SB1493 - 522R

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

Section 1. Title 28, chapter 22, article 1, Arizona Revised Statutes, is amended by adding section 28-7704.02, to read:

START_STATUTE28-7704.02. State highway construction tax credits; rules

A. The state highway construction tax credit is established. The department shall administer the credit as provided by this section and use the sale of the credits to finance the construction, reconstruction and renovation of eligible facilities in this state. The department shall prescribe the criteria and procedures for receiving and evaluating applications and identifying eligible facilities that are suitable for financing pursuant to this section.

B. Each year the department shall:

1. Adopt and publish a list of eligible facility projects that best meet the prescribed criteria within the dollar limit of the credits prescribed for that year pursuant to subsection D of this section.

2. Announce dates and conduct public bidding procedures for the sale of the credits for each eligible facility project. The credits shall be sold by competitive public sale or through an online bidding process in which the department receives bids electronically over the internet in a real-time, competitive bidding event. The credits shall be awarded to the highest and best qualified bidder but may not be sold for less than __ percent of face value. The department shall issue a credit certificate to the successful bidder that includes:

(a) The full amount of the credit and the amount of each annual installment.

(b) A distinguishing name of the credit, including the eligible facility, date of the bid and name of the successful bidder.

C. State highway construction tax credits that are awarded through the bidding process:

1. Shall be allocated to the winning bidder in ten consecutive equal annual installments, beginning when the project is completed and placed in service and subject to the faithful performance of the construction, reconstruction or renovation contract and continuing maintenance of the eligible facility project by the winning bidder during the entire term of the credit. On the failure of performance or noncompliance under the terms of any agreement during the term of the credit, the tax credit is subject to recapture as provided by section 43-1075 or 43-1163, as applicable.

2. Are transferrable, subject only to the requirement of notifying the department of transportation and the department of revenue of any transfer, and may be applied against the state income tax liability of the winning bidder, any partner or member of the winning bidder or any transferee from the winning bidder, as provided by section 43-1075 or 43-1163, as applicable.

D. The annual amount of state highway construction tax credits that may be awarded under this section each year shall be prescribed by the legislature as part of the annual state budget.

E. An eligible facility project performed under this section is considered to be a public-private partnership for all purposes of this chapter.

F. The department of transportation, with the cooperation of the department of revenue, shall adopt rules and publish and prescribe forms and procedures as necessary to effectuate the purposes of this section. END_STATUTE

Sec. 2. 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 43‑1079.01, 43‑1087, 43‑1088, 43-1089.04, 43‑1167.01 and 43‑1175.

2. For years ending in 1 and 6, sections 43‑1074.02, 43-1075, 43‑1083, 43‑1083.02, 43‑1085.01, 43-1163, 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, 43-1089.03, 43‑1090, 43‑1164, 43‑1167, 43‑1169, 43‑1176 and 43‑1181.

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, 43‑1076.01, 43‑1081.01, 43‑1083.01, 43‑1083.04, 43‑1084, 43‑1162, 43‑1162.01, 43‑1164.01, 43‑1164.05, 43‑1170.01 and 43-1184 and, beginning in 2019, sections 43‑1083.03 and 43‑1164.04. END_STATUTE

Sec. 3. Title 43, chapter 10, article 5, Arizona Revised Statutes, is amended by adding section 43-1075, to read:

START_STATUTE43-1075. State highway construction tax credit

A. A credit is allowed against the taxes imposed by this title for taxpayers who participate in financing the construction, reconstruction or renovation of eligible transportation facilities pursuant to section 28‑7704.02. The department of transportation shall determine the amount of the credit, which shall be allocated in ten consecutive equal taxable year installments, as shown on the credit certificate issued to the successful bidder under section 28‑7704.02, subsection B, paragraph 2.

B. On notice to the department of revenue, joint participants in the successful bidding entity, including corporate members as participants, may allocate the credit among themselves on any basis without regard to their proportional interest in the bidding entity. The total of the allocated credits allowed all such participants may not exceed the amount of the credit issued by the department of transportation.

