The URL can be used to link to this page

Home My WebLink About170216Pz:\council packets\2017\r170216\170216a.docx Last Printed: 2/13/2017 5:27 PM Page 1 of 4 REVISED: 2-13-17 NOTICE OF THE EXECUTIVE AND REGULAR SESSIONS OF THE FOUNTAIN HILLS TOWN COUNCIL TIME: 6:00 P.M. – EXECUTIVE SESSION (Executive Session will be held in the Fountain Conference Room - 2nd floor) 6:30 P.M. – REGULAR SESSION WHEN: THURSDAY, FEBRUARY 16, 2017 WHERE: FOUNTAIN HILLS COUNCIL CHAMBERS 16705 E. AVENUE OF THE FOUNTAINS, FOUNTAIN HILLS, AZ Councilmembers of the Town of Fountain Hills will attend either in person or by telephone conference call; a quorum of the Town’s various Commission, Committee or Board members may be in attendance at the Council meeting. Notice is hereby given that pursuant to A.R.S. § 1-602.A.9, subject to certain specified statutory exceptions, parents have a right to consent before the State or any of its political subdivisions make a video or audio recording of a minor child. Meetings of the Town Council are audio and/or video recorded and, as a result, proceedings in which children are present may be subject to such recording. Parents, in order to exercise their rights may either file written consent with the Town Clerk to such recording, or take personal action to ensure that their child or children are not present when a recording may be made. If a child is present at the time a recording is made, the Town will assume that the rights afforded parents pursuant to A.R.S. § 1-602.A.9 have been waived. PROCEDURE FOR ADDRESSING THE COUNCIL Anyone wishing to speak before the Council must fill out a speaker’s card and submit it to the Town Clerk prior to Council discussion of that Agenda item. Speaker Cards are located in the Council Chamber Lobby and near the Clerk’s position on the dais. Speakers will be called in the order in which the speaker cards were received either by the Clerk or the Mayor. At that time, speakers should stand and approach the podium. Speakers are asked to state their name and whether or not they reside in Fountain Hills (do not provide a home address) prior to commenting and to direct their comments to the Presiding Officer and not to individual Councilmembers. Speakers’ statements should not be repetitive. If a speaker chooses not to speak when called, the speaker will be deemed to have waived his or her opportunity to speak on the matter. Speakers may not (i) reserve a portion of their time for a later time or (ii) transfer any portion of their time to another speaker. If there is a Public Hearing, please submit the speaker card to speak to that issue during the Public Hearing. Individual speakers will be allowed three contiguous minutes to address the Council. Time limits may be waived by (i) discretion of the Town Manager upon request by the speaker not less than 24 hours prior to a Meeting, (ii) consensus of the Council at Meeting or (iii) the Mayor either prior to or during a Meeting. Please be respectful when making your comments. If you do not comply with these rules, you will be asked to leave. Mayor Linda M. Kavanagh Councilmember Dennis Brown Councilmember Alan Magazine Vice Mayor Nick DePorter Councilmember Art Tolis Councilmember Henry Leger Councilmember Cecil A. Yates z:\council packets\2017\r170216\170216a.docx Last Printed: 2/13/2017 5:27 PM Page 2 of 4 EXECUTIVE SESSION AGENDA  CALL TO ORDER – Mayor Linda M. Kavanagh 1. ROLL CALL AND VOTE TO GO INTO EXECUTIVE SESSION: Pursuant to: A.R.S. § 38-431.03(A) (4), Discussion or consultation with the attorneys of the public body in order to consider its position and instruct its attorneys regarding the public body’s position regarding contracts that are the subject of negotiations, in pending or contemplated litigation or in settlement discussions conducted in order to avoid or resolve litigation (specifically, the Chaparral City Water rate case). 2. ADJOURNMENT. REGULAR SESSION AGENDA  CALL TO ORDER AND PLEDGE OF ALLEGIANCE – Mayor Linda M. Kavanagh  INVOCATION – Bishop Larry Radford, Church of Jesus Christ of Latter Day Saints  ROLL CALL – Mayor Linda M. Kavanagh  MAYOR’S REPORT i) None.  SCHEDULED PUBLIC APPEARANCES/PRESENTATIONS i) The Mayor and/or Council may review RECENT EVENTS attended relating to Economic Development. CALL TO THE PUBLIC Pursuant to A.R.S. §38-431-01(H), public comment is permitted (not required) on matters not listed on the agenda. Any such comment (i) must be within the jurisdiction of the Council and (ii) is subject to reasonable time, place, and manner restrictions. The Council will not discuss or take legal action on matters raised during “Call to the Public” unless the matters are properly noticed for discussion and legal action. At the conclusion of the call to the public, individual Councilmembers may (i) respond to criticism, (ii) ask staff to review a matter or (iii) ask that the matter be placed on a future Council agenda. CONSENT AGENDA ITEMS All items listed on the Consent Agenda are considered to be routine, non-controversial matters and will be enacted by one motion and one roll call vote of the Council. All motions and subsequent approvals of consent items will include all recommended staff stipulations unless otherwise stated. There will be no separate discussion of these items unless a Councilmember or member of the public so requests. If a Councilmember or member of the public wishes to discuss an item on the consent agenda, he/she may request so prior to the motion to accept the Consent Agenda or with notification to the Town Manager or Mayor prior to the date of the meeting for which the item was scheduled. The items will be removed from the Consent Agenda and considered in its normal sequence on the Agenda. z:\council packets\2017\r170216\170216a.docx Last Printed: 2/13/2017 5:27 PM Page 3 of 4 1. CONSIDERATION of approving the TOWN COUNCIL MEETING MINUTES from February 2, 2017. 2. CONSIDERATION of approving a SPECIAL EVENT LIQUOR LICENSE APPLICATION for It Ain’t Chemo (Kevin Hoyt) for the promotion of a fundraiser to be held at Fountain Park in conjunction with the Ragnar Relay event, from 9:00 AM to 9:00 PM on Saturday, March 11, 2017. 3. CONSIDERATION of approving a SPECIAL EVENT LIQUOR LICENSE APPLICATION for the American Legion Post 58 (Harold Denomme) for the promotion a fund raiser to be held at the American Legion Post, located at 16837 Parkview Drive, Fountain Hills, AZ from 10:00 AM to 10:00 PM daily, beginning Friday, February 24, 2017, through Sunday, February 26, 2017. 4. CONSIDERATION of approving a SPECIAL EVENT LIQUOR LICENSE APPLICATION for the Extended Hands Food Bank (David Iverson) for the promotion a fund raiser, in conjunction with Kern Entertainment's St. Patrick's Day/Arch Mahaffey Chili Cook Off to be held at Kern Entertainment, located at 16742 Parkview Drive, Fountain Hills, AZ, from 3:00 PM to 10:00 PM, Friday, March 17, 2017. 5. CONSIDERATION of approving a LIQUOR LICENSE APPLICATION submitted by Andy James Weiner, owner of Skullenwink, LLC d/b/a Dead Heat Brewing, located at 14825 E. Shea Blvd., Suite 101, Fountain Hills, AZ. This is for a series 3 license (Microbrewery). 6. CONSIDERATION of approving RESOLUTION 2017-04, abandoning whatever right, title, or interest the Town has in the certain public utility and drainage easement located at the rear property line of Plat 505B, Lot 82 (15644 E. Tepee Drive), as recorded in Book 158, Page 43, records of Maricopa County, Arizona. (EA2017-01) 7. CONSIDERATION of approving RESOLUTION 2017-05, abandoning whatever right, title, or interest the Town has in the certain 20' Public Utility and Drainage Easement located at the rear property line of Plat 505-D, Block 2, Lot 35 (16406 Dixie Mine Trail), as recorded in Book 158, Page 41, records of Maricopa County, Arizona, with stipulation. (EA 2016-03) REGULAR AGENDA 8. CONSIDERATION of APPOINTING three (3) Board of Adjustment Members, each to serve two (2) year terms, beginning on February 17, 2017, and ending January 31, 2019. 