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REFERENCE TITLE: research tax credit; transferable; refundable |
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State of Arizona House of Representatives Forty-ninth Legislature Second Regular Session 2010
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HB 2243 |
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Introduced by Representative Reagan
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AN ACT
Amending title 41, chapter 10, article 1, Arizona Revised Statutes, by adding section 41-1507; amending section 43-1074.01, Arizona Revised Statutes, as amended by Laws 2008, chapter 290, section 2; amending section 43‑1074.01, Arizona Revised Statutes, as added by Laws 2008, chapter 290, section 4; amending section 43‑1168, Arizona Revised Statutes, as amended by Laws 2008, chapter 290, section 5; amending section 43-1168, Arizona Revised Statutes, as added by Laws 2008, chapter 290, section 7; relating to income tax credits for increased research activities.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 41, chapter 10, article 1, Arizona Revised Statutes, is amended by adding section 41-1507, to read:
41-1507. Tax credit for increased research activity; qualification for refund or transfer
A. The department of commerce shall receive applications and evaluate and certify taxpayers who otherwise qualify for income tax credits for increased research activities to further qualify for income tax refunds or to transfer the taxpayer's credit to another taxpayer pursuant to section 43‑1074.01, subsection C or section 43-1168, subsection D, as applicable.
B. An application for a refund of the taxpayer's credit must include:
1. The taxpayer's name, address, taxpayer identification number and a telephone number and e-mail address of a person responsible for the application.
2. A general description of the taxpayer's business and the research activities conducted by the taxpayer.
3. The number of full-time employees on the taxpayer's payroll on December 31 of the taxable year. Only taxpayers employing fewer than two hundred fifty full-time employees qualify for a refund of the taxpayer's income tax credit.
4. The amount of the taxpayer's income tax credit for the taxable year.
5. Any other information required by the department of commerce.
C. An application to transfer the taxpayer's credit must include:
1. The taxpayer's name, address, taxpayer identification number and a telephone number and e-mail address of a person responsible for the application.
2. A general description of the taxpayer's business and the research activities conducted by the taxpayer.
3. The number of full-time employees on the taxpayer's payroll on December 31 of the taxable year. Only taxpayers employing fewer than two hundred fifty full-time employees qualify to transfer the taxpayer's income tax credit to another taxpayer.
4. The amount of the taxpayer's income tax credit for the taxable year.
5. Each transferee's name, address, taxpayer identification number, telephone number and e-mail address.
6. The amount of the credit transferred to each transferee.
D. Each application shall include a processing fee equal to one per cent of the taxpayer's tax credit being refunded or transferred.
E. The department shall process and evaluate each application and within thirty days after receiving the application either:
1. Issue to the applicant a certificate of qualification for the refund or for transfer of the credit, as applicable.
2. Notify the applicant of denial of the application with specific reasons for the denial. A denial of the application does not preclude a subsequent application if the applicant is able to correct any error or deficiency.
F. The department of commerce, with the cooperation of the department of revenue, shall adopt rules and publish and prescribe forms and procedures as necessary to effectuate the purposes of this section.
Sec. 2. Section 43-1074.01, Arizona Revised Statutes, as amended by Laws 2008, chapter 290, section 2, 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 or less, the credit is equal to twenty-four per cent of that amount.
(b) If the excess is over two million five hundred thousand dollars, the credit is equal to six hundred thousand dollars plus fifteen per cent of any amount exceeding two million five hundred thousand dollars, except that:
(i) For taxable years beginning from and after December 31, 2000 through December 31, 2001, the credit shall not exceed one million five hundred thousand dollars.
(ii) For taxable years beginning from and after December 31, 2001 through December 31, 2002, the credit shall not exceed two million five hundred thousand dollars.
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 not used to offset taxes may be carried forward to the next fifteen 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.
