43-1076.01. Healthy forest production tax credit; definitions

A. For taxable years beginning from and after December 31, 2020, a credit is allowed against the taxes imposed by this title for processing qualifying forest products.

B. The taxpayer is eligible for the credit if all of the following apply:

1. The taxpayer has a current healthy forest enterprise incentive certification and memorandum of understanding with the Arizona commerce authority pursuant to section 41-1516.

2. The taxpayer processes qualifying forest products from a qualifying project from and after December 31, 2020 and before January 1, 2031.

3. The facility that processes qualifying forest products is located within this state.

C. The taxpayer is eligible for the credit for the calendar year in which the qualifying project processes qualifying forest products pursuant to subsection B of this section.

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

E. The credit authorized by this section is based on the number of tons of qualifying forest products that a taxpayer processes during a calendar year. For a taxpayer who files on a fiscal year basis, the credit shall be claimed on the return for the taxable year in which the calendar year ends.

F. Subject to subsection H of this section, the amount of the credit is $10,000 for the first twenty thousand tons and $5,000 for every ten thousand tons thereafter of qualifying forest products the taxpayer processes in the calendar year.

G. To be eligible for the credit under this section, the taxpayer must apply to the department, on a form prescribed by the department, for certification of the credit. The department shall accept applications beginning January 2 through January 31 of the year following the calendar year for which the credit is being requested. The application shall include:

1. The taxpayer's name, address and social security number or federal employer identification number.

2. The location of the taxpayer's facility that processes qualifying forest products for which the credit is claimed.

3. The amount of the credit that is claimed.

4. The date the taxpayer began processing commercially marketable amounts of qualifying forest products.

5. Any additional information that the department requires.

H. The department shall review each application under subsection G of this section and certify to the taxpayer the amount of the credit authorized. The amount of the credit for any calendar year may not exceed $500,000 per taxpayer who processes qualifying forest products. Credits are allowed under this section and section 43-1162 on a first-come, first-served basis. The department may not authorize tax credits under this section and section 43-1162 that exceed in the aggregate a total of $2,000,000 for any calendar year.

I. The first time a taxpayer submits a qualified application under subsection G of this section, the department shall add the taxpayer's name to a credit authorization list in the order in which qualified applications are first received by the department on behalf of the taxpayer. A taxpayer's position on the credit authorization list shall be determined in the first year the taxpayer submits an application under subsection G of this section for processing qualifying forest products. The taxpayer's position on the list shall remain unchanged for the  remainder of the period specified in subsection B, paragraph 2 of this section or until a year in which the taxpayer fails to submit a timely application under subsection G of this section or otherwise fails to comply with this section. If a taxpayer is removed from the credit authorization list for processing qualifying forest products, the taxpayer may establish a new position on the credit authorization list in a subsequent year by filing a timely application for processing qualifying forest products that qualifies for the credit.

J. If an application is received that, if authorized, would require the department to exceed the $2,000,000 limit, the department shall grant the applicant only the remaining credit amount that would not exceed the $2,000,000 limit. After the department authorizes $2,000,000 in tax credits, the department shall deny any subsequent applications received for that calendar year. The department may not authorize any additional tax credits that exceed the $2,000,000 limit even if the amounts that have been certified to any taxpayer were not claimed or a taxpayer otherwise fails to meet the requirements to claim the additional credit.

K. Co-owners of a facility that processes qualifying forest products, including partners in a partnership and shareholders of an S corporation as defined in section 1361 of the internal revenue code, may each claim the pro rata share of the credit allowed under this section based on ownership interest.  The total of the credits allowed all such owners who process qualifying forest products may not exceed the amount that would have been allowed for a sole owner.

L. The department shall adopt rules and publish and prescribe forms and procedures as necessary to effectuate the purposes of this section.

M. For the purposes of this section:

1. "Processed" or "processing" means any change in the physical structure of qualifying forest products removed from a qualifying project into a marketable commercial product or component of a product that has commercial value to a consumer or purchaser and that is ready to be used with or without further altering its form.

2. "Qualifying forest products" means qualifying forest products as defined in section 41-1516 that are sourced within this state.

3. "Qualifying project" has the same meaning prescribed in section 41-1516.