Bill Text: AZ HB2429 | 2021 | Fifty-fifth Legislature 1st Regular | Chaptered
Bill Title: Tax corrections act of 2021
Spectrum: Partisan Bill (Republican 2-0)
Status: (Passed) 2021-04-09 - Chapter 196 [HB2429 Detail]
Download: Arizona-2021-HB2429-Chaptered.html
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Senate Engrossed House Bill
tax corrections act of 2021
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State of Arizona House of Representatives Fifty-fifth Legislature First Regular Session 2021
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CHAPTER 196
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HOUSE BILL 2429 |
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AN ACT
amending sections 36-798.06, 41-1520, 42-1003, 42-2001, 42-2003, 42-3001, 42-3401, 42-3502, 42-12009, 43-222, 43-304, 43-931, 43-1021, 43-1022 and 43-1024; Arizona Revised Statutes; repealing section 43-1030, Arizona Revised Statutes; amending sections 43-1072.02 and 43-1074.01, Arizona Revised Statutes; repealing section 43-1087, Arizona Revised Statutes; amending sections 43-1089.01, 43-1164.05, 43-1168 and 43-1175, 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 36-798.06, Arizona Revised Statutes, is amended to read:
36-798.06. Delivery sales prohibited; common carriers; penalties; forfeiture; unlawful practice; exceptions; violation; classification; definitions
A. A person shall not do either of the following:
1. Cause a tobacco product to be ordered or purchased by anyone other than a licensed person or a retailer who orders or purchases from a licensed person, including by ordering or purchasing a tobacco product.
2. Knowingly provide substantial assistance to a person who violates this section.
B. A common carrier shall not knowingly transport a tobacco product for a person who is in violation of this section.
C. Each order or purchase of a tobacco product in violation of subsection A, paragraph 1 of this section constitutes a separate violation under this section.
D. In addition to any other penalty, a person who violates this section is subject to all of the following:
1. A civil penalty in an amount not to exceed five thousand dollars $5,000 for each violation.
2. An injunction to restrain a threatened or actual violation of this section.
3. Recovery by this state for:
(a) The costs of any investigation related to a violation of this section.
(b) The cost of expert witness fees in any action related to a violation of this section.
(c) The cost of the action related to a violation of this section.
(d) Reasonable attorney fees.
4. All state tobacco taxes due under title 42, chapter 3, except as prohibited under section 42-3402, and all transaction privilege or use taxes due under title 42, chapter 5, including any penalties and interest.
E. All tobacco products that are seized for a violation of this section shall be forfeited to the state and destroyed pursuant to section 42-1124.
F. A violation of this section is an unlawful practice under section 44-1522 and is in addition to all other causes of action, remedies and penalties that are available to this state. The attorney general may investigate and take appropriate action pursuant to title 44, chapter 10, article 7.
G. This section does not apply to either any of the following:
1. The shipment of a tobacco product to a foreign trade zone that is established under 19 United States Code section 81 sections 81a through 81u and title 44, chapter 18 and that is located in this state if the tobacco product is from outside of this country, was ordered by a distributor in another state and is not distributed in this state.
2. A government employee who is acting in the course of the employee's official duties.
3. The shipment of a tobacco product to a university that is acquiring the tobacco product to use to conduct basic and applied research, if the tobacco product is exempt from federal excise tax under 26 United States code section 5704(a).
H. A person who violates this section is guilty of a class 6 felony.
I. For the purposes of this section:
1. "Licensed person" means a person who is required to be licensed under section 42-3401.
2. "Order or purchase" means any of the following:
(a) By mail or delivery service.
(b) Through the internet or a computer network.
(c) By telephone.
(d) Through any other electronic method.
3. "Person" means an individual, partnership, firm, association, corporation, limited liability company or partnership, joint venture or other entity.
4. "Retailer" has the same meaning prescribed in section 42-5001.
5. "Tobacco product" means all luxuries included in section 42-3052, paragraphs 5, 6 and 7. Tobacco product does not include pipe tobacco or cigars.
Sec. 2. Section 41-1520, Arizona Revised Statutes, is amended to read:
41-1520. 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 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 both all of the following investment 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 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.
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 investment requirements prescribed in subsection D of this section. Until the investment 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.
G. H. The authority and the department of revenue shall prescribe forms and procedures as necessary for the purposes of this section.
H. 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.
I. 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.
J. 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.
K. M. For the purposes of this section:
1. "Affiliated entity" means an entity that is included in the same Arizona income tax return as 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.
1. 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 or section 43-1164.05, subsection B.
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 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.
2. 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, paragraph 2 and section 42-6012, paragraph 2.
Sec. 3. Section 42-1003, Arizona Revised Statutes, is amended to read:
42-1003. Department organization; director's staff; deputy director; assistant directors; fingerprinting; consumer reports; definitions
A. The department consists of such divisions as the director deems necessary to achieve maximum efficiency, economy and effectiveness in administering and collecting taxes. The departmental organization shall provide for administering taxes as prescribed by law and for administrative services to the department, including data processing, accounting, records management, publications, collection of delinquent accounts, personnel services and budget and property control.
B. The director may divide the state into a reasonable number of districts and establish a full-time or part-time branch office or offices in each district as may be necessary. In establishing districts and branch offices, the director shall give due consideration to economy of administration and service to the taxpayers.
C. The director may employ, appoint and remove, in the manner prescribed by law, such officers, agents, branch office deputies and other staff personnel as the director deems necessary to assist in administering the department. The director's staff may perform such functions as the director prescribes, including budget development, legal research and analysis, tax research, departmental audit and public relations.
D. A deputy director of the department may be appointed by the director with the approval of the governor. The deputy director, if appointed, serves at the pleasure of the director with the approval of the governor. The deputy director shall assist the director in administering the department and has the duties and responsibilities as the director assigns.