9. PRESENTATION by J2 Engineering and Environmental Design, LLC relating to the TOWN’S ADERO CANYON TRAILHEAD DESIGN. 10. DISCUSSION WITH POSSIBLE DIRECTION TO STAFF regarding EXTENDING undergrounding of the existing overhead 12 kV lines farther northward, revising part of Salt River Projects’ Municipal Aesthetics Fund project (El Pueblo and Grande Conversion and 69 kV Replacement). z:\council packets\2017\r170216\170216a.docx Last Printed: 2/13/2017 5:27 PM Page 4 of 4 11. DISCUSSION WITH POSSIBLE DIRECTION TO STAFF relating to any item included in the League of Arizona Cities and Towns weekly LEGISLATIVE BULLETIN or relating to any ACTION PROPOSED OR PENDING BEFORE THE STATE LEGISLATURE. a. HB2213 - Government Property Lease Excise Tax (GPLET) – the request was made to add this bill for further discussion at the February 2, 2017 meeting. b. HB2179 – Municipalities, Counties: intergovernmental agreements, requirements c. HB2521 – TPT reform, contractors d. League of Cities and Towns – Bulletin #4 e. League of Cities and Towns – Bulletin #5 12. COUNCIL DISCUSSION/DIRECTION to the Town Manager. Item(s) listed below are related only to the propriety of (i) placing such item(s) on a future agenda for action or (ii) directing staff to conduct further research and report back to the Council: i.) None. 13. SUMMARY OF COUNCIL REQUESTS and REPORT ON RECENT ACTIVITIES by the Mayor, Individual Councilmembers, and the Town Manager. 14. ADJOURNMENT. DATED this 9th day of February, 2017. Bevelyn J. Bender, Town Clerk The Town of Fountain Hills endeavors to make all public meetings accessible to persons with disabilities. Please call 480 -816-5100 (voice) or 1-800-367-8939 (TDD) 48 hours prior to the meeting to request a reasonable accommodation to participate in this meeting or to obtain agenda information in large print format. Supporting documentation and staff reports furnished the Council with this agenda are available for review in the Clerk’s office. z:\council packets\2017\r170216\170216a.docx Last Printed: 2/13/2017 5:27 PM Page 1 of 4 REVISED: 2-13-17 NOTICE OF THE EXECUTIVE AND REGULAR SESSIONS OF THE FOUNTAIN HILLS TOWN COUNCIL TIME: 6:00 P.M. – EXECUTIVE SESSION (Executive Session will be held in the Fountain Conference Room - 2nd floor) 6:30 P.M. – REGULAR SESSION WHEN: THURSDAY, FEBRUARY 16, 2017 WHERE: FOUNTAIN HILLS COUNCIL CHAMBERS 16705 E. AVENUE OF THE FOUNTAINS, FOUNTAIN HILLS, AZ Councilmembers of the Town of Fountain Hills will attend either in person or by telephone conference call; a quorum of the Town’s various Commission, Committee or Board members may be in attendance at the Council meeting. Notice is hereby given that pursuant to A.R.S. § 1-602.A.9, subject to certain specified statutory exceptions, parents have a right to consent before the State or any of its political subdivisions make a video or audio recording of a minor child. Meetings of the Town Council are audio and/or video recorded and, as a result, proceedings in which children are present may be subject to such recording. Parents, in order to exercise their rights may either file written consent with the Town Clerk to such recording, or take personal action to ensure that their child or children are not present when a recording may be made. If a child is present at the time a recording is made, the Town will assume that the rights afforded parents pursuant to A.R.S. § 1-602.A.9 have been waived. PROCEDURE FOR ADDRESSING THE COUNCIL Anyone wishing to speak before the Council must fill out a speaker’s card and submit it to the Town Clerk prior to Council discussion of that Agenda item. Speaker Cards are located in the Council Chamber Lobby and near the Clerk’s position on the dais. Speakers will be called in the order in which the speaker cards were received either by the Clerk or the Mayor. At that time, speakers should stand and approach the podium. Speakers are asked to state their name and whether or not they reside in Fountain Hills (do not provide a home address) prior to commenting and to direct their comments to the Presiding Officer and not to individual Councilmembers. Speakers’ statements should not be repetitive. If a speaker chooses not to speak when called, the speaker will be deemed to have waived his or her opportunity to speak on the matter. Speakers may not (i) reserve a portion of their time for a later time or (ii) transfer any portion of their time to another speaker. If there is a Public Hearing, please submit the speaker card to speak to that issue during the Public Hearing. Individual speakers will be allowed three contiguous minutes to address the Council. Time limits may be waived by (i) discretion of the Town Manager upon request by the speaker not less than 24 hours prior to a Meeting, (ii) consensus of the Council at Meeting or (iii) the Mayor either prior to or during a Meeting. Please be respectful when making your comments. If you do not comply with these rules, you will be asked to leave. Mayor Linda M. Kavanagh Councilmember Dennis Brown Councilmember Alan Magazine Vice Mayor Nick DePorter Councilmember Art Tolis Councilmember Henry Leger Councilmember Cecil A. Yates z:\council packets\2017\r170216\170216a.docx Last Printed: 2/13/2017 5:27 PM Page 2 of 4 EXECUTIVE SESSION AGENDA  CALL TO ORDER – Mayor Linda M. Kavanagh 1. ROLL CALL AND VOTE TO GO INTO EXECUTIVE SESSION: Pursuant to: A.R.S. § 38-431.03(A) (4), Discussion or consultation with the attorneys of the public body in order to consider its position and instruct its attorneys regarding the public body’s position regarding contracts that are the subject of negotiations, in pending or contemplated litigation or in settlement discussions conducted in order to avoid or resolve litigation (specifically, the Chaparral City Water rate case). 2. ADJOURNMENT. REGULAR SESSION AGENDA  CALL TO ORDER AND PLEDGE OF ALLEGIANCE – Mayor Linda M. Kavanagh  INVOCATION – Bishop Larry Radford, Church of Jesus Christ of Latter Day Saints  ROLL CALL – Mayor Linda M. Kavanagh  MAYOR’S REPORT i) None.  SCHEDULED PUBLIC APPEARANCES/PRESENTATIONS i) The Mayor and/or Council may review RECENT EVENTS attended relating to Economic Development. CALL TO THE PUBLIC Pursuant to A.R.S. §38-431-01(H), public comment is permitted (not required) on matters not listed on the agenda. Any such comment (i) must be within the jurisdiction of the Council and (ii) is subject to reasonable time, place, and manner restrictions. The Council will not discuss or take legal action on matters raised during “Call to the Public” unless the matters are properly noticed for discussion and legal action. At the conclusion of the call to the public, individual Councilmembers may (i) respond to criticism, (ii) ask staff to review a matter or (iii) ask that the matter be placed on a future Council agenda. CONSENT AGENDA ITEMS All items listed on the Consent Agenda are considered to be routine, non-controversial matters and will be enacted by one motion and one roll call vote of the Council. All motions and subsequent approvals of consent items will include all recommended staff stipulations unless otherwise stated. There will be no separate discussion of these items unless a Councilmember or member of the public so requests. If a Councilmember or member of the public wishes to discuss an item on the consent agenda, he/she may request so prior to the motion to accept the Consent Agenda or with notification to the Town Manager or Mayor prior to the date of the meeting for which the item was scheduled. The items will be removed from the Consent Agenda and considered in its normal sequence on the Agenda. z:\council packets\2017\r170216\170216a.docx Last Printed: 2/13/2017 5:27 PM Page 3 of 4 1. CONSIDERATION of approving the TOWN COUNCIL MEETING MINUTES from February 2, 2017. 2. CONSIDERATION of approving a SPECIAL EVENT LIQUOR LICENSE APPLICATION for It Ain’t Chemo (Kevin Hoyt) for the promotion of a fundraiser to be held at Fountain Park in conjunction with the Ragnar Relay event, from 9:00 AM to 9:00 PM on Saturday, March 11, 2017. 