HB2713 - 542R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 12-348, Arizona Revised Statutes, is amended to read:

START_STATUTE12-348. Award of fees and other expenses against the state or a city, town or county; reduction or denial of award; application; basis for amount of award; source of award; definitions

A. In addition to any costs that are awarded as prescribed by statute, a court shall award fees and other expenses to any party other than this state or a city, town or county that prevails by an adjudication on the merits in any of the following:

1. A civil action brought by this state or a city, town or county against the party.

2. A court proceeding to review a state agency decision pursuant to chapter 7, article 6 of this title or any other statute authorizing judicial review of agency, city, town or county decisions.

3. A proceeding pursuant to section 41‑1034.

4. A special action proceeding brought by the party to challenge an action by this state or a city, town or county against the party.

5. An appeal by this state to a court of law from a decision of the personnel board under title 41, chapter 4, article 6.

6. A civil action brought by the party to challenge the seizure and sale of personal property by this state or a city, town or county.

7. A civil action brought by the party to challenge a rule, decision, guideline, enforcement policy or procedure of a state agency or commission that is statutorily exempt from the rulemaking requirements of title 41, chapter 6 on the grounds that the rule, decision, guideline, enforcement policy or procedure is not authorized by statute or violates the Constitution of the United States or this state.

B. In addition to any costs that are awarded as prescribed by statute, except as provided in subsection C of this section, a court may award fees and other expenses to any party, other than this state or a city, town or county, that prevails by an adjudication on the merits in an action brought by the party against this state or a city, town or county challenging:

1. The assessment, collection or refund of taxes or in an action brought by this state or a city, town or county against the party to enforce the assessment or collection of taxes or the denial of a refund.

2. The adequacy or regularity of notice of delinquent taxes.

3. The regularity of sales of property for delinquent taxes.

C. The court in its discretion may deny the award provided for in this section or may reduce the award if it finds that any of the following applies:

1. During the course of the proceeding the prevailing party unduly and unreasonably protracted the final resolution of the matter.

2. The reason that the party other than this state or a city, town or county has prevailed is an intervening change in the applicable law.

3. The prevailing party refused an offer of civil settlement that was at least as favorable to the party as the relief ultimately granted.

D. A party may apply pursuant to the applicable procedural rules for an award of attorney fees and other expenses authorized under this section and shall include as part of the application evidence of the party's eligibility for the award and the amount sought, including an itemized statement from the attorneys and experts stating the actual time expended in representing the party and the rate at which the fees were computed.

E. The court shall base any award of fees as provided in this section on prevailing market rates for the kind and quality of the services furnished, except that:

1. An expert is not eligible for compensation at a rate in excess of the highest rate of compensation for experts paid by this state or a city, town or county except for awards made pursuant to subsection B of this section.

2. Except for awards made pursuant to subsection B of this section, the award of attorney fees may not exceed the amount that the prevailing party has paid or has agreed to pay the attorney or a maximum amount of seventy‑five dollars per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceeding involved, justifies a higher fee.

3. 1. For awards made pursuant to subsection B of this section, The award of attorney fees may not exceed the amount that the prevailing party has paid or agreed to pay the attorney or a maximum amount of three hundred fifty dollars $350 per hour.

4. Except for awards made pursuant to subsection B of this section, an award of fees against a city, town or county as provided in this section shall not exceed ten thousand dollars.

5. 2. For awards made pursuant to subsection B of this section, An award of fees against this state or a city, town or county shall not exceed seventy-five thousand dollars $125,000 for fees incurred at each level of judicial appeal.

6. 3. For each calendar year beginning from and after December 31, 2015, the attorney general shall adjust the income dollar amounts for maximum awards made pursuant to subsection B of this section shall be adjusted by the attorney general according to the average annual change in the metropolitan Phoenix consumer price index published by the United States bureau of labor statistics. The revised dollar amounts shall be raised to the nearest whole dollar. The income dollar amounts may not be revised below the amounts prescribed in the prior calendar year.