E. The director, with the approval of the governor, may appoint an assistant director to head each division of the department. Any assistant director appointed is directly responsible for the functions performed by the assistant director's division. Each assistant director serves at the pleasure of the director with the approval of the governor.
F. The director may appoint other deputies or assistants to conduct hearings, prescribe administrative rules or perform any other duty prescribed for the department by law.
G. The director may require officers, agents, deputies and other employees designated by the director to give bond for the faithful performance of their duties in such an amount and with such sureties as the director determines or as prescribed by statute. The department shall pay all premiums on the bonds out of monies appropriated for the administration of the department.
H. The director and officers and employees designated by the director may administer an oath to any person or take the acknowledgement of any person in respect of any return or report required by law or the administrative rules of the department.
I. The director may reassign the administration of taxes and may assign and delegate the duties, powers and functions of the department among its divisions in order to achieve maximum efficiency, economy and effectiveness. The director or the deputy director, if any, shall enforce cooperation among the divisions in the provision and integration of all functions at all levels of the department.
J. The director may obtain a state and federal criminal records check for an applicant for employment for the purpose of hiring personnel or for any employee, or contractor or temporary employee as required by internal revenue service guidelines or any other federal guidelines. if the applicant, employee or contractor may receive or access federal tax information obtained from the internal revenue service in the course of employment with the department. Before making a final offer of employment or for purposes of screening an employee or contractor, the director shall require the preferred applicants, employees or contractors applicant, employee or contractor to submit a full set of fingerprints. The director shall submit the fingerprints to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41-1750 and Public Law 92-544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation. The department of revenue may disclose information obtained pursuant to this subsection only to members of the department's staff solely for employment purposes. An applicant, employee, or contractor or temporary employee is not disqualified from employment under this subsection except in accordance with section 13-904, subsection E.
K. The director may obtain a consumer report for an applicant for employment for the purpose of hiring personnel whose job duties include the distribution of distributing tax revenues pursuant to this title and title 43. Consumer report information may be obtained and used only in accordance with the fair credit reporting act (P.L. 90-321; 84 Stat. 1128; 15 United States Code sections 1681 through 1681x). The consumer report information shall not be the sole reason for the disqualification of the applicant.
L. For the purposes of this section: ,
1. "Applicant" means any person who seeks employment as a new hire or any employee of the department who seeks a transfer, a reclassification or a reassignment to a different position.
2. "Federal tax information" means returns and return information as defined in 26 United States code section 6103(b) that the department receives directly from the internal revenue service or obtains through an Internal revenue service-authorized secondary source and that are subject to the confidentiality protections and safeguarding requirements of the internal revenue code and corresponding federal regulations and guidance.
Sec. 4. Section 42-2001, Arizona Revised Statutes, is amended to read:
42-2001. Definitions
In this article, unless the context otherwise requires:
1. "Confidential information":
(a) Includes the following information whether it concerns individual taxpayers or is aggregate information for specifically identified taxpayers:
(i) Returns and reports filed with the department for income tax, withholding tax, transaction privilege tax, luxury tax, use tax, property tax, excise tax on marijuana and severance tax.
(ii) Applications to receive a license or registration for transaction privilege licenses tax, luxury tax licenses, use tax licenses, excise tax on marijuana and withholding licenses tax.
(iii) Information discovered concerning taxes and receipts by the department, whether or not by compulsory process.
(iv) Return information obtained from the United States internal revenue service and United States bureau of alcohol, tobacco and firearms.
(v) Information supplied at the special request of the department by a taxpayer that the taxpayer requests to be held in confidence.
(vi) Guidelines, standards or procedures that are established by the department for, or other information relating to, selecting returns or taxpayers for examination or settling or compromising any tax liability.
(vii) A taxpayer's identity, the nature, source or amount of the taxpayer's income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments or tax payments, whether the taxpayer's return was, is being or will be examined or subject to investigation, collection or processing or any other data received by, recorded by, prepared by, furnished to or collected by the department with respect to a return or with respect to the termination, or possible existence, of liability of any person for any tax, penalty or interest imposed pursuant to this title or title 43.
(viii) Information supplied by an employee to an employer regarding the employee's election to have the employee's withholding tax reduced for the purposes of contributions to qualifying charitable organizations, qualified school tuition organizations or public schools pursuant to section 43-401, subsection G.
(b) Does not include information that is otherwise a public record.
2. "Report" includes a notice of insurance payments, a request for a release of a bank account and an inventory of a safe deposit box.
3. "Return" includes any form prescribed by the department and any supporting schedules, attachments and lists.
4. "Tax administration" includes assessment, collection, investigation, litigation, statistical gathering functions, enforcement, policy making functions or management of those functions of the tax revenue laws of this state.
5. "Tax official" means a nonelected employee or the nonelected employee's designee or agent who is responsible for tax administration.
6. "Taxpayer", with respect to a joint return, means either party.
Sec. 5. Section 42-2003, Arizona Revised Statutes, is amended to read:
42-2003. 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.
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 41-1511, subsections U and V and section 41-1512, subsections U and V.
(d) Certifying computer data centers for tax relief under section 41-1519.
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 if the following:
(a) whether a medical marijuana dispensary is in compliance with the tax requirements of title 42, 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.
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. 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 permitted 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. 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. 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. The department and attorney general may share the information specified in subsection S 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 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 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. 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. 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 only be used 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. 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.
Sec. 6. Section 42-3001, Arizona Revised Statutes, is amended to read:
42-3001. Definitions
In this chapter, unless the context otherwise requires:
1. "Affix" and "affixed" include imprinting tax meter stamps on packages and individual containers as authorized by the department.
2. "Brand family" has the same meaning prescribed in section 44-7111.
