 49-282,
subsection B, credit the remainder of the monies designated as distribution
base to the state general fund.� From this amount the legislature shall
annually appropriate to:
(a) The department of revenue, sufficient monies to
administer and enforce this article and articles 5 and 8 of this chapter.
(b) The department of economic security, monies to
be used for the purposes stated in title 46, chapter 1.
(c) The firearms safety and ranges fund established
by section 17-273, $50,000 derived from the taxes collected from the
retail classification pursuant to section 42-5061 for the current fiscal
year.
E. If approved by the qualified electors voting at a
statewide general election, all monies collected pursuant to section 42-5010,
subsection G and section 42-5155, subsection D shall be distributed each
fiscal year pursuant to this subsection. The monies distributed
pursuant to this subsection are in addition to any other appropriation,
transfer or other allocation of public or private monies from any other source
and shall not supplant, replace or cause a reduction in other school district,
charter school, university or community college funding sources. The
monies shall be distributed as follows:
1. If there are outstanding state school facilities
revenue bonds pursuant to title 15, chapter 16, article 7, each month one-twelfth
of the amount that is necessary to pay the fiscal year's debt service on
outstanding state school improvement revenue bonds for the current fiscal year
shall be transferred each month to the school improvement revenue bond debt
service fund established by section 15-2084. The total amount
of bonds for which these monies may be allocated for the payment of debt
service shall not exceed a principal amount of eight hundred million dollars
exclusive of refunding bonds and other refinancing obligations.
2. After any transfer of monies pursuant to
paragraph 1 of this subsection, twelve per cent of the remaining monies
collected during the preceding month shall be transferred to the technology and
research initiative fund established by section 15-1648 to be distributed
among the universities for the purpose of investment in technology and research-based
initiatives.
3. After the transfer of monies pursuant to
paragraph 1 of this subsection, three per cent of the remaining monies
collected during the preceding month shall be transferred to the workforce
development account established in each community college district pursuant to
section 15-1472 for the purpose of investment in workforce development
programs.
4. After transferring monies pursuant to paragraphs
1, 2 and 3 of this subsection, one-twelfth of the amount a community
college that is owned, operated or chartered by a qualifying Indian tribe on
its own Indian reservation would receive pursuant to section 15-1472,
subsection D, paragraph 2 if it were a community college district shall be
distributed each month to the treasurer or other designated depository of a
qualifying Indian tribe.� Monies distributed pursuant to this paragraph are for
the exclusive purpose of providing support to one or more community colleges
owned, operated or chartered by a qualifying Indian tribe and shall be used in
a manner consistent with section 15-1472, subsection B. For
the purposes of this paragraph, "qualifying Indian tribe" has the
same meaning as defined in section 42-5031.01, subsection D.
5. After transferring monies pursuant to paragraphs
1, 2 and 3 of this subsection, one-twelfth of the following amounts shall
be transferred each month to the department of education for the increased cost
of basic state aid under section 15-971 due to added school days and
associated teacher salary increases enacted in 2000:
(a) In fiscal year 2001-2002, $15,305,900.
(b) In fiscal year 2002-2003, $31,530,100.
(c) In fiscal year 2003-2004, $48,727,700.
(d) In fiscal year 2004-2005, $66,957,200.
(e) In fiscal year 2005-2006 and each fiscal
year thereafter, $86,280,500.
6. After transferring monies pursuant to paragraphs
1, 2 and 3 of this subsection, seven million eight hundred thousand dollars is
appropriated each fiscal year, to be paid in monthly installments, to the
department of education to be used for school safety as provided in section 15-154
and two hundred thousand dollars is appropriated each fiscal year, to be paid
in monthly installments to the department of education to be used for the
character education matching grant program as provided in section 15-154.01.
7. After transferring monies pursuant to paragraphs
1, 2 and 3 of this subsection, no more than seven million dollars may be
appropriated by the legislature each fiscal year to the department of education
to be used for accountability purposes as described in section 15-241 and
title 15, chapter 9, article 8.
8. After transferring monies pursuant to paragraphs
1, 2 and 3 of this subsection, one million five hundred thousand dollars is
appropriated each fiscal year, to be paid in monthly installments, to the
failing schools tutoring fund established by section 15-241.
9. After transferring monies pursuant to paragraphs
1, 2 and 3 of this subsection, twenty-five million dollars shall be
transferred each fiscal year to the state general fund to reimburse the general
fund for the cost of the income tax credit allowed by section 43-1072.01.
10. After the payment of monies pursuant to
paragraphs 1 through 9 of this subsection, the remaining monies collected
during the preceding month shall be transferred to the classroom site fund
established by section 15-977. The monies shall be allocated
as follows in the manner prescribed by section 15-977:
(a) Forty per cent shall be allocated for teacher
compensation based on performance.
(b) Twenty per cent shall be allocated for increases
in teacher base compensation and employee related expenses.
(c) Forty per cent shall be allocated for
maintenance and operation purposes.
F. The department shall credit the remainder of the
monies in the transaction privilege and severance tax clearing account to the
state general fund, subject to any distribution required by section 42-5030.01.
G. Notwithstanding subsection D of this section, if
a court of competent jurisdiction finally determines that tax monies
distributed under this section were illegally collected under this article or
articles 5 and 8 of this chapter and orders the monies to be refunded to the
taxpayer, the department shall compute the amount of such monies that was
distributed to each city, town and county under this section. Each
city's, town's and county's proportionate share of the costs shall be based on
the amount of the original tax payment each municipality and county received.�
Each month the state treasurer shall reduce the amount otherwise distributable
to the city, town and county under this section by 1/36 of the total amount to
be recovered from the city, town or county until the total amount has been
recovered, but the monthly reduction for any city, town or county shall not
exceed ten percent of the full monthly distribution to that
entity. The reduction shall begin for the first calendar month after
the final disposition of the case and shall continue until the total amount,
including interest and costs, has been recovered.
H. On receiving a certificate of default from the
greater Arizona development authority pursuant to section 41-2257 or 41-2258
and to the extent not otherwise expressly prohibited by law, the state
treasurer shall withhold from the next succeeding distribution of monies
pursuant to this section due to the defaulting political subdivision the amount
specified in the certificate of default and immediately deposit the amount
withheld in the greater Arizona development authority revolving
fund. The state treasurer shall continue to withhold and deposit the
monies until the greater Arizona development authority certifies to the state
treasurer that the default has been cured. In no event
may The state treasurer may not withhold any
amount that the defaulting political subdivision certifies to the state
treasurer and the authority as being necessary to make any required deposits
then due for the payment of principal and interest on bonds of the political
subdivision that were issued before the date of the loan repayment agreement or
bonds and that have been secured by a pledge of distributions made pursuant to
this section.
I. Except as provided by sections 42-5033 and
42-5033.01, the population of a county, city or town as determined by the
most recent United States decennial census plus any revisions to the decennial
census certified by the United States bureau of the census shall be used as the
basis for apportioning monies pursuant to subsection D of this section.
J. Except as otherwise provided by this subsection,
on notice from the department of revenue pursuant to section 42-6010,
subsection B, the state treasurer shall withhold from the distribution of
monies pursuant to this section to the affected city or town the amount of the
penalty for business location municipal tax incentives provided by the city or
town to a business entity that locates a retail business facility in the city
or town. The state treasurer shall continue to withhold monies
pursuant to this subsection until the entire amount of the penalty has been
withheld. The state treasurer shall credit any monies withheld pursuant to this
subsection to the state general fund as provided by subsection D, paragraph 4
of this section. The state treasurer shall not withhold any amount
that the city or town certifies to the department of revenue and the state
treasurer as being necessary to make any required deposits or payments for debt
service on bonds or other long-term obligations of the city or town that
were issued or incurred before the location incentives provided by the city or
town.
K. On notice from the auditor general pursuant to
section 9-626, subsection D, the state treasurer shall withhold from the
distribution of monies pursuant to this section to the affected city the amount
computed pursuant to section 9-626, subsection D. The state
treasurer shall continue to withhold monies pursuant to this subsection until
the entire amount specified in the notice has been withheld. The
state treasurer shall credit any monies withheld pursuant to this subsection to
the state general fund as provided by subsection D, paragraph 4 of this
section.
L. Except as otherwise provided by this subsection,
on notice from the attorney general pursuant to section 41-194.01,
subsection B, paragraph 1 that an ordinance, regulation, order or other
official action adopted or taken by the governing body of a county, city or
town violates state law or the Constitution of Arizona, the state treasurer
shall withhold the distribution of monies pursuant to this section to the
affected county, city or town and shall continue to withhold monies pursuant to
this subsection until the attorney general certifies to the state treasurer
that the violation has been resolved. The state treasurer shall
redistribute the monies withheld pursuant to this subsection among all other
counties, cities and towns in proportion to their population as provided by
subsection D of this section. The state treasurer shall not withhold
any amount that the county, city or town certifies to the attorney general and
the state treasurer as being necessary to make any required deposits or
payments for debt service on bonds or other long-term obligations of the
county, city or town that were issued or incurred before committing the
violation.
M. For the purposes of this section, "community
college district" means a community college district that is established
pursuant to sections 15-1402 and 15-1403 and that is a political
subdivision of this state and, unless otherwise specified, includes a community
college tuition financing district established pursuant to section 15-1409.
END_STATUTE
Sec. 15. Repeal
Section 42-5031, Arizona Revised
Statutes, is repealed.
Sec. 16. Section 42-5061, Arizona Revised
Statutes, is amended to read:
START_STATUTE42-5061. Retail classification; definitions
A. The retail classification is comprised of the
business of selling tangible personal property at retail. The tax
base for the retail classification is the gross proceeds of sales or gross
income derived from the business. The tax imposed on the retail
classification does not apply to the gross proceeds of sales or gross income
from:
1. Professional or personal service occupations or
businesses that involve sales or transfers of tangible personal property only
as inconsequential elements.
2. Services rendered in addition to selling tangible
personal property at retail.
3. Sales of warranty or service
contracts. The storage, use or consumption of tangible personal
property provided under the conditions of such contracts is subject to tax
under section 42-5156.
4. Sales of tangible personal property by any
nonprofit organization organized and operated exclusively for charitable
purposes and recognized by the United States internal revenue service under
section 501(c)(3) of the internal revenue code.
5. Sales to persons engaged in business classified
under the restaurant classification of articles used by human beings for food,
drink or condiment, whether simple, mixed or compounded.
6. Business activity that is properly included in
any other business classification that is taxable under this article.
7. The sale of stocks and bonds.
8. Drugs and medical oxygen, including delivery
hose, mask or tent, regulator and tank, if prescribed by a member of the
medical, dental or veterinarian profession who is licensed by law to administer
such substances.
9. Prosthetic appliances as defined in section 23-501
and as prescribed or recommended by a health professional who is licensed
pursuant to title 32, chapter 7, 8, 11, 13, 14, 15, 16, 17 or 29.
10. Insulin, insulin syringes and glucose test
strips.
11. Prescription eyeglasses or contact lenses.
12. Hearing aids as defined in section 36-1901.
13. Durable medical equipment that has a centers for
medicare and medicaid services common procedure code, is designated
reimbursable by medicare, is prescribed by a person who is licensed under title
32, chapter 7, 8, 13, 14, 15, 17 or 29, can withstand repeated use, is
primarily and customarily used to serve a medical purpose, is generally not
useful to a person in the absence of illness or injury and is appropriate for
use in the home.
14. Sales of motor vehicles to nonresidents of this
state for use outside this state if either of the following applies:
(a) The motor vehicle dealer ships or delivers the
motor vehicle to a destination out of this state.
(b) The vehicle, trailer or semitrailer has a gross
vehicle weight rating of more than ten thousand pounds, is used or maintained
to transport property in the furtherance of interstate commerce and otherwise
meets the definition of commercial motor vehicle as defined in section 28-5201.
15. Food, as provided in and subject to the
conditions of article 3 of this chapter and sections 42-5074 and 42-6017.
16. Items purchased with United States department of
agriculture coupons issued under the supplemental nutrition assistance program
pursuant to the food and nutrition act of 2008 (P.L. 88-525; 78 Stat. 703; 7
United States Code sections 2011 through 2036b) by the United States department
of agriculture food and nutrition service or food instruments issued under
section 17 of the child nutrition act (P.L. 95-627;
92 Stat. 3603; P.L. 99-661, section 4302; P.L. 111-296; 42
United States Code section 1786).
17. Textbooks by any bookstore that are required by
any state university or community college.
18. Food and drink to a person that is engaged in a
business that is classified under the restaurant classification and that
provides such food and drink without monetary charge to its employees for their
own consumption on the premises during the employees' hours of employment.
19. Articles of food, drink or condiment and
accessory tangible personal property to a school district or charter school if
such articles and accessory tangible personal property are to be prepared and
served to persons for consumption on the premises of a public school within the
district or on the premises of the charter school during school hours.
20. Lottery tickets or shares pursuant to title 5,
chapter 5.1, article 2.
21. The sale of cash equivalents and the sale of
precious metal bullion and monetized bullion to the ultimate consumer, but the
sale of coins or other forms of money for manufacture into jewelry or works of
art is subject to the tax and the gross proceeds of sales or gross income
derived from the redemption of any cash equivalent by the holder as a means of
payment for goods or services that are taxable under this article is subject to
the tax. For the purposes of this paragraph:
(a) "Cash equivalents" means items or
intangibles, whether or not negotiable, that are sold to one or more persons,
through which a value denominated in money is purchased in advance and may be
redeemed in full or in part for tangible personal property, intangibles or
services. Cash equivalents include gift cards, stored value cards,
gift certificates, vouchers, traveler's checks, money orders or other
instruments, orders or electronic mechanisms, such as an electronic code,
personal identification number or digital payment mechanism, or any other
prepaid intangible right to acquire tangible personal property, intangibles or
services in the future, whether from the seller of the cash equivalent or from
another person. Cash equivalents do not include either of the
following:
(i) Items or intangibles that are sold to one or
more persons, through which a value is not denominated in money.
(ii) Prepaid calling cards or prepaid authorization
numbers for telecommunications services made taxable by subsection P  O of this section.
(b) "Monetized bullion" means coins and
other forms of money that are manufactured from gold, silver or other metals
and that have been or are used as a medium of exchange in this or another state,
the United States or a foreign nation.
(c) "Precious metal bullion" means
precious metal, including gold, silver, platinum, rhodium and palladium, that
has been smelted or refined so that its value depends on its contents and not
on its form.
22. Motor vehicle fuel and use fuel that are subject
to a tax imposed under title 28, chapter 16, article 1, sales of use fuel to a
holder of a valid single trip use fuel tax permit issued under section 28-5739,
sales of aviation fuel that are subject to the tax imposed under section 28-8344
and sales of jet fuel that are subject to the tax imposed under article 8 of
this chapter.
23. Tangible personal property sold to a person
engaged in the business of leasing or renting such property under the personal
property rental classification if such property is to be leased or rented by
such person.
24. Tangible personal property sold in interstate or
foreign commerce if prohibited from being so taxed by the constitution of the
United States or the constitution of this state.
25. Tangible personal property sold to:
(a) A qualifying hospital as defined in section 42-5001.
(b) A qualifying health care organization as defined
in section 42-5001 if the tangible personal property is used by the
organization solely to provide health and medical related educational and
charitable services.
(c) A qualifying health care organization as defined
in section 42-5001 if the organization is dedicated to providing
educational, therapeutic, rehabilitative and family medical education training
for blind and visually impaired children and children with multiple
disabilities from the time of birth to age twenty-one.
(d) A qualifying community health center as defined
in section 42-5001.
(e) A nonprofit charitable organization that has
qualified under section 501(c)(3) of the internal revenue code and that
regularly serves meals to the needy and indigent on a continuing basis at no
cost.
(f) For taxable periods beginning from and after
June 30, 2001, a nonprofit charitable organization that has qualified under
section 501(c)(3) of the internal revenue code and that provides residential
apartment housing for low-income persons over sixty-two years of
age in a facility that qualifies for a federal housing subsidy, if the tangible
personal property is used by the organization solely to provide residential
apartment housing for low-income persons over sixty-two years of
age in a facility that qualifies for a federal housing subsidy.
(g) A qualifying health sciences educational
institution as defined in section 42-5001.
(h) Any person representing or working on behalf of
another person described in subdivisions (a) through (g) of this paragraph if
the tangible personal property is incorporated or fabricated into a project
described in section 42-5075, subsection P.
26. Magazines or other periodicals or other
publications by this state to encourage tourist travel.
27. Tangible personal property sold to:
(a) A person that is subject to tax under this
article by reason of being engaged in business classified under section 42-5075
or to a subcontractor working under the control of a person engaged in business
classified under section 42-5075, if the property so sold is any of the
following:
(i) Incorporated or fabricated by the person into
any real property, structure, project, development or improvement as part of
the business.
(ii) Incorporated or fabricated by the person into
any project described in section 42-5075, subsection P.
(iii) Used in environmental response or remediation
activities under section 42-5075, subsection B, paragraph 6.
(b) A person that is not subject to tax under
section 42-5075 and that has been provided a copy of a certificate under
section 42-5009, subsection L, if the property so sold is incorporated or
fabricated by the person into the real property, structure, project,
development or improvement described in the certificate.
28. The sale of a motor vehicle to a nonresident of
this state if the purchaser's state of residence does not allow a corresponding
use tax exemption to the tax imposed by article 1 of this chapter and if the
nonresident has secured a special ninety day nonresident registration permit
for the vehicle as prescribed by sections 28-2154 and 28-2154.01.
29. Tangible personal property purchased in this
state by a nonprofit charitable organization that has qualified under section
501(c)(3) of the United States internal revenue code and that engages in and
uses such property exclusively in programs for persons with mental or physical
disabilities if the programs are exclusively for training, job placement,
rehabilitation or testing.
30. Sales of tangible personal property by a
nonprofit organization that is exempt from taxation under section 501(c)(3),
501(c)(4) or 501(c)(6) of the internal revenue code if the organization is
associated with a major league baseball team or a national touring professional
golfing association and no part of the organization's net earnings inures to
the benefit of any private shareholder or individual. This paragraph
does not apply to an organization that is owned, managed or controlled, in
whole or in part, by a major league baseball team, or its owners, officers,
employees or agents, or by a major league baseball association or professional
golfing association, or its owners, officers, employees or agents, unless the
organization conducted or operated exhibition events in this state before
January 1, 2018 that were exempt from taxation under section 42-5073.
31. Sales of commodities, as defined by title 7
United States Code section 2, that are consigned for resale in a warehouse in
this state in or from which the commodity is deliverable on a contract for
future delivery subject to the rules of a commodity market regulated by the
United States commodity futures trading commission.
32. Sales of tangible personal property by a
nonprofit organization that is exempt from taxation under section 501(c)(3),
501(c)(4), 501(c)(6), 501(c)(7) or 501(c)(8) of the internal revenue code if
the organization sponsors or operates a rodeo featuring primarily farm and
ranch animals and no part of the organization's net earnings inures to the
benefit of any private shareholder or individual.
33. Sales of propagative materials to persons who
use those items to commercially produce agricultural, horticultural,
viticultural or floricultural crops in this state. For the purposes of this
paragraph, "propagative materials":
(a) Includes seeds, seedlings, roots, bulbs, liners,
transplants, cuttings, soil and plant additives, agricultural minerals,
auxiliary soil and plant substances, micronutrients, fertilizers, insecticides,
herbicides, fungicides, soil fumigants, desiccants, rodenticides, adjuvants,
plant nutrients and plant growth regulators.
(b) Except for use in commercially producing
industrial hemp as defined in section 3-311, does not include any
propagative materials used in producing any part, including seeds, of any plant
of the genus cannabis.
34. Machinery, equipment, technology or related
supplies that are only useful to assist a person with a physical disability as
defined in section 46-191 or a person who has a developmental disability
as defined in section 36-551 or has a head injury as defined in section
41-3201 to be more independent and functional.
35. Sales of natural gas or liquefied petroleum gas
used to propel a motor vehicle.
36. Paper machine clothing, such as forming fabrics
and dryer felts, sold to a paper manufacturer and directly used or consumed in
paper manufacturing.
37. Coal, petroleum, coke, natural gas, virgin fuel
oil and electricity sold to a qualified environmental technology manufacturer,
producer or processor as defined in section 41-1514.02 and directly used
or consumed in generating or providing on-site power or energy solely for
environmental technology manufacturing, producing or processing or
environmental protection. This paragraph applies for twenty full
consecutive calendar or fiscal years from the date the first paper
manufacturing machine is placed in service. In the case of an
environmental technology manufacturer, producer or processor that does not
manufacture paper, the time period begins with the date the first
manufacturing, processing or production equipment is placed in service.
38. Sales of liquid, solid or gaseous chemicals used
in manufacturing, processing, fabricating, mining, refining, metallurgical
operations, research and development and, beginning on January 1, 1999,
printing, if using or consuming the chemicals, alone or as part of an
integrated system of chemicals, involves direct contact with the materials from
which the product is produced for the purpose of causing or allowing a chemical
or physical change to occur in the materials as part of the production
process. This paragraph does not include chemicals that are used or
consumed in activities such as packaging, storage or transportation but does
not affect any deduction for such chemicals that is otherwise provided by this
section. For the purposes of this paragraph, "printing"
means a commercial printing operation and includes job printing, engraving,
embossing, copying and bookbinding.
39. Through December 31, 1994, personal property
liquidation transactions, conducted by a personal property
liquidator. From and after December 31, 1994, personal property
liquidation transactions shall be taxable under this section provided that
nothing in this subsection shall be construed to authorize the taxation of
casual activities or transactions under this chapter. For the
purposes of this paragraph:
(a) "Personal property liquidation
transaction" means a sale of personal property made by a personal property
liquidator acting solely on behalf of the owner of the personal property sold
at the dwelling of the owner or on the death of any owner, on behalf of the
surviving spouse, if any, any devisee or heir or the personal representative of
the estate of the deceased, if one has been appointed.
(b) "Personal property liquidator" means a
person who is retained to conduct a sale in a personal property liquidation
transaction.
40. Sales of food, drink and condiment for
consumption within the premises of any prison, jail or other institution under
the jurisdiction of the state department of corrections, the department of
public safety, the department of juvenile corrections or a county sheriff.
41. A motor vehicle and any repair and replacement
parts and tangible personal property becoming a part of such motor vehicle sold
to a motor carrier that is subject to a fee prescribed in title 28, chapter 16,
article 4 and that is engaged in the business of leasing or renting such
property.
42. Sales of:
(a) Livestock and poultry to persons engaging in the
businesses of farming, ranching or producing livestock or poultry.
(b) Livestock and poultry feed, salts, vitamins and
other additives for livestock or poultry consumption that are sold to persons
for use or consumption by their own livestock or poultry, for use or
consumption in the businesses of farming, ranching and producing or feeding
livestock, poultry, or livestock or poultry products or for use or consumption
in noncommercial boarding of livestock. For the purposes of this
paragraph, "poultry" includes ratites.
43. Sales of implants used as growth promotants and
injectable medicines, not already exempt under paragraph 8 of this subsection,
for livestock or poultry owned by or in possession of persons that are engaged
in producing livestock, poultry, or livestock or poultry products or that are
engaged in feeding livestock or poultry commercially. For the
purposes of this paragraph, "poultry" includes ratites.
44. Sales of motor vehicles at auction to
nonresidents of this state for use outside this state if the vehicles are
shipped or delivered out of this state, regardless of where title to the motor
vehicles passes or its free on board point.
45. Tangible personal property sold to a person
engaged in business and subject to tax under the transient lodging
classification if the tangible personal property is a personal hygiene item or
articles used by human beings for food, drink or condiment, except alcoholic
beverages, that are furnished without additional charge to and intended to be
consumed by the transient during the transient's occupancy.
46. Sales of alternative fuel, as defined in section
1-215, to a used oil fuel burner who has received a permit to burn used
oil or used oil fuel under section 49-426 or 49-480.
47. Sales of materials that are purchased by or for
publicly funded libraries, including school district libraries, charter school
libraries, community college libraries, state university libraries or federal,
state, county or municipal libraries, for use by the public as follows:
(a) Printed or photographic materials, beginning
August 7, 1985.
(b) Electronic or digital media materials, beginning
July 17, 1994.
