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Senate Engrossed
income tax; credit; labor costs |
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State of Arizona Senate Fifty-sixth Legislature First Regular Session 2023
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SENATE BILL 1108 |
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An Act
amending sections 43-206 and 43-222, Arizona Revised Statutes; amending title 43, chapter 10, article 5, Arizona Revised Statutes, by adding section 43-1079; amending title 43, chapter 11, article 6, Arizona Revised Statutes, by adding section 43-1166; relating to the taxation of income.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 43-206, Arizona Revised Statutes, is amended to read:
43-206. Urban revenue sharing fund; allocation; distribution; withholding
A. The urban revenue sharing fund is established. Through fiscal year 2022-2023, the fund consists of an amount equal to fifteen percent of the net proceeds of the state income taxes for the fiscal year two years preceding the current fiscal year. Beginning in fiscal year 2023-2024, the fund consists of an amount equal to eighteen percent of the net proceeds of the state income taxes for the fiscal year two years preceding the current fiscal year. The fund shall be distributed to incorporated cities and towns as provided in this section, except that a city or town shall receive at least an amount equal to what a city or town with a population of fifteen hundred or more persons would receive. The transfer of net proceeds prescribed by section 49-282, subsection B does not affect the calculation of net proceeds prescribed by this subsection.
B. Each city or town shall share in the urban revenue sharing fund in the proportion that the population of each bears to the population of all. Except as provided by sections 42-5033 and 42-5033.01, the population of a city or town as determined by the most recent United States decennial census plus any revisions to the decennial census certified by the United States census bureau of the census shall be used as the basis for apportioning monies pursuant to this subsection.
D. A newly incorporated city or town shall share in the urban revenue sharing fund beginning the first month of the first full fiscal year following incorporation.
E. On receipt of a certificate of default from the greater Arizona development authority pursuant to section 41-2257 or 41-2258, the state treasurer, to the extent not otherwise expressly prohibited by law, shall withhold from the next succeeding distribution of monies pursuant to this section due to the city or town the amount specified in the certificate of default and immediately deposit the amount withheld in the greater Arizona development authority revolving fund. The state treasurer shall continue to withhold and deposit the monies until the authority certifies to the state treasurer that the default has been cured. The state treasurer may not withhold any amount that is necessary, as certified by the defaulting political subdivision to the state treasurer and the authority, to make any required deposits then due for the payment of principal and interest on bonds of the political subdivision that were issued before the date of the loan repayment agreement or bonds and that have been secured by a pledge of distributions made pursuant to this section.
F. Except as otherwise provided by this subsection, on notice from the attorney general pursuant to section 41-194.01, subsection B, paragraph 1 that an ordinance, regulation, order or other official action adopted or taken by the governing body of a city or town violates state law or the Constitution of Arizona, the state treasurer shall withhold the distribution of monies pursuant to this section to the affected city or town and shall continue to withhold monies pursuant to this subsection until the attorney general certifies to the state treasurer that the violation has been resolved. The state treasurer shall redistribute the monies withheld pursuant to this subsection among all other cities and towns in proportion to their population as provided by subsection B of this section. The state treasurer shall not withhold any amount that the city or town certifies to the attorney general and the state treasurer as being necessary to make any required deposits or payments for debt service on bonds or other long-term obligations of the city or town that were issued or incurred before committing the violation.
G. On notice from the department pursuant to section 43-1079 or 43-1166, each month the state treasurer shall withhold from a city or town an amount equal to one-twelfth of the total amount of tax credits claimed under sections 43-1079 and 43-1166 for the prior taxable year by taxpayers located in that city or town from that city's or town's distribution of monies pursuant to this section and deposit that amount in the state general fund. The state treasurer shall not withhold any amount that the city or town certifies to the department and the state treasurer as being necessary to make any required deposits or payments for debt service on bonds or other long-term obligations of the city or town that were issued or incurred by a pledge of distributions made pursuant to this section.
Sec. 2. Section 43-222, Arizona Revised Statutes, is amended to read:
43-222. Income tax credit review schedule
The joint legislative income tax credit review committee shall review the following income tax credits:
1. For years ending in 0 and 5, sections 43-1079.01, 43-1088, 43-1089.04, 43-1167.01 and 43-1175.
2. For years ending in 1 and 6, sections 43-1072.02, 43-1074.02, 43-1075, 43-1076.01, 43-1077, 43-1078, 43-1083, 43-1083.02, 43-1162, 43-1164.03 and 43-1183.
