ARIZONA HOUSE OF REPRESENTATIVES

Fifty-fourth Legislature

Second Regular Session

House: WM DP 6-4-0-0

HB 2814: rural economic development; project certification

Sponsor:  Representative Dunn, LD 13

Caucus & Cow

Overview

Allows a county, city or town to establish and adopt a rural economic development improvement program (program) and prescribes project certification criteria for a program. Allows a certified project that meets eligibility requirements to receive a qualified facilities tax credit provided that qualifications for the tax credit are met.

History

Current law establishes nine different property classifications for tax purposes with varying assessment ratios. The class 6 property classification has an assessed valuation of 5% of the full cash value (FCV) or limited valuation, as applicable, and consists of various property types including: 1) noncommercial historic property; 2) property located within a foreign trade zone; and 3) property used for renewable energy manufacturing or headquarters (A.R.S.§§ 42-12006 and 42-15006).

An individual and corporate income tax credit may be taken for qualifying investments and employment in expanding or locating a qualified facility in Arizona. To qualify for the credit, the taxpayer must invest in a new qualified facility or expand an existing qualified facility in Arizona and produce new full-time employment positions with job duties that are performed at the location of the qualifying investment (A.R.S. §§ 43-1083.03 and 43-1164.04).

Provisions

Program Designation

1.    ☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal NoteAllows a county with a population of less than 800,000 persons to propose establishing a program in the unincorporated areas of the county. (Sec. 1)

2.    Allows a city or town located in the county with a population of less 800,000 persons to propose adopting a program in the city or town. (Sec. 1)

3.    Directs a county, city or town to apply to the Arizona Commerce Authority (ACA) for designation as a program. (Sec. 1)

4.    Requires the application to be in a form prescribed by the ACA and include a plan for projects that meet capital investment requirements and that create the minimum number of employment positions, as determined by the county, city or town. (Sec. 1)

5.    Requires the projects positions to be paid an average of 100% of the county median wage. (Sec. 1)

6.    Stipulates that program designation is valid for 10 years after the date the program is adopted or until the infrastructure investments for the project are recouped. (Sec. 1)

7.    Allows a county, city or town to apply to renew the program designation during the last year before the designation ends if the project continues to meet the prescribed criteria. (Sec. 1)

8.    Requires the ACA to establish a renewal process. (Sec. 1)

9.    Allows a county, city or town to enter into development agreements with property owners to construct projects after receiving a program designation and adopting a program. (Sec. 1)

10.  Requires the development agreement to be recorded in the Office of the County Recorder in the county where the property is located. (Sec. 1)

Project Certification

11.  Requires the ACA to annually certify projects that qualify for property tax incentives. (Sec. 1)

12.  States that in order to qualify for certification, the project must meet a minimum capital investment in fixed assets. (Sec. 1)

13.  Stipulates that certification is effective on January 1 of the valuation year following completion of the required minimum capital investment. (Sec. 1)

14.  Specifies that in order to qualify for certification, a project must invest at least the following amount in fixed assets in the designated program area:

a)    In counties with a population of 250,000-800,000, $25 million; and

b)    In counties with a population less than 250,000 and for cities and towns located in a county with a population of 250,000-800,000:

i.      For cities with a population of 80,000 or more, $10 million;

ii.     For cities with a population of 15,000-80,000 and in unincorporated areas of the county, $5,000,000; and

iii.    For cities and towns with a population less than 15,000, $1 million. (Sec. 1)

15.  Requires a project initially applying for certification to apply to the ACA on a form prescribed by the ACA for preapproval of the project. (Sec. 1)

16.  Requires the application to include:

a)    The project name and address and any other contact information requested by the ACA;

b)    The project location and the program area where the project is located;

c)    The number of full-time employees at the time of application and the wages provided;

d)    The county assessor's parcel number for the real property to which the class six assessment classification will apply;

e)    For the program area, the gross receipts, gross payroll and average hourly wages paid to employees for the preceding taxable year;

f)     A statement of ownership and a description of operations of the project;

g)    Documentation of the required capital investment in fixed assets that identifies the fixed assets and establishes the cost of the fixed assets and the time of investment;

h)    Documentation that establishes the type of project and amount of activity conducted in the program area;

i)      Ownership information and the FCV of the real and personal property to be certified; and

j)      Other information necessary to manage and report the program as determined by the ACA. (Sec. 1)

17.  States that in order to qualify as a class six property, the certified project must submit by December 10 of each year to the county assessor a copy of the ACA's initial certification and each annual recertification with a written request to reclassify the property. (Sec. 1)

18.  Requires the project to apply to the ACA for initial certification and annual recertification by October 1 of each year. (Sec. 1)

19.  Requires the ACA to notify the appropriate county assessor by December 1 of each year of all qualified properties located in that county. (Sec. 1)

20.  Requires the developer of a certified project located within a program area to report all development costs of the project to the county assessor and file an annual report with the county assessor disclosing the realized and unrealized development costs. (Sec. 1)

21.  Specifies that development costs do not include financing costs beyond monies borrowed to construct the real or personal property and improvements. (Sec. 1)

Tax Incentives for Certified Projects

22.  Allows a certified project that meets eligibility requirements to also receive the qualified facilities tax credit provided that qualifications for the tax credit are met. (Sec. 1)

23.  Requires a project that is certified by the ACA to be assessed as class 6 property and valued at the property's FCV. (Sec. 1)

24.  Specifies that if ownership of the property changes, the property no longer qualifies for the property tax incentive. (Sec. 1)

Classification of Property Used for Certified Projects

25.  Establishes real and personal property and improvements that are certified by the ACA and valued at FCV as class 6 property. (Sec. 2)

26.  Specifies that property may not be classified as class 6 property if the ownership of the property changes or for more than 10 years after the date the project is certified or until the development costs for the project are recouped. (Sec. 2)

27.  States that property classified as real and personal property and improvements certified by the ACA may not be classified as real and personal property and improvements used solely for the purpose of harvesting, transporting or processing forest products. (Sec. 2)

Miscellaneous

28.  Defines program and project. (Sec. 1)

29.  Makes technical and conforming changes. (Sec. 2)

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33.                    HB 2814

34.  Initials VP/EB        Page 0 Caucus & COW

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