F. The particular state agency over which a party prevails shall pay the fees and expenses awarded as provided in this section from any monies appropriated to the agency for that purpose. If no agency is involved or if an agency fails or refuses to pay fees and other expenses within thirty days after demand by a person who has received an award pursuant to this section, and if no further review or appeals of the award are pending, the person may file a claim for the fees and other expenses with the department of administration, which shall pay the claim within thirty days, in the same manner as an uninsured property loss under title 41, chapter 3.1, article 1. If, at the time the agency failed or refused to pay the award, it had appropriated monies either designated or assignable for the purpose of paying awards, the legislature shall reduce the agency's operating appropriation for the following year by the amount of the award and shall appropriate the amount of the reduction to the department of administration as reimbursement for the loss.

G. A city, town or county shall pay fees and expenses awarded as provided in this section within thirty days after demand by a party who has received an award if no further review or appeal of the award is pending.

H. This section does not:

1. Apply to an action arising from a proceeding before this state or a city, town or county in which the role of this state or a city, town or county was to determine the eligibility or entitlement of an individual to a monetary benefit or its equivalent, to adjudicate a dispute or issue between private parties or to establish or fix a rate.

2. Apply to proceedings brought by this state pursuant to title 13 or 28.

3. Entitle a party to obtain fees and other expenses incurred in making an application for an award pursuant to this section for fees and other expenses.

4. Apply to proceedings involving eminent domain, foreclosure, collection of judgment debts or proceedings in which this state or a city, town or county is a nominal party.

5. Personally obligate any officer or employee of this state or a city, town or county for the payment of an award entered under this section.

6. Apply, except as provided in subsection A, paragraph 5 of this section, to proceedings involving the personnel board under title 41, chapter 4, article 6.

7. Apply to proceedings brought by a city, town or county pursuant to title 13 or 28.

8. Apply to proceedings brought by a city, town or county on collection of taxes or pursuant to traffic ordinances or to criminal proceedings brought by a city, town or county on ordinances which that contain a criminal penalty or fine for violations of those ordinances.

I. For the purposes of this section:

1. "Fees and other expenses" means the reasonable expenses of expert witnesses, the reasonable cost of any study, analysis, engineering report, test or project which that the court finds to be directly related to and necessary for the presentation of the party's case and reasonable and necessary attorney fees, and in the case of an action to review an agency decision pursuant to subsection A, paragraph 2 of this section, all fees and other expenses that are incurred in the contested case proceedings in which the decision was rendered.

2. "Party" means an individual, partnership, corporation, limited liability company, limited liability partnership, association or public or private organization.

3. "State" means this state and any agency, officer, department, board or commission of this state.

4. "Taxes" includes all taxes and related levies and assessments addressed in section 12‑163. END_STATUTE

Sec. 2. Section 41-1001, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1001. Definitions

In this chapter, unless the context otherwise requires:

1. "Agency" means any board, commission, department, officer or other administrative unit of this state, including the agency head and one or more members of the agency head or agency employees or other persons directly or indirectly purporting to act on behalf or under the authority of the agency head, whether created under the Constitution of Arizona or by enactment of the legislature. Agency does not include the legislature, the courts or the governor. Agency does not include a political subdivision of this state or any of the administrative units of a political subdivision, but does include any board, commission, department, officer or other administrative unit created or appointed by joint or concerted action of an agency and one or more political subdivisions of this state or any of their units. To the extent an administrative unit purports to exercise authority subject to this chapter, an administrative unit otherwise qualifying as an agency must be treated as a separate agency even if the administrative unit is located within or subordinate to another agency.

2. "Appealable agency action" has the same meaning prescribed in section 41-1092.

2. 3. "Audit" means an audit, investigation or inspection pursuant to title 23, chapter 2 or 4.

3. 4. "Code" means the Arizona administrative code, which is published pursuant to section 41‑1011.

4. 5. "Committee" means the administrative rules oversight committee.

5. 6. "Contested case" means any proceeding, including rate making, except rate making pursuant to article XV, Constitution of Arizona, price fixing and licensing, in which the legal rights, duties or privileges of a party are required or permitted by law, other than this chapter, to be determined by an agency after an opportunity for an administrative hearing.

6. 7. "Council" means the governor's regulatory review council.

7. 8. "Delegation agreement" means an agreement between an agency and a political subdivision that authorizes the political subdivision to exercise functions, powers or duties conferred on the delegating agency by a provision of law. Delegation agreement does not include intergovernmental agreements entered into pursuant to title 11, chapter 7, article 3.

8. 9. "Emergency rule" means a rule that is made pursuant to section 41‑1026.

