Assigned to FICO                                                                                                                    FOR COMMITTEE

ARIZONA STATE SENATE

Fifty-Sixth Legislature, Second Regular Session

FACT SHEET FOR H.B. 2634

department of revenue; reuse zone

Purpose

Transfers the administration and tax incentive eligibility determination of military reuse zones (MRZs) from the Arizona Commerce Authority (ACA) to the Arizona Department of Revenue (ADOR).

Background

In 1992, the Legislature established the MRZ Program to lessen the impact of military base closures in Arizona by offering tax incentives to qualifying businesses and projects within a designated MRZ, including: 1) an exemption from transaction privilege taxes on contracts for certain types of construction at an MRZ; and 2) a property tax reclassification, from class 1 to class 6, for five tax years for qualifying MRZ property. The ACA oversees the administration of the MRZ Program, including tax incentive eligibility determinations and revocations (A.R.S. Title 41, Chapter 15, Article 3; ACA).

To qualify for designation as an MRZ, the subject property must be located on a closed military facility that was formerly used for operational and training purposes for active U.S. Uniformed Servicess and must include a runway that is at least 8,000 feet in length. The Governor may designate an MRZ after consulting with the CEO of the ACA (A.R.S § 41-1531).

The ACA may establish necessary rules for administering the MRZ Program and must:
1) monitor and evaluate the MRZ Program's implementation and operation; 2) aid employers within an MRZ in accessing tax incentives; and 3) provide an annual report to the Governor detailing the effectiveness of the MRZ Program (A.R.S § 41-1533).

Currently, there are two MRZs in Arizona. The former Williams Air Force Base was designated as an MRZ in 1996 and is the current location of the Phoenix-Mesa Gateway Airport. The former U.S. Naval Air Facility in Goodyear was designated as an MRZ in 2002 and is the current location of the Phoenix Goodyear Airport (ADOR).

There is no anticipated fiscal impact to the state General Fund associated with this legislation.

Provisions

1. Transfers the administration and tax incentive eligibility determination of MRZs from the ACA to ADOR.

2. Makes technical and conforming changes.

3. Becomes effective on the general effective date.

House Action

WM                 2/14/24      DPA             10-0-0-0

3^rd Read           2/26/24                           56-0-3-0-1

Prepared by Senate Research

March 6, 2024

MG/JC/cs