3. CONSIDERATION of approving a SPECIAL EVENT LIQUOR LICENSE APPLICATION for the American Legion Post 58 (Harold Denomme) for the promotion a fund raiser to be held at the American Legion Post, located at 16837 Parkview Drive, Fountain Hills, AZ from 10:00 AM to 10:00 PM daily, beginning Friday, February 24, 2017, through Sunday, February 26, 2017. 4. CONSIDERATION of approving a SPECIAL EVENT LIQUOR LICENSE APPLICATION for the Extended Hands Food Bank (David Iverson) for the promotion a fund raiser, in conjunction with Kern Entertainment's St. Patrick's Day/Arch Mahaffey Chili Cook Off to be held at Kern Entertainment, located at 16742 Parkview Drive, Fountain Hills, AZ, from 3:00 PM to 10:00 PM, Friday, March 17, 2017. 5. CONSIDERATION of approving a LIQUOR LICENSE APPLICATION submitted by Andy James Weiner, owner of Skullenwink, LLC d/b/a Dead Heat Brewing, located at 14825 E. Shea Blvd., Suite 101, Fountain Hills, AZ. This is for a series 3 license (Microbrewery). 6. CONSIDERATION of approving RESOLUTION 2017-04, abandoning whatever right, title, or interest the Town has in the certain public utility and drainage easement located at the rear property line of Plat 505B, Lot 82 (15644 E. Tepee Drive), as recorded in Book 158, Page 43, records of Maricopa County, Arizona. (EA2017-01) 7. CONSIDERATION of approving RESOLUTION 2017-05, abandoning whatever right, title, or interest the Town has in the certain 20' Public Utility and Drainage Easement located at the rear property line of Plat 505-D, Block 2, Lot 35 (16406 Dixie Mine Trail), as recorded in Book 158, Page 41, records of Maricopa County, Arizona, with stipulation. (EA 2016-03) REGULAR AGENDA 8. CONSIDERATION of APPOINTING three (3) Board of Adjustment Members, each to serve two (2) year terms, beginning on February 17, 2017, and ending January 31, 2019. 9. PRESENTATION by J2 Engineering and Environmental Design, LLC relating to the TOWN’S ADERO CANYON TRAILHEAD DESIGN. 10. DISCUSSION WITH POSSIBLE DIRECTION TO STAFF regarding EXTENDING undergrounding of the existing overhead 12 kV lines farther northward, revising part of Salt River Projects’ Municipal Aesthetics Fund project (El Pueblo and Grande Conversion and 69 kV Replacement). z:\council packets\2017\r170216\170216a.docx Last Printed: 2/13/2017 5:27 PM Page 4 of 4 11. DISCUSSION WITH POSSIBLE DIRECTION TO STAFF relating to any item included in the League of Arizona Cities and Towns weekly LEGISLATIVE BULLETIN or relating to any ACTION PROPOSED OR PENDING BEFORE THE STATE LEGISLATURE. a. HB2213 - Government Property Lease Excise Tax (GPLET) – the request was made to add this bill for further discussion at the February 2, 2017 meeting. b. HB2179 – Municipalities, Counties: intergovernmental agreements, requirements c. HB2521 – TPT reform, contractors d. League of Cities and Towns – Bulletin #4 e. League of Cities and Towns – Bulletin #5 12. COUNCIL DISCUSSION/DIRECTION to the Town Manager. Item(s) listed below are related only to the propriety of (i) placing such item(s) on a future agenda for action or (ii) directing staff to conduct further research and report back to the Council: i.) None. 13. SUMMARY OF COUNCIL REQUESTS and REPORT ON RECENT ACTIVITIES by the Mayor, Individual Councilmembers, and the Town Manager. 14. ADJOURNMENT. DATED this 9th day of February, 2017. Bevelyn J. Bender, Town Clerk The Town of Fountain Hills endeavors to make all public meetings accessible to persons with disabilities. Please call 480-816-5100 (voice) or 1-800-367-8939 (TDD) 48 hours prior to the meeting to request a reasonable accommodation to participate in this meeting or to obtain agenda information in large print format. Supporting documentation and staff reports furnished the Council with this agenda are available for review in the Clerk’s office. TOWN OF FOUNTAIN HILLS TOWN COUNCIL AGENDA ACTION FORM Meeting Date:2/16/2017 Meeting Type:Regular Session Agenda Type:Consent Submitting Department:Administration Staff Contact Information:Bevelyn J.Bender,Town Clerk;480-816-5115;bbender@fh.az.gov Council Goal: Strategic Values:Civic Responsibility C3 Solicit feedback indecision-making REQUEST TO COUNCIL (Agenda Language):CONSIDERATION of approving the TOWN COUNCIL MEETING MINUTES from February 2,2017. Applicant:NA Applicant Contact Information: Property Location: Related Ordinance,Policy or Guiding Principle:A.R.S.§38-431.01 Staff Summary (background):The intent of approving previous meeting minutes is to ensure an accurate account of the discussion and action that took place at that meeting for archival purposes.Approved minutes are placed on the Town's website in compliance with state law. Risk Analysis (options or alternatives with implications): Fiscal Impact (initial and ongoing costs;budget status): Budget Reference (page number): Funding Source:NA If Multiple Funds utilized,list here: Budgeted;if No,attach Budget Adjustment Form:NA Recommendation(s)by Board(s)or Commission(s): Staff Recommendation(s):Approve List Attachment(s):None SUGGESTED MOTION (for Council use):Move to approve the consent agenda as listed Prepared by:Approved: Bevelyn Bender, Town Clerk 2/6/2017 Grady E.Miller,Town WVanager 2/8/2017 '%_.Ih>Uu^ Page 1 of 1 redact redact redact redactredact redact redact redact redact redact redact redact redact redact redact redact TOWN OF FOUNTAIN HILLS TOWN COUNCIL AGENDA ACTION FORM Meeting Date:2/16/2017 Meeting Type:Regular Session Agenda Type:Consent Submitting Department:Administration Staff Contact Information:Sonia Kukkola/Financial Services Technician (480)-816-5136 Strategic Planning Goal:Not Applicable (NA)Operational Priority:Not Applicable (NA) REQUEST TO COUNCIL (Agenda Language):Consideration of a LIQUOR LICENSE APPLICATION submitted by Andy James Weiner,Owner of SkuUenwink LLC DBA Dead Heat Brewing,located at 14825 E Shea Blvd Suite #101 Fountain Hills,AZ.This is for a series 3 (Microbrewery). Applicant:Andy James Weiner -Owner Applicant Contact Information:480-980-3579 Owner:Andy James Weiner Owner Contact Information:480-980-3579 Property Location:14825 E Shea Blvd Suite #101,Fountain Hills, AZ Related Ordinance,Policy or Guiding Principle:A.R.S.§4-201;4-202;4-203 &4-205 and R19-1-102 and R19-1-311. Staff Summary (background):The purpose of this item is to obtain Council's recommendation regarding a Series 3 (Microbrewery) liquor license submitted by Andy James Weiner, Owner of SkuUenwink LLC DBA Dead Heat Brewing.The application was reviewed by staff for compliance with Town ordinances.Staff recommends approval of this liquor license application as submitted. Risk Analysis (options or alternatives with implications):N/A Fiscal Impact (initial and ongoing costs;budget status):N/A Budget Reference (page number):N/A Funding Source:NA If Multiple Funds utilized,list here: Budgeted;if No,attach Budget Adjustment Form:NA Recommendation(s)by Board(s)or Commission(s):N/A Staff Recommendation(s):N/A List Attachment(s):Front page of the application and staffs'recommendation SUGGESTED MOTION (for council use):Move to approve LIQUOR LICENSE APPLICATION.. Page 1 of 2 TOWN OF FOUNTAIN HILLS TOWN COUNCIL AGENDA ACTION FORM Meeting Date:2/16/2017 Meeting Type:Regular Session Agenda Type:Consent Submitting Department:Development Services Staff Contact Information:Randy Harrel,Town Engineer;rharrel@fh.az.gov;480-816-5112 REQUEST TO COUNCIL (Agenda Language):CONSIDERATION of approving RESOLUTION 2017-04,abandoning whatever right, title, or interest the Town has in the certain public utility and drainage easement located at the rear property line of Plat 505B, Lot 82 (15644 E.Tepee Drive),as recorded in Book 158,Page 43,records of Maricopa County,Arizona.(EA2017-01 Applicant:Alison Papanikos Applicant Contact Information:15644 E.Tepee Drive,Fountain Hills, AZ 85268;Tele:872-800-4827; papanikos@aol.com Owner:same Owner Contact Information:same Property Location:same Related Ordinance,Policy or Guiding Principle:N/A Staff Summary (background):This item on the Town Council's agenda is a proposal to abandon a portion of the 20'Public Utility and Drainage Easement at the rear property line of Plat 505B,Lot 82 (15644 E.Tepee Drive),as shown in Exhibit "A". All of the public utilities have approved of this abandonment,except that Century Link has not yet responded to the applicant.