48. Tangible personal property sold to a commercial
airline and consisting of food, beverages and condiments and accessories used
for serving the food and beverages, if those items are to be provided without
additional charge to passengers for consumption in flight. For the
purposes of this paragraph, "commercial airline" means a person
holding a federal certificate of public convenience and necessity or foreign
air carrier permit for air transportation to transport persons, property or
United States mail in intrastate, interstate or foreign commerce.
49. Sales of alternative fuel vehicles if the
vehicle was manufactured as a diesel fuel vehicle and converted to operate on
alternative fuel and equipment that is installed in a conventional diesel fuel
motor vehicle to convert the vehicle to operate on an alternative fuel, as
defined in section 1-215.
50. Sales of any spirituous, vinous or malt liquor
by a person that is licensed in this state as a wholesaler by the department of
liquor licenses and control pursuant to title 4, chapter 2, article 1.
51. Sales of tangible personal property to be
incorporated or installed as part of environmental response or remediation
activities under section 42-5075, subsection B, paragraph 6.
52. Sales of tangible personal property by a
nonprofit organization that is exempt from taxation under section 501(c)(6) of
the internal revenue code if the organization produces, organizes or promotes
cultural or civic related festivals or events and no part of the organization's
net earnings inures to the benefit of any private shareholder or individual.
53. Application services that are designed to assess
or test student learning or to promote curriculum design or enhancement
purchased by or for any school district, charter school, community college or
state university. For the purposes of this paragraph:
(a) "Application services" means software
applications provided remotely using hypertext transfer protocol or another
network protocol.
(b) "Curriculum design or enhancement"
means planning, implementing or reporting on courses of study, lessons,
assignments or other learning activities.
54. Sales of motor vehicle fuel and use fuel to a
qualified business under section 41-1516 for off-road use in harvesting,
processing or transporting qualifying forest products removed from qualifying
projects as defined in section 41-1516.
55. Sales of repair parts installed in equipment
used directly by a qualified business under section 41-1516 in
harvesting, processing or transporting qualifying forest products removed from
qualifying projects as defined in section 41-1516.
56. Sales or other transfers of renewable energy
credits or any other unit created to track energy derived from renewable energy
resources. For the purposes of this paragraph, "renewable energy
credit" means a unit created administratively by the corporation
commission or governing body of a public power utility to track kilowatt hours
of electricity derived from a renewable energy resource or the kilowatt hour
equivalent of conventional energy resources displaced by distributed renewable
energy resources.
57. Orthodontic devices dispensed by a dental
professional who is licensed under title 32, chapter 11 to a patient as part of
the practice of dentistry.
58. Sales of tangible personal property incorporated
or fabricated into a project described in section 42-5075, subsection P,
that is located within the exterior boundaries of an Indian reservation for
which the owner, as defined in section 42-5075, of the project is an
Indian tribe or an affiliated Indian. For the purposes of this
paragraph:
(a) "Affiliated Indian" means an
individual Native American Indian who is duly registered on the tribal rolls of
the Indian tribe for whose benefit the Indian reservation was established.
(b) "Indian reservation" means all lands
that are within the limits of areas set aside by the United States for the
exclusive use and occupancy of an Indian tribe by treaty, law or executive
order and that are recognized as Indian reservations by the United States
department of the interior.
(c) "Indian tribe" means any organized
nation, tribe, band or community that is recognized as an Indian tribe by the
United States department of the interior and includes any entity formed under
the laws of the Indian tribe.
59. Sales of works of fine art, as defined in
section 44-1771, at an art auction or gallery in this state to
nonresidents of this state for use outside this state if the vendor ships or
delivers the work of fine art to a destination outside this state.
60. Sales of tangible personal property by a
marketplace seller that are facilitated by a marketplace facilitator in which
the marketplace facilitator has remitted or will remit the applicable tax to
the department pursuant to section 42-5014.
B. In addition to the deductions from the tax base
prescribed by subsection A of this section, the gross proceeds of sales or
gross income derived from sales of the following categories of tangible
personal property shall be deducted from the tax base:
1. Machinery, or equipment, used directly in
manufacturing, processing, fabricating, job printing, refining or metallurgical
operations. The terms "manufacturing", "processing",
"fabricating", "job printing", "refining" and
"metallurgical" as used in this paragraph refer to and include those
operations commonly understood within their ordinary meaning.
"Metallurgical operations" includes leaching, milling, precipitating,
smelting and refining.
2. Mining machinery, or equipment, used directly in
the process of extracting ores or minerals from the earth for commercial
purposes, including equipment required to prepare the materials for extraction
and handling, loading or transporting such extracted material to the surface.
"Mining" includes underground, surface and open pit operations for
extracting ores and minerals.
3. Tangible personal property sold to persons
engaged in business classified under the telecommunications classification,
including a person representing or working on behalf of such a person in a
manner described in section 42-5075, subsection P, and consisting of
central office switching equipment, switchboards, private branch exchange
equipment, microwave radio equipment and carrier equipment including optical
fiber, coaxial cable and other transmission media that are components of
carrier systems.
4. Machinery, equipment or transmission lines used
directly in producing or transmitting electrical power, but not including
distribution. Transformers and control equipment used at transmission
substation sites constitute equipment used in producing or transmitting
electrical power.
5. Machinery and equipment used directly for energy
storage for later electrical use. For the purposes of this paragraph:
(a) "Electric utility scale" means a
person that is engaged in a business activity described in section 42-5063,
subsection A or such person's equipment or wholesale electricity suppliers.
(b) "Energy storage" means commercially
available technology for electric utility scale that is capable of absorbing
energy, storing energy for a period of time and thereafter dispatching the
energy and that uses mechanical, chemical or thermal processes to store energy.
(c) "Machinery and equipment used
directly" means all machinery and equipment that are used for electric
energy storage from the point of receipt of such energy in order to facilitate
storage of the electric energy to the point where the electric energy is
released.
6. Neat animals, horses, asses, sheep, ratites,
swine or goats used or to be used as breeding or production stock, including
sales of breedings or ownership shares in such animals used for breeding or
production.
7. Pipes or valves four inches in diameter or larger
used to transport oil, natural gas, artificial gas, water, wastewater or coal
slurry, including compressor units, regulators, machinery and equipment,
fittings, seals and any other part that is used in operating the pipes or
valves.
8. Aircraft, navigational and communication
instruments and other accessories and related equipment sold to:
(a) A person:
(i) Holding, or exempted by federal law from
obtaining, a federal certificate of public convenience and necessity for use
as, in conjunction with or becoming part of an aircraft to be used to transport
persons for hire in intrastate, interstate or foreign commerce.
(ii) That is certificated or licensed under federal
aviation administration regulations (14 Code of Federal Regulations part 121 or
135) as a scheduled or unscheduled carrier of persons for hire for use as or in
conjunction with or becoming part of an aircraft to be used to transport
persons for hire in intrastate, interstate or foreign commerce.
(iii) Holding a foreign air carrier permit for air
transportation for use as or in conjunction with or becoming a part of aircraft
to be used to transport persons, property or United States mail in intrastate,
interstate or foreign commerce.
(iv) Operating an aircraft to transport persons in
any manner for compensation or hire, or for use in a fractional ownership
program that meets the requirements of federal aviation administration
regulations (14 Code of Federal Regulations part 91, subpart K), including
as an air carrier, a foreign air carrier or a commercial operator or under a
restricted category, within the meaning of 14 Code of Federal Regulations,
regardless of whether the operation or aircraft is regulated or certified under
part 91, 119, 121, 133, 135, 136 or 137, or another part of 14 Code of Federal
Regulations.
(v) That will lease or otherwise transfer
operational control, within the meaning of federal aviation administration
operations specification A008, or its successor, of the aircraft, instruments
or accessories to one or more persons described in item (i), (ii), (iii) or
(iv) of this subdivision, subject to section 42-5009, subsection Q.
(b) Any foreign government.
(c) Persons who are not residents of this state and
who will not use such property in this state other than in removing such
property from this state. This subdivision also applies to
corporations that are not incorporated in this state, regardless of maintaining
a place of business in this state, if the principal corporate office is located
outside this state and the property will not be used in this state other than
in removing the property from this state.
9. Machinery, tools, equipment and related supplies
used or consumed directly in repairing, remodeling or maintaining aircraft,
aircraft engines or aircraft component parts by or on behalf of a certificated
or licensed carrier of persons or property.
10. Railroad rolling stock, rails, ties and signal
control equipment used directly to transport persons or property.
11. Machinery or equipment used directly to drill
for oil or gas or used directly in the process of extracting oil or gas from
the earth for commercial purposes.
12. Buses or other urban mass transit vehicles that
are used directly to transport persons or property for hire or pursuant to a
governmentally adopted and controlled urban mass transportation program and
that are sold to bus companies holding a federal certificate of convenience and
necessity or operated by any city, town or other governmental entity or by any
person contracting with such governmental entity as part of a governmentally
adopted and controlled program to provide urban mass transportation.
13. Groundwater measuring devices required under
section 45-604.
14. Machinery and equipment consisting of
agricultural aircraft, tractors, off-highway vehicles, tractor-drawn
implements, self-powered implements, machinery and equipment necessary
for extracting milk, and machinery and equipment necessary for cooling milk and
livestock, and drip irrigation lines not already exempt under paragraph 7 of
this subsection and that are used for commercial production of agricultural,
horticultural, viticultural and floricultural crops and products in this
state. For the purposes of this paragraph:
(a) "Off-highway vehicles" means off-highway
vehicles as defined in section 28-1171 that are modified at the time of
sale to function as a tractor or to tow tractor-drawn implements and that
are not equipped with a modified exhaust system to increase horsepower or speed
or an engine that is more than one thousand cubic centimeters or that have a
maximum speed of fifty miles per hour or less.
(b) "Self-powered implements"
includes machinery and equipment that are electric-powered.
15. Machinery or equipment used in research and
development. For the purposes of this paragraph, "research and
development" means basic and applied research in the sciences and
engineering, and designing, developing or testing prototypes, processes or new
products, including research and development of computer software that is
embedded in or an integral part of the prototype or new product or that is
required for machinery or equipment otherwise exempt under this section to
function effectively. Research and development do not include
manufacturing quality control, routine consumer product testing, market
research, sales promotion, sales service, research in social sciences or
psychology, computer software research that is not included in the definition
of research and development, or other nontechnological activities or technical
services.
16. Tangible personal property that is used by
either of the following to receive, store, convert, produce, generate, decode,
encode, control or transmit telecommunications information:
(a) Any direct broadcast satellite television or
data transmission service that operates pursuant to 47 Code of Federal
Regulations part 25.
(b) Any satellite television or data transmission
facility, if both of the following conditions are met:
(i) Over two-thirds of the transmissions,
measured in megabytes, transmitted by the facility during the test period were
transmitted to or on behalf of one or more direct broadcast satellite
television or data transmission services that operate pursuant to 47 Code of
Federal Regulations part 25.
(ii) Over two-thirds of the transmissions,
measured in megabytes, transmitted by or on behalf of those direct broadcast
television or data transmission services during the test period were
transmitted by the facility to or on behalf of those services. For the
purposes of subdivision (b) of this paragraph, "test period" means
the three hundred sixty-five day period beginning on the later of the
date on which the tangible personal property is purchased or the date on which
the direct broadcast satellite television or data transmission service first
transmits information to its customers.
17. Clean rooms that are used for manufacturing,
processing, fabrication or research and development, as defined in paragraph 15
of this subsection, of semiconductor products. For the purposes of
this paragraph, "clean room" means all property that comprises or
creates an environment where humidity, temperature, particulate matter and
contamination are precisely controlled within specified parameters, without
regard to whether the property is actually contained within that environment or
whether any of the property is affixed to or incorporated into real property.
Clean room:
(a) Includes the integrated systems, fixtures,
piping, movable partitions, lighting and all property that is necessary or
adapted to reduce contamination or to control airflow, temperature, humidity,
chemical purity or other environmental conditions or manufacturing tolerances,
as well as the production machinery and equipment operating in conjunction with
the clean room environment.
(b) Does not include the building or other
permanent, nonremovable component of the building that houses the clean room
environment.
18. Machinery and equipment used directly in feeding
poultry, environmentally controlling housing for poultry, moving eggs within a
production and packaging facility or sorting or cooling eggs. This
exemption does not apply to vehicles used for transporting eggs.
19. Machinery or equipment, including related
structural components and containment structures, that is employed in
connection with manufacturing, processing, fabricating, job printing, refining,
mining, natural gas pipelines, metallurgical operations, telecommunications,
producing or transmitting electricity or research and development and that is
used directly to meet or exceed rules or regulations adopted by the federal
energy regulatory commission, the United States environmental protection
agency, the United States nuclear regulatory commission, the Arizona department
of environmental quality or a political subdivision of this state to prevent,
monitor, control or reduce land, water or air pollution. For the
purposes of this paragraph, "containment structure" means a structure
that prevents, monitors, controls or reduces noxious or harmful discharge into
the environment.
20. Machinery and equipment that are sold to a
person engaged in commercially producing livestock, livestock products or
agricultural, horticultural, viticultural or floricultural crops or products in
this state, including a person representing or working on behalf of such a
person in a manner described in section 42-5075, subsection P, if the
machinery and equipment are used directly and primarily to prevent, monitor,
control or reduce air, water or land pollution.
21. Machinery or equipment that enables a television
station to originate and broadcast or to receive and broadcast digital
television signals and that was purchased to facilitate compliance with the
telecommunications act of 1996 (P.L. 104-104; 110 Stat. 56; 47 United
States Code section 336) and the federal communications commission order issued
April 21, 1997 (47 Code of Federal Regulations part 73). This
paragraph does not exempt any of the following:
(a) Repair or replacement parts purchased for the
machinery or equipment described in this paragraph.
(b) Machinery or equipment purchased to replace
machinery or equipment for which an exemption was previously claimed and taken
under this paragraph.
(c) Any machinery or equipment purchased after the
television station has ceased analog broadcasting, or purchased after November
1, 2009, whichever occurs first.
22. Qualifying equipment that is purchased from and
after June 30, 2004 through December 31, 2028 by a qualified business
under section 41-1516 for harvesting or processing qualifying forest
products removed from qualifying projects as defined in section 41-1516. To
qualify for this deduction, the qualified business at the time of purchase must
present its certification approved by the department.
23. Computer data center equipment sold to the
owner, operator or qualified colocation tenant of a computer data center that
is certified by the Arizona commerce authority under section 41-1519 or
an authorized agent of the owner, operator or qualified colocation tenant
during the qualification period for use in the qualified computer data
center. For the purposes of this paragraph, "computer data
center", "computer data center equipment", "qualification
period" and "qualified colocation tenant" have the same meanings
prescribed in section 41-1519.
C. The deductions provided by subsection B of this
section do not include sales of:
1. Expendable materials. For the purposes
of this paragraph, expendable materials do not include any of the categories of
tangible personal property specified in subsection B of this section regardless
of the cost or useful life of that property.
2. Janitorial equipment and hand tools.
3. Office equipment, furniture and supplies.
4. Tangible personal property used in selling or
distributing activities, other than the telecommunications transmissions
described in subsection B, paragraph 16 of this section.
5. Motor vehicles required to be licensed by this
state, except buses or other urban mass transit vehicles specifically exempted
pursuant to subsection B, paragraph 12 of this section, without regard to the
use of such motor vehicles.
6. Shops, buildings, docks, depots and all other
materials of whatever kind or character not specifically included as exempt.
7. Motors and pumps used in drip irrigation systems.
8. Machinery and equipment or other tangible
personal property used by a contractor in performing a contract.
D. In addition to the deductions from the tax base
prescribed by subsection A of this section, there shall be deducted from the
tax base the gross proceeds of sales or gross income derived from sales of
machinery, equipment, materials and other tangible personal property used
directly and predominantly to construct a qualified environmental technology
manufacturing, producing or processing facility as described in section 41-1514.02. This
subsection applies for ten full consecutive calendar or fiscal years after the
start of initial construction.
E. In computing the tax base, gross proceeds of
sales or gross income from retail sales of heavy trucks and trailers does not
include any amount attributable to federal excise taxes imposed by 26 United
States Code section 4051.
F. If a person is engaged in an occupation or
business to which subsection A of this section applies, the person's books
shall be kept so as to show separately the gross proceeds of sales of tangible
personal property and the gross income from sales of services, and if not so
kept the tax shall be imposed on the total of the person's gross proceeds of
sales of tangible personal property and gross income from services.
G. If a person is engaged in the business of selling
tangible personal property at both wholesale and retail, the tax under this
section applies only to the gross proceeds of the sales made other than at
wholesale if the person's books are kept so as to show separately the gross
proceeds of sales of each class, and if the books are not so kept, the tax
under this section applies to the gross proceeds of every sale so made.
H. A person who engages in manufacturing, baling,
crating, boxing, barreling, canning, bottling, sacking, preserving, processing
or otherwise preparing for sale or commercial use any livestock, agricultural
or horticultural product or any other product, article, substance or commodity
and who sells the product of such business at retail in this state is deemed,
as to such sales, to be engaged in business classified under the retail
classification. This subsection does not apply to:
1. Agricultural producers who are owners,
proprietors or tenants of agricultural lands, orchards, farms or gardens where
agricultural products are grown, raised or prepared for market and who are
marketing their own agricultural products.
2. Businesses classified under the:
(a) Transporting classification.
(b) Utilities classification.
(c) Telecommunications classification.
(d) Pipeline classification.
(e) Private car line classification.
(f) Publication classification.
(g) Job printing classification.
(h) Prime contracting classification.
(i) Restaurant classification.
I. The gross proceeds of sales or gross income
derived from the following shall be deducted from the tax base for the retail
classification:
1. Sales made directly to the United States
government or its departments or agencies by a manufacturer, modifier,
assembler or repairer.
2. Sales made directly to a manufacturer, modifier,
assembler or repairer if such sales are of any ingredient or component part of
products sold directly to the United States government or its departments or
agencies by the manufacturer, modifier, assembler or repairer.
3. Overhead materials or other tangible personal
property that is used in performing a contract between the United States
government and a manufacturer, modifier, assembler or repairer, including
property used in performing a subcontract with a government contractor who is a
manufacturer, modifier, assembler or repairer, to which title passes to the
government under the terms of the contract or subcontract.
4. Sales of overhead materials or other tangible
personal property to a manufacturer, modifier, assembler or repairer if the
gross proceeds of sales or gross income derived from the property by the
manufacturer, modifier, assembler or repairer will be exempt under paragraph 3
of this subsection.
J. There shall be deducted from the tax base fifty
percent of the gross proceeds or gross income from any sale of tangible
personal property made directly to the United States government or its
departments or agencies that is not deducted under subsection I of this
section.
K. The department shall require every person
claiming a deduction provided by subsection I or J of this section to file on
forms prescribed by the department at such times as the department directs a
sworn statement disclosing the name of the purchaser and the exact amount of
sales on which the exclusion or deduction is claimed.
L. In computing the tax base, gross proceeds of
sales or gross income does not include:
1. A manufacturer's cash rebate on the sales price
of a motor vehicle if the buyer assigns the buyer's right in the rebate to the
retailer.
2. The waste tire disposal fee imposed pursuant to
section 44-1302.
M. There shall be deducted from the
tax base the amount received from sales of solar energy devices. The
retailer shall register with the department as a solar energy
retailer. By registering, the retailer acknowledges that it will
make its books and records relating to sales of solar energy devices available
to the department for examination.
N. M. In
computing the tax base in the case of the sale or transfer of wireless
telecommunications equipment as an inducement to a customer to enter into or
continue a contract for telecommunications services that are taxable under
section 42-5064, gross proceeds of sales or gross income does not include
any sales commissions or other compensation received by the retailer as a
result of the customer entering into or continuing a contract for the
telecommunications services.
O. N. For
the purposes of this section, a sale of wireless telecommunications equipment
to a person who holds the equipment for sale or transfer to a customer as an
inducement to enter into or continue a contract for telecommunications services
that are taxable under section 42-5064 is considered to be a sale for
resale in the regular course of business.
P. O. Retail
sales of prepaid calling cards or prepaid authorization numbers for
telecommunications services, including sales of reauthorization of a prepaid
card or authorization number, are subject to tax under this section.
Q. P. For
the purposes of this section, the diversion of gas from a pipeline by a person
engaged in the business of:
1. Operating a natural or artificial gas pipeline,
for the sole purpose of fueling compressor equipment to pressurize the
pipeline, is not a sale of the gas to the operator of the pipeline.
2. Converting natural gas into liquefied natural
gas, for the sole purpose of fueling compressor equipment used in the
conversion process, is not a sale of gas to the operator of the compressor
equipment.
R. Q. For
the purposes of this section, the transfer of title or possession of coal from
an owner or operator of a power plant to a person in the business of refining
coal is not a sale of coal if both of the following apply:
1. The transfer of title or possession of the coal
is for the purpose of refining the coal.
2. The title or possession of the coal is
transferred back to the owner or operator of the power plant after completion
of the coal refining process. For the purposes of this paragraph,
"coal refining process" means the application of a coal additive
system that aids in the reduction of power plant emissions during the
combustion of coal and the treatment of flue gas.
S. R. If
a seller is entitled to a deduction pursuant to subsection B,
paragraph 16, subdivision (b) of this section, the department may require
the purchaser to establish that the requirements of subsection B,
paragraph 16, subdivision (b) of this section have been
satisfied. If the purchaser cannot establish that the requirements
of subsection B, paragraph 16, subdivision (b) of this section have been
satisfied, the purchaser is liable in an amount equal to any tax, penalty and
interest that the seller would have been required to pay under article 1 of
this chapter if the seller had not made a deduction pursuant to subsection B,
paragraph 16, subdivision (b) of this section. Payment of the amount
under this subsection exempts the purchaser from liability for any tax imposed
under article 4 of this chapter and related to the tangible personal property
purchased. The amount shall be treated as transaction privilege tax
to the purchaser and as tax revenues collected from the seller to designate the
distribution base pursuant to section 42-5029.
T. S. For
the purposes of section 42-5032.01, the department shall separately
account for revenues collected under the retail classification from businesses
selling tangible personal property at retail:
1. On the premises of a multipurpose facility that
is owned, leased or operated by the tourism and sports authority pursuant to
title 5, chapter 8.
2. At professional football contests that are held
in a stadium located on the campus of an institution under the jurisdiction of
the Arizona board of regents.
U. T. For
the purposes of section 42-5032.03 and subject to section 48-4238,
beginning October 1, 2025 and each month thereafter through December 31, 2055,
the department shall separately account for revenues collected under the retail
classification from each business selling tangible personal property at retail
on the premises of a major league baseball facility or an adjacent building
that is owned by a county stadium district pursuant to title 48, chapter 26 and
operated by the county stadium district or the professional baseball franchise
organization that occupies the major league baseball facility
or adjacent building. For the purposes of this subsection,
"adjacent building" and "major league baseball facility"
have the same meanings prescribed in section 48-4201.
V. U. In
computing the tax base for the sale of a motor vehicle to a nonresident of this
state, if the purchaser's state of residence allows a corresponding use tax
exemption to the tax imposed by article 1 of this chapter and the rate of the
tax in the purchaser's state of residence is lower than the rate prescribed in
article 1 of this chapter or if the purchaser's state of residence does not
impose an excise tax, and the nonresident has secured a special ninety day
nonresident registration permit for the vehicle as prescribed by sections 28-2154
and 28-2154.01, there shall be deducted from the tax base a portion of
the gross proceeds or gross income from the sale so that the amount of
transaction privilege tax that is paid in this state is equal to the excise tax
that is imposed by the purchaser's state of residence on the nonexempt sale or
use of the motor vehicle.
W. V. For
the purposes of this section:
1. "Agricultural aircraft" means an
aircraft that is built for agricultural use for the aerial application of
pesticides or fertilizer or for aerial seeding.
2. "Aircraft" includes:
(a) An airplane flight simulator that is approved by
the federal aviation administration for use as a phase II or higher flight
simulator under appendix H, 14 Code of Federal Regulations part 121.
(b) Tangible personal property that is permanently
affixed or attached as a component part of an aircraft that is owned or
operated by a certificated or licensed carrier of persons or property.
