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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
REVISED
AMENDED
tax omnibus
Purpose
Makes various changes to taxes, deduction amounts, credits and fees.
Background
Assessed Valuation of Class One Property
Class one property consists of properties of mining, telecommunication companies, utilities, standing timber, airport fuel delivery, oil and gas production, pipelines, shopping centers, golf courses and most other commercial uses (A.R.S. § 42-12001). The assessed valuation of class one property is currently 18 percent of its full cash value or limited valuation, as applicable (A.R.S. § 42-15001).
State Equalization Assistance Property Tax Rate
The board of supervisors in each county is required to levy the state equalization property tax each year and it is the responsibility of the county treasurer to apportion the monies to school districts within the county as provided by law (A.R.S. § 15-994). The state equalization assistance property tax rate (SETR) in tax year 2019 is $0.4566 (A.R.S. § 41-1276).
Highway Safety Fee
Laws 2018, Chapter 265 established the highway safety fee which is collected with vehicle registration applications and deposited into the Arizona Highway Patrol Fund. The Director of the Arizona Department of Transportation (ADOT) is required to annually determine the highway safety fee amount, which is currently $32. Beginning July 1, 2021, the Director of ADOT may not collect a highway safety fee (A.R.S. § 28-2007).
Motor Fuel Taxes and Other Fuel Taxes
The motor vehicle fuel tax is levied on each gallon of motor vehicle fuel, commonly known as gasoline, produced or imported into the state by a distributor. The state motor vehicle fuel tax rate is $0.18 per gallon. The use fuel tax applies to diesel fuel and there is no use fuel tax on alternative fuels. To partially compensate Arizona for the use of its highways, the use fuel tax for a light class motor vehicle is $0.18 gallon and $0.26 gallon for a use class motor vehicle.
A use class motor vehicle is a road tractor, truck tractor, truck or passenger carrying vehicle having a declared gross vehicle weight of more than 26,000 pounds or having more than two axles. A light class motor vehicle uses use fuel and excludes use class motor vehicles (A.R.S. § 28-5601).
Dependent Tax Credit
Laws 2019, Chapter 273 established a dependent tax credit for qualifying taxpayers as follows:
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Less than $200,000 for a single person, married filing separately or head of household, and less than $400,000 for married filing jointly: |
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$100 for each dependent under 17 years old |
$25 for each dependent at least 17 years old |
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At least $200,000 for a single person, married filing separately or head of household, and at least $400,000 for married filing jointly: |
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$100 minus 5% for each $1,000 by which the taxpayer's federal adjusted gross income (FAGI) exceeds the applicable threshold for each dependent under 17 years old |
$25 minus 5% for each $1,000 by which the taxpayer's FAGI exceeds the applicable threshold for each dependent at least 17 years old |
Arizona Gross Income for Individuals and Corporations
Current statute authorizes various amounts to be added or subtracted when computing an individual's Arizona adjusted gross income or a corporation's Arizona taxable income. Additions and subtractions are in place that require the addback of all federal depreciation taken under section 167(a) of the Internal Revenue Code (IRC) and the subtraction for the depreciation that would have been claimed if the taxpayer had made the election to opt out of bonus depreciation under section 168(k) of the IRC (A.R.S. §§ 43-1021; 43-1022; 43-1121 and 43- 1122).
Arizona Job Training Fund
The Arizona Commerce Authority administers the Arizona Job Training Fund. Monies appropriated to the Fund must be used to provide training to small businesses employing fewer than 100 employees and to businesses located in rural areas in Arizona (A.R.S. § 41-1544).
The Joint Legislative Budget Committee (JLBC) fiscal note indicates that the bill is estimated to have a state General Fund cost of $83.4 million in FY 2021, $106 million in FY 2022 and $166.1 million in FY 2023. The JLBC fiscal note contains a detailed breakdown of the fiscal impact of each provision of S.B. 1398 (JLBC fiscal note).