(Approval of Century Link of abandonment of the Public Utility Easement is a stipulation of this abandonment.Staff anticipates that Century Link will approve of the abandonment in the near future.) The applicant has applied for a Building Permit (BP 16-506)to construct a swimming pool that encroaches into this easement area.To "Provide verification of...abandonment"is the only remaining comment on that building permit application.The applicant needs to note that access to construct that swimming pool through the Town-owned Hesperus Wash property at the rear of this lot is prohibited by Town Code Article 9-3 Town Staff has reviewed the proposed public utility and drainage easement abandonment.Although the Town- owned Hespurus Wash parcel lies at the rear of this property;its 100-year floodplain lies a minimum of 20' outside of this lot,and a minimum of 4'below the adjacent edge of lot elevation.So,the floodplain is not an issue for this abandonment. A 10'x10' Public Utility Easement should be granted by the applicant at the southerly front corner of this lot,for existing and potential future utility boxes there. Risk Analysis (options or alternatives with implications): N/A Page 1 of 2 TOWN OF FOUNTAIN HILLS TOWN COUNCIL AGENDA ACTION FORM Meeting Date:2/16/2017 Meeting Type:Regular Session • • Agenda Type:Regular Submitting Department:Community Services Staff Contact Information:Mark Mayer -mmayer@fh.az.gov REQUEST TO COUNCIL (Agenda Language):Presentation by J2 Engineering and Environmental Design,LLC related to the Town's Adero Canyon Trailhead Design. Applicant:N/A Applicant Contact Information:N/A Owner:N/A Owner Contact Information:N/A Property Location:N/A Related Ordinance,Policy or Guiding Principle:N/A Staff Summary (background):The plans for the trailhead were originally drawn in 2005 to the 95% completion.Further design work was delayed until such time as access could be gained for construction with the development of MCO's Adero Canyon development.Now that access is available,J2 has completed the 95%plan submittals and has now received the Town's staff comments on the 100%plans.Final plans and specifications are due back fromthe architect on March 3rd for bidding.Prior to bidding the plans staff wanted to have J2 review the site design with the Council. Funds for construction will be available on July 1stin the CIP with construction expected to take from six to nine months.This would mean completion as soon as December 2017 or no later than March 2018. Risk Analysis (options or alternatives with implications):N/A Fiscal Impact (initial and ongoing costs;budget status): Budget Reference (page number):2016-17 CIP-pages 356 &357 Funding Source:Multiple Funds if Multiple Funds utilized,list here:Development Fees and CIP Funds Budgeted;if No,attach Budget Adjustment Form:Yes Recommendation(s)by Board(s)or Commission(s):N/A Staff Recommendation(s):N/A List Attachment(s):N/A Page 1 of 2 Adero Canyon Trailhead Construction Bid Documents Adero Canyon Trailhead Site Location Adero Canyon Trailhead 2 Master Plan - 2006 Adero Canyon Trailhead 3 Walk/Drive Through the Trailhead Construction Documents Entry Monument Adero Canyon Trailhead 4 Construction Documents Entry Gate Adero Canyon Trailhead 5 Roadway Tine Texture for Steep Grade Colored Concrete to blend into hillside Ribbon Curb for Low Impact Development and Storm Water Harvesting Wash Preservation and Enhancement Adero Canyon Trailhead 6 Roadside Re-Vegetation Salvaged Surface Soils Salvaged Boulders Desert Pavement Supplemental Cover Revegetation Seed Mix Salvaged Plant Materials Supplemental Vegetation Plantings Adero Canyon Trailhead 7 Parking Areas Wash Preservation and Enhancement ADA Accessible Stalls and Walkways Asphalt Parking Drive Walkway Connections Bus Drop Off School Attendance/Parking Non School Days Grade Nestled into and Behind Outcroppings Adero Canyon Trailhead 8 Public Amenities Public Restroom Aesthetic Adero Canyon Trailhead 9 Public Amenities Public Ramada Aesthetic Adero Canyon Trailhead 10 Public Amenities Public Seating Areas Adero Canyon Trailhead 11 Public Amenities Public Information Kiosk Adero Canyon Trailhead 12 Site Enhancement Gabion Basket Retaining Walls Adero Canyon Trailhead 13 Site Enhancement Vegetation Adero Canyon Trailhead 14 Cacti – Salvaged and New Saguaro Fishhook Barrel Cacti Ocotillo Cacti New Trees Foothill Paloverde Ironwood New Shrubs/Groundcovers Desert Marigold Brittlebush Jojoba Globe Mallow Site Linkages Literally 1000’s Of Miles of Trail Linkages Adero Canyon Trailhead 15 Take only photographs leave only footprints Thank You Adero Canyon Trailhead 16 TOWN OF FOUNTAIN HILLS TOWN COUNCIL AGENDA ACTION FORM Meeting Date:2/16/2017 Meeting Type:Regular Session Agenda Type:Regular Submitting Department:Development Services Staff Contact Information:Randy Harrel,Town Engineer;rharrel@fh.az.gov;480-816-5112 REQUEST TO COUNCIL (Agenda Language):DISCUSSION WITH POSSIBLE DIRECTION TO STAFF, regarding extending undergrounding of the existing overhead 12 kV lines farther northward,revising part of SRP's existing Municipal Aesthetics Fund project ("El Pueblo and Grande Conversion and 69 kV Replacement"). Applicant:N/A Applicant Contact Information:N/A Owner:Salt River Project Owner Contact Information:Janice Cacioppo/SRP Municipal Aesthetics Program Administrator; Tele:602-236-3755;Cell:602-818-1447;E-mail:Janice.Cacioppo@srpnet.com; Ryan Campbell,BSE/SRP Design Consultant -Customer Improvements (Municipal); Tele:602-236-2494:Cell:602-292-7431;E-mail:Ryan.Campbell@srpnet.com Property Location:El Pueblo Blvd.(Grande to Calico) Related Ordinance,Policy or Guiding Principle:N/A Staff Summary (background):On 4-7-16,the Town Council approved utilizing SRP Municipal Aesthetics Funds (SRP MAF) to convert two wood poles on El Pueblo near the Grande intersection to weathering steel poles (thereby eliminating 14 guy wires,one overhead guy wire span,and one guy pole),and to underground the underhung 12 kV wires crossing Grande between those two poles.That pole replacement has been completed (and an SRP project recently replaced the other poles within the proposed project length),but the 12 kV undergrounding has been on hold,pending consideration of this extension to that 12 kV undergrounding.(Note:SRP's previous Conceptual Estimate cost for the 12 kV undergrounding portion of the original project was $280,500.) Cost savings between SRP's pre-constuction cost estimates and their final tabulated cost tabulations;and the anticipated annual SRP MAF funding contribution to the Town's account at the end of April ($100,000)are anticipated to create an SRP MAF account balance exceeding SRP's allowed maximum ($300,000). So,on 8-23-16,Staff requested an estimate from SRP to extend the 12 kV undergrounding on El Pueblo northward to Calico Drive.SRP initially deferred providing that estimate,until it was clear that there would be a substantial account balance in the Town's account to fund this expanded project.SRP has now provided that estimate (on 1-25-17;attached). The project cost for the expanded project is $654,900,which exceeds the amount currently inthe Town's SRP MAF account by $43,700.For the past 8 years,the Town has always received the minimum annual SRP MAF Page 1 of 2 CORRECTED Fifty-third Legislature HB 2213 First Regular Session Version 1: Ways & Means ARIZONA HOUSE OF REPRESENTATIVES HB 2213: GPLET reform; K-12 taxes PRIME SPONSOR: Representative Leach, LD 11 BILL STATUS: Ways & Means Abstract Relating to GPLETs Provisions GPLET Rates1. Specifies that government property leases entered into prior to January 1, 2017 are to be taxed at the GPLET rates in column A, while all new leases are to be taxed at the rates in column B: (Sec. 1) Type of Property A (Pre-2017) B (2017- Beyond)* One-story