HB2647 - 502R

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

Section 1. Section 9-835, Arizona Revised Statutes, is amended to read:

START_STATUTE9-835. Licensing time frames; compliance; consequence for failure to comply with time frame; exception

A. For any new ordinance or code requiring a license, a municipality shall have in place an overall time frame during which the municipality will either grant or deny each type of license that it issues. The overall time frame for each type of license shall state separately the administrative completeness review time frame and the substantive review time frame.

B. On or before December 31, 2012, a municipality that issues licenses required under existing ordinances or codes shall have in place an overall time frame during which the municipality will either grant or deny each type of license that it issues. The overall time frame for each type of license shall state separately the administrative completeness review time frame and the substantive review time frame. Municipalities shall prioritize the establishment of time frames for those licenses that have the greatest impact on the public. The time frame for issuing or denying municipal licenses and permits to any applicant for any project within a county stadium district established within the municipality pursuant to section 48-4202, subsection B shall not exceed thirty days after the submission of a complete and correct application.

C. In establishing time frames, municipalities shall consider all of the following:

1. The complexity of the licensing subject matter.

2. The resources of the municipality.

3. The economic impact of delay on the regulated community.

4. The impact of the licensing decision on public health and safety.

5. The possible use of volunteers with expertise in the subject matter area.

6. The possible increased use of general licenses for similar types of licensed businesses or facilities.

7. The possible increased cooperation between the municipality and the regulated community.

8. Increased municipal flexibility in structuring the licensing process and personnel including:

(a) Adult businesses and other licenses that are related to the first amendment.

(b) Master planned communities.

(c) Suspension of the substantive and overall time frames for purposes including public hearings or state or federal licenses.

D. A municipality shall issue a written or electronic notice of administrative completeness or deficiencies to an applicant for a license within the administrative completeness review time frame. If the permit sought requires approval of more than one department of the municipality, each department may issue a written or electronic notice of administrative completeness or deficiencies.

E. If a municipality determines that an application for a license is not administratively complete, the municipality shall include a comprehensive list of the specific deficiencies in the written or electronic notice provided pursuant to subsection D of this section. If the municipality issues a written or electronic notice of deficiencies within the administrative completeness time frame, the administrative completeness review time frame and the overall time frame are suspended from the date the notice is issued until the date that the municipality receives the missing information from the applicant. The municipality may issue an additional written or electronic notice of administrative completeness or deficiencies based on the applicant's submission of missing information. If the permit sought requires approval of more than one department of the municipality, each department may issue an additional written or electronic notice of administrative completeness or deficiencies based on the applicant's submission of missing information.

F. If a municipality does not issue a written or electronic notice of administrative completeness or deficiencies within the administrative completeness review time frame, the application is deemed administratively complete. If a municipality issues a timely written or electronic notice of deficiencies, an application shall not be complete until all requested information has been received by the municipality.

G. During the substantive review time frame, a municipality may make one comprehensive written or electronic request for additional information. If the permit sought requires approval of more than one department of the municipality, each department may issue a written or electronic request for additional information. The municipality and applicant may mutually agree in writing or electronically to allow the municipality to submit supplemental requests for additional information. If a municipality issues a comprehensive written or electronic request or a supplemental request by mutual written or electronic agreement for additional information, the substantive review time frame and the overall time frame are suspended from the date the request is issued until the date that the municipality receives the additional information from the applicant.

H. By mutual written or electronic agreement, a municipality and an applicant for a license may extend the substantive review time frame and the overall time frame. An extension of the substantive review time frame and the overall time frame may not exceed twenty-five per cent of the overall time frame.

I. Unless a municipality and an applicant for a license mutually agree to extend the substantive review time frame and the overall time frame pursuant to subsection H of this section, a municipality shall issue a written or electronic notice granting or denying a license to an applicant. If a municipality denies an application for a license, the municipality shall include in the written or electronic notice at least the following information:

1. Justification for the denial with references to the statutes, ordinances, codes or substantive policy statements on which the denial is based.

2. An explanation of the applicant's right to appeal the denial. The explanation shall include the number of working days in which the applicant must file a protest challenging the denial and the name and telephone number of a municipal contact person who can answer questions regarding the appeals process.

J. If a municipality does not issue the applicant the written or electronic notice granting or denying a license within the overall time frame or within the mutually agreed upon time frame extension, the municipality shall refund to the applicant all fees charged for reviewing and acting on the application for the license and shall excuse payment of any fees that have not yet been paid. The municipality shall not require an applicant to submit an application for a refund pursuant to this subsection. The refund shall be made within thirty working days after the expiration of the overall time frame or the time frame extension. The municipality shall continue to process the application. Notwithstanding any other statute, the municipality shall make the refund from the fund in which the application fees were originally deposited.

K. This section does not apply to licenses issued within seven working days after receipt of the initial application or a permit that expire within twenty‑one working days after issuance. END_STATUTE

Sec. 2. Section 42-5031, Arizona Revised Statutes, is amended to read:

START_STATUTE42-5031. Distribution of multipurpose facility revenues to district

A. Subject to the requirements of subsection D C of this section, if a county stadium district is authorized by an election pursuant to section 48‑4237, subsection E, paragraph 5 to use the amounts paid to the district pursuant to subsection B of this section as permitted by law, then after delivery of a resolution of the district board of directors requesting payment, which resolution shall contain notice of the exercise of the option to begin payments provided for in this subsection, the state treasurer shall pay each month, beginning with the second calendar month after the optional payment commencement event contained in the resolution, from the amount designated as distribution base pursuant to section 42‑5029, subsection D, the amount determined under subsection B of this section to the district. Payments under this section shall continue until July 1, 2025 or until the date all authorized debt service payments are completed as provided by section 48-4203, subsection B, paragraph 3, whichever date is earlier.

B. The amount to be paid each month under subsection A of this section is one-half of the amount of state transaction privilege tax revenues received in the second preceding calendar month from all persons conducting business under any business classification under this article at a multipurpose facility site, or in the construction of a multipurpose facility, the public or district owned components of which cost at least two hundred million dollars to construct. In no event shall the amount to be paid each month under this section exceed the net new state transaction privilege tax revenues received from the multipurpose facility site as compared to the revenues received in the same month during the twelve months prior to the month in which the public vote pursuant to section 48‑4237 is held. The amount paid to the district shall not exceed the amount required to service the debts and obligations of the district and to meet the purposes set forth in section 48-4204, subsection B.

C. The primary component, as described in section 48‑4201, shall be constructed during the first phase of the project.

D. C. To qualify for payments under this section, the municipality in which the multipurpose facility site is located must either obtain voter approval for a local transaction privilege tax to pay costs associated with a multipurpose facility, or make a financial commitment by intergovernmental agreement between the municipality and the district to make direct payments to the district from any lawful source, including municipal transaction privilege taxes or to expend monies for land, infrastructure or other improvements directly related to the multipurpose facility or the multipurpose facility site, by the end of the date referred to in subsection A of this section in an aggregate amount equal to the amount received by the district pursuant to this section.

E. D. If the municipality in which the multipurpose facility site is located fails to satisfy the obligations of the municipality pursuant to subsection D C of this section, then beginning six months after the date referred to in subsection A of this section, distributions otherwise payable to the municipality pursuant to section 42‑5029, subsection C shall be reduced by an amount equal to the excess of the amount received by the district pursuant to this section over the amount paid or expended by the municipality. The amount of the reduction shall be distributed to the district to satisfy the financial commitment of the municipality pursuant to subsection D C of this section.

F. E. To comply with the requirements of this section, the county stadium district board of directors or any city or town that is part of the county stadium district shall supply the department with all requested information necessary to administer this section. END_STATUTE

Sec. 3. Section 42-5061, Arizona Revised Statutes, is amended to read:

START_STATUTE42-5061. Retail classification; definitions

A. The retail classification is comprised of the business of selling tangible personal property at retail. The tax base for the retail classification is the gross proceeds of sales or gross income derived from the business. The tax imposed on the retail classification does not apply to the gross proceeds of sales or gross income from:

1. Professional or personal service occupations or businesses which that involve sales or transfers of tangible personal property only as inconsequential elements.

2. Services rendered in addition to selling tangible personal property at retail.

3. Sales of warranty or service contracts. The storage, use or consumption of tangible personal property provided under the conditions of such contracts is subject to tax under section 42‑5156.

4. Sales of tangible personal property by any nonprofit organization organized and operated exclusively for charitable purposes and recognized by the United States internal revenue service under section 501(c)(3) of the internal revenue code.

5. Sales to persons engaged in business classified under the restaurant classification of articles used by human beings for food, drink or condiment, whether simple, mixed or compounded.

6. Business activity which that is properly included in any other business classification which that is taxable under this article.

7. The sale of stocks and bonds.

8. Drugs and medical oxygen, including delivery hose, mask or tent, regulator and tank, on the prescription of a member of the medical, dental or veterinarian profession who is licensed by law to administer such substances.

9. Prosthetic appliances as defined in section 23‑501 prescribed or recommended by a health professional who is licensed pursuant to title 32, chapter 7, 8, 11, 13, 14, 15, 16, 17 or 29.

10. Insulin, insulin syringes and glucose test strips.

11. Prescription eyeglasses or contact lenses.

12. Hearing aids as defined in section 36‑1901.

13. Durable medical equipment which has a centers for medicare and medicaid services common procedure code, is designated reimbursable by medicare, is prescribed by a person who is licensed under title 32, chapter 7, 8, 13, 14, 15, 17 or 29, can withstand repeated use, is primarily and customarily used to serve a medical purpose, is generally not useful to a person in the absence of illness or injury and is appropriate for use in the home.

14. Sales to nonresidents of this state for use outside this state if the vendor ships or delivers the tangible personal property out of this state.

15. Food, as provided in and subject to the conditions of article 3 of this chapter and section 42‑5074.

16. Items purchased with United States department of agriculture food stamp coupons issued under the food stamp act of 1977 (P.L. 95‑113; 91 Stat. 958) or food instruments issued under section 17 of the child nutrition act (P.L. 95‑627; 92 Stat. 3603; P.L. 99‑661, section 4302; 42 United States Code section 1786).

17. Textbooks by any bookstore that are required by any state university or community college.

18. Food and drink to a person who is engaged in business which that is classified under the restaurant classification and which that provides such food and drink without monetary charge to its employees for their own consumption on the premises during the employees' hours of employment.

19. Articles of food, drink or condiment and accessory tangible personal property to a school district or charter school if such articles and accessory tangible personal property are to be prepared and served to persons for consumption on the premises of a public school within the district or on the premises of the charter school during school hours.

