Bill Text: AZ HB2263 | 2023 | Fifty-sixth Legislature 1st Regular | Introduced

Arizona House Bill 2263 (Prior Session Legislation)

Introduced

Bill Title: Tax credits; reporting requirements

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2023-01-26 - House read second time [HB2263 Detail]

Download: Arizona-2023-HB2263-Introduced.html

REFERENCE TITLE: tax credits; reporting requirements

State of Arizona

House of Representatives

Fifty-sixth Legislature

First Regular Session

2023

HB 2263

Introduced by

Representative Cano

An Act

amending sections 41-1518, 43-1083.02 and 43-1164.03, Arizona Revised Statutes; relating to income tax credits.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 41-1518, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1518. Capital investment incentives; evaluation; certification; reporting requirements; definitions

A. The Arizona commerce authority shall receive and evaluate applications that are submitted by qualified investors to receive a tax credit pursuant to section 43-1074.02 for qualified investments made in a qualified small business and shall certify to the department of revenue the names, amounts and other relevant information relating to the applicants.

B. To be eligible for a tax credit pursuant to this section and section 43-1074.02, a qualified investor shall file an application with the authority within ninety days after making a qualified investment. The application, on a form prescribed by the authority, shall include:

1. The name, address and federal income tax identification number of the applicant.

2. The name and federal employer identification number of the qualified small business that received a qualified investment made by the applicant.

3. The date the qualified investment was made.

4. Any additional information that the authority requires.

C. As part of the application, the applicant and the qualified small business that receives the investment shall each provide written authorization pursuant to section 42-2003 designating the authority as eligible to receive tax information from the department of revenue for the purpose of determining if any misrepresentations exist on the application.� The authorization shall limit disclosure to income tax information for the latest two years for which returns were filed with the department of revenue preceding the date the application is filed and for all tax years through the year in which the investment was made for which a return was not filed as of the date of the application. The applicant shall also provide in the written authorization income tax information for all tax years in which the applicant could claim or carry forward the credit pursuant to this section, but limited to the tax years in which the applicant actually claims a credit or carries forward a credit on a return filed with the department of revenue.� An applicant who has an individual ownership interest as a co-owner of a business who may be entitled to a pro rata share of the credit pursuant to section 43-1074.02, subsection E shall provide a written authorization with content similar to the authorization, and in the same manner as, any other applicant is required to provide.

D. The authority shall review and make a determination with respect to each application within ninety days after receiving the application. The authority may request additional information from the applicant in order to make an informed decision regarding the eligibility of the qualified investor or qualified small business.

E. Subject to subsection F of this section, the authority shall authorize tax credits for each qualified investor who makes a qualified investment in a qualified small business. The amount of the credit shall be:

1. If the qualified investment is made in a qualified small business that maintains its principal place of business in a rural county of this state or is a bioscience enterprise, twelve percent of the amount of the investment per year for the first and second taxable years after the investment is made and eleven percent of the amount of the investment for the third taxable year after the year in which the investment is made.

2. If the qualified investment is made in a qualified small business other than a business described in paragraph 1 of this subsection, ten percent of the amount of the investment for each of the three taxable years after the year in which the investment is made.

F. The authority shall not authorize tax credits under this section after June 30, 2031. Through June 30, 2017, the authority shall not certify tax credits under this section exceeding $20,000,000.� From and after June 30, 2017 through June 30, 2021, the authority may certify additional tax credits under this section not exceeding $2,500,000 each fiscal year, plus any unused credit capacity that carries over from the preceding fiscal year or years. From and after June 30, 2021 through June 30, 2031, the authority may certify additional tax credits under this section not exceeding $2,500,000 each fiscal year, plus any unused credit capacity that carries over from the preceding fiscal year or years. Tax credits that expire after certification or that are otherwise not timely used by the qualified investor for whom they were originally authorized shall also be included in the applicable dollar limit. If qualifying applications exceed the dollar limit, the authority shall authorize credits in the order of the date and time that the applications are received by the authority, as evidenced by the time and date stamped on the application when received by the authority. All applications shall be filed on a form and in the manner prescribed by the authority. If an application is received that, if authorized, would require the authority to exceed the applicable dollar limit, the authority shall only grant the applicant the remaining amount of tax credits that would not exceed the dollar limit. After the authority authorizes the allowable amount of tax credits, the authority shall deny any subsequent applications that are received. The authority shall certify to the qualified investor and to the department of revenue the amount of the tax credit that is authorized for the purposes of section 43-1074.02 for each taxable year described in subsection E of this section.