Office Buildings $1.00 per square foot $2.00 per square foot 2-7 story Office Buildings $1.25 per square foot $2.30 per square foot 8 story or more Office Buildings $1.75 per square foot $3.10 per square foot Retail Buildings $1.50 per square foot $2.51 per square foot Hotel/Motel Buildings $1.50 per square foot $2.00 per square foot Warehouse or Industrial Buildings $0.75 per square foot $1.35 per square foot Residential Rental Buildings $0.50 per square foot $0.76 per square foot Parking Garages $100 per parking space $200 per parking space Other Buildings $1.00 per square foot $2.00 per square foot *base rate adjusted annually for inflation since 2010 2. Stipulates that leases entered into prior to 2017 pay column A GPLET rates if amended before January 1, 2018, if specified conditions apply. (Sec. 1) GPLET Calculations 3. Requires the government property lessor to calculate the GPLET for each prime lessee. (Sec. 2) The lessee currently calculates the GPLET.4. Establishes a delinquency interest rate of 16% per year. (Sec. 2) 5. Strikes the requirement that a county treasurer submit a report to each government property lessor regarding returns and payments received by the lessor in the preceding calendar year. (Sec. 2) Slum and Blighted Area Abatement 6. Limits a GPLET tax abatement to amounts designated for counties, cities, towns and community college districts. The amount designated for school districts is not abated. (Sec. 3) 7. Specifies that a slum and blighted area may only be designated in an area where at least 50% of the parcels are blighted parcels that: a. substantially impair or arrest the sound growth of the state or a political subdivision thereof; b. retard the provision of housing accommodations; c. constitute an economic or social liberty; or Legend: GPLET – Government Property Lease Excise Tax Amendments – BOLD and Stricken (Committee) CORRECTED Fifty-third Legislature HB 2213 First Regular Session Version 1: Ways & Means d. are a menace to the public health, safety, morals or welfare. (Sec. 3) 8. Defines a blighted parcel as a parcel that meets at least one of the following conditions: a. The parcel includes a structure that is dilapidated, unsanitary, unsafe of vermin-infested and has been designated as unfit for human habitation. b. The parcel or an improvement on the parcel is substantially deteriorated or abandoned. c. The parcel or an improvement on the parcel exhibits extensive damage or destruction caused by a major disaster and the damage is not remediated within a reasonable time. (Sec. 3) 9. Allows a municipality to designate a central business district as a slum and blighted area for only five years before the municipality must redesignate the area. (Sec. 3) 10. Makes technical and conforming changes. (Sec. 1,2,3) Current Law Title 42, Chapter 6, Article 5, Arizona Revised Statutes establishes the GPLET. A GPLET applies to any entity that leases property from a city, town, county or county stadium district for at least 30 consecutive days for commercial or industrial use. The tax is based in terms of dollars per square foot, rather than the value of the property, to be calculated by each lessee. The GPLET is abated for a period of eight years if the property is: 1) located in a single central business district within a slum and blighted area and subject to a lease or development agreement entered into on or after April 1, 1985; and 2) if the improvement resulted or will result in an increase in property value of at least 100%. The government jurisdiction levying the tax must remit GPLET collections to the county (13%), the municipality (7%), the community college district (7%) and the school district (73% for unified districts or 36.5% for an elementary or high school district). Additional Information In December, 2015 the Office of the Auditor General submitted a report regarding its findings from a financial audit of the GPLET. ☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal Note Fifty-third Legislature HB 2213 First Regular Session Version 2: Caucus and COW ARIZONA HOUSE OF REPRESENTATIVES HB 2213: GPLET reform; K-12 taxes PRIME SPONSOR: Representative Leach, LD 11 BILL STATUS: Caucus and COW WM: DP (6-1-1-1) Abstract Relating to GPLETs Provisions GPLET Rates1. Specifies that government property leases entered into prior to January 1, 2017 are to be taxed at the GPLET rates in column A, while all new leases are to be taxed at the rates in column B: (Sec. 1) Type of Property A (Pre-2017) B (2017- Beyond)* One-story Office Buildings $1.00 per square foot $2.00 per square foot 2-7 story Office Buildings $1.25 per square foot $2.30 per square foot 8 story or more Office Buildings $1.75 per square foot $3.10 per square foot Retail Buildings $1.50 per square foot $2.51 per square foot Hotel/Motel Buildings $1.50 per square foot $2.00 per square foot Warehouse or Industrial Buildings $0.75 per square foot $1.35 per square foot Residential Rental Buildings $0.50 per square foot $0.76 per square foot Parking Garages $100 per parking space $200 per parking space Other Buildings $1.00 per square foot $2.00 per square foot *base rate adjusted annually for inflation since 2010 2. Stipulates that leases entered into prior to 2017 pay column A GPLET rates if amended before January 1, 2018, if specified conditions apply. (Sec. 1) GPLET Calculations 3. Requires the government property lessor to calculate the GPLET for each prime lessee. (Sec. 2)  The lessee currently calculates the GPLET. 4. Establishes a delinquency interest rate of 16% per year. (Sec. 2) 5. Strikes the requirement that a county treasurer submit a report to each government property lessor regarding returns and payments received by the lessor in the preceding calendar year. (Sec. 2) Slum and Blighted Area Abatement 6. Limits a GPLET tax abatement to amounts designated for counties, cities, towns and community college districts. The amount designated for school districts is not abated. (Sec. 3) 7. Specifies that a slum and blighted area may only be designated in an area where at least 50% of the parcels are blighted parcels that: a. substantially impair or arrest the sound growth of the state or a political subdivision thereof; Legend: GPLET – Government Property Lease Excise Tax Amendments – BOLD and Stricken (Committee) ☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal Note Fifty-third Legislature HB 2213 First Regular Session Version 2: Caucus and COW b. retard the provision of housing accommodations; c. constitute an economic or social liberty; or d. are a menace to the public health, safety, morals or welfare. (Sec. 3) 8. Defines a blighted parcel as a parcel that meets at least one of the following conditions: a. The parcel includes a structure that is dilapidated, unsanitary, unsafe of vermin-infested and has been designated as unfit for human habitation. b. The parcel or an improvement on the parcel is substantially deteriorated or abandoned. c. The parcel or an improvement on the parcel exhibits extensive damage or destruction caused by a major disaster and the damage is not remediated within a reasonable time. (Sec. 3) 9. Allows a municipality to designate a central business district as a slum and blighted area for only five years before the municipality must redesignate the area. (Sec. 3) 10. Makes technical and conforming changes. (Sec. 1,2,3) Current Law Title 42, Chapter 6, Article 5, Arizona Revised Statutes establishes the GPLET. A GPLET applies to any entity that leases property from a city, town, county or county stadium district for at least 30 consecutive days for commercial or industrial use. The tax is based in terms of dollars per square foot, rather than the value of the property, to be calculated by each lessee. The GPLET is abated for a period of eight years if the property is: 1) located in a single central business district within a slum and blighted area and subject to a lease or development agreement entered into on or after April 1, 1985; and 2) if the improvement resulted or will