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ARIZONA STATE SENATE
Fifty-Fifth Legislature, First Regular Session
AMENDED
DOR;
administrative rulings; procedures
(NOW: qualified facilities)
Purpose
Modifies the amount of the Credit for Qualified Facilities and prohibits the Arizona Commerce Authority (ACA) from preapproving Credits that exceed $125,000,000, rather than $70,000,000, in any calendar year. Extends, from October 1, 2023, to October 1, 2033, the requirement that the State Treasurer pay state prime contracting transaction privilege tax (TPT) revenues to a city, town or county each month for funding up to 80 percent of the cost of public infrastructure improvements.
Background
From January 1, 2013, through December 31, 2030, the Credit for Qualified Facilities is allowed against a qualified facility's income tax liability. A qualified facility devotes at least 80 percent of the property and payroll at the facility to qualified manufacturing, headquarters or research. To be eligible for the individual or corporate Credit for Qualified Facilities, a taxpayer must apply to the ACA for preapproval of the business.
To qualify for the Credit for Qualified Facilities, a taxpayer must invest in a new qualified facility in Arizona or expand an existing qualified facility in Arizona and produce new full-time employment positions where the job duties are performed at the location of the qualifying investment. Only capital investments in a qualified facility that are made within 36 months before submitting an application for preapproval are included in the computation of the Credit.
The Credit for Qualified Facilities must be preapproved by the ACA and is equal to 10 percent of the lesser of: 1) the amount the applicant has projected in total qualifying investment in the qualified facility; or 2) $200,000 for each net new full-time employment position projected by the applicant that has job duties associated with a qualified facility. The Credit must be claimed in five equal annual installments in five consecutive taxable years (A.R.S. §§ 41-1512; 43-1083.03; and 43-1164.04).
From October 1, 2013, through October 1, 2023, the State Treasurer must pay a city, town or county each month the total amount of TPT revenues collected from persons conducting business under the prime contracting classification that are derived from contracts to construct buildings and associated improvements for the benefit of a manufacturing facility for the purpose of funding up to 80 percent of the cost of public infrastructure improvements for the benefit of a manufacturing facility (A.R.S. § 42-5032.02).
If the modification of the Credit for Qualified Facilities results in additional claims against individual and corporate income tax liability, there may be a fiscal impact to the state General Fund.
Provisions
1. Bifurcates the amount of the Credit for Qualified Facilities, based on the amount of the total qualifying investment, to be 10 percent of the lessor of:
a) $200,000 for each new full-time employment position projected by the applicant that has job duties associated with a qualified facility, if the total qualifying investment is less than $2,000,000,000; or
b) $300,000 for each net new full-time employment position projected by the applicant that has job duties associated with a qualified facility, if the total qualifying investment is $2,000,000,000 or more.
2. Increases, from $70,000,000 to $125,000,000, the aggregate cap on Credit for Qualified Facilities preapproved by the ACA in a calendar year, with certain exceptions.
3. Removes, from the definition of qualified headquarters, the requirement that a global, national or regional headquarters be involved in manufacturing.
4. Expands the definition of qualified manufacturing to include the manufacturing of tangible products in Arizona if at least 65 percent of the product is directly sold to one or more qualified facilities, regardless of whether the qualified facilities are preapproved by the ACA.
5. Extends, from October 1, 2023, to October 1, 2033, the requirement that the State Treasurer pay state prime contracting TPT revenues to a city, town or county each month to fund up to 80 percent of the cost of public infrastructure improvements for the benefit of a manufacturing facility.
6. Makes technical and conforming changes.
7. Becomes effective on the general effective date.
Amendments Adopted by the Appropriations Committee
· Adopted the strike-everything amendment.
House Action Senate Action
WM 1/27/21 DPA 10-0-0-0 FIN 3/3/21 DP 6-3-1
3rd Read 2/9/21 59-0-0-0-1 APPROP 3/17/21 DPA/SE 9-1-0
Prepared by Senate Research
March 17, 2021
MG/ML/gs