Bill Text: AZ SB1343 | 2019 | Fifty-fourth Legislature 1st Regular | Introduced
Bill Title: Insurance; premium tax credits; employment
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2019-02-04 - Senate read second time [SB1343 Detail]
Download: Arizona-2019-SB1343-Introduced.html
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REFERENCE TITLE: insurance; premium tax credits; employment |
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State of Arizona Senate Fifty-fourth Legislature First Regular Session 2019
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SB 1343 |
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Introduced by Senator Leach
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AN ACT
Amending sections 20‑224.03 and 41‑1525, Arizona Revised Statutes; relating to insurance premium tax credits.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 20-224.03, Arizona Revised Statutes, is amended to read:
20-224.03. Premium tax credit for new employment
A. For taxable years beginning from and after June 30, 2011, a credit is allowed against the premium tax liability imposed pursuant to section 20‑224, 20‑837, 20‑1010, 20‑1060 or 20‑1097.07 for net increases in full‑time employees residing in this state and hired in qualified employment positions in this state as computed and certified by the Arizona commerce authority pursuant to section 41‑1525. For the purposes of this section and section 41-1525:
1. A tax credit is not allowed against the portion of the tax payable to the fire fighters' relief and pension fund pursuant to section 20‑224 or the portion of the tax payable to the public safety personnel retirement system pursuant to section 20‑224.01.
2. A reciprocal insurer and its attorney-in-fact are considered to be the same entity for the purposes of calculating the tax credit under this section.
3. Affiliated insurers are eligible to claim the premium tax credit prescribed in this section in the amounts reported to and certified by the Arizona commerce authority pursuant to the requirements of section 41‑1525.
B. Subject to subsection F of this section, the amount of the tax credit is equal to:
1. Three thousand dollars $3,000 for each full‑time employee hired in a qualified employment position in the first year or partial year of employment. Employees hired in the last ninety days of the taxable year are excluded for that taxable year and are considered to be new employees in the following taxable year.
2. Three thousand dollars $3,000 for each full‑time employee in a qualified employment position for the full taxable year in the second year of continuous employment.
3. Three thousand dollars $3,000 for each full‑time employee in a qualified employment position for the full taxable year in the third year of continuous employment.
C. The capital investment and the new qualified employment positions requirements of section 41‑1525, subsection B must be accomplished within twelve months after the start of the required capital investment. A credit may not be claimed until both requirements are met. A business that meets the requirements of section 41‑1525, subsection B for a location is eligible to claim first year credits for three years beginning with the taxable year in which those requirements are completed. Employees hired at the location before the beginning of the taxable year but during the twelve‑month period allowed in this subsection are considered to be new employees for the taxable year in which all of those requirements are completed. The employees that are considered to be new employees for the taxable year under this subsection shall not be included in the average number of full‑time employees during the immediately preceding taxable year until the taxable year in which all of the requirements of section 41‑1525, subsection B are completed. An employee working at a temporary worksite in this state while the designated location is under construction is considered to be working at the designated location if all of the following occur:
1. The employee is hired after the start of the required investment at the designated location.
2. The employee is hired to work at the designated location after it is completed.
3. The payroll for the employees destined for the designated location is segregated from other employees.
4. The employee is moved to the designated location within thirty days after its completion.
D. To qualify for a credit under this section, the insurer and the employment positions must meet the requirements prescribed by section 41‑1525.
E. A credit is allowed for employment in the second and third year only for qualified employment positions for which a credit was claimed and allowed in the first year.
F. The net increase in the number of qualified employment positions is the lesser of the total number of filled qualified employment positions created at the designated location or locations during the taxable year or the difference between the average number of full‑time employees in this state in the current taxable year and the average number of full‑time employees in this state during the immediately preceding taxable year. The net increase in the number of qualified employment positions computed under this subsection may not exceed the difference between the average number of full‑time employees in this state in the current taxable year and the average number of full‑time employees in this state during the immediately preceding taxable year.
G. If the allowable tax credit exceeds the state premium tax liability, the amount of the claim not used as an offset against the state premium tax liability may be carried forward as a tax credit against subsequent years' state premium tax liability for a period not exceeding five taxable years.
