Bill Text: AZ SB1249 | 2015 | Fifty-second Legislature 1st Regular | Introduced
Bill Title: Green technology and manufacturing incentives
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2015-01-29 - Referred to Senate CWD Committee [SB1249 Detail]
Download: Arizona-2015-SB1249-Introduced.html
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REFERENCE TITLE: green technology and manufacturing incentives |
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State of Arizona Senate Fifty-second Legislature First Regular Session 2015
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SB 1249 |
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Introduced by Senator Ableser
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AN ACT
Amending title 41, chapter 10, article 1, Arizona Revised Statutes, by adding sections 41-1509 and 41-1510; amending sections 42-12006 and 43-222, Arizona Revised Statutes; amending title 43, chapter 10, article 5, Arizona Revised Statutes, by adding section 43-1075; amending sections 43-1079 and 43-1161, Arizona Revised Statutes; amending title 43, chapter 11, article 6, Arizona Revised Statutes, by adding section 43-1161.01; amending section 43-1167, Arizona Revised Statutes; relating to business tax incentives.
(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 sections 41-1509 and 41-1510, to read:
41-1509. Green manufacturing property tax incentives; certification; definitions
A. The Arizona commerce authority shall annually certify green manufacturing businesses for property tax assessment as class six property as provided by section 42‑12006. To qualify under this section:
1. A green manufacturing business must meet the minimum investment requirements prescribed by this paragraph. The investments may be cumulative. Subject to subsection E of this section, certification is effective on January 1 of the valuation year, as defined in section 42‑11001, following completion of the required investment. To qualify, the green manufacturing business must invest at least the following amount, as applicable, in fixed assets after December 31, 2015:
(a) In counties with a population of two hundred fifty thousand persons or more, two million dollars, except as provided in subdivision (b) of this paragraph.
(b) In all other counties, and in cities and towns that are located in counties with a population of two hundred fifty thousand persons or more and that have no portion of the corporate boundaries located within twenty‑five air miles from the exterior corporate boundary of the largest city in the county:
(i) Cities and towns with a population of eighty thousand persons or more, two million dollars.
(ii) Cities and towns with a population of at least fifteen thousand but less than eighty thousand persons and in unincorporated areas of the county, one million dollars.
(iii) Cities and towns with a population of less than fifteen thousand persons, five hundred thousand dollars.
2. A business initially applying for certification under this section must report the following with supporting documentation to the authority on a form and in a manner prescribed by the authority:
(a) The business name and mailing address and any other contact information requested by the authority.
(b) The business location.
(c) The number of full‑time employees at the time of application and the benefits provided to employees.
(d) The assessor's parcel number of real property to which class six assessment classification will apply.
(e) If available, the assessor's account number for personal property to which class six assessment classification will apply.
(f) The gross receipts, gross payroll and average hourly wage paid to employees for the preceding taxable year.
(g) A statement of the ownership and description of operations of the business.
(h) Documentation of the required investment in fixed assets that identifies the fixed assets and establishes the cost of the fixed assets and the time of investment.
(i) Documentation that establishes the type and amount of manufacturing activity conducted at the location.
(j) The ownership and full cash value of real and personal property to be certified.
(k) Other information necessary for the management and reporting of this program as determined by the authority.
B. Certification under this section is valid for five years subject to annual recertification if the business continues to meet the other eligibility requirements.
C. To be annually recertified pursuant to subsection B of this section, a green manufacturing business must continue to meet all the eligibility requirements of this section and must annually report the following and provide supporting documentation to the authority on a form and in a manner approved by the authority:
1. Information required by subsection A, paragraph 2, subdivisions (a), (b), (d), (e), (f), (i), (j) and (k) of this section.
2. Changes in location, ownership and operations of the business in the immediately preceding year.
3. The average number of full‑time employees at the location for the immediately preceding year.
D. To qualify for classification as class six property for tax purposes, the certified business must submit a copy of the authority's initial certification and each annual recertification, with a written request to reclassify the property to the county assessor of the county in which the property is located on or before December 10 of each year.
E. A green manufacturing business shall submit its application for initial certification or annual recertification to the authority not later than October 1 of each year. The authority shall notify the appropriate county assessors of all qualified properties located within their county not later than December 1 of each year.
F. If a green manufacturing business moves from the originally certified location, it loses its eligibility. The manufacturer may apply for certification at a new location for the remainder of its five years if it meets the minimum investment requirements in fixed assets that were not moved from the prior location, meets all other eligibility requirements of this section and has not reached the five‑year eligibility limit.
G. Once a green manufacturing business establishes the basis for eligibility and the authority certifies the manufacturer, the business may change its basis of eligibility during the four remaining years of potential eligibility as long as the manufacturer meets the requirements for the new basis of eligibility.