9. 10. "Fee" means a charge prescribed by an agency for an inspection or for obtaining a license.

10. 11. "Final rule" means any rule filed with the secretary of state and made pursuant to an exemption from this chapter in section 41‑1005, made pursuant to section 41‑1026, approved by the council pursuant to section 41‑1052 or 41‑1053 or approved by the attorney general pursuant to section 41‑1044. For purposes of judicial review, final rule includes expedited rules pursuant to section 41‑1027.

11. 12. "General permit" means a regulatory permit, license or agency authorization that is for facilities, activities or practices in a class that are substantially similar in nature and that is issued or granted by an agency to a qualified applicant to conduct identified operations or activities if the applicant meets the applicable requirements of the general permit, that requires less information than an individual or traditional permit, license or authorization and that does not require a public hearing.

12. 13. "License" includes the whole or part of any agency permit, certificate, approval, registration, charter or similar form of permission required by law, but does not include a license required solely for revenue purposes.

13. 14. "Licensing" includes the agency process respecting the grant, denial, renewal, revocation, suspension, annulment, withdrawal, change, reduction, modification or amendment of a license, including an existing permit, certificate, approval, registration, charter or similar form of permission, approval or authorization obtained from an agency by the holder of a license.

15. "Licensing decision" means any action by an agency to grant or deny any request for permission, approval or authorization issued in response to any request from an applicant for a license or to the holder of a license to exercise authority within the scope of the license.

14. 16. "Party" means each person or agency named or admitted as a party or properly seeking and entitled as of right to be admitted as a party.

15. 17. "Person" means an individual, partnership, corporation, association, governmental subdivision or unit of a governmental subdivision, a public or private organization of any character or another agency.

16. 18. "Preamble" means:

(a) For any rulemaking subject to this chapter, a statement accompanying the rule that includes:

(i) Reference to the specific statutory authority for the rule.

(ii) The name and address of agency personnel with whom persons may communicate regarding the rule.

(iii) An explanation of the rule, including the agency's reasons for initiating the rulemaking.

(iv) A reference to any study relevant to the rule that the agency reviewed and either proposes to rely on in its evaluation of or justification for the rule or proposes not to rely on in its evaluation of or justification for the rule, where the public may obtain or review each study, all data underlying each study and any analysis of each study and other supporting material.

(v) The economic, small business and consumer impact summary, or in the case of a proposed rule, a preliminary summary and a solicitation of input on the accuracy of the summary.

(vi) A showing of good cause why the rule is necessary to promote a statewide interest if the rule will diminish a previous grant of authority of a political subdivision of this state.

(vii) Such other matters as are prescribed by statute and that are applicable to the specific agency or to any specific rule or class of rules.

(b) In addition to the information set forth in subdivision (a) of this paragraph, for a proposed rule, the preamble also shall include a list of all previous notices appearing in the register addressing the proposed rule, a statement of the time, place and nature of the proceedings for the making, amendment or repeal of the rule and where, when and how persons may request an oral proceeding on the proposed rule if the notice does not provide for one.

(c) In addition to the information set forth in subdivision (a) of this paragraph, for an expedited rule, the preamble also shall include a statement of the time, place and nature of the proceedings for the making, amendment or repeal of the rule and an explanation of why expedited proceedings are justified.

(d) For a final rule, except an emergency rule, the preamble also shall include, in addition to the information set forth in subdivision (a), the following information:

(i) A list of all previous notices appearing in the register addressing the final rule.

(ii) A description of the changes between the proposed rules, including supplemental notices and final rules.

(iii) A summary of the comments made regarding the rule and the agency response to them.

(iv) A summary of the council's action on the rule.

(v) A statement of the rule's effective date.

(e) In addition to the information set forth in subdivision (a) of this paragraph, for an emergency rule, the preamble also shall include an explanation of the situation justifying the rule being made as an emergency rule, the date of the attorney general's approval of the rule and a statement of the emergency rule's effective date.

17. 19. "Provision of law" means the whole or a part of the federal or state constitution, or of any federal or state statute, rule of court, executive order or rule of an administrative agency.

18. 20. "Register" means the Arizona administrative register, which is:

(a) This state's official publication of rulemaking notices that are filed with the office of secretary of state.

(b) Published pursuant to section 41‑1011.

