SB1228 - 452R - Senate Fact Sheet

ARIZONA STATE SENATE

Phoenix, Arizona

FACT SHEET FOR S.B. 1228

joint legislative tax committee

Purpose

Re-establishes the Joint Legislative Tax Committee (JLTC) and mandates JLTC to review various tax exemptions beginning in calendar year (CY) 2004 to CY 2008. Sunsets, on a staggered schedule, various tax exemptions.

Background

Created in 1974, JLTC was a statutorily established committee whose duties and powers were to recommend rate settings for the telecommunication service excise tax, and analyze the state tax structure, burdens on taxpayers and tax incentives for existing and prospective businesses. In 1999, the National Conference of State Legislatures conducted a sunset review of JLTC in conjunction with a sunset review of the Joint Legislative Budget Committee. Additionally, the Joint Legislative Audit Committee assigned a sunset review of JLTC in 1999. The Senate Finance (Finance) and House Ways & Means (W&M) Committees made no formal recommendation; however, the consensus opinion was to allow JLTC to sunset. In 2000, JLTC was repealed (Laws 2000, Chapter 187, §12) and its responsibilities transferred to the Department of Revenue (DOR) Director, the Legislature and the Joint Legislative Budget Committee (JLBC). S.B. 1228 re-establishes this committee and sets down new duties.

Currently, Arizona has 234 transaction privilege tax (TPT) and use tax exemptions. The chart below indicates the number of exemptions, deductions and other exemption-like provisions in the major taxable activities as of December 2001.

TRANSACTION PRIVILEGE TAX AND USE TAX EXEMPTIONS – December 2001

Major Taxable Activities	Number of Exemptions	Number of Deductions from the Base	Other Subtractions	Totals

Retail (ARS 42-5061)	54	21	7	82
Use Tax (ARS 42-5159)	47	21	2	70
Transporting (ARS 42-5062)	5	4		9
Utilities (ARS 42-5063)	4	4		8
Telecommunications (ARS 42-5064)	2	5		7
Transient lodging (ARS 42-5070)	3	1		4
Personal property rentals (ARS 42-5071)	8	4	2	14
Amusement (ARS 42-5073)	9	4		13
Restaurant (ARS 42-5074)	9	1		10
Prime contracting (ARS 42-5075)	17			17
TOTALS	158	65	11	234

S.B. 1228 sunsets certain tax exemptions on a staggered schedule beginning CY 2004 and ending CY 2008, and subjects these tax exemptions to a corresponding scheduled review by JLTC.

A fiscal note has been request from JLBC staff, but has not been received.

Provisions

1. Establishes JLTC with the following membership: Senate President, Speaker of the House of Representatives (House), Senate floor leader, House majority leader, Finance Committee chairman, W&M Committee chairman, Senate and House Appropriations Committees chairmen, two appointed members each from both the Finance and W&M Committees and the Director of DOR or a designee.

2. Charges JLTC with the following duties:

(a) Analyze the state’s tax structure, individual and business tax burdens and tax incentives for both existing and future businesses.

(b) Determine the original purpose of TPT and use tax exemptions and establish evaluation standards for existing exemptions.

3. Requires JLTC to review certain tax exemptions from CY 2004 to CY 2008 with the assistance of JLBC and DOR staff.

4. Requires JLTC to submit a report regarding the statutory future of certain tax exemptions on December 15, 2004, 2005, 2006, 2007 and 2008 to the Senate, House and Governor’s office.

5. Sunsets certain tax exemptions on a staggered schedule, as follows:

(a) Taxable periods ending December 31, 2004:

· Sales of new semi-trailers or semi-trailer parts made in Arizona for use in interstate commerce.

· Sales of natural gas or liquefied petroleum gas used for motor vehicles.

· Leased or rented motor vehicles and any repair and replacement parts.

· Sales of motor vehicles at auction to out of state residents.

(b) Taxable periods ending December 31, 2005:

· Aircraft, navigational and communication instruments that are sold to foreign governments, out of state residents, individuals who hold a federal certificate of public convenience or supplemental air carrier certificate or a foreign air carrier.

· Aircraft machinery, tools, equipment and related supplies.

· Machinery or equipment used in research and development.

· Machinery or equipment purchased by a soundstage complex owner and used for motion picture, multimedia or interactive video productions in that complex.

· “Clean rooms” used for manufacturing, processing, fabrication or research and development.

· Machinery or equipment used to meet environmental regulations adopted by various federal agencies for manufacturing, processing, fabricating, job printing, refining, mining, natural gas pipelines, etc. purposes.

· Machinery or equipment used to meet environmental regulations adopted by various federal agencies for agricultural, horticultural, viticultural, livestock or floricultural purposes.

· Machinery or equipment for use in digital TV.

(d) Taxable periods ending December 31, 2007:

· Machinery, equipment and materials used to construct a qualified environmental technology manufacturing, producing or processing facility.

· Sales of solar energy devices.

· Retail sales commissions resulting from telecommunication contract services.

· Wireless telecommunications equipment used as an inducement to enter a telecommunications service contract.

· The storage of machinery, equipment and materials used to construct a qualified environmental technology facility.

(e) Taxable periods ending December 31, 2008:

· Freight or property transported interstate, if one point of destination is in Arizona, via the railroad.

· Sales of direct broadcast satellite television services.

· Leasing or renting semi-trailers made in Arizona.

· Admissions sales to intercollegiate football games if the games are operated by a nonprofit organization and does not take place in a Tourism and Sports Authority multipurpose facility.

6. Blends multiple enactments.

7. Makes technical and conforming changes.

8. Provides for a general effective date.

Prepared by Senate Staff

February 7, 2002

Assigned to FIN FOR COMMITTEE