ARIZONA STATE SENATE
Phoenix, Arizona
REVISED
delinquent property taxes;
interest
(NOW: limitations period; federal tax
deficiencies)
Purpose
Retroactive to January 1,
1993, provides for extensions for the limitation period for proposing and
assessing federal income tax deficiencies based on federal limited consents
executed by homebuilders and outlines related claim procedures and policies.
Background
The alternative cost method
allows developers to include, in the basis of properties sold, the estimated
future costs of common improvements. The Internal Revenue Service (IRS)
requires homebuilders wishing to use the alternative cost method to file
federal limited consents. The requirement enables IRS to assess homebuilders
for deficiencies arising from projects covered under the federal limited
consent, specifically, the alternative cost method.
According to Arizona
statute, a taxpayer may agree with the IRS for an extension or renewal of the
period for proposing and assessing deficiencies in federal income taxes. If
such an agreement is made, notices of a proposed income tax deficiency must be
mailed within four years of when the return was filed or six months after the
expiration of the agreed period for assessing deficiencies. The extension or
renewal applies only to items specifically enumerated in the agreement (A.R.S.
§42-1104).
S.B. 1201, retroactive to
January 1, 1993, provides for extensions for proposing and assessing federal
tax deficiencies based on federal limited consents executed by homebuilders and
outlines related claim procedures and policies.
According to the Department
of Revenue, S.B. 1201 will cost $3 million to $4 million in foregone revenues.
Provisions
1. Contains a retroactivity clause of January 1, 1993 for extension periods for proposing and assessing federal income tax deficiencies and proposed income tax notice mailing deadlines for federal limited consents executed by homebuilders.
2. Requires, with respect to certain federal limited consents executed by homebuilders, claims for income tax refunds to be filed by December 31, 2002.
3. Requires taxpayers to furnish evidence for refund claims and basis of entitlement based on assessments for items not included in federal limited consents.
4. Requires the Department of Revenue (DOR) to review all timely claims, determine the correct amount of the claims and notify the taxpayer of its interpretation.
5. Prohibits DOR from making any refunds until all refund claims respecting the federal limited consents executed by homebuilders are processed.
6. Allows DOR, if a taxpayer appeals the interpretation of the claim, to notify other taxpayers filing similar claims of the nature and extent of the delay.
7. Prohibits the aggregate refund amount from exceeding $10,000.
8. Reduces proportionately the amount of each claim if the correct aggregate refund amount exceeds $10,000.
9. Requires interest to be added to claim amounts on refunds that are not paid or cannot be determined by June 30, 2003 if the payments are delayed due to departmental action unrelated to claimant objections.
10. Requires taxpayers making retroactive claims related to the federal limited consents executed by homebuilders to complete waivers of the statute of limitations until the legality of these provisions has been adjudicated.
11. Contains a nonseverability clause.
12. Provides for general effective date.
Amendments
Adopted by Committee
·
The
strike everything amendment was adopted.
Senate
Action
FIN 3/18/02 DPA/SE 5-1-2-0
3rd
Read 3/28/02 28-0-2-0
Prepared
by Senate Staff
April
25, 2002