19. 21. "Rule" means an agency statement of general applicability that implements, interprets or prescribes law or policy, or describes the procedure or practice requirements of an agency. Rule includes prescribing fees or the amendment or repeal of a prior rule but does not include intraagency memoranda that are not delegation agreements.

20. 22. "Rulemaking" means the process to make a new rule or amend, repeal or renumber a rule.

21. 23. "Small business" means a concern, including its affiliates, which is independently owned and operated, which is not dominant in its field and which employs fewer than one hundred full‑time employees or which had gross annual receipts of less than four million dollars in its last fiscal year. For purposes of a specific rule, an agency may define small business to include more persons if it finds that such a definition is necessary to adapt the rule to the needs and problems of small businesses and organizations.

22. 24. "Substantive policy statement" means a written expression which informs the general public of an agency's current approach to, or opinion of, the requirements of the federal or state constitution, federal or state statute, administrative rule or regulation, or final judgment of a court of competent jurisdiction, including, where appropriate, the agency's current practice, procedure or method of action based upon that approach or opinion. A substantive policy statement is advisory only. A substantive policy statement does not include internal procedural documents which only affect the internal procedures of the agency and does not impose additional requirements or penalties on regulated parties, confidential information or rules made in accordance with this chapter. END_STATUTE

Sec. 3. Section 41-1001.01, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1001.01. Regulatory bill of rights; small businesses

A. To ensure fair and open regulation by state agencies, a person:

1. Is eligible for reimbursement of fees and other expenses if the person prevails by adjudication on the merits against an agency in a court proceeding regarding an agency decision as provided in section 12‑348.

2. Is eligible for reimbursement of the person's costs and fees if the person prevails against any agency in an administrative hearing as provided in section 41‑1007.

3. Is entitled to have an agency not charge the person a fee unless the fee for the specific activity is expressly authorized as provided in section 41‑1008.

4. Is entitled to receive the information and notice regarding inspections and audits prescribed in section 41‑1009.

5. May review the full text or summary of all rulemaking activity, the summary of substantive policy statements and the full text of executive orders in the register as provided in article 2 of this chapter.

6. May participate in the rulemaking process as provided in articles 3, 4, 4.1 and 5 of this chapter, including:

(a) Providing written comments or testimony on proposed rules to an agency as provided in section 41‑1023 and having the agency adequately address those comments as provided in section 41‑1052, subsection D, including comments or testimony concerning the information contained in the economic, small business and consumer impact statement.

(b) Filing an early review petition with the governor's regulatory review council as provided in article 5 of this chapter.

(c) Providing written comments or testimony on rules to the governor's regulatory review council during the mandatory sixty-day comment period as provided in article 5 of this chapter.

7. Is entitled to have an agency not base a licensing decision in whole or in part on licensing conditions or requirements that are not specifically authorized by statute, rule or state tribal gaming compact as provided in section 41‑1030, subsection B.

8. Is entitled to have an agency not base a decision regarding any filing or other matter submitted to an agency on a requirement or condition that is not specifically authorized by statute, rule or state tribal gaming compact as provided in section 41-1030, subsection C.

8. 9. Is entitled to have an agency not make a rule under a specific grant of rulemaking authority that exceeds the subject matter areas listed in the specific statute or not make a rule under a general grant of rulemaking authority to supplement a more specific grant of rulemaking authority as provided in section 41‑1030, subsection C D.

9. 10. May allege that an existing agency practice or substantive policy statement constitutes a rule and have that agency practice or substantive policy statement declared void because the practice or substantive policy statement constitutes a rule as provided in section 41‑1033.

10. 11. May file a complaint with the administrative rules oversight committee concerning:

(a) A rule's, practice's or substantive policy statement's lack of conformity with statute or legislative intent as provided in section 41‑1047.

(b) An existing statute, rule, practice alleged to constitute a rule or substantive policy statement that is alleged to be duplicative or onerous as provided in section 41‑1048.

11. 12. May have the person's administrative hearing on contested cases and appealable agency actions heard by an independent administrative law judge as provided in articles 6 and 10 of this chapter.

12. 13. May have administrative hearings governed by uniform administrative appeal procedures as provided in articles 6 and 10 of this chapter and may appeal a final administrative decision by filing a notice of appeal pursuant to title 12, chapter 7, article 6.