3. "Cavendish" means a tobacco product that is smoked from a pipe and that meets one of the following criteria:
(a) Is described as cavendish, as containing cavendish or as a cavendish blend on its packaging, labeling or promotional materials.
(b) Appears to have been processed or manufactured with an amount of flavorings and humectants that exceeds twenty percent of the weight of the tobacco contained in the product.
(c) Appears to be blended with or contain a tobacco product described in subdivision (b) of this paragraph.
4. "Cider" means vinous liquor that is made from the normal alcoholic fermentation of the juice of sound, ripe apples, pears or other pome fruit, including flavored, sparkling and carbonated cider and cider made from condensed apple, pear or other pome fruit must, and that contains more than one-half of one percent of alcohol by volume but not more than seven percent of alcohol by volume.
5. "Cigar" means any roll of tobacco wrapped in leaf tobacco or in any substance containing tobacco other than any roll of tobacco that is a cigarette, as defined in paragraph 6, subdivision (b) of this section.
6. "Cigarette" means either of the following:
(a) Any roll of tobacco wrapped in paper or any substance not containing tobacco.
(b) Any roll of tobacco wrapped in any substance containing tobacco that, because of its appearance, the type of tobacco used in the filler or its packaging and labeling, is likely to be offered to or purchased by a consumer as a cigarette described in subdivision (a) of this paragraph. This subdivision shall be interpreted consistently with the classification guidelines established by the federal alcohol and tobacco tax and trade bureau.
7. "Consumer" means a person in this state that comes into possession of any luxury subject to the tax imposed by this chapter and that, on coming into possession of the luxury, is not a distributor intending to sell or distribute the luxury, a retailer or a wholesaler.
8. "Craft distiller" means a distiller in the United States or in a territory or possession of the United States that holds a license pursuant to section 4-205.10.
9. "Distributor" means any person that manufactures, produces, ships, transports or imports into this state or in any manner acquires or possesses for the purpose of making the first sale of the following:
(a) Cigarettes without Arizona tax stamps affixed as required by this article.
(b) Roll-your-own tobacco or other tobacco products on which the taxes have not been paid as required by this chapter.
10. "Farm winery" has the same meaning prescribed in section 4-101.
11. "First sale" means the initial sale or distribution in intrastate commerce or the initial use or consumption of cigarettes, roll-your-own tobacco or other tobacco products.
12. "Luxury" means any article, object or device on which a tax is imposed under this chapter.
13. "Malt liquor" means any liquid that contains more than one-half of one percent alcohol by volume and that is made by the process of fermentation and not distillation of hops or grains, but not including:
(a) Liquids made by the process of distillation of such substances.
(b) Medicines that are unsuitable for beverage purposes.
14. "Master settlement agreement" has the same meaning prescribed in section 44-7101.
15. "Microbrewery" has the same meaning prescribed in section 4-101.
16. "Nonparticipating manufacturer" has the same meaning prescribed in section 44-7111.
17. "Other tobacco products" means tobacco products other than cigarettes and roll-your-own tobacco.
18. "Participating manufacturer" has the same meaning prescribed in section 44-7111.
19. "Person" means any individual, firm, partnership, joint venture, association, corporation, municipal corporation, estate, trust, club, society or other group or combination acting as a unit, and the plural as well as the singular number.
20. "Place of business" means a building, facility site or location where an order is received or where tobacco products are sold, distributed or transferred. Place of business does not include a vehicle.
21. "Retailer" means any person that comes into possession of any luxury subject to the taxes imposed by this chapter for the purpose of selling it for consumption and not for resale.
22. "Roll-your-own tobacco" means any tobacco that, because of its appearance, type, packaging or labeling, is suitable for use and likely to be offered to or purchased by consumers as tobacco for making cigarettes. This paragraph shall be interpreted consistently with the term as used in section 44-7101. This paragraph shall be interpreted consistently with the classification guidelines established by the federal alcohol and tobacco tax and trade bureau.
23. "Smoking tobacco" means any tobacco that, because of its appearance, type, packaging, labeling or promotion, is suitable for use and likely to be offered to or purchased by consumers as tobacco for making cigarettes or otherwise consumed by burning. Smoking tobacco includes pipe tobacco and roll-your-own tobacco.
24. "Spirituous liquor" means any liquid that contains more than one-half of one percent alcohol by volume, that is produced by distillation of any fermented substance and that is used or prepared for use as a beverage. Spirituous liquor does not include medicines that are unsuitable for beverage purposes.
25. "Tobacco product manufacturer" has the same meaning prescribed in section 44-7101.
26. "Tobacco products" means all luxuries included in section 42-3052, paragraphs 5 through 9.
27. "Vehicle" means a device in, on or by which a person or property is or may be transported or drawn on the roads of this state regardless of the means by which it is propelled or whether it runs on a track.
28. "Vinous liquor" means any liquid that contains more than one-half of one percent alcohol by volume and that is made by the process of fermentation of grapes, berries, fruits, vegetables or other substances but does not include:
(a) Liquids in which hops or grains are used in the process of fermentation.
(b) Liquids made by the process of distillation of hops or grains.
(c) Medicines that are unsuitable for beverage purposes.
29. "Wholesaler" means a person that sells any spirituous, vinous or malt liquor taxed under this chapter to retail dealers or for the purposes of resale only.
