A.R.S. tit. 43 ch. 2 — Arizona Revised Statutes Title 43 Chapter 2 — Administration

43-201. Preemption by state of income taxation The area of income taxation is preempted by the state, and a county, city, town or other political subdivision of this state shall not levy an income tax, so long as the urban revenue sharing fund is maintained as provided in section 43-206. 43-202. Object of tax The object for which the taxes are imposed by this title is to assist in defraying the cost of maintenance of the state government and to lessen the burden in this regard resting upon tangible property. All taxes collected under the provisions of this title shall be used, together with revenue from other sources, to pay appropriations for the maintenance of the state government. 43-203. Severability If any provision of this title be held invalid, such invalidity shall not affect other provisions which can be given effect without the invalid provision and to this end the provisions of this title are declared to be severable. 43-204. Repeal; savings clause The "income tax act of 1933", being sections 73-1501 to 73-1551, inclusive, as amended, Arizona code of 1939, is repealed. The "income tax act of 1954", as amended, Arizona Revised Statutes of 1956, is also repealed. Such repeals shall not affect any act done or any right accruing or accrued, or any suit or proceeding had or commenced in any civil cause before such repeals, but all rights and liabilities under such acts shall continue, and may be enforced in the same manner, as if such repeals had not been made. All offenses committed, and all penalties, assessments or forfeitures incurred or imposed under such acts repealed, may be prosecuted and punished in the same manner and with the same effect as if this title had not been passed. 43-206. Urban revenue sharing fund; allocation; distribution; withholding A. The urban revenue sharing fund is established. Through fiscal year 2022-2023, the fund consists of an amount equal to fifteen percent of the net proceeds of the state income taxes for the fiscal year two years preceding the current fiscal year. Beginning in fiscal year 2023-2024, the fund consists of an amount equal to eighteen percent of the net proceeds of the state income taxes for the fiscal year two years preceding the current fiscal year. The fund shall be distributed to incorporated cities and towns as provided in this section, except that a city or town shall receive at least an amount equal to what a city or town with a population of fifteen hundred or more persons would receive. The transfer of net proceeds prescribed by section 49-282, subsection B does not affect the calculation of net proceeds prescribed by this subsection. B. Each city or town shall share in the urban revenue sharing fund in the proportion that the population of each bears to the population of all. Except as provided by sections 42-5033 and 42-5033.01, the population of a city or town as determined by the most recent United States decennial census plus any revisions to the decennial census certified by the United States bureau of the census shall be used as the basis for apportioning monies pursuant to this subsection. C. The treasurer, on instruction from the department, shall transmit, not later than the tenth day of each month, to each city or town an amount equal to one-twelfth of that city's or town's total entitlement for the current fiscal year from the urban revenue sharing fund as determined by the department. D. A newly incorporated city or town shall share in the urban revenue sharing fund beginning the first month of the first full fiscal year following incorporation. E. On receipt of a certificate of default from the greater Arizona development authority pursuant to section 41-2257 or 41-2258, the state treasurer, to the extent not otherwise expressly prohibited by law, shall withhold from the next succeeding distribution of monies pursuant to this section due to the city or town the amount specified in the certificate of default and immediately deposit the amount withheld in the greater Arizona development authority revolving fund. The state treasurer shall continue to withhold and deposit the monies until the authority certifies to the state treasurer that the default has been cured. The state treasurer may not withhold any amount that is necessary, as certified by the defaulting political subdivision to the state treasurer and the authority, to make any required deposits then due for the payment of principal and interest on bonds of the political subdivision that were issued before the date of the loan repayment agreement or bonds and that have been secured by a pledge of distributions made pursuant to this section. F. Except as otherwise provided by this subsection, on notice from the attorney general pursuant to section 41-194.01, subsection B, paragraph 1 that an ordinance, regulation, order or other official action adopted or taken by the governing body of a city or town violates state law or the Constitution of Arizona, the state treasurer shall withhold the distribution of monies pursuant to this section to the affected city or town and shall continue to withhold monies pursuant to this subsection until the attorney general certifies to the state treasurer that the violation has been resolved. The state treasurer shall redistribute the monies withheld pursuant to this subsection among all other cities and towns in proportion to their population as provided by subsection B of this section. The state treasurer shall not withhold any amount that the city or town certifies to the attorney general and the state treasurer as being necessary to make any required deposits or payments for debt service on bonds or other long-term obligations of the city or town that were issued or incurred before committing the violation. 