H. If a certified green manufacturing business is purchased by another entity or changes by more than twenty percent of the ownership interest through reorganization, stock purchase or merger, the certification is terminated. The new green manufacturing business may apply for certification according to eligibility requirements of this section.
I. A business that was originally certified for property reclassification loses eligibility for any year in which the business is no longer independently owned and operated.
J. The authority shall notify the department of revenue and the county assessor if a certified green manufacturing business closes, moves or fails to maintain its eligibility, and the assessor shall make the appropriate changes to the tax roll.
K. The authority may make site visits to a taxpayer's facilities if it is necessary to further document or clarify reported information. The taxpayer shall freely provide the access.
L. Documents filed with the authority pursuant to 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 tax benefits under this section and is subject to recovery of the amount of tax benefits allowed in preceding years based on the false information, including penalties and interest.
M. The authority by rule may prescribe additional reporting requirements for persons who claim a tax benefit pursuant to this section.
N. For the purposes of this section:
1. "Closely held" means that five or fewer individuals own more than fifty percent of the ownership interest in the company, corporation or partnership.
2. "Family owned" means that more than fifty percent of the ownership interest in the company, corporation or partnership is owned by members of the same family.
3. "Fixed assets" means property that is used in operating a business, such as furniture, land, buildings and machinery, and that is not ordinarily converted into cash after it is declared a fixed asset.
4. "Green manufacturing business" means a manufacturing enterprise that meets all of the following requirements when certified or recertified by the authority:
(a) Is independently owned and operated.
(b) Is located in capital facilities in this state that are certified pursuant to the United States green building council leadership in energy and environmental design (leed) green building standards.
(c) Uses technologies, products, goods and services in the manufacturing process that measure, prevent, limit, minimize, correct or reduce environmental risk and minimize pollution of resources.
5. "Independently owned and operated" means not more than fifty percent of the ownership interest in the green manufacturing business is held by another entity unless the final ownership of the entity is family owned or closely held.
6. "Manufacturing" means fabricating, producing or manufacturing products, wares or articles for use from raw or prepared materials and imparting to those materials new forms, qualities, properties and combinations. Manufacturing does not include generating electricity at a facility that is assessed pursuant to title 42, chapter 14, article 4.
41-1510. Green manufacturing income tax credits; certification; definitions
A. The owner of a green manufacturing business is eligible for an income tax credit under section 43‑1075 or 43‑1161.01 for net increases in qualified employment positions, except employment positions at a location where more than ten percent of the business conducted at the location consists of retail sales of tangible personal property, measured either by the number of employees assigned to retail sales or the square footage of the facility used for retail sales activities at the location. Retail sales and retail sales activities do not include:
1. Food and beverage for consumption on the premises solely by employees and occasional guests of employees at the location.
2. Promotional products that are not available for sale and that display the company logo or trademark.
3. Products that are sold to company employees.
B. To qualify for a tax credit, the green manufacturing business 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, on a form prescribed by the department including electronic media, information that the department may require, including the ownership interests of co‑owners of the business if the business is a partnership, limited liability company or 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 residence of the employee.
(e) The employee's annual compensation.
(f) The total cost of health insurance for the employee and the cost paid by the employer.
(g) If the employee was previously employed, the last date of previous employment.
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 as specified in subsection C of this section, for each year in which the taxpayer earned and claimed or used credits or is carrying forward amounts from previously earned and claimed credits:
(a) The business name and mailing address and any other contact information requested by the authority.
(b) The business location.
(c) The average hourly wage and the total amount of compensation paid to employees who qualify for the credit and for all employees at the location.
(d) The total number of qualified employment positions and the amount of income tax credits qualified for in the taxable year.
(e) The estimated amount of tax credits to be used in the taxable year to offset tax liability.
(f) The estimated amount of tax credits to be available for carryforward in the taxable year and the taxable year in which the credits expire.
(g) The number of jobs and the amount of credits earned and claimed on the prior year's income tax returns.
(h) The amount of credits used to offset tax liabilities on the prior year's income tax return.
(i) The amount of credits available for carryforward as reported on the prior year's tax return and the taxable year the credits expire.
(j) Capital investment made in this state during the taxable year and the preceding taxable year.
(k) That each qualified employment position meets all of the following requirements:
(i) The position is at least one thousand seven hundred fifty hours per year of full‑time permanent employment.
(ii) All credits that are being claimed are for wages for job duties performed primarily at the location of the business.
(iii) The employment includes health insurance coverage for the employee for which the employer pays at least fifty percent of the premium or membership cost. If the taxpayer is self‑insured, the employer must pay at least fifty percent of a predetermined fixed cost per employee for an insurance program that is payable whether or not the employee has filed claims.
(iv) The employer pays compensation at least equal to the wage offer by county as computed annually by the department of economic security.
(l) That the only retail sales activities engaged in at the location were as specified in subsection A of this section.