H. If the business is sold or changes ownership through reorganization, stock purchase or merger, the new taxpayer may claim first year credits only for the qualified employment positions that it created and filled with an eligible employee after the purchase or reorganization was complete. If a person purchases a taxpayer that had qualified for first or second year credits or if an insurance business changes ownership through reorganization, stock purchase or merger, the new taxpayer may claim the second or third year credits if it meets other eligibility requirements of this section. Credits for which a taxpayer qualified before the changes described in this subsection are terminated and lost at the time the changes are implemented.
I. An insurer that claims a tax credit against state premium tax liability is not required to pay any additional retaliatory tax imposed pursuant to section 20‑230 as a result of claiming that tax credit.
J. A failure to timely report and certify to the Arizona commerce authority the information prescribed by section 41‑1525, subsection E and in the manner prescribed by section 41‑1525, subsection F disqualifies the insurer from the credit under this section. The department of insurance shall require written evidence of the timely report to the Arizona commerce authority.
K. A tax credit under this section is subject to recovery for a violation described in section 41‑1525, subsection H.
L. The department may adopt rules necessary for the administration of this section.
M. For the purposes of subsection B, paragraphs 2 and 3 of this section, if a full‑time employee in the qualified employment position leaves during the taxable year, the employee may be replaced with another new full‑time employee in the same employment position and the new employee will be treated as being in the employee's second or third full year of continuous employment for the purposes of the credit under this section if:
1. The total time the position was vacant from the date the employment position was originally filled to the end of the current tax year totals ninety days or less.
2. The new employee meets all of the same requirements as the original employee was required to meet.
Sec. 2. Section 41-1525, Arizona Revised Statutes, is amended to read:
41-1525. Arizona quality jobs incentives; tax credits for new employment; qualifications; definitions
A. The owner of A business that is located in this state before July 2025 is eligible for income tax credits under section 43‑1074 or 43‑1161 or an insurance premium tax credit under section 20‑224.03 for net increases in full-time employees residing in this state and hired in qualified employment positions in this state.
B. To qualify under this section, and subject to preapproval by the authority, the business must meet at least one of the following requirements for each location of the business before it claims a first year tax credit for the location:
1. Invest at least five million dollars $5,000,000 of capital investment and create at least twenty‑five net new qualified employment positions that pay compensation at least equal to one hundred percent of the county median wage as computed annually by the authority in an urban location.
2. Invest at least two million five hundred thousand dollars $2,500,000 of capital investment and create at least twenty‑five net new qualified employment positions that pay compensation at least equal to one hundred twenty‑five percent of the county median wage as computed annually by the authority in an urban location.
3. Invest at least one million dollars $1,000,000 of capital investment and create at least twenty‑five net new qualified employment positions that pay compensation at least equal to one hundred fifty percent of the county median wage as computed annually by the authority in an urban location.
4. Invest at least five hundred thousand dollars $500,000 of capital investment and create at least twenty‑five net new qualified employment positions that pay compensation at least equal to two hundred percent of the county median wage as computed annually by the authority in an urban location.
5. Invest at least one million dollars $1,000,000 of capital investment and create at least five net new qualified employment positions that pay compensation at least equal to one hundred percent of the county median wage as computed annually by the authority in a rural location.
6. Invest at least five hundred thousand dollars $500,000 of capital investment and create at least five net new qualified employment positions that pay compensation at least equal to one hundred twenty‑five percent of the county median wage as computed annually by the authority in a rural location.
7. Invest at least one hundred thousand dollars $100,000 of capital investment and create at least five net new qualified employment positions that pay compensation at least equal to one hundred fifty percent of the county median wage as computed annually by the authority in a rural location.
