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ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
AMENDED
technical correction; prepaid legal insurance
(NOW:
property rights; zoning ordinances; costs)
(NOW: residential leases; municipal tax exemption)
As passed by the Senate, S.B. 1131 required the legislative body of a municipality, before adopting any zoning ordinance or zoning ordinance text amendment of general applicability, to consider a housing impact statement regarding the impact of the zoning ordinance or text amendment.
The House of Representatives adopted a strike-everything amendment that does the following:
Purpose
Prohibits, effective January 1, 2025, a city, town or other taxing jurisdiction from levying a tax or fee on the business of renting or leasing real property for residential purposes (business of residential rentals).
Background
Transaction privilege tax (TPT) on the business of residential rentals is
imposed at the
city-level and TPT rates vary by municipality. The Model City Tax Code (MCTC)
is a uniform sales and use tax act that has been adopted by most Arizona cities
and towns as the basis for imposing tax. Regardless of MCTC adoption, a city or
town that levies a TPT, sales, gross receipts, use, franchise or other similar
tax or fee may impose or increase the rate of tax applied on residential
rentals, if approved by the qualified electors at a regular municipal election.
Health care facilities, long-term care facilities and hotel, motel or other
transient lodging businesses are excluded from the statutory requirements for
taxing residential rentals (A.R.S. §§ 42-5014
and
42-6011).
The Arizona Department of Revenue (ADOR) transmits TPT revenues to the State Treasurer, separately accounting for certain categories with dedicated uses. A portion of TPT is designated for distribution to counties, incorporated municipalities and the state General Fund and is referred to as the distribution base. Monies in the distribution base are allocated monthly with 25 percent being paid to incorporated municipalities in proportion to their population to be used for any municipal purpose (A.R.S. § 42-5029).
There is no anticipated fiscal impact to the state General Fund as the state does not currently impose TPT on the business of residential rentals. Beginning January 1, 2025, S.B. 1131 may reduce municipal tax revenue collections.
Provisions
Residential Rental Tax Prohibition (Effective January 1, 2025)
1. Prohibits, beginning January 1, 2025, a city, town or other taxing jurisdiction from levying a tax or fee on the business of residential rentals.
Rent Reduction (Effective on the general effective date)
2. Requires a landlord of residential rental property, by January 1, 2025, to cease charging tenants the amount of the repealed residential rental TPT.
3. Specifies that the landlord has the burden of proving by a preponderance of evidence, in any civil action challenging the lawfulness of a charge, assessment or other amount, that the challenged amount is not attributable to and does not represent all or any portion of a city's, town's or other taxing jurisdiction's residential rental TPT.
4. Repeals the rent reduction requirement on January 1, 2027.
Remote Seller Revenues (Effective January 1, 2025)
5. Requires ADOR to separately account for revenues collected from remote sellers when depositing TPT revenues in the state General Fund.
6. Requires municipalities to use separately accounted remote seller revenues paid to the municipality as part of the distribution base for public safety purposes before any other municipal purpose.
ADOR TPT Licensee Notification (Effective on the general effective date)
7. Requires ADOR, by September 30, 2024, to post on its website and electronically notify each residential rental TPT licensee that a municipality will no longer levy the tax beginning January 1, 2025.
8. Requires ADOR, if ADOR is unable to send the TPT licensee notices electronically, to send the notice by first class mail to:
a) the address on the TPT license;
b) the address of any residential rental property delegates; and
c) the address of each residential rental property.
9. Repeals the ADOR notification requirement on January 1, 2027.
Miscellaneous
10. Contains a statement of legislative intent.
11. Makes technical and conforming changes.
12. Becomes effective on the general effective date, with a delayed effective date as noted.
Amendments Adopted by the House of Representatives
· Adopted the strike-everything amendment relating to a residential rental tax prohibition.
House Action
GOV 3/29/23 DPA/SE 5-4-0-0
3rd Read 5/15/23 35-23-1-0-1
Prepared by Senate Research
May 15, 2023
MG/sr