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ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
assessed valuation; class one property
Purpose
Accelerates the reduction of the percentage of assessed valuation of class 1 property by two years and modifies the depreciation schedule for certain subclasses of class 1, class 2 and class 6 personal property initially classified before TY 2022.
Background
Class 1 property consists of properties of mining, telecommunication companies, utilities, standing timber, airport fuel delivery, oil and gas production, pipelines, shopping centers, golf courses and most other commercial uses. Laws 2021, Chapter 412 reduced the percentage of assessed valuation of class 1 property to: 1) 17 percent in CY 2023; 2) 16.5 percent in CY 2024; and 3) 16 percent thereafter. Laws 2022, Chapter 171 further reduced the percentage of assessed valuation of class 1 property to 15.5 percent in CY 2026 and 15 percent for each year thereafter (A.R.S. §§ 42-12001 and 42-15001).
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 the Arizona Department of Revenue's (ADOR's) guidelines, for the sixth year and thereafter.
Laws 2022, Chapter 103 adjusted the depreciation schedule prescribed by ADOR by using a valuation factor of 2.5 percent to determine the valuation of certain subclasses of: 1) class 1 and class 2 personal property initially classified during or after TY 2022; and 2) class 6 personal property acquired and initially classified during or after TY 2022 (A.R.S. § 42-13054).
If accelerating the reduction of the percentage of assessed valuation of class 1 property and modifying the depreciation schedule for certain personal property results in a tax shift that affects the obligations of the state, there may be a fiscal impact to the state General Fund.
Provisions
1. Accelerates the reduction of the percentage of assessed valuation of class 1 property to 15 percent beginning in CY 2025, rather than beginning in CY 2027.
2. Replaces the depreciation schedule for qualifying subclasses of class 1 and class 2 personal property initially classified before TY 2022 and qualifying subclasses of class 6 personal property acquired and initially classified before TY 2022 as follows:
a) 26 percent of the depreciated value for the second year of assessment;
b) 42 percent of the depreciated value for the third year of assessment;
c) 58 percent of the depreciated value for the fourth year of assessment;
d) 74 percent of the depreciated value for the fifth year of assessment; and
e) the scheduled depreciated value as prescribed in ADOR's guidelines, for the sixth year and thereafter.
3. Makes conforming changes.
4. Becomes effective on the general effective date.
Prepared by Senate Research
February 2, 2023
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