Purpose

Enables the state of Arizona to participate in the Federal Refund Offset Program, and eases restrictions on the release of confidential taxpayer information.

Background

In 1998, the IRS Restructuring and Reform Act was enacted, creating the Federal Refund Offset Program. This program is managed by the Financial Management Service of the U.S. Treasury Department (FMS), and allows states and territories the opportunity to offset federal tax refunds against state tax liabilities. H.B. 2019 enables the state of Arizona to participate in the Federal Refund Offset Program.

Currently, the Arizona Department of Revenue (DOR) may only release confidential taxpayer information to the principal of a corporation or partnership (A.R.S. §42-2003). However, some entities conducting business in the state of Arizona are multinational corporations, whose principals do not reside in Arizona or even the United States. In such cases, locating the principals is difficult. H.B. 2019 broadens who is authorized to receive confidential taxpayer information, which eases the ability of tax prepares to obtain authentic powers of attorney. Additionally, this legislation eases the restrictions on the release of confidential information pertaining to tax credits.

H.B. 2019 appropriates $146,250 in each of FY 2001-2002 and FY 2002-2003 from the state general fund to DOR to administer the Federal Refund Offset Program. However, DOR estimates the refund offset program will generate about $2.1 million, creating a net general fund savings. The Joint Legislative Budget Committee staff is reviewing DOR’s estimates.

Provisions

Federal Refund Offset Program

1. Permits the FMS to receive confidential information for the refund offset program.

2. Appropriates $146,250 in each of FY 2001-2002 and FY 2002-2003 from the state general fund to DOR to administer the federal refund offset program.

Release of Confidential Taxpayer Information

3. Broadens who is authorized to receive confidential taxpayer information to include a principal corporate officer of a parent corporation for a controlled subsidiary and any person designated by a principal officer, the board of directors or other governing body.

4. Allows DOR to disclose aggregate amounts of any tax credit or tax rebate from any tax incentive program enacted after January 1, 1994, except if this information would give advantage to competitors or bidders.

Miscellaneous

5. Makes technical and conforming changes.

6. Provides for a general effective date.

House Action

WM 1/23/01 DPA 10-0-0-0

APPROP 3/13/01 DPA 10-0-1-5

3^rd Read 3/19/01 45-7-8-0

Prepared by Senate Staff

March 23, 2001