ARIZONA STATE SENATE
Forty-seventh Legislature, Second Regular Session
FINAL AMENDED
FACT SHEET FOR S.B. 1461
department of revenue; continuation
Purpose
Continues the Arizona Department of Revenue (DOR) for ten years, provides an affirmative defense for taxpayers, in administrative or judicial proceedings regarding a retroactive tax assessment, if DOR adopts a new interpretation or application of current tax law and prescribes a public hearing process for property valuation manuals, tables and guidelines drafted or modified by DOR.
Background
Pursuant to A.R.S. § 41-2953, the Joint Legislative Audit Committee assigned the sunset review of DOR to the House of Representatives Ways and Means Committee and the Senate Finance Committee of Reference. The Office of the Auditor General conducted the sunset review of DOR.
DOR was established in 1973 as the consolidation of several agencies. The mission of DOR is to administer tax laws fairly and efficiently for the people of Arizona. DOR is responsible for administering Arizona’s tax laws in the areas of income, transaction privilege, use, luxury, withholding, property, estate, fiduciary, bingo, tobacco and severance tax. DOR currently operates with nine divisions: Administrative Services, Audit, Collections, External Services & Special Projects, Information Technology, Processing Administration, Property Tax, Taxpayer Services and Tax Policy and Research.
According to the Joint Legislative Budget Committee, DOR’s budget in FY 2005-2006 is $67,756,800.
Provisions
Department of Revenue Sunset
1. Continues, retroactive to July 1, 2006, DOR until July 1, 2016.
2. Repeals DOR on January 1, 2017.
New Tax Interpretation or Application
3. Provides an affirmative defense to taxpayers in an administrative or judicial proceeding regarding a retroactive assessment of tax, interest and penalties if DOR determines that the taxes due apply to a new or additional category or a type of taxpayer and the change in interpretation or application is not due to a change in the law.
4. Prohibits DOR from applying newly enacted legislation retroactively.
5. Applies any change or interpretation or application prospectively unless favorable to taxpayers.
6. Prohibits DOR from assessing a tax penalty or interest based on a change in interpretation or application.
7. Defines “new interpretation or application.”
8. Repeals a duplicative section of statute that sets down rules for DOR regarding the prospective interpretation and application of new tax law.
Property Valuation Tables
9. Establishes a public hearing process for property tax guidelines, tables and manuals drafted, amended or modified by DOR via the Joint Legislative Oversight Committee on Property Tax Assessments and Appeals (Committee).
10. Requires DOR to consider the Committee’s comments before the final adoption of the issue.
Miscellaneous
11. Contains a purpose statement.
12. Makes technical and conforming changes
13. Becomes effective on the general effective date, with a retroactive provision as noted.
Amendments Adopted by Finance Committee
1. Prohibits DOR from the retroactive application of newly enacted legislation.
2. Applies prospectively, any change in interpretation or application, unless it is favorable to taxpayers.
3. Prohibits DOR from assessing a tax, penalty or interest based on a change in interpretation or application.
4. Requires the Legislature to approve all guidelines, tables and manuals, reflecting standard appraisal methods and techniques used in the determination of the valuation of property.
5. Prohibits the adoption of a proposed or amended guideline, table or manual that has not been approved by the Legislature, by concurrent resolution.
6. Makes technical and conforming changes.
Amendments Adopted by House of Representatives
1. Removes provisions authorizing the Legislature to review and approve guidelines, tables and manuals drafted by DOR.
2. Redefines “new interpretation or application.”
3. Defines “new or additional category or type of business.”
Amendments Adopted by Conference Committee
1. Establishes a public hearing committee process for property tax guidelines, tables and manuals drafted, amended or modified by DOR.
2. DOR must consider the committee’s comments.
3. The committee must meet within 30 days, after which time DOR may proceed without obstruction regarding property tax issues.
4. Restores affirmative defense language.
5. Repeals a duplicative section of statute.
Senate Action House Action
FIN 2/16/06 DPA 8-0-1-0 WM 3/27/06 DPA 5-0-0-4
3rd Read 3/6/06 29-0-1-0 3rd Read 4/13/06 43-16-1-0
Final Read 6/21/06 28-1-1-0 Final Read 6/21/06 49-7-4-0
Signed by the Governor 6/28/06
Chapter 391
Prepared by Senate Research
July 19, 2006
SL/ac