20. Lottery tickets or shares pursuant to title 5, chapter 5, article 1.

21. The sale of precious metal bullion and monetized bullion to the ultimate consumer, but the sale of coins or other forms of money for manufacture into jewelry or works of art is subject to the tax. For the purposes of this paragraph:

(a) "Monetized bullion" means coins and other forms of money which that are manufactured from gold, silver or other metals and which that have been or are used as a medium of exchange in this or another state, the United States or a foreign nation.

(b) "Precious metal bullion" means precious metal, including gold, silver, platinum, rhodium and palladium, which has been smelted or refined so that its value depends on its contents and not on its form.

22. Motor vehicle fuel and use fuel that are subject to a tax imposed under title 28, chapter 16, article 1, sales of use fuel to a holder of a valid single trip use fuel tax permit issued under section 28‑5739, sales of aviation fuel that are subject to the tax imposed under section 28‑8344 and sales of jet fuel that are subject to the tax imposed under article 8 of this chapter.

23. Tangible personal property sold to a person engaged in the business of leasing or renting such property under the personal property rental classification if such property is to be leased or rented by such person.

24. Tangible personal property sold in interstate or foreign commerce if prohibited from being so taxed by the Constitution of the United States or the constitution of this state.

25. Tangible personal property sold to:

(a) A qualifying hospital as defined in section 42‑5001.

(b) A qualifying health care organization as defined in section 42‑5001 if the tangible personal property is used by the organization solely to provide health and medical related educational and charitable services.

(c) A qualifying health care organization as defined in section 42‑5001 if the organization is dedicated to providing educational, therapeutic, rehabilitative and family medical education training for blind, visually impaired and multihandicapped children from the time of birth to age twenty‑one.

(d) A qualifying community health center as defined in section 42‑5001.

(e) A nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that regularly serves meals to the needy and indigent on a continuing basis at no cost.

(f) For taxable periods beginning from and after June 30, 2001, a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that provides residential apartment housing for low income persons over sixty‑two years of age in a facility that qualifies for a federal housing subsidy, if the tangible personal property is used by the organization solely to provide residential apartment housing for low income persons over sixty‑two years of age in a facility that qualifies for a federal housing subsidy.

26. Magazines or other periodicals or other publications by this state to encourage tourist travel.

27. Tangible personal property sold to a person that is subject to tax under this article by reason of being engaged in business classified under the prime contracting classification under section 42‑5075, or to a subcontractor working under the control of a prime contractor that is subject to tax under article 1 of this chapter, if the property so sold is any of the following:

(a) Incorporated or fabricated by the person into any real property, structure, project, development or improvement as part of the business.

(b) Used in environmental response or remediation activities under section 42‑5075, subsection B, paragraph 6.

(c) Incorporated or fabricated by the person into any lake facility development in a commercial enhancement reuse district under conditions prescribed for the deduction allowed by section 42‑5075, subsection B, paragraph 8.

28. The sale of a motor vehicle to:

(a) A nonresident of this state if the purchaser's state of residence does not allow a corresponding use tax exemption to the tax imposed by article 1 of this chapter and if the nonresident has secured a special ninety day nonresident registration permit for the vehicle as prescribed by sections 28‑2154 and 28‑2154.01.

(b) An enrolled member of an Indian tribe who resides on the Indian reservation established for that tribe.

29. Tangible personal property purchased in this state by a nonprofit charitable organization that has qualified under section 501(c)(3) of the United States internal revenue code and that engages in and uses such property exclusively in programs for mentally or physically handicapped persons if the programs are exclusively for training, job placement, rehabilitation or testing.

30. Sales of tangible personal property by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4) or 501(c)(6) of the internal revenue code if the organization is associated with a major league baseball team or a national touring professional golfing association and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.

31. Sales of commodities, as defined by title 7 United States Code section 2, that are consigned for resale in a warehouse in this state in or from which the commodity is deliverable on a contract for future delivery subject to the rules of a commodity market regulated by the United States commodity futures trading commission.

32. Sales of tangible personal property by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4), 501(c)(6), 501(c)(7) or 501(c)(8) of the internal revenue code if the organization sponsors or operates a rodeo featuring primarily farm and ranch animals and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.

33. Sales of seeds, seedlings, roots, bulbs, cuttings and other propagative material to persons who use those items to commercially produce agricultural, horticultural, viticultural or floricultural crops in this state.

34. Machinery, equipment, technology or related supplies that are only useful to assist a person who is physically disabled as defined in section 46‑191, has a developmental disability as defined in section 36‑551 or has a head injury as defined in section 41‑3201 to be more independent and functional.

35. Sales of tangible personal property that is shipped or delivered directly to a destination outside the United States for use in that foreign country.

36. Sales of natural gas or liquefied petroleum gas used to propel a motor vehicle.

37. Paper machine clothing, such as forming fabrics and dryer felts, sold to a paper manufacturer and directly used or consumed in paper manufacturing.

38. Coal, petroleum, coke, natural gas, virgin fuel oil and electricity sold to a qualified environmental technology manufacturer, producer or processor as defined in section 41‑1514.02 and directly used or consumed in the generation or provision of on-site power or energy solely for environmental technology manufacturing, producing or processing or environmental protection. This paragraph shall apply for twenty full consecutive calendar or fiscal years from the date the first paper manufacturing machine is placed in service. In the case of an environmental technology manufacturer, producer or processor who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service.

39. Sales of liquid, solid or gaseous chemicals used in manufacturing, processing, fabricating, mining, refining, metallurgical operations, research and development and, beginning on January 1, 1999, printing, if using or consuming the chemicals, alone or as part of an integrated system of chemicals, involves direct contact with the materials from which the product is produced for the purpose of causing or permitting a chemical or physical change to occur in the materials as part of the production process. This paragraph does not include chemicals that are used or consumed in activities such as packaging, storage or transportation but does not affect any deduction for such chemicals that is otherwise provided by this section. For the purposes of this paragraph, "printing" means a commercial printing operation and includes job printing, engraving, embossing, copying and bookbinding.

40. Through December 31, 1994, personal property liquidation transactions, conducted by a personal property liquidator. From and after December 31, 1994, personal property liquidation transactions shall be taxable under this section provided that nothing in this subsection shall be construed to authorize the taxation of casual activities or transactions under this chapter. For the purposes of this paragraph:

(a) "Personal property liquidation transaction" means a sale of personal property made by a personal property liquidator acting solely on behalf of the owner of the personal property sold at the dwelling of the owner or upon the death of any owner, on behalf of the surviving spouse, if any, any devisee or heir or the personal representative of the estate of the deceased, if one has been appointed.

(b) "Personal property liquidator" means a person who is retained to conduct a sale in a personal property liquidation transaction.

41. Sales of food, drink and condiment for consumption within the premises of any prison, jail or other institution under the jurisdiction of the state department of corrections, the department of public safety, the department of juvenile corrections or a county sheriff.

42. A motor vehicle and any repair and replacement parts and tangible personal property becoming a part of such motor vehicle sold to a motor carrier who is subject to a fee prescribed in title 28, chapter 16, article 4 and who is engaged in the business of leasing or renting such property.

43. Livestock and poultry feed, salts, vitamins and other additives for livestock or poultry consumption that are sold to persons who are engaged in producing livestock, poultry, or livestock or poultry products or who are engaged in feeding livestock or poultry commercially. For the purposes of this paragraph, "poultry" includes ratites.

44. Sales of implants used as growth promotants and injectable medicines, not already exempt under paragraph 8 of this subsection, for livestock or poultry owned by or in possession of persons who are engaged in producing livestock, poultry, or livestock or poultry products or who are engaged in feeding livestock or poultry commercially. For the purposes of this paragraph, "poultry" includes ratites.

45. Sales of motor vehicles at auction to nonresidents of this state for use outside this state if the vehicles are shipped or delivered out of this state, regardless of where title to the motor vehicles passes or its free on board point.

46. Tangible personal property sold to a person engaged in business and subject to tax under the transient lodging classification if the tangible personal property is a personal hygiene item or articles used by human beings for food, drink or condiment, except alcoholic beverages, which are furnished without additional charge to and intended to be consumed by the transient during the transient's occupancy.

47. Sales of alternative fuel, as defined in section 1‑215, to a used oil fuel burner who has received a permit to burn used oil or used oil fuel under section 49‑426 or 49‑480.

48. Sales of materials that are purchased by or for publicly funded libraries including school district libraries, charter school libraries, community college libraries, state university libraries or federal, state, county or municipal libraries for use by the public as follows:

(a) Printed or photographic materials, beginning August 7, 1985.

(b) Electronic or digital media materials, beginning July 17, 1994.

49. Tangible personal property sold to a commercial airline and consisting of food, beverages and condiments and accessories used for serving the food and beverages, if those items are to be provided without additional charge to passengers for consumption in flight. For the purposes of this paragraph, "commercial airline" means a person holding a federal certificate of public convenience and necessity or foreign air carrier permit for air transportation to transport persons, property or United States mail in intrastate, interstate or foreign commerce.

50. Sales of alternative fuel vehicles if the vehicle was manufactured as a diesel fuel vehicle and converted to operate on alternative fuel and equipment that is installed in a conventional diesel fuel motor vehicle to convert the vehicle to operate on an alternative fuel, as defined in section 1‑215.

51. Sales of any spirituous, vinous or malt liquor by a person that is licensed in this state as a wholesaler by the department of liquor licenses and control pursuant to title 4, chapter 2, article 1.

52. Sales of tangible personal property to be incorporated or installed as part of environmental response or remediation activities under section 42‑5075, subsection B, paragraph 6.

53. Sales of tangible personal property by a nonprofit organization that is exempt from taxation under section 501(c)(6) of the internal revenue code if the organization produces, organizes or promotes cultural or civic related festivals or events and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.

54. Through August 31, 2014, sales of Arizona centennial medallions by the historical advisory commission.

55. Application services that are designed to assess or test student learning or to promote curriculum design or enhancement purchased by or for any school district, charter school, community college or state university. For the purposes of this paragraph:

(a) "Application services" means software applications provided remotely using hypertext transfer protocol or another network protocol.

(b) "Curriculum design or enhancement" means planning, implementing or reporting on courses of study, lessons, assignments or other learning activities.

56. Retail sales conducted at a business located in a county stadium district established pursuant to section 48-4202, subsection B that after January 1, 2013 is improved by the construction of new or expanded fixed capital assets equal to fifty per cent of the original full cash value of the property as determined by the county assessor. The deduction under this paragraph applies with respect to the taxpayer that made the initial capital investment, and expires on the sale or transfer of the property to another owner. The amount of the deduction under this paragraph is determined as follows:

(a) For the first 120 consecutive months beginning after the municipality issues a certificate of occupancy for the capital improvements, the deduction is one hundred per cent of the gross proceeds of sales at the location.

