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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
tax; distribution; county stadium district
Purpose
Redirects state income tax from the professional baseball franchise organization domiciled in Arizona before the general effective date (Arizona Diamondbacks) and Arizona Diamondback employees and redirects specified transaction privilege tax (TPT) revenues collected from certain business activities at a Major League Baseball (MLB) facility or adjacent buildings that are owned by the Maricopa County Stadium District to the Maricopa County Stadium District Fund (District Fund). Requires the TPT and income tax to cease being transferred to the District Fund if the Arizona Diamondbacks leave the facility before 2055 and prescribes penalties for leaving before 2035, 2045 or 2050.
Background
The Maricopa County Stadium District was formed through action of the Maricopa County Board of Supervisors in September 1991 and is governed by a board of directors consisting of the five members of the Maricopa County Board of Supervisors. The Maricopa County Stadium District has the same boundaries as Maricopa County and owns Chase Field, home of the Arizona Diamondbacks, which opened in 1998 (MCSD). The Maricopa County Stadium District must maintain the District Fund consisting of all monies received by the district. District Fund monies may be used for any lawful district purpose (A.R.S. ยง 48-4231).
TPT is a tax on vendors for the privilege of doing business in Arizona. The state TPT rate for most classifications is 5.6 consisting of the state portion of 5 percent plus an additional 0.6 percent for education. City and town TPT rates vary by category and jurisdiction. In 2024, Maricopa County voters approved a countywide transportation excise tax levied at a rate of up to 10 percent of the state TPT (one-half cent transportation tax). Revenues from the one-half cent transportation tax are used for transportation projects. The Arizona Department of Revenue (ADOR) transmits TPT revenues to the State Treasurer, separately accounting for certain categories with dedicated uses. A portion of TPT is designated for distribution to counties, incorporated municipalities and the state General Fund and is referred to as the distribution base (A.R.S. Title 42, Chapter 5, Articles 2 and 4).
The Joint Legislative Budget Committee (JLBC) fiscal note estimates that H.B. 2704 would reduce state General Fund revenue by $9.2 million annually beginning in FY 2027. The local government impact would be an annual revenue loss of $5.8 million. The result is a combined state and local revenue loss of $15 million annually (JLBC fiscal note).
Provisions
Income Tax Distributions
1. Requires ADOR, by March 31 of each year, to separately account for and report to the State Treasurer as a single aggregate amount the total net revenues collected during the preceding calendar year from income tax on all sources of income from:
a) any professional baseball franchise organization domiciled in Arizona; and
b) resident and nonresident employees of any professional baseball franchise organization domiciled in Arizona, including the spouse of any resident and nonresident employee regardless of the spouse to whom the income is attributable.
2. Requires the State Treasurer, annually beginning January 1, 2026, through the date a notice is provided that the Arizona Diamondbacks left the MLB facility, to transmit to the District Fund the amount of income tax reported to ADOR for the prior taxable year.
3. Requires the aggregate amount of income tax reported to ADOR for a taxable year to be included when determining the net proceeds of state income taxes for the fiscal year for the purposes of Urban Revenue Sharing Fund distributions.
4. Defines professional baseball franchise organization as an organization that has the right to field a team for participation in professional baseball contests scheduled by a nationwide league during a regular season held in the months of March through October each year and that is domiciled in Arizona on or before the general effective date.
County Excise Tax Distributions
5. Requires Maricopa County to transmit to the District Fund the total amount of the one-half cent transportation tax collected from persons engaged in the following business activities at, or with respect to events held at, an MLB facility or an adjacent owned building:
a) selling tangible personal property at retail;
b) operating or conducting theaters, movies, operas, shows of any type or nature, exhibitions, concerts, carnivals, circuses, amusement parks, menageries, fairs, races, contests, games, billiard or pool parlors, bowling alleys, public dances, dance halls, boxing and wrestling matches, skating rinks, tennis courts, video games, pinball machines or sports events or any other business charging admission or user fees for exhibition, amusement or entertainment;
c) operating a restaurant, dining car, dining room, lunchroom, mobile food unit, lunch stand, soda fountain, catering service or similar establishment where articles of food or drink are sold for consumption on or of the premises; and
d) prime contracting.
6. Requires ADOR to separately account for one-half cent transportation tax revenues collected from the businesses prescribed above on the premises of an MLB facility or an owned adjacent building.
7. Repeals the Maricopa County one-half cent transportation tax distribution and accounting requirements on January 1, 2056.
City and Town TPT Distributions
8. Requires a city or town to transmit to the District Fund the first 2 percent of TPT, sales, use, franchise or any other similar tax or fee collected on behalf of the city or town from persons engaged in the following business activities at, or with respect to events held at, an MLB facility or an adjacent owned building:
a) selling tangible personal property at retail;
b) operating or conducting theaters, movies, operas, shows of any type or nature, exhibitions, concerts, carnivals, circuses, amusement parks, menageries, fairs, races, contests, games, billiard or pool parlors, bowling alleys, public dances, dance halls, boxing and wrestling matches, skating rinks, tennis courts, video games, pinball machines or sports events or any other business charging admission or user fees for exhibition, amusement or entertainment;
c) operating a restaurant, dining car, dining room, lunchroom, mobile food unit, lunch stand, soda fountain, catering service or similar establishment where articles of food or drink are sold for consumption on or of the premises; and
d) prime contracting.