C. All or part of any unclaimed amount of any installment of a credit under this section may be sold or otherwise transferred under the following conditions:

1. A single sale or transfer may involve one or more transferees, and a transferee may in turn resell or transfer the credit subject to the same conditions of this subsection. A transferee may be a corporation, in which case the transferred credit becomes subject to section 43-1163.

2. Both the transferor and transferee must submit a written notice of the sale or transfer to the department of revenue within thirty days after the sale or transfer. The transferee's notice shall include a processing fee equal to one percent of the transferee's tax credit balance or two hundred dollars, whichever is less. The notice shall include:

(a) The name of the credit assigned by the department of transportation.

(b) The name and tax identification number of both the transferor and transferee.

(d) The amount of the sold or transferred credit and any balance of allocated credit installments.

(e) The transferor's tax credit balance before the sale or transfer and any remaining balance after the sale or transfer.

(f) The amount of consideration paid by the transferee to the transferor.

(g) Any other information required by rule.

3. A sale or transfer of the credit does not extend the time in which the credit can be used. The carryforward period of time under subsection D of this section for a credit that is sold or transferred begins on the date the credit is sold or transferred.

4. If the department determines that a transferor was not qualified or was disqualified from using the credit at the time of the sale or transfer, the department shall either disallow the credit claimed by the transferee or recapture the credit from the transferee as provided by this section. the transferee's recourse is against the transferor.

5. in the case of any failure to comply with this subsection, the department shall disallow the tax credit until the taxpayer is in full compliance.

D. If the allowable tax credit installment for a taxable year 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.

E. Qualification for a credit under this section by any taxpayer, including any transferee and previous transferor of a credit under subsection C of this section, is subject to the faithful performance of the construction, reconstruction or renovation contract and continuing maintenance of the eligible facility by the winning bidder during the entire term of the credit. On the failure of performance or noncompliance under the terms of any agreement during the term of the credit, the tax credit is subject to recapture from all taxpayers who claimed a credit under this section during the term of the credit, and those taxpayers are disqualified from further credits under this section in subsequent taxable years. The recapture is calculated by increasing the amount of taxes imposed in the year following the year of termination or revocation by the full amount of all credits previously allowed the taxpayer under this section. If the failure of performance or noncompliance under the terms of any agreement with the department of transportation was beyond the taxpayer's control, the taxpayer's recourse is against the malfeasant party.

F. The department of revenue shall maintain annual data on the total amount of monies credited pursuant to this section and shall provide this information to the department of transportation on request.

G. The department of revenue, with the cooperation of the department of transportation, shall adopt rules and publish and prescribe forms and procedures as necessary to effectuate the purposes of this section. END_STATUTE

Sec. 4. Title 43, chapter 11, article 6, Arizona Revised Statutes, is amended by adding section 43-1163, to read:

START_STATUTE43-1163. State highway construction tax credit

B. On notice to the department of revenue, joint participants in the successful bidding entity, including individuals as participants, may allocate the credit among themselves on any basis without regard to their proportional interest in the bidding entity. The total of the allocated credits allowed all such participants may not exceed the amount of the credit issued by the department of transportation.

C. All or part of any unclaimed amount of any installment of a credit under this section may be sold or otherwise transferred under the following conditions:

1. A single sale or transfer may involve one or more transferees, and a transferee may in turn resell or transfer the credit subject to the same conditions of this subsection. A transferee may be a taxpayer subject to individual income tax, in which case the transferred credit becomes subject to section 43-1075.

(a) The name of the credit assigned by the department of transportation.

(b) The name and tax identification number of both the transferor and transferee.

(d) The amount of the sold or transferred credit and any balance of allocated credit installments.

(e) The transferor's tax credit balance before the sale or transfer and any remaining balance after the sale or transfer.

(f) The amount of consideration paid by the transferee to the transferor.

(g) Any other information required by rule.

5. in the case of any failure to comply with this subsection, the department shall disallow the tax credit until the taxpayer is in full compliance.

Sec. 5. Purpose

Pursuant to section 43-223, Arizona Revised Statutes, the legislature enacts sections 43-1075 and 43-1163, Arizona Revised Statutes, as added by this act, to attract private equity capital invested for transportation infrastructure projects in this state.