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ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
AMENDED
tax exemptions; affidavit
Purpose
Modifies administration and requirements relating to property tax exemption eligibility affidavits (eligibility affidavit) and Arizona Department of Revenue (ADOR) transaction privilege tax (TPT) exemption letters.
Background
All property in Arizona is subject to taxation with certain exceptions. ADOR prescribes the procedure, affidavits and forms that effectuate property tax exemptions. Certain property that is not used or held for profit is exempt from property tax, including: 1) educational and library property; 2) religious property; 3) cemeteries; and 4) low-income property owned and operated by an Indian tribe or tribal housing authority. Certain property used for educational or religious purposes and property leased to veterans' organizations is exempt from property tax if the property is used for the exempted purpose (A.R.S. § 42-11132; 42-11132.01; and 42-11132.02).
A person that claims a property tax exemption must file an eligibility
affidavit with the county assessor when initially claiming the exemption and
when claiming the exemption in subsequent years. If outlined 501(c)3 nonprofit
organizations (nonprofit) file with the county assessor evidence of the
organization's tax-exempt status, the organization is exempt from the
requirement of filing subsequent eligibility affidavits until all or part of
the property is conveyed to a new owner or is no longer used for the exempted
purpose. At that time the organization must notify the assessor of the change
in writing (A.R.S. Title
42, Chapter 11). If a person does not file an eligibility affidavit or
furnish evidence between the first Monday in January and March 1 of each year,
the person waives the right to a property tax exemption (A.R.S. § 42-11152
and
42-11153).
Arizona does not provide an overall TPT exemption for nonprofit organizations. Sales to nonprofits are generally subject to TPT and use tax, unless the nonprofit is a qualified hospital or health care organization. A qualifying hospital, qualifying health care organization, qualifying community health care center and a nonprofit that provides rehabilitation programs for mentally or physically disabled persons must apply for an annual TPT exemption letter from ADOR (ADOR).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
Property Tax Eligibility Affidavits
1. Removes the requirement for a nonprofit to file subsequent annual eligibility affidavits with the county assessor for the following types of property:
a) educational and library property;
b) religious property; and
c) low-income Indian housing.
2. Requires a nonprofit to file evidence of the nonprofit's tax-exempt status with the county assessor, rather than allowing the nonprofit to file the evidence with the county assessor to be exempt from the requirement to file subsequent annual eligibility affidavits.
3. Requires the following to notify the county assessor in writing if there is any event that disqualifies the person or property from the exemption:
a) a nonprofit;
b) the owner of a cemetery, historic private burial site or historic private cemetery;
c) an Indian tribe or tribal housing authority;
d) an educational, religious or charitable organization that owns property that is leased to an educational institution;
e) an educational, religious or charitable organization that owns property leased to a church, religious assembly or religious institution; and
f) a veterans' organization that owns property leased to a veterans' organization.
Exemption Letter
4. Requires a qualifying community health center, qualifying health care organization or qualifying hospital or any other entity that is recognized as a 501(c) nonprofit and that is required to obtain an exemption letter from ADOR to:
a) apply to ADOR for the exemption letter and fully answer any eligibility questions required by ADOR for the purposes of the exemption letter; and
b) notify ADOR in writing if the entity no longer qualifies for the exemption letter.
5. Stipulates that, if ADOR approves the exemption letter application, the exemption letter is valid until the recognized nonprofit no longer qualifies for the exemption letter.
6. Holds the nonprofit liable, if the nonprofit no longer qualifies for the exemption letter, in an amount equal to any tax, penalty and interest that the seller would have been required to pay if the seller had not been furnished the exemption letter regardless of whether the entity notifies ADOR.
7. Exempts a nonprofit from liability for any imposed use tax with payment of the amount of liability.
8. Requires the liability amount to be treated as tax revenues collected from the seller in order to designate the distribution base for purposes of remission and distribution of TPT revenues.
Miscellaneous
9. Applies eligibility affidavit filing requirements to taxable periods beginning January 1, 2024.
10. Makes technical and conforming changes.
11. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Replaces the qualified hospital exemption letter renewal requirement changes with a requirement for any nonprofit that is required to obtain an exemption letter from ADOR to apply for the exemption letter and notify ADOR in writing if the entity no longer qualifies for the exemption letter.
2. Removes the requirement for a widow, widower, person with a disability or veteran with a disability to file subsequent annual eligibility affidavits.
Senate Action
FIN 2/6/23 DPA 7-0-0
Prepared by Senate Research
February 7, 2023
MG/MC/sr