SB1455 - 502R

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

Section 1. Title 15, chapter 9, article 1, Arizona Revised Statutes, is amended by adding section 15-901.07, to read:

START_STATUTE15-901.07. Education transformation fund; report

A. The department of education shall establish the education transformation fund. The purpose of the fund is to provide funding to public schools to implement transformative educational practices, improve student academic performance, fund improvements and enhancements to the statewide data systems and to purchase software and technology for the use of all public schools in this state.

B. The department shall allocate a minimum of eighty per cent of funds available in the fund each fiscal year to public schools who submit applications pursuant to subsection D of this section that propose activities to increase student academic performance by implementing transformative practices that are identified by the department of education, including:

1. The use of classroom technology.

2. Changes or additions to capital facilities.

3. Adoption of blended learning models.

C. At least fifty per cent of the funds allocated pursuant to subsection b of this section shall be allocated to schools with an azlearns letter grade profile of "D" or "F".

D. The department may retain up to twenty per cent of available funds each fiscal year to fund improvements and enhancements to statewide data systems pursuant to section 15-249 and to purchase software and technology for the use of all public schools in this state.

E. The department shall develop an application, policies and procedures for awarding funds to schools pursuant to subsections B and C of this section and to collect and track data regarding projects that are funded under this section.

F. The department shall annually provide a report to the governor, the president of the senate and the speaker of the house of representative and to the joint legislative budget committee that includes a description of all projects that are funded pursuant to this section and other performance measures adopted by the department. END_STATUTE

Sec. 2. Title 20, chapter 2, article 1, Arizona Revised Statutes, is amended by adding section 20-224.08, to read:

START_STATUTE20-224.08. Premium tax credit for contributions to the education transformation fund

A. A credit is allowed against the premium tax liability incurred by an insurer pursuant to section 20-224, 20-837, 20-1010, 20-1060 or 20-1097.07 for fifty per cent of the amount of voluntary cash contributions made by the insurer during the tax year to the education transformation fund established by section 15‑901.07.

B. The amount of the credit is fifty per cent of the total amount of the insurer's contributions for the tax year under subsection A of this section that is preapproved by the department of revenue pursuant to section 43-1186, subsection D.

C. If the allowable amount of a credit under this section exceeds the insurer's state premium tax liability, the amount of the claim not used to offset the premium tax liability may be carried forward as a credit against the insurer's subsequent years' premium tax liability for a period not to exceed five taxable years.

D. An insurer that claims a tax credit against state premium tax liability is not required to pay any additional retaliatory tax imposed pursuant to section 20-230 as a result of claiming that tax credit.

E. The department of insurance, with the cooperation of the department of education and the department of revenue, shall adopt rules necessary for the administration of this section. END_STATUTE

Sec. 3. Section 43-222, Arizona Revised Statutes, is amended to read:

START_STATUTE43-222. Income tax credit review schedule

The joint legislative income tax credit review committee shall review the following income tax credits:

1. For years ending in 0 and 5, sections 43‑1075, 43‑1075.01, 43‑1079.01, 43‑1087, 43‑1088, 43‑1090.01, 43‑1163, 43‑1163.01, 43‑1167.01, 43‑1175 and 43‑1182.

2. For years ending in 1 and 6, sections 43‑1074.02, 43‑1083, 43‑1083.02, 43‑1085.01, 43‑1164.02, 43-1164.03 and 43‑1183.

3. For years ending in 2 and 7, sections 43‑1073, 43‑1079, 43‑1080, 43‑1085, 43‑1086, 43‑1089, 43‑1089.01, 43‑1089.02, 43‑1090, 43‑1164, 43‑1167, 43‑1169, 43‑1176, and 43‑1181 and 43-1186.

4. For years ending in 3 and 8, sections 43‑1074.01, 43‑1081, 43‑1168, 43‑1170 and 43‑1178.

5. For years ending in 4 and 9, sections 43‑1076, 43‑1081.01, 43‑1083.01, 43‑1084, 43‑1162, 43‑1164.01, 43‑1170.01 and 43-1184. END_STATUTE

Sec. 4. Section 43-1121, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1121. Additions to Arizona gross income; corporations

In computing Arizona taxable income for a corporation, the following amounts shall be added to Arizona gross income:

1. The amounts computed pursuant to section 43‑1021, paragraphs 3 through 9, 12, 26, 27, 33, 34 and 35.

2. The amount of dividend income received from corporations and allowed as a deduction pursuant to sections 243, 244 and 245 of the internal revenue code.

3. Taxes which are based on income paid to states, local governments or foreign governments and which were deducted in computing federal taxable income.

4. Expenses and interest relating to tax‑exempt income on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from the tax imposed by this title. Financial institutions, as defined in section 6‑101, shall be governed by section 43‑961, paragraph 2.

5. Commissions, rentals and other amounts paid or accrued to a domestic international sales corporation controlled by the payor corporation if the domestic international sales corporation is not required to report its taxable income to this state because its income is not derived from or attributable to sources within this state. If the domestic international sales corporation is subject to article 4 of this chapter, the department shall prescribe by rule the method of determining the portion of the commissions, rentals and other amounts which are paid or accrued to the controlled domestic international sales corporation and which shall be deducted by the payor. For the purposes of this paragraph, "control" means direct or indirect ownership or control of fifty per cent or more of the voting stock of the domestic international sales corporation by the payor corporation.

6. Federal income tax refunds received during the taxable year to the extent they were deducted in arriving at Arizona taxable income in a previous year.

7. The amount of net operating loss taken pursuant to section 172 of the internal revenue code.

8. The amount of exploration expenses determined pursuant to section 617 of the internal revenue code to the extent that they exceed seventy‑five thousand dollars and to the extent that the election is made to defer those expenses not in excess of seventy‑five thousand dollars.

