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ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
AMENDED
taxation; 2024-2025.
Purpose
Makes statutory and session law changes relating to taxation necessary to implement the FY 2025 state budget.
Background
The Arizona Constitution prohibits substantive law from being included in the general appropriations, capital outlay appropriations and supplemental appropriations bills. However, it is often necessary to make statutory and session law changes to effectuate the budget. Thus, separate bills called budget reconciliation bills (BRBs) are introduced to enact these provisions. Because BRBs contain substantive law changes, the Arizona Constitution provides that they become effective on the general effective date, unless an emergency clause is enacted.
S.B. 1747 contains the budget reconciliation provisions for changes relating to taxation.
Provisions
School Tuition Organizations (STOs)
1. Caps, beginning in FY 2025, the aggregate amount of the Credit for Corporate Contributions to STOs for Low-Income Students (Low-Income Credit) at $135,000,000 annually.
2. Adds students who are placed in Arizona foster care before graduating from high school or obtaining a GED to the student population that is eligible to receive a scholarship or grant awarded through the Credit for Contributions to Certified STOs (Switcher Credit) or the Low-Income Credit.
3. Prohibits an STO from issuing an educational scholarship or tuition grant for children who qualified under the foster child student population if a court of competent jurisdiction issues a final judgment that the above aggregate credit cap is unenforceable and that judgment is no longer subject to further appeal or review.
4. Requires, for a student who is placed in Arizona foster care to be eligible to receive an STO scholarship or grant, the student to:
a) be unable to attend a governmental school as a full-time student;
b) not have attended a governmental school as a full-time student for at least 90 days of the prior fiscal year or one full semester before enrolling in a qualified school;
c) be unable to receive other STO scholarships or grants in an amount equal to the qualified school's cost of tuition; and
d) only consider the qualified school in which the student enrolls because a governmental school cannot meet the student's unique needs, such as medical or behavioral needs that require specialized programs.
5. Defines unable to attend to mean that the student has been expelled or asked not to return due to the student's behavior or the school is not able to provide necessary services to the student.
Common School Districts Not Within a High School District (Type 03 Districts)
6. Requires each county board of supervisors (BOS) that levied a minimum qualifying tax rate (MQTR) in a Type 03 district in TY 2023 to reduce the school district property tax levies in TY 2024 by the amount of the Type 03 district's TY 2023 additional county levy, as added by Laws 2022, Chapter 285, subject to the following:
a) the county BOS must reduce the Type 03 district's additional county levy by an amount equal to the Type 03 district's TY 2023 additional county levy, as added by Laws 2022, Chapter 285; and
b) if the amount of the Type 03 district's TY 2023 additional county levy, as added by Laws 2022, Chapter 285, exceeds the TY 2024 levy amount prescribed by Laws 2024, Chapter 134, the county BOS must reduce the MQTR by the amount of the exceedance.
7. Requires the TY 2024 MQTR to be calculated without consideration of the above property tax levy reductions.
8. Repeals the Type 03 district TY 2024 property tax reduction requirements on January 1, 2027.
Qasimyar v. Maricopa County
9. Allows the governing body of a taxing jurisdiction that is subject to a tax judgment ordered in Qasimyar v. Maricopa County and that estimates a property tax rate increase of 4 percent or more from the 2023 tax rate to:
a) issue tax anticipation notes that mature and that must be paid by July 31 of the fourth fiscal year following the end of the fiscal year in which the notes are issued; and
b) request the Governor, the Director of the Arizona Department of Administration and the State Treasurer to issue state bonds to redeem or refund the issued tax anticipation notes in a manner consistent with statute.
10. Requires the Arizona Department of Education (ADE) to:
a) estimate the amount of state aid adjustments for a prior year due to a change in assessed valuation that occurred as a result of a tax judgment ordered in Qasimyar v. Maricopa County for each school district subject to the judgment;
b) send the estimates to each school district and to the Property Tax Oversight Commission by August 1, 2024;
c) recalculate state aid for each prior affected year;
d) report the recalculation amounts to the Joint Legislative Budget Committee (JLBC) and the Governor's Office of Strategic Planning and Budgeting; and
e) subject to review by JLBC, adjust state aid for each applicable school district.
11. Requires each school district affected by the Qasimyar v. Maricopa County tax judgment to:
a) subtract ADE's estimated state aid adjustment amount from the amount the tax judgment ordered for FY 2025, which is the maximum amount of a cash deficit resulting from the tax judgment that the district may levy in FY 2025; and
b) submit the amount calculated above to the Property Tax Oversight Commission for approval by August 1, 2024.
12. Allows, if the county school superintendent estimates that the 2024 property tax rate in a school district that is subject to the tax judgment ordered in Qasimyar v. Maricopa County will be more than 4 percent or more than the 2023 rate for that district, to issue tax anticipation notes or request the Governor, the Director of the Arizona Department of Administration and the State Treasurer to issue state bonds, or both, as outlined.
13. Allows the governing board of a school district that is subject to the tax judgment ordered in Qasimyar v. Maricopa County to use any portion of the district's total ending cash balances as of June 30, 2023, from the district's annual financial report for FY 2023 that was not included in the district's adopted budget for FY 2024 to pay property tax refunds in FY 2025.
14. Specifies that the Qasimyar v. Maricopa County requirements for school districts does not prevent a school district from levying sufficient property taxes to pay the required debt service on general obligation bonds.
15. Requires a county treasurer to include a prescribed statement in the tax bill for each school district that is subject to the tax judgment ordered in Qasimyar v. Maricopa County.
16. Repeals the Qasimyar v. Maricopa County tax anticipation note, state aid adjustment and property tax requirements on January 1, 2031.
17. Defines terms.
Arizona Department of Revenue (ADOR) Integrated Tax System Modernization Project
18. Declares the Legislature's intent that the total amount of fees that ADOR must assess on the following entities in FY 2025 to implement an integrated tax system modernization project may not exceed $6,626,900 and must be assessed in proportion to the aggregate amount of specified tax revenues distributed for the fiscal year two years preceding the current fiscal year:
a) counties, cities and towns that receive state shared revenues;
b) the Maricopa County council of governments; and
c) Maricopa County and Pima County regional transportation authorities.
19. Declares the Legislature's intent that a county's, city's or town's population in the most recent census must be used as the basis for apportioning the assessment.
20. Declares the Legislature's intent that the amount of the 0.6 percent additional education transaction privilege tax revenues transferred for the integrated tax system modernization project not exceed $803,600 in FY 2025.
21. Declares the Legislature's intent that the amount of marijuana excise tax revenues transferred for the integrated tax system modernization project not exceed $179,000 in FY 2025.
Miscellaneous
22. Amends Laws 2024, Chapter 142 to delay the requirement for ADOR to establish a certification process for third-party providers that offer sourcing services to taxpayers for transactions involving tangible personal property.
23. Extends, from June 30, 2024, to December 31, 2026, the transaction privilege and use tax exemption for equipment that is used directly in harvesting or processing qualifying forest products removed from a qualifying project and that is purchased by a qualified healthy forest enterprise.
24. Makes technical and conforming changes.
25. Becomes effective on the general effective date.
Amendments Adopted by Committee of the Whole
ˇ Makes clarifying changes.
Amendments Adopted by Additional Committee of the Whole
ˇ Removes the emergency clause.
Senate Action
APPROP 6/13/24 DP 6-5-0
Prepared by Senate Research
June 15, 2024
MG/MM/slp/cs