Sec. 7. Section 42-3401, Arizona Revised Statutes, is amended to read:
42-3401. Tobacco distributor licenses; application; conditions; revocations and cancellations
A. Every person acquiring or possessing for the purpose of making the initial sale or distribution in this state of any tobacco products on which a tax is imposed by this chapter shall obtain from the department a license to sell tobacco products. The application for the license shall be in the form provided by the department and shall be accompanied by a fee of $25 for each place of business listed in the application. The form shall state that the identity of the applicant will be posted to the department's website for public inspection. The application for a license shall include the applicant's name and address, the applicant's principal place of business, all other places of business where the applicant's business is conducted for the purpose of making the initial sale or distribution of tobacco products in this state, including any location that maintains an inventory of tobacco products, and any other information required by the department. The applicant's principal place of business and other business locations may not include a residential location or post office box address, except as allowed under subsection D, paragraph 2, subdivision (c) of this section. If the applicant is a firm, partnership, limited liability company, limited liability partnership or association, the applicant shall list the name and address of each of the applicant's members. If the applicant is a corporation, the application shall list the name and address of the applicant's officers and any person who directly or indirectly owns an aggregate amount of ten percent or more of the ownership interest in the corporation. If a licensee is a corporation, firm, partnership, limited liability company, limited liability partnership or association, the licensee under this subsection shall notify the department in writing within thirty days after any change in membership, legal entity status or ownership of more than fifty percent of the total ownership interest in a single transaction. If a licensee changes its business location, the licensee under this subsection shall notify the department within thirty days after a change in location. If the licensee is making a change in its business location by adding or replacing one or more additional places of business that are not currently listed on its application, the licensee must remit a fee of $25 for each additional place of business.
B. For the purposes of subsection A of this section, an applicant with a controlling interest in more than one business engaged in activities as a distributor shall apply for a single license encompassing all such businesses and list each place of business in its application. For the purposes of this subsection, "controlling interest" means direct or indirect ownership of at least eighty percent of the voting shares of a corporation or of the interests in a company, business or person other than a corporation.
C. The department shall issue a license authorizing the applicant to acquire or possess tobacco products in this state on the condition that the applicant complies with this chapter and the rules of the department. The license:
1. Shall be nontransferable. A licensee may not transfer its license to a new owner when selling its business, and any court-appointed trustee, receiver or other person shall obtain a license in its own name in cases of liquidation, insolvency, or bankruptcy or pursuant to a court order if the business remains in operation as a distributor of tobacco products. in cases of liquidation, insolvency or bankruptcy or pursuant to a court order, the department will not consider a business as remaining in operation under this paragraph if the court-appointed trustee, receiver or other person winds up the business within sixty days after the order is issued. A licensee shall apply for a new license if it changes its legal entity status or otherwise changes the legal structure of its business.
2. Shall be valid for one year unless earlier canceled or revoked by the department.
3. Shall be displayed in a conspicuous place at the licensee's place of business. If the licensee operates from more than one place of business, the licensee must display a copy of its license in a conspicuous place at each location.
D. As a condition of licensure under this section, an applicant agrees to the following conditions:
1. A person may not hold or store any tobacco products, whether within or outside of this state, for sale or distribution in this state by or on behalf of a distributor at any place other than a location that has been disclosed to the department pursuant to subsection A of this section. This paragraph does not include a person holding or storing tobacco products by or on behalf of the distributor when the tobacco products are in transit to a distributor or retailer as part of a lawful sale.
2. All tobacco products held or stored, whether within or outside of this state, for sale or distribution in this state by or on behalf of a distributor:
(a) Shall be accessible to the department during normal business hours without a judicial warrant or prior written consent of the distributor.
(b) May not be held or stored in a vehicle, except as allowed under section 42-3403, subsection B.
3. Tobacco products may be sold, transferred or distributed to a retailer located on an Indian reservation in this state only if the retailer is registered with, and has a registration identification number issued by, the department.
E. A person who is convicted of an offense described in section 42-1127, subsection E is permanently ineligible to hold a license issued under this section.
F. The department may not issue or renew a license to an applicant and may revoke a license issued under subsection C of this section if any of the following applies:
1. The applicant or licensee owes $1,000 or more in delinquent taxes imposed on tobacco products under this chapter that are not under protest or subject to a payment agreement.
2. The department has revoked any license held by the applicant or licensee within the previous two years.
3. The applicant or licensee has been convicted of a crime that relates to stolen or counterfeit cigarettes.
4. The applicant or licensee has imported cigarettes into the United States for sale or distribution in violation of 19 United States Code section 1681a.
5. The applicant or licensee has imported cigarettes into the United States for sale or distribution without fully complying with the federal cigarette labeling and advertising act (P.L. 89-92; 79 Stat. 282; 15 United States Code section 1331).
6. The applicant or licensee is in violation of section 13-3711 or section 36-798.06, subsection A.
7. Pursuant to section 44-7111, section 6(a), the applicant or licensee is in violation of section 44-7111, section 3(c).
8. The civil rights of the applicant or licensee have been suspended under section 13-904. An applicant or licensee whose civil rights have been suspended is ineligible to hold a license for a period of five years following the restoration of the applicant's or licensee's civil rights.
G. In addition to any other civil or criminal penalty and except as otherwise provided in this section, the department may deny the issuance or renewal of or revoke a license issued under subsection C of this section if the person violates any requirement under this title more than two times within a three-year period or fails to otherwise maintain the conditions of licensure in this section.
H. The department shall publish on its website the names of each person who is issued a license under subsection C of this section, including any trade names or business names used by the licensee. The department shall update the published names at least once each month.
I. A person may not apply for or hold a distributor's license if that person does not engage in the activities described in subsection A of this section. In addition to any other applicable penalty, the department may cancel the license of any licensee that fails to incur any tax liability under this chapter for twelve consecutive months.
J. Any revocation, cancellation or denial of a license issued under this section by the department must comply with section 41-1092.11, subsection B.
