HB2918 - 571R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 41-1276, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1276. Truth in taxation levy for equalization assistance to school districts

A. On or before February 15 of each year, the joint legislative budget committee shall compute and transmit the truth in taxation rates for equalization assistance for school districts for the following fiscal year to:

1. The chairpersons of the house of representatives ways and means committee and the senate finance committee, or their successor committees.

2. The chairpersons of the appropriations committees of the senate and the house of representatives, or their successor committees.

B. The truth in taxation rates consist of the qualifying tax rate for a high school district or a common school district within a high school district that does not offer instruction in high school subjects pursuant to section 15-971, subsection B, paragraph 1 and a qualifying tax rate for a unified district, a common school district not within a high school district or a common school district within a high school district that offers instruction in high school subjects pursuant to section 15-971, subsection B, paragraph 2 that will offset the change in net assessed valuation of property that was subject to tax in the prior year.

C. The joint legislative budget committee shall compute the truth in taxation rates as follows:

1. Determine the statewide net assessed value for the preceding tax year as provided in section 42-17151, subsection A, paragraph 3.

2. Determine the statewide net assessed value for the current tax year, excluding the net assessed value of property that was not subject to tax in the preceding year.

3. Divide the amount determined in paragraph 1 of this subsection by the amount determined in paragraph 2 of this subsection.

4. Adjust the qualifying tax rates for the current fiscal year by the percentage determined in paragraph 3 of this subsection in order to offset the change in net assessed value.

D. Except as provided in subsections E and G of this section, the qualifying tax rate for a high school district or a common school district within a high school district that does not offer instruction in high school subjects and the qualifying tax rate for a unified school district, a common school district not within a high school district or a common school district within a high school district that offers instruction in high school subjects for the following fiscal year shall be the rate determined by the joint legislative budget committee pursuant to subsection C of this section. The committee shall transmit the rates to the superintendent of public instruction and the county boards of supervisors by March 15 of each year.

E. If the legislature proposes qualifying tax rates that exceed the truth in taxation rate:

1. The house of representatives ways and means committee and the senate finance committee, or their successor committees, shall hold a joint hearing on or before February 28 and publish a notice of a truth in taxation hearing subject to the following requirements:

(a) The notice shall be published twice in a newspaper of general circulation in this state that is published at the state capital. The first publication shall be at least fourteen but not more than twenty days before the date of the hearing. The second publication shall be at least seven but not more than ten days before the date of the hearing.

(b) The notice shall be published in a location other than the classified or legal advertising section of the newspaper.

(c) The notice shall be at least one-fourth page in size and shall be surrounded by a solid black border at least one-eighth inch in width.

(d) The notice shall be in the following form, with the "truth in taxation hearing — notice of tax increase" headline in at least eighteen-point type:

Truth in Taxation Hearing

Notice of Tax Increase

In compliance with section 41-1276, Arizona Revised Statutes, the state legislature is notifying property taxpayers in Arizona of the legislature's intention to raise the property tax levy over last year's level.

The proposed tax increase will cause the taxes on a $100,000 home to be $(total proposed taxes including the tax increase). Without the proposed tax increase, the total taxes that would be owed on a $100,000 home would have been $_______.

All interested citizens are invited to attend a public hearing on the tax increase that is scheduled to be held (date and time) at (location).

(e) For the purposes of computing the tax increase on a $100,000 home as required by the notice, the joint meeting of the house of representatives ways and means committee and the senate finance committee, or their successor committees, shall consider the difference between the truth in taxation rate and the proposed increased rate.

2. The joint meeting of the house of representatives ways and means committee and the senate finance committee, or their successor committees, shall consider any motion to recommend the proposed tax rates to the full legislature by roll call vote.

F. In addition to publishing the truth in taxation notice under subsection E, paragraph 1 of this section, the joint meeting of the house of representatives ways and means committee and the senate finance committee, or their successor committees, shall issue a press release containing the truth in taxation notice.