(b) for the 121^st through the 132^nd months, the deduction is eighty per cent of the gross proceeds of sales at the location.

(c) For the 133^rd through the 144^th months, the deduction is sixty per cent of the gross proceeds of sales at the location.

(d) For the 145^th through the 156^th months, the deduction is forty per cent of the gross proceeds of sales at the location.

(e) For the 157^th through the 168^th months, the deduction is twenty per cent of the gross proceeds of sales at the location.

(f) Thereafter, the deduction is zero.

B. In addition to the deductions from the tax base prescribed by subsection A of this section, the gross proceeds of sales or gross income derived from sales of the following categories of tangible personal property shall be deducted from the tax base:

1. Machinery, or equipment, used directly in manufacturing, processing, fabricating, job printing, refining or metallurgical operations. The terms "manufacturing", "processing", "fabricating", "job printing", "refining" and "metallurgical" as used in this paragraph refer to and include those operations commonly understood within their ordinary meaning. "Metallurgical operations" includes leaching, milling, precipitating, smelting and refining.

2. Mining machinery, or equipment, used directly in the process of extracting ores or minerals from the earth for commercial purposes, including equipment required to prepare the materials for extraction and handling, loading or transporting such extracted material to the surface. "Mining" includes underground, surface and open pit operations for extracting ores and minerals.

3. Tangible personal property sold to persons engaged in business classified under the telecommunications classification and consisting of central office switching equipment, switchboards, private branch exchange equipment, microwave radio equipment and carrier equipment including optical fiber, coaxial cable and other transmission media which are components of carrier systems.

4. Machinery, equipment or transmission lines used directly in producing or transmitting electrical power, but not including distribution. Transformers and control equipment used at transmission substation sites constitute equipment used in producing or transmitting electrical power.

5. Neat animals, horses, asses, sheep, ratites, swine or goats used or to be used as breeding or production stock, including sales of breedings or ownership shares in such animals used for breeding or production.

6. Pipes or valves four inches in diameter or larger used to transport oil, natural gas, artificial gas, water or coal slurry, including compressor units, regulators, machinery and equipment, fittings, seals and any other part that is used in operating the pipes or valves.

7. Aircraft, navigational and communication instruments and other accessories and related equipment sold to:

(a) A person holding a federal certificate of public convenience and necessity, a supplemental air carrier certificate under federal aviation regulations (14 Code of Federal Regulations part 121) or a foreign air carrier permit for air transportation for use as or in conjunction with or becoming a part of aircraft to be used to transport persons, property or United States mail in intrastate, interstate or foreign commerce.

(b) Any foreign government.

(c) Persons who are not residents of this state and who will not use such property in this state other than in removing such property from this state. This subdivision also applies to corporations that are not incorporated in this state, regardless of maintaining a place of business in this state, if the principal corporate office is located outside this state and the property will not be used in this state other than in removing the property from this state.

8. Machinery, tools, equipment and related supplies used or consumed directly in repairing, remodeling or maintaining aircraft, aircraft engines or aircraft component parts by or on behalf of a certificated or licensed carrier of persons or property.

9. Railroad rolling stock, rails, ties and signal control equipment used directly to transport persons or property.

10. Machinery or equipment used directly to drill for oil or gas or used directly in the process of extracting oil or gas from the earth for commercial purposes.

11. Buses or other urban mass transit vehicles which are used directly to transport persons or property for hire or pursuant to a governmentally adopted and controlled urban mass transportation program and which are sold to bus companies holding a federal certificate of convenience and necessity or operated by any city, town or other governmental entity or by any person contracting with such governmental entity as part of a governmentally adopted and controlled program to provide urban mass transportation.

12. Groundwater measuring devices required under section 45‑604.

13. New machinery and equipment consisting of tractors, tractor‑drawn implements, self‑powered implements, machinery and equipment necessary for extracting milk, and machinery and equipment necessary for cooling milk and livestock, and drip irrigation lines not already exempt under paragraph 6 of this subsection and that are used for commercial production of agricultural, horticultural, viticultural and floricultural crops and products in this state. For the purposes of this paragraph:

(a) "New machinery and equipment" means machinery and equipment which that have never been sold at retail except pursuant to leases or rentals which that do not total two years or more.

(b) "Self‑powered implements" includes machinery and equipment that are electric‑powered.

14. Machinery or equipment used in research and development. For the purposes of this paragraph, "research and development" means basic and applied research in the sciences and engineering, and designing, developing or testing prototypes, processes or new products, including research and development of computer software that is embedded in or an integral part of the prototype or new product or that is required for machinery or equipment otherwise exempt under this section to function effectively. Research and development do not include manufacturing quality control, routine consumer product testing, market research, sales promotion, sales service, research in social sciences or psychology, computer software research that is not included in the definition of research and development, or other nontechnological activities or technical services.

15. Machinery and equipment that are purchased by or on behalf of the owners of a soundstage complex and primarily used for motion picture, multimedia or interactive video production in the complex. This paragraph applies only if the initial construction of the soundstage complex begins after June 30, 1996 and before January 1, 2002 and the machinery and equipment are purchased before the expiration of five years after the start of initial construction. For the purposes of this paragraph:

(a) "Motion picture, multimedia or interactive video production" includes products for theatrical and television release, educational presentations, electronic retailing, documentaries, music videos, industrial films, CD‑ROM, video game production, commercial advertising and television episode production and other genres that are introduced through developing technology.

(b) "Soundstage complex" means a facility of multiple stages including production offices, construction shops and related areas, prop and costume shops, storage areas, parking for production vehicles and areas that are leased to businesses that complement the production needs and orientation of the overall facility.

16. Tangible personal property that is used by either of the following to receive, store, convert, produce, generate, decode, encode, control or transmit telecommunications information:

(a) Any direct broadcast satellite television or data transmission service that operates pursuant to 47 Code of Federal Regulations part 25.

(b) Any satellite television or data transmission facility, if both of the following conditions are met:

(i) Over two‑thirds of the transmissions, measured in megabytes, transmitted by the facility during the test period were transmitted to or on behalf of one or more direct broadcast satellite television or data transmission services that operate pursuant to 47 Code of Federal Regulations part 25.

(ii) Over two‑thirds of the transmissions, measured in megabytes, transmitted by or on behalf of those direct broadcast television or data transmission services during the test period were transmitted by the facility to or on behalf of those services.

For the purposes of subdivision (b) of this paragraph, "test period" means the three hundred sixty‑five day period beginning on the later of the date on which the tangible personal property is purchased or the date on which the direct broadcast satellite television or data transmission service first transmits information to its customers.

17. Clean rooms that are used for manufacturing, processing, fabrication or research and development, as defined in paragraph 14 of this subsection, of semiconductor products. For the purposes of this paragraph, "clean room" means all property that comprises or creates an environment where humidity, temperature, particulate matter and contamination are precisely controlled within specified parameters, without regard to whether the property is actually contained within that environment or whether any of the property is affixed to or incorporated into real property. Clean room:

(a) Includes the integrated systems, fixtures, piping, movable partitions, lighting and all property that is necessary or adapted to reduce contamination or to control airflow, temperature, humidity, chemical purity or other environmental conditions or manufacturing tolerances, as well as the production machinery and equipment operating in conjunction with the clean room environment.

(b) Does not include the building or other permanent, nonremovable component of the building that houses the clean room environment.

18. Machinery and equipment used directly in the feeding of poultry, the environmental control of housing for poultry, the movement of eggs within a production and packaging facility or the sorting or cooling of eggs. This exemption does not apply to vehicles used for transporting eggs.

19. Machinery or equipment, including related structural components, that is employed in connection with manufacturing, processing, fabricating, job printing, refining, mining, natural gas pipelines, metallurgical operations, telecommunications, producing or transmitting electricity or research and development and that is used directly to meet or exceed rules or regulations adopted by the federal energy regulatory commission, the United States environmental protection agency, the United States nuclear regulatory commission, the Arizona department of environmental quality or a political subdivision of this state to prevent, monitor, control or reduce land, water or air pollution.

20. Machinery and equipment that are sold to a person engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state and that are used directly and primarily to prevent, monitor, control or reduce air, water or land pollution.

21. Machinery or equipment that enables a television station to originate and broadcast or to receive and broadcast digital television signals and that was purchased to facilitate compliance with the telecommunications act of 1996 (P.L. 104‑104; 110 Stat. 56; 47 United States Code section 336) and the federal communications commission order issued April 21, 1997 (47 Code of Federal Regulations part 73). This paragraph does not exempt any of the following:

(a) Repair or replacement parts purchased for the machinery or equipment described in this paragraph.

(b) Machinery or equipment purchased to replace machinery or equipment for which an exemption was previously claimed and taken under this paragraph.

(c) Any machinery or equipment purchased after the television station has ceased analog broadcasting, or purchased after November 1, 2009, whichever occurs first.

22. Qualifying equipment that is purchased from and after June 30, 2004 through June 30, 2014 by a qualified business under section 41‑1516 for harvesting or the initial processing of qualifying forest products removed from qualifying projects as defined in section 41‑1516. To qualify for this deduction, the qualified business at the time of purchase must present its certification approved by the department.

23. Machinery, equipment and other tangible personal property used directly in motion picture production by a motion picture production company. To qualify for this deduction, at the time of purchase, the motion picture production company must present to the retailer its certificate that is issued pursuant to section 42‑5009, subsection H and that establishes its qualification for the deduction.

C. The deductions provided by subsection B of this section do not include sales of:

1. Expendable materials. For the purposes of this paragraph, expendable materials do not include any of the categories of tangible personal property specified in subsection B of this section regardless of the cost or useful life of that property.

2. Janitorial equipment and hand tools.

3. Office equipment, furniture and supplies.

4. Tangible personal property used in selling or distributing activities, other than the telecommunications transmissions described in subsection B, paragraph 16 of this section.

5. Motor vehicles required to be licensed by this state, except buses or other urban mass transit vehicles specifically exempted pursuant to subsection B, paragraph 11 of this section, without regard to the use of such motor vehicles.

6. Shops, buildings, docks, depots and all other materials of whatever kind or character not specifically included as exempt.

7. Motors and pumps used in drip irrigation systems.

D. In addition to the deductions from the tax base prescribed by subsection A of this section, there shall be deducted from the tax base the gross proceeds of sales or gross income derived from sales of machinery, equipment, materials and other tangible personal property used directly and predominantly to construct a qualified environmental technology manufacturing, producing or processing facility as described in section 41‑1514.02. This subsection applies for ten full consecutive calendar or fiscal years after the start of initial construction.