K. Notwithstanding any other law, for the purposes of subsection F, paragraphs 1 and 2 of this section, section 42-1127, subsection C and section 42-3461, subsection B, if a distributor has listed in its application more than one place of business, any revocation, cancellation, denial or nonrenewal of the distributor's license shall apply only with effect to remove the place of business or business location at which the activity occurred from the distributor's license. If such a removal occurs, the distributor shall be subject to restrictions that the department prescribes by rule.
Sec. 8. Section 42-3502, Arizona Revised Statutes, is amended to read:
42-3502. Transport of untaxed other tobacco products prohibited; exceptions; definition
A. except as allowed in section 42-3403, a person may not hold, store or transport untaxed other tobacco products for sale or distribution in this state in any vehicle pursuant to section 36-798.06.
B. This section does not apply to either of the following:
1. A vehicle that is owned, operated or contracted by a person who holds a valid license issued under section 42-3401 and is transporting untaxed other tobacco products from one to another of the licensee's places of business listed on its application.
2. A vehicle that is transporting untaxed other tobacco products to a licensed distributor as part of a lawful sale or in interstate commerce to a person lawfully operating as a manufacturer, distributor or retailer of other tobacco products.
C. For the purposes of this section, "untaxed other tobacco products" means other tobacco products on which applicable taxes have not been remitted pursuant to this chapter.
Sec. 9. Section 42-12009, Arizona Revised Statutes, is amended to read:
42-12009. Class nine property
A. For purposes of taxation, class nine is established consisting of:
1. Improvements that are located on federal, state, county or municipal property and owned by the lessee of the property if:
(a) The improvements are required to become the property of the federal, state, county or municipal owner of the property on termination of the leasehold interest in the property.
(b) Both the improvements and the property are used exclusively for convention activities or athletic, recreational, entertainment, artistic or cultural facilities.
2. Improvements that are located on federal, state, county or municipal property and owned by the lessee of the property if:
(a) The improvements are required to become the property of the federal, state, county or municipal owner of the property on termination of the leasehold interest in the property.
(b) Both the improvements and the property are:
(i) Used for or in connection with aviation, including hangars, tie-downs, aircraft maintenance, sales of aviation-related items, charter and rental activities, parking facilities and restaurants, stores and other services located in a terminal.
(ii) Located on a state, county, city or town airport or a public airport operating pursuant to sections 28-8423, 28-8424 and 28-8425.
3. Property that is defined as "contractor-acquired property" or "government-furnished property" in the federal acquisition regulations (48 Code of Federal Regulations section 45.101) and that is leased to or acquired by the government and used to perform a government contract.
4. Property of a corporation that is organized by or at the direction of this state or a county, city or town to develop, construct, improve, repair, replace or own any property, improvement, building or other facility to be used for public purposes that the state, county, city or town pledges to lease or lease-purchase with state, county or municipal special or general revenues and that is not otherwise exempt under chapter 11, article 3 of this title.
5. Real property and improvements, including land, buildings, furniture and equipment, regardless of ownership, that are leased for the entire valuation year to, and used exclusively by, a nonprofit organization that is recognized under section 501(c)(3) of the internal revenue code and that operates on the premises as either a charter school pursuant to section 15-183 or a residential treatment and education facility or that are leased for the entire valuation year to, and used exclusively by, a nonprofit church, religious assembly or religious institution. If only part of a parcel of real property or improvements to real property, including land, buildings, furniture and equipment, is leased for operation of a charter school or residential treatment and education center facility or a church, religious assembly or religious institution as provided by this paragraph, only the portion so leased qualifies for classification under this section. A property owner that leases property to a charter school or residential treatment and education facility or a church, religious assembly or religious institution as provided by this paragraph shall file an affidavit with the county assessor stating that the charter school or residential treatment and education facility or the church, religious assembly or religious institution shall be the sole beneficiary of the change in property tax classification pursuant to this section and that the lease rate that is charged to the charter school or residential treatment and education facility or the church, religious assembly or religious institution is consistent with the lease rates that are charged to other tenants of the property or a fair market rate.
B. Improvements that are located in an area defined as a research park pursuant to section 35-701 may not be classified under this section.
C. All property classified as class nine is subject to valuation at full cash value.
Sec. 10. Section 43-222, Arizona Revised Statutes, is amended to read:
43-222. 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, 43-1087, 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, 43-1083, 43-1083.02, 43-1164.03 and 43-1183.
3. For years ending in 2 and 7, sections 43-1073, 43-1085, 43-1086, 43-1089, 43-1089.01, 43-1089.02, 43-1089.03, 43-1164 and 43-1169.
4. For years ending in 3 and 8, sections 43-1074.01, 43-1081, 43-1168, 43-1170 and 43-1178.
5. For years ending in 4 and 9, sections 43-1073.01, 43-1076, 43-1081.01, 43-1083.03, 43-1084, 43-1164.04, 43-1164.05, and 43-1184.
Sec. 11. Section 43-304, Arizona Revised Statutes, is amended to read:
43-304. Fiduciary returns
A. Every fiduciary, except a receiver appointed by authority of law in possession of part only of the property of an individual, shall make a return for any of the following taxpayers for whom the fiduciary acts:
1. Every individual having an Arizona adjusted gross income for the taxable year of five thousand five hundred dollars or over, if single or married filing a separate return.
2. Every individual having an Arizona adjusted gross income for the taxable year of eleven thousand dollars or over, if married and filing a joint return pursuant to section 43-309.
3. Every individual having gross income for the taxable year of fifteen thousand dollars or over, regardless of the amount of taxable income. For the purposes of this paragraph, "gross income" means gross income as defined in the internal revenue code minus income that is included in gross income but excluded from taxation under this title.
1. Every individual who is required to file an individual income tax return under section 43-301.
4. 2. Every estate or trust that has Arizona taxable income for the taxable year.
5. 3. Every estate or trust of which the gross income of which for the taxable year is five thousand dollars $5,000 or over, regardless of the amount of the Arizona taxable income.