13. 14. May have an agency approve or deny the person's license application within a predetermined period of time as provided in article 7.1 of this chapter.

14. 15. Is entitled to receive written notice from an agency on denial of a license application:

(a) That justifies the denial with references to the statutes or rules on which the denial is based as provided in section 41‑1076.

(b) That explains the applicant's right to appeal the denial as provided in section 41‑1076.

15. 16. Is entitled to receive information regarding the license application process before or at the time the person obtains an application for a license as provided in sections 41‑1001.02 and 41‑1079.

16. 17. May receive public notice and participate in the adoption or amendment of agreements to delegate agency functions, powers or duties to political subdivisions as provided in section 41‑1026.01 and article 8 of this chapter.

17. 18. May inspect all rules and substantive policy statements of an agency, including a directory of documents, in the office of the agency director as provided in section 41‑1091.

18. 19. May file a complaint with the office of the ombudsman‑citizens aide to investigate administrative acts of agencies as provided in chapter 8, article 5 of this title.

19. 20. Unless specifically authorized by statute, may expect state agencies to avoid duplication of other laws that do not enhance regulatory clarity and to avoid dual permitting to the extent practicable as prescribed in section 41‑1002.

20. 21. May have the person's administrative hearing on contested cases pursuant to title 23, chapter 2 or 4 heard by an independent administrative law judge as prescribed by title 23, chapter 2 or 4.

21. 22. Pursuant to section 41‑1009, subsection E, may correct deficiencies identified during an inspection unless otherwise provided by law.

B. The enumeration of the rights listed in subsection A of this section does not grant any additional rights that are not prescribed in the sections referenced in subsection A of this section.

C. Each state agency that conducts audits, inspections or other regulatory enforcement actions pursuant to section 41‑1009 shall create and clearly post on the agency's website a small business bill of rights. The agency shall create the small business bill of rights by selecting the applicable rights prescribed in this section and section 41‑1009 and any other agency-specific statutes and rules. The agency shall provide a written document of the small business bill of rights to the authorized on-site representative of the regulated small business. In addition to the rights listed in this section and section 41‑1009, the agency notice of the small business bill of rights shall include the process by which a small business may file a complaint with the agency employees who are designated to assist members of the public or regulated community pursuant to section 41‑1006. The notice must provide the contact information of the agency's designated employees. The agency notice must also state that if the regulated person has already made a reasonable effort with the agency to resolve the problem and still has not been successful, the regulated person may contact the office of ombudsman‑citizens aide. END_STATUTE

Sec. 4. Section 41-1009, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1009. Inspections and audits; applicability; exceptions

A. An agency inspector, auditor or regulator who enters any premises of a regulated person for the purpose of conducting an inspection or audit shall, unless otherwise provided by law:

1. Present photo identification on entry of the premises.

2. On initiation of the inspection or audit, state the purpose of the inspection or audit and the legal authority for conducting the inspection or audit.

3. Disclose any applicable inspection or audit fees.

4. Afford an opportunity to have an authorized on‑site representative of the regulated person accompany the agency inspector, auditor or regulator on the premises, except during confidential interviews.

5. Provide notice of the right to have on request:

(a) Copies of any original documents taken by the agency during the inspection or audit if the agency is permitted alLOWED by law to take original documents.

(b) A split of any samples taken during the inspection if the split of any samples would not prohibit an analysis from being conducted or render an analysis inconclusive.

(d) Copies of any documents to be relied on to determine compliance with licensure or regulatory requirements if the agency is otherwise permitted allowed by law to do so.

6. Inform each person whose conversation with the agency inspector, auditor or regulator during the inspection or audit is tape recorded that the conversation is being tape recorded.

7. Inform each person who is interviewed during the inspection or audit that:

(a) Statements made by the person may be included in the inspection or audit report.

(b) Participation in an interview is voluntary, unless the person is legally compelled to participate in the interview.

(c) The person is allowed at least twenty‑four hours to review and revise any written witness statement that is drafted by the agency inspector, auditor or regulator and on which the agency inspector, auditor or regulator requests the person's signature.

(d) The agency inspector, auditor or regulator may not prohibit the regulated person from having an attorney or any other experts in their field present during the interview to represent or advise the regulated person.

