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ARIZONA STATE SENATE
Fifty-Fifth Legislature, Second Regular Session
personal property; additional depreciation
Purpose
Requires the county assessor to adjust the depreciation schedule prescribed by the Arizona Department of Revenue (ADOR) by using a valuation factor of 2.5 percent to determine the valuation of certain subclasses of class 1, class 2 and class 6 personal property initially classified during or after TY 2022.
Background
Statute outlines an additional depreciation schedule for certain subclasses of class 1, class 2 and class 6 personal property. For qualifying class 1 and class 2 personal property initially classified beginning in TY 2012 and qualifying class 6 property acquired beginning in TY 2017 and initially classified beginning in TY 2018, the current schedule allows the qualifying property to be valued at: 1) 25 percent of the depreciated value in the first year of assessment; 2) 41 percent of the depreciated value in the second year; 3) 57 percent of the depreciated value in the third year; 4) 73 percent of the depreciated value in the fourth year; 5) 89 percent of the depreciated value in the fifth year; and 6) the scheduled depreciated value as prescribed in ADOR's guidelines, for the sixth year and thereafter. The additional depreciation may not reduce the valuation below the minimum value prescribed by ADOR for property in use (A.R.S. § 42-13054).
A minimum valuation factor is applied if personal property is still in use after the number of expected life years has passed. Personal property still in use maintains a minimum value, never reaching zero, until it is scrapped or discarded. For personal property that qualifies for additional depreciation, ADOR must reduce the minimum value by 2.5 percent good each year (ADOR; A.R.S. § 13055).
The Joint Legislative Budget Committee fiscal note estimates a cost to the state General Fund of $23.4 million in FY 2023 and specifies that the amount does not include any dynamic effects that may occur as a result of any potential behavioral responses of taxpayers (JLBC fiscal note).
Provisions
1. Sets the additional depreciation schedule at a valuation factor of 2.5 percent to determine the valuation of:
a) qualifying subclasses of class 1 and class 2 personal property initially classified during or after TY 2022; and
b) qualifying subclasses of class 6 personal property acquired during TY 2022 and initially classified during or after TY 2022.
2. Makes conforming changes.
3. Becomes effective on the general effective date.
House Action
COM 2/15/22 DP 8-2-0-0
3rd Read 2/23/22 35-24-1
Prepared by Senate Research
March 7, 2022
MG/sr