6. 4. Every decedent, for the year in which death occurred and for prior years, if returns for such years should have been filed but have not been filed by the decedent, under such rules as the department may prescribe.
B. Any fiduciary required to make a return for an individual is subject to the provisions of this title which that apply to individuals.
Sec. 12. Section 43-931, Arizona Revised Statutes, is amended to read:
43-931. Change of accounting period; computation of income; due date of return
If a separate return is made under section 443 of the internal revenue code on account of a change in the accounting period, and in all other cases in which a separate return is required or permitted allowed by treasury regulations to be made for a fractional part of a year, the income shall be computed on the basis of the period for which the separate return is made. Except for partnership and S corporation returns, the due date of the separate return for the period is the fifteenth day of the fourth month following the close of that period unless the short period return is due to a change in ownership of a corporation, in which case the due date shall be determined pursuant to treasury regulations. For a partnership or s corporation, the due date of the separate return for the period is the fifteenth day of the third month following the close of that period.
Sec. 13. Section 43-1021, Arizona Revised Statutes, is amended to read:
43-1021. Addition to Arizona gross income
In computing Arizona adjusted gross income, the following amounts shall be added to Arizona gross income:
1. A beneficiary's share of the fiduciary adjustment to the extent that the amount determined by section 43-1333 increases the beneficiary's Arizona gross income.
2. An amount equal to the ordinary income portion of a lump sum distribution that was excluded from federal adjusted gross income pursuant to the special rule for individuals who attained fifty years of age before January 1, 1986 under Public Law 99-514, section 1122(h)(3).
3. 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 the state of Arizona, 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.
4. 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.
5. 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.
6. Any amount of agricultural water conservation expenses that were deducted pursuant to the internal revenue code for which a credit is claimed under section 43-1084.
7. 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 either section 43-1081 or 43-1081.01 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.
8. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43-1074.02, 43-1081 or 43-1081.01 and that is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43-1074.02, 43-1081 or 43-1081.01, as applicable.
9. 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.
10. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 43-1029, subsection F.
11. Any wage expenses deducted pursuant to the internal revenue code for which a credit is claimed under section 43-1087 and representing net increases in qualified employment positions for employment of temporary assistance for needy families recipients.
12. 11. The amount of any depreciation allowance allowed pursuant to section 167(a) of the internal revenue code to the extent not previously added.
13. 12. The amount of a nonqualified withdrawal, as defined in section 15-1871, from a college savings plan established pursuant to section 529 of the internal revenue code that is made to a distributee to the extent the amount is not included in computing federal adjusted gross income, except that the amount added under this paragraph shall not exceed the difference between the amount subtracted under section 43-1022 in prior taxable years and the amount added under this section in any prior taxable years.
14. 13. If a subtraction is or has been taken by the taxpayer under section 43-1024, 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 taxable income for the current taxable year.
15. 14. 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.
Sec. 14. Section 43-1022, Arizona Revised Statutes, is amended to read:
43-1022. 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 27 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 not to exceed $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 shall not exceed $3,000. 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.
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. The amount authorized by section 43-1030 relating to holocaust survivors.
18. 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.
19. 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 12 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.
20. 19. The amount contributed during the taxable year to college savings plans established pursuant to section 529 of the internal revenue code to the extent that the contributions were not deducted in computing federal adjusted gross income. The amount subtracted shall not exceed:
(a) $2,000 for a single individual or a head of household.
(b) $4,000 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 shall not exceed $4,000.
21. 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).
22. 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.
23. 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.
24. 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.
25. 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.
26. 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.
27. 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, an amount totaling not more than $3,500.
Sec. 15. Section 43-1024, Arizona Revised Statutes, is amended to read:
43-1024. Americans with disabilities act access expenditures
A. For taxable years beginning from and after December 31, 2017, in computing Arizona adjusted gross income, a subtraction is allowed under section 43-1022, paragraph 25 24 for eligible business access expenditures paid or incurred by the taxpayer during the taxable year in order to comply with the requirements of the Americans with disabilities act of 1990 (P.L. 101-336) or title 41, chapter 9, article 8 by retrofitting developed real property that was originally placed in service at least ten years before the current taxable year.
B. For the purposes of this section, eligible business access expenditures include reasonable and necessary amounts paid or incurred to:
1. Remove any barriers that prevent a business from being accessible to or usable by individuals with disabilities.
2. Provide qualified interpreters or other methods of making audio materials available to hearing-impaired individuals.
3. Provide qualified readers, taped texts and other effective methods of making visually delivered materials available to individuals with visual impairments.
4. Acquire or modify equipment or devices for individuals with disabilities.
5. Provide other similar services, modifications, materials or equipment.
C. A taxpayer who has been cited for noncompliance with the Americans with disabilities act of 1990 or title 41, chapter 9, article 8 by either federal or state enforcement officials is ineligible for a subtraction under this section for any expenditure required to cure the cited violation.
Sec. 16. Repeal
Section 43-1030, Arizona Revised Statutes, is repealed.
Sec. 17. Section 43-1072.02, Arizona Revised Statutes, is amended to read:
43-1072.02. Credit for increased transaction privilege or excise tax paid for education
A. Subject to the conditions prescribed by this section, for taxable years beginning from and after December 31, 2020 and ending before January 1, 2042, a credit is allowed against the taxes imposed by this chapter for a taxable year for a taxpayer who is not claimed as a dependent by any other taxpayer and whose federal adjusted gross income is:
1. $25,000 or less for a married couple or a single person who is a head of a household.
2. $12,500 or less for a single person or a married person filing separately.
B. The credit is considered to be in mitigation of increased tax rates pursuant to section 42-5010.01 and section 42-5155, subsection E.
