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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
tax credits; performance measures; reporting
Purpose
Prescribes performance measures for the Qualified Facility Income Tax Credit and the Credit for Agricultural Water Conservation Systems to be reported each year to the Joint Legislative Budget Committee (JLBC).
Background:
The Credit for Agricultural Water Conservation Systems is provided to purchase and install an agricultural water conservation system that is primarily designed to substantially conserve water on land used to: 1) produce crops, fruit or other agricultural products; 2) raise, harvest or grow trees; or 3) sustain livestock (A.R.S. § 43-1084).
The Qualified Facility Income Tax Credit is a refundable tax credit provided to an individual or a corporation for qualifying investment and employment in expanding or locating a qualified facility in Arizona. The qualified facility must produce new full-time employment positions at the location of the qualified facility. A taxpayer is subject to preapproval and postapproval by the Arizona Commerce Authority (ACA) (A.R.S. §§ 41-1512; 43-1083.03; and 43-1164.04).
The Joint Legislative Income Tax Credit Review Committee (JLITCRC) is responsible for determining the original purpose of each existing income tax credit and establishing a standard for evaluating the success or failure of a tax credit. The standard for evaluation of the credits may include: 1) the history, rationale and estimated revenue impact; 2) the benefit to the state in terms of measurable economic development, new investments, creation of new jobs or retention of existing jobs; and 3) the complexity of the application, administration and approval process of the credit (A.R.S. § 43-221).
The JLITCRC met on December 19, 2019, and recommended the Qualified Facility Income Tax Credit be amended to include reporting on: 1) the number of employees hired by the qualified facility; and 2) the total capital expenditures invested as a result of the tax credit. JLITCRC also recommended the Credit for Agricultural Water Conservation Systems be amended to include requirements to report on: 1) the reduction of water usage as a result of the installation of a qualified water conservation system; and 2) the number of states where taxpayers receive a comparable credit (JLITCRC Annual Report).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Requires a qualified facility to annually report to the ACA by March 1:
a) the number of full-time employees the qualified facility hired in Arizona in the preceding calendar year; and
b) the total capital expenditures the qualified facility invested as a result of the Qualified Facility Income Tax Credit.
2. Requires the ACA to annually report to JLBC by May 1:
a) the number of full-time employees each qualified facility hired in Arizona in the preceding calendar year; and
b) the total capital expenditures each qualified facility invested in Arizona as a result of the Qualified Facility Income Tax Credit.
3. Requires each claimant of the Credit for Agricultural Water Conservation Systems to report to the Arizona Department of Revenue (ADOR) on the reduction in water usage as a result of installing the agricultural water conservation system by March 1 of each year.
4. Requires ADOR to annually report to JLBC by May 1:
a) the reduction in water usage as a result of installing the agricultural water conservation systems, as reported by all claimants; and
b) the number of states where taxpayers receive an income tax credit that is comparable to the Credit for Agricultural Water Conservation Systems.
5. Makes technical and conforming changes.
6. Becomes effective on the general effective date.
Prepared by Senate Research
January 27, 2020
MG/AJS/gs