Assigned to FIN FOR COMMITTEE

ARIZONA STATE SENATE

Phoenix, Arizona

FACT SHEET FOR H.B. 2624
personal property tax; minimum valuation

Purpose

Reduces the minimum value for commercial, industrial and agricultural personal property from 10 percent to 2.5 percent

Background

Article 9, Section 2, of the Arizona Constitution exempts personal property used for agricultural purposes or in a trade or business from taxation up to the first $50,000. Personal property owned by a taxpayer above the $50,000 is taxed using an accelerated depreciation schedule developed by the Department of Revenue (DOR). Current law provides that the assessors shall further reduce the value on personal property as follows:

1st Assessment Year	2nd Assessment Year	3rd Assessment Year	4th Assessment Year	5th & Subsequent Year
35% of the scheduled depreciated value	51% of the scheduled depreciated value	67% of the schedules depreciated value	83% of the scheduled depreciated value	the scheduled depreciated value prescribed by DOR

However, the value of the personal property shall not be reduced below the Department's guidelines. Currently, the minimum value for any property in use is 10 percent.

H.B. 2624 proposes to reduce this minimum value for any property in use from 10 percent to 2.5 percent by fiscal year 2002. According to DOR, H.B. 2624 will result in a $6.7 million loss of tax revenues in tax year 2000, $13.6 million in tax year 2001 and $21.9 million in tax year 2002. JLBC estimates this bill will cost the general fund $2.3 million in fiscal year 2001, $4.6 million in fiscal year 2002 and $7.4 million in fiscal year 2003.

Provisions

1. Reduces the minimum value prescribed for commercial, industrial and agricultural personal property from 10 percent to 7.5 percent in tax year 2000. This value will be further reduced by 2.5 percent in both tax year 2001 and 2002, after which it will remain at 2.5 percent each year.

2. Contains an effective date of January 1, 2000.

FACT SHEET H.B. 2624 Page

House Action

WM 2/9/99 DPA 12-0-0-0

3rd Read 3/8/99 45-14-1-0

Prepared by Senate Staff

March 18, 1999

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