3. For years ending in 2 and 7, sections 43-1073, 43-1082, 43-1085, 43-1086, 43-1089, 43-1089.01, 43-1089.02, 43-1089.03, 43-1164, 43-1165, and 43-1181.
4. For years ending in 3 and 8, sections 43-1074.01, 43-1079, 43-1166, 43-1168, 43-1170 and 43-1178.
5. For years ending in 4 and 9, sections 43-1073.01, 43-1081.01, 43-1083.03, 43-1084, 43-1164.04, 43-1164.05 and 43-1184.
Sec. 3. Title 43, chapter 10, article 5, Arizona Revised Statutes, is amended by adding section 43-1079, to read:
43-1079. Credit for increased hourly labor costs; definitions
A. For taxable years beginning from and after December 31, 2023, a credit is allowed against the taxes imposed by this title for a portion of a taxpayer's increased hourly labor costs that results from paying a local minimum wage that is more than the state minimum wage.
B. The amount of the credit is ten percent of the difference between the amount of hourly labor costs the employer actually paid during the taxable year and the product of the total number of hours worked by all employees during the taxable year multiplied by the state minimum wage.
C. To qualify for a credit under this section, the employer shall:
1. employ employees who work in a city or town that has adopted a local minimum wage.
2. Certify to the department, on a form prescribed by the department, the amount of hourly labor costs the employer actually paid during the taxable year and the product of the total number of hours worked by all employees during the taxable year multiplied by the state minimum wage.
D. If the allowable tax credit exceeds the income taxes otherwise due on the claimant's income, or if there are no taxes due under this title, the amount of the claim not used to offset taxes under this title may be carried forward for not more than five consecutive taxable years as a credit against subsequent years' income tax liability.
E. Co-owners of a business, including partners in a partnership and shareholders of an S corporation as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner.
F. On or before the beginning of each fiscal year, the department shall notify the state treasurer of each city or town in which an employee of a taxpayer who claimed a credit under this section works and the total amount to withhold from that city's or town's urban revenue sharing distribution under section 43-206 over the course of that fiscal year to reimburse this state for the amount of tax credits claimed under this section for the taxable year.
G. For the purposes of this section:
1. "Local MINIMUM wage" means a minimum wage established by a city or town pursuant to section 23-364, subsection I that is more than the state minimum wage.
2. "State minimum wage" means the minimum wage established by this state pursuant to section 23-363.
Sec. 4. Title 43, chapter 11, article 6, Arizona Revised Statutes, is amended by adding section 43-1166, to read:
43-1166. Credit for increased hourly labor costs; definitions
A. For taxable years beginning from and after December 31, 2023, a credit is allowed against the taxes imposed by this title for a portion of a taxpayer's increased hourly labor costs that results from paying employees a local minimum wage THAT is more than the state minimum wage.
B. The amount of the credit is ten percent of the difference between the amount of hourly labor costs the employer actually paid during the taxable year and the product of the total number of hours worked by all employees during the taxable year multiplied by the state minimum wage.
C. To qualify for a credit under this section, the employer shall:
1. employ employees who work in a city or town that has adopted a local minimum wage.
2. Certify to the department, on a form prescribed by the department, the amount of hourly labor costs the employer actually paid during the taxable year and the product of the total number of hours worked by all employees during the taxable year multiplied by the state minimum wage.
D. If the allowable tax credit exceeds the income taxes otherwise due on the claimant's income, or if there are no taxes due under this title, the amount of the claim not used to offset taxes under this title may be carried forward for not more than five consecutive taxable years as a credit against subsequent years' income tax liability.
E. Co-owners of a business, including partners in a partnership, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner.
F. On or before the beginning of each fiscal year, the department shall notify the state treasurer of each city or town in which an employee of a taxpayer that claimed a credit under this section works and the total amount to withhold from that city's or town's urban revenue sharing distribution under section 43-206 over the course of that fiscal year to reimburse this state for the amount of tax credits claimed under this section for the taxable year.
G. For the purposes of this section:
1. "Local MINIMUM wage" means a minimum wage established by a city or town pursuant to section 23-364, subsection I that is more than the state minimum wage.
2. "State minimum wage" means the minimum wage established by this state pursuant to section 23-363.
Sec. 5. Purpose
Pursuant to section 43-223, Arizona Revised Statutes, the legislature enacts sections 43-1079 and 43-1166, Arizona Revised Statutes, as added by this act, to provide relief for businesses that are affected by burdensome local minimum wage increases.