HB 4165

House Engrossed
revenue; 2026-2027
State of Arizona
House of Representatives
Fifty-seventh Legislature
Second Regular Session
2026
CHAPTER 137
HOUSE BILL 4165
AN
ACT
amending sections 42-5029.02 and 42-5041,
Arizona Revised Statutes; amending laws 2022, chapter 321, section 3; relating
to taxation.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 42-5029.02, Arizona Revised
Statutes, is amended to read:
START_STATUTE42-5029.02. Distribution of revenues for education; definitions
A. All monies collected pursuant to section 42-5010.01
and section 42-5155, subsection E 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 may 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. $64,100,000 is appropriated each fiscal year, to
be paid in monthly installments, to the superintendent of public instruction
for basic state aid.
2. After any transfer of monies pursuant to
paragraph 1 of this subsection, twelve percent 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 under the jurisdiction of the Arizona board of regents
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 percent 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 the transfer of 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 the
qualifying Indian tribe. Monies distributed pursuant to this
paragraph are for the exclusive purpose of providing support to one or more
community colleges that are owned, operated or chartered by a qualifying Indian
tribe and shall be used in a manner consistent with section 15-1472,
subsection B.
5. After the transfer of monies pursuant to
paragraphs 1, 2 and 3 of this subsection, one-twelfth of $86,280,500
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 that were enacted in 2000.
6. After the transfer of monies pursuant to
paragraphs 1, 2 and 3 of this subsection, $7,800,000 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 $200,000
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 the transfer of monies pursuant to
paragraphs 1, 2 and 3 of this subsection, the legislature may not appropriate
more than $7,000,000 each fiscal year to the department of education to be used
for accountability purposes as described in section 15-241.02 and title
15, chapter 9, article 8.
8. After the transfer of monies pursuant to
paragraphs 1, 2 and 3 of this subsection, $1,500,000 is appropriated each
fiscal year, to be paid in monthly installments, to the failing schools
tutoring fund established by section 15-241.
9. After the transfer of monies pursuant to
paragraphs 1, 2 and 3 of this subsection, $25,000,000 shall be transferred each
fiscal year to the state general fund to reimburse the state general fund for
the cost of the income tax credit allowed by section 43-1072.02.
10. From and after June 30, 2022 through June 30, 2028 2030, after the transfer of monies
pursuant to paragraphs 1 through 9 of this subsection, an amount determined by
the director pursuant to section 42-5041 shall be
transferred to the department of revenue integrated tax system project
fund established by section 42-5041.
11. After the transfer of monies pursuant to
paragraphs 1 through 10 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
in the manner prescribed by section 15-977.
B. For the purposes of this section:
1. "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.
2. "Qualifying Indian tribe" has the same
meaning as defined in section 42-5031.01. END_STATUTE
Sec. 2. Section 42-5041, Arizona Revised
Statutes, is amended to read:
START_STATUTE42-5041. Assessment of fees; integrated tax system modernization project;
fund
A. From and after June 30, 2022 through June 30, 2028 2030, the department shall assess and
collect fees from counties, cities, towns, councils of governments and regional
transportation authorities as determined by the director and as provided by
this section to implement an integrated tax system modernization project at the
department.
B. From and after June 30, 2022 through June 30, 2028 2030, a fee is assessed to each
county, city and town that receives state shared revenues pursuant to section
42-5029 or 43-206, to each council of governments that receives
revenues pursuant to section sections 42-6105
and 42-6105.01 and to each regional transportation
authority located in a county with a population of more than eight hundred
thousand persons that receives revenues pursuant to section 42-6106.
C. The department shall assess the fees under subsection subsections A and B of this
section not later than October 31 each year, and the fees are payable
immediately on assessment. If a county, city, town, council of
governments or regional transportation authority fails to pay the fees in full
on or before December 31, the department shall notify the state treasurer who
shall withhold the delinquent amount from the distribution of monies to the
affected county, city or town pursuant to sections 42-5029 and 43-206,
from the distribution of monies to the affected council of governments pursuant
to section sections 42-6105 and 42-6105.01 and from the distribution of monies to the
affected regional transportation authority pursuant to section 42-6106,
and who shall continue to withhold monies until the entire amount of the
assessment has been satisfied.
D. Counties, cities and towns may meet their cost
sharing obligation from any source of county, city or town revenue designated
by the appropriate county, city or town. The county sources may
include monies of any countywide special taxing jurisdiction in which the board
of supervisors serves as the board of directors.
E. From and after June 30, 2022 through June 30, 2028 2030, pursuant to section 42-5029.02,
the department shall transfer an amount from monies collected pursuant to
section 42-5010.01 and section 42-5155, subsection E as determined
by the director to implement the integrated tax system modernization project at
the department. The amount transferred pursuant to this subsection
shall be the actual reasonable costs incurred by the department for integrated
tax system modernization upgrades related to the taxes authorized and levied
pursuant to section 42-5010.01 and section 42-5155, subsection E.
F. From and after June 30, 2022 through June 30, 2028 2030, pursuant to section 36-2856,
subsection B, paragraph 2, the state treasurer shall transfer an amount from
monies collected pursuant to section 42-5452 as determined by the
director to implement the integrated tax system modernization project at the
department. The amount transferred pursuant to this subsection shall
be the actual reasonable costs incurred by the department for integrated tax
system modernization upgrades related to the tax authorized and levied by
section 42-5452.
G. All monies paid to
the department or withheld by the state treasurer for the fees assessed
pursuant to subsection B of this section or transferred pursuant to subsections
E and F of this section shall be credited to the department of revenue
integrated tax system project fund established by subsection H of this section.
