Bill Text: AZ HB2705 | 2012 | Fiftieth Legislature 2nd Regular | Introduced
Bill Title: Small business employment; tax rate
Spectrum: Partisan Bill (Democrat 18-0)
Status: (Introduced - Dead) 2012-01-31 - Referred to House WM Committee [HB2705 Detail]
Download: Arizona-2012-HB2705-Introduced.html
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REFERENCE TITLE: small business employment; tax rate |
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State of Arizona House of Representatives Fiftieth Legislature Second Regular Session 2012
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HB 2705 |
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Introduced by Representatives Campbell, Chabin, Farley, Hale, Heinz, Hobbs, Miranda C, Miranda R, Pancrazi, Patterson, Saldate, Tovar, Wheeler: Ableser, Alston, Gonzales, McCune Davis, Meyer
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AN ACT
Amending title 41, chapter 10, article 1, Arizona Revised Statutes, by adding section 41-1524; amending section 43-1011, Arizona Revised Statutes; amending title 43, chapter 10, article 2, Arizona Revised Statutes, by adding section 43-1013; relating to small business employment.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 41, chapter 10, article 1, Arizona Revised Statutes, is amended by adding section 41-1524, to read:
41-1524. Small business jobs incentives; qualifications; definitions
A. The owner of a small business located in this state before July 2017 is eligible for income tax rate reductions for net increases in qualified employment positions.
B. No more than four new jobs per employer qualify for first year credits each year, and no more than one thousand new jobs for all small business employers in this state qualify for first year credits each year.
C. To qualify for the rate reductions, the owner must:
1. Certify to the department of revenue on or before the due date of the tax return, including any extensions for the year for which the credit is claimed, in a form prescribed by the department, including electronic media, information that the department may require, including the ownership interests of co‑owners of the small business if the business is a partnership, limited liability company or an S corporation, and the following information for each employee in the location:
(a) The date of initial employment.
(b) The number of hours worked during the year.
(c) Whether the position was full‑time.
(d) The employee's annual compensation.
(e) The total cost of health insurance for the employee and the cost paid by the employer.
(f) Other information required by the department.
2. Report and certify to the authority the following information, and provide supporting documentation, on a form and in a manner approved by the authority, and as specified in subsection D of this section, for each year in which the taxpayer claimed a reduced rate:
(a) The small business name and mailing address and any other contact information requested by the authority.
(b) The physical address of the small business location.
(c) The average hourly wage and the total amount of compensation paid to all employees and to those employees qualifying the business for the rate reductions.
(d) The total number of qualified employment positions.
(e) The number of qualifying employment positions claimed on the prior year's tax return.
(f) Other information necessary for the management and reporting of the incentives under this section.
3. For any year in which the taxpayer is claiming first year employment rate reductions, report and certify the following additional information and provide supporting documentation to the authority on a form and in a manner approved by the authority, and as specified in subsection D of this section:
(a) That the increase in the number of qualified employment positions for which the rate reduction is sought is the least of:
(i) The total number of filled qualified employment positions created at the location during the taxable year.
(ii) The difference between the average number of full‑time employees in the current taxable year and the average number of full‑time employees during the immediately preceding taxable year.
(iii) Four qualified employment positions per taxpayer each year.
(b) That all employees filling a qualified employment position were employed for at least ninety days during the first taxable year.
(c) That none of the employees filling qualified employment positions were employed by the taxpayer during the twelve months before the current date of hire except for those relocating to this state.
(d) That all employees for whom second and third year rate reductions are claimed are in qualified employment positions for which first year rate reductions were allowed and claimed by the taxpayer on the original first and second year tax returns.
(e) That all employees for whom rate reductions are taken performed their job duties primarily at the designated locations of the small business.
D. To qualify for first year rate reductions, the report and certification prescribed by subsection C, paragraphs 2 and 3 of this section must be filed with the authority by the earlier of six months after the end of the taxable year in which the qualified employment positions were created or by the date the tax return is filed for the taxable year in which the qualified employment positions were created. To qualify for second year rate reductions, the report and certification prescribed by subsection C, paragraph 2 of this section must be filed with the authority by the earlier of six months after the end of the taxable year or the date the tax return is filed for the taxable year in which the second year rate reductions are allowable. To qualify for third year rate reductions, the report and certification prescribed by subsection C, paragraph 2 of this section must be filed with the authority by the earlier of six months after the end of the taxable year or the date the tax return is filed for the taxable year in which the third year rate reductions are allowable.