(m) 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 credits, 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 C of this section:
(a) That all of the employees with respect to whom a credit is claimed resided in this state on the date of employment.
(b) That the increase in the number of qualified employment positions for which credit 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 at the location in the current taxable year and the average number of full‑time employees during the immediately preceding taxable year.
(iii) Two hundred qualified employment positions per taxpayer each year.
(c) That all employees filling a qualified employment position were employed for at least ninety days during the first taxable year.
(d) That none of the employees filling qualified employment positions were employed by the taxpayer during the twelve months before the current date of hire.
(e) That all employees for whom second and third year credits are claimed are in qualified employment positions for which first year credits were allowed and claimed by the taxpayer on the original first and second year tax returns. For the purposes of this subdivision, the requirement to claim the credit on the original tax return does not apply to qualified employment positions created before January 1, 2015 and certified to the authority.
(f) That all employees for whom credits are taken performed their job duties primarily at the location of the business.
C. To qualify for first year credits, the report and certification prescribed by subsection B, 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 credits, the report and certification prescribed by subsection B, 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 credits are allowable. To qualify for third year credits, the report and certification prescribed by subsection B, 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 credits are allowable.
D. Any information submitted to the authority under subsection B, paragraph 2, subdivisions (e) through (i) of this section is exempt from title 39, chapter 1, article 2, is 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.
E. Documents filed with the authority and the department of revenue under subsection B 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 tax credits described in subsection A of this section and is subject to recovery of the amount of tax credits allowed in preceding taxable years based on the false information, plus penalties and interest.
F. The authority may make site visits to a taxpayer's facilities if it is necessary to further document or clarify reported information. The taxpayer shall freely provide the access.
G. The authority by rule may prescribe additional reporting requirements for taxpayers who claim tax benefits pursuant to this section.
H. For the purposes of this section:
1. "Assigned to retail" means working more than twenty‑five percent of an employee's time in one or more retail sales activities.
2. "Green manufacturing business" has the same meaning prescribed in section 41-1509.
3. "Location" means a single parcel or contiguous parcels of owned or leased land, the structures and personal property contained on the land or any part of the structures occupied by a taxpayer.
4. "Retail sales" means the sale of tangible personal property to an ultimate consumer.
5. "Retail sales activities" means all activities that persons operating a retail business normally engage in, including taking orders, filling orders, billing orders, receiving and processing payments and shipping, stocking and delivering tangible personal property to the ultimate consumer, except drop shipments by a company acting on behalf of an unrelated company that has made a sale to a final consumer.
Sec. 2. Section 42-12006, Arizona Revised Statutes, is amended to read:
42-12006. Class six property
For purposes of taxation, class six is established consisting of:
1. Noncommercial historic property as defined in section 42‑12101 and valued at full cash value.
2. Real and personal property that is located within the area of a foreign trade zone or subzone established under 19 United States Code section 81 and title 44, chapter 18, that is activated for foreign trade zone use by the district director of the United States customs service pursuant to 19 Code of Federal Regulations section 146.6 and that is valued at full cash value. Property that is classified under this paragraph shall not thereafter be classified under paragraph 6 of this section.
3. Real and personal property and improvements that are located in a military reuse zone that is established under title 41, chapter 10, article 3 and that is devoted to providing aviation or aerospace services or to manufacturing, assembling or fabricating aviation or aerospace products, valued at full cash value and subject to the following terms and conditions:
(a) Property may not be classified under this paragraph for more than five tax years.
(b) Any new addition or improvement to property already classified under this paragraph qualifies separately for classification under this paragraph for not more than five tax years.
(c) If a military reuse zone is terminated, the property in that zone that was previously classified under this paragraph shall be reclassified as prescribed by this article.
(d) Property that is classified under this paragraph shall not thereafter be classified under paragraph 6 of this section.
4. Real and personal property and improvements or a portion of such property comprising an environmental technology manufacturing, producing or processing facility that qualified under section 41‑1514.02 or a green manufacturing business that is certified pursuant to section 41-1509, valued at full cash value and subject to the following terms and conditions:
(a) Environmental technology manufacturing, producing or processing facility property that qualified under section 41-1514.02 shall be classified under this paragraph for twenty tax years from the date placed in service.
(b) Any addition or improvement to property already classified under this paragraph subdivision qualifies separately for classification under this subdivision paragraph for an additional twenty tax years from the date placed in service.
(b) Green manufacturing property that qualified under section 41-1509 shall be classified under this paragraph for ten years from the date placed in service. Any addition or improvement to property already classified under this subdivision qualifies separately for classification under this paragraph for an additional ten tax years from the date placed in service.
(c) After revocation of certification under section 41‑1514.02 or termination of eligibility under section 41-1509, property that was previously classified under this paragraph shall be reclassified as prescribed by this article.
