Strike Everything Amendment to H.B. 2641
Purpose
Authorizes eligible insurance companies located in an enterprise zone or military reuse zone
to claim a premium tax credit for net increases in qualified employment positions.
Background
Laws 1987, Chapter 361 allows a county or incorporated cities and towns to propose
establishing an enterprise zone (EZ). Enterprise zones are governed by an EZ Commission
(Commission), which must appoint a zone administrator. The Commission must identify areas of the
county that potentially qualify as enterprise zones and are allowed to apply for designation or renewal
of designation as an EZ. Once established, the Commission must provide for planning, community
relations and promotion of the zone among interested parties in the county, apply for and receive
gifts, loans and other monies from private sources and make an annual report to the Department of
Commerce (ADC) on the development of the zone.
An area is eligible to be designated an EZ if the average annual unemployment rate in the area
in the preceding two years was at least 150 percent of the average annual statewide unemployment
rate for the same period or if the poverty rate in the area is at least 150 percent of the statewide
poverty rate. An entire county with a population of less than 400,000 may be designated an EZ and
a proposed EZ must include an area of at least 1/4 of a square mile and have a population of at least
1,000 persons.
An owner of a business located in an EZ, before July 1, 2001, is eligible for an income tax
credit for net increases in qualified employment positions, excluding employment positions at a
business where tangible personal property is sold at retail. The owner must also certify to the ADC
that the owner qualifies to claim the tax credit. Through June 30, 2001, the ADC must certify small
manufacturing businesses that qualify for property tax incentives if an existing business already
located in an EZ has a profitable operating history for the two most recent years and invests at least
$2,000,000 in fixed assets in the zone after December 31, 1995, or if a business newly located in the
zone invests $2,000,000 in fixed assets in the zone after December 31, 1995. Certification is valid
for five years.
Currently, statute allows an income tax credit for net increases in qualified employment
positions of Arizona residents by a business located in an EZ. The credit is equal to 1/4 of the taxable
wages paid to an employee, not to exceed $500 in the first year of employment, 1/3 of the taxable
wages not to exceed $1,000 in the second year of employment and ½ taxable of the taxable wages
not to exceed $1,500 in the third year on continuous employment. To qualify for the credit all of the
employees to whom the credit is claimed must reside in Arizona, and for the first year of employment,
35 percent must reside on the date of hire in an EZ in the same county where the business is located.
The employment position must be a minimum of 1,750 hours per year of full-time employment,
employment must include health insurance coverage that the employer pays at least 50 percent of the
premium, compensation must be at least equal to the wage offer by the county and the employee
cannot have been previously employed by the taxpayer within 12 months before the current date of
hire.
There is an undetermined negative fiscal impact to the state general fund associated with this
legislation.
Provisions
Premium Tax Credit for Increased Employment in Enterprise Zones
1. Allows a tax credit against the premium tax liability incurred by an insurer for net increases in qualified employment positions of Arizona residents by an insurer located in an EZ.
2. Prohibits a tax credit from being allowed for the portion of tax payable to the Fire Fighters' Relief and Pension Fund or the Public Safety Personnel Retirement System.
3. Specifies the amount of the tax credit is equal to:
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Maximum Premium Tax Credits
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1st year: 1/4 taxable wages;
$500 maximum
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2nd year: 1/3 taxable wages;
$1000 maximum
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3rd year: ½ taxable wages:
$1,500 maximum
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4. Specifies to qualify for the credit all employees for whom a credit is claimed must be Arizona residents and 35 percent of the employees for whom a credit is claimed must reside, on the
date of hire, in an EZ located in the same county where the insurer is located.
5. Requires qualified employment positions meet the following requirements:
(a) The position is a minimum of 1,750 hours per year of full-time employment and include health insurance coverage for which the employer pays at least 50 percent of
the premium.
(b) The employer pays compensation at least equal to the wage offer by county.
(c) The employee has been employed for at least 90 days during the first taxable year and specifies employees hired during the last 90 days of the taxable year are considered
a new employee during the next taxable year.