E. Any information submitted to the authority under subsection C, paragraph 2, subdivisions (e) through (i) of this section is exempt from title 39, chapter 1, article 2 and considered to be confidential and is not subject to disclosure except:
1. To the extent that the person or organization that provided the information consents to the disclosure.
2. To the department of revenue for use in tax administration.
F. Documents filed with the authority and the department of revenue under subsection C of this section shall contain either a sworn statement or certification, signed by an officer of the company under penalty of perjury, that the information contained is true and correct according to the best belief and knowledge of the person submitting the information after a reasonable investigation of the facts. If the document contains information that is materially false, the taxpayer is ineligible for the reduced rate of tax described under subsection A of this section and is subject to recovery of the amount of rate reductions allowed in preceding taxable years based on the false information, plus penalties and interest.
G. The authority may make site visits to a taxpayer's facilities if it is necessary to further document or clarify reported information. The taxpayer must freely provide the access.
H. The authority by rule may prescribe additional reporting requirements for taxpayers who claim rate reductions pursuant to this section.
I. On or before September 30 of each year, the authority shall transmit a report to the governor, the president of the senate, the speaker of the house of representatives and the chairpersons of the senate finance committee and the house of representatives ways and means committee and provide a copy of the report to the secretary of state. The report shall include the following information:
1. The small business names, locations, number of employees and amount of compensation paid to employees qualifying for reduced income tax rate as reported to the authority.
2. The total amount of income tax reduction allowed for the preceding taxable year and the number of qualified employment positions.
J. To qualify for the purposes of this section, a small business must:
1. Be organized for profit.
2. Have a place of business in this state.
3. Be independently owned and operated. For the purposes of this paragraph, not more than fifty per cent of the ownership interest in the business may be held by another entity unless the final ownership of the entity is closely held or owned by members of the taxpayer's family.
4. Generate less than four million dollars in gross receipts during the taxable year. For the purposes of this paragraph, multiple businesses that are each more than fifty per cent owned by the same taxpayer are considered to be a single small business.
K. For the purposes of this section:
1. "Primarily" means more than seventy-five per cent of the square footage of the location or locations.
2. "Qualified employment position" means employment that meets the following requirements:
(a) The position consists of at least one thousand seven hundred fifty hours per year of full-time permanent employment.
(b) The job duties are performed primarily at the location or locations of the small business.
(c) The employment provides health insurance coverage for the employee for which the employer pays at least sixty-five per cent of the premium or membership cost. If the small business is self-insured, the employer pays at least sixty-five per cent of a predetermined fixed cost per employee for an insurance program that is payable whether or not the employee has filed claims.
(d) The employer pays compensation at least equal to the median wage by county as computed annually by the authority.
Sec. 2. Section 43-1011, Arizona Revised Statutes, is amended to read:
43-1011. Taxes and tax rates
There shall be levied, collected and paid for each taxable year upon the entire taxable income of every resident of this state and upon the entire taxable income of every nonresident which 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. except as provided by section 43-1013, for taxable years beginning from and after 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 2.59% 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
Sec. 3. Title 43, chapter 10, article 2, Arizona Revised Statutes, is amended by adding section 43-1013, to read:
43-1013. Small business tax rate
A. For taxable years beginning from and after December 31, 2012, an individual having an ownership interest in a qualified small business hiring new employees in qualified employment positions as determined pursuant to section 41-1524 is subject to tax on taxable income derived from the small business sources in this state at the rate prescribed by section 43-1011 minus:
1. One-fourth of one per cent for one employee hired in the first full taxable year in qualified employment positions in each of the first three years of employment.
2. One-half of one per cent for two employees hired in the first full taxable year in qualified employment positions in each of the first three years of employment.
3. Three-fourths of one per cent for three employees hired in the first full taxable year in qualified employment positions in each of the first three years of employment.
4. One per cent for four employees hired in the first full taxable year in qualified employment positions in each of the first three years of employment.
B. If an employee hired in a qualified employment position leaves the qualified employment position for any reason, the employee no longer counts for the purposes of determining the tax rate reduction under subsection A of this section.
C. For the purposes of filing under this section, a small business must be organized as any of the following:
(a) A sole proprietorship.
(b) A partnership that is required to file a return under chapter 14 of this title.
(c) A limited liability partnership that has filed a statement of qualification under section 29-1101.
(d) A limited liability company formed under title 29, chapter 4.
(e) An S corporation, as defined in section 1361 of the internal revenue code.
(f) Any other form of business where a distributive share of income of the business is subject to tax under this chapter only in the individual capacity of its owners.