C. The amount of the credit may not exceed $25 for each person who is a resident of this state and who is either the taxpayer, the taxpayer's spouse who does not file a return or a dependent and shall not exceed $100 for all persons in the taxpayer's household as defined in section 43-1072.
D. If the allowable amount of the credit exceeds the income taxes otherwise due on the claimant's income, the amount of the claim not used as an offset against income taxes shall be paid in the same manner as a refund granted under section 42-1118. Refunds made pursuant to this subsection are subject to setoff under section 42-1122.
E. A person who is sentenced for at least sixty days of the taxable year to the custody of the federal bureau of prisons, the state department of corrections or a county jail is not eligible to claim a credit pursuant to this section.
F. The department shall make available suitable forms with instructions for claimants. Claimants who certify on the prescribed form that they have no income tax liability for the taxable year and who do not meet the filing requirements of section 43-301 are not required to file an individual income tax return. The claim shall be in a form prescribed by the department.
G. A tax return or form prescribed pursuant to subsection F of this section must have:
1. A social security number that is valid for employment for the claimant.
2. Either a valid social security number or an individual taxpayer identification number issued by the internal revenue service for the claimant's spouse and any qualifying children of the claimant.
H. A taxpayer that claims a credit under this section may not claim the credit under section 43-1072.01 for the same taxable year. The credits under this section and section 43-1072.01 shall be collectively referred to as the excise tax credit and claimed using the same credit form or line on the tax return. For the purposes of the report required by section 43-224, the department shall report the credits under section 43-1072.01 and this section together as one credit.
Sec. 18. Section 43-1074.01, Arizona Revised Statutes, is amended to read:
43-1074.01. 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 two million five hundred thousand dollars $2,500,000 or less:
(i) For taxable years beginning before December 31, 2021 2030, the credit is equal to twenty-four percent of that amount.
(ii) For taxable years beginning from and after December 31, 2021 2030, the credit is equal to twenty percent of that amount.
(b) If the excess is over two million five hundred thousand dollars $2,500,000:
(i) For taxable years beginning before December 31, 2021 2030, the credit is equal to six hundred thousand dollars $600,000 plus fifteen percent of any amount exceeding two million five hundred thousand dollars $2,500,000.
(ii) For taxable years beginning from and after December 31, 2021 2030, the credit is equal to five hundred thousand dollars $500,000 plus eleven percent of any amount exceeding two million five hundred thousand dollars $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 ten million dollars $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 ten million dollar $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 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, 2000 through December 31, 2002 that may be used in any taxable year may not exceed the taxpayer's tax liability under this title or five hundred thousand dollars, whichever is less, minus the credit under this section for the current taxable year's qualified research expenses. 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.
Sec. 19. Repeal
Section 43-1087, Arizona Revised Statutes, is repealed.
Sec. 20. Section 43-1089.01, Arizona Revised Statutes, is amended to read:
43-1089.01. Tax credit; public school fees and contributions; definitions
A. A credit is allowed against the taxes imposed by this title for the amount of any fees paid or cash contributions made by a taxpayer or on the taxpayer's behalf pursuant to section 43-401, subsection G during the taxable year to a public school located in this state for the following public school purposes:
1. Standardized testing for college credit or readiness offered by a widely recognized and accepted educational testing organization.
2. The career and technical education industry certification assessment.
3. Preparation courses and materials for standardized testing.
4. Cardiopulmonary resuscitation training pursuant to section 15-718.01.
5. Extracurricular activities.
6. Character education programs.
7. From and after June 30, 2019 through June 30, 2022:
(a) Acquiring capital items, as defined in the uniform system of financial records, including those items listed in section 15-903, subsection C, paragraphs 2 through 8.
(b) Community school meal programs. An amount paid by an individual to receive a meal or a meal card does not qualify as a fee or donation for community school meal programs.
(c) Student consumable health care supplies.
(d) Playground equipment and shade structures for playground equipment.
B. The amount of the credit shall not exceed:
1. $200 for a single individual or a head of household.
2. $400 for a married couple filing a joint return.
C. A husband and wife who file separate returns for a taxable year in which they could have filed a joint return may each claim only one-half of the tax credit that would have been allowed for a joint return.
D. The credit allowed by this section is in lieu of any deduction pursuant to section 170 of the internal revenue code and taken for state tax purposes.
E. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry the amount of the claim not used to offset the taxes under this title forward for not more than five consecutive taxable years' income tax liability.
F. The site council of the public school that receives contributions that are not designated for a specific purpose shall determine how the contributions are used at the school site. If a charter school does not have a site council, the principal, director or chief administrator of the charter school shall determine how the contributions that are not designated for a specific purpose are used at the school site. If at the end of a fiscal year a public school has unspent contributions that were previously designated for a specific purpose or program and that purpose or program has been discontinued or has not been used for two consecutive fiscal years, these contributions shall be considered undesignated in the following fiscal year for the purposes of this subsection, and the site council may transfer these undesignated contributions to any school within the same school district.
G. A public school that receives fees or a cash contribution pursuant to subsection A of this section shall report to the department, in a form prescribed by the department, by February 28 of each year the following information:
1. The total number of fee and cash contribution payments received during the previous calendar year.
2. The total dollar amount of fees and contributions received during the previous calendar year.
3. The total dollar amount of fees and contributions spent by the school during the previous calendar year, categorized by specific standardized testing, preparation courses and materials for standardized testing, extracurricular activity or character education program.
H. For the purposes of this section, a contribution for which a credit is claimed and that is made on or before the fifteenth day of the fourth month following the close of the taxable year may be applied to either the current or preceding taxable year and is considered to have been made on the last day of that taxable year.
I. For the purposes of this section:
1. "Career and technical education industry certification assessment" means an assessment for career and technical preparation programs for pupils.