3. "Other accessories and related
equipment" includes aircraft accessories and equipment such as ground
service equipment that physically contact aircraft at some point during the
overall carrier operation.
4. "Selling at retail" means a sale for
any purpose other than for resale in the regular course of business in the form
of tangible personal property, but transfer of possession, lease and rental as
used in the definition of sale mean only such transactions as are found on
investigation to be in lieu of sales as defined without the words lease or
rental.
X. W. For
the purposes of subsection I of this section:
1. "Assembler" means a person who unites
or combines products, wares or articles of manufacture so as to produce a
change in form or substance without changing or altering the component parts.
2. "Manufacturer" means a person who is
principally engaged in fabricating, producing or manufacturing products, wares
or articles for use from raw or prepared materials, imparting to those
materials new forms, qualities, properties and combinations.
3. "Modifier" means a person who reworks,
changes or adds to products, wares or articles of manufacture.
4. "Overhead materials" means tangible
personal property, the gross proceeds of sales or gross income derived from
that would otherwise be included in the retail classification, and that are
used or consumed in performing a contract, the cost of which is charged to an
overhead expense account and allocated to various contracts based on generally
accepted accounting principles and consistent with government contract
accounting standards.
5. "Repairer" means a person who restores
or renews products, wares or articles of manufacture.
6. "Subcontract" means an agreement
between a contractor and any person who is not an employee of the contractor
for furnishing supplies or services that, in whole or in part, are necessary to
perform one or more government contracts, or under which any portion of the
contractor's obligation under one or more government contracts is performed,
undertaken or assumed and that includes provisions causing title to overhead
materials or other tangible personal property used in performing the
subcontract to pass to the government or that includes provisions incorporating
such title passing clauses in a government contract into the subcontract. END_STATUTE
Sec. 17. Section 42-5071, Arizona Revised Statutes, is amended to read:
START_STATUTE42-5071. Personal property rental classification; definitions
A. The personal
property rental classification is comprised of the business of leasing or
renting tangible personal property for a consideration and includes
peer-to-peer car sharing. The tax does not apply to:
1. Leasing or renting films, tapes or slides used by
theaters or movies, which are engaged in business under the amusement
classification, or used by television stations or radio stations.
2. Activities engaged in by the Arizona exposition
and state fair board or county fair commissions in connection with events
sponsored by such entities.
3. Leasing or renting tangible personal property by
a parent business entity to a subsidiary business entity or by a subsidiary
business entity to another subsidiary of the same parent business entity if
taxes were paid under this chapter on the gross proceeds or gross income
accruing from the initial sale of the tangible personal property.� For the
purposes of this paragraph, "subsidiary" means a business entity of
which at least eighty percent of the voting shares are owned by the parent
business entity.
4. Operating coin-operated washing, drying and
dry cleaning machines or coin-operated car washing machines at
establishments for the use of such machines.
5. Leasing or renting tangible personal property for
incorporation into or comprising any part of a qualified environmental
technology facility as described in section 41-1514.02. This
paragraph shall apply for ten full consecutive calendar or fiscal years
following the initial lease or rental by each qualified environmental
technology manufacturer, producer or processor.
6. Leasing or renting aircraft, flight simulators or
similar training equipment to students or staff by nonprofit, accredited
educational institutions that offer associate or baccalaureate degrees in
aviation or aerospace related fields.
7. Leasing or renting photographs, transparencies or
other creative works used by this state on internet websites, in magazines or
in other publications that encourage tourism.
8. Leasing or renting certified ignition interlock
devices installed pursuant to the requirements prescribed by section 28-1461.�
For the purposes of this paragraph, "certified ignition interlock
device" has the same meaning prescribed in section 28-1301.
9. The leasing or renting of space to make
attachments to utility poles, as follows:
(a) By a person that is engaged in business under
section 42-5063 or 42-5064 or that is a cable operator.
(b) To a person that is engaged in business under
section 42-5063 or 42-5064 or that is a cable operator.
10. Leasing or renting billboards that are designed,
intended or used to advertise or inform and that are visible from any street,
road or other highway.
B. The tax base for the personal property rental
classification is the gross proceeds of sales or gross income derived from the
business, but the gross proceeds of sales or gross income derived from the
following shall be deducted from the tax base:
1. Reimbursements by the lessee to the lessor of a
motor vehicle for payments by the lessor of the applicable fees and taxes
imposed by sections 28-2003, 28-2352, 28-2402, 28-2481
and 28-5801, title 28, chapter 15, article 2 and article IX, section 11,
Constitution of Arizona, to the extent such amounts are separately identified
as such fees and taxes and are billed to the lessee.
2. Leases or rentals of tangible personal property
that, if it had been purchased instead of leased or rented by the lessee, would
have been exempt under:
(a) Section 42-5061, subsection A, paragraph
8, 9, 12, 13, 25, 29, 49 or 53.
(b) Section 42-5061, subsection B.
(c) Section 42-5061, subsection I, paragraph
1.
(d) Section 42-5061, subsection
M.
3. Motor vehicle fuel and use fuel that are subject
to a tax imposed under title 28, chapter 16, article 1, sales of use fuel to a
holder of a valid single trip use fuel tax permit issued under section 28-5739
and sales of aviation fuel that are subject to the tax imposed under section 28-8344.
4. Leasing or renting a motor vehicle subject to and
on which the fee has been paid under title 28, chapter 16, article 4.
5. Amounts received by a motor vehicle dealer for
the first month of a lease payment if the lease and the lease payment for the
first month of the lease are transferred to a third-party leasing
company.
C. Sales of tangible personal property to be leased
or rented to a person engaged in a business classified under the personal
property rental classification are deemed to be resale sales.
D. In computing the tax base, the gross proceeds of
sales or gross income from the lease or rental of a motor vehicle does not
include any amount attributable to the car rental surcharge under section 5-839,
28-5810 or 48-4234.
E. Until December 31, 1988, leasing or renting
animals for recreational purposes is exempt from the tax imposed by this
section. Beginning January 1, 1989, the gross proceeds or gross income from
leasing or renting animals for recreational purposes is subject to taxation
under this section. Tax liabilities, penalties and interest paid for
taxable periods before January 1, 1989 shall not be refunded unless the
taxpayer requesting the refund provides proof satisfactory to the department
that the monies paid as taxes will be returned to the customer.
F. The tax base of the personal property rental
classification does not include the gross proceeds or gross income received by
a shared vehicle owner from a peer-to-peer car sharing program pursuant to
section 42-5009, subsection R.
G. For the purposes of this section:
1. "Cable operator" has the same meaning
prescribed in section 9-505 and includes a video service provider.
2. "Peer-to-peer car sharing"
has the same meaning prescribed in section 28-9601.
3. "Peer-to-peer car sharing
program" has the same meaning prescribed in section 28-9601.
4. "Shared vehicle owner" has the same
meaning prescribed in section 28-9601.
5. "Utility pole" means any wooden, metal
or other pole used for utility purposes and the pole's appurtenances that are
attached or authorized for attachment by the person controlling the pole. END_STATUTE
Sec. 18. Section 42-5159, Arizona Revised
Statutes, as amended by Laws 2025, chapter 135, section 2 and chapter 247,
section 2, is amended to read:
START_STATUTE42-5159. Exemptions
A. The tax levied by this article does not apply to the
storage, use or consumption in this state of the following described tangible
personal property:
1. Tangible personal property, sold in this state, the
gross receipts from the sale of which are included in the measure of the tax
imposed by articles 1 and 2 of this chapter.
2. Tangible personal
property, the sale or use of which has already been subjected to an excise tax
at a rate equal to or exceeding the tax imposed by this article under the laws
of another state of the United States. If the excise tax imposed by
the other state is at a rate less than the tax imposed by this article, the tax
imposed by this article is reduced by the amount of the tax already imposed by
the other state.
3. Tangible personal property, the storage, use or
consumption of which the constitution or laws of the United States prohibit
this state from taxing or to the extent that the rate or imposition of tax is
unconstitutional under the laws of the United States.
4. Tangible personal property that directly enters
into and becomes an ingredient or component part of any manufactured,
fabricated or processed article, substance or commodity for sale in the regular
course of business.
5. Motor vehicle fuel and use fuel, the sales,
distribution or use of which in this state is subject to the tax imposed under
title 28, chapter 16, article 1, use fuel that is sold to or used by a person
holding a valid single trip use fuel tax permit issued under section 28-5739,
aviation fuel, the sales, distribution or use of which in this state is subject
to the tax imposed under section 28-8344, and jet fuel, the sales,
distribution or use of which in this state is subject to the tax imposed under
article 8 of this chapter.
6. Tangible personal property brought into this
state by an individual who was a nonresident at the time the property was
purchased for storage, use or consumption by the individual if the first actual
use or consumption of the property was outside this state, unless the property
is used in conducting a business in this state.
7. Purchases of implants used as growth promotants and
injectable medicines, not already exempt under paragraph 16 of this subsection,
for livestock and poultry owned by, or in possession of, persons who are
engaged in producing livestock, poultry, or livestock or poultry products, or
who are engaged in feeding livestock or poultry commercially. For
the purposes of this paragraph, "poultry" includes ratites.
8. Purchases of:
(a) Livestock and poultry to persons engaging in the
businesses of farming, ranching or producing livestock or poultry.
(b) Livestock and poultry feed, salts, vitamins and
other additives sold to persons for use or consumption in the businesses of
farming, ranching and producing or feeding livestock or poultry or for use or
consumption in noncommercial boarding of livestock. For the purposes
of this paragraph, "poultry" includes ratites.
9. Propagative
materials for use in commercially producing agricultural, horticultural,
viticultural or floricultural crops in this state. For the purposes
of this paragraph, "propagative materials":
(a) Includes
seeds, seedlings, roots, bulbs, liners, transplants, cuttings, soil and plant
additives, agricultural minerals, auxiliary soil and plant substances,
micronutrients, fertilizers, insecticides, herbicides, fungicides, soil
fumigants, desiccants, rodenticides, adjuvants, plant nutrients and plant
growth regulators.
(b) Except
for use in commercially producing industrial hemp as defined in section 3-311,
does not include any propagative materials used in producing any part,
including seeds, of any plant of the genus cannabis.
10. Tangible personal property not exceeding $200 in
any one month purchased by an individual at retail outside the continental
limits of the United States for the individual's own
personal use and enjoyment.
11. Advertising supplements that are intended for sale
with newspapers published in this state and that have already been subjected to
an excise tax under the laws of another state in the United States that equals
or exceeds the tax imposed by this article.
12. Materials
that are purchased by or for publicly funded libraries, including school district libraries,
charter school libraries, community college libraries, state university
libraries or federal, state, county or municipal libraries, for use by the public as follows:
(a) Printed or photographic materials, beginning August
7, 1985.
(b) Electronic or digital media materials, beginning
July 17, 1994.
13. Tangible personal property purchased by:
(a) A hospital organized and operated exclusively for
charitable purposes, no part of the net earnings of which inures to the benefit
of any private shareholder or individual.
(b) A hospital operated by this state or a political
subdivision of this state.
(c) A licensed nursing care institution or a licensed
residential care institution or a residential care facility operated in
conjunction with a licensed nursing care institution or a licensed kidney
dialysis center, which provides medical services, nursing services or health
related services and is not used or held for profit.
(d) A qualifying health care organization, as defined
in section 42-5001, if the tangible personal property is used by the
organization solely to provide health and medical related educational and
charitable services.
(e) A qualifying health care organization as defined in
section 42-5001 if the organization is dedicated to providing
educational, therapeutic, rehabilitative and family medical education training
for blind and visually impaired children and children with multiple
disabilities from the time of birth to age twenty-one.
(f) A nonprofit charitable organization that has
qualified under section 501(c)(3) of the United States internal revenue code
and that engages in and uses such property exclusively in programs for persons
with mental or physical disabilities if the programs are exclusively for
training, job placement, rehabilitation, or testing.
(g) A person that is subject to tax under this chapter
by reason of being engaged in business classified under section 42-5075,
or a subcontractor working under the control of a person that is engaged in
business classified under section 42-5075, if the tangible personal
property is any of the following:
(i) Incorporated or fabricated by the person into a
structure, project, development or improvement in fulfillment of a contract.
(ii) Incorporated or fabricated by the person into any
project described in section 42-5075, subsection O  P.
(iii) Used in environmental response or remediation
activities under section 42-5075, subsection B, paragraph 6.
(h) A person that is not subject to tax under section
42-5075 and that has been provided a copy of a certificate described in
section 42-5009, subsection L, if the property purchased is incorporated
or fabricated by the person into the real property, structure, project,
development or improvement described in the certificate.
(i) A nonprofit charitable organization that has
qualified under section 501(c)(3) of the internal revenue code if the property
is purchased from the parent or an affiliate organization that is located
outside this state.
(j) A qualifying community health center as defined
in section 42-5001.
(k) A nonprofit charitable organization that has
qualified under section 501(c)(3) of the internal revenue code and that
regularly serves meals to the needy and indigent on a continuing basis at no
cost.
(l) A person engaged in business under the transient
lodging classification if the property is a personal hygiene item or articles
used by human beings for food, drink or condiment, except alcoholic beverages,
which are furnished without additional charge to and intended to be consumed by
the transient during the transient's occupancy.
(m) For taxable periods beginning from and after June
30, 2001, a nonprofit charitable organization that has qualified under section
501(c)(3) of the internal revenue code and that provides residential apartment
housing for low-income persons over sixty-two
years of age in a facility that qualifies for a federal housing subsidy, if the
tangible personal property is used by the organization solely to provide
residential apartment housing for low-income persons over sixty-two
years of age in a facility that qualifies for a federal housing subsidy.
(n) A qualifying health sciences educational
institution as defined in section 42-5001.
(o) A person representing or working on behalf of any
person described in subdivision (a), (b), (c), (d), (e), (f), (i), (j), (k),
(m) or (n) of this paragraph, if the tangible personal property is incorporated
or fabricated into a project described in section 42-5075, subsection O  P.
14. Commodities, as defined by title 7 United States
Code section 2, that are consigned for resale in a warehouse in this state
in or from which the commodity is deliverable on a contract for future delivery
subject to the rules of a commodity market regulated by the United States
commodity futures trading commission.
15. Tangible personal property sold by:
(a) Any nonprofit organization organized and
operated exclusively for charitable purposes and recognized by the United
States internal revenue service under section 501(c)(3) of the internal revenue
code.
(b) A nonprofit organization that is exempt from
taxation under section 501(c)(3), 501(c)(4) or 501(c)(6) of the internal
revenue code if the organization is associated with a major league baseball
team or a national touring professional golfing association and no part of the
organization's net earnings inures to the benefit of any private shareholder or
individual. This subdivision does not apply to an organization that
is owned, managed or controlled, in whole or in part, by a major league
baseball team, or its owners, officers, employees or agents, or by a major
league baseball association or professional golfing association, or its owners,
officers, employees or agents, unless the organization conducted or operated
exhibition events in this state before January 1, 2018 that were exempt from
transaction privilege tax under section 42-5073.
(c) A nonprofit organization that is exempt from
taxation under section 501(c)(3), 501(c)(4), 501(c)(6), 501(c)(7) or 501(c)(8)
of the internal revenue code if the organization sponsors or operates a rodeo
featuring primarily farm and ranch animals and no part of the organization's
net earnings inures to the benefit of any private shareholder or individual.
16. Drugs and medical oxygen, including delivery hose,
mask or tent, regulator and tank, if
prescribed by a member of the medical, dental or veterinarian profession who is
licensed by law to administer such substances.
17. Prosthetic appliances, as defined in section 23-501,
prescribed or recommended by a person who is licensed, registered or otherwise
professionally credentialed as a physician, dentist, podiatrist, chiropractor,
naturopath, homeopath, nurse or optometrist.
18. Prescription eyeglasses and contact lenses.
19. Insulin, insulin syringes and glucose test strips.
20. Hearing aids as defined in section 36-1901.
21. Durable medical equipment that has a centers for
medicare and medicaid services common procedure code, is designated
reimbursable by medicare, is prescribed by a person who is licensed under title
32, chapter 7, 13, 17 or 29, can withstand repeated use, is primarily and
customarily used to serve a medical purpose, is generally not useful to a
person in the absence of illness or injury and is appropriate for use in the
home.
22. Food, as provided in and subject to the conditions
of article 3 of this chapter
and sections 42-5074 and 42-6017.
23. Items purchased with United States department of
agriculture coupons issued under the supplemental nutrition assistance program
pursuant to the food and nutrition act of 2008 (P.L. 88-525; 78 Stat. 703; 7 United States Code sections 2011
through 2036b) by the United States department of agriculture food and
nutrition service or food instruments issued under section 17 of the child
nutrition act (P.L. 95-627; 92 Stat. 3603; P.L. 99-661,
section 4302; P.L. 111-296; 42 United States Code
section 1786).
24. Food and drink provided without monetary charge by
a taxpayer that is subject to section 42-5074 to its employees for their
own consumption on the premises during the employees' hours of employment.
25. Tangible personal property that is used or consumed
in a business subject to section 42-5074 for human food, drink or
condiment, whether simple, mixed or compounded.
26. Food, drink or condiment and accessory tangible
personal property that are acquired for use by or provided to a school district
or charter school if they are to be either served or prepared and served to
persons for consumption on the premises of a public school in the school
district or on the premises of the charter school during school hours.
27. Lottery tickets or shares purchased pursuant to
title 5, chapter 5.1, article 1.
28. Textbooks, sold by a bookstore, that are required
by any state university or community college.
29. Magazines, other periodicals or other publications
produced by this state to encourage tourist travel.
30. Paper machine clothing, such as forming fabrics and
dryer felts, purchased by a paper manufacturer and directly used or consumed in
paper manufacturing.
31. Coal, petroleum, coke, natural gas, virgin fuel oil
and electricity purchased by a qualified environmental technology manufacturer,
producer or processor as defined in section 41-1514.02 and directly used
or consumed in generating or providing on-site power
or energy solely for environmental technology manufacturing, producing or
processing or environmental protection. This paragraph applies for twenty full
consecutive calendar or fiscal years from the date the first paper
manufacturing machine is placed in service. In the case of an
environmental technology manufacturer, producer or processor that does not manufacture paper, the time
period begins with the date the
first manufacturing, processing or production equipment is placed in service.
32. Motor vehicles that are removed from inventory by a
motor vehicle dealer as defined in section 28-4301 and that are provided
to:
(a) Charitable or educational institutions that are
exempt from taxation under section 501(c)(3) of the internal revenue code.
(b) Public educational institutions.
(c) State universities or affiliated organizations of a
state university if no part of the organization's net earnings inures to the
benefit of any private shareholder or individual.
33. Natural gas or liquefied petroleum gas used to
propel a motor vehicle.
34. Machinery, equipment, technology or related
supplies that are only useful to assist a person with a physical disability as
defined in section 46-191 or a person who has a developmental disability
as defined in section 36-551 or has a head injury as defined in section
41-3201 to be more independent and functional.
35. Liquid, solid or gaseous chemicals used in
manufacturing, processing, fabricating, mining, refining, metallurgical
operations, research and development and, beginning on January 1, 1999,
printing, if using or consuming the chemicals, alone or as part of an
integrated system of chemicals, involves direct contact with the materials from
which the product is produced for the purpose of causing or allowing a chemical
or physical change to occur in the materials as part of the production process. This
paragraph does not include chemicals that are used or consumed in activities
such as packaging, storage or transportation but does not affect any exemption
for such chemicals that is otherwise provided by this section. For
the purposes of this paragraph, "printing" means a commercial
printing operation and includes job printing, engraving, embossing, copying and
bookbinding.
36. Food, drink and condiment purchased for
consumption within the premises of any prison, jail or other institution under
the jurisdiction of the state department of corrections, the department of
public safety, the department of juvenile corrections or a county sheriff.
37. A motor vehicle and any repair and replacement
parts and tangible personal property becoming a part of such motor vehicle sold
to a motor carrier that is subject to a fee
prescribed in title 28, chapter 16, article 4 and that is engaged in the business of leasing or
renting such a property.
38. Tangible personal property that is or directly
enters into and becomes an ingredient or component part of cards used as
prescription plan identification cards.
39. Overhead materials or other tangible personal
property that is used in performing a contract between the United States
government and a manufacturer, modifier, assembler or repairer, including
property used in performing a subcontract with a government contractor who is a
manufacturer, modifier, assembler or repairer, to which title passes to the
government under the terms of the contract or subcontract. For the
purposes of this paragraph:
(a) "Overhead materials" means tangible
personal property, the gross proceeds of sales or gross income derived from
which would otherwise be included in the retail classification, that is used or
consumed in performing a contract, the cost of which is charged to an overhead
expense account and allocated to various contracts based on generally accepted
accounting principles and consistent with government contract accounting
standards.
(b) "Subcontract" means an agreement between
a contractor and any person who is not an employee of the contractor for
furnishing of supplies or services that, in whole or in part, are necessary to perform one or more
government contracts, or under which any portion of the contractor's obligation
under one or more government contracts is performed, undertaken or assumed, and
that includes provisions causing title to overhead materials or other tangible
personal property used in performing the subcontract to
pass to the government or that includes provisions incorporating such title
passing clauses in a government contract into the subcontract.
40. Through December 31, 1994, tangible personal
property sold pursuant to a personal property liquidation transaction, as
defined in section 42-5061. From and after December 31, 1994,
tangible personal property sold pursuant to a personal property liquidation
transaction, as defined in section 42-5061, if the gross proceeds of the
sales were included in the measure of the tax imposed by article 1 of this
chapter or if the personal property liquidation was a casual activity or
transaction.
41. Wireless telecommunications equipment that is
held for sale or transfer to a customer as an inducement to enter into or
continue a contract for telecommunications services that are taxable under
section 42-5064.
42. Alternative fuel, as defined in section 1-215,
purchased by a used oil fuel burner who has received a permit to burn used oil
or used oil fuel under section 49-426 or 49-480.
43. Tangible personal property purchased by a
commercial airline and consisting of food, beverages and condiments and
accessories used for serving the food and beverages, if those items are to be
provided without additional charge to passengers for consumption in
flight. For the purposes of this paragraph, "commercial
airline" means a person holding a federal certificate of public
convenience and necessity or foreign air carrier permit for air transportation
to transport persons, property or United States mail in intrastate, interstate
or foreign commerce.
44. Alternative fuel vehicles if the vehicle was
manufactured as a diesel fuel vehicle and converted to operate on alternative
fuel and equipment that is installed in a conventional diesel fuel motor
vehicle to convert the vehicle to operate on an alternative fuel, as defined in
section 1-215.
45. Gas diverted from a pipeline, by a person engaged
in the business of:
(a) Operating a natural or artificial gas pipeline,
and used or consumed for the sole purpose of fueling compressor equipment that
pressurizes the pipeline.
(b) Converting natural gas into liquefied natural
gas, and used or consumed for the sole purpose of fueling compressor equipment
used in the conversion process.
46. Tangible personal property that is excluded, exempt
or deductible from transaction privilege tax pursuant to section 42-5063.
47. Tangible personal property purchased to be
incorporated or installed as part of environmental response or remediation
activities under section 42-5075, subsection B, paragraph 6.
48. Tangible personal property sold by a nonprofit
organization that is exempt from taxation under section 501(c)(6) of the
internal revenue code if the organization produces, organizes or promotes
cultural or civic related festivals or events and no part of the organization's
net earnings inures to the benefit of any private shareholder or individual.
49. Prepared food, drink or condiment donated by a
restaurant as classified in section 42-5074, subsection A to a nonprofit
charitable organization that has qualified under section 501(c)(3) of the
internal revenue code and that regularly serves meals to the needy and indigent
on a continuing basis at no cost.
50. Application
services that are designed to assess or test student learning or to promote
curriculum design or enhancement purchased by or for any school district,
charter school, community college or state university. For the purposes of this
paragraph:
(a) "Application services" means software
applications provided remotely using hypertext transfer protocol or another
network protocol.
(b) "Curriculum design or enhancement" means
planning, implementing or reporting on courses of study, lessons, assignments
or other learning activities.
51. Motor vehicle fuel and use fuel to a qualified
business under section 41-1516 for off-road use in harvesting, processing
or transporting qualifying forest products removed from qualifying projects as
defined in section 41-1516.