9. Requires ADOR to separately account for the first 2 percent of TPT, sales, use, franchise or other similar tax or fee revenues collected from the businesses prescribed above on the premises of an MLB facility or an owned adjacent building.
10. Repeals the TPT, sales, use, franchise or other similar tax or fee distribution and accounting requirements on January 1, 2056.
State TPT Distributions
11. Requires the State Treasurer to transmit to the District Fund, from the amount designated as the TPT distribution base, the state TPT revenues received from persons conducting retail, amusement, restaurant and prime contracting business at, or with respect to events held at, an MLB facility or an adjacent owned building.
Notice and Penalty for Leaving the MLB Facility
12. Stipulates that, if the Arizona Diamondbacks leave the MLB facility, the district treasurer must:
a) notify the State Treasurer and ADOR that the Arizona Diamondbacks left the facility; and
b) return any remaining tax distribution monies that are unexpended and unencumbered to the taxing jurisdiction from which the monies were generated.
13. Prohibits the State Treasurer, on receiving the notice that the Diamondbacks left the MLB facility, from continuing to transmit the TPT and income tax distributions and requires the State Treasurer to assess a penalty against the Diamondbacks in the following amounts:
a) $10 million, if the Diamondbacks leave on or before October 1, 2035;
b) $5 million, if the Diamondbacks leave on or before October 1, 2045; or
c) $1 million, if the Diamondbacks leave on or before October 1, 2050.
14. Requires the State Treasurer to deposit 50 percent of the assessed penalty in the state General Fund and distribute 25 percent each to the county and city in which the MLB facility is located.
15. Requires ADOR to stop separately accounting for tax revenues that were subject to transmission, on receiving the notice that the Arizona Diamondbacks left the MLB facility.
16. Repeals the notice and penalty requirements on January 1, 2056.
County Stadium District Fund
17. Adds, to the authorized purposes for which county stadium district fund monies may be used, reconstructing, equipping, repairing, maintaining or improving an MLB facility or the adjacent buildings owned by the district and operated by the district or the professional baseball franchise organization that occupies the facility or adjacent buildings.
18. Subjects any individual, including an employee of a professional baseball franchise organization to statutes governing conflicts of interest for state officers and employees for the purposes of spending the TPT and income tax distributions.
19. Adds, to the county stadium district fund sources, monies transmitted from the prescribed:
a) income tax collections;
b) state TPT collections;
c) Maricopa County one-half cent transportation excise tax collections; and
d) 2 percent of city or town TPT collections.
Maricopa County Stadium District Board
20. Requires the Maricopa County Stadium District Board, by November 1 each year through 2055, to report to JLBC and the Governor's Office of Strategic Planning and Budgeting (OSPB) regarding all new projects for reconstructing, equipping, repairing, maintaining or improving an MLB facility or adjacent buildings that are paid for by the district from the District Fund.
21. Requires the report to JLBC and OSPB to indicate which projects the professional baseball franchise organization contributed monies toward and the amount of the contribution.
Miscellaneous
22. Specifies that the TPT and income tax distributions to the District Fund begin on the first day of the month after the general effective date and continue each month thereafter until the latter of December 31, 2055, or the date a notice is provided that the Arizona Diamondbacks left the MLB facility.
23. States that the Legislature finds that the professional baseball franchise organization that occupies the MLB facility and adjacent buildings owned by the county stadium district or professional baseball organization will contribute at least $250 million of the organization's own monies for the purposes of reconstructing, equipping, repairing, maintaining or improving the MLB facility and the adjacent buildings.
24. Requires ADOR, beginning the first day of the month after the general effective date and each month thereafter until the latter of December 31, 2055, or the date a notice is provided that the Arizona Diamondbacks left the MLB facility, to separately account for the following revenues:
a) for the purposes of distributing revenues for city or town infrastructure improvements related to manufacturing facilities, prime contracting TPT revenues from any prime contractor engaged in constructing any buildings and associated improvements for the benefit of an MLB facility or an owned adjacent building;
b) restaurant revenues collected from businesses operating restaurants, dining rooms, lunchrooms, lunch stands, soda fountains, catering services or similar establishments on the premises of an MLB facility or an owned adjacent building;
c) for the purposes of distributing state TPT revenues to the Maricopa County Stadium District, amusement revenues collected from the sales of admissions to an MLB facility owned by a county stadium district and operated by the district or the professional baseball franchise organization that occupies the facility or adjacent building; and
d) retail revenues from businesses selling tangible personal property at retail on the premises of an MLB facility or an owned adjacent building.
25. Requires the Arizona Diamondbacks to provide ADOR the federal taxpayer identification number for each employee who rendered services in Arizona for the organization during the tax year and to pay a $5 civil penalty for each number that the organization fails to provide.
26. Makes technical and conforming changes.
27. Becomes effective on the general effective date.
House Action
COM 2/4/25 DPA 8-1-1-0
3rd Read 2/26/25 35-25-0
Prepared by Senate Research
March 20, 2025
MG/ci