(d) Property that is classified under this paragraph shall not thereafter be classified under paragraph 6 of this section.
5. That portion of real and personal property that is used on or after January 1, 1999 specifically and solely for remediation of the environment by an action that has been determined to be reasonable and necessary to respond to the release or threatened release of a hazardous substance by the department of environmental quality pursuant to section 49‑282.06 or pursuant to its corrective action authority under rules adopted pursuant to section 49‑922, subsection B, paragraph 4 or by the United States environmental protection agency pursuant to the national contingency plan (40 Code of Federal Regulations part 300) and that is valued at full cash value. Property that is not being used specifically and solely for the remediation objectives described in this paragraph shall not be classified under this paragraph. For the purposes of this paragraph, "remediation of the environment" means one or more of the following actions:
(a) Monitoring, assessing or evaluating the release or threatened release.
(b) Excavating, removing, transporting, treating and disposing of contaminated soil.
(c) Pumping and treating contaminated water.
(d) Treatment, containment or removal of contaminants in groundwater or soil.
6. Real and personal property and improvements constructed or installed from and after December 31, 2004 through December 31, 2024 and owned by a qualified business under section 41‑1516 and used solely for the purpose of harvesting, transporting or processing qualifying forest products removed from qualifying projects as defined in section 41‑1516. The classification under this paragraph is subject to the following terms and conditions:
(a) Property may be initially classified under this paragraph only in valuation years 2005 through 2024.
(b) Property may not be classified under this paragraph for more than five years.
(c) Any new addition or improvement, constructed or installed from and after December 31, 2004 through December 31, 2024, to property already classified under this paragraph qualifies separately for classification and assessment under this paragraph for not more than five years.
(d) Property that is classified under this paragraph shall not thereafter be classified under paragraph 2, 3 or 4 of this section.
7. Real and personal property and improvements to the property that are used specifically and solely to manufacture from and after December 31, 2006 through December 31, 2023 biodiesel fuel that is one hundred per cent percent biodiesel and its by-products or motor vehicle biofuel and its by‑products and that are valued at full cash value. This paragraph applies only to the portion of property that is used specifically for manufacturing and processing one hundred per cent percent biodiesel fuel, or its related by-products, or motor vehicle biofuel, or its related by-products, from raw feedstock obtained from off-site sources, including necessary on‑site storage facilities that are intrinsically associated with the manufacturing process. Any other commercial or industrial use disqualifies the entire property from classification under this paragraph. For the purposes of this paragraph, "motor vehicle biofuel" means a solid, liquid or gaseous fuel that is derived from biological material such as plant or animal matter, excluding organic material that has been transformed by geological processes into substances such as coal or petroleum or derivatives thereof, and that:
(a) Contains fuel additives in compliance with federal and state law.
(b) Is manufactured exclusively for use in a motor vehicle.
8. Real and personal property and improvements that are certified pursuant to section 41‑1511, subsection C, paragraph 2 and that are used for renewable energy manufacturing or headquarters operations as provided by section 42‑12057. This paragraph applies only to property that is used in manufacturing and headquarters operations of renewable energy companies, including necessary on-site research and development, testing and storage facilities that are associated with the manufacturing process. Up to ten per cent percent of the aggregate full cash value of the property may be derived from uses that are ancillary to and intrinsically associated with the manufacturing process or headquarters operation. Any additional ancillary property is not qualified for classification under this paragraph. No new properties may be classified pursuant to this paragraph from and after December 31, 2014. Classification under this paragraph is limited to the time periods determined by the Arizona commerce authority pursuant to section 41‑1511, subsection C, paragraph 2, subdivision (a) or (b). Property that is classified under this paragraph shall not thereafter be classified under any other paragraph of this section.
Sec. 3. Section 43-222, Arizona Revised Statutes, is amended to read:
43-222. Income tax credit review schedule
The joint legislative income tax credit review committee shall review the following income tax credits:
1. For years ending in 0 and 5, sections 43-1075, 43‑1079.01, 43‑1087, 43‑1088, 43-1161.01, 43‑1167.01 and 43‑1175.
2. For years ending in 1 and 6, sections 43‑1074.02, 43‑1083, 43‑1083.02, 43‑1085.01, 43‑1164.02, 43-1164.03 and 43‑1183.
3. For years ending in 2 and 7, sections 43‑1073, 43‑1079, 43‑1080, 43‑1085, 43‑1086, 43‑1089, 43‑1089.01, 43‑1089.02, 43-1089.03, 43‑1090, 43‑1164, 43‑1167, 43‑1169, 43‑1176 and 43‑1181.
