FOR CAUCUS & FLOOR ACTION
REVISED
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ARIZONA STATE SENATE
RESEARCH STAFF
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TAMARA MULEMBO LEGISLATIVE
INTERN DENISSE GEE LEGISLATIVE
RESEARCH ANALYST FINANCE COMMITTEE Telephone: (602) 542-3171 Facsimile: (602) 542-7833 |
DATE: March 18, 2002
SUBJECT: Strike Everything
Amendment to S.B. 1201
Purpose
The strike everything amendment to S.B. 1201, 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).
The strike everything amendment to 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, the negative fiscal impact of the strike everything amendment to S.B. 1201 is $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
TM/DG/jas