Provisions
Assessed Valuation of Class One Property
1. Reduces the percentage of assessed valuation of class one property to:
a) 17.5 percent in calendar year 2021; and
b) 17 percent thereafter.
State Equalization Assistance Property Tax Rate
2. Sets the SETR at:
a) $0.3520 in TY 2021; and
b) $0.2776 in TY 2022.
Highway Safety Fee
3. Repeals the annual highway safety fee beginning January 1, 2021.
Motor Fuel Taxes, Other Fuel Taxes and Electric and Hybrid Vehicles Tax
(Effective July 1, 2021)
4. Imposes the following motor vehicle fuel tax rates on fuels used to propel any vehicle:
a) for natural gas, $0.19 per gallon; and
b) for propane, $0.23 per gallon.
5. Removes the exemption from use fuel tax on alternative fuels.
6. Imposes a use fuel tax on the following fuels used to propel a light class motor vehicle on a highway:
a) for natural gas, $0.19 per gallon; and
b) for propane, $0.23 per gallon.
7. Imposes a use fuel tax on the following fuels used to propel a use class motor vehicle on a highway in Arizona:
a) for natural gas, $0.23 per gallon; and
b) for propane, $0.30 per gallon.
8. Imposes a tax on each vehicle propelled by electricity or a combination of electricity and a taxable fuel and that accesses a street or highway, as follows:
a) $130 per year for a vehicle that is propelled only by electricity; and
b) $52 per year for a vehicle that is propelled by a combination of electricity and other fuels.
Dependent Tax Credit
(Retroactive to taxable years beginning January 1, 2020)
9. Raises the dependent tax credit for the following categories in the following amounts:
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Less than $200,000 for a single person, married filing separately or head of household, and less than $400,000 for married filing jointly: |
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$120 for each dependent under 17 years old |
$30 for each dependent under 17 years old |
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At least $200,000 for a single person, married filing separately or head of household, and at least $400,000 for married filing jointly: |
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$120 minus 5% for each $1,000 by which the taxpayer's FAGI exceeds the applicable threshold for each dependent under 17 years old |
$30 minus 5% for each $1,000 by which the taxpayer's FAGI exceeds the applicable threshold for each dependent under 17 years old |
Arizona Adjusted Gross Income for Individuals
(Retroactive to taxable years beginning January 1, 2020)
10. Removes, from the computation of Arizona adjusted gross income, the amount of the addback of all federal depreciation taken and the subtraction for the depreciation that would have been claimed if the taxpayer had made the election to opt out of bonus depreciation.
11. Reduces the subtraction used in computing Arizona adjusted gross income for the taxable year, from 100 percent to 50 percent, of the net long-term capital gain included in FAGI that is derived from an investment in an asset acquired after December 31, 2019.
Arizona Gross Income for Corporations
(Retroactive to taxable years beginning January 1, 2020)
12. Removes, from the computation of Arizona taxable income, the amount of the addback of all federal depreciation taken and the subtraction for the depreciation that would have been claimed if the taxpayer had made the election to opt out of bonus depreciation.
Arizona Job Training Fund
13. Reverts unencumbered monies to the state GF on January 1, 2022, rather than January 1, 2021, and reverts all monies remaining in the Arizona Job Training Fund to the state GF on June 30, 2023, rather than June 30, 2022.
14. Prohibits monies in the Arizona Job Training Fund from being encumbered from and after December 31, 2021, rather than December 31, 2020.
Miscellaneous
15. Makes technical and conforming changes.
16. Becomes effective on the general effective date, with retroactive provisions and a delayed effective date as noted.
Amendments Adopted by Committee
· Increases the SETR from:
o $0.3277 to $0.3520 in TY 2021; and
o $0.2540 to $0.2776 in TY 2022.
Revisions
· Updates the fiscal impact statement.
Senate Action
FIN 2/5/20 DPA 6-3-1
Prepared by Senate Research
February 11, 2020
MG/gs