G. The total of all qualified investments in any calendar year by a qualified investor and its affiliates in qualified small businesses that are eligible for a tax credit pursuant to this section and section 43-1074.02 shall not exceed $500,000. The maximum amount of qualified investments in a single qualified small business for which the authority may authorize tax credits under this section shall not exceed an aggregate of $2,000,000 in investments for all taxable years. If applications for tax credits are received for investments that exceed the limits prescribed by this subsection for any qualified small business, the authority shall authorize credits in the order of the date and time that the applications are received by the authority. If an application is received that, if authorized, would require the authority to authorize tax credits for any investment in a qualified small business that would cause the total qualified investments in the business to exceed the limits prescribed by this subsection, the authority shall only grant the applicant the remaining amount of tax credits that would not exceed the limits prescribed by this subsection.

H. The qualified investor shall file a return claiming the tax credit with the department of revenue for application against income tax pursuant to section 43-1074.02 by the due date of the return, including extensions, for the tax year in which the credit is available. If the qualified investor fails to timely file a return claiming the credit for a taxable year, the credit expires for that taxable year and there shall be no carryforward of the expired credit. If a qualified investor includes co-owners of a business who qualify for individual pro rata shares of the credit pursuant to section 43-1074.02, subsection E, each individual owner shall file a return claiming the tax credit with the department of revenue by the due date of the return, including extensions, for the tax year in which the credit is available. If an individual co-owner fails to timely file a return claiming the credit for a taxable year, the credit expires for that taxable year and there shall be no carryforward of the expired credit. Credits that expire or that otherwise are not timely used by the qualified investor or by the individual co-owner of a business for whom the credits were originally authorized shall not be reissued.

I. On receiving an application for a tax credit from a qualified investor, or a written request for certification as a qualified small business from a corporation, limited liability company, partnership or other business entity, the authority shall determine whether the corporation, limited liability company, partnership or other business entity that is named in the application or written request is a qualified small business. The authority shall determine if the business is a bioscience enterprise and if the business maintains its principal place of business in a rural county in this state. After determining the qualifications, the authority shall certify the qualified small business as being eligible to receive qualified investments for purposes of this section. The certification is valid for one year, but the authority may revoke the certification at any time or refuse to renew the certification if the business fails to maintain the required qualifications. If a qualified small business fails to maintain the qualifications, the business shall notify the authority within five business days after failing to meet the qualifications. The authority shall revoke the certification of the business and may assess a penalty against the business entity equal to the amount of the tax credits authorized after the business failed to meet the qualifications. The penalty shall be deposited in the state general fund. If the certification is revoked or expires, subsequent investments in the business do not qualify for a tax credit pursuant to this section and section 43-1074.02. All tax credits that are issued before any expiration or revocation of the certification shall remain valid.� Any application for a tax credit shall not be denied on the basis of the expiration or revocation of the certification if the investment was made before the date of the expiration or revocation.

J. The authority shall provide to the department of revenue necessary information required to administer this section and section 43-1074.02. If the authority subsequently discovers that an applicant who received a tax credit misrepresented information on the application, the authority shall immediately notify the department of revenue and provide the department of revenue all information that relates to that applicant. If the department of revenue determines that there has been a misrepresentation on the application, the department of revenue shall deny the credit if the misrepresentation relates to whether the applicant was a qualified investor or made a qualified investment. If the misrepresentation relates to whether the investment was made to:

1. A qualified small business, the department of revenue shall deny the credit only if the applicant knew or should have known at any time before the certification that the representation was false.

2. A bioscience enterprise or a business that maintains its principal place of business in a rural county in this state, the department of revenue shall decrease the amount of the credit that would have been allowed under subsection E, paragraph 1 of this section to the amount allowed under subsection E, paragraph 2 of this section only if the applicant knew or should have known at any time before the certification that the representation was false.

K. ON or before May 15 of each year, each qualified investor shall report to the authority, on a form prescribed by the authority, The number of jobs created by a qualified small business that received a qualified investment from the qualified investor.

L. On or before June 15 of each year, the authority shall report to the president of the senate, the speaker of the house of representatives and the joint legislative budget committee the information it receives pursuant to subsection K of this section and the following information:

1. The allocation of qualified investments by industry.

2. The number of qualified small businesses that received qualified investments and that remain active.

K. M. For the purposes of this section:

1. "Affiliate" means any person or entity that controls, that is controlled by or that is under common control with another person or entity. For the purposes of this paragraph, "control" means the power to determine the policies of an entity whether through ownership of voting securities, by contract or otherwise.