C. If a taxpayer who claims a credit under this section employs fewer than two 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 either of the following options:
1. The taxpayer may elect to receive a refund as follows:
(a) The taxpayer must apply to the department of commerce for qualification for the refund pursuant to section 41-1507 and submit a copy of the department of commerce's certificate of qualification to the department of revenue with the taxpayer's income tax return.
(b) The amount of the refund is limited to seventy-five per cent of the amount by which the allowable credit under this section exceeds the taxpayer's tax liability under this title for the taxable year.
(c) The refund shall be paid in the manner prescribed by section 42‑1118.
(d) The refund is subject to setoff under section 42-1122.
2. The taxpayer may elect to sell or otherwise transfer the credit to one or more other taxpayers for application against the transferees' taxes due under this chapter or chapter 11 of this title as follows:
(a) The taxpayer must apply to the department of commerce for qualification for the transfer pursuant to section 41-1507 and submit a copy of the department of commerce's certificate of qualification to the department of revenue with the taxpayer's income tax return.
(b) The taxpayer must transfer the entire nominal amount of the credit. When transferred, the original taxpayer retains no credit amount against the taxpayer's income tax liability.
(c) A TRANSFEREE may apply the credit against the TRANSFEREE'S tax liability under this chapter or chapter 11 of this title for the current taxable year in the same manner as the original taxpayer. If the amount of the credit transferred to a TRANSFEREE exceeds the TRANSFEREE'S income tax liability, the excess amount of the credit is extinguished and the TRANSFEREE is not eligible to claim a refund for the excess amount or to carry the excess amount forward to subsequent years' income tax liability.
(d) A TRANSFEREE shall not resell or transfer the credit to a subsequent taxpayer.
(e) If it is determined that the original taxpayer was not qualified, or was disqualified from using the credit at the time of the transfer, the department of revenue shall either disallow the credit claimed by a TRANSFEREE or recapture the credit from the TRANSFEREE through any authorized collection method. The TRANSFEREE'S recourse is against the original taxpayer.
(f) In the case of any failure to comply with this paragraph, the department of revenue shall disallow the credit until the taxpayer or TRANSFEREE is in full compliance.
Sec. 3. Section 43-1074.01, Arizona Revised Statutes, as amended by Laws 2008, chapter 290, section 4, 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 or less, the credit is equal to twenty per cent of that amount.
(b) If the excess is over two million five hundred thousand dollars, the credit is equal to five hundred thousand dollars plus eleven per cent of any amount exceeding two million five hundred thousand dollars, except that:
(i) For taxable years beginning from and after December 31, 2000 through December 31, 2001, the credit shall not exceed one million five hundred thousand dollars.
(ii) For taxable years beginning from and after December 31, 2001 through December 31, 2002, the credit shall not exceed two million five hundred thousand dollars.
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 not used to offset taxes may be carried forward to the next fifteen 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.
C. If a taxpayer who claims a credit under this section employs fewer than two 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 either of the following options:
1. The taxpayer may elect to receive a refund as follows:
(a) The taxpayer must apply to the department of commerce for qualification for the refund pursuant to section 41-1507 and submit a copy of the department of commerce's certificate of qualification to the department of revenue with the taxpayer's income tax return.
(b) The amount of the refund is limited to seventy-five per cent of the amount by which the allowable credit under this section exceeds the taxpayer's tax liability under this title for the taxable year.
(c) The refund shall be paid in the manner prescribed by section 42‑1118.
(d) The refund is subject to setoff under section 42-1122.
2. The taxpayer may elect to sell or otherwise transfer the credit to one or more other taxpayers for application against the transferees' taxes due under this chapter or chapter 11 of this title as follows:
(a) The taxpayer must apply to the department of commerce for qualification for the transfer pursuant to section 41-1507 and submit a copy of the department of commerce's certificate of qualification to the department of revenue with the taxpayer's income tax return.
(b) The taxpayer must transfer the entire nominal amount of the credit. When transferred, the original taxpayer retains no credit amount against the taxpayer's income tax liability.