E. In computing the tax base, gross proceeds of sales or gross income from retail sales of heavy trucks and trailers does not include any amount attributable to federal excise taxes imposed by 26 United States Code section 4051.

F. In computing the tax base, gross proceeds of sales or gross income from the sale of use fuel, as defined in section 28‑5601, does not include any amount attributable to federal excise taxes imposed by 26 United States Code section 4091.

G. If a person is engaged in an occupation or business to which subsection A of this section applies, the person's books shall be kept so as to show separately the gross proceeds of sales of tangible personal property and the gross income from sales of services, and if not so kept the tax shall be imposed on the total of the person's gross proceeds of sales of tangible personal property and gross income from services.

H. If a person is engaged in the business of selling tangible personal property at both wholesale and retail, the tax under this section applies only to the gross proceeds of the sales made other than at wholesale if the person's books are kept so as to show separately the gross proceeds of sales of each class, and if the books are not so kept, the tax under this section applies to the gross proceeds of every sale so made.

I. A person who engages in manufacturing, baling, crating, boxing, barreling, canning, bottling, sacking, preserving, processing or otherwise preparing for sale or commercial use any livestock, agricultural or horticultural product or any other product, article, substance or commodity and who sells the product of such business at retail in this state is deemed, as to such sales, to be engaged in business classified under the retail classification. This subsection does not apply to businesses classified under the:

1. Transporting classification.

2. Utilities classification.

3. Telecommunications classification.

4. Pipeline classification.

5. Private car line classification.

6. Publication classification.

7. Job printing classification.

8. Prime contracting classification.

9. Owner builder sales classification.

10. Restaurant classification.

J. The gross proceeds of sales or gross income derived from the following shall be deducted from the tax base for the retail classification:

1. Sales made directly to the United States government or its departments or agencies by a manufacturer, modifier, assembler or repairer.

2. Sales made directly to a manufacturer, modifier, assembler or repairer if such sales are of any ingredient or component part of products sold directly to the United States government or its departments or agencies by the manufacturer, modifier, assembler or repairer.

3. Overhead materials or other tangible personal property that is used in performing a contract between the United States government and a manufacturer, modifier, assembler or repairer, including property used in performing a subcontract with a government contractor who is a manufacturer, modifier, assembler or repairer, to which title passes to the government under the terms of the contract or subcontract.

4. Sales of overhead materials or other tangible personal property to a manufacturer, modifier, assembler or repairer if the gross proceeds of sales or gross income derived from the property by the manufacturer, modifier, assembler or repairer will be exempt under paragraph 3 of this subsection.

K. There shall be deducted from the tax base fifty per cent of the gross proceeds or gross income from any sale of tangible personal property made directly to the United States government or its departments or agencies, which is not deducted under subsection J of this section.

L. The department shall require every person claiming a deduction provided by subsection J or K of this section to file on forms prescribed by the department at such times as the department directs a sworn statement disclosing the name of the purchaser and the exact amount of sales on which the exclusion or deduction is claimed.

M. In computing the tax base, gross proceeds of sales or gross income does not include:

1. A manufacturer's cash rebate on the sales price of a motor vehicle if the buyer assigns the buyer's right in the rebate to the retailer.

2. The waste tire disposal fee imposed pursuant to section 44‑1302.

N. There shall be deducted from the tax base the amount received from sales of solar energy devices. The retailer shall register with the department as a solar energy retailer. By registering, the retailer acknowledges that it will make its books and records relating to sales of solar energy devices available to the department for examination.

O. In computing the tax base in the case of the sale or transfer of wireless telecommunications equipment as an inducement to a customer to enter into or continue a contract for telecommunications services that are taxable under section 42‑5064, gross proceeds of sales or gross income does not include any sales commissions or other compensation received by the retailer as a result of the customer entering into or continuing a contract for the telecommunications services.

P. For the purposes of this section, a sale of wireless telecommunications equipment to a person who holds the equipment for sale or transfer to a customer as an inducement to enter into or continue a contract for telecommunications services that are taxable under section 42‑5064 is considered to be a sale for resale in the regular course of business.

Q. Retail sales of prepaid calling cards or prepaid authorization numbers for telecommunications services, including sales of reauthorization of a prepaid card or authorization number, are subject to tax under this section.

R. For the purposes of this section, the diversion of gas from a pipeline by a person engaged in the business of:

1. Operating a natural or artificial gas pipeline, for the sole purpose of fueling compressor equipment to pressurize the pipeline, is not a sale of the gas to the operator of the pipeline.

2. Converting natural gas into liquefied natural gas, for the sole purpose of fueling compressor equipment used in the conversion process, is not a sale of gas to the operator of the compressor equipment.

S. If a seller is entitled to a deduction pursuant to subsection B, paragraph 16, subdivision (b) of this section, the department may require the purchaser to establish that the requirements of subsection B, paragraph 16, subdivision (b) of this section have been satisfied. If the purchaser cannot establish that the requirements of subsection B, paragraph 16, subdivision (b) of this section have been satisfied, the purchaser is liable in an amount equal to any tax, penalty and interest which the seller would have been required to pay under article 1 of this chapter if the seller had not made a deduction pursuant to subsection B, paragraph 16, subdivision (b) of this section. Payment of the amount under this subsection exempts the purchaser from liability for any tax imposed under article 4 of this chapter and related to the tangible personal property purchased. The amount shall be treated as transaction privilege tax to the purchaser and as tax revenues collected from the seller to designate the distribution base pursuant to section 42‑5029.

T. For the purposes of section 42‑5032.01, the department shall separately account for revenues collected under the retail classification from businesses selling tangible personal property at retail:

1. On the premises of a multipurpose facility that is owned, leased or operated by the tourism and sports authority pursuant to title 5, chapter 8.

2. At professional football contests that are held in a stadium located on the campus of an institution under the jurisdiction of the Arizona board of regents.

U. In computing the tax base for the sale of a motor vehicle to a nonresident of this state, if the purchaser's state of residence allows a corresponding use tax exemption to the tax imposed by article 1 of this chapter and the rate of the tax in the purchaser's state of residence is lower than the rate prescribed in article 1 of this chapter or if the purchaser's state of residence does not impose an excise tax, and the nonresident has secured a special ninety day nonresident registration permit for the vehicle as prescribed by sections 28‑2154 and 28‑2154.01, there shall be deducted from the tax base a portion of the gross proceeds or gross income from the sale so that the amount of transaction privilege tax that is paid in this state is equal to the excise tax that is imposed by the purchaser's state of residence on the nonexempt sale or use of the motor vehicle.

V. For the purposes of this section:

1. "Aircraft" includes:

(a) An airplane flight simulator that is approved by the federal aviation administration for use as a phase II or higher flight simulator under appendix H, 14 Code of Federal Regulations part 121.

(b) Tangible personal property that is permanently affixed or attached as a component part of an aircraft that is owned or operated by a certificated or licensed carrier of persons or property.

2. "Other accessories and related equipment" includes aircraft accessories and equipment such as ground service equipment that physically contact aircraft at some point during the overall carrier operation.

3. "Selling at retail" means a sale for any purpose other than for resale in the regular course of business in the form of tangible personal property, but transfer of possession, lease and rental as used in the definition of sale mean only such transactions as are found on investigation to be in lieu of sales as defined without the words lease or rental.

W. For the purposes of subsection J of this section:

1. "Assembler" means a person who unites or combines products, wares or articles of manufacture so as to produce a change in form or substance without changing or altering the component parts.

2. "Manufacturer" means a person who is principally engaged in the fabrication, production or manufacture of products, wares or articles for use from raw or prepared materials, imparting to those materials new forms, qualities, properties and combinations.

3. "Modifier" means a person who reworks, changes or adds to products, wares or articles of manufacture.

4. "Overhead materials" means tangible personal property, the gross proceeds of sales or gross income derived from which would otherwise be included in the retail classification, and which are used or consumed in the performance of a contract, the cost of which is charged to an overhead expense account and allocated to various contracts based upon generally accepted accounting principles and consistent with government contract accounting standards.

5. "Repairer" means a person who restores or renews products, wares or articles of manufacture.

6. "Subcontract" means an agreement between a contractor and any person who is not an employee of the contractor for furnishing of supplies or services that, in whole or in part, are necessary to the performance of one or more government contracts, or under which any portion of the contractor's obligation under one or more government contracts is performed, undertaken or assumed and that includes provisions causing title to overhead materials or other tangible personal property used in the performance of the subcontract to pass to the government or that includes provisions incorporating such title passing clauses in a government contract into the subcontract. END_STATUTE

Sec. 4. Section 42-5159, Arizona Revised Statutes, is amended to read:

START_STATUTE42-5159. Exemptions

A. The tax levied by this article does not apply to the storage, use or consumption in this state of the following described tangible personal property:

1. Tangible personal property sold in this state, the gross receipts from the sale of which are included in the measure of the tax imposed by articles 1 and 2 of this chapter.

2. Tangible personal property the sale or use of which has already been subjected to an excise tax at a rate equal to or exceeding the tax imposed by this article under the laws of another state of the United States. If the excise tax imposed by the other state is at a rate less than the tax imposed by this article, the tax imposed by this article is reduced by the amount of the tax already imposed by the other state.

3. Tangible personal property, the storage, use or consumption of which the constitution or laws of the United States prohibit this state from taxing or to the extent that the rate or imposition of tax is unconstitutional under the laws of the United States.

4. Tangible personal property which that directly enters into and becomes an ingredient or component part of any manufactured, fabricated or processed article, substance or commodity for sale in the regular course of business.

5. Motor vehicle fuel and use fuel, the sales, distribution or use of which in this state is subject to the tax imposed under title 28, chapter 16, article 1, use fuel which is sold to or used by a person holding a valid single trip use fuel tax permit issued under section 28‑5739, aviation fuel, the sales, distribution or use of which in this state is subject to the tax imposed under section 28‑8344, and jet fuel, the sales, distribution or use of which in this state is subject to the tax imposed under article 8 of this chapter.

6. Tangible personal property brought into this state by an individual who was a nonresident at the time the property was purchased for storage, use or consumption by the individual if the first actual use or consumption of the property was outside this state, unless the property is used in conducting a business in this state.

7. Purchases of implants used as growth promotants and injectable medicines, not already exempt under paragraph 16 of this subsection, for livestock and poultry owned by, or in possession of, persons who are engaged in producing livestock, poultry, or livestock or poultry products, or who are engaged in feeding livestock or poultry commercially. For the purposes of this paragraph, "poultry" includes ratites.