B. On initiation of an audit or an inspection of any premises of a regulated person, an agency inspector, auditor or regulator shall provide the following in writing:

1. The rights described in subsection A of this section and section 41‑1001.01, subsection C.

2. The name and telephone number of a contact person who is available to answer questions regarding the inspection or audit.

3. The due process rights relating to an appeal of a final decision of an agency based on the results of the inspection or audit, including the name and telephone number of a person to contact within the agency and any appropriate state government ombudsman.

4. A statement that the agency inspector, auditor or regulator may not take any adverse action, treat the regulated person less favorably or draw any inference as a result of the regulated person's decision to be represented by an attorney or advised by any other experts in their field.

5. A notice that if the information and documents provided to the agency inspector, auditor or regulator become a public record, the regulated person may redact trade secrets and proprietary and confidential information unless the information and documents are confidential pursuant to statute.

6. The time limit or statute of limitations applicable to the right of the agency inspector, auditor or regulator to file a compliance action against the regulated person arising from the inspection or audit, which applies to both new and amended compliance actions.

C. An agency inspector, auditor or regulator shall obtain the signature of the regulated person or on‑site representative of the regulated person on the writing prescribed in subsection B of this section and section 41‑1001.01, subsection C, if applicable, indicating that the regulated person or on‑site representative of the regulated person has read the writing prescribed in subsection B of this section and section 41‑1001.01, subsection C, if applicable, and is notified of the regulated person's or on‑site representative of the regulated person's inspection or audit and due process rights. The agency inspector, auditor or regulator may provide an electronic document of the writing prescribed in subsection B of this section and section 41‑1001.01, subsection C and, at the request of the regulated person or on‑site representative, obtain a receipt in the form of an electronic signature. The agency shall maintain a copy of this signature with the inspection or audit report and shall leave a copy with the regulated person or on‑site representative of the regulated person. If a regulated person or on‑site representative of the regulated person is not at the site or refuses to sign the writing prescribed in subsection B of this section and section 41‑1001.01, subsection C, if applicable, the agency inspector, auditor or regulator shall note that fact on the writing prescribed in subsection B of this section and section 41‑1001.01, subsection C, if applicable.

D. An agency that conducts an inspection shall give a copy of the inspection report to the regulated person or on‑site representative of the regulated person either:

1. At the time of the inspection.

2. Notwithstanding any other state law, within thirty working days after the inspection.

3. As otherwise required by federal law.

E. The inspection report shall contain deficiencies identified during an inspection. Unless otherwise provided by state or federal law, the agency shall provide the regulated person an opportunity to correct the deficiencies unless the agency documents in writing as part of the inspection report that the deficiencies are:

1. Committed intentionally.

2. Not correctable within a reasonable period of time as determined by the agency.

3. Evidence of a pattern of noncompliance.

4. A risk to any person, the public health, safety or welfare or the environment.

F. If the agency is unsure whether a regulated person meets the exemptions in subsection E of this section, the agency shall provide the regulated person with an opportunity to correct the deficiencies.

G. If the agency allows the regulated person an opportunity to correct the deficiencies pursuant to subsection E of this section, the regulated person shall notify the agency when the deficiencies have been corrected. Within thirty days after receipt of notification from the regulated person that the deficiencies have been corrected, the agency shall determine if the regulated person is in substantial compliance and notify the regulated person whether or not the regulated person is in substantial compliance. If the regulated person fails to correct the deficiencies or the agency determines the deficiencies have not been corrected within a reasonable period of time, the agency may take any enforcement action authorized by law for the deficiencies.

H. If the agency does not allow the regulated person an opportunity to correct deficiencies pursuant to subsection E of this section, on the request of the regulated person, the agency shall provide a detailed written explanation of the reason that an opportunity to correct was not allowed.

I. An agency decision pursuant to subsection E or G of this section is not an appealable agency action.

J. At least once every month after the commencement of the inspection, an agency shall provide a regulated person with an update on the status of any agency action resulting from an inspection of the regulated person. An agency is not required to provide an update after the regulated person is notified that no agency action will result from the agency inspection or after the completion of agency action resulting from the agency inspection.

K. For agencies with authority under title 49, if, as a result of an inspection or any other investigation, an agency alleges that a regulated person is not in compliance with licensure or other applicable regulatory requirements, the agency shall provide written notice of that allegation to the regulated person. The notice shall contain the following information:

1. A citation to the statute, regulation, license or permit condition on which the allegation of noncompliance is based, including the specific provisions in the statute, regulation, license or permit condition that are alleged to be violated.