(c) A TRANSFEREE may apply the credit against the TRANSFEREE'S tax liability under this chapter or chapter 11 of this title for the current taxable year in the same manner as the original taxpayer. If the amount of the credit transferred to a TRANSFEREE exceeds the TRANSFEREE'S income tax liability, the excess amount of the credit is extinguished and the TRANSFEREE is not eligible to claim a refund for the excess amount or to carry the excess amount forward to subsequent years' income tax liability.
(d) A TRANSFEREE shall not resell or transfer the credit to a subsequent taxpayer.
(e) If it is determined that the original taxpayer was not qualified, or was disqualified from using the credit at the time of the transfer, the department of revenue shall either disallow the credit claimed by a TRANSFEREE or recapture the credit from the TRANSFEREE through any authorized collection method. The TRANSFEREE'S recourse is against the original taxpayer.
(f) In the case of any failure to comply with this paragraph, the department of revenue shall disallow the credit until the taxpayer or TRANSFEREE is in full compliance.
Sec. 4. Section 43-1168, Arizona Revised Statutes, as amended by Laws 2008, chapter 290, section 5, is amended to read:
43-1168. 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 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) is two million five hundred thousand dollars or less, the credit is equal to twenty-four per cent of that amount.
(c) If the sum computed under subdivision (a) is over two million five hundred thousand dollars, the credit is equal to six hundred thousand dollars plus fifteen per cent of any amount exceeding two million five hundred thousand dollars, except that:
(i) For taxable years beginning from and after December 31, 2000 through December 31, 2001, the credit shall not exceed one million five hundred thousand dollars.
(ii) For taxable years beginning from and after December 31, 2001 through December 31, 2002, the credit shall not exceed two million five hundred thousand dollars.
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 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 not used to offset taxes may be carried forward to the next fifteen 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 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 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.
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 per cent. A credit carryforward determined under this subsection may be carried forward to not more than fifteen 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 five hundred thousand dollars, 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 five hundred thousand dollars, whichever is less, minus the credit under this section for the current taxable year's qualified research expenses.
D. If a taxpayer who claims a credit under this section employs fewer than two 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 either of the following options:
1. The taxpayer may elect to receive a refund as follows:
(a) The taxpayer must apply to the department of commerce for qualification for the refund pursuant to section 41-1507 and submit a copy of the department of commerce's certificate of qualification to the department of revenue with the taxpayer's income tax return.
(b) The amount of the refund is limited to seventy-five per cent of the amount by which the allowable credit under this section exceeds the taxpayer's tax liability under this title for the taxable year.
(c) The refund shall be paid in the manner prescribed by section 42‑1118.
(d) The refund is subject to setoff under section 42-1122.
2. The taxpayer may elect to sell or otherwise transfer the credit to one or more other taxpayers for application against the transferees' taxes due under this chapter or chapter 10 of this title as follows:
(a) The taxpayer must apply to the department of commerce for qualification for the transfer pursuant to section 41-1507 and submit a copy of the department of commerce's certificate of qualification to the department of revenue with the taxpayer's income tax return.
(b) The taxpayer must transfer the entire nominal amount of the credit. When transferred, the original taxpayer retains no credit amount against the taxpayer's income tax liability.
(c) A TRANSFEREE may apply the credit against the TRANSFEREE'S tax liability under this chapter or chapter 10 of this title for the current taxable year in the same manner as the original taxpayer. If the amount of the credit transferred to a TRANSFEREE exceeds the TRANSFEREE'S income tax liability, the excess amount of the credit is extinguished and the TRANSFEREE is not eligible to claim a refund for the excess amount or to carry the excess amount forward to subsequent years' income tax liability.
(d) A TRANSFEREE shall not resell or transfer the credit to a subsequent taxpayer.