52. Repair parts installed in equipment used directly
by a qualified business under section 41-1516 in harvesting, processing
or transporting qualifying forest products removed from qualifying projects as
defined in section 41-1516.
53. Renewable energy credits or any other unit created
to track energy derived from renewable energy resources. For the
purposes of this paragraph, "renewable energy credit" means a unit
created administratively by the corporation commission or governing body of a
public power entity to track kilowatt hours of electricity derived from a
renewable energy resource or the kilowatt hour equivalent of conventional
energy resources displaced by distributed renewable energy resources.
54. Coal
acquired from an owner or operator of a power plant by a person that is responsible for refining coal if both
of the following apply:
(a) The transfer of title or possession of the coal is
for the purpose of refining the coal.
(b) The title or possession of the coal is transferred
back to the owner or operator of the power plant after completion of the coal
refining process. For the purposes of this subdivision, "coal
refining process" means the application of a coal additive system that
aids the reduction of power plant emissions during the combustion of coal and
the treatment of flue gas.
55. Tangible personal property incorporated or
fabricated into a project described in section 42-5075, subsection O  P, that is located within the
exterior boundaries of an Indian reservation for which the owner, as defined in
section 42-5075, of the project is an Indian tribe or an affiliated
Indian. For the purposes of this paragraph:
(a) "Affiliated Indian" means an individual
Native American Indian who is duly registered on the tribal rolls of the Indian
tribe for whose benefit the Indian reservation was established.
(b) "Indian reservation" means all lands that
are within the limits of areas set aside by the United States for the exclusive
use and occupancy of an Indian tribe by treaty, law or executive order and that
are recognized as Indian reservations by the United States department of the
interior.
(c) "Indian tribe" means any organized
nation, tribe, band or community that is recognized as an Indian tribe by the
United States department of the interior and includes any entity formed under
the laws of the Indian tribe.
56. Cash
equivalents, precious metal bullion and monetized bullion purchased by the
ultimate consumer, but coins or other forms of money for manufacture into
jewelry or works of art are subject to tax, and tangible personal property that
is purchased through the redemption of any cash equivalent by the holder as a
means of payment for goods that are subject to tax under this article is
subject to tax. For the purposes of this paragraph:
(a) "Cash equivalents" means items, whether
or not negotiable, that are sold to one or more persons, through which a value
denominated in money is purchased in advance and that may be redeemed in full
or in part for tangible personal property, intangibles or services. Cash
equivalents include gift cards, stored value cards, gift certificates,
vouchers, traveler's checks, money orders or other tangible instruments or
orders. Cash equivalents do not include either of the following:
(i) Items that are sold to one or more persons and
through which a value is not denominated in money.
(ii) Prepaid calling cards for telecommunications
services.
(b) "Monetized bullion" means coins and other
forms of money that are manufactured from gold, silver or other metals and that
have been or are used as a medium of exchange in this or another state, the
United States or a foreign nation.
(c) "Precious metal
bullion" means precious metal, including gold, silver, platinum, rhodium
and palladium, that has been smelted or refined so that its value depends on
its contents and not on its form.
B. In addition to the exemptions allowed by subsection
A of this section, the following categories of tangible personal property are
also exempt:
1. Machinery, or equipment, used directly in
manufacturing, processing, fabricating, job printing, refining or metallurgical
operations. The terms "manufacturing", "processing",
"fabricating", "job printing", "refining" and
"metallurgical" as used in this paragraph refer to and include those
operations commonly understood within their ordinary meaning.
"Metallurgical operations" includes leaching, milling, precipitating,
smelting and refining.
2. Machinery, or equipment, used directly in the
process of extracting ores or minerals from the earth for commercial purposes,
including equipment required to prepare the materials for extraction and
handling, loading or transporting such extracted material to the surface.�
"Mining" includes underground, surface and open pit operations for
extracting ores and minerals.
3. Tangible personal property sold to persons
engaged in business classified under the telecommunications classification
under section 42-5064, including a person representing or working on
behalf of such a person in a manner described in section 42-5075,
subsection O  P, and consisting
of central office switching equipment, switchboards, private branch exchange
equipment, microwave radio equipment and carrier equipment including optical
fiber, coaxial cable and other transmission media that are components of
carrier systems.
4. Machinery, equipment or transmission lines used
directly in producing or transmitting electrical power, but not including
distribution.� Transformers and control equipment used at transmission
substation sites constitute equipment used in producing or transmitting
electrical power.
5. Machinery and equipment used directly for energy
storage for later electrical use. For the purposes of this paragraph:
(a) "Electric utility scale" means a
person that is engaged in a business activity described in section 42-5063,
subsection A or such person's equipment or wholesale electricity suppliers.
(b) "Energy storage" means commercially
available technology for electric utility scale that is capable of absorbing
energy, storing energy for a period of time and thereafter dispatching the
energy and that uses mechanical, chemical or thermal processes to store energy.
(c) "Machinery and equipment used
directly" means all machinery and equipment that are used for electric
energy storage from the point of receipt of such energy in order to facilitate
storage of the electric energy to the point where the electric energy is
released.
6. Neat
animals, horses, asses, sheep, ratites, swine or goats used or to be used as
breeding or production stock, including sales of breedings or ownership shares
in such animals used for breeding or production.
7. Pipes or
valves four inches in diameter or larger used to transport oil, natural gas,
artificial gas, water,
wastewater
or coal slurry, including compressor units, regulators, machinery and
equipment, fittings, seals and any other part that is used in operating the
pipes or valves.
8. Aircraft, navigational and
communication instruments and other accessories and related equipment sold to:
(a) A person:
(i) Holding, or exempted by federal law from
obtaining, a federal certificate of public convenience and necessity for use
as, in conjunction with or becoming part of an aircraft to be used to transport
persons for hire in intrastate, interstate or foreign commerce.
(ii) That is certificated or licensed under federal
aviation administration regulations (14 Code of Federal Regulations part 121 or
135) as a scheduled or unscheduled carrier of persons for hire for use as or in
conjunction with or becoming part of an aircraft to be used to transport
persons for hire in intrastate, interstate or foreign commerce.
(iii) Holding a foreign air carrier permit for air
transportation for use as or in conjunction with or becoming a part of aircraft
to be used to transport persons, property or United States mail in intrastate,
interstate or foreign commerce.
(iv) Operating an aircraft to transport persons in any
manner for compensation or hire, or for use in a fractional ownership program
that meets the requirements of federal aviation administration regulations (14
Code of Federal Regulations part 91, subpart K), including as an air carrier, a
foreign air carrier or a commercial operator or under a restricted category,
within the meaning of 14 Code of Federal Regulations, regardless of whether the
operation or aircraft is regulated or certified under part 91, 119, 121, 133,
135, 136 or 137, or another part of 14 Code of Federal Regulations.
(v) That will lease or otherwise transfer operational
control, within the meaning of federal aviation administration operations
specification A008, or its successor, of the aircraft, instruments or
accessories to one or more persons described in item (i), (ii), (iii) or (iv)
of this subdivision, subject to section 42-5009, subsection Q.
(b) Any foreign government.
(c) Persons who are not residents of this state and who
will not use such property in this state other than in removing such property
from this state. This subdivision also applies to corporations that
are not incorporated in this state, regardless of maintaining a place of
business in this state, if the principal corporate office is located outside
this state and the property will not be used in this state other than in
removing the property from this state.
9. Machinery,
tools, equipment and related supplies used or consumed directly in repairing,
remodeling or maintaining aircraft, aircraft engines or aircraft component
parts by or on behalf of a certificated or licensed carrier of persons or property.
10. Rolling
stock, rails, ties and signal control equipment used directly to transport
persons or property.
11. Machinery or equipment used
directly to drill for oil or gas or used directly in the process of extracting
oil or gas from the earth for commercial purposes.
12. Buses or
other urban mass transit vehicles that are used directly to transport persons
or property for hire or pursuant to a governmentally adopted and controlled
urban mass transportation program and that are sold to bus companies holding a federal
certificate of convenience and necessity or operated by any city, town or other
governmental entity or by any person contracting with such governmental entity
as part of a governmentally adopted and controlled program to provide urban
mass transportation.
13. Groundwater
measuring devices required under section 45-604.
14. Machinery
and equipment consisting of agricultural aircraft, tractors, off-highway vehicles, tractor-drawn
implements, self-powered implements, machinery and equipment necessary
for extracting milk, and machinery and equipment necessary for cooling milk and
livestock, and drip irrigation lines not already exempt under paragraph 7 of this subsection and that are used for commercially producing agricultural,
horticultural, viticultural and floricultural crops and products in this
state. For the purposes of this paragraph:
(a) "Off-highway vehicles" means off-highway
vehicles as defined in section 28-1171 that are modified at the time of
sale to function as a tractor or to tow tractor-drawn implements and that
are not equipped with a modified exhaust system to increase horsepower or speed
or an engine that is more than one thousand cubic centimeters or that have a
maximum speed of fifty miles per hour or less.
(b) "Self-powered implements" includes
machinery and equipment that are electric-powered.
15. Machinery
or equipment used in research and development. For the purposes of
this paragraph, "research and development" means basic and applied
research in the sciences and engineering, and designing, developing or testing
prototypes, processes or new products, including research and development of
computer software that is embedded in or an integral part of the prototype or
new product or that is required for machinery or equipment otherwise exempt
under this section to function effectively. Research and development
do not include manufacturing quality control, routine consumer product testing,
market research, sales promotion, sales service, research in social sciences or
psychology, computer software research that is not included in the definition
of research and development, or other nontechnological activities or technical
services.
16. Tangible
personal property that is used by either of the following to receive, store,
convert, produce, generate, decode, encode, control or transmit
telecommunications information:
(a) Any
direct broadcast satellite television or data transmission service that
operates pursuant to 47 Code of Federal Regulations part 25.
(b) Any satellite television or data transmission
facility, if both of the following conditions are met:
(i) Over two-thirds of the transmissions,
measured in megabytes, transmitted by the facility during the test period were
transmitted to or on behalf of one or more direct broadcast satellite
television or data transmission services that operate pursuant to 47 Code of
Federal Regulations part 25.
(ii) Over two-thirds of the transmissions,
measured in megabytes, transmitted by or on behalf of those direct broadcast
television or data transmission services during the test period were
transmitted by the facility to or on behalf of those services.
For the purposes of subdivision (b) of this paragraph, "test
period" means the three hundred sixty-five day period beginning on
the later of the date on which the tangible personal property is purchased or
the date on which the direct broadcast satellite television or data
transmission service first transmits information to its customers.
17. Clean
rooms that are used for manufacturing, processing, fabrication or research and
development, as defined in paragraph 15 of this subsection,
of semiconductor products. For the purposes of this paragraph,
"clean room" means all property that comprises or creates an
environment where humidity, temperature, particulate matter and contamination
are precisely controlled within specified parameters, without regard to whether
the property is actually contained within that environment or whether any of the
property is affixed to or incorporated into real property. Clean
room:
(a) Includes the integrated systems, fixtures, piping,
movable partitions, lighting and all property that is necessary or adapted to
reduce contamination or to control airflow, temperature, humidity, chemical
purity or other environmental conditions or manufacturing tolerances, as well
as the production machinery and equipment operating in conjunction with the
clean room environment.
(b) Does not include the building or other permanent,
nonremovable component of the building that houses the clean room environment.
18. Machinery
and equipment that are used directly in feeding poultry, environmentally controlling housing for poultry, moving eggs within a
production and packaging facility or sorting or cooling eggs.� This exemption
does not apply to vehicles used for transporting eggs.
19. Machinery
or equipment, including related structural components and containment structures, that is employed in
connection with manufacturing, processing, fabricating, job printing, refining,
mining, natural gas pipelines, metallurgical operations, telecommunications,
producing or transmitting electricity or research and development and that is
used directly to meet or exceed rules or regulations adopted by the federal
energy regulatory commission, the United States environmental protection
agency, the United States nuclear regulatory commission, the Arizona department
of environmental quality or a political subdivision of this state to prevent,
monitor, control or reduce land, water or air pollution. For the purposes of this
paragraph, "containment structure" means a structure that prevents,
monitors, controls or reduces noxious or harmful discharge into the
environment.
20. Machinery
and equipment that are used in commercially
producing livestock,
livestock products or agricultural, horticultural, viticultural or
floricultural crops or products in this state, including production by a person
representing or working on behalf of such a person in a manner described in
section 42-5075, subsection O  P, if the machinery and
equipment are used directly and primarily to prevent, monitor, control or
reduce air, water or land pollution.
21. Machinery
or equipment that enables a television station to originate and broadcast or to
receive and broadcast digital television signals and that was purchased to
facilitate compliance with the telecommunications act of 1996 (P.L. 104-104;
110 Stat. 56; 47 United States Code section 336) and the federal communications
commission order issued April 21, 1997 (47 Code of Federal Regulations part
73). This paragraph does not exempt any of the following:
(a) Repair or replacement parts purchased for the
machinery or equipment described in this paragraph.
(b) Machinery or equipment purchased to replace
machinery or equipment for which an exemption was previously claimed and taken
under this paragraph.
(c) Any machinery or equipment purchased after the
television station has ceased analog broadcasting, or purchased after November
1, 2009, whichever occurs first.
22. Qualifying
equipment that is purchased from and after June 30, 2004 through December 31, 2028 by a qualified
business under section 41-1516 for harvesting or processing qualifying
forest products removed from qualifying projects as defined in section 41-1516. To
qualify for this exemption, the qualified business must obtain and present its
certification from the Arizona commerce authority at the time of purchase.
23. Machinery,
equipment, materials and other tangible personal property used directly and
predominantly to construct a qualified environmental technology manufacturing,
producing or processing facility as described in section 41-1514.02. This
paragraph applies for ten full consecutive calendar or fiscal years after the
start of initial construction.
24. Computer
data center equipment sold to the owner, operator or qualified colocation
tenant of a computer data center that is certified by the Arizona commerce
authority under section 41-1519 or an authorized agent of the owner,
operator or qualified colocation tenant during the qualification period for use
in the qualified computer data center. For the purposes of this
paragraph, "computer data center", "computer data center
equipment", "qualification period" and "qualified
colocation tenant" have the same meanings prescribed in section 41-1519.
C. The exemptions provided by subsection B of this
section do not include:
1. Expendable materials. For the purposes
of this paragraph, expendable materials do not include any of the categories of
tangible personal property specified in subsection B of this section regardless
of the cost or useful life of that property.
2. Janitorial equipment and hand tools.
3. Office equipment, furniture and supplies.
4. Tangible personal property used in selling or
distributing activities, other than the telecommunications transmissions
described in subsection B, paragraph 16
of this
section.
5. Motor vehicles required to be licensed by this
state, except buses or other urban mass transit vehicles specifically exempted
pursuant to subsection B, paragraph 12
of this
section, without regard to the use of such motor vehicles.
6. Shops, buildings, docks, depots and all other
materials of whatever kind or character not specifically included as exempt.
7. Motors and pumps used in drip irrigation systems.
8. Machinery and equipment or tangible personal
property used by a contractor in performing
a
contract.
D. The following shall be deducted in computing the
purchase price of electricity by a retail electric customer from a utility
business:
1. Revenues received from sales of ancillary services,
electric distribution services, electric generation services, electric
transmission services and other services related to providing electricity to a
retail electric customer who is located outside this state for use outside this
state if the electricity is delivered to a point of sale outside this state.
2. Revenues received from providing electricity,
including ancillary services, electric distribution services, electric
generation services, electric transmission services and other services related
to providing electricity with respect to which the transaction privilege tax
imposed under section 42-5063 has been paid.
E. The tax levied by
this article does not apply to the purchase of solar energy devices from a
retailer that is registered with the department as a solar energy retailer or a
solar energy contractor.
F. E. The
following shall be deducted in computing the purchase price of electricity by a
retail electric customer from a utility business:
1. Fees charged by a municipally owned utility to
persons constructing residential, commercial or industrial developments or
connecting residential, commercial or industrial developments to a municipal
utility system or systems if the fees are segregated and used only for capital
expansion, system enlargement or debt service of the utility system or systems.
2. Reimbursement or contribution compensation to any
person or persons owning a utility system for property and equipment installed
to provide utility access to, on or across the land of an actual utility
consumer if the property and equipment become the property of the utility. This
deduction shall not exceed the value of such property and equipment.
G. F. The tax
levied by this article does not apply to the purchase price of electricity,
natural gas or liquefied petroleum gas by:
1. A qualified manufacturing or smelting
business. A utility that claims this deduction shall report each
month, on a form prescribed by the department, the name and address of each
qualified manufacturing or smelting business for which this deduction is
taken. This paragraph applies to gas transportation
services. For the purposes of this paragraph:
(a) "Gas transportation services" means the
services of transporting natural gas to a natural gas customer or to a natural
gas distribution facility if the natural gas was purchased from a supplier
other than the utility.
(b) "Manufacturing" means the performance as
a business of an integrated series of operations that places tangible personal
property in a form, composition or character different from that in which it
was acquired and transforms it into a different product with a distinctive
name, character or use. Manufacturing does not include job printing,
publishing, packaging, mining, generating electricity or operating a
restaurant.
(c) "Qualified manufacturing or smelting
business" means one of the following:
(i) A business that manufactures or smelts tangible
products in this state, of which at least fifty-one percent of the manufactured
or smelted products will be exported out of state for incorporation into
another product or sold out of state for a final sale.
(ii) A business that derives at least fifty-one
percent of its gross income from the sale of manufactured or smelted products
manufactured or smelted by the business.
(iii) A business
that uses at least fifty-one percent of its square footage in this state
for manufacturing or smelting and business activities directly related to
manufacturing or smelting.
(iv) A business that employs at least fifty-one
percent of its workforce in this state in manufacturing or smelting and
business activities directly related to manufacturing or smelting.
(v) A business that uses at least fifty-one
percent of the value of its capitalized assets in this state, as reflected on
the business's books and records, for manufacturing or smelting and business
activities directly related to manufacturing or smelting.
(d) "Smelting" means to melt or fuse a
metalliferous mineral, often with an accompanying chemical change, usually to
separate the metal.
2. A business that operates an international
operations center in this state and that is certified by the Arizona commerce
authority pursuant to section 41-1520.
H. G. A
city or town may exempt proceeds from sales of paintings, sculptures or similar
works of fine art if such works of fine art are sold by the original
artist. For the purposes of this subsection, fine art does not
include an art creation such as jewelry, macrame, glasswork, pottery, woodwork,
metalwork, furniture or clothing if the art creation has a dual purpose, both
aesthetic and utilitarian, whether sold by the artist or by another person.
I. H. For the purposes of
subsection B of this section:
1. "Agricultural aircraft" means an aircraft
that is built for agricultural use for the aerial application of pesticides or
fertilizer or for aerial seeding.
2. "Aircraft" includes:
(a) An airplane flight simulator that is approved by
the federal aviation administration for use as a phase II or higher flight
simulator under appendix H, 14 Code of Federal Regulations part 121.
(b) Tangible personal property that is permanently
affixed or attached as a component part of an aircraft that is owned or
operated by a certificated or licensed carrier of persons or property.
3. "Other accessories and related equipment"
includes aircraft accessories and equipment such as ground service equipment
that physically contact aircraft at some point during the overall carrier
operation.
J. I. For the purposes of subsection D of this section,
"ancillary services", "electric distribution service",
"electric generation service", "electric transmission
service" and "other services" have the same meanings prescribed
in section 42-5063.END_STATUTE
Sec. 19. Repeal
Section 42-5159, Arizona Revised
Statutes, as amended by Laws 2025, chapter 251, section 13, is repealed.
Sec. 20. Section 42-6009, Arizona Revised
Statutes, is amended to read:
START_STATUTE42-6009. Online lodging; definitions
A. Except as provided by this section, a city, town
or other taxing jurisdiction may not levy a transaction privilege, sales, use,
franchise or other similar tax or fee, however denominated, on the business of
operating an online lodging marketplace or, in the case of an online lodging
marketplace that is licensed pursuant to section 42-5005, subsection L,
on any online lodging transaction facilitated by the online lodging marketplace
or on any online lodging operator with respect to any online lodging transaction
for which it has received documentation that the online lodging marketplace has
remitted or will remit the applicable tax to the department pursuant to section
42-5014, subsection E.
B. In the case of an online lodging marketplace that
is licensed pursuant to section 42-5005, subsection L, a city, town or
other taxing jurisdiction may levy a transaction privilege, sales, use,
franchise or other similar tax or fee on an online lodging marketplace from any
activity subject to tax under the model city tax code, with the tax base for an
online lodging marketplace being limited pursuant to
section 42-5076, subject to the following conditions:
1. The city, town or other taxing jurisdiction tax
must be administered in a manner that is uniform with the treatment of online
lodging marketplaces, online lodging operators and online lodging transactions
provided by chapter 5 of this title, except that:
(a) The city, town or other taxing jurisdiction tax
rate may be different from the state tax rate prescribed by section 42-5010.
(b) The city, town or other taxing jurisdiction tax
may apply to online lodging transactions involving rentals of lodging
accommodations in the city, town or other taxing jurisdiction for more than
twenty-nine consecutive days. With respect to any tax on rentals of
lodging accommodations for more than twenty-nine consecutive days, in the case
of an online lodging marketplace that has registered pursuant to section 42-5005,
subsection L, the city, town or other taxing jurisdiction tax must uniformly
apply to all lodging accommodations in the city, town or other taxing
jurisdiction for thirty consecutive days or more, and the tax base for the tax
must be limited exclusively to online lodging transactions facilitated by an
online lodging marketplace for rentals of lodging accommodations for thirty
consecutive days or more and located in the applicable city, town or other
taxing jurisdiction.
2. The city, town or other taxing jurisdiction tax
shall be administered, collected and enforced by the department and distributed
to the city, town or other taxing jurisdiction in a uniform manner.
3. The city, town or other taxing jurisdiction tax
imposed on online lodging marketplaces and online lodging operators must be
uniform with all other taxpayers engaging in the same activity within the
jurisdictional boundaries of the city, town or other taxing jurisdiction.
4. Any city, town or other taxing jurisdiction tax
is subject to:
(a) Section 42-6002, relating to audits.
(b) Section 42-2003, subsection X  W, relating to confidential information.
(c) Section 42-5003, subsection B, relating to
judicial enforcement.
(d) Section 42-5005, subsection L, relating to
registration of online lodging marketplaces.
(e) Section 42-5014, subsection E, relating to
tax returns.
5. The city, town or other taxing jurisdiction tax
may not be collected from an online lodging operator with respect to any online
lodging transaction or transactions for which the online lodging operator has
received written notice or documentation from a registered online lodging
marketplace that it has remitted or will remit the applicable city, town or
other taxing jurisdiction tax with respect to those transactions to the
department pursuant to section 42-5014, subsection E.
C. For the purposes of this section, "lodging
accommodations", "online lodging marketplace", "online
lodging operator" and "online lodging transaction" have the same
meanings prescribed in section 42-5076. END_STATUTE
Sec. 21. Section 43-105, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-105. Internal revenue code; definition; application
A. For the purposes of
computing income tax pursuant to this title, for taxable years beginning from
and after December 31, 2025, "internal revenue code" means the United
States internal revenue code of 1986, as amended, in effect on January 1, 2026,
including those provisions that became effective during 2025 with the specific
adoption of all retroactive effective dates, but excluding any changes to the
code enacted after January 1, 2026.
A. B. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2024 through December 31,
2025, "internal revenue code" means the United States internal
revenue code of 1986, as amended, in effect on January 1, 2025, including those
provisions that became effective during 2024 with the specific adoption of all
retroactive effective dates, but excluding any changes to the
code enacted after January 1, 2025 and including those
provisions of public law 119-21 that are retroactively effective during
taxable years beginning from and after December 31, 2024 through December 31,
2025.
B. C. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2023 through December 31, 2024,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2024, including those provisions
that became effective during 2023 with the specific adoption of all retroactive
effective dates, and including those provisions of public law
119-21 that are retroactively effective during taxable years beginning
from and after December 31, 2023 through December 31, 2024.
C. D. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2022 through December 31, 2023,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2023, including those provisions
that became effective during 2022 with the specific adoption of all retroactive
effective dates, and including those provisions of public law
119-21 that are retroactively effective during taxable years beginning
from and after December 31, 2022 through December 31, 2023.