2. Identification of any documents relied on as a basis for the allegation of noncompliance.

3. An explanation stated with reasonable specificity of the regulatory and factual basis for the allegation of noncompliance.

4. Instructions for obtaining a timely opportunity to discuss the alleged violation with the agency.

L. Subsection K of this section applies only to inspections necessary for the issuance of a license or to determine compliance with licensure or other regulatory requirements. Subsection K of this section does not apply to an action taken pursuant to section 11‑871, 11‑876, 11‑877, 49‑457.01, 49‑457.03 or 49‑474.01. Issuance of a notice under subsection K of this section is not a prerequisite to otherwise lawful agency actions seeking an injunction or issuing an order if the agency determines that the action is necessary on an expedited basis to abate an imminent and substantial endangerment to public health or the environment and documents the basis for that determination in the documents initiating the action.

M. This section does not authorize an inspection or any other act that is not otherwise authorized by law.

N. Except as otherwise provided in subsection L of this section, this section applies only to inspections necessary for the issuance of a license or to determine compliance with licensure or other regulatory requirements applicable to a licensee and audits pursuant to enforcement of title 23, chapters 2 and 4. This section does not apply:

1. To criminal investigations, investigations under tribal state gaming compacts and undercover investigations that are generally or specifically authorized by law.

2. If the agency inspector, auditor or regulator has reasonable suspicion to believe that the regulated person may be engaged in criminal activity.

3. To the Arizona peace officer standards and training board established by section 41‑1821.

4. To certificates of convenience and necessity that are issued by the corporation commission pursuant to title 40, chapter 2.

O. If an agency inspector, auditor or regulator gathers evidence in violation of this section, the violation may be a basis to exclude the evidence in a civil or administrative proceeding.

P. Failure of an agency, board or commission employee to comply with this section:

1. May subject the employee to disciplinary action or dismissal.

2. Shall be considered by the judge and administrative law judge as grounds for reduction of any fine or civil penalty.

Q. An agency may make rules to implement subsection A, paragraph 5 of this section.

R. Nothing in this section shall be used to exclude evidence in a criminal proceeding.

S. Subsection A, paragraph 7, subdivision (c) and subsection E of this section do not apply to the department of health services for the purposes of title 36, chapters 4 and 7.1.

T. Subsection B, paragraph 5 and subsection E of this section do not apply to the corporation commission for the purposes of title 44, chapters 12 and 13.

U. Except as otherwise prescribed by this section and notwithstanding any other law:

1. This section applies to all state agencies that conduct inspections and audits.

2. If a conflict arises between The rights afforded a regulated person pursuant to this section and the rights afforded a regulated person pursuant to another statute, this section governs. END_STATUTE

Sec. 5. Section 41-1030, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1030. Invalidity of rules not made according to this chapter; prohibited agency action; prohibited acts by state employees; enforcement; notice

A. A rule is invalid unless it is made and approved in substantial compliance with sections 41‑1021 through 41‑1029 and articles 4, 4.1 and 5 of this chapter, unless otherwise provided by law.

B. An agency shall not base a licensing decision in whole or in part on a licensing requirement or condition that is not specifically authorized by statute, rule or state tribal gaming compact. A general grant of authority in statute does not constitute a basis for imposing a licensing requirement or condition unless a rule is made pursuant to that general grant of authority that specifically authorizes the requirement or condition.

C. An agency shall not base a decision regarding any filing or other matter submitted by a licensee on a requirement or condition that is not specifically authorized by statute, rule or state tribal gaming compact. A general grant of authority in statute does not constitute a basis for imposing a requirement or condition for approval of a decision on any filing or other matter submitted by a licensee unless a rule is made pursuant to that general grant of authority that specifically authorizes the requirement or condition.

C. D. An agency shall not:

1. Make a rule under a specific grant of rulemaking authority that exceeds the subject matter areas listed in the specific statute authorizing the rule.

2. Make a rule under a general grant of rulemaking authority to supplement a more specific grant of rulemaking authority.

D. E. This section may be enforced in a private civil action and relief may be awarded against the state. The court may award reasonable attorney fees, damages and all fees associated with the license application to a party that prevails in an action against the state for a violation of this section.