4. For years ending in 3 and 8, sections 43‑1074.01, 43‑1081, 43‑1168, 43‑1170 and 43‑1178.
5. For years ending in 4 and 9, sections 43‑1076, 43‑1076.01, 43‑1081.01, 43‑1083.01, 43‑1083.04, 43‑1084, 43‑1162, 43‑1162.01, 43‑1164.01, 43‑1164.05, 43‑1170.01 and 43-1184 and, beginning in 2019, sections 43‑1083.03 and 43‑1164.04.
Sec. 4. Title 43, chapter 10, article 5, Arizona Revised Statutes, is amended by adding section 43-1075, to read:
43-1075. Credit for increased employment by green manufacturing businesses; definitions
A. A credit is allowed against the taxes imposed by this title for net increases in qualified employment positions of residents of this state by a green manufacturing business qualified pursuant to section 41-1510, except employment positions at a location where more than ten percent of the business consists of retail sales of tangible personal property, measured by either the number of employees assigned to retail sales or the square footage of the facility used for retail sales activities at the location. Retail sales and retail sales activities do not include:
1. Food and beverage for consumption on the premises solely by employees and occasional guests of employees at the location.
2. Promotional products that are not available for sale and that display the company logo or trademark.
3. Products that are sold to company employees.
B. Subject to subsection E of this section, the amount of the credit is equal to:
1. One‑fourth of the taxable wages paid to an employee in a qualified employment position, not to exceed five hundred dollars, in the first year or partial year of employment.
2. One‑third of the taxable wages paid to an employee in a qualified employment position, not to exceed one thousand dollars per qualified employment position, in the second year of continuous employment.
3. One‑half of the taxable wages paid to an employee in a qualified employment position, not to exceed one thousand five hundred dollars per qualified employment position, in the third year of continuous employment.
C. To qualify for a credit under this section:
1. All of the employees with respect to whom a credit is claimed must reside in this state.
2. A qualified employment position must meet all of the following requirements:
(a) The position must be a minimum of one thousand seven hundred fifty hours per year of full‑time and permanent employment.
(b) The job duties must be performed primarily at the location of the business. If an eligible employee in a qualified employment position is transferred or assigned to work in the taxpayer's workplace at a different location, it may be considered to be continuous employment if it continues to meet all qualified employment position requirements.
(c) The employment must include health insurance coverage for the employee for which the employer pays at least fifty percent of the premium or membership cost. If the taxpayer is self‑insured, the taxpayer must pay at least fifty percent 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 must pay compensation at least equal to the wage offer by county as computed annually by the department of economic security.
(e) The employee must have been employed for at least ninety days during the first taxable year. An employee who is hired during the last ninety days of the taxable year shall be considered a new employee during the next taxable year. A qualified employment position that is filled during the last ninety days of the taxable year is considered to be a new qualified employment position for the next taxable year.
(f) The employee must not have been previously employed by the taxpayer within twelve months before the current date of hire.
D. A credit is allowed for employment in the second and third years only for qualified employment positions for which a credit was allowed and claimed by the taxpayer on the original first and second year tax returns.
E. The net increase in the number of qualified employment positions is the lesser of the total number of filled qualified employment positions created during the taxable year or 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. The net increase in the number of qualified employment positions computed under this subsection may not exceed two hundred qualified employment positions per taxpayer each year.
F. A taxpayer who claims a credit under section 43‑1079 may not claim a credit under this section with respect to the same employment position.
G. If the allowable tax credit exceeds the income taxes otherwise due on the claimant's income, or if there are no state income taxes due on the claimant's income, the amount of the claim not used as an offset against income taxes may be carried forward as a tax credit against subsequent taxable years' income tax liability, not to exceed five taxable years.
H. Co‑owners of a business, including partners in a partnership and shareholders of an S corporation, as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners of the business may not exceed the amount that would have been allowed for a sole owner of the business.
I. If a person purchases a business or changes ownership through reorganization, stock purchase or merger, the new taxpayer may claim first year credits only for one or more qualified employment positions that it created and filled with an eligible employee after the purchase or reorganization was complete. If a person purchases a taxpayer that had qualified for first or second year credits or changes ownership through reorganization, stock purchase or merger, the new taxpayer may claim the second or third year credits if the taxpayer meets other eligibility requirements of this section. Credits for which a taxpayer qualified before the changes described in this subsection are terminated and lost at the time the changes are implemented.
J. A failure to timely report and certify to the Arizona commerce authority and the department of revenue the information prescribed by section 41‑1510, subsection B, paragraphs 1, 2 and 3 in the manner prescribed by section 41‑1510, subsection C disqualifies the taxpayer from the credit under this section. The department of revenue shall require written evidence of the timely report to the Arizona commerce authority.
K. For the purposes of this section:
1. "Assigned to retail" means working more than twenty‑five percent of an employee's time in one or more retail sales activities.
2. "Location" means a single parcel or contiguous parcels of owned or leased land, the structures and personal property contained on the land or any part of the structures occupied by a taxpayer.