D. E. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2021 through December 31, 2022,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2022, including those provisions
that became effective during 2021 with the specific adoption of all retroactive
effective dates, and including those provisions of the chips and science act of
2022 (P.L. 117-167), the inflation reduction act of 2022 (P.L. 117-169), and the consolidated appropriations act,
2023 (P.L. 117-328) and public law 119-21 that are
retroactively effective during taxable years beginning from and after December
31, 2021 through December 31, 2022.
E. F. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2020 through December 31, 2021,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on March 11, 2021, including those provisions
that became effective during 2020 with the specific adoption of all retroactive
effective dates and including those provisions of the PPP extension act of 2021
(P.L. 117-6) and the infrastructure investment and jobs act
(P.L. 117-58) that are retroactively effective during taxable years
beginning from and after December 31, 2020 through December 31, 2021.
F. G. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2019 through December 31, 2020,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2020, including those provisions
that became effective during 2019 with the specific adoption of all retroactive
effective dates, and including those provisions of the families first
coronavirus response act (P.L. 116-127), the coronavirus aid,
relief, and economic security act (P.L. 116-136), the paycheck
protection program flexibility act of 2020 (P.L. 116-142), the
consolidated appropriations act, 2021 (P.L. 116-260) and the
American rescue plan act of 2021 (P.L. 117-2) that are retroactively
effective during taxable years beginning from and after December 31, 2019
through December 31, 2020.
G. H. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2018 through December 31, 2019,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2019, including those provisions
that became effective during 2018 with the specific adoption of all retroactive
effective dates, and including those provisions of the taxpayer first act
(P.L. 116-25), the further consolidated appropriations act, 2020
(P.L. 116-94), the coronavirus aid, relief, and economic security
act (P.L. 116-136) and the consolidated appropriations act, 2021
(P.L. 116-260) that are retroactively effective during taxable years
beginning from and after December 31, 2018 through December 31, 2019.
H. I. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2017 through December 31, 2018,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2018, including those
provisions that became effective during 2017 with the specific adoption of all
retroactive effective dates, and including those provisions of the bipartisan
budget act of 2018 (P.L. 115-123), the consolidated appropriations
act, 2018 (P.L. 115-141), the further consolidated appropriations
act, 2020 (P.L. 116-94), the coronavirus aid, relief, and economic
security act (P.L. 116-136) and the consolidated appropriations act,
2021 (P.L. 116-260) that are retroactively effective during taxable
years beginning from and after December 31, 2017 through December 31, 2018.
I. J. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2016 through December 31, 2017,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2017, including those provisions
that became effective during 2016 with the specific adoption of all federal
retroactive effective dates, and including those provisions of the disaster tax
relief and airport and airway extension act of 2017 (P.L. 115-63), the tax
cuts and jobs act (P.L. 115-97), the bipartisan budget act of 2018 (P.L.
115-123), the consolidated appropriations act, 2018 (P.L. 115-141),
the further consolidated appropriations act, 2020 (P.L. 116-94) and
the coronavirus aid, relief, and economic security act (P.L. 116-136) that
are retroactively effective during taxable years beginning from and after
December 31, 2016 through December 31, 2017.
J. K. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2015 through December 31, 2016,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2016, including those provisions
that became effective during 2015 with the specific adoption of all federal
retroactive effective dates, and including those provisions of the United
States appreciation for olympians and paralympians act of 2016 (P.L. 114-239),
the tax cuts and jobs act (P.L. 115-97), the consolidated
appropriations act, 2018 (P.L. 115-141), the further consolidated
appropriations act, 2020 (P.L. 116-94) and the coronavirus aid,
relief, and economic security act (P.L. 116-136) that are retroactively
effective during taxable years beginning from and after December 31, 2015
through December 31, 2016.
K. For the purposes of computing
income tax pursuant to this title, for taxable years beginning from and after
December 31, 2014 through December 31, 2015, "internal revenue
code" means the United States internal revenue code of 1986, as amended,
in effect on January 1, 2015, including those provisions that became effective
during 2014 with the specific adoption of all federal retroactive effective
dates, and including those provisions of the slain officer family support act
of 2015 (P.L. 114-7), the don't tax our fallen public safety heroes
act (P.L. 114-14), the surface transportation and veterans health
care choice improvement act of 2015 (P.L. 114-41), the consolidated
appropriations act, 2016 (P.L. 114-113), the consolidated
appropriations act, 2018 (P.L. 115-141) and the coronavirus aid,
relief, and economic security act (P.L. 116-136) that are retroactively
effective during taxable years beginning from and after December 31, 2014
through December 31, 2015.END_STATUTE
Sec. 22. Section 43-222, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-222. Income tax credit review schedule
The joint legislative income tax credit review committee shall
review the following income tax credits:
1. For years ending in 0 and 5, sections 43-1079.01,
43-1088, 43-1089.04, 43-1167.01 and 43-1175.
2. For years ending in 1 and 6, sections 43-1072.02,
43-1074.02, 43-1075, 43-1076.01, 43-1077,
43-1078, 43-1083, 43-1083.02, 43-1162, 43-1164.03 and 43-1183.
3. For years ending in 2 and 7, sections 43-1073,
43-1082, 43-1085, 43-1086, 43-1089, 43-1089.01,
43-1089.02, 43-1089.03, 43-1164, 43-1165, and 43-1181.
4. For years ending in 3 and 8, sections 43-1074.01,
43-1168, 43-1170 and 43-1178.
5. For years ending in 4 and 9, sections 43-1073.01,
43-1081.01, 43-1083.03, 43-1084, 43-1164.04, 43-1164.05
and 43-1184. END_STATUTE
Sec. 23. Section 43-301, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-301. Individual returns; definition
A. A full-year or part-year resident
individual shall file a return with the department if, for the taxable year,
the individual's gross income was greater than the amount of the standard
deduction allowed under subsection section 43-1041,
subsection A as adjusted for inflation pursuant to section 43-1041,
subsection H.
B. A nonresident individual shall file a return with
the department if, for the taxable year, the individual's gross income was
greater than the amount under subsection A of this section determined for a
full-year or part-year resident individual multiplied by the
percentage that the individual's Arizona gross income is of the individual's
federal adjusted gross income.
C. In the case of a husband and wife, the spouse who
controls the disposition of or who receives or spends community income as well
as the spouse who is taxable on such income is liable for the payment of taxes
imposed by this title on such income. If a joint return is filed,
the liability for the tax on the aggregate income is joint and several.
D. This section applies regardless of whether an
individual is required to file a return under the internal revenue code or
whether the individual has any federal adjusted gross income for the taxable
year.
E. For the purposes of this section, "gross
income" means gross income as defined in the internal revenue code minus
income included in gross income but excluded from taxation under this title. END_STATUTE
Sec. 24. Section 43-323, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-323. Place and form of filing returns
A. All returns required by this title shall be in
such a form as the department may from time to time prescribe and shall be filed
with the department.
B. The department shall prescribe a short form
return for individual taxpayers who:
1. Are eligible and elect to pay tax based on the
optional tax tables pursuant to section 43-1012.
2. Elect to claim the optional standard deduction
pursuant to section 43-1041, subsection A, but not the increased amount
for charitable deductions under section 43-1041, subsection I  H.
3. Elect not to file for credits against income tax
liability other than those contained in sections 43-1072, 43-1072.01,
43-1072.02, 43-1073 and 43-1073.01.
4. Are not required to add any income under section
43-1021 and do not elect any subtractions under section 43-1022,
except for the exemptions allowed under section 43-1023.
C. The department may provide a simplified return
form for individual taxpayers who:
1. Are eligible and elect to pay tax based on the
optional tax tables pursuant to section 43-1012.
2. Are residents for the full taxable year.
3. File as single individuals or married couples
filing joint returns under section 43-309.
4. Are not sixty-five years of age or older or
blind at the end of the taxable year.
5. Claim no exemptions under section 43-1023
for the taxable year.
6. Elect to claim the optional standard deduction
under section 43-1041, subsection A, but not the increased amount for
charitable deductions under section 43-1041, subsection I  H.
7. Are not required to add any income under section
43-1021 and do not elect to claim any subtractions under section 43-1022
or file for any credits under chapter 10, article 5 of this title, except the
credits provided by sections 43-1072.01, 43-1072.02 and 43-1073.
8. Do not elect to contribute a portion of any tax
refund as provided by any provision of chapter 6, article 1 of this title.�
Notwithstanding any provision of chapter 6, article 1 of this title, a
simplified return form under this subsection shall not include any space for
the taxpayer to so contribute a portion of a refund.
D. The department shall prepare blank forms for the
returns and furnish them on request.� Failure to receive or secure the form
does not relieve any taxpayer from making any return required.
E. An individual income tax preparer who prepares
more than ten original income tax returns that are timely filed during any
taxable year that begins from and after December 31, 2017 shall file
electronically all individual tax returns prepared by that tax preparer, for
that taxable year and each subsequent taxable year.� An individual income tax
preparer may not charge a separate fee to the taxpayer for filing a return
using the department's electronic filing program.� This subsection does not
apply if the taxpayer elects to have the return filed on paper or if the return
cannot be filed electronically for reasons outside of the tax preparer's
control.
F. Fiduciary returns, partnership returns,
withholding returns and corporate returns shall be filed electronically for
taxable years beginning from and after December 31, 2019, or when the
department establishes an electronic filing program, whichever is
later. Any person who is required to file electronically pursuant to
this subsection may apply to the director, on a form prescribed by the
department, for an annual waiver from the electronic filing requirement.� The
director may grant the waiver, which may be renewed for one subsequent year, if
any of the following applies:
1. The taxpayer has no computer.
2. The taxpayer has no internet access.
3. Any other circumstance considered to be worthy by
the director exists.
G. A waiver is not required if the return cannot be
electronically filed for reasons beyond the taxpayer's control, including
situations in which the taxpayer was instructed by either the internal revenue
service or the department of revenue to file by paper. END_STATUTE
Sec. 25. Section 43-1022, Arizona Revised Statutes, is amended to read:
START_STATUTE43-1022. Subtractions from Arizona gross income
In computing Arizona adjusted
gross income, the following amounts shall be subtracted from Arizona gross
income:
1. The amount of exemptions allowed by section 43-1023.
2. Benefits,
annuities and pensions in an amount totaling not more than $2,500 received from
one or more of the following:
(a) The United States
government service retirement and disability fund, the United States foreign
service retirement and disability system and any other retirement system or
plan established by federal law, except retired or retainer pay of the
uniformed services of the United States that qualifies for a subtraction under
paragraph 26 of this section.
(b) The Arizona state retirement system, the
corrections officer retirement plan, the public safety personnel retirement
system, the elected officials' retirement plan, an optional retirement program
established by the Arizona board of regents under section 15-1628, an
optional retirement program established by a community college district board
under section 15-1451 or a retirement plan established for employees of a
county, city or town in this state.
3. A beneficiary's share of the fiduciary adjustment
to the extent that the amount determined by section 43-1333 decreases the
beneficiary's Arizona gross income.
4. Interest income received on obligations of the
United States, minus any interest on indebtedness, or other related expenses,
and deducted in arriving at Arizona gross income, that were incurred or
continued to purchase or carry such obligations.
5. The excess of a partner's share of income
required to be included under section 702(a)(8) of the internal revenue code
over the income required to be included under chapter 14, article 2 of this
title.
6. The excess of a partner's share of partnership
losses determined pursuant to chapter 14, article 2 of this title over the
losses allowable under section 702(a)(8) of the internal revenue code.
7. The amount allowed by section 43-1025 for
contributions during the taxable year of agricultural crops to charitable
organizations.
8. The portion of any wages or salaries paid or
incurred by the taxpayer for the taxable year that is equal to the amount of
the federal work opportunity credit, the empowerment zone employment credit,
the credit for employer paid social security taxes on employee cash tips and
the Indian employment credit that the taxpayer received under sections 45A,
45B, 51(a) and 1396 of the internal revenue code.
9. The amount of exploration expenses that is
determined pursuant to section 617 of the internal revenue code, that has been
deferred in a taxable year ending before January 1, 1990 and for which a
subtraction has not previously been made. The subtraction shall be
made on a ratable basis as the units of produced ores or minerals discovered or
explored as a result of this exploration are sold.
10. The amount included in federal adjusted gross
income pursuant to section 86 of the internal revenue code, relating to
taxation of social security and railroad retirement benefits.
11. To the extent not already excluded from Arizona
gross income under the internal revenue code, compensation received for active
service as a member of the reserves, the national guard or the armed forces of
the United States, including compensation for service in a combat zone as
determined under section 112 of the internal revenue code.
12. The amount of unreimbursed medical and hospital
costs, adoption counseling, legal and agency fees and other nonrecurring costs
of adoption.� The subtraction under this paragraph may be taken for the costs
that are described in this paragraph and that are incurred in prior years, but
the subtraction may be taken only in the year during which the final adoption
order is granted.� The amount subtracted may not exceed:
(a) In taxable years beginning before December 31,
2025, $3,000. In the case of a husband and wife who file separate returns, the
subtraction may be taken by either taxpayer or may be divided between them, but
the total subtractions allowed both husband and wife may not exceed $3,000.�
(b) In taxable years beginning from and after
December 31, 2025, $5,000 for a single individual or head of household.
(c) For taxable years beginning from and after
December 31, 2025, $10,000 for a married couple filing a joint return.� In the
case of a husband and wife who file separate returns, the subtraction may be
taken by either taxpayer or may be divided between them, but the total
subtractions allowed both husband and wife may not exceed $10,000.�
13. The amount authorized by section 43-1027
for the taxable year relating to qualified wood stoves, wood fireplaces or gas
fired fireplaces.
14. The amount by which a net operating loss
carryover or capital loss carryover allowable pursuant to section 43-1029,
subsection F exceeds the net operating loss carryover or capital loss carryover
allowable pursuant to section 1341(b)(5) of the internal revenue code.
15. Any amount of qualified educational expenses
that is distributed from a qualified state tuition program determined pursuant
to section 529 of the internal revenue code and that is included in income in
computing federal adjusted gross income.
16. Any item of income resulting from an installment
sale that has been properly subjected to income tax in another state in a
previous taxable year and that is included in Arizona gross income in the
current taxable year.
17. For property placed in service:
(a) In taxable years beginning before December 31,
2012, an amount equal to the depreciation allowable pursuant to section 167(a)
of the internal revenue code for the taxable year computed as if the election
described in section 168(k) of the internal revenue code had been made for each
applicable class of property in the year the property was placed in service.
(b) In taxable years beginning from and after
December 31, 2012 through December 31, 2013, an amount determined in the year
the asset was placed in service based on the calculation in subdivision (a) of
this paragraph. In the first taxable year beginning from and after
December 31, 2013, the taxpayer may elect to subtract the amount necessary
to make the depreciation claimed to date for the purposes of this title the
same as it would have been if subdivision (c) of this paragraph had applied for
the entire time the asset was in service. Subdivision (c) of this
paragraph applies for the remainder of the asset's life. If the
taxpayer does not make the election under this subdivision, subdivision (a) of
this paragraph applies for the remainder of the asset's life.
(c) In taxable years beginning from and after
December 31, 2013 through December 31, 2015, an amount equal to the
depreciation allowable pursuant to section 167(a) of the internal revenue code
for the taxable year as computed as if the additional allowance for
depreciation had been ten percent of the amount allowed pursuant to section
168(k) of the internal revenue code.
(d) In taxable years beginning from and after
December 31, 2015 through December 31, 2016, an amount equal to the
depreciation allowable pursuant to section 167(a) of the internal revenue code
for the taxable year as computed as if the additional allowance for
depreciation had been fifty-five percent of the amount allowed pursuant
to section 168(k) of the internal revenue code.
(e) In taxable years beginning from and after
December 31, 2016, an amount equal to the depreciation allowable pursuant to
section 167(a) of the internal revenue code for the taxable year as computed as
if the additional allowance for depreciation had been the full amount allowed
pursuant to section 168(k) of the internal revenue code.
18. With respect to property that is sold or
otherwise disposed of during the taxable year by a taxpayer that complied with
section 43-1021, paragraph 11 with respect to that property, the amount
of depreciation that has been allowed pursuant to section 167(a) of the
internal revenue code to the extent that the amount has not already reduced
Arizona taxable income in the current or prior taxable years.
19. The amount contributed during the taxable year
to college savings plans established pursuant to section 529 of the internal
revenue code on behalf of the designated beneficiary to the extent that the
contributions were not deducted in computing federal adjusted gross income.�
The amount subtracted may not exceed:
(a) $2,000 per beneficiary for a single individual
or a head of household.
(b) $4,000 per beneficiary for a married couple
filing a joint return. In the case of a husband and wife who file
separate returns, the subtraction may be taken by either taxpayer or may be
divided between them, but the total subtractions allowed both husband and wife
may not exceed $4,000 per beneficiary.
20. The portion of the net operating loss
carryforward that would have been allowed as a deduction in the current year
pursuant to section 172 of the internal revenue code if the election described
in section 172(b)(1)(H) of the internal revenue code had not been made in the
year of the loss that exceeds the actual net operating loss carryforward that
was deducted in arriving at federal adjusted gross income.� This subtraction
only applies to taxpayers who made an election under section 172(b)(1)(H) of
the internal revenue code as amended by section 1211 of the American recovery
and reinvestment act of 2009 (P.L. 111-5) or as amended by section
13 of the worker, homeownership, and business assistance act of 2009
(P.L. 111-92).
21. For taxable years beginning from and after
December 31, 2013, the amount of any net capital gain included in federal
adjusted gross income for the taxable year derived from investment in a
qualified small business as determined by the Arizona commerce authority
pursuant to section 41-1518.
22. An amount of any net long-term capital gain
included in federal adjusted gross income for the taxable year that is derived
from an investment in an asset acquired after December 31, 2011, as follows:
(a) For taxable years beginning from and after
December 31, 2012 through December 31, 2013, ten percent of the net long-term
capital gain included in federal adjusted gross income.
(b) For taxable years beginning from and after
December 31, 2013 through December 31, 2014, twenty percent of the net
long-term capital gain included in federal adjusted gross income.
(c) For taxable years beginning from and after
December 31, 2014, twenty-five percent of the net long-term capital gain
included in federal adjusted gross income.� For the purposes of this paragraph,
a transferee that receives an asset by gift or at the death of a transferor is
considered to have acquired the asset when the asset was acquired by the
transferor. If the date an asset is acquired cannot be verified, a
subtraction under this paragraph is not allowed.
23. If an individual is not claiming itemized
deductions pursuant to section 43-1042, the amount of premium costs for
long-term care insurance, as defined in section 20-1691.
24. The amount of eligible access expenditures paid
or incurred during the taxable year to comply with the requirements of the
Americans with disabilities act of 1990 (P.L. 101-336) or title 41,
chapter 9, article 8 as provided by section 43-1024.
25. For taxable years beginning from and after
December 31, 2017, the amount of any net capital gain included in Arizona gross
income for the taxable year that is derived from the exchange of one kind of
legal tender for another kind of legal tender. For the purposes of
this paragraph:
(a) "Legal tender" means a medium of
exchange, including specie, that is authorized by the United States
Constitution or Congress to pay debts, public charges, taxes and dues.
(b) "Specie" means coins having precious
metal content.
26. Benefits, annuities and pensions received as
retired or retainer pay of the uniformed services of the United States in
amounts as follows:
(a) For taxable years through December 31, 2018, an
amount totaling not more than $2,500.
(b) For
taxable years beginning from and after December 31, 2018 through December 31,
2020, an amount totaling not more than $3,500.
(c) For taxable years beginning from and after
December 31, 2020, the full amount received.
27. For taxable years beginning from and after
December 31, 2020, the amount contributed during the taxable year to an
achieving a better life experience account established pursuant to section 529A
of the internal revenue code on behalf of the designated beneficiary to the
extent that the contributions were not deducted in computing federal adjusted
gross income.� The amount subtracted may not exceed:
(a) $2,000 per beneficiary for a single individual
or a head of household.
(b) $4,000
per beneficiary for a married couple filing a joint return.� In the case of a
husband and wife who file separate returns, the subtraction may be taken by
either taxpayer or may be divided between them, but the total subtractions allowed
both husband and wife may not exceed $4,000 per beneficiary.
28. For taxable years beginning from and after
December 31, 2020, Arizona small business gross income but only if an
individual taxpayer has elected to separately report and pay tax on the
taxpayer's Arizona small business adjusted gross income on the Arizona small
business income tax return.
29. To the extent not already excluded from Arizona
gross income under the internal revenue code, the value of virtual currency and
non-fungible tokens the taxpayer received pursuant to an airdrop at the
time of the airdrop. This paragraph may not be interpreted as
providing a subtraction for any appreciation in value that occurs from holding
the virtual currency after the initial receipt of the airdrop. For
the purposes of this paragraph:
(a) "Airdrop" means the receipt of virtual
currency through a means of distribution of virtual currency to the distributed
ledger addresses of multiple taxpayers.
(b) "Non-fungible token" has the
same meaning prescribed in section 43-1028.
(c) "Virtual currency" has the same
meaning prescribed in section 43-1028.
30. The amount allowed as a subtraction by section
43-1028 for gas fees not already included in the taxpayer's virtual
currency or non-fungible token basis.
31. for taxable years beginning from
and after december 31, 2024, To the extent not already excluded from Arizona
gross income under the internal revenue code, the amount of qualified tips
received during the taxable year that is deducted under section 224 of the
internal revenue code.
32. for taxable years beginning from
and after december 31, 2024, To the extent not already excluded from Arizona
gross income under the internal revenue code, the amount of qualified overtime
compensation received during the taxable year that is deducted under section
225 of the internal revenue code.
33. For taxable years beginning from
and after December 31, 2025, to the extent not already excluded from Arizona
gross income under the internal revenue code, the amount of a distribution from
an account established pursuant to section 530A of the internal revenue code.
34. for taxable years beginning from
and after december 31, 2025, To the extent not already excluded from Arizona
gross income under the internal revenue code, the amount of child and dependent
care expenses for a qualifying individual under section 21 of the internal
revenue code paid or incurred by the taxpayer for the taxable year that exceeds
the amount of the federal credit that the taxpayer received under section 21 of
the internal revenue code.
35. for taxable years beginning from
and after december 31, 2025, The amount authorized by section 43-1030 for
the taxable year relating to distributions from a pension or retirement
account.
36. for taxable years beginning from
and after December 31, 2025, the amount totaling not more than $6,000 that is
contributed during the taxable year to A retirement account to the extent that
the contributions were not deducted in computing federal adjusted gross
income. The total amount subtracted under this paragraph and section
43-1030 may not exceed $6,000 for a taxpayer who is a single person, a
married person filing separately or a head of household or $12,000 for a
married couple filing a joint return. For the purposes of this
paragraph, "Retirement account" means A Roth individual retirement
account under section 408A of the internal revenue code.
37. For
taxable years beginning from and after December 31, 2024 through December 31,
2025, to the extent not already excluded from Arizona gross income under the
internal revenue code, the amount deducted for a qualified individual under
section 151(d)(5)(C) of the internal revenue code.
38. For taxable years beginning from
and after December 31, 2024 through December 31, 2025, to the extent not
already excluded from Arizona gross income under the internal revenue code, the
amount deducted for qualified passenger vehicle loan interest
under section 163(h)(4) of the internal revenue code. END_STATUTE
Sec. 26. Title 43, chapter 10, article 3,
Arizona Revised Statutes, is amended by adding section 43-1030, to read:
START_STATUTE43-1030. Subtraction for distributions from a pension or retirement
account; limits; definitions
A. for taxable years beginning from
and after December 31, 2025, in computing Arizona adjusted gross income, a
taxpayer who is sixty years of age or older during the taxable year may
subtract from Arizona gross income, to the extent not already excluded from
Arizona gross income pursuant to section 43-1022 or the internal revenue code,
an amount totaling not more than $6,000 received from a distribution to a
qualified individual from a pension or retirement account.
B. For a taxpayer whose Arizona gross
income is $75,000 or more for a taxpayer who is a single person, a married
person filing separately or a head of household or $150,000 or more for a
married couple filing a joint return, The subtraction amount prescribed by
subsection A of this section shall be reduced by six percent of the amount that
the taxpayer's income exceeds the amount prescribed by this subsection for the
taxpayer's filing status, but not below zero.