8. Livestock, poultry, supplies, feed, salts, vitamins and other additives for use or consumption in the businesses of farming, ranching and feeding livestock or poultry, not including fertilizers, herbicides and insecticides. For the purposes of this paragraph, "poultry" includes ratites.

9. Seeds, seedlings, roots, bulbs, cuttings and other propagative material for use in commercially producing agricultural, horticultural, viticultural or floricultural crops in this state.

10. Tangible personal property not exceeding two hundred dollars in any one month purchased by an individual at retail outside the continental limits of the United States for the individual's own personal use and enjoyment.

11. Advertising supplements which that are intended for sale with newspapers published in this state and which that have already been subjected to an excise tax under the laws of another state in the United States which that equals or exceeds the tax imposed by this article.

12. Materials that are purchased by or for publicly funded libraries including school district libraries, charter school libraries, community college libraries, state university libraries or federal, state, county or municipal libraries for use by the public as follows:

(a) Printed or photographic materials, beginning August 7, 1985.

(b) Electronic or digital media materials, beginning July 17, 1994.

13. Tangible personal property purchased by:

(a) A hospital organized and operated exclusively for charitable purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual.

(b) A hospital operated by this state or a political subdivision of this state.

(c) A licensed nursing care institution or a licensed residential care institution or a residential care facility operated in conjunction with a licensed nursing care institution or a licensed kidney dialysis center, which provides medical services, nursing services or health related services and is not used or held for profit.

(d) A qualifying health care organization, as defined in section 42‑5001, if the tangible personal property is used by the organization solely to provide health and medical related educational and charitable services.

(e) A qualifying health care organization as defined in section 42‑5001 if the organization is dedicated to providing educational, therapeutic, rehabilitative and family medical education training for blind, visually impaired and multihandicapped children from the time of birth to age twenty‑one.

(f) A nonprofit charitable organization that has qualified under section 501(c)(3) of the United States internal revenue code and that engages in and uses such property exclusively in programs for mentally or physically handicapped persons if the programs are exclusively for training, job placement, rehabilitation or testing.

(g) A person that is subject to tax under article 1 of this chapter by reason of being engaged in business classified under the prime contracting classification under section 42‑5075, or a subcontractor working under the control of a prime contractor, if the tangible personal property is any of the following:

(i) Incorporated or fabricated by the contractor into a structure, project, development or improvement in fulfillment of a contract.

(ii) Used in environmental response or remediation activities under section 42‑5075, subsection B, paragraph 6.

(iii) Incorporated or fabricated by the person into any lake facility development in a commercial enhancement reuse district under conditions prescribed for the deduction allowed by section 42‑5075, subsection B, paragraph 8.

(h) A nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code if the property is purchased from the parent or an affiliate organization that is located outside this state.

(i) A qualifying community health center as defined in section 42‑5001.

(j) A nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that regularly serves meals to the needy and indigent on a continuing basis at no cost.

(k) A person engaged in business under the transient lodging classification if the property is a personal hygiene item or articles used by human beings for food, drink or condiment, except alcoholic beverages, which are furnished without additional charge to and intended to be consumed by the transient during the transient's occupancy.

(l) For taxable periods beginning from and after June 30, 2001, a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that provides residential apartment housing for low income persons over sixty‑two years of age in a facility that qualifies for a federal housing subsidy, if the tangible personal property is used by the organization solely to provide residential apartment housing for low income persons over sixty‑two years of age in a facility that qualifies for a federal housing subsidy.

14. Commodities, as defined by title 7 United States Code section 2, that are consigned for resale in a warehouse in this state in or from which the commodity is deliverable on a contract for future delivery subject to the rules of a commodity market regulated by the United States commodity futures trading commission.

15. Tangible personal property sold by:

(a) Any nonprofit organization organized and operated exclusively for charitable purposes and recognized by the United States internal revenue service under section 501(c)(3) of the internal revenue code.

(b) A nonprofit organization that is exempt from taxation under section 501(c)(3) or 501(c)(6) of the internal revenue code if the organization is associated with a major league baseball team or a national touring professional golfing association and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.

(c) A nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4), 501(c)(6), 501(c)(7) or 501(c)(8) of the internal revenue code if the organization sponsors or operates a rodeo featuring primarily farm and ranch animals and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.

16. Drugs and medical oxygen, including delivery hose, mask or tent, regulator and tank, on the prescription of a member of the medical, dental or veterinarian profession who is licensed by law to administer such substances.

17. Prosthetic appliances, as defined in section 23‑501, prescribed or recommended by a person who is licensed, registered or otherwise professionally credentialed as a physician, dentist, podiatrist, chiropractor, naturopath, homeopath, nurse or optometrist.

18. Prescription eyeglasses and contact lenses.

19. Insulin, insulin syringes and glucose test strips.

20. Hearing aids as defined in section 36‑1901.

21. Durable medical equipment which that has a centers for medicare and medicaid services common procedure code, is designated reimbursable by medicare, is prescribed by a person who is licensed under title 32, chapter 7, 13, 17 or 29, can withstand repeated use, is primarily and customarily used to serve a medical purpose, is generally not useful to a person in the absence of illness or injury and is appropriate for use in the home.

22. Food, as provided in and subject to the conditions of article 3 of this chapter and section 42‑5074.

23. Items purchased with United States department of agriculture food stamp coupons issued under the food stamp act of 1977 (P.L. 95‑113; 91 Stat. 958) or food instruments issued under section 17 of the child nutrition act (P.L. 95‑627; 92 Stat. 3603; P.L. 99‑661, section 4302; 42 United States Code section 1786).

24. Food and drink provided without monetary charge by a taxpayer which that is subject to section 42‑5074 to its employees for their own consumption on the premises during the employees' hours of employment.

25. Tangible personal property that is used or consumed in a business subject to section 42‑5074 for human food, drink or condiment, whether simple, mixed or compounded.

26. Food, drink or condiment and accessory tangible personal property that are acquired for use by or provided to a school district or charter school if they are to be either served or prepared and served to persons for consumption on the premises of a public school in the school district or on the premises of the charter school during school hours.

27. Lottery tickets or shares purchased pursuant to title 5, chapter 5, article 1.

28. Textbooks, sold by a bookstore, that are required by any state university or community college.

29. Magazines, other periodicals or other publications produced by this state to encourage tourist travel.

30. Paper machine clothing, such as forming fabrics and dryer felts, purchased by a paper manufacturer and directly used or consumed in paper manufacturing.

31. Coal, petroleum, coke, natural gas, virgin fuel oil and electricity purchased by a qualified environmental technology manufacturer, producer or processor as defined in section 41‑1514.02 and directly used or consumed in the generation or provision of on‑site power or energy solely for environmental technology manufacturing, producing or processing or environmental protection. This paragraph shall apply for twenty full consecutive calendar or fiscal years from the date the first paper manufacturing machine is placed in service. In the case of an environmental technology manufacturer, producer or processor who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service.

32. Motor vehicles that are removed from inventory by a motor vehicle dealer as defined in section 28‑4301 and that are provided to:

(a) Charitable or educational institutions that are exempt from taxation under section 501(c)(3) of the internal revenue code.

(b) Public educational institutions.

(c) State universities or affiliated organizations of a state university if no part of the organization's net earnings inures to the benefit of any private shareholder or individual.

33. Natural gas or liquefied petroleum gas used to propel a motor vehicle.

35. Liquid, solid or gaseous chemicals used in manufacturing, processing, fabricating, mining, refining, metallurgical operations, research and development and, beginning on January 1, 1999, printing, if using or consuming the chemicals, alone or as part of an integrated system of chemicals, involves direct contact with the materials from which the product is produced for the purpose of causing or permitting a chemical or physical change to occur in the materials as part of the production process. This paragraph does not include chemicals that are used or consumed in activities such as packaging, storage or transportation but does not affect any exemption for such chemicals that is otherwise provided by this section. For the purposes of this paragraph, "printing" means a commercial printing operation and includes job printing, engraving, embossing, copying and bookbinding.

36. Food, drink and condiment purchased for consumption within the premises of any prison, jail or other institution under the jurisdiction of the state department of corrections, the department of public safety, the department of juvenile corrections or a county sheriff.

37. A motor vehicle and any repair and replacement parts and tangible personal property becoming a part of such motor vehicle sold to a motor carrier who is subject to a fee prescribed in title 28, chapter 16, article 4 and who is engaged in the business of leasing or renting such property.

38. Tangible personal property which is or directly enters into and becomes an ingredient or component part of cards used as prescription plan identification cards.

39. Overhead materials or other tangible personal property that is used in performing a contract between the United States government and a manufacturer, modifier, assembler or repairer, including property used in performing a subcontract with a government contractor who is a manufacturer, modifier, assembler or repairer, to which title passes to the government under the terms of the contract or subcontract. For the purposes of this paragraph:

(a) "Overhead materials" means tangible personal property, the gross proceeds of sales or gross income derived from which would otherwise be included in the retail classification, and which are used or consumed in the performance of a contract, the cost of which is charged to an overhead expense account and allocated to various contracts based upon generally accepted accounting principles and consistent with government contract accounting standards.

(b) "Subcontract" means an agreement between a contractor and any person who is not an employee of the contractor for furnishing of supplies or services that, in whole or in part, are necessary to the performance of one or more government contracts, or under which any portion of the contractor's obligation under one or more government contracts is performed, undertaken or assumed, and that includes provisions causing title to overhead materials or other tangible personal property used in the performance of the subcontract to pass to the government or that includes provisions incorporating such title passing clauses in a government contract into the subcontract.

40. Through December 31, 1994, tangible personal property sold pursuant to a personal property liquidation transaction, as defined in section 42‑5061. From and after December 31, 1994, tangible personal property sold pursuant to a personal property liquidation transaction, as defined in section 42‑5061, if the gross proceeds of the sales were included in the measure of the tax imposed by article 1 of this chapter or if the personal property liquidation was a casual activity or transaction.

41. Wireless telecommunications equipment that is held for sale or transfer to a customer as an inducement to enter into or continue a contract for telecommunications services that are taxable under section 42‑5064.

42. Alternative fuel, as defined in section 1‑215, purchased by a used oil fuel burner who has received a permit to burn used oil or used oil fuel under section 49‑426 or 49‑480.

43. Tangible personal property purchased by a commercial airline and consisting of food, beverages and condiments and accessories used for serving the food and beverages, if those items are to be provided without additional charge to passengers for consumption in flight. For the purposes of this paragraph, "commercial airline" means a person holding a federal certificate of public convenience and necessity or foreign air carrier permit for air transportation to transport persons, property or United States mail in intrastate, interstate or foreign commerce.