result in an increase in property value of at least 100%. The government jurisdiction levying the tax must remit GPLET collections to the county (13%), the municipality (7%), the community college district (7%) and the school district (73% for unified districts or 36.5% for an elementary or high school district). Additional Information In December, 2015 the Office of the Auditor General submitted a report regarding its findings from a financial audit of the GPLET. - i - REFERENCE TITLE: GPLET reform; K-12 taxes State of Arizona House of Representatives Fifty-third Legislature First Regular Session 2017 HB 2213 Introduced by Representatives Leach: Barton, Kern, Livingston, Mitchell, Ugenti-Rita AN ACT AMENDING SECTIONS 42-6203, 42-6204 AND 42-6209, ARIZONA REVISED STATUTES; RELATING TO GOVERNMENT PROPERTY LEASE EXCISE TAX. (TEXT OF BILL BEGINS ON NEXT PAGE) HB 2213 - 1 - Be it enacted by the Legislature of the State of Arizona: 1 Section 1. Section 42-6203, Arizona Revised Statutes, is amended to 2 read: 3 42-6203. Rates of tax 4 A. Except as otherwise provided in this section, if a lease of a 5 government property improvement was entered into before June 1, 2010, or 6 if a development agreement, ordinance or resolution was approved by the 7 governing body of the government lessor before June 1, 2010 that 8 authorized a lease on the occurrence of specified conditions and the lease 9 was entered into within ten years after the date the development agreement 10 was entered into or the ordinance or resolution was approved by the 11 governing body BEFORE JANUARY 1, 2017: 12 1. The tax authorized by this article shall be levied and collected 13 at the following rates: 14 (a) One dollar per square foot of gross building space for office 15 buildings with one floor above ground. 16 (b) One dollar twenty-five cents per square foot of gross building 17 space for office buildings with more than one but fewer than eight floors 18 above ground. 19 (c) One dollar seventy-five cents per square foot of gross building 20 space for office buildings with eight floors or more above ground. 21 (d) One dollar fifty cents per square foot of retail building 22 space, including space that is devoted to the sale of tangible personal 23 property, restaurants, health clubs, hair salons, dry cleaners, travel 24 agencies and other retail services. 25 (e) One dollar fifty cents per square foot of hotel or motel 26 building space. 27 (f) Seventy-five cents per square foot of warehouse or industrial 28 building space. 29 (g) Fifty cents per square foot of residential rental building 30 space. 31 (h) One hundred dollars per parking space located in a parking 32 garage or deck. 33 (i) One dollar per square foot of all other government property 34 improvements not included in subdivisions (a) through (h) of this 35 paragraph. 36 2. The tax rate for government property improvements for which the 37 original certificate of occupancy was issued: 38 (a) At least ten years but less than twenty years before the date 39 the tax is due is eighty per cent PERCENT of the rate provided in 40 paragraph 1 of this subsection. 41 (b) At least twenty years but less than thirty years before the 42 date the tax is due is sixty per cent PERCENT of the rate provided in 43 paragraph 1 of this subsection. 44 HB 2213 - 2 - (c) At least thirty but less than forty years before the date the 1 tax is due is forty per cent PERCENT of the rate provided in paragraph 1 2 of this subsection. 3 (d) At least forty but less than fifty years before the date the 4 tax is due is twenty per cent PERCENT of the rate provided in paragraph 1 5 of this subsection. 6 (e) Fifty or more years before the date the tax is due is zero. 7 3. If no certificate of occupancy can be located, dated aerial 8 photographs or other evidence of substantial completion may be used to 9 determine the age of the building for purposes of paragraph 2 of this 10 subsection. 11 4. A lease or development agreement, originally subject to this 12 subsection, that is subsequently amended BEFORE JANUARY 1, 2018 remains 13 subject to this subsection if the amended lease or development agreement 14 meets all of the following requirements: 15 (a) The government lessor determines that the amendment furthers 16 the original purpose of the lease or development agreement. 17 (b) Any land added under the amendment is contiguous to the land 18 under the original lease or development agreement and does not increase 19 the land area under the original lease or development agreement by more 20 than fifty per cent PERCENT. 21 (c) Any government property improvement added under the amendment 22 does not increase the area of gross building space of government property 23 improvements under the original lease or development agreement by more 24 than one hundred per cent PERCENT. 25 B. Except as otherwise provided in this section, if a lease of a 26 government property improvement does not meet the conditions for applying 27 subsection A of this section: 28 1. Subject to paragraphs 2 and 3 of this subsection, the tax 29 authorized by this article shall be levied and collected at the following 30 base rates, which apply through December 31, 2011: 31 (a) Two dollars per square foot of gross building space for office 32 buildings with one floor above ground. 33 (b) Two dollars thirty cents per square foot of gross building 34 space for office buildings with more than one but fewer than eight floors 35 above ground. 36 (c) Three dollars ten cents per square foot of gross building space 37 for office buildings with eight floors or more above ground. 38 (d) Two dollars fifty-one cents per square foot of retail building 39 space, including space that is devoted to the sale of tangible personal 40 property, restaurants, health clubs, hair salons, dry cleaners, travel 41 agencies and other retail services. 42 (e) Two dollars per square foot of hotel or motel building space. 43 (f) One dollar thirty-five cents per square foot of warehouse or 44 industrial building space. 45 HB 2213 - 3 - (g) Seventy-six cents per square foot of residential rental 1 building space. 2 (h) Two hundred dollars per parking space located in a parking 3 garage or deck. 4 (i) Two dollars per square foot of all other government property 5 improvements not included in subdivisions (a) through (h) of this 6 paragraph. 7 2. If, in the tax year in which the lease of the government 8 property improvement is entered into, the aggregate of all ad valorem 9 property tax rates of all taxing jurisdictions in which the government 10 property improvement is located is at least ninety per cent PERCENT of the 11 countywide average combined property tax rates, the rate of tax prescribed 12 by paragraph 1 of this subsection, as currently adjusted pursuant to 13 paragraph 3 of this subsection, applies with respect to that government 14 property improvement. If, in the tax year in which the lease of the 15 government property improvement is entered into, the aggregate of all ad 16 valorem property tax rates of all taxing jurisdictions in which the 17 government property improvement is located is less than ninety per cent 18 PERCENT of the countywide average combined property tax rates, the rate of 19 tax prescribed by paragraph 1 of this subsection, as currently adjusted 20 pursuant to paragraph 3 of this subsection, shall be reduced by ten per 21 cent PERCENT. 22 3. On or before December 1, 2011 and December 1 of each year 23 thereafter, for all government property leases that are subject to this 24 subsection, the department of revenue shall adjust the tax rates that 25 apply under paragraphs 1 and 2 of this subsection in the following 26 calendar year for each property use according to the average annual 27 positive or negative percentage change for the two most recent fiscal 28 years in the producer price index for new construction or its successor 29 index published by the United States bureau of labor statistics. On or 30 before December 15 of each year, the department shall post the adjusted 31 rates for the following calendar year on its official website and transmit 32 the adjusted rates to each county treasurer. 