ARIZONA STATE SENATE
Phoenix, Arizona
airline tax deferral
Purpose
Retroactive to January 1,
2002, defers flight property and corporate income tax liabilities from accruing
through January 1, 2004.
Background
Airlines operating in the
State of Arizona are subject to two types of direct State taxation: flight property tax and corporate income
tax. The airline companies in Arizona pay
a tax on the flight property within the State.
The taxable value, or net assessed value, of the flight property is
determined by multiplying the full cash value of the property by an assessment
ratio. The tax rate that is applied to
the net assessed value is equal to the statewide average tax rate, which was $12.68
in tax year 2000.
Airlines pay corporate
income tax similar to other companies doing business in the State of
Arizona. In FY 2000-2001, the
Department of Revenue (DOR) collected over $541.2 million in net corporate
income taxes. For tax years beginning
after 2000, all business income of a taxpayer engaged in air commerce is
apportioned to Arizona by multiplying the income by a fraction. The numerator is the revenue aircraft miles
flown within this State for flights beginning or ending in this State and the
denominator of which is the total revenue aircraft miles flown by the
taxpayer’s aircraft.
S.B. 1011 suspends new
flight property and corporate income tax liabilities from accruing through
January 1, 2004.
According to DOR, the fiscal
impact to the general fund will be $11 million. A fiscal note has been requested from the Joint Legislative
Budget Committee but not yet received.
Provisions
1. Defers payments for the following taxes until January 1, 2004:
(a)
Flight
property tax for the 2002 and 2003 tax years.
(b)
Corporate
income tax, for the taxable period January 1, 2001 through December 31, 2002,
on income stemming from aircraft transportation activities.
2. Stipulates that no interest will accrue through December 31, 2003 on the deferred taxes.
3. Requires the deferred taxes to be fully paid by February 1, 2004, or penalties will be imposed.
4. Contains a retroactivity clause of January 1, 2002.
Prepared by Senate Staff
January 10, 2002