44. Alternative fuel vehicles if the vehicle was manufactured as a diesel fuel vehicle and converted to operate on alternative fuel and equipment that is installed in a conventional diesel fuel motor vehicle to convert the vehicle to operate on an alternative fuel, as defined in section 1‑215.

45. Gas diverted from a pipeline, by a person engaged in the business of:

(a) Operating a natural or artificial gas pipeline, and used or consumed for the sole purpose of fueling compressor equipment that pressurizes the pipeline.

(b) Converting natural gas into liquefied natural gas, and used or consumed for the sole purpose of fueling compressor equipment used in the conversion process.

46. Tangible personal property that is excluded, exempt or deductible from transaction privilege tax pursuant to section 42‑5063.

47. Tangible personal property purchased to be incorporated or installed as part of environmental response or remediation activities under section 42‑5075, subsection B, paragraph 6.

48. Tangible personal property sold by a nonprofit organization that is exempt from taxation under section 501(c)(6) of the internal revenue code if the organization produces, organizes or promotes cultural or civic related festivals or events and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.

49. Prepared food, drink or condiment donated by a restaurant as classified in section 42‑5074, subsection A to a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that regularly serves meals to the needy and indigent on a continuing basis at no cost.

50. Application services that are designed to assess or test student learning or to promote curriculum design or enhancement purchased by or for any school district, charter school, community college or state university. For the purposes of this paragraph:

(a) "Application services" means software applications provided remotely using hypertext transfer protocol or another network protocol.

(b) "Curriculum design or enhancement" means planning, implementing or reporting on courses of study, lessons, assignments or other learning activities.

51. Tangible personal property purchased at a business location that qualifies for a deduction pursuant to section 42-5061, subsection A, paragraph 56 in computing transaction privilege tax.

B. In addition to the exemptions allowed by subsection A of this section, the following categories of tangible personal property are also exempt:

2. Machinery, or equipment, used directly in the process of extracting ores or minerals from the earth for commercial purposes, including equipment required to prepare the materials for extraction and handling, loading or transporting such extracted material to the surface. "Mining" includes underground, surface and open pit operations for extracting ores and minerals.

3. Tangible personal property sold to persons engaged in business classified under the telecommunications classification under section 42‑5064 and consisting of central office switching equipment, switchboards, private branch exchange equipment, microwave radio equipment and carrier equipment including optical fiber, coaxial cable and other transmission media which are components of carrier systems.

7. Aircraft, navigational and communication instruments and other accessories and related equipment sold to:

(b) Any foreign government, or sold to persons who are not residents of this state and who will not use such property in this state other than in removing such property from this state.

9. Rolling stock, rails, ties and signal control equipment used directly to transport persons or property.

10. Machinery or equipment used directly to drill for oil or gas or used directly in the process of extracting oil or gas from the earth for commercial purposes.

12. Groundwater measuring devices required under section 45‑604.

(a) "New machinery and equipment" means machinery or equipment which has never been sold at retail except pursuant to leases or rentals which do not total two years or more.

(b) "Self‑powered implements" includes machinery and equipment that are electric‑powered.

16. Tangible personal property that is used by either of the following to receive, store, convert, produce, generate, decode, encode, control or transmit telecommunications information:

(a) Any direct broadcast satellite television or data transmission service that operates pursuant to 47 Code of Federal Regulations part 25.

(b) Any satellite television or data transmission facility, if both of the following conditions are met:

(b) Does not include the building or other permanent, nonremovable component of the building that houses the clean room environment.

18. Machinery and equipment that are used directly in the feeding of poultry, the environmental control of housing for poultry, the movement of eggs within a production and packaging facility or the sorting or cooling of eggs. This exemption does not apply to vehicles used for transporting eggs.

20. Machinery and equipment that are used in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state and that are used directly and primarily to prevent, monitor, control or reduce air, water or land pollution.

(a) Repair or replacement parts purchased for the machinery or equipment described in this paragraph.

(b) Machinery or equipment purchased to replace machinery or equipment for which an exemption was previously claimed and taken under this paragraph.

(c) Any machinery or equipment purchased after the television station has ceased analog broadcasting, or purchased after November 1, 2009, whichever occurs first.

22. Qualifying equipment that is purchased from and after June 30, 2004 through June 30, 2014 by a qualified business under section 41‑1516 for harvesting or the initial processing of qualifying forest products removed from qualifying projects as defined in section 41‑1516. To qualify for this exemption, the qualified business must obtain and present its certification from the Arizona commerce authority at the time of purchase.

23. Machinery, equipment and other tangible personal property used directly in motion picture production by a motion picture production company. To qualify for this exemption, at the time of purchase, the motion picture production company must present to the retailer its certificate that is issued pursuant to section 42-5009, subsection H and that establishes its qualification for the exemption.

C. The exemptions provided by subsection B of this section do not include:

2. Janitorial equipment and hand tools.

3. Office equipment, furniture and supplies.

4. Tangible personal property used in selling or distributing activities, other than the telecommunications transmissions described in subsection B, paragraph 16 of this section.

6. Shops, buildings, docks, depots and all other materials of whatever kind or character not specifically included as exempt.

7. Motors and pumps used in drip irrigation systems.

D. The following shall be deducted in computing the purchase price of electricity by a retail electric customer from a utility business:

1. Revenues received from sales of ancillary services, electric distribution services, electric generation services, electric transmission services and other services related to providing electricity to a retail electric customer who is located outside this state for use outside this state if the electricity is delivered to a point of sale outside this state.

2. Revenues received from providing electricity, including ancillary services, electric distribution services, electric generation services, electric transmission services and other services related to providing electricity with respect to which the transaction privilege tax imposed under section 42‑5063 has been paid.

E. The tax levied by this article does not apply to:

1. The storage, use or consumption in Arizona of machinery, equipment, materials or other tangible personal property if used directly and predominantly to construct a qualified environmental technology manufacturing, producing or processing facility, as described in section 41‑1514.02. This paragraph applies for ten full consecutive calendar or fiscal years after the start of initial construction.

2. The purchase of electricity by a qualified environmental technology manufacturer, producer or processor as defined in section 41‑1514.02 that is used directly in environmental technology manufacturing, producing or processing. This paragraph shall apply for twenty full consecutive calendar or fiscal years from the date the first paper manufacturing machine is placed in service. In the case of an environmental technology manufacturer, producer or processor who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service.

3. The purchase of solar energy devices from a retailer that is registered with the department as a solar energy retailer or a solar energy contractor.

F. The following shall be deducted in computing the purchase price of electricity by a retail electric customer from a utility business:

1. Fees charged by a municipally owned utility to persons constructing residential, commercial or industrial developments or connecting residential, commercial or industrial developments to a municipal utility system or systems if the fees are segregated and used only for capital expansion, system enlargement or debt service of the utility system or systems.

2. Reimbursement or contribution compensation to any person or persons owning a utility system for property and equipment installed to provide utility access to, on or across the land of an actual utility consumer if the property and equipment become the property of the utility. This deduction shall not exceed the value of such property and equipment.

G. For the purposes of subsection B of this section:

1. "Aircraft" includes:

(a) An airplane flight simulator that is approved by the federal aviation administration for use as a phase II or higher flight simulator under appendix H, 14 Code of Federal Regulations part 121.

(b) Tangible personal property that is permanently affixed or attached as a component part of an aircraft that is owned or operated by a certificated or licensed carrier of persons or property.

H. For the purposes of subsection D of this section, "ancillary services", "electric distribution service", "electric generation service", "electric transmission service" and "other services" have the same meanings prescribed in section 42‑5063. END_STATUTE

Sec. 5. Title 42, chapter 13, article 7, Arizona Revised Statutes, is amended by adding section 42-13305, to read:

START_STATUTE42-13305. Property located in county stadium district

A. This section applies only to real property and improvements that are classified as class one pursuant to section 42-12001, located in a county stadium district established pursuant to section 48-4202, subsection B and that after January 1, 2013 are improved by the construction of new or expanded fixed capital assets equal to fifty per cent of the original full cash value of the property.

B. Beginning with the valuation year in which the municipality issues a certificate of occupancy for the capital improvements and for nine consecutive valuation years thereafter, the county assessor shall value property that meets the requirements of subsection A of this section at the same full cash value determined for the valuation year immediately preceding the year in which the municipality issues the certificate of occupancy.

C. For ______ consecutive valuation years after the last year to which subsection B of this section applies to the property, the assessor shall annually increase the property's full cash value by equal ______ increments. Thereafter, the property is subject to valuation at its current full cash value as provided by law. END_STATUTE

Sec. 6. Section 48-4201, Arizona Revised Statutes, is amended to read:

START_STATUTE48-4201. Definitions

In this chapter, unless the context otherwise requires:

1. "Board" means the board of directors of any district established under section 48‑4202, subsection A, B or C.

2. "Bond" means any obligation authorized and issued pursuant to this chapter, including bonds, lease-purchase and installment purchase agreements, certificates of participation in a lease-purchase or installment purchase agreement and obligations that are authorized and issued to refund or refinance obligations that are authorized and issued pursuant to this chapter.

3. "District" means any county stadium district established pursuant to section 48‑4202, subsection A, B or C.

4. "Multipurpose facility" means any facility or facilities that include:

(a) A primary component that is located in the district on the multipurpose facility site and on lands that are adjacent to each other or separated by public rights-of-way, that the district owns or leases and that is used to accommodate sporting, entertainment, cultural, civic, meeting, trade show or convention events or activities, fire, police or other public safety facilities and tourism offices. The primary component may not include any structure or part of a structure that is used or designed for use as a county, city or town hall, as meeting space for the county, city or town governing body or for general municipal administrative office space other than for the administration, maintenance and operation of the multipurpose facility.

(b) Secondary components that are located in the district and that the board determines are necessary or beneficial to the primary component, limited to on-site infrastructure, artistic components, parking garages and lots, and public parks and plazas. In addition, secondary components may include related commercial facilities that are located within the multipurpose facility site.

5. "Multipurpose facility site" means the geographic area within the district which is depicted in the publicity pamphlet for an election held pursuant to section 48‑4237.

6. "Municipality" means a city or town that is incorporated or chartered under the constitution and laws of this state.