H. The department of revenue integrated tax system
project fund is established consisting of monies deposited in or
transferred to the fund pursuant to this section.� The director shall
administer the fund.� Monies in the fund are subject to legislative
appropriation.� The director shall use monies in the fund solely for the
administrative, development and other operating costs incurred in implementing
the integrated tax system modernization project at the department. END_STATUTE
Sec. 3. Laws 2022, chapter 321, section 3 is
amended to read:
Sec. 3. Repeal
Section 42-1009, Arizona Revised Statutes, as added by this
act, is repealed from and after December 31, 2029 2031.
Sec. 4. Legislative intent
The
legislature intends:
1. That
in fiscal year 2026-2027 the fee prescribed in section 42-5041,
subsection B, Arizona Revised Statutes, as amended by this act, be assessed and
collected pursuant to the following guidelines:
(a) The total amount of fees for all counties,
cities, towns, councils of governments and regional transportation authorities
may not exceed $1,273,800 in fiscal year 2026-2027.
(b) The share of fees assessed to all counties
pursuant to subdivision (a) of this� paragraph
shall be in proportion to the aggregate amount of monies distributed to
counties for the fiscal year two years preceding the current fiscal year
pursuant to sections 42-5029, 42-6103, 42-6107, 42-6108,
42-6108.01, 42-6109, 42-6109.01, 42-6110, 42-6111
and 42-6112, Arizona Revised Statutes, as a percentage of aggregate
distributions to all counties, cities, towns, councils of governments and
regional transportation authorities located in a county with a population of
more than eight hundred thousand persons for the fiscal year two years
preceding the current fiscal year pursuant to sections 42-5029, 42-6001,
42-6103, 42-6105, 42-6105.01, 42-6106, 42-6107,
42-6108, 42-6108.01, 42-6109, 42-6109.01, 42-6110,
42-6111, 42-6112 and 43-206, Arizona Revised Statutes.
(c) The share of fees assessed to all cities and
towns pursuant to subdivision (a) of this
paragraph shall be in proportion to the aggregate amount of monies distributed
to cities and towns for the fiscal year two years preceding the current fiscal
year pursuant to sections 42-5029, 42-6001 and 43-206,
Arizona Revised Statutes, as a percentage of aggregate distributions to all
counties, cities, towns, councils of governments and regional transportation
authorities located in a county with a population of more than eight hundred
thousand persons for the fiscal year two years preceding the current fiscal
year pursuant to sections 42-5029, 42-6001, 42-6103, 42-6105,
42-6105.01, 42-6106, 42-6107, 42-6108, 42-6108.01,
42-6109, 42-6109.01, 42-6110, 42-6111, 42-6112
and 43-206, Arizona Revised Statutes.
(d) The
share of fees assessed to all councils of governments pursuant to subdivision (a) of this paragraph shall be in proportion to the aggregate
amount of monies distributed to all councils of governments for the fiscal year
two years preceding the current fiscal year pursuant to section 42-6105,
Arizona Revised Statutes, as a percentage of aggregate distributions to all
counties, cities, towns, councils of governments and regional transportation
authorities located in a county with a population of more than eight hundred
thousand persons for the fiscal year two years preceding the current fiscal
year pursuant to sections 42-5029, 42-6001, 42-6103, 42-6105,
42-6105.01, 42-6106, 42-6107, 42-6108, 42-6108.01,
42-6109, 42-6109.01, 42-6110, 42-6111, 42-6112
and 43-206, Arizona Revised Statutes.
(e) The share of fees assessed to all regional
transportation authorities located in a county with a population of more than
eight hundred thousand persons pursuant to subdivision (a) of this paragraph shall be in proportion to the aggregate
amount of monies distributed to all regional transportation authorities located
in a county with a population of more than eight hundred thousand persons for
the fiscal year two years preceding the current fiscal year pursuant to section
42-6106, Arizona Revised Statutes, as a percentage of aggregate
distributions to all counties, cities, towns, councils of governments and
regional transportation authorities located in a county with a population of
more than eight hundred thousand persons for the fiscal year two years
preceding the current fiscal year pursuant to sections 42-5029, 42-6001,
42-6103, 42-6105, 42-6105.01, 42-6106, 42-6107,
42-6108, 42-6108.01, 42-6109, 42-6109.01, 42-6110,
42-6111, 42-6112 and 43-206, Arizona Revised Statutes.
(f) Except
as provided by sections 42-5033 and 42-5033.01, Arizona Revised
Statutes, the population of a county as determined by the most recent United
States decennial census plus any revision to the decennial census certified by
the United States census bureau shall be used as the basis for apportioning
monies pursuant to subdivision (b) of this
paragraph.
(g) Except
as provided by sections 42-5033 and 42-5033.01, Arizona Revised
Statutes, the population of a city or town as determined by the most recent
United States decennial census plus any revision to the decennial census
certified by the United States census bureau shall be used as the basis for
apportioning monies pursuant to subdivision (c)
of this paragraph.
2. That in fiscal year 2026-2027
the transfer prescribed in section 42-5041, subsection E, Arizona Revised
Statutes, as amended by this act, not exceed $154,500.
3. That in fiscal year 2026-2027
the transfer prescribed in section 42-5041, subsection F, Arizona Revised
Statutes, as amended by this act, not exceed $34,400.
APPROVED BY THE GOVERNOR JUNE 13, 2026.
FILED IN THE OFFICE OF THE SECRETARY OF STATE JUNE 13, 2026.