C. The total amount subtracted under
this section and section 43-1022, paragraph 36 may not exceed $6,000 for
a taxpayer who is a single person, a married person filing separately or a head
of household or $12,000 for a married couple filing a joint return.
D. For the purposes of this section:
1. "Pension" means either
of the following:
(a) A defined
benefit plan authorized under the internal revenue code paid to an individual.
(b) Periodic,
fixed amount retirement payments made by the United States military, the United
States civil service or a state or local government or a private employer to
former employees and surviving spouses of former employees for prior services
performed.
2. "Qualified individual"
means:
(a) The
taxpayer, if the taxpayer has attained sixty years of age before the close of
the taxable year.
(b) In the case
of a joint return, the taxpayer's spouse, if the taxpayer's spouse has attained
sixty years of age before the close of the taxable year.
3. "Retirement account"
includes:
(a) A qualified
retirement plan under sections 401 and 403 of the internal revenue code and an
eligible deferred compensation plan under section 457 of the internal revenue
code.
(b) An
individual retirement account under section 408 of the internal revenue code,
including a simplified employee pension as defined in section 408(k) of the internal revenue code and a simple retirement account as
defined in section 408(p) of the internal revenue code. END_STATUTE
Sec. 27. Section 43-1041, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1041. Optional standard deduction
A. A taxpayer may elect to take a standard deduction
as follows:
1. In the case of a single person or a
married person filing separately, the standard deduction is $12,200, subject to
subsection H of this section.
2. In the case of a single person who
is a head of a household, the standard deduction is $18,350, subject to
subsection H of this section.
3. In the case of a married couple
filing a joint return, the standard deduction is $24,400, subject to subsection
H of this section. The amount of the standard deduction
is the amount of the federal basic standard deduction determined pursuant to
section 63 of the internal revenue code for the taxpayer's filing status.
B. The standard deduction provided for in subsection
A of this section is in lieu of all itemized deductions allowed by section 43-1042,
which are to be subtracted from Arizona adjusted gross income in computing
taxable income.
C. The standard deduction is allowed if the taxpayer
so elects. The election is made by the taxpayer claiming on the tax
return the amount provided for in this section in lieu of the itemized
deductions allowed under section 43-1042. Electing to file a
short form return or a simplified return that does not allow itemized
deductions to be claimed is considered to be an election to claim the standard
deduction.
D. In the case of a husband and wife, the standard
deduction provided for in subsection A of this section is not allowed to either
if the taxable income of one of the spouses is determined without regard to the
standard deduction.
E. The standard deduction provided for by subsection
A of this section is not allowed in the case of a taxable year of less than
twelve months on account of a change in the accounting period.
F. Except as provided in subsection G of this
section, a change of an election to take, or not to take, the standard
deduction for any taxable year may be made after the filing of the return for
that year.
G. A taxpayer is not allowed to change an election
to take, or not to take, the standard deduction if:
1. The spouse of the taxpayer filed a separate
return for any taxable year corresponding, for the purposes of subsection D of
this section, to the taxable year of the taxpayer unless both of the following
apply:
(a) The spouse makes a change of election with
respect to the standard deduction for the taxable year covered in the separate
return consistent with the change of election sought by the taxpayer.
(b) The taxpayer and spouse consent in writing to
the assessment, within such a period as may be agreed on with the department,
of any deficiency, to the extent attributable to the change of election, even
though at the time of filing the consent the assessment of the deficiency would
otherwise be prevented by the operation of any law or rule of law.
2. The tax liability of the taxpayer or the
taxpayer's spouse for the taxable year has been compromised.
H. For each taxable year beginning
from and after December 31, 2019, the department shall adjust the dollar
amounts prescribed by subsection A, paragraphs 1, 2 and 3 of this section for
inflation in the same manner in which the federal basic standard deduction is
adjusted for inflation pursuant to section 63 of the internal revenue code.
I. For taxable years beginning from
and after December 31, 2018,
H. The standard deduction
allowed under subsection A of this section shall be increased as
follows:
1. For taxable years beginning from
and after December 31, 2018 through December 31, 2025, by the amount
equal to twenty-five percent of the total amount of a taxpayer's
charitable deductions that would have been allowed if the taxpayer elected to
claim itemized deductions under section 43-1042 rather than elect the
standard deduction. For taxable years beginning from and after
December 31, 2021 through December 31, 2025, the
department shall adjust the percentage prescribed in this subsection paragraph according to the average annual change in the
metropolitan Phoenix consumer price index published by the United States
department of labor, bureau of labor statistics, except that the adjusted
percentage may not exceed one hundred percent. The revised
percentage shall be raised to the nearest whole percent and may not be revised
below the amounts prescribed in the prior taxable year.
2. For taxable years beginning from
and after December 31, 2025, by an amount equal to the total amount of a
taxpayer's charitable contributions as defined in section 170(c) of the internal revenue code. The increase allowed by
this paragraph may not exceed:
(a) In the case
of a single person or a married person filing separately, $1,000.
(b) In the case
of a married couple filing a joint return, $2,000. END_STATUTE
Sec. 28. Section 43-1042, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1042. Itemized deductions
A. Except as provided by subsections B, and C and D of
this section, at the election of the taxpayer, and in lieu of the standard
deduction allowed by section 43-1041, in computing taxable income the
taxpayer may take the amount of itemized deductions allowable for the taxable
year pursuant to subtitle A, chapter 1, subchapter B, parts VI and VII, but
subject to the limitations limits prescribed
by sections 67, 68 and 274 of the internal revenue code.
B. In lieu of the amount of the federal itemized
deduction for expenses paid for medical care allowed under section 213 of the
internal revenue code, the taxpayer may deduct the full amount of such
expenses.
C. A taxpayer shall not claim both a deduction
provided by this section and a credit allowed by this title with respect to the
same charitable contributions. This subsection applies to any contribution for
which a credit is allowed by this title even if the contribution is treated as
a payment of state income tax.
D. for taxable years beginning from
and after december 31, 2025, In lieu of the amount of the federal itemized
deduction for state and local taxes allowed under section 164(b)(7) of the internal revenue code, the taxpayer may deduct up to
$10,000 of that amount for such state and local taxes.
D. E. The
taxpayer may add any interest expense paid by the taxpayer for the taxable year
that is equal to the amount of federal credit for interest on certain home
mortgages allowed by section 25 of the internal revenue code.END_STATUTE
Sec. 29. Section 43-1073.01, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1073.01. Dependent tax credit
A. A credit is allowed against the taxes imposed by
this title for a taxable year for each dependent of a taxpayer as provided by
this section.
B. For taxpayers whose federal adjusted gross income
is less than $200,000 for a taxpayer who is a single person, a married person
filing separately or a head of household or is less than $400,000 for a married
couple filing a joint return, the amount of the credit is:
1. $100 $125 for
each dependent who is under seventeen years of age at the end of the taxable
year.
2. $25 for each dependent who is at least seventeen
years of age at the end of the taxable year.
C. For taxpayers whose federal adjusted gross income
is $200,000 or more for a taxpayer who is a single person, a married person
filing separately or a head of household or is $400,000 or more for a married
couple filing a joint return, the amount of the credit is:
1. $100 $125 minus
five percent for each $1,000, or fraction thereof, by which the taxpayer's
federal adjusted gross income exceeds the applicable threshold provided in this
subsection for each dependent who is under seventeen years of age at the end of
the taxable year.
2. $25 minus five percent for each $1,000, or
fraction thereof, by which the taxpayer's federal adjusted gross income exceeds
the applicable threshold provided in this subsection for each dependent who is
at least seventeen years of age at the end of the taxable year.
D. In the case of a nonresident or part-year
resident taxpayer, the credit allowed under this section is allowed in the
percentage that the taxpayer's Arizona gross income is of the federal adjusted
gross income. END_STATUTE
Sec. 30. Repeal
Section 43-1074, Arizona Revised
Statutes, is repealed.
Sec. 31. Section 43-1074.01, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1074.01. Credit for increased research activities
A. A credit is allowed against the taxes imposed by
this title in an amount determined pursuant to section 41 of the internal
revenue code, except that:
1. The amount of the credit is based on the excess,
if any, of the qualified research expenses for the taxable year over the base
amount as defined in section 41(c) of the internal revenue code and is computed
as follows:
(a) If the excess is $2,500,000 or less:
(i) For taxable years beginning before December 31,
2030, the credit is equal to twenty-four percent of that amount.
(ii) For taxable years beginning from and after
December 31, 2030, the credit is equal to twenty percent of that amount.
(b) If the excess is over $2,500,000:
(i) For taxable years beginning before December 31,
2030, the credit is equal to $600,000 plus fifteen percent of any amount
exceeding $2,500,000.
(ii) For taxable years beginning from and after
December 31, 2030, the credit is equal to $500,000 plus eleven percent of
any amount exceeding $2,500,000.
(c) For taxable years beginning from and after
December 31, 2011, an additional credit amount is allowed if the taxpayer made
basic research payments during the taxable year to a university under the
jurisdiction of the Arizona board of regents. The additional credit
amount is equal to ten percent of the excess, if any, of the basic research
payments over the qualified organization base period amount for the taxable
year. The department shall not allow credit amounts under this
subdivision and section 43-1168, subsection A, paragraph 1, subdivision
(d) that exceed, in the aggregate, a combined total of $10,000,000 in any
calendar year. Subject to that limit, on application by the
taxpayer, the department shall certify credit amounts under this subdivision
and section 43-1168, subsection A, paragraph 1, subdivision (d) based on
priority placement established by the date that the taxpayer filed the
application. For taxable years beginning from and after December 31, 2014, any
basic research payments used to determine the additional credit under this
subdivision must first receive certification from the Arizona commerce
authority pursuant to section 41-1507.01. The additional
credit amount under this subdivision shall not exceed the amount allowed based
on actual basic research payments or the department's certification, whichever
is less. If an application, if certified in full, would exceed the
$10,000,000 limit, the department shall certify only an amount within that
limit. After the limit is attained, the department shall deny any
subsequent applications regardless of whether other certified amounts are not
actually claimed as a credit or other taxpayers fail to qualify to actually
claim certified amounts.� Notwithstanding subsections subsection B and C of this section, any
amount of the additional credit under this subdivision that exceeds the taxes
otherwise due under this title is not refundable, but may be carried forward to
the next five consecutive taxable years. For the purposes of this
subdivision, "basic research payments" and "qualified
organization base period amount" have the same meanings prescribed by
section 41(e) of the internal revenue code without regard to whether the
taxpayer is or is not a corporation.
2. Qualified research includes only research
conducted in this state, including research conducted at a university in this
state and paid for by the taxpayer.
3. If two or more taxpayers, including partners in a
partnership and shareholders of an S corporation, as defined in section 1361 of
the internal revenue code, share in the eligible expenses, each taxpayer is
eligible to receive a proportionate share of the credit.
4. The credit under this section applies only to
expenses incurred from and after December 31, 2000.
5. The termination provisions of section 41 of the
internal revenue code do not apply.
B. Except as provided by subsection C
of this section, If the allowable credit under this section exceeds the
taxes otherwise due under this title on the claimant's income, or if there are
no taxes due under this title, the amount of the credit that is claimed for
taxable years beginning before January 1, 2022 and that is not used to offset
taxes may be carried forward to the next fifteen consecutive taxable years and
the amount of the credit that is claimed for taxable years beginning from and
after December 31, 2021 and that is not used to offset taxes may be carried
forward to the next ten consecutive taxable years. The amount of
credit carryforward from taxable years beginning from and after December 31,
2002 that may be used in any taxable year may not exceed the taxpayer's tax
liability under this title minus the credit under this section for the current
taxable year's qualified research expenses. A taxpayer
who carries forward any amount of credit under this subsection may not
thereafter claim a refund of any amount of the credit under subsection C of
this section.
C. For taxable years beginning from
and after December 31, 2009, if a taxpayer who claims a credit under this
section employs fewer than one hundred fifty persons in the taxpayer's trade or
business and if the allowable credit under this section exceeds the taxes
otherwise due under this title on the claimant's income, or if there are no
taxes due under this title, in lieu of carrying the excess amount of credit
forward to subsequent taxable years under subsection B of this section, the
taxpayer may elect to receive a refund as follows:
1. The taxpayer must apply to the
Arizona commerce authority for qualification for the refund pursuant to section
41-1507 and submit a copy of the authority's certificate of qualification
to the department of revenue with the taxpayer's income tax return.
2. The amount of the refund is limited
to seventy-five percent of the amount by which the allowable credit under this
section exceeds the taxpayer's tax liability under this title for the taxable
year.� The remainder of the excess amount of the credit is waived.
3. The refund shall be paid in the
manner prescribed by section 42-1118.
4. The refund is subject to setoff
under section 42-1122.
5. If the department determines that a
credit refunded pursuant to this subsection is incorrect or invalid, the excess
credit issued may be treated as a tax deficiency pursuant to section 42-1108.END_STATUTE
Sec. 32. Repeal
Sections 43-1083 and 43-1083.02,
Arizona Revised Statutes, are repealed.
Sec. 33. Section 43-1083.03, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1083.03. Credit for qualified facilities
A. For taxable years beginning from and after
December 31, 2012 through December 31, 2030, a credit is allowed against the
taxes imposed by this title for qualifying investment and employment in
expanding or locating a qualified facility in this state. To qualify
for the credit, after June 30, 2012 the taxpayer must invest in a new
qualified facility or expand an existing qualified facility in this state and
produce new full-time employment positions where the job duties are
associated with the location of the qualifying investment. The
taxpayer must meet the employee compensation and employee health benefit
requirements prescribed by section 41-1512.
B. The amount of the credit is computed as follows:
1. Ten percent of the lesser of:
(a) The total qualifying investment in the qualified
facility.
(b) Either:
(i) If the total qualifying investment is less than
$2,000,000,000, $200,000 for each net new full-time employment position
that has duties associated with the qualified facility.
(ii) If the total qualifying investment is
$2,000,000,000 or more, $300,000 for each net new full-time employment
position that has duties associated with the qualified facility.
2. The amount of the credit shall not exceed the
postapproval amount determined by the Arizona commerce authority under section
41-1512, subsection P.
3. Subject to subsections G and J
I of this section:
(a) The credit amount computed under paragraph 1 of
this subsection is apportioned, and the taxpayer shall claim the credit in five
equal annual installments in each of five consecutive taxable years.
(b) The taxpayer may claim all five annual
installments of a credit that was preapproved before January 1, 2031 by the
Arizona commerce authority notwithstanding any intervening repeal or other
termination of the credit.
C. To claim the credit the taxpayer must:
1. Conduct a business that qualifies under section
41-1512.
2. Receive preapproval and postapproval from the
Arizona commerce authority pursuant to section 41-1512.
3. Submit to the department a copy of a current and
valid certification of qualification issued to the taxpayer by the Arizona
commerce authority.
D. To be counted for the purposes of the credit, an
employee must have been employed with job duties associated with the qualified
facility for at least ninety days during the taxable year in a permanent full-time
employment position of at least one thousand seven hundred fifty hours per
year.� An employee who is hired during the last ninety days of the taxable year
shall be considered a new employee during the next taxable year. To
be counted for the purposes of the credit during the first taxable year of
employment, the employee must not have been previously employed by the taxpayer
within twelve months before the current date of hire.� The terms of employment
must comply in all cases with the requirements of section 41-1512 and be
certified by the Arizona commerce authority.
E. Co-owners of a business, including partners
in a partnership, members of a limited liability company and shareholders of an
S corporation, as defined in section 1361 of the internal revenue code,
may each claim only the pro rata share of the credit allowed under this section
based on the ownership interest. The total of the credits allowed
all owners of the business may not exceed the amount that would have been
allowed for a sole owner of the business.
F. If the allowable tax credit for a taxable year
exceeds the income taxes otherwise due on the claimant's income, or if there
are no state income taxes due on the claimant's income, the amount of the claim
not used as an offset against income taxes shall be paid to the taxpayer in the
same manner as a refund under section 42-1118. Refunds made
pursuant to this subsection are subject to setoff under section 42-1122.�
If the department determines that a refund is incorrect or invalid, the excess
refund may be treated as a tax deficiency pursuant to section 42-1108.
G. Except as provided by subsection H
of this section, If, within five taxable years after first receiving a
credit pursuant to this section, the certification of qualification of a
business is terminated or revoked under section 41-1512, other than for
reasons beyond the control of the business as determined by the Arizona
commerce authority, the taxpayer is disqualified from credits under this
section in subsequent taxable years.� On a determination that the taxpayer has
committed fraud or relocated outside of this state within five taxable years
after first receiving a credit pursuant to this section, the credits allowed
the taxpayer in all taxable years pursuant to this section are subject to
recapture pursuant to this subsection. This subsection applies only
in the case of the termination or revocation of a certification of
qualification under section 41-1512. This subsection does not
apply if, in any taxable year, a taxpayer otherwise does not qualify for or
fails to claim the credit under this section. The recapture of
credits is computed by increasing the amount of taxes imposed in the year
following the year of termination or revocation by the full amount of all
credits previously allowed under this section.
H. A taxpayer who claims a credit
under section 43-1074 may not claim a credit under this section with
respect to the same full-time employment positions.
I. H. The
department of revenue shall adopt rules and prescribe forms and procedures as
necessary for the purposes of this section. The department of
revenue and the Arizona commerce authority shall collaborate in adopting rules
as necessary to avoid duplication and contradictory requirements while
accomplishing the intent and purposes of this section.
J. I. Each
taxable year after the postapproval of the credit under section 41-1512,
subsection P, when the taxpayer files the taxpayer's income tax return, the
taxpayer shall:
1. Notify the department, on a form prescribed by
the department, of any full-time employment position for which a credit
was claimed under this section and that was vacant for more than one hundred
fifty days after the date the full-time employment position was
originally filled to the end of that taxable year.� The period that a full-time
employment position was vacant may not include the period before the full-time
employment position was filled for the first time.
2. Reduce the portion of the credit claimed for the
taxable year pursuant to subsection B, paragraph 3 of this section by $4,000
for each full-time employment position reported pursuant to paragraph 1
of this subsection. END_STATUTE
Sec. 34. Section 43-1121, Arizona Revised Statutes, is amended to read:
START_STATUTE43-1121. Additions to Arizona gross income; corporations
In computing Arizona taxable
income for a corporation, the following amounts shall be added to Arizona gross
income:
1. The amount of interest income received on
obligations of any state, territory or possession of the United States, or any
political subdivision thereof, located outside this state, reduced, for taxable
years beginning from and after December 31, 1996, by the amount of any interest
on indebtedness and other related expenses that were incurred or continued to
purchase or carry those obligations and that are not otherwise deducted or
subtracted in arriving at Arizona gross income.
2. The excess of a partner's share of partnership
taxable income required to be included under chapter 14, article 2 of this
title over the income required to be reported under section 702(a)(8) of the
internal revenue code.
3. The excess of a partner's share of partnership
losses determined pursuant to section 702(a)(8) of the internal revenue code
over the losses allowable under chapter 14, article 2 of this title.
4. The amount of any depreciation allowance allowed
pursuant to section 167(a) of the internal revenue code to the extent not
previously added.
5. The amount of dividend income received from
corporations and allowed as a deduction pursuant to sections 243, 245, 245A and
250(a)(1)(B) of the internal revenue code.
6. Taxes that are based on income paid to states,
local governments or foreign governments and that were deducted in computing
federal taxable income.
7. Expenses and interest relating to tax-exempt
income on indebtedness incurred or continued to purchase or carry obligations
the interest on which is wholly exempt from the tax imposed by this title.�
Financial institutions, as defined in section 6-101, shall be governed by
section 43-961, paragraph 2.
8. Commissions, rentals and other amounts paid or
accrued to a domestic international sales corporation controlled by the payor
corporation if the domestic international sales corporation is not required to
report its taxable income to this state because its income is not derived from
or attributable to sources within this state. If the domestic
international sales corporation is subject to article 4 of this chapter, the
department shall prescribe by rule the method of determining the portion of the
commissions, rentals and other amounts that are paid or accrued to the
controlled domestic international sales corporation and that shall be deducted
by the payor.� For the purposes of this paragraph, "control" means
direct or indirect ownership or control of fifty percent or more of the voting
stock of the domestic international sales corporation by the payor corporation.
9. The amount of net operating loss taken pursuant
to section 172 of the internal revenue code.
10. The amount of exploration expenses determined
pursuant to section 617 of the internal revenue code to the extent that they
exceed $75,000 and to the extent that the election is made to defer those
expenses not in excess of $75,000.
11. Amortization of costs incurred to install
pollution control devices and deducted pursuant to the internal revenue code or
the amount of deduction for depreciation taken pursuant to the internal revenue
code on pollution control devices for which an election is made pursuant to
section 43-1129.
12. The amount of depreciation or amortization of
costs of child care facilities deducted pursuant to section 167 or 188 of the
internal revenue code for which an election is made to amortize pursuant to
section 43-1130.
13. The loss of an insurance company that is exempt
under section 43-1201 to the extent that it is included in computing
Arizona gross income on a consolidated return pursuant to section 43-947.
14. The amount by which the depreciation or
amortization computed under the internal revenue code with respect to property
for which a credit was taken under section 43-1170 exceeds the amount of
depreciation or amortization computed pursuant to the internal revenue code on
the Arizona adjusted basis of the property.
15. The amount by which the adjusted basis computed
under the internal revenue code with respect to property that is
pollution control equipment for which a credit was claimed
under section 43-1170 taken before taxable year
2026 and that is sold or otherwise disposed of during the taxable year
exceeds the adjusted basis of the property computed under section
43-1170 the section in which the credit was
taken.
16. The deduction referred to in section 1341(a)(4)
of the internal revenue code for restoration of a substantial amount held under
a claim of right.
17. The amount by which a capital loss carryover
allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds
the capital loss carryover allowable pursuant to section 43-1130.01,
subsection F.
18. Any wage expenses deducted pursuant to the internal
revenue code for which a credit is claimed under section 43-1175 and
representing net increases in qualified employment positions for employment of
temporary assistance for needy families recipients.
19. Any amount of expenses that were deducted
pursuant to the internal revenue code and for which a credit is claimed under
section 43-1178.
20. Any amount deducted pursuant to section 170 of
the internal revenue code representing contributions to a school tuition
organization for which a credit is claimed under section 43-1183 or 43-1184.
21. If a subtraction is or has been taken by the
taxpayer under section 43-1124, in the current or a prior taxable year
for the full amount of eligible access expenditures paid or incurred to comply
with the requirements of the Americans with disabilities act of 1990
(P.L. 101-336) or title 41, chapter 9, article 8, any amount of
eligible access expenditures that is recognized under the internal revenue
code, including any amount that is amortized according to federal amortization
schedules, and that is included in computing Arizona taxable income for the
current taxable year.
22. For taxable years beginning from and after
December 31, 2017, the amount of any net capital loss included in Arizona gross
income for the taxable year that is derived from the exchange of one kind of
legal tender for another kind of legal tender. For the purposes of
this paragraph:
(a) "Legal tender" means a medium of
exchange, including specie, that is authorized by the United States
Constitution or Congress to pay debts, public charges, taxes and dues.
(b) "Specie" means coins having precious
metal content.
23. The amount of any deduction that is claimed in
computing Arizona gross income and that represents a donation of a school site
for which a credit is claimed under section 43-1181.
24. The amount of any motion picture production
costs that was deducted pursuant to the internal revenue code for which a tax
credit is claimed under section 43-1165.� END_STATUTE
Sec. 35. Section 43-1122, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1122. Subtractions from Arizona gross income; corporations
In computing Arizona taxable income for a corporation, the
following amounts shall be subtracted from Arizona gross income:
1. The excess of a partner's share of income
required to be included under section 702(a)(8) of the internal revenue code
over the income required to be included under chapter 14, article 2 of this
title.
2. The excess of a partner's share of partnership
losses determined pursuant to chapter 14, article 2 of this title over the
losses allowable under section 702(a)(8) of the internal revenue code.
3. The amount allowed by section 43-1025 for
contributions during the taxable year of agricultural crops to charitable
organizations.