7. "Stadium" means a sports facility or facilities located in the district and designed to accommodate, but not be limited to, major league baseball events or intercollegiate athletic events. END_STATUTE

Sec. 7. Section 48-4202, Arizona Revised Statutes, is amended to read:

START_STATUTE48-4202. Formation of district

A. The board of supervisors of each county having a population of more than one million five hundred thousand persons according to the most recent United States decennial census or any county in which a major league baseball organization has established or seeks to establish a spring training operation may organize a countywide district to include both the incorporated and unincorporated areas of the county, if the board determines that the public convenience, necessity or welfare will be promoted by establishing the district.

B. Two or more municipalities in the same county may organize a district for multipurpose facilities if the governing bodies of the municipalities determine that the public convenience, necessity or welfare will be promoted by establishing the district. The district shall be comprised of the areas within the corporate boundaries of the municipalities. After formation, the boundaries of the district shall not be altered. A district may be established under this subsection in the same county in which a district is established under subsection A of this section. A district formed pursuant to this subsection shall be deemed a county stadium district for purposes of this chapter. Notwithstanding any other law, a district may not be organized under this subsection from and after October 31, 1999, except that a district may be organized under this subsection after October 31, 1999 if before that date the governing body of two or more of the municipalities identified the location of a multipurpose facility site and has voted with the purpose of forming a district for multipurpose facilities under this subsection.

C. The board of supervisors of any county in which a state supported university is established may organize a single university athletic facilities district if the board determines that the public convenience, necessity or welfare will be promoted by establishing the district. The district shall include only the area in the county within the contiguous exterior boundaries of real property owned by the Arizona board of regents and shall exclude any such real property subject to an existing ground lease or subject to an existing agreement granting a third party the right or option to a ground lease. After formation, the boundaries of the district shall be altered only as the Arizona board of regents acquires and disposes of real property. A district may be established under this subsection in the same county in which a district is established under subsection A of this section. A district formed pursuant to this subsection is deemed a county stadium district for the purposes of this chapter.

D. The county board of supervisors shall be the board of directors of a countywide district established under subsection A of this section.

E. The board of directors of a district established under subsection B of this section shall consist of:

1. Five members who are appointed by the governor, at least three of whom must reside in the municipality in which the district is located and each of whom must have experience in commercial real estate, construction, redevelopment, real estate law, architecture, economic development or commercial or public finance. The governor may receive nominations for appointment from any interested organization or person. Members appointed by the governor serve at the pleasure of the governor.

2. Two members who are appointed by the president of the senate, at least one of whom must reside in the municipality in which the district is located. The members appointed by the president serve at the pleasure of the president.

3. Two members who are appointed by the speaker of the house of representatives, at least one of whom must reside in the municipality in which the district is located. The members appointed by the speaker serve at the pleasure of the speaker.

F. The board of directors of a district established under subsection C of this section shall be established pursuant to an intergovernmental agreement between the county and the Arizona board of regents.

G. The directors of any district are not eligible for compensation for their services but are eligible for reimbursement for their necessary expenses in attending to and traveling on district business.

H. The board of supervisors may pay the necessary costs incurred in connection with establishing a countywide district from any county monies available for that purpose. The municipalities may pay their proportionate share of the necessary costs incurred in establishing a district formed by two or more municipalities under subsection B of this section from any monies available for that purpose. The Arizona board of regents may pay the necessary costs incurred in connection with establishing a district under subsection C of this section from any monies available for that purpose.

I. Subject to limitations imposed by this chapter, by intergovernmental agreement and by the ordinance or resolution authorizing the formation of the district, the district is a tax levying public improvement district and a political taxing subdivision of this state and has all the powers, privileges and immunities granted generally to municipal corporations for the purposes of implementing this chapter, including:

1. Eminent domain, as provided by section 48‑4203, subsection A, paragraph 7. , and

2. Immunity of its property, bonds and interest on and transfer of its bonds from taxation.

3. Exemption from the provisions of article IX, section 7, Constitution of Arizona, as provided by article XIII, section 7, Constitution of Arizona. END_STATUTE

Sec. 8. Section 48-4203, Arizona Revised Statutes, is amended to read:

START_STATUTE48-4203. Powers and duties of board of directors; conflict of interest

A. The board of directors, on behalf of the district, may:

1. Adopt and use a corporate seal.

2. Sue and be sued.

3. Enter into contracts, including intergovernmental agreements under title 11, chapter 7, article 3, as necessary to carry out the purposes and requirements of this chapter. The district may contract with a county sports authority established under title 11, chapter 5 to carry out any power of the district.

4. Adopt administrative rules as necessary to administer and operate the district and any property under its jurisdiction.

5. Adopt rules that allow weighted voting by board members and establish conditions for terminating the district.

6. Employ an executive director and administrative and clerical employees, or contract for other management personnel, and prescribe the terms and conditions of their employment as necessary to carry out the purposes of the district.

7. Acquire by any lawful means and operate, maintain, encumber and dispose of real and personal property and interests in property. A district established under section 48‑4202, subsection A may acquire real property by eminent domain. A district established under section 48‑4202, subsection B shall not acquire real property by eminent domain. A district established under section 48‑4202, subsection C shall not acquire or own real property or interests in real property.

8. Administer trusts declared or established for the district, receive and hold in trust or otherwise property located in or out of this state and, if not otherwise provided, dispose of the property for the benefit of the district.

9. Retain legal counsel and other consultants as necessary to carry out the purposes of the district.

B. The board of directors, on behalf of a district established pursuant to section 48‑4202, subsection B, may:

1. Use revenues paid to the district pursuant to section 42‑5031 and other revenues the district may receive from other sources, for the purposes set forth in section 48‑4204, subsection B.

2. Enter into agreements with developers, contractors, tenants and other users of all or part of a multipurpose facility as determined appropriate.

3. Pledge all or part of the revenues described in section 42-5031, subsection B to secure the district's bonds or other financial obligations issued or incurred under this chapter for the construction of all or part of a multipurpose facility.

4. Enter into contracts, agreements and other transactions that may survive the district's termination. Such a transaction must include provisions for the succession to the district's interest until all of the obligations and interests of the district are satisfied.

C. The board of directors of a district established pursuant to section 48‑4202, subsection B shall provide public outreach and education on the purpose and activities of the district, including:

1. Presentations to the governing bodies of the municipalities in the county in which the district is located.

2. Presentations to community, civic and business organizations.

3. Printed or electronic materials that support the purposes of this subsection.

D. The board of directors shall:

1. Appoint from among its members a chairman, a secretary and such other officers as may be necessary to conduct its business. The board of directors may appoint the chief financial officer of the county as the district treasurer of a countywide district established under section 48‑4202, subsection A. If the board does not appoint the chief financial officer, the county treasurer is designated ex officio as the treasurer. The board of directors of a district that is established pursuant to section 48‑4202, subsection B shall designate a member of the board with financial management or accounting experience or a person with whom the board has contracted for financial management as treasurer of the district. The county treasurer is designated ex officio as the treasurer of a district that is established pursuant to section 48‑4202, subsection C.

2. Keep and maintain a complete and accurate record of all its proceedings. All proceedings and records of the board shall be open to the public as required by title 38, chapter 3, article 3.1 and title 39, chapter 1.

3. Provide for the use, maintenance and operation of the properties and interests controlled by the district.

E. The board of directors of a district that is established pursuant to section 48‑4202, subsection B shall determine by agreement the distribution of revenues from operating and using the multipurpose facilities among the municipalities and any participating Indian tribe or community.

F. The directors, officers and employees of the district are subject to title 38, chapter 3, article 8 relating to conflicts of interest.

G. This state and political subdivisions of this state other than the district are not liable for any financial or other obligations of the district and the financial or other obligations do not constitute a debt or liability of this state or any political subdivision of this state, other than the district. END_STATUTE

Sec. 9. Section 48-4204, Arizona Revised Statutes, is amended to read:

START_STATUTE48-4204. Constructing and operating a stadium and other structures; regulating alcoholic beverages

A. From the taxes and surcharges levied pursuant to article 2 of this chapter for use with respect to major league baseball spring training, the district may acquire land and construct, finance, furnish, maintain, improve, operate, market and promote the use of existing or proposed major league baseball spring training facilities or stadiums and other structures, utilities, roads, parking areas or buildings necessary for full use of the training facilities or stadiums for sports and other purposes and do all things necessary or convenient to accomplish those purposes. The board shall require that any project undertaken by the district include financial participation from the county or municipality in which the project is located, from a private party or from any combination of these entities which equals or exceeds one-half of the amount to be expended or distributed by the district. Capital improvement funds expended at any time after June 1, 1991 by a county, municipality or private party for a purpose authorized by this section may be deemed financial participation with respect to any project the district may undertake.

B. From the taxes and charges levied or identified pursuant to section 48‑4237 for use with respect to multipurpose facilities and from other monies lawfully available to the district, the district may acquire land and construct, finance, furnish, maintain, improve, operate, market and promote the use of multipurpose facilities and other structures, utilities, roads, parking areas or buildings necessary for full use of the multipurpose facilities and do all things necessary or convenient to accomplish those purposes. Public funds identified in section 48‑4237, including funds distributed pursuant to section 42‑5031, may only be used as follows:

1. For the components for a multipurpose facility which are owned by the district or which are publicly owned. , except that

2. For any other commercial real estate development project within or contiguous to the boundaries of the district if the project will benefit the district and will increase employment and tax revenue within the district.

3. Monies paid to the district pursuant to section 42-5031 may only be used for the following purposes until a notice to proceed is issued for a hotel and convention center located on the multipurpose facility site:

1. (a) Debt service for bonds issued by the district before January 1, 2009.

2. (b) Contractual obligations incurred by the district before June 1, 2009.

3. (c) Fiduciary, reasonable legal and administrative expenses of the district.

4. (d) The design and construction of the hotel and convention center located on the multipurpose facility site.

c. Any component of the multipurpose facility or other commercial real estate development under subsection B, paragraphs 1 and 2 of this section may include privately-owned projects as follows:

1. The project must comply with all applicable municipal codes.

2. In the board's judgment, the project must either:

(a) Substantially increase tax revenue, employment or public pedestrian traffic at the project site.

(b) Create an extraordinary increase in tax revenue, employment or public pedestrian traffic throughout all or part of the district.

3. Any financial assistance for the project may not violate article IX, section 7, Constitution of Arizona, relating to donations or grants of public monies.

4. The developer may transfer to the district, and the district may accept and hold one or more conservation easements over the project pursuant to title 33, chapter 2, article 4 in return for financial assistance from the district to the project.

5. The district may loan money to finance the project, including loans that may be repaid by crediting against the loan the incremental periodic amounts of transaction privilege tax revenue collected by all taxing jurisdictions from the development that exceed the transaction privilege tax revenue collected by all taxing jurisdictions before the development was begun.