2. "Character education programs" means a program described in section 15-719.
3. "Community school meal program" means a school meal program that takes place before or after the regular school day on school property.
4. "Extracurricular activities" means school-sponsored activities that may require enrolled students to pay a fee in order to participate, including fees for:
(a) Band uniforms.
(b) Equipment or uniforms for varsity athletic activities.
(c) Scientific laboratory materials.
(d) In-state or out-of-state trips that are solely for competitive events. Extracurricular activities do not include any senior trips or events that are recreational, amusement or tourist activities.
5. "Public school" means a school that is part of a school district, a career technical education district or a charter school.
6. "Standardized testing for college credit or readiness" includes the SAT, PSAT, ACT, advanced placement and international baccalaureate diploma tests and other similar tests.
7. "Student consumable health care supplies" includes tissues, hand wipes, bandages and other health care consumables that are generally used by children.
8. "Widely recognized and accepted educational testing organization" means the college board, the ACT, the international baccalaureate and other organizations that are widely recognized and accepted by colleges and universities in the United States and that offer college credit and readiness examinations.
Sec. 21. Section 43-1164.05, Arizona Revised Statutes, is amended to read:
43-1164.05. 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 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, 2030 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 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, 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.
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.
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. The department shall adopt rules and publish and prescribe forms and procedures as necessary to effectuate the purposes of this section.
P. 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 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 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.
Sec. 22. Section 43-1168, Arizona Revised Statutes, is amended to read:
43-1168. 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 B and D 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 D 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, 2000 through 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 or $500,000, whichever is less, minus the credit under this section for the current taxable year's qualified research expenses. 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 D C of this section.
C. If a taxpayer has qualified research expenses that are carried forward from taxable years beginning before January 1, 2001, the amount of the expenses carried forward shall be converted to a credit carryforward by multiplying the amount of the qualified expenses carried forward by twenty percent. A credit carryforward determined under this subsection from taxable years beginning before January 1, 2022 may be carried forward to not more than fifteen years from the year in which the expenses were incurred. A credit carryforward determined under this subsection from taxable years beginning from and after December 31, 2021 may be carried forward to not more than ten years from the year in which the expenses were incurred. The amount of credit carryforward from taxable years beginning before January 1, 2001 that may be used under this subsection in any taxable year may not exceed the taxpayer's tax liability under this title or $500,000, whichever is less, minus the credit under this section for the current taxable year's qualified research expenses. The total amount of credit carryforward from taxable years beginning before January 1, 2003 that may be used in any taxable year under subsection B and this subsection may not exceed the taxpayer's tax liability under this title or $500,000, whichever is less, minus the credit under this section for the current taxable year's qualified research expenses.
D. 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.
Sec. 23. Section 43-1175, Arizona Revised Statutes, is amended to read:
43-1175. Credit for employment of temporary assistance for needy families recipients
A. A credit is allowed against the taxes imposed by this title for net increases in qualified employment by the taxpayer of recipients of temporary assistance for needy families as defined in section 46-101 who are residents of this state. The amount of the credit is equal to the sum of the following:
1. One-fourth of the taxable wages paid to each employee in qualified employment positions, not to exceed five hundred dollars $500 per qualified employment position, in the first year or partial year of employment. Wages that were subsidized as provided by section 46-299 shall not be included.
2. One-third of the taxable wages paid to each employee in qualified employment positions, not to exceed one thousand dollars $1,000 per qualified employment position, in the second year of continuous employment. Wages that were subsidized as provided by section 46-299 shall not be included.
3. One-half of the taxable wages paid to each employee in qualified employment positions, not to exceed one thousand five hundred dollars $1,500 per qualified employment position, in the third year of continuous employment. Wages that were subsidized as provided by section 46-299 shall not be included.
B. The credit allowed in this section is in lieu of any wage expense deduction taken for state tax purposes.
C. To qualify for a credit under this section:
1. All of the employees with respect to whom a credit is claimed must reside in this state and must be recipients of temporary assistance for needy families as defined in section 46-101 at the time the employee is hired.
2. A qualified employment position must meet all of the following requirements:
(a) The position must be classified as full-time employment.
(b) The employment must include health insurance coverage for the employee if the employer offers this coverage for employees who are not recipients of temporary assistance for needy families.
(c) The employer must pay compensation at least equal to the minimum wage or a wage comparable to that paid to employees who are not receiving temporary assistance for needy families based on the employee's training, skills and job classification.
(d) The employee must have been employed for at least ninety days during the first taxable 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. Periods for which the employee's wages were subsidized as provided by section 46-299 shall not be included as periods of employment.
(e) The employee was not employed by the taxpayer within twelve months before the current date of hire.
(f) The employee position is not eligible for any other employment credit pursuant to this title based on wages paid.
D. The net increase in the number of qualified employment positions shall be determined by comparing the average number of qualified employment positions during the taxable year with the immediately preceding taxable year based on the taxpayer’s report to the department of economic security for unemployment purposes.
E. If the allowable tax credit exceeds the income taxes otherwise due on the claimant's income, the amount of the claim not used as an offset against income taxes may be carried forward as a tax credit against subsequent years' income tax liability for the period, not to exceed five consecutive taxable years.
F. Co-owners of a business, including corporate partners in a partnership, may claim only the pro rata share of the credit allowed under this section based on the 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 of the owners of the business may not exceed the amount that would have been allowed for a sole owner of the business.
G. The department may adopt rules necessary for the administration of this section.
Sec. 24. Retroactivity
Section 43-1164.05, Arizona Revised Statutes, as amended by this act, applies retroactively to from and after August 24, 2020.
APPROVED BY THE GOVERNOR APRIL 9, 2021.
FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 9, 2021.