(d) The employee has not been employed previously by the taxpayer within a year before the current date of hire.
6. Determines the net increase in the number of qualified positions by comparing the average number of qualified employment during the taxable year with the immediately preceding
taxable year, according to the report filed by the insurer with the ADC.
7. Allows the amount of the claim not used as an offset against the state premium tax liability, if the allowable tax credit exceeds the liability, to be carried forward as a tax credit against
subsequent years' tax liability for up to five taxable years, as long as the insurer remains in an
EZ.
8. Specifies an insurer claiming a tax credit against state premium tax liability is not required to pay any additional retaliatory tax as a result of claiming that tax credit.
9. Disqualifies an insurer from the credit for failure to report and certify prescribed information to the ADC.
Premium Tax Credit for Increased Employment in Military Reuse Zones
10. Allows a premium tax credit against the premium tax liability incurred by an insurer for net increases in employment positions of Arizona residents by an insurer located in a military
reuse zone.
11. Prohibits a tax credit from being allowed for the portion of tax payable to the Fire Fighters' Relief and Pension Fund or the Public Safety Personnel Retirement System.
12. Establishes the amount of the tax credit as a dollar amount for each new employee, excluding a dislocated military base employee, as follows:
(a) 1st year of employment - $500
(b) 2nd year of employment - $1,000
(c) 3rd year of employment - $1,500
(d) 4th year of employment - $2,000
(e) 5th year of employment - $2,500
13. Establishes the amount of the tax credit as a dollar amount for each new employee with respect to each dislocated military employee as follows:
(a) 1st year of employment - $1,000
(b) 2nd year of employment - $1,500
(c) 3rd year of employment - $2,000
(d) 4th year of employment - $2,500
(e) 5th year of employment - $3,000
14. Allows the amount of the claim not used as an offset against the state premium tax liability, if the allowable tax credit exceeds the liability, to be carried forward as a tax credit against
subsequent years' tax liability for up to five taxable years, as long as the insurer remains in a
military reuse zone.
15. Determines the net increase in the number of employees by comparing the insurer's average employment in the military reuse zone during the taxable year with the insurer's previous
year's fourth quarter employment in the zone, based on its report to the Department of
Economic Security for unemployment insurance purposes, considering only employment in
the zone.
16. Prohibits a credit from being allowed, with respect to an employee whose place of employment is relocated by the insurer from a location in this state to the military reuse zone,
unless the insurer maintains at least the same number of employees in Arizona but outside the
zone.
17. Requires an insurer located, in a military reuse zone, in order to qualify for a premium tax credit to:
(a) Agree with the ADC in writing to furnish information relating to the amount of premium tax credits the insurer receives each year. Requires the ADC to immediately
revoke the insurer's qualification and notify the Department of Insurance (DOI) if the
insurer fails to provide the required information.
(b) Enter into a memorandum of understanding with this state containing employment goals and to report each year, in writing, its performance in achieving the goals. The
memorandum must contain provisions allowing the ADC to stop, readjust or
recapture all or part of the premium tax credits provided on noncompliance with the
memorandum, and to notify DOI of the conditions of the noncompliance.
Miscellaneous
18. Allows an insurer to claim a premium tax credit, except for taxes paid on fire insurance claims, if the insurer qualifies for a premium tax credit for increased employment in enterprise
zones and military reuse zones.
19. Prohibits an insurer from claiming a premium tax credit, for increased employment in enterprise zones and military reuse zones, for premium taxes paid on premiums received from
all insurance paid for or on vehicles.
20. Allows a corporation, a prepaid dental plan organization, a health care services organization and a prepaid legal insurance corporation to claim a premium tax credit if they qualify for a
premium tax credit for increases in employment in an EZ or a military reuse zone.
21. Specifies an insurer that maintains a sales, service or claims office located in an enterprise zone before July 1, 2001 is eligible for an income tax credit or a premium tax credit for net
increases in qualified employment positions.
22. Prescribes definitions.
23. Eliminates obsolete language.
24. Makes technical and conforming changes.
25. Contains a general effective date.
BT/jas
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