2. "Asset" means any owned property that has value, including financial assets and physical assets.� Intellectual property shall not be included when determining total assets.

3. "Bioscience enterprise" means a business whose activity is related to bioscience as determined by the authority or any corporation, partnership, limited liability company or other business entity that is primarily engaged in a business that conducts research, development, manufacturing, marketing, sales and licensing of products, services and solutions relating to either of the following:

(a) Medical, pharmaceutical, nutraceutical, bioengineering, biomechanical, bioinformatics or other life-science based applications.

(b) Applications of modern biological, bioengineering, biomechanical or bioinformatics technologies in the fields of human, plant or animal health, agriculture, defense, homeland security or the environment.

4. "Qualified investment" means an investment in an equity security that meets all of the following requirements:

(a) The equity security shall be common stock, preferred stock, an interest in a partnership or limited liability company, a security that is convertible into an equity security or any other equity security as determined by the authority.

(b) The investment shall be at least $25,000.

(c) The qualified investor and its affiliates do not hold, of record or beneficially, immediately before making an investment, equity securities possessing more than thirty percent of the total voting power of all equity securities of the qualified small business.

5. "Qualified investor" means an individual, limited liability company, partnership, S corporation as defined in section 1361 of the internal revenue code or other business entity that makes a qualified investment in a qualified small business. Qualified investor does not mean a corporation that is subject to tax under title 43, chapter 11.

6. "Qualified small business" means a corporation, limited liability company, partnership or other business entity that:

(a) Maintains at least a portion of its operations at an office or manufacturing or research facility located in this state.

(b) Has at least two principal full-time equivalent employees who are residents in this state. For the purposes of this subdivision, "principal" means a person whose sole responsibility is not administrative.

(d) Has total assets not exceeding $2,000,000 through December 31, 2011 or $10,000,000 beginning from and after December 31, 2011, excluding any investment made under this section.

(e) Has not exceeded the limit on qualified investments prescribed by subsection G of this section.

(f) Does not have a principal business involving activities excluded by the authority.� The authority shall provide a list of excluded businesses to any person on request.

7. "Rural county" means a county that has a population of seven hundred fifty thousand or fewer persons. END_STATUTE

Sec. 2. Section 43-1083.02, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1083.02. Renewable energy production tax credit; reporting requirements; definitions

A. A credit is allowed against the taxes imposed by this title for the production of electricity using renewable energy resources.

B. The taxpayer is eligible for the credit:

1. If the taxpayer holds title to a qualified energy generator that first produces electricity from and after December 31, 2010 and before January 1, 2021.

2. For ten consecutive calendar years beginning with the calendar year in which the qualified energy generator begins producing electricity that is transmitted through a transmission facility to a grid connection with a public or private electric transmission or distribution utility system.� That same date applies with respect to that generator until the expiration of the ten-year period regardless of whether the generator is sold to another taxpayer or goes out of production before the expiration of the ten-year period.

C. The credit authorized by this section is based on the electricity that is generated by a qualified energy generator during a calendar year.� For a taxpayer that files on a fiscal year basis, the credit shall be claimed on the return for the taxable year in which the calendar year ends.

D. Subject to subsection G of this section, the amount of the credit is:

1. One cent $.01 per kilowatt-hour of the first two hundred thousand megawatt-hours of electricity produced by a qualified energy generator in the calendar year using a wind or biomass derived qualified energy resource.

2. The following amounts for electricity produced by a qualified energy generator using a solar light derived or solar heat derived qualified energy resource:

(a) Four cents $.04 per kilowatt-hour in the first calendar year in which the qualified energy generator produces electricity.

(b) Four cents $.04 per kilowatt-hour in the second calendar year in which the qualified energy generator produces electricity.

(c) Three and one-half cents $.035 per kilowatt-hour in the third calendar year in which the qualified energy generator produces electricity.

(d) Three and one-half cents $.035 per kilowatt-hour in the fourth calendar year in which the qualified energy generator produces electricity.

(e) Three cents $.03 per kilowatt-hour in the fifth calendar year in which the qualified energy generator produces electricity.

(f) Three cents $.03 per kilowatt-hour in the sixth calendar year in which the qualified energy generator produces electricity.

(g) Two cents $.02 per kilowatt-hour in the seventh calendar year in which the qualified energy generator produces electricity.

(h) Two cents $.02 per kilowatt-hour in the eighth calendar year in which the qualified energy generator produces electricity.