3. "Retail sales" means the sale of tangible personal property to an ultimate consumer.
4. "Retail sales activities" means all activities that persons operating a retail business normally engage in, including taking orders, filling orders, billing orders, receiving and processing payments and shipping, stocking and delivering tangible personal property to the ultimate consumer, except drop shipments by a company acting on behalf of an unrelated company that has made a sale to a final consumer.
Sec. 5. Section 43-1079, Arizona Revised Statutes, is amended to read:
43-1079. Credit for increased employment in military reuse zones; definition
A. A credit is allowed against the taxes imposed by this title for net increases in employment by the taxpayer of full‑time employees who are working in a military reuse zone, established under title 41, chapter 10, article 3, and who are primarily engaged in providing aviation or aerospace services or in manufacturing, assembling or fabricating aviation or aerospace products. The amount of the credit is a dollar amount allowed for each new employee, determined as follows:
1. With respect to each employee other than a dislocated military base employee:
1st year of employment $ 500
2nd year of employment $1,000
3rd year of employment $1,500
4th year of employment $2,000
5th year of employment $2,500
2. With respect to each dislocated military base employee:
1st year of employment $1,000
2nd year of employment $1,500
3rd year of employment $2,000
4th year of employment $2,500
5th year of employment $3,000
B. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the amount of the claim not used to offset the taxes under this title may be carried forward as a credit against subsequent years' income tax liability for the period, not to exceed five taxable years, if the business remains in the military reuse zone.
C. The net increase in the number of employees for purposes of this section shall be determined by comparing the taxpayer's average employment in the military reuse zone during the taxable year with the taxpayer's previous year's fourth quarter employment in the zone, based on the taxpayer's report to the department of economic security for unemployment insurance purposes but considering only employment in the zone.
D. Co‑owners of a business, including partners in a partnership and shareholders of an S corporation, as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed for a sole owner of the business.
E. A credit is not allowed under this section with respect to an employee whose place of employment is relocated by the taxpayer from a location in this state to the military reuse zone, unless the employee is engaged in aviation or aerospace services or in manufacturing, assembling or fabricating aviation or aerospace products and the taxpayer maintains at least the same number of employees in this state but outside the zone.
F. A taxpayer who claims a credit under section 43‑1074, 43‑1075 or 43‑1083.01 may not claim a credit under this section with respect to the same employees employment position.
G. For the purposes of this section, "dislocated military base employee" means a civilian who previously had permanent full‑time civilian employment on the military facility as of the date the closure of the facility was finally determined under federal law, as certified by the Arizona commerce authority.
Sec. 6. Section 43-1161, Arizona Revised Statutes, is amended to read:
43-1161. Credit for new employment
A. For taxable years
beginning from and after June 30, 2011, a credit is allowed against the taxes
imposed by this title for net increases in full‑time employees residing
in this state and hired in qualified employment positions in this state as
computed and certified by the Arizona commerce authority pursuant to section 41‑1525.
B. Subject to subsection F of this section, the amount of the credit is equal to:
1. Three thousand dollars for each full‑time employee hired in a qualified employment position in the first year or partial year of employment. Employees hired in the last ninety days of the taxable year are excluded for that taxable year and are considered to be new employees in the following taxable year.
2. Three thousand dollars for each full-time employee in a qualified employment position for the full taxable year in the second year of continuous employment.
3. Three thousand dollars for each full-time employee in a qualified employment position for the full taxable year in the third year of continuous employment.
C. The capital investment and the new qualified employment positions requirements of section 41‑1525, subsection B must be accomplished within twelve months after the start of the required capital investment. No credit may be claimed until both requirements are met. A business that meets the requirements of section 41‑1525, subsection B for a location is eligible to claim first year credits for three years beginning with the taxable year in which those requirements are completed. Employees hired at the location before the beginning of the taxable year but during the twelve-month period allowed in this subsection are considered to be new employees for the taxable year in which all of those requirements are completed. The employees that are considered to be new employees for the taxable year under this subsection shall not be included in the average number of full-time employees during the immediately preceding taxable year until the taxable year in which all of the requirements of section 41‑1525, subsection B are completed. An employee working at a temporary work site in this state while the designated location is under construction is considered to be working at the designated location if all of the following occur:
1. The employee is hired after the start of the required investment at the designated location.
2. The employee is hired to work at the designated location after it is completed.
3. The payroll for the employees destined for the designated location is segregated from other employees.
4. The employee is moved to the designated location within thirty days after its completion.
D. To qualify for a credit under this section, the taxpayer and the employment positions must meet the requirements prescribed by section 41‑1525.
E. A credit is allowed for employment in the second and third year only for qualified employment positions for which a credit was claimed and allowed in the first year.