4. The portion of any wages or salaries paid or
incurred by the taxpayer for the taxable year that is equal to the amount of
the federal work opportunity credit, the empowerment zone employment credit,
the credit for employer paid social security taxes on employee cash tips and
the Indian employment credit that the taxpayer received under sections 45A,
45B, 51(a) and 1396 of the internal revenue code.
5. With respect to property that is sold or
otherwise disposed of during the taxable year by a taxpayer that complied with
section 43-1121, paragraph 4 with respect to that property, the amount of
depreciation that has been allowed pursuant to section 167(a) of the internal
revenue code to the extent that the amount has not already reduced Arizona
taxable income in the current taxable year or prior taxable years.
6. With respect to a financial institution as
defined in section 6-101, expenses and interest relating to tax-exempt
income disallowed pursuant to section 265 of the internal revenue code.
7. Dividends received from another corporation owned
or controlled directly or indirectly by a recipient corporation. For
the purposes of this paragraph, "control" means direct or indirect
ownership or control of fifty percent or more of the voting stock of the payor
corporation by the recipient corporation. Dividends shall have the meaning
provided in section 316 of the internal revenue code. This
subtraction shall apply without regard to section 43-961, paragraph 2 and
article 4 of this chapter.
8. Interest income received on obligations of the
United States.
9. The amount of dividend income from foreign
corporations.� For the purposes of this paragraph, gross up income as described
in section 78 of the internal revenue code, global intangible low-taxed
the income as defined described in section 951A of the internal revenue code and
subpart F income as defined in section 952 of the internal revenue code shall
be considered foreign dividends.
10. The amount of net operating loss allowed by
section 43-1123.
11. The amount of any state income tax refunds
received that were included as income in computing federal taxable income.
12. The amount of expense recapture included in
income pursuant to section 617 of the internal revenue code for mine
exploration expenses.
13. The amount of deferred exploration expenses
allowed by section 43-1127.
14. The amount of exploration expenses related to
the exploration of oil, gas or geothermal resources, computed in the same
manner and on the same basis as a deduction for mine exploration pursuant to
section 617 of the internal revenue code. This computation is
subject to the adjustments contained in section 43-1121,
paragraph 10 and paragraphs 12 and 13 of this section relating to
exploration expenses.
15. The amortization of pollution control devices
allowed by section 43-1129.
16. The amount of amortization of the cost of child
care facilities pursuant to section 43-1130.
17. The amount of income from a domestic
international sales corporation required to be included in the income of its
shareholders pursuant to section 995 of the internal revenue code.
18. The income of an insurance company that is
exempt under section 43-1201 to the extent that it is included in
computing Arizona gross income on a consolidated return pursuant to section 43-947.
19. The amount by which a capital loss carryover
allowable pursuant to section 43-1130.01, subsection F exceeds the
capital loss carryover allowable pursuant to section 1341(b)(5) of the internal
revenue code.
20. An amount equal to the depreciation allowable
pursuant to section 167(a) of the internal revenue code for the taxable year
computed as if the election described in section 168(k)(7) of the internal
revenue code had been made for each applicable class of property in the year
the property was placed in service.
21. The amount of eligible access expenditures paid
or incurred during the taxable year to comply with the requirements of the
Americans with disabilities act of 1990 (P.L. 101-336) or title 41,
chapter 9, article 8 as provided by section 43-1124.
22. For taxable years beginning from and after
December 31, 2017, the amount of any net capital gain included in Arizona gross
income for the taxable year that is derived from the exchange of one kind of
legal tender for another kind of legal tender. For the purposes of
this paragraph:
(a) "Legal tender" means a medium of
exchange, including specie, that is authorized by the United States
Constitution or Congress to pay debts, public charges, taxes and dues.
(b) "Specie" means coins having precious
metal content.
23. With respect to a public service corporation
operating a water system or sewage disposal facility, the amount of monies or
property received as a contribution in aid of construction.� For the purposes
of this paragraph:
(a) "Contribution in aid of construction"
means any amount of monies or other property contributed to a public service
corporation that provides water or sewage disposal services to the extent that
the purpose of the contribution is to provide for expanding, improving or
replacing the public service corporation's water system or sewage disposal
facilities, including any amount of monies or other property contributed to a
public service corporation for a water system or sewage disposal facility
subject to a contingent obligation to repay the amount, in whole or in part, to
the contributor.
(b) "Public service corporation" means a
public service corporation as defined in article XV, section 2, Constitution of
Arizona, that is regulated by the corporation commission. END_STATUTE
Sec. 36. Repeal
Sections
43-1161 and 43-1164.03, Arizona Revised Statutes, are repealed.
Sec. 37. Section 43-1164.04, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1164.04. Credit for qualified facilities
A. For taxable years beginning from and after
December 31, 2012 through December 31, 2030, a credit is allowed against the
taxes imposed by this title for qualifying investment and employment in
expanding or locating a qualified facility in this state.� To qualify for the
credit, after June 30, 2012 the taxpayer must invest in a new qualified
facility or expand an existing qualified facility in this state and produce new
full-time employment positions where the job duties are associated with
the location of the qualifying investment.� The taxpayer must meet the employee
compensation and employee health benefit requirements prescribed by section 41-1512.
B. The amount of the credit is computed as follows:
1. Ten percent of the lesser of:
(a) The total qualifying investment in the qualified
facility.
(b) Either:
(i) If the total qualifying investment is less than
$2,000,000,000, $200,000 for each net new full-time employment position
that has job duties associated with the qualified facility.
(ii) If the total qualifying investment is
$2,000,000,000 or more, $300,000 for each net new full-time employment
position that has job duties associated with the qualified facility.
2. The amount of the credit shall not exceed the
postapproval amount determined by the Arizona commerce authority under section
41-1512, subsection P.
3. Subject to subsections G and J
I of this section:
(a) The credit amount computed under paragraph 1 of
this subsection is apportioned, and the taxpayer shall claim the credit in five
equal annual installments in each of five consecutive taxable years.
(b) The taxpayer may claim all five annual
installments of a credit that was preapproved before January 1, 2031 by the
Arizona commerce authority notwithstanding any intervening repeal or other
termination of the credit.
C. To claim the credit the taxpayer must:
1. Conduct a business that qualifies under section
41-1512.
2. Receive preapproval and postapproval from the
Arizona commerce authority pursuant to section 41-1512.
3. Submit to the department a copy of a current and
valid certification of qualification issued to the taxpayer by the Arizona
commerce authority.
D. To be counted for the purposes of the credit, an
employee must have been employed with job duties associated with the qualified
facility for at least ninety days during the taxable year in a permanent full-time
employment position of at least one thousand seven hundred fifty hours per
year.� An employee who is hired during the last ninety days of the taxable year
shall be considered a new employee during the next taxable year. To
be counted for the purposes of the credit during the first taxable year of
employment, the employee must not have been previously employed by the taxpayer
within twelve months before the current date of hire. The terms of
employment must comply in all cases with the requirements of section 41-1512
and be certified by the Arizona commerce authority.
E. Co-owners of a business, including
corporate partners in a partnership and members of a limited liability company,
may each claim only the pro rata share of the credit allowed under this section
based on the ownership interest. The total of the credits allowed
all owners of the business may not exceed the amount that would have been
allowed for a sole owner of the business.
F. If the allowable tax credit for a taxable year
exceeds the income taxes otherwise due on the claimant's income, or if there
are no state income taxes due on the claimant's income, the amount of the claim
not used as an offset against income taxes shall be paid to the taxpayer in the
same manner as a refund under section 42-1118. Refunds made
pursuant to this subsection are subject to setoff under section 42-1122.�
If the department determines that a refund is incorrect or invalid, the excess
refund may be treated as a tax deficiency pursuant to section 42-1108.
G. Except as provided by subsection H
of this section, If, within five taxable years after first receiving a
credit pursuant to this section, the certification of qualification of a
business is terminated or revoked under section 41-1512, other than for
reasons beyond the control of the business as determined by the Arizona
commerce authority, the taxpayer is disqualified from credits under this
section in subsequent taxable years.� On a determination that the taxpayer has
committed fraud or relocated outside of this state within five taxable years
after first receiving a credit pursuant to this section, the credits allowed
the taxpayer in all taxable years pursuant to this section are subject to
recapture pursuant to this subsection. This subsection applies only
in the case of the termination or revocation of a certification of
qualification under section 41-1512. This subsection does not
apply if, in any taxable year, a taxpayer otherwise does not qualify for or
fails to claim the credit under this section. The recapture of
credits is computed by increasing the amount of taxes imposed in the year
following the year of termination or revocation by the full amount of all
credits previously allowed under this section.
H. A taxpayer that claims a credit
under section 43-1161 may not claim a credit under this section with
respect to the same full-time employment positions.
I. H. The
department of revenue shall adopt rules and prescribe forms and procedures as
necessary for the purposes of this section. The department of
revenue and the Arizona commerce authority shall collaborate in adopting rules
as necessary to avoid duplication and contradictory requirements while
accomplishing the intent and purposes of this section.
J. I. Each
taxable year after the postapproval of the credit under section 41-1512,
subsection P, when the taxpayer files the taxpayer's income tax return, the
taxpayer shall:
1. Notify the department, on a form prescribed by
the department, of any full-time employment position for which a credit
was claimed under this section and that was vacant for more than one hundred
fifty days after the date the full-time employment position was
originally filled to the end of that taxable year.� The period that a full-time
employment position was vacant may not include the period before the full-time
employment position was filled for the first time.
2. Reduce the portion of the credit claimed for the
taxable year pursuant to subsection B, paragraph 3 of this section by $4,000
for each full-time employment position reported pursuant to paragraph 1
of this subsection. END_STATUTE
Sec. 38. Section 43-1164.05, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1164.05. Credit for renewable energy investment and production for
self-consumption by international operations centers; definitions
A. A credit is allowed against the taxes imposed by
this title for investment in new renewable energy facilities that produce
energy for self-consumption using renewable energy resources if the power
will be used primarily for an international operations center.
B. The taxpayer is eligible for the credit if all of
the following apply:
1. The taxpayer, or a third-party entity on behalf
of or for the direct benefit of the taxpayer, invests at least $100,000,000 in
one or more new renewable energy facilities in this state that produce energy
for self-consumption using renewable energy resources. The
minimum investment must be completed within a three-year period beginning on
the date the initial application is received or by December 31, 2018, whichever
is earlier.
2. A portion of the energy produced at each
renewable energy facility is used for self-consumption in this
state. By the fifth year a renewable energy facility is in
operation, at least fifty-one percent of the energy produced must be used for
self-consumption in this state.� Self-consumption includes the
power used by related entities if the related entities are directly or
indirectly under the same ownership interests that collectively own more than
eighty percent. Power that a renewable energy facility transfers to
a utility or power generated by a utility-owned renewable energy facility
developed on behalf of or for the direct benefit of the taxpayer qualifies as
self-consumption if the utility is the same utility that provides power
to the owner's international operations center in this state.
3. The power that is used for self-consumption under
paragraph 2 of this subsection is used for an international operations center
in this state. A lessor of an international operations center
facility that uses power for self-consumption under paragraph 2 of this
subsection satisfies the requirements of this paragraph if the lessee is an
international operations center and the power is transferred as part of the
lease to the lessee.
C. Subject to subsection F of this section, the
credit authorized by this section is $5,000,000 per year for five years for
each renewable energy facility. The maximum credit allowed per
taxpayer per year is $5,000,000. The taxpayer, including all
affiliates of the taxpayer, may not cumulate tax credits under this section
over different taxable years exceeding, in the aggregate,
$25,000,000. The initial credit for each facility is claimed in the
year that the facility becomes operational. A credit, other than
carryovers allowed under subsection M of this section, may not be claimed for
any taxable year beginning after December 31, 2025. An international
operations center that is initially certified pursuant to section 41-1520,
subsection C after December 31, 2018 may not claim the tax credit authorized by
this section.
D. To qualify as a separate renewable energy
facility for the purposes of this section, a facility must be located at least
one mile from any other renewable energy facility for which the taxpayer is
claiming a credit under this section.
E. To be eligible for the credit under this section,
the taxpayer must apply to the department for certification of the credit on a
form prescribed by the department.� The application shall include:
1. The name, address and social security number or
federal employer identification number of the applicant.
2. An estimate of the total investment the taxpayer
will make, including investments made by a third-party entity on behalf
of or for the direct benefit of the taxpayer, over a three-year period
beginning on the date the application is received, in new renewable energy
facilities in this state that produce energy for self-consumption using
renewable energy resources. For investments made by a third party, a
statement from the utility that provides power to the international operations
center affirming that the investment in new renewable energy facilities is made
on behalf of or for the direct benefit of the taxpayer satisfies the
requirement of this paragraph.
3. The expected location of each of the taxpayer's
facilities that comprise the total investment in paragraph 2 of this subsection
and the earliest date that each facility is expected to be operational.
4. A statement that the portion of the power
generated by each facility, as required by subsection B, paragraph 2 of this
section, shall be for self-consumption and shall be used for
international operations center use.
5. Any additional information that the department
requires.
F. The department shall review each application
under subsection E of this section and preapprove the taxpayer for a specified
amount of credit that is authorized. Credits are allowed under this
section on a first-come, first-served basis. The
department may not authorize tax credits under this section that exceed in the
aggregate a total of $10,000,000 for any calendar year.� The portion of each
year's limit that is reserved for each taxpayer must be based on the year that
each credit is expected to be claimed using the dates provided in subsection E,
paragraph 3 of this section. If the year a facility is completed is
different from the estimated completion date provided in subsection E,
paragraph 3 of this section, the taxpayer must amend the application with the
new dates. If an application is received that, if authorized, would
require the department to exceed the $10,000,000 limit, the department shall
grant the applicant only the remaining credit amount that would not exceed the
$10,000,000 limit. After the department authorizes $10,000,000 in
tax credits, the department shall deny any subsequent applications that are
received for that calendar year. The department may not authorize
any additional tax credits that exceed the $10,000,000 limit even if the
amounts that have been certified to any taxpayer are not claimed or a taxpayer
otherwise fails to meet the requirements to claim the additional credit.
G. If a taxpayer fails to start construction within
six months after submitting the application under subsection E of this section,
the preapproval issued under subsection F of this section is void and all
monies reserved from the limits specified in subsection F of this section
revert back to the limit for the year for which they were reserved.
H. Each year after initial preapproval, on or before
the anniversary date of the application specified in subsection E of this
section, the taxpayer must submit to the department:
1. Documentation of the taxpayer's progress toward
the investment required by subsection B, paragraph 1 of this
section. This documentation is not required after the department
receives a report stating that the required investment threshold has been
reached.
2. Documentation for each facility that demonstrates
that the required portion of the power generated by each renewable energy
facility is for self-consumption as required by subsection B, paragraph 2
of this section.
3. If applicable, certification from the Arizona
commerce authority pursuant to section 41-1520.
I. The taxpayer must submit a request for final
certification to the department within thirty days after each of the renewable
energy facilities for which an authorization was given under subsection F of
this section becomes operational. Within thirty days after receiving
a completed request under this subsection, the department shall review the
request and either issue a final certification of the credit to the taxpayer or
issue a denial of the credit if it is determined that the requirements of this
section have not been met.� Every final certification issued under this
subsection must include a facility code issued by the department that is unique
to each facility.� To show that the facility has been certified, the taxpayer
shall include with the tax return the facility code for each facility for which
a credit is claimed. If the taxpayer is the owner or operator of an
international operations center, the taxpayer must submit the request for final
certification for each of the renewable energy facilities for which capital
investment will be claimed towards the required investment threshold and must
submit additional evidence to the department within sixty days after the end of
the fifth year of operation of each facility that the requirements of subsection
B, paragraph 2 of this section have been met.
J. If the taxpayer fails to make the required
investment in renewable energy facilities within the time period required by
subsection B, paragraph 1 of this section or if the certification of an
international operations center has been revoked under section 41-1520
due to a failure to make a $1,250,000,000 investment in the center within ten
years after certification or if the taxpayer fails to receive final
certification of the credit under subsection I of this section, the taxpayer is
not eligible and must cease claiming any further credits under this section and
shall reimburse the amount of all credits previously received under this
section. The reimbursement must be made on the taxpayer's income tax
return for the taxable year in which it is first known that the required
investment would not be made within the required time or the taxable year in
which the certification was revoked.� The department may give special
consideration or allow a temporary exemption from reimbursement if there is
extraordinary hardship due to factors beyond the taxpayer's control.� If the
reimbursement is due to revocation of the certification of an international
operations center due to a failure to invest $1,250,000,000 in the center
within ten years after certification, the credits shall be reimbursed in
inverse proportion to the total capital investment made in the international
operations center divided by $1,250,000,000. The department may
require reimbursement before the tenth anniversary of certification of an
international operations center if the facility has been closed or relocated or
the taxpayer has otherwise demonstrated that the $1,250,000,000 investment will
not be timely made. For taxpayers using investments made by
third-party entities on behalf of or for the direct benefit of the taxpayer,
the investment threshold is $1,500,000,000. A third-party
entity may not include the owner or operator of the international operations
center or, solely for the purposes of this subsection, the owner's or
operator's affiliated entities.
K. If a particular facility ceases to meet the
requirements of this section or if the facility is sold, the taxpayer may not
claim any future credits related to that facility.
L. Co-owners of a business, including
corporate partners in a partnership and corporate members of a limited
liability company treated as a partnership, may each claim the pro rata share
of the credit allowed under this section based on ownership interest.� Only co-owners
that are corporations may claim a share of the credit allowed under this
section. The total of the credits allowed all the owners of the business may
not exceed the amount that would have been allowed for a sole owner of the
business.
M. If the allowable tax credit for a taxpayer
exceeds the taxes otherwise due under this title on the claimant's income, or
if there are no taxes due under this title, the amount of the claim not used to
offset taxes under this title may be carried forward for not more than five
consecutive taxable years as a credit against subsequent years' income tax
liability.
N. A taxpayer may not claim a credit
under this section and section 43-1164.03 regarding the same facilities.
O. N. The
department shall adopt rules and publish and prescribe forms and procedures as
necessary to effectuate the purposes of this section.
P. O. For
the purposes of this section:
1. "Biomass" means organic material that
is available on a renewable or recurring basis, including:
(a) Forest-related materials, including mill
residues, logging residues, forest thinnings, slash, brush, low-commercial
value materials or undesirable species, salt cedar and other phreatophyte or
woody vegetation removed from river basins or watersheds and woody material
harvested for the purpose of forest fire fuel reduction or forest health and
watershed improvement.
(b) Agricultural-related materials, including
orchard trees, vineyard, grain or crop residues, including straws and stover,
aquatic plants and agricultural processed coproducts and waste products,
including fats, oils, greases, whey and lactose.
(c) Animal waste, including manure and
slaughterhouse and other processing waste.
(d) Solid woody waste materials, including landscape
or right-of-way tree trimmings, rangeland maintenance residues,
waste pallets, crates and manufacturing, construction and demolition wood
wastes but excluding pressure-treated, chemically treated or painted wood
wastes and wood contaminated with plastic.
(e) Crops and trees planted for the purpose of being
used to produce energy.
(f) Landfill gas, wastewater treatment gas and
biosolids, including organic waste by-products generated during the
wastewater treatment process.
2. "International operations center" means
a facility that is certified by the Arizona commerce authority pursuant to
section 41-1520.
3. "Renewable energy facility" means a
facility in which the taxpayer, or a third-party entity on behalf of and
for the benefit of the taxpayer, invested at least $30,000,000, that has at
least twenty megawatts generating capacity or a minimum typical annual
generation of forty thousand megawatt hours, that is located on land in this state
owned or leased by the taxpayer or a third-party entity on behalf of and for
the benefit of the taxpayer and that produces electricity using a renewable
energy resource.
4. "Renewable energy resource" means a
resource that generates electricity through the use of only the following
energy sources:
(a) Solar light.
(b) Solar heat.
(c) Wind.
(d) Biomass, including fuel cells supplied directly
or indirectly with biomass generated fuels.
(e) Battery storage that is independent from or
coupled with other sources. END_STATUTE
Sec. 39. Section 43-1168, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1168. Credit for increased research activity
A. A credit is allowed against the taxes imposed by this
title in an amount determined pursuant to section 41 of the internal revenue
code, except that:
1. The amount of the credit is computed as follows:
(a) Add:
(i) The excess, if any, of the qualified research
expenses for the taxable year over the base amount as defined in section 41(c)
of the internal revenue code.
(ii) The basic research payments determined under
section 41(e)(1)(A) of the internal revenue code.
(b) If the sum computed under subdivision (a) of
this paragraph is $2,500,000 or less:
(i) For taxable years beginning before December 31,
2030, the credit is equal to twenty-four percent of that amount.
(ii) For taxable years beginning from and after
December 31, 2030, the credit is equal to twenty percent of that amount.
(c) If the sum computed under subdivision (a) of
this paragraph is over $2,500,000:
(i) For taxable years beginning before December 31,
2030, the credit is equal to $600,000 plus fifteen percent of any amount
exceeding $2,500,000.
(ii) For taxable years beginning from and after
December 31, 2030, the credit is equal to $500,000 plus eleven percent of any
amount exceeding $2,500,000.
(d) For taxable years beginning from and after
December 31, 2011, an additional credit amount is allowed if the taxpayer made
basic research payments during the taxable year to a university under the
jurisdiction of the Arizona board of regents. The additional credit
amount is equal to ten percent of the excess, if any, of the basic research
payments over the qualified organization base period amount for the taxable
year. The department shall not allow credit amounts under this
subdivision and section 43-1074.01, subsection A, paragraph 1,
subdivision (c) that exceed, in the aggregate, a combined total of $10,000,000
in any calendar year. Subject to that limit, on application by the
taxpayer, the department shall certify credit amounts under this subdivision
and section 43-1074.01, subsection A, paragraph 1, subdivision (c) based
on priority placement established by the date that the taxpayer filed the
application.� For taxable years beginning from and after December 31, 2014, any
basic research payments used to determine the additional credit under this
subdivision must first receive certification from the Arizona commerce
authority pursuant to section 41-1507.01. The additional
credit amount under this subdivision shall not exceed the amount allowed based
on actual basic research payments or the department's certification, whichever
is less. If an application, if certified in full, would exceed the
$10,000,000 limit, the department shall certify only an amount within that
limit. After the limit is attained, the department shall deny any
subsequent applications regardless of whether other certified amounts are not
actually claimed as a credit or other taxpayers fail to qualify to actually
claim certified amounts.� Notwithstanding subsections subsection B and C of this section, any
amount of the additional credit under this subdivision that exceeds the taxes
otherwise due under this title is not refundable, but may be carried forward to
the next five consecutive taxable years. For the purposes of this
subdivision, "basic research payments" and "qualified
organization base period amount" have the same meanings prescribed by
section 41(e) of the internal revenue code.
2. Qualified research includes only research
conducted in this state, including research conducted at a university in this
state and paid for by the taxpayer.
3. If two or more taxpayers, including corporate
partners in a partnership, share in the eligible expenses, each taxpayer is
eligible to receive a proportionate share of the credit.
4. The credit under this section applies only to
expenses incurred from and after December 31, 1993.
5. The termination provisions of section 41 of the
internal revenue code do not apply.
B. Except as provided by subsection C
of this section, If the allowable credit under this section exceeds the
taxes otherwise due under this title on the claimant's income, or if there are
no taxes due under this title, the amount of the credit claimed for taxable
years beginning before January 1, 2022 not used to offset taxes may be carried
forward to the next fifteen consecutive taxable years, and the amount of the
credit claimed for taxable years beginning from and after December 31, 2021 not
used to offset taxes may be carried forward to the next ten consecutive taxable
years. The amount of credit carryforward from taxable years
beginning from and after December 31, 2002 that may be used under this
subsection in any taxable year may not exceed the taxpayer's tax liability
under this title minus the credit under this section for the current taxable
year's qualified research expenses. A taxpayer that
carries forward any amount of credit under this subsection may not thereafter
claim a refund of any amount of the credit under subsection C of this
section.