(i) One and one-half cents $.015 per kilowatt-hour in the ninth calendar year in which the qualified energy generator produces electricity.

(j) One cent $.01 per kilowatt-hour in the tenth calendar year in which the qualified energy generator produces electricity.

E. To qualify for the purposes of this section, an energy generator may be located within one mile of an existing qualified energy generator only if the owner of the energy generator or the owner's corporate affiliates are not the owner of or the corporate affiliate of the owner of the existing qualified energy generator.

F. To be eligible for the credit under this section, the taxpayer must apply to the department, on a form prescribed by the department, for certification of the credit.� The department shall only accept applications beginning January 2 through January 31 of the year following the calendar year for which the credit is being requested.� The application shall include:

1. The name, address and social security number or federal employer identification number of the applicant.

2. The location of the taxpayer's facility that produces electricity using renewable energy resources for which the credit is claimed.

3. The amount of the credit that is claimed.

4. The date the qualified energy generator began producing commercially marketable amounts of electricity.

5. Any additional information that the department requires.

G. The department shall review each application under subsection F of this section and certify to the taxpayer the amount of the credit that is authorized.� The amount of the credit for any calendar year shall not exceed two million dollars $2,000,000 per facility that produces electricity using renewable energy resources.� Credits are allowed under this section and section 43-1164.03 on a first come, first served first-come, first-served basis. The department shall not authorize tax credits under this section and section 43-1164.03 that exceed in the aggregate a total of twenty million dollars $20,000,000 for any calendar year.� The first time that a taxpayer submits a qualified application for a qualified energy generator under subsection F of this section, the department shall add the taxpayer's name to a credit authorization list that is maintained in the order in which qualified applications are first received by the department on behalf of the qualified energy generator.� A taxpayer's position on the credit authorization list shall be determined in the first year the taxpayer submits an application under subsection F of this section for the qualified energy generator. The taxpayer's position on the credit authorization list for a particular qualified energy generator shall remain unchanged for the ten years that are specified in subsection B, paragraph 2 of this section or until a year in which the taxpayer fails to submit a timely application under subsection F of this section or otherwise fails to comply with this section. If a taxpayer is removed from the credit authorization list for a qualified energy generator, the taxpayer may establish a new position on the credit authorization list in a subsequent year by filing a timely application for a qualified energy generator that qualifies for the credit. If an application is received that, if authorized, would require the department to exceed the twenty million dollar $20,000,000 limit, the department shall grant the applicant only the remaining credit amount that would not exceed the twenty million dollar $20,000,000 limit. After the department authorizes twenty million dollars $20,000,000 in tax credits, the department shall deny any subsequent applications that are received for that calendar year.� The department shall not authorize any additional tax credits that exceed the twenty million dollar $20,000,000 limit even if the amounts that have been certified to any taxpayer were not claimed or a taxpayer otherwise fails to meet the requirements to claim the additional credit.

H. Co-owners of a qualified energy generator, 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 the pro rata share of the credit allowed under this section based on ownership interest.� The total of the credits allowed all such owners of the qualified energy generator may not exceed the amount that would have been allowed for a sole owner of the generator.

I. 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.

J. The department shall adopt rules and publish and prescribe forms and procedures as necessary to effectuate the purposes of this section.

K. ON or before May 15 of each year, each claimant shall report to the department, on a form prescribed by the department, all of the following:

1. The total megawatt hours of electricity generated from the qualified energy generator specified by the qualified energy RESOURCE used.

2. The total megawatt hours of electricity generated from nonqualified energy resources.

3. The number of persons employed at the time the tax credit is claimed by businesses in this state that manufacture, install or service qualified energy generators in this state.

L. On or before June 15 of each year, the department shall report the information it receives pursuant to subsection K of this section to the president of the senate, the speaker of the house of representatives and the joint legislative budget committee.

K. M. 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.

(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, excluding pressure-treated, chemically-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 byproducts generated during the wastewater treatment process.

2. "Qualified energy generator" means a facility that has at least five megawatts generating capacity, that is located on land in this state owned or leased by the taxpayer, that produces electricity using a qualified energy resource and that sells that electricity to an unrelated entity, unless the electricity is sold to a public service corporation.

3. "Qualified energy resource" means a resource that generates electricity through the use of only the following energy sources:

(a) Solar light.

(b) Solar heat.

(d) Biomass. END_STATUTE

Sec. 3. Section 43-1164.03, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1164.03. Renewable energy production tax credit; reporting requirements; definitions