43-207. Illegal income; duty of law enforcement or prosecuting agency; distribution of revenue; definitions A. Whenever state or local law enforcement agency personnel in the course of an investigation obtain knowledge or a good faith belief that a person has received illegal income with an estimated value in excess of one thousand dollars, the person in charge of the investigation shall provide identifying information to the department. The law enforcement agency shall cooperate fully with the department in providing the department with information regarding the illegal income. Such cooperation and identifying information shall include but is not limited to the provision of names, addresses, the identity and location of income sources, and the identity and location of assets. B. Whenever any person prosecuting a person on behalf of the state obtains information in the course of the prosecution which information shows that the person being prosecuted has received or may have received illegal income in excess of one thousand dollars and it appears that the information has not been previously reported to the department, the prosecutor shall immediately provide identifying information to the department. The prosecutor shall cooperate fully with the department in providing information regarding the person and amount of illegal income received. C. The monies collected in taxes as a result of information provided to the department under this section shall be deposited in the state general fund. D. For the purposes of this section: 1. "Illegal income" means any economic benefit of money or property of any kind derived from any unlawful activity, including but not limited to theft, robbery, forgery, bribery, prostitution, gambling, fraud, or unlawful sales. 2. "State or local law enforcement agency" means the department of public safety, county sheriff departments, and municipal police departments. 43-208. Administration and enforcement The department shall administer and enforce this title. In addition to the administrative provisions of this title, title 42, chapter 1, article 3, including the civil and criminal penalties prescribed by sections 42-1125 and 42-1127, applies to this title. 43-209. Collection of tax on income of professional athletes earned in this state; separate accounting for tax revenue from professional football and baseball; definitions A. The department shall adopt and enforce rules for the collection of tax under this title on the income earned for services rendered in this state by professional athletes and employees of professional sport franchise organizations. B. On or before December 31 of each year each professional football franchise organization that is domiciled in this state and each professional baseball franchise organization that compensates individuals for services rendered at a major league baseball facility that is owned by a county stadium district pursuant to title 48, chapter 26 and that is operated by the county stadium district or the professional baseball franchise organization that occupies the facility shall provide to the department the federal taxpayer identification number, assigned pursuant to section 6109 of the internal revenue code, for each resident and nonresident employee of the organization who rendered services in this state for the organization during the calendar year. Unless due to reasonable cause and not due to wilful neglect, a professional football franchise organization or professional baseball franchise organization that fails to provide taxpayer identification numbers pursuant to this subsection shall pay a civil penalty of $5 for each such number. C. For purposes of section 42-1116, subsection C, on or before March 31 of each year, the department shall separately account for and report to the state treasurer as a single aggregate amount the total net revenues collected during the preceding calendar year from the imposition of tax under this title on the income from all sources of: 1. Any professional football franchise organization that is domiciled in this state. 2. Resident and nonresident employees of any professional football franchise organization that is domiciled in this state. For reporting purposes under this subsection, the department shall include all income reported on joint returns, regardless of the spouse to whom it is attributable, and the income of an employee's spouse that is reported on a separate return. D. For the purposes of section 42-1116, subsection D and subject to section 48-4238, on or before March 31 of each year through December 31, 2056, the department shall separately account for and report to the state treasurer as a single aggregate amount the total net revenues collected during the preceding calendar year from the imposition of tax under this title on the income from all sources of: 1. Any professional baseball franchise organization that is domiciled in this state. 2. Resident and nonresident employees who are members of any professional baseball franchise organization that is domiciled in this state. For reporting purposes under this subsection, the department shall include all income reported on joint returns, regardless of the spouse to whom it is attributable, and the income of an employee's spouse that is reported on a separate return. 3. Resident and nonresident employees who are members of any professional baseball franchise organization that is domiciled outside of this state for services rendered in this state at a major league baseball facility that is owned by a county stadium district pursuant to title 48, chapter 26 and that is operated by the county stadium district or the professional baseball franchise organization that occupies the facility. E. For the purposes of this section: 1. "Member of any professional baseball franchise organization": (a) Means an employee who is an active player, a player on the disabled list and any other person required to travel and who travels with and performs services for the professional baseball franchise organization on a regular basis. (b) Includes coaches, managers, trainers and broadcasters. 