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ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
REVISED
AMENDED
business personal property; tax exemption
Purpose
Exempts, from property tax, all locally assessed personal property that is used for agricultural purposes or used in a trade or business.
Background
Personal property is classified and valued by each county assessor, except for centrally assessed personal property, which is valued by the Arizona Department of Revenue (ADOR). After the county assessor values locally assessed personal property, it is placed on the personal property tax roll. Locally assessed personal property, except manufactured housing or mobile homes, is assessed based on the property's full cash value (A.R.S. §§ 42-13304; 42-15053; and 42-19002).
The Arizona Constitution grants the Legislature the authority to determine by law the qualifications for, and the amount of, a property tax exemption for personal property used in trade or business or for agricultural purposes. Current statute exempts up to $207,366 of specified personal property used in trade or business or for agricultural purposes from property tax. ADOR annually adjusts the exemption amount for the following tax year to account for inflation. For TY 2023, the exemption is $225,572. The amount of personal property that exceeds the exemption amount is subject to an assessment ratio of 15 percent. Statute outlines an additional depreciation schedule for certain subclasses of class 1, class 2 and class 6 personal property (Ariz. Const. art. 9, § 2; A.R.S. §§ 42-11127 and 42-15002).
Each person that owns or has control of taxable personal property must deliver a correct report of property to the county assessor by April 1. The self-report is used to identify taxable personal property. Certain personal property used in trade or business or for agricultural purposes is exempt from the requirement to provide a property report (A.R.S. § 42-15053).
The Joint Legislative Budget Committee fiscal note estimates, beginning in FY 2025, a state General Fund cost of $154.9 million, reduced to $47.8 million after being offset by savings attributable to the automatic school tax rate adjustments under the state's truth-in-taxation provisions (JLBC fiscal note).
Provisions
1. Expands the personal property tax exemption to include all locally assessed personal property that is used for agricultural purposes or used in a trade or business.
2. Removes all locally assessed personal property that is used for agricultural purposes or in trade or business from the applicable property tax classifications.
3. Repeals the additional depreciation schedule applicable to certain subclasses of class 1, class 2 and class 6 personal property.
4. Removes the centrally assessed personal property of electric cooperatives from the class 1 property classification.
5. Applies, to a person that owns or has control of locally assessed, tax-exempt personal property, the exemption from the requirement to annually provide a property report to the county assessor.
6. Applies the exemption to tax years beginning January 1, 2024.
7. Makes technical and conforming changes.
8. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Expands the business personal property tax exemption by including all locally assessed personal property that is used for agricultural purposes or in trade or business.
2. Removes all locally assessed personal property that is used for agricultural purposes or in trade or business from the applicable property tax classifications.
3. Repeals the additional depreciation schedule applicable to certain subclasses of class 1, class 2 and class 6 personal property.
4. Applies, to a person that owns or has control of locally assessed, tax-exempt personal property, the exemption from the requirement to annually provide a property report to the county assessor.
5. Removes the centrally valued personal property of electric cooperatives from the class 1 property classification.
6. Makes technical and conforming changes.
Revisions
· Updates the fiscal impact statement.
Senate Action
FIN 2/6/23 DPA 4-3-0
Prepared by Senate Research
February 13, 2023
MG/sr