G. Notwithstanding any other law, the legislature shall not adopt a state budget that provides for qualifying tax rates pursuant to section 15-971 that exceed the truth in taxation rates computed pursuant to subsection A of this section unless the rates are adopted by a concurrent resolution approved by an affirmative roll call vote of two-thirds of the members of each house of the legislature before the legislature enacts the general appropriations bill. If the resolution is not approved by two-thirds of the members of each house of the legislature, the rates for the following fiscal year shall be the truth in taxation rates determined pursuant to subsection C of this section and shall be transmitted to the superintendent of public instruction and the county boards of supervisors.

H. Notwithstanding subsection C of this section and if approved by the qualified electors voting at a statewide general election, the legislature shall not set a qualifying tax rate that exceeds $2.1265 for a common or high school district or $4.253 for a unified school district. The legislature shall not set a county equalization assistance for education rate that exceeds $0.5123.

I. Pursuant to subsection C of this section, the qualifying tax rate in tax year 2024 2025 for a high school district or a common school district within a high school district that does not offer instruction in high school subjects as provided in section 15-447 is $1.5930 $1.54185 and for a unified school district, a common school district not within a high school district or a common school district within a high school district that offers instruction in high school subjects as provided in section 15-447 is $3.1860 $3.0837. END_STATUTE

Sec. 2. Section 42-5010, Arizona Revised Statutes, is amended to read:

START_STATUTE42-5010. Rates; distribution base

A. The tax imposed by this article is levied and shall be collected at the following rates:

1. Five Four and ninety-three hundredths percent of the tax base as computed for the business of every person engaging or continuing in this state in the following business classifications described in article 2 of this chapter:

(a) Transporting classification.

(b) Utilities classification.

(d) Pipeline classification.

(e) Private car line classification.

(f) Publication classification.

(g) Job printing classification.

(h) Prime contracting classification.

(i) Amusement classification.

(j) Restaurant classification.

(k) Personal property rental classification.

(l) Retail classification and amounts equal to retail transaction privilege tax due pursuant to section 42-5008.01.

2. Five and one-half percent of the tax base as computed for the business of every person engaging or continuing in this state in:

(a) The transient lodging classification described in section 42-5070.

(b) The online lodging marketplace classification described in section 42-5076 who has entered into an agreement with the department to register for, or has otherwise obtained from the department, a license to collect tax pursuant to section 42-5005, subsection L.

3. Three and one-eighth percent of the tax base as computed for the business of every person engaging or continuing in this state in the mining classification described in section 42-5072.

4. Zero percent of the tax base as computed for the business of every person engaging or continuing in this state in the commercial lease classification described in section 42-5069.

B. Except as provided by subsection J of this section, twenty percent of the tax revenues collected at the rate prescribed by subsection A, paragraph 1 of this section from persons on account of engaging in business under the business classifications listed in subsection A, paragraph 1, subdivisions (a) through (h) of this section is designated as distribution base for purposes of section 42-5029.

C. Forty percent of the tax revenues collected at the rate prescribed by subsection A, paragraph 1 of this section from persons on account of engaging in business under the business classifications listed in subsection A, paragraph 1, subdivisions (i) through (l) of this section is designated as distribution base for purposes of section 42-5029.

D. Thirty-two percent of the tax revenues collected from persons on account of engaging in business under the business classification listed in subsection A, paragraph 3 of this section is designated as distribution base for purposes of section 42-5029.

E. Fifty-three and one-third percent of the tax revenues collected from persons on account of engaging in business under the business classification listed in subsection A, paragraph 4 of this section is designated as distribution base for purposes of section 42-5029.

F. Fifty percent of the tax revenues collected from persons on account of engaging in business under the business classification listed in subsection A, paragraph 2 of this section is designated as distribution base for purposes of section 42-5029.