E. F. A state employee may not intentionally or knowingly violate this section. A violation of this section is cause for disciplinary action or dismissal pursuant to the agency's adopted personnel policy.

F. G. This section does not abrogate the immunity provided by section 12‑820.01 or 12‑820.02.

G. H. An agency shall prominently print the provisions of subsections B, D, E, and F and G of this section on all license applications, except license applications processed by the corporation commission.

H. I. The licensing license application may be in either print or electronic format. END_STATUTE

Sec. 6. Section 41-1074, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1074. Compliance with administrative completeness review time frame

A. An agency shall issue a written notice of administrative completeness or deficiencies to an applicant for a license within the administrative completeness review time frame.

B. If an agency determines that an application for a license is not administratively complete, the agency shall include a comprehensive list of the specific deficiencies in the written notice provided pursuant to subsection A of this section. If the agency issues a written notice of deficiencies within the administrative completeness time frame, the administrative completeness review time frame and the overall time frame are suspended from the date the notice is issued until the date that the agency receives the missing information from the applicant.

C. If an agency does not issue a written notice of administrative completeness or deficiencies within the administrative completeness review time frame, the application is deemed administratively complete. If an agency issues a timely written notice of deficiencies, an application shall is not be complete until the agency receives all requested information has been received by the agency.

D. A determination by an agency that an application is not administratively complete is an appealable agency action, which if timely initiated, entitles the applicant to an adjudication on the merits of the administrative completeness of the application. END_STATUTE

Sec. 7. Section 41-1092, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1092. Definitions

In this article, unless the context otherwise requires:

1. "Administrative law judge" means an individual or an agency head, board or commission that sits as an administrative law judge, that conducts administrative hearings in a contested case or an appealable agency action and that makes decisions regarding the contested case or appealable agency action.

2. "Administrative law judge decision" means the findings of fact, conclusions of law and recommendations or decisions issued by an administrative law judge.

3. "Appealable agency action" means an action that determines the legal rights, duties or privileges of a party, including the administrative completeness of an application, and that is not a contested case. Appealable agency actions do not include interim orders by self‑supporting regulatory boards, rules, orders, standards or statements of policy of general application issued by an administrative agency to implement, interpret or make specific the legislation enforced or administered by it or clarifications of interpretation, nor does it mean or include rules concerning the internal management of the agency that do not affect private rights or interests. For the purposes of this paragraph, administrative hearing does not include a public hearing held for the purpose of receiving public comment on a proposed agency action.

4. "Director" means the director of the office of administrative hearings.

5. "Final administrative decision" means a decision by an agency that is subject to judicial review pursuant to title 12, chapter 7, article 6.

6. "Office" means the office of administrative hearings.

7. "Self‑supporting regulatory board" means any one of the following:

(a) The Arizona state board of accountancy.

(b) The board of barbers.

(d) The Arizona state boxing and mixed martial arts commission.

(e) The state board of chiropractic examiners.

(f) The board of cosmetology.

(g) The state board of dental examiners.

(h) The state board of funeral directors and embalmers.

(i) The Arizona game and fish commission.

(j) The board of homeopathic and integrated medicine examiners.

(k) The Arizona medical board.

(l) The naturopathic physicians medical board.

(m) The Arizona state board of nursing.

(n) The board of examiners of nursing care institution administrators and adult care home assisted living facility managers.

(o) The board of occupational therapy examiners.

(p) The state board of dispensing opticians.

(q) The state board of optometry.

(r) The Arizona board of osteopathic examiners in medicine and surgery.

(s) The Arizona peace officer standards and training board.

(t) The Arizona state board of pharmacy.

(u) The board of physical therapy.

(v) The state board of podiatry examiners.

(w) The state board for private postsecondary education.

(x) The state board of psychologist examiners.

(y) The board of respiratory care examiners.

(z) The state board of technical registration.

(aa) The Arizona state veterinary medical examining board.

(bb) The acupuncture board of examiners.

(cc) The Arizona regulatory board of physician assistants.

(dd) The board of athletic training.

(ee) The board of massage therapy. END_STATUTE

Sec. 8. Applicability

Section 12-348, Arizona Revised Statutes, as amended by this act, applies to all proceedings described in section 12-348, Arizona Revised Statutes, as amended by this act, that are pending on or filed after the effective date of this act.