9. Amortization of costs incurred to install pollution control devices and deducted pursuant to the internal revenue code or the amount of deduction for depreciation taken pursuant to the internal revenue code on pollution control devices for which an election is made pursuant to section 43‑1129.

10. The amount of depreciation or amortization of costs of child care facilities deducted pursuant to section 167 or 188 of the internal revenue code for which an election is made to amortize pursuant to section 43‑1130.

11. Arizona state income tax refunds received, to the extent the amount of the refunds is not already included in Arizona gross income, if a tax benefit was derived by deduction of this amount in a prior year.

12. The amount paid as taxes on property in this state by a qualified defense contractor with respect to which a credit is claimed under section 43‑1166.

13. The loss of an insurance company that is exempt under section 43‑1201 to the extent that it is included in computing Arizona gross income on a consolidated return pursuant to section 43‑947.

14. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43‑1169 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.

15. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43‑1169 and which is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43‑1169.

16. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under either section 43‑1170 or 43‑1170.01 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.

17. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under either section 43‑1170 or 43‑1170.01 and which is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43‑1170 or 43‑1170.01, as applicable.

18. The deduction referred to in section 1341(a)(4) of the internal revenue code for restoration of a substantial amount held under a claim of right.

19. The amount by which a capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the capital loss carryover allowable pursuant to section 43‑1130.01, subsection F.

20. Any amount deducted in computing Arizona taxable income as expenses for installing solar stub outs or electric vehicle recharge outlets in this state with respect to which a credit is claimed pursuant to section 43‑1176.

21. Any wage expenses deducted pursuant to the internal revenue code for which a credit is claimed under section 43‑1175 and representing net increases in qualified employment positions for employment of temporary assistance for needy families recipients.

22. Any amount of expenses that were deducted pursuant to the internal revenue code and for which a credit is claimed under section 43‑1178.

23. Any amount deducted for conveying ownership or development rights of property to an agricultural preservation district under section 48‑5702 for which a credit is claimed under section 43‑1180.

24. The amount of any deduction that is claimed in computing Arizona gross income and that represents a donation of a school site for which a credit is claimed under section 43‑1181.

25. The amount of any deductions that are claimed in computing federal taxable income representing expenses for which a credit is claimed under either section 43‑1163 or 43‑1163.01 or both.

26. Any amount deducted in computing Arizona taxable income as expenses for installing water conservation system plumbing stub outs in this state with respect to which a credit is claimed pursuant to section 43‑1182.

27. Any amount deducted pursuant to section 170 of the internal revenue code representing contributions to a school tuition organization for which a credit is claimed under section 43‑1183 or 43‑1184.

28. Any amount deducted pursuant to section 170 of the internal revenue code representing contributions to the education transformation fund for which a credit is claimed under section 43‑1186.END_STATUTE

Sec. 5. Title 43, chapter 11, article 6, Arizona Revised Statutes, is amended by adding section 43-1186, to read:

START_STATUTE43-1186. Tax credit for contributions to the education transformation fund

A. A credit is allowed against the taxes imposed by this title for fifty per cent of the amount of voluntary cash contributions made by the taxpayer during the taxable year to the education transformation fund established by section 15-901.07.

B. The amount of the credit is fifty per cent of the total amount of the taxpayer's contributions for the taxable year under subsection A of this section that is preapproved by the department of revenue pursuant to subsection D of this section.

C. The department of revenue:

1. Shall not allow tax credits under this section and section 20‑224.08 that exceed in the aggregate a combined total of twenty-five million dollars in any fiscal year.

2. Shall preapprove tax credits under this section and section 20‑224.08 subject to subsection D of this section.

3. Shall allow the tax credits under this section and section 20‑224.08 on a first come, first served basis.

D. For the purposes of subsection C, paragraph 2 of this section, before making a contribution to the education transformation fund, the taxpayer under this title or title 20 must notify the department of education of the total amount of contributions that the taxpayer intends to make to the education transformation fund. Before accepting the contribution, the department of education shall request preapproval from the department of revenue for the taxpayer's intended contribution amount. The department of revenue shall preapprove or deny the requested amount within twenty days after receiving the request from the department of education. If the department of revenue preapproves the request, the department of education shall immediately notify the taxpayer, and the department of insurance in the case of a credit under section 20‑224.08, that the requested amount was preapproved by the department of revenue. In order to receive a tax credit under this subsection, the taxpayer shall make the contribution to the department of education within twenty days after receiving notice from the department of education that the requested amount was preapproved. If the department of education does not receive the preapproved contribution from the taxpayer within the required twenty days, the department of education shall immediately notify the department of revenue, and the department of insurance in the case of a credit under section 20‑224.08, and the department of revenue shall no longer include this preapproved contribution amount when calculating the limit prescribed in subsection C, paragraph 1 of this section.

E. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry the amount of the claim not used to offset the taxes under this title forward for not more than five consecutive taxable years' income tax liability.

F. Co-owners of a business, including corporate partners in a partnership, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner.

G. The credit allowed by this section is in lieu of any deduction pursuant to section 170 of the internal revenue code and taken for state tax purposes.

H. The department of revenue, with the cooperation of the department of education and the department of insurance, shall adopt rules and publish and prescribe forms and procedures necessary for the administration of this section. END_STATUTE

Sec. 6. Purpose

Pursuant to section 43-223, Arizona Revised Statutes, the purpose of section 43-1186, Arizona Revised Statutes, as added by this act, is to encourage taxpayers to direct a portion of their taxes by contributing to the education transformation fund in order to support transformative education practices that improve academic performance in public schools and to purchase software and technology for public schools.

Sec. 7. Effective date

This act is effective from and after December 31, 2012.