F. The net increase in the number of qualified employment positions is the lesser of the total number of filled qualified employment positions created at the designated location or locations during the taxable year or the difference between the average number of full‑time employees in this state in the current taxable year and the average number of full‑time employees in this state during the immediately preceding taxable year. The net increase in the number of qualified employment positions computed under this subsection may not exceed the difference between the average number of full‑time employees in this state in the current taxable year and the average number of full-time employees in this state during the immediately preceding taxable year.
G. A taxpayer that claims a credit under section 43-1161.01, 43‑1164.01 or 43‑1167 shall not claim a credit under this section with respect to the same employment positions.
H. If the allowable tax credit exceeds the income taxes otherwise due on the claimant's income, or if there are no state income taxes due on the claimant's income, the amount of the claim not used as an offset against the income taxes may be carried forward as a tax credit against subsequent years' income tax liability for a period not exceeding five taxable years.
I. Co-owners of a business, including corporate partners in a partnership, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners of the business may not exceed the amount that would have been allowed for a sole owner of the business.
J. If the business is sold or changes ownership through reorganization, stock purchase or merger, the new taxpayer may claim first year credits only for the qualified employment positions that it created and filled with an eligible employee after the purchase or reorganization was complete. If a person purchases a taxpayer that had qualified for first or second year credits or changes ownership through reorganization, stock purchase or merger, the new taxpayer may claim the second or third year credits if it meets other eligibility requirements of this section. Credits for which a taxpayer qualified before the changes described in this subsection are terminated and lost at the time the changes are implemented.
K. A failure to timely report and certify to the Arizona commerce authority the information prescribed by section 41‑1525, subsection E, and in the manner prescribed by section 41‑1525, subsection F disqualifies the taxpayer from the credit under this section. The department shall require written evidence of the timely report to the Arizona commerce authority.
L. A tax credit under this section is subject to recovery for a violation described in section 41‑1525, subsection H.
M For the purposes of subsection B, paragraphs 2 and 3 of this section, if a full‑time employee in the qualified employment position leaves during the taxable year, the employee may be replaced with another new full‑time employee in the same employment position and the new employee will be treated as being in their second or third full year of continuous employment for the purposes of the credit under this section if:
1. The total time the position was vacant from the date the employment position was originally filled to the end of the current tax year totals ninety days or less.
2. The new employee meets all of the same requirements as the original employee was required to meet.
Sec. 7. Title 43, chapter 11, article 6, Arizona Revised Statutes, is amended by adding section 43-1161.01, to read:
43-1161.01. Credit for increased employment by green manufacturing businesses; definitions
A. A credit is allowed against the taxes imposed by this title for net increases in qualified employment positions of residents of this state by a green manufacturing business qualified pursuant to section 41-1510, except employment positions at a location where more than ten percent of the business consists of retail sales of tangible personal property, measured by either the number of employees assigned to retail sales or the square footage of the facility used for retail sales activities at the location. Retail sales and retail sales activities do not include:
1. Food and beverage for consumption on the premises solely by employees and occasional guests of employees at the location.
2. Promotional products that are not available for sale and that display the company logo or trademark.
3. Products that are sold to company employees.
B. Subject to subsection E of this section, the amount of the credit is equal to:
1. One‑fourth of the taxable wages paid to an employee in a qualified employment position, not to exceed five hundred dollars, in the first year or partial year of employment.
2. One‑third of the taxable wages paid to an employee in a qualified employment position, not to exceed one thousand dollars per qualified employment position, in the second year of continuous employment.
3. One‑half of the taxable wages paid to an employee in a qualified employment position, not to exceed one thousand five hundred dollars per qualified employment position, in the third year of continuous employment.
C. To qualify for a credit under this section:
1. All of the employees with respect to whom a credit is claimed must reside in this state.
2. A qualified employment position must meet all of the following requirements:
(a) The position must be a minimum of one thousand seven hundred fifty hours per year of full‑time and permanent employment.
(b) The job duties must be performed primarily at the location of the business. If an eligible employee in a qualified employment position is transferred or assigned to work in the taxpayer's workplace at a different location, it may be considered to be continuous employment if it continues to meet all qualified employment position requirements.
(c) The employment must include health insurance coverage for the employee for which the employer pays at least fifty percent of the premium or membership cost. If the taxpayer is self‑insured, the taxpayer must pay at least fifty percent 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 must pay compensation at least equal to the wage offer by county as computed annually by the department of economic security.
(e) The employee must have been employed for at least ninety days during the first taxable year. An employee who is hired during the last ninety days of the taxable year shall be considered a new employee during the next taxable year. A qualified employment position that is filled during the last ninety days of the taxable year is considered to be a new qualified employment position for the next taxable year.
(f) The employee must not have been previously employed by the taxpayer within twelve months before the current date of hire.
D. A credit is allowed for employment in the second and third years only for qualified employment positions for which a credit was allowed and claimed by the taxpayer on the original first and second year tax returns.