C. For taxable years beginning from
and after December 31, 2009, if a taxpayer that claims a credit under this
section employs fewer than one hundred fifty persons in the taxpayer's trade or
business and if the allowable credit under this section exceeds the taxes
otherwise due under this title on the claimant's income, or if there are no
taxes due under this title, in lieu of carrying the excess amount of credit
forward to subsequent taxable years under subsection B of this section, the
taxpayer may elect to receive a refund as follows:
1. The taxpayer must apply to the
Arizona commerce authority for qualification for the refund pursuant to section
41-1507 and submit a copy of the authority's certificate of qualification
to the department of revenue with the taxpayer's income tax return.
2. The amount of the refund is limited
to seventy-five percent of the amount by which the allowable credit under this
section exceeds the taxpayer's tax liability under this title for the taxable
year. The remainder of the excess amount of the credit is waived.
3. The refund shall be paid in the
manner prescribed by section 42-1118.
4. The refund is subject to setoff
under section 42-1122.
5. If the department determines that a
credit refunded pursuant to this subsection is incorrect or invalid, the excess
credit issued may be treated as a tax deficiency pursuant to section 42-1108.END_STATUTE
Sec. 40. Repeal
Section 43-1170, Arizona Revised
Statutes, is repealed.
Sec. 41. Title 43, Arizona Revised Statutes, is
amended by adding chapter 18, to read:
CHAPTER
18
SCHOLARSHIP
GRANTING ORGANIZATIONS
ARTICLE
1. GENERAL PROVISIONS
START_STATUTE43-1801. State election to participate; federal tax credit for individual
contributions to scholarship granting organizations
A. This state elects to participate
in the federal tax credit established by section 25F of the internal revenue
code for individuals who make qualified contributions to scholarship granting
organizations.
B. The department shall comply with
all federal laws and regulations to administer the federal tax credit
established by section 25F of the internal revenue code to ensure this state is
eligible to participate in taxable years beginning from and after December 31,
2026 and annually submit all of the required information to the United States
secretary of the treasury for participation.� END_STATUTE
START_STATUTE43-1802. Scholarship granting organizations; certification; list; rules
A. A nonprofit organization in this
state that is exempt or that has applied for exemption from federal taxation
under section 501(c)(3) of the internal revenue code may
apply to the department for certification as a scholarship granting
organization, and the department shall certify that the scholarship granting
organization meets the requirements of section 25F of the internal revenue code
and the applicable regulations or guidance issued by the United States
secretary of the treasury.
B. On or before January 1 of each
year, the department shall:
1. Submit to the United States
secretary of the treasury a list of the scholarship granting organizations that
are certified pursuant to this section and that are located in this state.
2. Post the list submitted pursuant
to paragraph 1 of this subsection on the department's official website.
C. THe department shall adopt rules
and publish and prescribe forms and procedures necessary to administer this
section. END_STATUTE
START_STATUTE43-1803. Scholarships
From and after December 31, 2026, a scholarship
granting organization that is certified by the department and on the list
submitted pursuant to section 43-1802, subsection B, paragraph 1 may
provide scholarships to eligible students for any qualified elementary or
secondary education expenses to the extent allowed under federal law.END_STATUTE
Sec. 42. Section 48-4203, Arizona Revised Statutes, is amended to read:
START_STATUTE48-4203. Powers and duties of board of directors; reporting requirements;
conflict of interest
A. The board of
directors, on behalf of the district, may:
1. Adopt and use a corporate seal.
2. Sue and be sued.
3. Enter into contracts, including intergovernmental
agreements under title 11, chapter 7, article 3, as necessary to carry out the
purposes and requirements of this chapter. The district may contract
with a county sports authority established under title 11, chapter 5 to carry
out any power of the district.
4. Adopt administrative rules as necessary to
administer and operate the district and any property under its jurisdiction.
5. Adopt rules that allow weighted voting by board
members and establish conditions for terminating the district.
6. Employ an executive director and administrative
and clerical employees, or contract for other management personnel, and
prescribe the terms and conditions of their employment as necessary to carry
out the purposes of the district.
7. Acquire by any lawful means and operate,
maintain, encumber and dispose of real and personal property and interests in
property. A district established under section 48-4202,
subsection A in a county with a population of less than one million five
hundred thousand persons may acquire real property by eminent domain.� A
district established under section 48-4202, subsection A in a county with
a population of one million five hundred thousand persons or more or section
48-4202, subsection B shall not acquire real
property by eminent domain. A district established under section 48-4202,
subsection C shall not acquire or own real property or interests in real
property.
8. Administer trusts declared or established for the
district, receive and hold in trust or otherwise property located in or out of
this state and, if not otherwise provided, dispose of the property for the
benefit of the district.
9. Retain legal counsel and other consultants as
necessary to carry out the purposes of the district.
B. The board of directors, on behalf of a district
established pursuant to section 48-4202, subsection B, may:
1. Use revenues paid to the district pursuant
to section 42-5031 and other revenues the district may receive from other
sources, for the purposes set forth in section 48-4204, subsection
B.
2. Enter into agreements with developers,
contractors, tenants and other users of all or part of a multipurpose facility
as determined appropriate.
3. Pledge all or part of the revenues described
in section 42-5031, subsection B paid to the
district to secure the district's bonds or other financial obligations
issued or incurred under this chapter for the construction of all or part of a
multipurpose facility.
C. The board of directors of a district established
pursuant to section 48-4202, subsection B shall provide public outreach
and education on the purpose and activities of the district, including:
1. Presentations to the governing bodies of the
municipalities in the county in which the district is located.
2. Presentations to community, civic and business
organizations.
3. Printed or electronic materials that support the
purposes of this subsection.
D. The board of directors shall:
1. Appoint from among its members a chairperson, a
secretary and such other officers as may be necessary to conduct its
business. The board of directors may appoint the chief financial
officer of the county as the district treasurer of a countywide district
established under section 48-4202, subsection A in a county with a
population of less than one million five hundred thousand persons. If
the board does not appoint the chief financial officer, the county treasurer is
designated ex officio as the treasurer. The board of directors of a
district that is established pursuant to section 48-4202, subsection A in
a county with a population of one million five hundred thousand persons or more
or section 48-4202, subsection B shall designate a
member of the board with financial management or accounting experience or a
person with whom the board has contracted for financial management as treasurer
of the district.� The county treasurer is designated ex officio as the treasurer
of a district that is established pursuant to section 48-4202,
subsection C.
2. Keep and maintain a complete and accurate record
of all its proceedings. All proceedings and records of the board
shall be open to the public as required by title 38, chapter 3, article 3.1 and
title 39, chapter 1.
3. Provide for the use, maintenance and operation of
the properties and interests controlled by the district.
E. The board of directors of a district that is
established pursuant to section 48-4202, subsection B shall:
1. Determine by agreement the distribution of
revenues from operating and using the multipurpose facilities among the
municipalities and any participating Indian tribe or community.
2. Report to the legislature by October 1 of each
year regarding the activities, operations, revenues and expenditures of the
district for the immediately preceding fiscal year.� The board shall submit the
annual report to the president of the senate and the speaker of the house of
representatives and provide a copy of the report to the secretary of
state. At the discretion of the chairpersons of the senate finance
committee and the house of representatives ways and means committee, or their
successor committees, the committees may hold separate or joint hearings to
consider the annual report prepared by the district.
3. Present to the joint legislative committee on
capital review each project for the construction or reconstruction of any
facility, structure, infrastructure or other improvement to real property of
any kind in an amount exceeding $500,000.
F. The board of directors of a district that is
established pursuant to section 48-4202, subsection A in a county with a
population of more than one million five hundred thousand persons:
1. May enter into agreements with contractors,
tenants and other users of all or part of the major league baseball facility or
any adjacent building that is owned by the district and operated by the
district or the professional baseball franchise organization that occupies the
major league baseball facility or adjacent building as determined appropriate,
including agreements for reconstructing, equipping, repairing, maintaining or
improving the major league baseball facility or adjacent building.
2. On or before November 1 of each year through
2055, shall report to the joint legislative budget
committee and the governor's office of strategic planning and budgeting
regarding all new projects for reconstructing, equipping, repairing,
maintaining or improving a major league baseball facility or any adjacent building that is
paid for by the district from the county stadium district fund established
pursuant to section 48-4231. The report shall indicate which
projects the professional baseball franchise organization contributed monies
toward and the amount of the contribution.
G. The directors, officers and employees of the
district are subject to title 38, chapter 3, article 8 relating to conflicts of
interest.
H. This state and political subdivisions of this
state other than the district are not liable for any financial or other
obligations of the district and the financial or other obligations do not
constitute a debt or liability of this state or any political subdivision of
this state, other than the district. END_STATUTE
Sec. 43. Section 48-4204, Arizona Revised
Statutes, is amended to read:
START_STATUTE48-4204. Constructing and operating a stadium and other structures;
regulating alcoholic beverages
A. From the taxes and surcharges levied pursuant to
article 2 of this chapter for use with respect to major league baseball spring
training, the district may acquire land and construct, finance, furnish,
maintain, improve, operate, market and promote the use of existing or proposed
major league baseball spring training facilities or stadiums and other
structures, utilities, roads, parking areas or buildings necessary for full use
of the training facilities or stadiums for sports and other purposes and do all
things necessary or convenient to accomplish those purposes.� The board shall
require that any project undertaken by the district include financial
participation from the county or municipality in which the project is located,
from a private party or from any combination of these entities that equals or
exceeds one-half of the amount to be expended or distributed by the
district. Capital improvement funds expended by a county,
municipality or private party for a purpose authorized by this section may be
deemed financial participation with respect to any project the district may
undertake.
B. From the taxes and charges levied or identified
pursuant to section 48-4237 for use with respect to multipurpose
facilities and from other monies lawfully available to the district, the
district may acquire land and construct, finance, furnish, maintain, improve,
operate, market and promote the use of multipurpose facilities and other
structures, utilities, roads, parking areas or buildings necessary for full use
of the multipurpose facilities and do all things necessary or convenient to
accomplish those purposes. Public monies identified in section 48-4237, including monies distributed pursuant to section 42-5031,
may only be used for the components for a multipurpose facility that are owned
by the district or that are publicly owned or for the following purposes:
1. Debt service for bonds issued by the district
before January 1, 2009.
2. Contractual obligations incurred by the district
before June 1, 2009.
3. Fiduciary, reasonable legal and administrative
expenses of the district.
4. The design and construction of the hotel and
convention center located on the multipurpose facility site.
C. For the public monies identified in section 48-4237, including monies distributed pursuant to section 42-5031,
and from which the district board has planned an expenditure of five
hundred thousand dollars $500,000 or more, the
following apply:
1. Each district board member shall provide advance
notice of the consideration of the expenditure by the board to the person who
holds the office that is responsible for that board member's appointment.�
2. The notice prescribed in paragraph 1 of this
subsection must be provided by regular mail delivered to the office that is
responsible for that board member's appointment and may be preceded by any
other form of notice.� The notice must be provided at least two weeks before
the date of the meeting and must be posted to the district's website on the day
the notice is mailed.
3. The notice prescribed in paragraph 1 of this
subsection must be accompanied by the board member's written statement as to
whether the board member has any financial interest in the subject of the
proposed expenditure by the board.� The board members' written statements may
be provided in a single document that is prepared by the board's administrative
personnel but must be signed by the board members and must be posted to the
district's website with the notice prescribed in paragraph 1 of this subsection.
4. The district board may not artificially divide or
fragment planned expenditures so as to circumvent the requirements of this
subsection.
D. A district established pursuant to
section 48-4202, subsection B may not use monies distributed pursuant to
section 42-5031 for the salaries or compensation of any employee of the
municipality in which the district is located.
E. D. Pursuant
to an intergovernmental agreement with the Arizona board of regents, from the
revenues collected from assessments pursuant to section 48-4235 for use
with respect to Arizona board of regents owned intercollegiate athletic
facilities, the district may construct, reconstruct, finance, furnish, maintain
and improve existing intercollegiate athletic facilities located on Arizona
board of regents' property, including utilities, roads, parking areas or
buildings necessary for full use of the athletic facilities.
F. E. Title
34 applies to the district, except that regardless of the funding source for
design and construction of facilities and structures the district may establish
alternative systems and procedures, including the use of the design-build method
of construction or the use of qualifications-based selection of contractors
with experience in stadium design or construction, to expedite the design and
construction or reconstruction of any of its facilities or structures or any
facilities or structures leased to it or used by it pursuant to an
intergovernmental agreement. For the purposes of this subsection:
1. "Design-build" means a process of
entering into and managing a contract between the district and another party in
which the other party agrees to both design and build a structure, a facility
or other items specified in the contract.
2. "Qualifications-based selection" means
a process of entering into and managing a contract between the district and
another party in which the other party is selected by the district on the basis
of the party's qualifications and experience in designing or constructing
facilities, structures or other items similar to those the district is
authorized to construct or lease. The other party may be selected by
direct selection or by public competition.
G. F. For
the purposes of financing, designing, constructing, reconstructing or operating
facilities or structures, the district is not the agent of any municipality,
this state or any agency or instrumentality of this state participating in the
funding of such facilities or structures.
H. G. Subject
to the requirements of title 4, the board of directors may permit and regulate
the sale, use and consumption of alcoholic beverages at events held on property
acquired, leased or subleased under this article. END_STATUTE
Sec. 44. Section 48-4231.01, Arizona Revised
Statutes, is amended to read:
START_STATUTE48-4231.01. Financial and performance audits of districts owning multipurpose
facilities; appearance before joint committee on capital review
A. Beginning in 2010 and every three years
thereafter, the auditor general shall contract with an independent auditor to
conduct a performance audit as defined in section 41-1278, including a
financial audit, of each district organized under section 48-4202, subsection
B.� The independent auditor must have national status with expertise in
evaluating public construction, ownership and management of capital
improvements that include hospitality, convention and sports venue facilities.�
The audit must be completed within one hundred twenty days after the end of the
fiscal year.
B. The audit shall include consideration of:
1. Capital costs, including debt service, of the
multipurpose facility and other assets of the district.
2. The level of the district's indebtedness, the
amount of principal, interest and other debt service expenses paid in the
preceding fiscal year and the remaining term to maturity with respect to each
outstanding bond issue.
3. Operation and maintenance costs of the
multipurpose facility and other assets of the district.
4. The district's overall expenditures in the
preceding fiscal year, including:
(a) The level of expenses for administration,
planning, travel and entertainment.
(b) The success of those expenditures in supporting
and achieving the district's purposes.
5. A description of and the amount of municipal
payments pursuant to section 42-5031, subsection D during
the preceding fiscal year and the cumulative amount of those payments through
the end of the preceding fiscal year.
6. The public use of each component of the
multipurpose facility.
7. Revenues derived from each component of the
multipurpose facility and other revenues of the district by source.
8. District projects that are currently under
construction and that are included in the district's plans for capital
improvements and investment.
C. The audit shall
make findings and recommendations regarding the construction, financing,
operation and maintenance of each component of the multipurpose facility,
including whether the facility exceeds, meets or fails to meet nationally recognized
design and performance standards.
D. The district and the board of directors shall
cooperate with and submit to the auditor general and the auditor contracted to
conduct the audit information necessary to conduct and complete the audit in a
timely manner.
E. Within forty-five days after the audit is
released, the board of directors shall:
1. Hold a public hearing on the audit's findings and
recommendations and allow any person to make or submit oral or written comments
on the audit.
2. By majority vote adopt a public response
agreeing, agreeing with reservations or disagreeing with each finding and
recommendation in the audit.
F. The auditor general shall distribute copies of
the audit and the board of director's response to:
1. The mayor and governing body of the municipality
in which the district is located.
2. The governor.
3. The president of the senate and the speaker of
the house of representatives.
4. The department of revenue and the state
treasurer.
5. The secretary of state.
6. Any other person who requests a copy of the
audit.
G. The cost incurred by the auditor general in
contracting with independent auditors under this section is an operating
expense of the district and shall be paid from revenues payable
to the district pursuant to section 42-5031. The auditor
general shall deposit the payments in the audit services revolving fund
established by section 41-1279.06.
H. At the request of the chairperson of the joint
committee on capital review, the executive director or a representative of the
board of directors shall appear before the joint committee on capital review to
report on any aspect of the district's operation, including the activities and
financial performance of the district during the previous fiscal year, the
district's plans for capital improvements and investment and the district's
response to the audit conducted under this section. END_STATUTE
Sec. 45. Section 48-4231.02, Arizona Revised
Statutes, is amended to read:
START_STATUTE48-4231.02. Financial reports; database of expenditures
A. Each district established pursuant to section
48-4202, subsection B shall maintain on its official website a database of
expenditures made by the district.� The database shall allow users to:
1. Search and aggregate payments by payee.
2. Search and aggregate payments by project.
3. Search and aggregate payments by year.
4. Search and aggregate all payments made by the
district.
5. Download information yielded by a user query.
B. Each expenditure listing contained in the
database shall include:
1. The date and amount of each payment.
2. The name of the payee.
3. The project for which the payment was made.
4. The purpose for which the payment was made.
5. The fund or budget account from which the payment
was made.
C. Each district established pursuant to section
48-4202, subsection B shall maintain on its official website the annual
financial reports of the district and a listing and the sum of the payments
made to the district pursuant to section 42-5031 from this state before July 1, 2026. END_STATUTE
Sec. 46. Section 48-4237, Arizona Revised
Statutes, is amended to read:
START_STATUTE48-4237. Transaction privilege tax; multipurpose facilities; rate;
administration
A. The board of directors of a district established
pursuant to section 48-4202, subsection B by resolution may seek authority for
the district to levy a transaction privilege tax for multipurpose facilities or
other taxes or charges pursuant to subsection E of this section, in addition to
or in lieu of other revenues collected pursuant to this article, to be used and
spent for the purposes described in section 48-4204, subsection B for the
multipurpose facilities.
B. The board of directors shall present the question
to the governing bodies of the participating municipalities.  The
district is exempt from section 16-226.� The governing body of each
municipality by resolution may approve the district's request to place a
question seeking authority for the district to levy a multipurpose facilities
district transaction privilege tax solely within the district, or to impose
other taxes or charges pursuant to subsection E of this section on the ballot
of an election pursuant to this section held on the same date or on the same
ballot as the regularly scheduled election of one or more of the participating
municipalities or the state or on any of the four dates prescribed by section
16-204. If the governing body of each municipality approves
the district's request for an election, and if a majority of the qualified
electors from each municipality voting at the election approves the
multipurpose facilities district transaction privilege tax or other taxes or
charges pursuant to subsection E of this section, the board by resolution may
levy and, if levied, the department of revenue shall collect a transaction
privilege tax solely within the district pursuant to this section or other
taxes or charges pursuant to subsection E of this section to be used and spent
for the purposes described in section 48-4204, subsection B for the
multipurpose facilities. If a question fails to receive a majority approval
among the voters in one municipality, but receives a majority approval among
the voters in at least two other municipalities, the governing bodies of the
approving municipalities, by majority vote of each governing body, may elect to
form a new district and authorize the district to levy the tax solely within
the boundaries of the new district subject to the conditions authorized by the
voters in the election.
C. The board shall state on the ballot the purpose
of the tax, the maximum rate of the tax and the maximum number of years for
which the tax will be authorized. The tax shall terminate upon on the expiration of the years
authorized or the completion of the purpose specified in the ballot, whichever
is earlier. The rate of tax shall not exceed the limits prescribed
by this section. The ballot question may propose to authorize the
district to levy and collect taxes and charges pursuant to subsection E of this
section.
D. The board shall set the rate of the tax at not
more than five per cent percent of
the transaction privilege tax rate prescribed by section 42-5010,
subsection A applying on January 1, 1990 to each person engaging or continuing
in the district in a business taxed under title 42, chapter 5, article 1, or in
the case of persons subject to the tax imposed under section 42-5352,
subsection A, at a rate of not more than .1525 cents $.1525 per gallon of jet fuel sold.
E. If authorized by an election held pursuant to
this section, the board may:
1. Pledge all or part of the revenues from a tax
under this section to secure the district's bonds or other financial
obligations issued or incurred under this chapter for the multipurpose
facilities.
2. Pledge all or part of the incremental increase in
the municipal transaction privilege taxes generated in all or a designated
geographic area of the district during a period of time before, during and
after any specified national championship sporting event or international games
hosted in the multipurpose facilities to secure the district's bonds or other
financial obligations issued or incurred under this chapter for the
construction of the multipurpose facilities.
3. Impose a surcharge pursuant to the procedures and
limits of section 48-4234 in all or a designated geographic area of the
district during a period of time before, during and after any specified
national championship sporting event or international games hosted in the
multipurpose facilities except that a car rental surcharge imposed pursuant to
this paragraph shall not apply to the lease or rental of a motor vehicle as a
replacement vehicle owned by the lessee for personal use. For the
purposes of this paragraph, "replacement vehicle" means a vehicle
loaned by a motor vehicle repair facility or dealer, or that an individual
rents temporarily, to use while a vehicle owned by the individual is not in use
because of breakdown, repair, service, damage, or loss as defined in the
individual's applicable private passenger automobile insurance policy.
4. Levy and, if levied, the department of revenue
shall collect a tax at a rate of not to exceed one per cent percent of the gross proceeds of sales or gross income from
the business of every person engaging or continuing in the district in a
business taxed under sections 42-5070 and 42-5074 during a period
of time before, during and after any specified national championship sporting
event or international games hosted in the multipurpose facilities to secure
the district's bonds or other financial obligations issued or incurred under
this chapter for the construction of the multipurpose facilities.
5. Use amounts paid to the district pursuant
to section 42-5031 and received from the multipurpose facility
site the boundaries or boundary amendment of which are described in the
publicity pamphlet as allowed by law, including securing the district's bonds
or other financial obligations issued or incurred under this chapter for the
construction of the multipurpose facilities which are owned by the district or
which are publicly owned.
F. Unless the context otherwise requires, section 42-6102
governs the administration of any tax imposed under this section.
G. Each month the state treasurer shall remit to the
district treasurer the net revenues collected under this section during the
second preceding month. The district treasurer shall deposit the
monies in the stadium district fund. Revenues from a tax under this
section shall not be commingled with revenues collected pursuant to this
article for any other purpose but shall be separately accounted for and used
solely with respect to uses authorized in section 48-4204, subsection B.
H. In addition to other requirements prescribed by
law, the board shall prepare, print and distribute publicity pamphlets
concerning the proposed issue to be submitted to the voters. The
board shall distribute one copy of the publicity pamphlet at least ten but not
more than thirty days before the election to each household containing a
registered voter in the district. The publicity pamphlet shall
contain all of the following:
1. The date of the election.
2. The location of the polling places and the times
the polling places will be open.
3. A true copy of the title and text of the
resolution proposing the tax.
4. A summary of the purposes for which the tax is
proposed to be levied and a description of the multipurpose facilities.
5. The estimated cost
of the multipurpose facility to be financed.
6. An estimate of the
annual amount of revenues to be raised from the proposed tax.
7. The geographic area, time period and amount of
any tax, tax distribution, or surcharge proposed under subsection E of this
section.END_STATUTE
Sec. 47. Applicability
Sections 20-224.03, 41-1525,
43-1074, 43-1083, 43-1083.02, 43-1161, 43-1164.03
and 43-1170, Arizona Revised Statutes, as repealed by this act, apply to
taxable years beginning from and after December 31, 2025.
Sec. 48. Retroactivity
A. Sections 42-1001,
43-105, 43-1022, 43-1041, 43-1121 and 43-1122,
Arizona Revised Statutes, as amended by this act, apply retroactively to
taxable years beginning from and after December 31, 2024.
B. Sections 43-1042,
43-1073.01, 43-1074.01 and 43-1168, Arizona Revised Statutes,
as amended by this act, apply retroactively to taxable years beginning from and
after December 31, 2025.
C. Section 42-5029,
Arizona Revised Statutes, as amended by this act, section 42-5031,
Arizona Revised Statutes, as repealed by this act, section 42-5061,
Arizona Revised Statutes, as amended by this act, and section 42-5159,
Arizona Revised Statutes, as amended by Laws 2025, chapter 135, section 2 and
chapter 247, section 2 and this act, apply retroactively to taxable periods
beginning from and after June 30, 2026.
Sec. 49. Saving clause
The repeal of the premium and income
tax credits by this act does not affect the continuing validity of any amount
of the credit carried forward from previous taxable years for application
against subsequent tax liabilities as allowed by prior law.