33 C. The tax rate for a government property improvement that was 34 constructed pursuant to a lease or development agreement entered into from 35 and after June 30, 1996 and that is located outside a slum or blighted 36 area established pursuant to title 36, chapter 12, article 3 is one and 37 one-half times the rate established by subsections A and B of this 38 section. 39 D. Within the first twenty years after the issuance of the original 40 certificate of occupancy, the tax rate on the use or occupancy of a 41 government property improvement is twenty per cent PERCENT of the rate 42 established in subsections A and B of this section for any of the 43 following: 44 HB 2213 - 4 - 1. Government property improvements that are subject to leases or 1 agreements that were entered into before April 1, 1985, and options and 2 rights contained in the leases or agreements. 3 2. Government property improvements that are subject to leases 4 entered into based on a redevelopment contract, as defined in section 5 36-1471, entered into before April 1, 1985. 6 3. Government property improvements that are subject to leases 7 entered into based on an agreement for a redevelopment project for which 8 federal grant monies have been received and that was entered into before 9 April 1, 1985. 10 4. Government property improvements that are located at an airport 11 that was owned on or before January 1, 1988 by a county having a 12 population of four hundred thousand persons or less or by a city or town 13 that is located in a county having a population of four hundred thousand 14 persons or less if the property is used primarily for manufacturing, 15 retail, distribution, research or commercial purposes. For the purposes 16 of this paragraph, "commercial" includes facilities for office, 17 recreational, hotel, motel and service uses. 18 E. Within the first ten years after the issuance of the certificate 19 of occupancy, the tax rate on the use or occupancy of a government 20 property improvement that is located in a slum or blighted area 21 established pursuant to title 36, chapter 12, article 3 DESCRIBED IN 22 SECTION 42-6209, SUBSECTION F, that resulted or will result in an increase 23 in property value of at least one hundred per cent PERCENT and that is not 24 eligible for abatement pursuant to section 42-6209 is eighty per cent 25 PERCENT of the rate established in subsections A and B of this section. 26 F. The tax rate to be applied under subsection A or B of this 27 section shall be determined by the predominant use to which the government 28 property improvement is devoted, except that in all cases the tax rate 29 prescribed by subsection A, paragraph 1, subdivision (h) or subsection B, 30 paragraph 1, subdivision (h) of this section shall be applied to any 31 parking garage or deck. If there is no single predominant use, the tax 32 shall be determined by applying the appropriate tax rate to the building 33 space devoted to each use identified in that subsection. For the purposes 34 of this subsection, in applying the tax rates under subsection A of this 35 section the functional area of a government property improvement does not 36 include subsidiary, auxiliary or servient areas such as lobbies, 37 stairwells, mechanical rooms and meeting and banquet rooms. For the 38 purposes of this subsection, "predominant use" means the use to which 39 eighty-five per cent PERCENT or more of the functional area of a 40 government property improvement is devoted. 41 G. Prime lessees of government property improvements who become 42 taxable or whose taxable status terminates during the calendar year in 43 which the taxes are due, including prime lessees subject to exemption or 44 HB 2213 - 5 - abatement under sections 42-6208 and 42-6209, shall pay tax for that 1 calendar year on a pro rata basis. 2 Sec. 2. Section 42-6204, Arizona Revised Statutes, is amended to 3 read: 4 42-6204. Payment; return; interest; penalty; annual reports 5 A. The taxes that are levied pursuant to this article are: 6 1. Due and payable to the county treasurer annually on or before 7 December 1. 8 2. Delinquent if not paid on or before that date. 9 B. The prime lessee, if subject to the tax or qualified for an 10 abatement under this article, shall THE GOVERNMENT LESSOR SHALL CALCULATE 11 THE EXCISE TAX FOR EACH PRIME LESSEE, submit a return to the county 12 treasurer on a return form prescribed by the department of revenue and 13 submit a copy of the return to the government lessor PRIME LESSEE. If the 14 prime lessee is exempt from the tax pursuant to section 42-6208, the prime 15 lessee LESSOR shall keep and maintain the information required in this 16 subsection. The return form shall be made available by the county 17 treasurer at least sixty days before the taxes are due and payable and 18 shall include: 19 1. The name and address of the prime lessee. 20 2. The location of the government property improvement. 21 3. The amount of gross building space or number of parking garage 22 or deck spaces. The prime lessee may submit an initial statement of gross 23 building space that is certified by a person who is professionally 24 credentialed in this state as an architect, general contractor, surveyor 25 or appraiser and thereafter shall file an annual statement with the 26 return, under penalty of perjury, that the gross building space is 27 unchanged from the amount previously certified. 28 4. The date of the original certificate of occupancy. 29 5. The use or uses of the property. 30 6. If an abatement under section 42-6209 applies, a certification 31 under penalty of perjury that all elements necessary to qualify for the 32 abatement are satisfied for the year covered by the return. 33 7. Any other pertinent information that is required by the return 34 form. 35 C. If any part of the tax is not paid before it becomes delinquent, 36 interest accrues on the unpaid amount at the rate and in the manner 37 prescribed by section 42-1123 42-18053 until it is paid. Interest on 38 overpayments accrues at the rate and in the manner prescribed by section 39 42-1123 42-18053 until the refund is paid by the county treasurer. 40 D. The county treasurer shall assess and collect a penalty of five 41 percent of any part of the tax that is not paid before it becomes 42 delinquent. 43 E. The county treasurer shall issue a receipt to the GOVERNMENT 44 LESSOR AND prime lessee for payments under this article. 45 HB 2213 - 6 - F. On or before February 15 of each year, the county treasurer 1 shall submit a report to: 2 1. The department of revenue of all returns and payments received 3 for the preceding calendar year under this section. The report shall be 4 in a form and contain data prescribed by the department of revenue. 5 2. Each government lessor of all returns and payments received for 6 the preceding calendar year with respect to leases of government property 7 improvements owned by the government lessor. These reports shall contain 8 the same data prescribed pursuant to paragraph 1 of this subsection. 9 3. 2. The joint legislative budget committee of all returns and 10 payments received for the preceding calendar year with respect to leases 11 of government property improvements owned by the government lessor. These 12 reports shall contain the same data prescribed in paragraph 1 of this 13 subsection. 14 G. The county treasurer is entitled to rely on any information 15 contained in any abatement certification described in subsection B, 16 paragraph 6 of this section unless the county treasurer has actual 17 knowledge that the certification is inaccurate. 