2. "Professional baseball franchise organization" means an organization that has the right to field a team for participation in professional baseball contests scheduled by a nationwide league during a regular season held in the months of March through October each year. 3. "Professional football franchise organization" means an organization that has the right to field a team for participation in professional football contests scheduled by a nationwide league during a regular season held in the months of September through December each year. 43-210. Premium tax credit; health insurance; certification of qualified persons; violation; classification; definitions A. The department shall issue a certificate of eligibility to a person who files an application with the department in the form and manner prescribed by the department on a first come, first served basis, subject to subsection E. An application submitted to the department under this section shall contain or be verified by a written declaration that it is made under penalty of perjury. A person is entitled to receive a certificate if the department determines monies are available for this program pursuant to subsection E, the person has never before received a certificate and the person is either: 1. A small business. 2. An individual who satisfies all of the following: (a) Earns less than two hundred fifty per cent of the federal poverty level. (b) Is a legal resident of this state and a citizen of the United States or a legal resident alien. (c) Has not been covered under a health insurance policy for at least six consecutive months before the application. (d) Is not enrolled in the Arizona health care cost containment system, medicare or any other state or federal government health insurance program. B. A health care insurer that enrolls an individual or small business certified pursuant to this section shall deduct the amount of the certificate from the premium. C. For an individual, the amount of the certificate is the lesser of: 1. One thousand dollars for coverage on a single person, five hundred dollars for coverage on a child or three thousand dollars for family coverage. 2. Fifty per cent of the health insurance premium. D. For a small business, the amount of the certificate is the lesser of: 1. One thousand dollars for coverage on each single employee or three thousand dollars for each employee who elects family coverage. 2. Fifty per cent of the health insurance premium. E. A health care insurer that enrolls an individual or small business certified pursuant to this section shall notify the department of the enrollment and the amount of premium tax credit it intends to claim for the current calendar year no later than the fifteenth day of the month following commencement of coverage. The department shall not issue any certificates under this section that exceed in the aggregate a combined total of five million dollars in any calendar year. F. The initial certificate is valid for a period of ninety days after the date the department issues the certificate. If the individual or small business obtains health care insurance within this period of time the certificate is valid for one year from commencement of coverage. G. Sixty days before the expiration of the certificate the department shall review the status of the individual or small business. If the individual or small business continues to meet the qualifications pursuant to subsection A, paragraph 1 or paragraph 2, subdivisions (a), (b) and (d), the department shall reissue the certificate of eligibility. H. Individuals and small businesses are eligible for a maximum of two reissued certificates of eligibility. I. This section does not guarantee health insurance coverage to an individual or small business pursuant to this section. J. The department shall issue the certificate of eligibility in the name of a specific individual and the certificate is nontransferable. A person who sells, conveys, transfers or assigns the certificate to another person or attempts to sell, convey, transfer or assign the certificate to another person is guilty of a class 2 misdemeanor. K. For the purposes of this section: 1. "Family" means any of the following: (a) An adult and the adult's spouse. (b) An adult, the adult's spouse and all unmarried dependent children under nineteen years of age or under twenty-five years of age if a full-time student. (c) An adult and the adult's unmarried dependent children under nineteen years of age or under twenty-five years of age if a full-time student. 2. "Federal poverty level" means the federal poverty level guidelines published annually by the United States department of health and human services. 3. "Health care insurer" means a disability insurer, group disability insurer, blanket disability insurer, health care services organization, hospital service corporation, medical service corporation or hospital and medical service corporation that provides health insurance in this state. 4. "Health insurance" means a licensed health care plan or arrangement that pays for or furnishes medical or health care services and that is issued by a health care insurer. 5. "Small business" means a business that has been in existence for at least one calendar year in this state, that had not provided health insurance to its employees for at least six consecutive months before the application and that had at least two and no more than twenty-five employees during the most recent calendar year. 43-211. I didn't pay enough fund A. The I didn't pay enough fund is established consisting of monies received pursuant to section 43-621. B. The director of the department of revenue shall administer the fund. On notice from the director, the state treasurer shall invest and divest monies in the fund as provided by section 35-313, and monies earned from investment shall be credited to the fund. C. The department of revenue shall use the monies in the fund for the administrative costs of this section, except that administrative costs may not exceed ten per cent of the monies in the fund. Any unexpended monies revert to the state general fund at the close of the fiscal year. 43-212. Individual income tax model; fiscal impact requests; staff access A. The department shall maintain an individual income tax model that estimates the fiscal impact of proposed individual income tax legislation. B. The individual income tax model shall: 1. At a minimum, allow for the adjustment of individual income tax law parameters against an anonymized representative sample of individual income tax returns. 