C. D. A district established pursuant to section 48-4202, subsection B may not use monies distributed pursuant to section 42-5031 for the salaries or compensation of any employee of the municipality in which the district is located.

D. E. Pursuant to an intergovernmental agreement with the Arizona board of regents, from the revenues collected from assessments pursuant to section 48‑4235 for use with respect to Arizona board of regents owned intercollegiate athletic facilities, the district may construct, reconstruct, finance, furnish, maintain and improve existing intercollegiate athletic facilities located on Arizona board of regents' property, including utilities, roads, parking areas or buildings necessary for full use of the athletic facilities.

E. F. Title 34 applies to the district, except that regardless of the funding source for design and construction of facilities and structures the district may establish alternative systems and procedures, including the use of the design-build method of construction or the use of qualifications-based selection of contractors with experience in stadium design or construction, to expedite the design and construction or reconstruction of any of its facilities or structures or any facilities or structures leased to it or used by it pursuant to an intergovernmental agreement. For the purposes of this subsection:

1. "Design-build" means a process of entering into and managing a contract between the district and another party in which the other party agrees to both design and build a structure, a facility or other items specified in the contract.

2. "Qualifications-based selection" means a process of entering into and managing a contract between the district and another party in which the other party is selected by the district on the basis of the party's qualifications and experience in designing or constructing facilities, structures or other items similar to those the district is authorized to construct or lease. The other party may be selected by direct selection or by public competition.

F. G. For the purposes of financing, designing, constructing, reconstructing or operating facilities or structures, the district is not the agent of any municipality, this state or any agency or instrumentality of this state participating in the funding of such facilities or structures.

G. H. Subject to the requirements of title 4, the board of directors may permit and regulate the sale, use and consumption of alcoholic beverages at events held on property acquired, leased or subleased under this article. END_STATUTE

Sec. 10. Section 48-4231.01, Arizona Revised Statutes, is amended to read:

START_STATUTE48-4231.01. Financial and performance audits of districts owning multipurpose facilities; appearance before joint committee on capital review

A. Beginning in 2010 and every three years thereafter, the auditor general shall contract with an independent auditor to conduct a performance audit as defined in section 41-1278, including a financial audit, of each district organized under section 48-4202, subsection B. The independent auditor must have national status with expertise in evaluating public construction, ownership and management of capital improvements that include hospitality, convention and sports venue facilities. The audit must be completed within one hundred twenty days after the end of the fiscal year.

B. The audit shall include consideration of:

1. Capital costs, including debt service, of the multipurpose facility and other assets of the district.

2. The level of the district's indebtedness, the amount of principal, interest and other debt service expenses paid in the preceding fiscal year and the remaining term to maturity with respect to each outstanding bond issue.

3. Operation and maintenance costs of the multipurpose facility and other assets of the district.

4. The district's overall expenditures in the preceding fiscal year, including:

(a) The level of expenses for administration, planning, travel and entertainment.

(b) The success of those expenditures in supporting and achieving the district's purposes.

5. A description of and the amount of municipal payments pursuant to section 42-5031, subsection D C during the preceding fiscal year and the cumulative amount of those payments through the end of the preceding fiscal year.

6. The public use of each component of the multipurpose facility.

7. Revenues derived from each component of the multipurpose facility and other revenues of the district by source.

8. District projects that are currently under construction and that are included in the district's plans for capital improvements and investment.

C. The audit shall make findings and recommendations regarding the construction, financing, operation and maintenance of each component of the multipurpose facility, including whether the facility exceeds, meets or fails to meet nationally recognized design and performance standards.

D. The district and the board of directors shall cooperate with and submit to the auditor general and the auditor contracted to conduct the audit information necessary to conduct and complete the audit in a timely manner.

E. Within forty-five days after the audit is released, the board of directors shall:

1. Hold a public hearing on the audit's findings and recommendations and allow any person to make or submit oral or written comments on the audit.

2. By majority vote adopt a public response agreeing, agreeing with reservations or disagreeing with each finding and recommendation in the audit.

F. The auditor general shall distribute copies of the audit and the board of director's response to:

1. The mayor and governing body of the municipality in which the district is located.

2. The governor.

3. The president of the senate and the speaker of the house of representatives.

4. The department of revenue and the state treasurer.

5. The secretary of state.

6. Any other person who requests a copy of the audit.

G. The cost incurred by the auditor general in contracting with independent auditors under this section is an operating expense of the district and shall be paid from revenues payable to the district pursuant to section 42-5031. The auditor general shall deposit the payments in the audit services revolving fund established by section 41-1279.06.

H. At the request of the chairperson of the Joint committee on capital review, the executive director or a representative of the board of directors shall appear before the joint committee on capital review to report on any aspect of the district's operation, including the activities and financial performance of the district during the previous fiscal year, the district's plans for capital improvements and investment and the district's response to the audit conducted under this section. END_STATUTE

Sec. 11. Section 48-4237, Arizona Revised Statutes, is amended to read:

START_STATUTE48-4237. Transaction privilege tax; multipurpose facilities; rate; administration

A. The board of directors of a district established pursuant to section 48-4202, subsection B by resolution may seek authority for the district to levy a transaction privilege tax for multipurpose facilities or other taxes or charges pursuant to subsection E of this section, in addition to or in lieu of other revenues collected pursuant to this article, to be used and spent for the purposes described in section 48‑4204, subsection B for the multipurpose facilities.

B. The board of directors shall present the question to the governing bodies of the participating municipalities. The district is exempt from section 16‑226. The governing body of each municipality by resolution may approve the district's request to place a question seeking authority for the district to levy a multipurpose facilities district transaction privilege tax solely within the district, or to impose other taxes or charges pursuant to subsection E of this section on the ballot of an election pursuant to this section held on the same date or on the same ballot as the regularly scheduled election of one or more of the participating municipalities or the state or on any of the four dates prescribed by section 16‑204. If the governing body of each municipality approves the district's request for an election, and if a majority of the qualified electors from each municipality voting at the election approves the multipurpose facilities district transaction privilege tax or other taxes or charges pursuant to subsection E of this section, the board by resolution may levy and, if levied, the department of revenue shall collect a transaction privilege tax solely within the district pursuant to this section or other taxes or charges pursuant to subsection E of this section to be used and spent for the purposes described in section 48‑4204, subsection B for the multipurpose facilities. If a question fails to receive a majority approval among the voters in one municipality, but receives a majority approval among the voters in at least two other municipalities, the governing bodies of the approving municipalities, by majority vote of each governing body, may elect to form a new district and authorize the district to levy the tax solely within the boundaries of the new district subject to the conditions authorized by the voters in the election.

C. The board shall state on the ballot the purpose of the tax, the maximum rate of the tax and the maximum number of years for which the tax will be authorized. The tax shall terminate upon the expiration of the years authorized or the completion of the purpose specified in the ballot, whichever is earlier. The rate of tax shall not exceed the limits prescribed by this section. The ballot question may propose to authorize the district to levy and collect taxes and charges pursuant to subsection E of this section.

D. The board shall set the rate of the tax at not more than five per cent of the transaction privilege tax rate prescribed by section 42‑5010, subsection A applying on January 1, 1990 to each person engaging or continuing in the district in a business taxed under title 42, chapter 5, article 1, or in the case of persons subject to the tax imposed under section 42‑5352, subsection A, at a rate of not more than .1525 cents per gallon of jet fuel sold.

E. If authorized by an election held pursuant to this section, the board may:

1. Pledge all or part of the revenues from a tax under this section to secure the district's bonds or other financial obligations issued or incurred under this chapter for the multipurpose facilities.

2. Pledge all or part of the incremental increase in the municipal transaction privilege taxes generated in all or a designated geographic area of the district during a period of time before, during and after any specified national championship sporting event or international games hosted in the multipurpose facilities to secure the district's bonds or other financial obligations issued or incurred under this chapter for the construction of the multipurpose facilities.

3. Impose a surcharge pursuant to the procedures and limits of section 48‑4234 in all or a designated geographic area of the district during a period of time before, during and after any specified national championship sporting event or international games hosted in the multipurpose facilities except that a car rental surcharge imposed pursuant to this paragraph shall not apply to the lease or rental of a motor vehicle as a replacement vehicle owned by the lessee for personal use. For the purposes of this paragraph, "replacement vehicle" means a vehicle loaned by a motor vehicle repair facility or dealer, or that an individual rents temporarily, to use while a vehicle owned by the individual is not in use because of breakdown, repair, service, damage, or loss as defined in the individual's applicable private passenger automobile insurance policy.

4. Levy and, if levied, the department of revenue shall collect a tax at a rate of not to exceed one per cent of the gross proceeds of sales or gross income from the business of every person engaging or continuing in the district in a business taxed under sections 42‑5070 and 42‑5074 during a period of time before, during and after any specified national championship sporting event or international games hosted in the multipurpose facilities to secure the district's bonds or other financial obligations issued or incurred under this chapter for the construction of the multipurpose facilities.

5. Use amounts paid to the district pursuant to section 42‑5031 and received from the multipurpose facility site the boundaries or boundary amendment of which are described in the publicity pamphlet as allowed by law, including securing the district's bonds or other financial obligations issued or incurred under this chapter for the construction of the multipurpose facilities which are owned by the district or which are publicly owned.

F. Unless the context otherwise requires, section 42‑6102 governs the administration of any tax imposed under this section.

G. Each month the state treasurer shall remit to the district treasurer the net revenues collected under this section during the second preceding month. The district treasurer shall deposit the monies in the stadium district fund. Revenues from a tax under this section shall not be commingled with revenues collected pursuant to this article for any other purpose but shall be separately accounted for and used solely with respect to uses authorized in section 48‑4204, subsection B.

H. In addition to other requirements prescribed by law, the board shall prepare, print and distribute publicity pamphlets concerning the proposed issue to be submitted to the voters. The board shall distribute one copy of the publicity pamphlet at least ten but not more than thirty days before the election to each household containing a registered voter in the district. The publicity pamphlet shall contain all of the following:

1. The date of the election.

2. The location of the polling places and the times the polling places will be open.

3. A true copy of the title and text of the resolution proposing the tax.

4. A summary of the purposes for which the tax is proposed to be levied and a description of the multipurpose facilities.

5. The estimated cost of the multipurpose facility to be financed.

6. An estimate of the annual amount of revenues to be raised from the proposed tax.

7. The geographic area, time period and amount of any tax, tax distribution, or surcharge proposed under subsection E of this section. END_STATUTE

Sec. 12. Emergency

This act is an emergency measure that is necessary to preserve the public peace, health or safety and is operative immediately as provided by law.