House of Representatives

HB 2527

Enterprise zone program; extension; enhancements

Sponsors: Carruthers, Cannell, Huffman, et al

W/D	Committee on PIRA
X	Committee on CED
	Caucus and COW
	As Passed the House

HB 2527 makes several changes to the Enterprise Zone Program.

History

The Enterprise Zone Program was created by the Legislature in 1989 and is administered by the Arizona Department of Commerce. Disadvantaged areas of the state may apply for zone formation, which is based on 150% of the poverty or unemployment rate. There are currently 22 Enterprise Zones throughout the state.

An eligible non-retail business or insurer located in a zone is currently authorized to claim an income tax or premium tax credit for net increases in qualified job positions. A business may carry-forward the credits for a period of five years.

Maximum Income Tax or Premium Tax Credits

First Year	Second Year	Third Year
1/4 of taxable wages [$500 maximum]	1/3 of taxable wages [$1,000 maximum]	1/2 of taxable wages [$1,500 maximum

Qualified Employment Position

Employer	Employees	Wage Amount
Employer pays minimum 50% of health insurance coverage. 35% of net new employees must reside in the zone.	Reside in Arizona Work 1750 hrs full-time per year; and Work minimum 90 days during first taxable year.	Pay Equal to "Wage Offer by County"

In addition, a qualified manufacturer [small, woman-owned or minority-owned] is eligible for a property tax reclassification from Class 1 to Class 6 [25% to 5% assessment ratio] for a period of five years. The manufacturer must make an aggregate investment of $2 million or more in fixed capital assets in the zone after December 31, 1995.

HB 2527 continues the Enterprise Zone Program five additional years, tiers the investment requirements and extends the program to businesses that have some retail sales. In addition, the bill authorizes the incentives, regardless of whether or not the zone designation remains and strikes the requirement for existing Arizona businesses to show a profitable history.

Provisions

· Stipulates the limitations for zone formation as set forth in statute do not prevent the department from renewing existing Enterprise Zones, or those certified in the first year under federal census poverty data.

· Permits businesses with no more than 50% of their retail activity at the location in the Enterprise Zone to be eligible for the program.

· Defines principal business activity as more than one-half of the business conducted at a business location measured either by gross income, number of FTEs or floor area used for retail operations.

· Requires documents submitted to the Department of Commerce and the Department of Revenue to contain either a sworn statement or certification that the information if true and correct. If the document contains materially false information, the taxpayer is ineligible for the tax incentives and subject to recovery of funds from prior tax years.

· Strikes the requirement for an existing business located in an Enterprise Zone to show a profitable operating history.

· Maintains the $2 million dollar investment requirement for those cities/towns located in a county with a population of 250,000 or more that are located less than 25 air miles from the exterior boundary of the largest city in the county.

· Tiers the minimum investment requirements for small manufacturers in rural areas:

- $2 million for communities with a population of 80,000 or more persons.

- $1 million for communities with a population of 10,000 to 80,000 persons.

- $500,000 for communities with a population of less than 10,000 persons.

· Establishes that the termination of an Enterprise Zone does not affect the right to claim the tax credits if the business maintains qualified employees and remains in the zone.

· Contains conforming session law language.

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· 45th Legislature

· First Regular Session 3 February 16, 2001

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