G. In addition to the rates prescribed by subsection A of this section, if approved by the qualified electors voting at a statewide general election, an additional rate increment is imposed and shall be collected through June 30, 2021. The taxpayer shall pay taxes pursuant to this subsection at the same time and in the same manner as under subsection A of this section. The department shall separately account for the revenues collected with respect to the rates imposed pursuant to this subsection and the state treasurer shall distribute all of those revenues in the manner prescribed by section 42-5029, subsection E. The rates imposed pursuant to this subsection shall not be considered local revenues for purposes of article IX, section 21, Constitution of Arizona. The additional tax rate increment is levied at the rate of six-tenths of one per cent of the tax base of every person engaging or continuing in this state in a business classification listed in subsection A, paragraph 1 of this section.

H. Any increase in the rate of tax that is imposed by this chapter and that is enacted by the legislature or by a vote of the people does not apply with respect to contracts entered into by prime contractors or pursuant to written bids made by prime contractors on or before the effective date of the legislation or the date of the election enacting the increase. To qualify for the exemption under this subsection, the prime contractor must maintain sufficient documentation, in a manner and form prescribed by the department, to verify the date of the contract or written bid.

I. For taxpayers that are taxable under this chapter other than prime contractors taxable pursuant to section 42-5075:

1. Any increase in the rate of tax that is levied by this article or article 2 of this chapter enacted by the legislature or by a vote of the people does not apply for a period of one hundred twenty days from after the date of the tax rate increase to the gross proceeds of sales or gross income from the business of the taxpayer with respect to written contracts entered into before the effective date of the tax rate increase unless the taxpayer has entered into a contract that contains a provision that entitles the taxpayer to recover from the purchaser the amount of the additional tax levied.

2. The provisions of this subsection apply without regard to the accounting method used by the taxpayer to report the taxes imposed under article 2 of this chapter.

3. The provisions of this subsection shall not be considered in determining the rate of tax imposed under chapter 6, article 3 of this title.

J. Zero percent of the tax revenues that are collected at the rate prescribed by subsection A, paragraph 1 of this section from persons on account of engaging in business under the business classification listed in subsection A, paragraph 1, subdivision (h) of this section, and that are subject to any distribution required by section 42-5032.02, is designated as distribution base for the purposes of section 42-5029 until the total amount subject to distribution pursuant to section 42-5032.02 has reached the maximum amount prescribed by section 42-5032.02, subsection C. Thereafter, twenty percent of the remaining tax revenues is designated as distribution base for the purposes of section 42-5029 as provided by subsection B of this section. END_STATUTE

Sec. 3. Section 43-1011, Arizona Revised Statutes, as amended by Laws 2021, chapter 412, section 15, is amended to read:

START_STATUTE43-1011. Taxes and tax rates

A. There shall be levied, collected and paid for each taxable year on the entire taxable income of every resident of this state and on the entire taxable income of every nonresident that is derived from sources within this state taxes determined in the following manner:

1. For taxable years beginning from and after December 31, 1996 through December 31, 1997:

(a) In the case of a single person or a married person filing separately:

If taxable income is: The tax is:

$0 — $10,000 2.90% of taxable income

$10,001 — $25,000 $290, plus 3.30% of the excess over $10,000

$25,001 — $50,000 $785, plus 3.90% of the excess over $25,000

$50,001 — $150,000 $1,760, plus 4.80% of the excess over $50,000

$150,001 and over $6,560, plus 5.17% of the excess over $150,000

(b) In the case of a married couple filing a joint return or a single person who is a head of a household:

If taxable income is: The tax is:

$0 — $20,000 2.90% of taxable income

$20,001 — $50,000 $580, plus 3.30% of the excess over $20,000

$50,001 — $100,000 $1,570, plus 3.90% of the excess over $50,000

$100,001 — $300,000 $3,520, plus 4.80% of the excess over $100,000

$300,001 and over $13,120, plus 5.17% of the excess over $300,000

2. For taxable years beginning from and after December 31, 1997 through December 31, 1998:

(a) In the case of a single person or a married person filing separately:

If taxable income is: The tax is:

$0 — $10,000 2.88% of taxable income

$10,001 — $25,000 $288, plus 3.24% of the excess over $10,000

$25,001 — $50,000 $774, plus 3.82% of the excess over $25,000

$50,001 — $150,000 $1,729, plus 4.74% of the excess over $50,000

$150,001 and over $6,469, plus 5.10% of the excess over $150,000

(b) In the case of a married couple filing a joint return or a single person who is a head of a household:

If taxable income is: The tax is:

$0 — $20,000 2.88% of taxable income

$20,001 — $50,000 $576, plus 3.24% of the excess over $20,000

$50,001 — $100,000 $1,548, plus 3.82% of the excess over $50,000

$100,001 — $300,000 $3,458, plus 4.74% of the excess over $100,000

$300,001 and over $12,938, plus 5.10% of the excess over $300,000

3. For taxable years beginning from and after December 31, 1998 through December 31, 2005:

(a) In the case of a single person or a married person filing separately:

If taxable income is: The tax is:

$0 — $10,000 2.87% of taxable income

$10,001 — $25,000 $287, plus 3.20% of the excess over $10,000

$25,001 — $50,000 $767, plus 3.74% of the excess over $25,000

$50,001 — $150,000 $1,702, plus 4.72% of the excess over $50,000

$150,001 and over $6,422, plus 5.04% of the excess over $150,000

(b) In the case of a married couple filing a joint return or a single person who is a head of a household:

If taxable income is: The tax is:

$0 — $20,000 2.87% of taxable income

$20,001 — $50,000 $574, plus 3.20% of the excess over $20,000

$50,001 — $100,000 $1,534, plus 3.74% of the excess over $50,000

$100,001 — $300,000 $3,404, plus 4.72% of the excess over $100,000

$300,001 and over $12,844, plus 5.04% of the excess over $300,000

4. For taxable years beginning from and after December 31, 2005 through December 31, 2006:

(a) In the case of a single person or a married person filing separately:

If taxable income is: The tax is:

$0 — $10,000 2.73% of taxable income

$10,001 — $25,000 $273, plus 3.04% of the excess over $10,000

$25,001 — $50,000 $729, plus 3.55% of the excess over $25,000

$50,001 — $150,000 $1,617, plus 4.48% of the excess over $50,000

$150,001 and over $6,097, plus 4.79% of the excess over $150,000

(b) In the case of a married couple filing a joint return or a single person who is a head of a household:

If taxable income is: The tax is:

$0 — $20,000 2.73% of taxable income

$20,001 — $50,000 $546, plus 3.04% of the excess over $20,000

$50,001 — $100,000 $1,458, plus 3.55% of the excess over $50,000

$100,001 — $300,000 $3,233, plus 4.48% of the excess over $100,000

$300,001 and over $12,193, plus 4.79% of the excess over $300,000

5. Subject to subsections B and C of this section, for taxable years beginning from and after December 31, 2006 through December 31, 2018:

(a) In the case of a single person or a married person filing separately:

If taxable income is: The tax is:

$0 — $10,000 2.59% of taxable income

$10,001 — $25,000 $259, plus 2.88% of the excess over $10,000

$25,001 — $50,000 $691, plus 3.36% of the excess over $25,000

$50,001 — $150,000 $1,531, plus 4.24% of the excess over $50,000

$150,001 and over $5,771, plus 4.54% of the excess over $150,000

(b) In the case of a married couple filing a joint return or a single person who is a head of a household:

If taxable income is: The tax is:

$0 — $20,000 2.59% of taxable income

$20,001 — $50,000 $518, plus 2.88% of the excess over $20,000

$50,001 — $100,000 $1,382, plus 3.36% of the excess over $50,000

$100,001 — $300,000 $3,062, plus 4.24% of the excess over $100,000

$300,001 and over $11,542, plus 4.54% of the excess over $300,000

6. Subject to subsections D and E of this section, for taxable years beginning from and after December 31, 2018 through December 31, 2021:

(a) In the case of a single person or a married person filing separately:

If taxable income is: The tax is:

$0 — $26,500 2.59% of taxable income

$26,501 — $53,000 $686, plus 3.34% of the amount

over $26,500

$53,001 — $159,000 $1,571, plus 4.17% of the

amount over $53,000

$159,001 and over $5,991, plus 4.50% of the amount

over $159,000

(b) In the case of a married couple filing a joint return or a single person who is a head of a household:

If taxable income is: The tax is:

$0 — $53,000 2.59% of taxable income

$53,001 — $106,000 $1,373, plus 3.34% of the amount over $53,000

$106,001 — $318,000 $3,143, plus 4.17% of the amount

over $106,000

$318,001 and over $11,983, plus 4.50% of the amount over $318,000

7. Subject to subsections subsection E and F of this section, for taxable years beginning from and after December 31, 2021 through December 31 of the year in which notice is provided to the department pursuant to section 43-243, subsection A or subsection B, paragraph 1:

(a) In the case of a single person or a married person filing separately:

If taxable income is: The tax is:

$0 — $27,272 2.55% of taxable income

$27,273 and over $695, plus 2.98% of the amount

over $27,272

(b) In the case of a married couple filing a joint return or a single person who is a head of a household:

If taxable income is: The tax is:

$0 — $54,544 2.55% of taxable income

$54,545 and over $1,391, plus 2.98% of the amount over $54,544

8. Subject to subsections subsection E and F of this section, for taxable years beginning from and after December 31 of the year in which notice is provided to the department pursuant to section 43-243, subsection A or subsection B, paragraph 1 through December 31 of the year in which notice is provided to the department pursuant to section 43-243, subsection B, paragraph 2:

(a) In the case of a single person or a married person filing separately:

If taxable income is: The tax is:

$0 — $27,272 2.53% of taxable income

$27,273 and over $690, plus 2.75% of the amount

over $27,272

(b) In the case of a married couple filing a joint return or a single person who is a head of a household:

If taxable income is: The tax is:

$0 — $54,544 2.53% of taxable income

$54,545 and over $1,380, plus 2.75% of the amount over $54,544

9. Subject to subsection F of this section, For taxable years beginning from and after December 31, of the year in which notice is provided to the department pursuant to section 43-243, subsection B, paragraph 2, 2022 through December 31, 2025, the tax is 2.5% of taxable income.

10. For taxable years beginning from and after December 31, 2025, the tax is 2.47% of taxable income.

B. For the taxable year beginning from and after December 31, 2014 through December 31, 2015, the department shall adjust the income dollar amounts for each rate bracket prescribed by subsection A, paragraph 5 of this section according to the average annual change in the metropolitan Phoenix consumer price index published by the United States department of labor, bureau of labor statistics. The revised dollar amounts shall be raised to the nearest whole dollar. The income dollar amounts for each rate bracket may not be revised below the amounts prescribed in the prior taxable year.

C. For each taxable year beginning from and after December 31, 2015 through December 31, 2018, the department shall adjust the income dollar amounts for each rate bracket prescribed by subsection A, paragraph 5 of this section according to the average annual change in the metropolitan Phoenix consumer price index published by the United States department of labor, bureau of labor statistics. The revised dollar amounts shall be raised to the nearest whole dollar. The income dollar amounts for each rate bracket may not be revised below the amounts prescribed in the prior taxable year.

D. For each taxable year beginning from and after December 31, 2019 through December 31, 2021, the department shall adjust the income dollar amount for each rate bracket prescribed by subsection A, paragraph 6 of this section according to the average annual change in the metropolitan Phoenix consumer price index published by the United States department of labor, bureau of labor statistics. The revised dollar amounts shall be raised to the nearest whole dollar. The income dollar amounts for each rate bracket may not be revised below the amounts prescribed in the prior taxable year.