C. The capital investment and the new qualified employment positions requirements of subsection B of this section must be accomplished within twelve months after the start of the required capital investment. No credit may be claimed until both requirements are met. A business that meets the requirements of subsection B of this section for a location is eligible to claim first year credits for three years beginning with the taxable year in which those requirements are completed. Employees hired at the location before the beginning of the taxable year but during the twelve-month period allowed in this subsection are considered to be new employees for the taxable year in which all of those requirements are completed. The employees that are considered to be new employees for the taxable year under this subsection shall not be included in the average number of full-time employees during the immediately preceding taxable year until the taxable year in which all of the requirements of subsection B of this section are completed. An employee working at a temporary worksite in this state while the designated location is under construction is considered to be working at the designated location if all of the following occur:
1. The employee is hired after the start of the required investment at the designated location.
2. The employee is hired to work at the designated location after it is completed.
3. The payroll for the employees destined for the designated location is segregated from other employees.
4. The employee is moved to the designated location within thirty days after its completion.
D. No more than ten thousand new jobs for all employers qualify for first year credits each year.
E. To claim a tax credit, the business must:
1. Obtain preapproval from the authority at a time, on a form and in a manner prescribed by the authority. Preapproval shall cover all first year credits intended to be claimed for the designated location and all second and third year credits associated with those first year credits.
2. Certify to the department of revenue or the department of insurance, as applicable, on or before the due date of the tax return, including any extensions for the year for which the credit is claimed, in a form prescribed by the department, including electronic media, information that the department may require, including the ownership interests of co‑owners of the business if the business is a partnership, limited liability company or an S corporation, and the following information for each employee in the designated location:
(a) The date of initial employment.
(b) The number of hours worked during the year.
(c) Whether the position was full‑time.
(d) The employee's annual compensation.
(e) The total cost of health insurance for the employee and the cost paid by the employer.
(f) Other information required by the department.
3. Report and certify to the authority the following information, and provide supporting documentation, on a form and in a manner approved by the authority, and as specified in subsection F of this section, for each year in which the taxpayer business earned and claimed or used credits or is carrying forward amounts from previously earned and claimed credits:
(a) The business name and mailing address and any other contact information requested by the authority.
(b) The physical address of the business location or locations and the number of employees qualified for the credit at each location.
(c) The average hourly wage and the total amount of compensation paid to employees qualified for the credit and for all employees.
(d) The total number of qualified employment positions and the amount of income tax or premium tax credits qualified for in the taxable year.
(e) The estimated amount of tax credits to be used in the taxable year to offset tax liability.
(f) The estimated amount of tax credits to be available for carryforward in the taxable year and the year in which the credits expire.
(g) The number of jobs and the amount of credits earned and claimed on the prior year's tax return.
(h) The amount of credits used to offset tax liabilities on the prior year's tax return.
(i) The amount of credits available for carryforward as reported on the prior year's tax return and the year the credits expire.
(j) Capital investment made during the taxable year and the preceding taxable year.
(k) Other information necessary for the management and reporting of the incentives under this section.
4. For any year in which the taxpayer business is claiming first year credits, report and certify the following additional information and provide supporting documentation to the authority on a form and in a manner approved by the authority, and as specified in subsection F of this section:
(a) That the net increase in the number of qualified employment positions for which credit is sought is the least of:
(i) The total number of filled qualified employment positions created at the designated location or locations during the taxable year.
(ii) The difference between the average number of full‑time employees in this state in the current taxable year and the average number of full‑time employees in this state during the immediately preceding taxable year.
(b) That all employees filling a qualified employment position were employed for at least ninety days during the first taxable year. Employees hired in the last ninety days of the taxable year are excluded for that taxable year and are considered to be new employees in the following taxable year.
(c) That none of the employees filling qualified employment positions were employed by the taxpayer business during the twelve months before the current date of hire except for those relocating to this state.
(d) That all employees for whom second and third year credits are claimed are in qualified employment positions for which first year credits were allowed and claimed by the taxpayer business on the original first and second year tax returns.
(e) That all employees for whom credits are taken performed their job duties primarily at the designated locations of the business.