E. The net increase in the number of qualified employment positions is the lesser of the total number of filled qualified employment positions created during the taxable year or 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. The net increase in the number of qualified employment positions computed under this subsection may not exceed two hundred qualified employment positions per taxpayer each year.
F. A taxpayer who claims a credit under section 43-1161 or 43‑1167 may not claim a credit under this section with respect to the same employment position.
G. If the allowable tax credit exceeds the income taxes otherwise due on the claimant's income, or if there are no state income taxes due on the claimant's income, the amount of the claim not used as an offset against income taxes may be carried forward as a tax credit against subsequent taxable years' income tax liability, not to exceed five taxable years.
H. Co‑owners of a business, including corporate partners in a partnership, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners of the business may not exceed the amount that would have been allowed for a sole owner of the business.
I. If a person purchases a business or changes ownership through reorganization, stock purchase or merger, the new taxpayer may claim first year credits only for one or more qualified employment positions that it created and filled with an eligible employee after the purchase or reorganization was complete. If a person purchases a taxpayer that had qualified for first or second year credits or changes ownership through reorganization, stock purchase or merger, the new taxpayer may claim the second or third year credits if it meets other eligibility requirements of this section. Credits for which a taxpayer qualified before the changes described in this subsection are terminated and lost at the time the changes are implemented.
J. A failure to timely report and certify to the Arizona commerce authority and the department of revenue the information prescribed by section 41‑1510, subsection B, paragraphs 1, 2 and 3 in the manner prescribed by section 41‑1510, subsection C disqualifies the taxpayer from the credit under this section. The department of revenue shall require written evidence of the timely report to the Arizona commerce authority.
K. For the purposes of this section:
1. "Assigned to retail" means working more than twenty‑five percent of an employee's time in one or more retail sales activities.
2. "Location" means a single parcel or contiguous parcels of owned or leased land, the structures and personal property contained on the land or any part of the structures occupied by a taxpayer.
3. "Retail sales" means the sale of tangible personal property to an ultimate consumer.
4. "Retail sales activities" means all activities that persons operating a retail business normally engage in, including taking orders, filling orders, billing orders, receiving and processing payments and shipping, stocking and delivering tangible personal property to the ultimate consumer, except drop shipments by a company acting on behalf of an unrelated company that has made a sale to a final consumer.
Sec. 8. Section 43-1167, Arizona Revised Statutes, is amended to read:
43-1167. Credit for increased employment in military reuse zones; definition
A. A credit is allowed against the taxes imposed by this title for net increases in employment by the taxpayer of full‑time employees working in a military reuse zone, established under title 41, chapter 10, article 3, and who are primarily engaged in providing aviation or aerospace services or in manufacturing, assembling or fabricating aviation or aerospace products. The amount of the credit is a dollar amount allowed for each new employee, determined as follows:
1. With respect to each employee other than a dislocated military base employee:
1st year of employment $ 500
2nd year of employment $1,000
3rd year of employment $1,500
4th year of employment $2,000
5th year of employment $2,500
2. With respect to each dislocated military base employee:
1st year of employment $1,000
2nd year of employment $1,500
3rd year of employment $2,000
4th year of employment $2,500
5th year of employment $3,000
B. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the amount of the claim not used to offset the taxes under this title may be carried forward as a credit against subsequent years' income tax liability for the period, not to exceed five taxable years, if the business remains in the military reuse zone.
C. The net increase in the number of employees for purposes of this section shall be determined by comparing the taxpayer's average employment in the military reuse zone during the taxable year with the taxpayer's previous year's fourth quarter employment in the zone, based on the taxpayer's report to the department of economic security for unemployment insurance purposes but considering only employment in the zone.
D. Co‑owners of a business, including corporate partners in a partnership, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed for a sole owner of the business.
E. A credit is not allowed under this section with respect to an employee whose place of employment is relocated by the taxpayer from a location in this state to the military reuse zone unless the employee is engaged in aviation or aerospace services or in manufacturing, assembling or fabricating aviation or aerospace products and the taxpayer maintains at least the same number of employees in this state but outside the zone.
F. A taxpayer who claims a credit under section 43‑1161, 43-1161.01 or 43‑1164.01 may not claim a credit under this section with respect to the same employees employment position.
G. For the purposes of this section, "dislocated military base employee" means a civilian who previously had permanent full‑time civilian employment on the military facility as of the date the closure of the facility was finally determined under federal law, as certified by the department of commerce.
Sec. 9. Purpose
Pursuant to section 43-223, Arizona Revised Statutes, the income tax credits enacted in sections 43-1075 and 43-1161.01, Arizona Revised Statutes, are intended to encourage investment and development of environmentally friendly businesses that will produce high quality employment opportunities for citizens of this state.
Sec. 10. Effective date
This act is effective from and after December 31, 2015.