E. For each taxable year beginning from and after December 31, 2021 through December 31, 2022, the department shall adjust the income dollar amount for each rate bracket prescribed by subsection A, paragraphs 7 and 8 of this section, as applicable, according to the average annual change in the metropolitan Phoenix consumer price index published by the United States department of labor, bureau of labor statistics. The revised dollar amounts shall be raised to the nearest whole dollar. The income dollar amounts for each rate bracket may not be revised below the amounts prescribed in the prior taxable year. END_STATUTE

Sec. 4. Section 43-1311, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1311. Tax imposed on estates and trusts; rates; annual adjustment

A. Except for trusts that are taxable as partnerships or corporations under the internal revenue code, the income of estates or of any kind of property held in trust is subject only to the income tax imposed by subsection B of this section.

B. There shall be levied, collected and paid for each taxable year on the entire taxable income of every resident trust of this state and on the entire taxable income of nonresident trust that is derived from sources within this state taxes determined in the following manner:

1. For taxable years beginning from and after December 31, 2020 through December 31, 2021:

If taxable income is: The tax is:

$0 — $27,272 2.59% of taxable income

$27,273 — $54,544 $686, plus 3.34% of the amount

over $27,272

$54,545 — $163,632 $1,571, plus 4.17% of the

amount over $54,544

$163,633 and over $5,991, plus 4.50% of the amount

over $163,632

2. Subject to subsection C of this section, for taxable years beginning from and after December 31, 2021 through December 31 of the year in which notice is provided to the department pursuant to section 43-244, subsection A or subsection B, paragraph 1:

If taxable income is: The tax is:

$0 — $27,272 2.55% of taxable income

$27,273 and over $695, plus 2.98% of the amount

over $27,272

3. Subject to subsection C of this section, for taxable years beginning from and after December 31 of the year in which notice is provided to the department pursuant to section 43-244, subsection A or subsection B, paragraph 1 through December 31 of the year in which notice is provided to the department pursuant to section 43-244, subsection B, paragraph 2:

If taxable income is: The tax is:

$0 — $27,272 2.53% of taxable income

$27,273 and over $690, plus 2.75% of the amount

over $27,272

4. For taxable years beginning from and after December 31, of the year in which notice is provided to the department pursuant to section 43-244, subsection B, paragraph 2, 2022 through December 31, 2025, the tax is 2.5% of taxable income.

5. For taxable years beginning from and after December 31, 2025, the tax is 2.47% of taxable income.

C. For each taxable year beginning from and after December 31, 2021 through December 31, 2022, the department shall adjust the income dollar amount for each rate bracket prescribed by subsection B, paragraphs 2 and 3 of this section, as applicable, according to the average annual change in the metropolitan Phoenix consumer price index published by the United States department of labor, bureau of labor statistics. The revised dollar amounts shall be raised to the nearest whole dollar. The income dollar amounts for each rate bracket may not be revised below the amounts prescribed in the prior taxable year. END_STATUTE

Sec. 5. Section 43-1711, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1711. Taxes and tax rate

If an Arizona small business taxpayer makes the election pursuant to section 43-302, there shall be levied, collected and paid for each taxable year on the Arizona small business taxable income taxes as determined in the following manner:

1. For taxable years beginning from and after December 31, 2020 through December 31, 2021, an amount equal to 3.5% of the Arizona small business taxable income.

2. For taxable years beginning from and after December 31, 2021 through December 31, 2022, an amount equal to 3.0% of the Arizona small business taxable income.

3. For taxable years beginning from and after December 31, 2022 through december 31, 2025, an amount equal to 2.5% of the Arizona small business taxable income.

4. For taxable years beginning from and after December 31, 2025, an amount equal to 2.47% of the Arizona small business taxable income. END_STATUTE