(e) If it is determined that the original taxpayer was not qualified, or was disqualified from using the credit at the time of the transfer, the department of revenue shall either disallow the credit claimed by a TRANSFEREE or recapture the credit from the TRANSFEREE through any authorized collection method. The TRANSFEREE'S recourse is against the original taxpayer.
(f) In the case of any failure to comply with this paragraph, the department of revenue shall disallow the credit until the taxpayer or TRANSFEREE is in full compliance.
Sec. 5. Section 43-1168, Arizona Revised Statutes, as amended by Laws 2008, chapter 290, section 7, 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) is two million five hundred thousand dollars or less, the credit is equal to twenty per cent of that amount.
(c) If the sum computed under subdivision (a) is over two million five hundred thousand dollars, the credit is equal to five hundred thousand dollars plus eleven per cent of any amount exceeding two million five hundred thousand dollars, except that:
(i) For taxable years beginning from and after December 31, 2000 through December 31, 2001, the credit shall not exceed one million five hundred thousand dollars.
(ii) For taxable years beginning from and after December 31, 2001 through December 31, 2002, the credit shall not exceed two million five hundred thousand dollars.
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 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 not used to offset taxes may be carried forward to the next fifteen 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 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 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.
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 per cent. A credit carryforward determined under this subsection may be carried forward to not more than fifteen 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 five hundred thousand dollars, 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 five hundred thousand dollars, whichever is less, minus the credit under this section for the current taxable year's qualified research expenses.
D. If a taxpayer who claims a credit under this section employs fewer than two 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 either of the following options:
1. The taxpayer may elect to receive a refund as follows:
(a) The taxpayer must apply to the department of commerce for qualification for the refund pursuant to section 41-1507 and submit a copy of the department of commerce's certificate of qualification to the department of revenue with the taxpayer's income tax return.
(b) The amount of the refund is limited to seventy-five per cent of the amount by which the allowable credit under this section exceeds the taxpayer's tax liability under this title for the taxable year.
(c) The refund shall be paid in the manner prescribed by section 42‑1118.
(d) The refund is subject to setoff under section 42-1122.
2. The taxpayer may elect to sell or otherwise transfer the credit to one or more other taxpayers for application against the transferees' taxes due under this chapter or chapter 10 of this title as follows:
(a) The taxpayer must apply to the department of commerce for qualification for the transfer pursuant to section 41-1507 and submit a copy of the department of commerce's certificate of qualification to the department of revenue with the taxpayer's income tax return.
(b) The taxpayer must transfer the entire nominal amount of the credit. When transferred, the original taxpayer retains no credit amount against the taxpayer's income tax liability.
(c) A TRANSFEREE may apply the credit against the TRANSFEREE'S tax liability under this chapter or chapter 10 of this title for the current taxable year in the same manner as the original taxpayer. If the amount of the credit transferred to a TRANSFEREE exceeds the TRANSFEREE'S income tax liability, the excess amount of the credit is extinguished and the TRANSFEREE is not eligible to claim a refund for the excess amount or to carry the excess amount forward to subsequent years' income tax liability.
(d) A TRANSFEREE shall not resell or transfer the credit to a subsequent taxpayer.
(e) If it is determined that the original taxpayer was not qualified, or was disqualified from using the credit at the time of the transfer, the department of revenue shall either disallow the credit claimed by a TRANSFEREE or recapture the credit from the TRANSFEREE through any authorized collection method. The TRANSFEREE'S recourse is against the original taxpayer.
(f) In the case of any failure to comply with this paragraph, the department of revenue shall disallow the credit until the taxpayer or TRANSFEREE is in full compliance.
Sec. 6. Effective date
A. Section 43-1074.01, Arizona Revised Statutes, as added by Laws 2008, chapter 290, section 4 and amended by this act, is effective for taxable years beginning from and after December 31, 2017.
B. Section 43-1168, Arizona Revised Statutes, as added by Laws 2008, chapter 290, section 7 and amended by this act, is effective for taxable years beginning from and after December 31, 2017.