2. Include procedures to protect taxpayer confidentiality under applicable state and federal law. C. The department shall accept requests from the joint legislative budget committee staff and legislative staff for estimates of the fiscal impact of proposed individual income tax legislation using the individual income tax model. The department shall fulfill any request under this subsection in a prompt and timely manner. D. On completion of the integrated tax system modernization project developed pursuant to section 42-5041, the individual income tax model required by this section shall provide department staff, joint legislative budget committee staff and the governor's office of strategic planning and budgeting staff direct access to the individual income tax model so that individual income tax law parameters may be interactively adjusted to develop immediate fiscal impact estimates without any additional programming required for each estimate. 43-221. Joint legislative income tax credit review committee; report A. The joint legislative income tax credit review committee is established consisting of the following members: 1. Five members of the house of representatives ways and means committee appointed by the speaker of the house of representatives. Not more than three appointees shall be of the same political party. 2. Five members of the senate finance committee appointed by the president of the senate. Not more than three appointees shall be of the same political party. B. The committee shall determine the original purpose of existing tax credits and establish a standard for evaluating and measuring the success or failure of the tax credits. The standard for evaluating tax credits may include: 1. The history, rationale and estimated revenue impact of the credit. 2. Whether the credit has provided a benefit to this state including, for corporate tax credits, measurable economic development, new investments, creation of new jobs or retention of existing jobs in this state. 3. Whether the credit is unnecessarily complex in the application, administration and approval process. C. The committee shall review the individual and corporate income tax credits pursuant to the schedule prescribed in section 43-222. The committee shall use the joint legislative budget committee staff and may use the staff of the department of revenue and legislative council for assistance. D. After completing the review process, the committee shall determine whether the credit should be amended, repealed or retained. If the credit is recommended to be retained or amended, the committee shall recommend that the credit be returned to the income tax credit review schedule prescribed in section 43-222. The next review year shall be the fifth full calendar year following the date the credit was reviewed. The committee shall report its findings and recommendations to the president of the senate, the speaker of the house of representatives and the governor by December 15 of the year that the committee reviews the credit. The committee shall provide a copy of the report to the secretary of state. 43-222. Income tax credit review schedule The joint legislative income tax credit review committee shall review the following income tax credits: 1. For years ending in 0 and 5, sections 43-1079.01, 43-1088, 43-1089.04, 43-1167.01 and 43-1175. 2. For years ending in 1 and 6, sections 43-1072.02, 43-1074.02, 43-1076.01, 43-1077, 43-1078, 43-1083, 43-1083.02, 43-1162, 43-1164.03 and 43-1183. 3. For years ending in 2 and 7, sections 43-1073, 43-1082, 43-1085, 43-1086, 43-1089, 43-1089.01, 43-1089.02, 43-1089.03, 43-1164, 43-1165, and 43-1181. 4. For years ending in 3 and 8, sections 43-1074.01, 43-1168 and 43-1178. 5. For years ending in 4 and 9, sections 43-1073.01, 43-1081.01, 43-1083.03, 43-1084, 43-1164.04, 43-1164.05 and 43-1184. 43-223. Requirements for new income tax credits established by the legislature Any new individual or corporate income tax credit that is enacted by the legislature shall include in its enabling legislation: 1. A specific review year for the joint legislative income tax credit review committee to review the credit. The specific review year shall be the fifth full calendar year following the date the credit is enacted. 2. A purpose clause that explains the rationale and objective of the tax credit. 43-224. Individual and corporate income tax credits; annual report; termination of unused credits A. On or before September 30 of each year, the department shall report to the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting on the amount of individual income tax credits and corporate income tax credits that were claimed in the previous fiscal year. B. Except as provided by subsection C of this section, if, in any three consecutive reports under subsection A of this section, an individual or corporate income tax credit was not claimed by or allowed to any individual or corporate taxpayer, the director of the department of revenue shall: 1. Terminate the recognition and servicing of that credit for taxable years beginning from and after December 31 of the year in which the third report is issued. 2. Issue a public announcement, including on the department's website, of the termination of the credit under authority of this section. 3. Notify the governor's office of strategic planning and budgeting, the president of the senate, the speaker of the house of representatives, the joint legislative budget committee and the legislative council. 4. Include the repeal of all statutes relating to the terminated credit in technical tax correction legislation for enactment in the next regular session of the legislature. If the credit included for repeal in the technical tax correction legislation has unused credits carried forward from prior years, the technical tax correction legislation shall include a saving clause to allow for the continued use of the carried forward amounts for the remainder of the carryforward period specified in the repealed credit. If the legislature fails to enact this legislation, the director shall rescind the termination of the credit. C. The director may not terminate under subsection B of this section the recognition and servicing of any income tax credit that is subject by law to preapproval by the Arizona commerce authority unless over any period of three consecutive calendar years both of the following conditions occur with respect to the credit: 1. The department has not received notice of preapproval of any applicant or project for the credit from the Arizona commerce authority. 