F. To qualify for first year credits, the report and certification prescribed by subsection E, paragraphs 3 and 4 of this section must be filed with the authority by the earlier of six months after the end of the taxable year in which the qualified employment positions were created or by the date the tax return is filed for the taxable year in which the qualified employment positions were created. To qualify for second year credits, the report and certification prescribed by subsection E, paragraph 3 of this section must be filed with the authority by the earlier of six months after the end of the taxable year or the date the tax return is filed for the taxable year in which the second year credits are allowable. To qualify for third year credits, the report and certification prescribed by subsection E, paragraph 3 of this section must be filed with the authority by the earlier of six months after the end of the taxable year or the date the tax return is filed for the taxable year in which the third year credits are allowable.
G. Any information submitted to the authority under subsection E, paragraph 3, subdivisions (e) through (j) of this section is exempt from title 39, chapter 1, article 2 and considered to be confidential and is not subject to disclosure except:
1. To the extent that the person or organization that provided the information consents to the disclosure.
2. To the department of revenue for use in tax administration.
H. Documents filed with the authority, the department of insurance and the department of revenue under subsection E of this section shall contain either a sworn statement or certification, signed by an officer of the company business under penalty of perjury, that the information contained is true and correct according to the best belief and knowledge of the person submitting the information after a reasonable investigation of the facts. If the document contains information that is materially false, the taxpayer business is ineligible for the tax credits described under subsection A of this section and is subject to recovery of the amount of tax credits allowed in preceding taxable years based on the false information, plus penalties and interest.
I. The authority may make site visits to a taxpayer's business's facilities if it is necessary to further document or clarify reported information. The taxpayer business must freely provide the access.
J. One or more affiliates within an insurance holding company system may individually or collectively fulfill the employment and capital investment requirements of subsections B and C of this section in order to qualify for the tax credits authorized by this section. an insurer in the insurance holding company system that is authorized in this state shall report to the authority the specific affiliates that are claiming a tax credit and the amount of the premium tax credit that the insurer and each affiliate will claim for the purposes of allocating the premium tax credit within the insurance holding company system pursuant to section 20‑224.03.
J. K. The authority by rule shall prescribe preapproval requirements and additional reporting requirements for taxpayers businesses who claim tax credits pursuant to this section.
K. L. On or before September 30 of each year, the authority shall transmit a report to the governor, the president of the senate, the speaker of the house of representatives and the chairpersons of the senate finance committee and the house of representatives ways and means committee and provide a copy of the report to the secretary of state. The report shall include the following information:
1. The business names, locations, number of employees and amount of compensation paid to employees qualifying for income tax credits as reported to the authority.
2. The amount of capital investment, made during the preceding fiscal year and cumulatively.
3. The total amount of income tax credits allowed for the preceding taxable year and the number of qualified employment positions for which credits were claimed pursuant to sections 43‑1074 and 43‑1161.
L. M. For the purposes of this section:
1. "Capital investment" means an expenditure to acquire, lease or improve property that is used in operating a business, including:
(a) Land, buildings, machinery and fixtures.
(b) For taxable years beginning from and after June 30, 2011, equipment.
2. "Designated location" means the location at which the required capital investment is made under subsection B of this section.
3. "Location" means a single parcel or contiguous parcels of owned or leased land in this state, the structures and personal property contained on the land or any part of the structures occupied by the owner business. Parcels that are separated only by a public thoroughfare or right-of-way are considered to be contiguous but a single contiguous parcel that is located in both an urban location and a rural location is considered to be a contiguous urban location.
4. "Qualified employment position" means employment that meets the following requirements:
(a) The position consists of at least one thousand seven hundred fifty hours per year of full‑time permanent employment.
(b) The job duties are performed primarily at the location or locations of the business in this state.
(c) The employment provides health insurance coverage for the employee for which the employer pays at least sixty‑five percent of the premium or membership cost. If the business is self-insured, the employer pays at least sixty‑five percent of a predetermined fixed cost per employee for an insurance program that is payable whether or not the employee has filed claims.
(d) The employer pays compensation at least equal to the wage threshold as described in subsection B of this section.
5. "Rural location" means a location that is within the boundaries of tribal lands or a city or town with a population of less than fifty thousand persons or a county with a population of less than eight hundred thousand persons.
6. "Urban location" means a location that is within the exterior boundaries of a city or town that has a population of fifty thousand persons or more and that is located in a county that has a population of eight hundred thousand persons or more.
