House of Representatives

HB 2474

tax returns; preparation; technical correction

Sponsors: Representative May

X	Committee on Ways and Means REVISED
	Caucus and COW
	As Passed the House

HB 2474 clarifies that DOR state employees cannot assist anyone with tax preparation for compensation. The proposed strike-everything amendment to HB 2474 establishes an income tax credit review committee, a review cycle for existing income tax credits and reporting requirements for education income tax credits.

History for proposed strike-everything amendment

A tax credit is a dollar-for-dollar reduction in the individual or corporate tax liability. This is different from deductions, subtractions and exemptions, which reduce the amount of income that will be subject to tax. Income tax credits in Arizona have grown significantly since 1992. Some credits that have passed are for a set period of years; however; most tax credits are enacted without any termination date. None of the income tax credits enacted over the years are subject to a periodic review to determine if they are, in fact, accomplishing the original purpose of the tax credit.

Additionally, the proposed strike-everything amendment clarifies that donations to school tuition organizations can not be for the direct benefit of any specific student. Original legislation prohibited the benefit for a dependent of the taxpayer. However, some taxpayers have been designating specific students and this practice would no longer be allowed under the amendment.

Currently, DOR requests information regarding the education tax credits, both public and private, to be reported by March 1 each year. While most schools and student tuition organizations report these figures voluntarily, there is currently no statutory requirement for this request.

Provisions for proposed strike-everything amendment

· Provides a purpose section, similar to the purpose statute for the review of state agencies and boards, that the Legislature finds that income tax credits have increased over the last several years without sufficient oversight.

· Declares that the Legislature will establish an orderly schedule for the review of individual and corporate income tax credits, that will enable future legislatures to evaluate the need for the continued existence of income tax credits in this state.

· Establishes a Joint Legislative Income Tax Credit Review Committee consisting of 5 members from the House of Representatives Ways & Means Committee, 5 members from the Senate Finance Committee and the Director of DOR (or the director’s designee).

· The Committee is required to:

ü Review and evaluate the existing corporate and individual income tax credits according to the schedule provided.

ü Utilize the JLBC staff to conduct a review of each credit. The JLBC staff may coordinate their efforts with DOR staff and Legislative Council staff.

ü Determine whether the credit has provided an economic benefit to this state.

ü Determine if new investments, new jobs or the retention of existing jobs has resulted from the credit.

ü Determine if the credit could be administered in a more efficient manner.

ü Determine the history, rationale and estimated state revenue loss of each tax credit.

ü Make recommendations to continue, change or repeal the credit.

ü Report to the Speaker of the House of Representatives, the President of the Senate and the Governor by December 15 each year.

· Establishes an income tax credit review schedule as follows:

2001:

Employment by qualified defense contractor (ARS 43-1077 and ARS 43-1165)

Property taxes paid for qualified defense contractor (ARS 43-1078 and 43-1166)

Employment in military reuse zone (ARS 43-1079 and ARS 43-1167)

Construction cost for qualified environmental technology facility (ARS 43-1080 and ARS 43-1169)

2002:

Research and Development activities (ARS 43-1074.01 and ARS 43-1168)

Underground storage tank corrective action costs (ARS 43-1085 and ARS 43-1173)

Pollution control equipment (ARS 43-1170)

Coal consumed in electric generating power (ARS 43-1178)

2003:

Agriculture pollution control devices (ARS 43-1081.01 and ARS 43-1170.01)

Agriculture water conservation system (ARS 43-1084)

Solar energy devices (ARS 43-1083)

2004:

Employment of temporary assistance for needy families (TANF) recipients (ARS 43-1087 and ARS 43-1175)

Contributions to charitable organizations that provide assistance to the working poor (ARS 43-1088)

Donations of motor vehicles to wheels to work program (ARS 43-1090.01 and ARS 43-1177)

2005:

Family tax credit (ARS 43-1073)

Private school tuition organization (ARS 43-1089)

Public school extra curricular activity fee (ARS 43-1089.01)

· Any new individual or corporate income tax credit enacted by the Legislature must include a specific review date five years after the effective date.

· Donations given to school tuition organizations by a taxpayer for a specific student are not eligible for the individual income tax credit.

· Requires student tuition organizations and public schools that receive donations that are eligible for income tax credits to report these donations to DOR by March 1 each year. The report must be on a form prescribed by DOR.

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45th Legislature

First Regular Session 3 March 5, 2001

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