2. In the report issued under subsection A of this section, the credit was not claimed by or allowed to any taxpayer. D. For the purposes of this section, unused credits carried forward from prior years are not considered claimed or allowed in the year the credit carried forward is used. 43-241. Time for performance of acts; definition A. Notwithstanding any other provision of this title or title 1, if the last day for performing any act under this title falls on a Saturday, Sunday or legal holiday, the act is considered timely if it is performed on the next day that is not a Saturday, Sunday or legal holiday. B. For the purposes of this section "legal holiday" shall include holidays specified in section 1-301 and holidays determined by the United States secretary of the treasury for the purposes of section 7503 of the internal revenue code. 43-242. Change of taxpayer organization; nontaxable event Notwithstanding any provision of the internal revenue code or any federal rule or regulation adopted pursuant to the internal revenue code, a change in the organizational structure of a corporation, including an S corporation, or a limited liability company, a partnership or any other entity, however organized, into another organizational structure is not a taxable event for the purposes of this title if there is no change among the owners, their ownership interests or the assets of the organization. 43-243. State general fund revenue notification; tax rate adjustment A. On or before September 30, 2022, the director of the joint legislative budget committee and the director of the governor's office of strategic planning and budgeting shall jointly notify the department whether the fiscal year 2021-2022 state general fund revenue, excluding the beginning balance, was $12,782,800,000 or more. B. On or before September 30, 2023 and on or before September 30 of each year until the notice is provided as prescribed in subsection A of this section or paragraph 1 of this subsection, and paragraph 2 of this subsection, the director of the joint legislative budget committee and the director of the governor's office of strategic planning and budgeting shall jointly notify the department whether the previous fiscal year state general fund revenue, excluding the beginning balance, was either of the following amounts: 1. More than $12,782,800,000 but less than $12,976,300,000. The notice required pursuant to this paragraph is not required if the notice required pursuant to subsection A of this section was provided on or before September 30, 2022. 2. $12,976,300,000 or more. C. On receipt of the notice required pursuant to subsection A or subsection B, paragraph 1 of this section, the department shall use the tax rates provided in section 43-1011, subsection A, paragraph 8 for taxable years beginning from and after December 31 of the year in which the notice required pursuant to subsection A or subsection B, paragraph 1 of this section is received. The tax rate prescribed in section 43-1011, subsection A, paragraph 8 applies until the department receives the notice required pursuant to subsection B, paragraph 2 of this section. D. On receipt of the notice required pursuant to subsection B, paragraph 2 of this section, the department shall use the tax rates provided in section 43-1011, subsection A, paragraph 9 for taxable years beginning from and after December 31 of the year in which the notice required pursuant to subsection B, paragraph 2 of this section is received. E. The director of the joint legislative budget committee and the director of the governor's office of strategic planning and budgeting shall notify the department as required pursuant to subsection B, paragraphs 1 and 2 of this section only on the first occurrence that each state general fund revenue threshold is met. 43-244. State general fund revenue notification; tax rate adjustment A. On or before September 30, 2022, the director of the joint legislative budget committee and the director of the governor's office of strategic planning and budgeting shall jointly notify the department whether the fiscal year 2021-2022 state general fund revenue, excluding the beginning balance, was $12,782,800,000 or more. B. On or before September 30, 2023 and on or before September 30 of each year until the notice is provided as prescribed in subsection A of this section or paragraph 1 of this subsection, and paragraph 2 of this subsection, the director of the joint legislative budget committee and the director of the governor's office of strategic planning and budgeting shall jointly notify the department whether the previous fiscal year state general fund revenue, excluding the beginning balance, was either of the following amounts: 1. More than $12,782,800,000 but less than $12,976,300,000. The notice required pursuant to this paragraph is not required if the notice required pursuant to subsection A of this section was provided on or before September 30, 2022. 2. $12,976,300,000 or more. C. On receipt of the notice required pursuant to subsection A or subsection B, paragraph 1 of this section, the department shall use the tax rates provided in section 43-1311, subsection B, paragraph 3 for taxable years beginning from and after December 31 of the year in which the notice required pursuant to subsection A or subsection B, paragraph 1 of this section is received. The tax rate prescribed in section 43-1311, subsection B, paragraph 3 applies until the department receives the notice required pursuant to subsection B, paragraph 2 of this section. D. On receipt of the notice required pursuant to subsection B, paragraph 2 of this section, the department shall use the tax rates provided in section 43-1311, subsection B, paragraph 4 for taxable years beginning from and after December 31 of the year in which the notice required pursuant to subsection B, paragraph 2 of this section is received. E. The director of the joint legislative budget committee and the director of the governor's office of strategic planning and budgeting shall notify the department as required pursuant to subsection B, paragraphs 1 and 2 of this section only on the first occurrence that each state general fund revenue threshold is met.