18 Sec. 3. Section 42-6209, Arizona Revised Statutes, is amended to 19 read: 20 42-6209. Abatement of tax for government property 21 improvements in single central business district 22 A. A city or town may abate the tax provided for under this article 23 for a limited period beginning when the certificate of occupancy is issued 24 and ending eight years after the certificate of occupancy is issued on a 25 government property improvement that is constructed either before or after 26 July 20, 1996 and that meets the following requirements: 27 1. The improvement is located in a single central business district 28 in the city or town and is subject to a lease or development agreement 29 entered into on or after April 1, 1985. For the purposes of this section: 30 (a) A city or town shall not designate more than one central 31 business district within its corporate boundaries. 32 (b) A city or town shall not approve or enter into a development 33 agreement or lease for a government property improvement within one year 34 after the designation of the central business district in which the 35 improvement is located. 36 (c) "Central business district" means a single and contiguous 37 geographical area THAT IS designated by resolution of the governing body 38 of the city or town and meeting THAT IS BOTH OF the following 39 requirements: 40 (i) The central business district is Located entirely within a slum 41 or blighted area that is established pursuant to title 36, chapter 12, 42 article 3 DESCRIBED IN SUBSECTION F OF THIS SECTION. 43 (ii) The central business district is Geographically compact and no 44 larger than the greater of five per cent PERCENT of the total land area 45 HB 2213 - 7 - within the exterior boundaries of the city or town or six hundred forty 1 acres. 2 2. The government property improvement resulted or will result in 3 an increase in property value of at least one hundred per cent PERCENT. 4 B. The prime lessee shall notify the county treasurer and the 5 government lessor and apply for the abatement before the taxes under this 6 article are due and payable in the first year after the certificate of 7 occupancy is issued. 8 C. Except as provided by subsection D OF THIS SECTION, each lease 9 between a prime lessee and a government lessor for which the tax is abated 10 under this section and that is entered into from and after May 31, 2010, 11 and that does not meet the conditions provided in section 42-6203, 12 subsection A, must be approved by a simple majority vote of the governing 13 body without the use of a consent calendar and shall not be approved 14 unless: 15 1. The government lessor notifies the governing bodies of the 16 county and any city, town and school district in which the government 17 property improvement is located at least sixty days before the approval. 18 The notice must include the name and address of the intended prime lessee, 19 the location and proposed use of the government property improvement and 20 the proposed term of the lease or development agreement. 21 2. The government lessor determines that, within the term of the 22 lease or development agreement, the economic and fiscal benefit to this 23 state and the county, city or town in which the government property 24 improvement is located will exceed the benefits received by the prime 25 lessee as a result of the development agreement or lease on the basis of 26 an estimate of those benefits prepared by an independent third party in a 27 manner and method acceptable to the governing body of the government 28 lessor. The estimate must be provided to the government lessor and the 29 governing bodies of the county and any city, town and school district in 30 which the government property improvement is located at least thirty days 31 before the vote of the governing body. A lease or development agreement 32 between a prime lessee and a government lessor involving residential 33 rental housing is exempt from the economic estimate analysis requirements 34 of this paragraph. 35 3. The lease or development agreement provides that the government 36 lessor may not approve an amendment to change the use of the government 37 property improvement during the period of abatement unless: 38 (a) The government lessor notifies the governing bodies of the 39 county and any city, town and school district in which the government 40 property improvement is located at least sixty days before the approval. 41 The notice must include the name and address of the prime lessee, the 42 location and proposed use of the government property improvement and the 43 remaining term of the lease or development agreement. 44 HB 2213 - 8 - (b) The government lessor determines that, within the remaining 1 term of the lease or development agreement, the economic and fiscal 2 benefit to this state and the county, city or town in which the government 3 property improvement is located will exceed the benefits received by the 4 prime lessee as a result of the change in the lease or development 5 agreement on the basis of an estimate of those benefits prepared by an 6 independent third party in a manner and method acceptable to the governing 7 body of the government lessor. The estimate must be provided to the 8 government lessor and the governing bodies of the county and any city, 9 town and school district in which the government property improvement is 10 located at least thirty days before the vote of the governing body. A 11 change in use under a lease or development agreement between a prime 12 lessee and a government lessor to residential rental housing is exempt 13 from the economic estimate analysis requirements of this subdivision. 14 D. Subsection C OF THIS SECTION does not apply if: 15 1. The tax is not abated under this section. 16 2. The government lessor is acting as a commercial landlord without 17 a development agreement in a lease for a use ancillary to a government 18 property improvement used for a public purpose. 19 E. NOTWITHSTANDING SUBSECTION A OF THIS SECTION, BEGINNING WITH 20 DEVELOPMENT AGREEMENTS FOR THE LEASE OF GOVERNMENT PROPERTY IMPROVEMENTS 21 APPROVED BY A GOVERNING BODY FROM AND AFTER DECEMBER 31, 2016, THE 22 ABATEMENT OF TAX UNDER THIS ARTICLE IS LIMITED TO AMOUNTS OTHERWISE 23 DESIGNATED FOR COUNTIES, CITIES, TOWNS AND COMMUNITY COLLEGE DISTRICTS 24 PURSUANT TO SECTION 42-6205, SUBSECTION B, PARAGRAPHS 1, 2 AND 3. THE 25 PROPORTIONAL AMOUNT OF GOVERNMENT PROPERTY LEASE EXCISE TAX REVENUE FOR 26 SCHOOL DISTRICTS PURSUANT TO SECTION 42-6205, SUBSECTION B, PARAGRAPH 4 27 SHALL NOT BE ABATED. 28 F. FOR THE PURPOSES OF THIS SECTION: 29 1. A SLUM AND BLIGHTED AREA MAY BE DESIGNATED ONLY IN AN AREA WHERE 30 AT LEAST FIFTY PERCENT OF THE PARCELS OF REAL PROPERTY ARE BLIGHTED 31 PARCELS AND THOSE BLIGHTED PARCELS SUBSTANTIALLY IMPAIR OR ARREST THE 32 SOUND GROWTH OF THIS STATE OR A POLITICAL SUBDIVISION OF THIS STATE, 33 RETARD THE PROVISION OF HOUSING ACCOMMODATIONS, CONSTITUTE AN ECONOMIC OR 34 SOCIAL LIABILITY OR ARE A MENACE TO THE PUBLIC HEALTH, SAFETY, MORALS OR 35 WELFARE IN THEIR PRESENT CONDITION AND USE. FOR THE PURPOSES OF THIS 36 PARAGRAPH, "BLIGHTED PARCEL" MEANS AT LEAST ONE OF THE FOLLOWING 37 CONDITIONS: 38 (a) THE PARCEL INCLUDES A STRUCTURE THAT IS DILAPIDATED, 39 UNSANITARY, UNSAFE OR VERMIN-INFESTED AND DUE TO THAT CONDITION HAS BEEN 40 DESIGNATED, BY AN AGENCY THAT IS RESPONSIBLE FOR THE ENFORCEMENT OF 41 HOUSING, BUILDING OR FIRE CODES, AS UNFIT FOR HUMAN HABITATION OR USE. 42 (b) THE PARCEL OR AN IMPROVEMENT ON THE PARCEL IS SUBSTANTIALLY 43 DETERIORATED OR IS ABANDONED. 44 HB 2213 - 9 - (c) THE PARCEL OR AN IMPROVEMENT ON THE PARCEL EXHIBITS EXTENSIVE 1 DAMAGE OR DESTRUCTION CAUSED BY A MAJOR DISASTER AND THE DAMAGE IS NOT 2 REMEDIATED WITHIN A REASONABLE TIME. 3 2. A MUNICIPALITY MAY DESIGNATE A CENTRAL BUSINESS DISTRICT AS A 4 SLUM AND BLIGHTED AREA ONLY FOR A PERIOD OF FIVE YEARS BEFORE THE 5 MUNICIPALITY MUST REDESIGNATE THE AREA PURSUANT TO THIS SECTION. 6 Fiscal Note JLBC BILL # HB 2179 TITLE: municipalities; counties; intergovernmental agreements; requirements SPONSOR: Ugenti-Rita STATUS: As Introduced PREPARED BY: Josh Hope Description The bill limits the length of agreements into which cities, towns, and counties may enter to 8 years and requires a public vote for those agreements. It also requires the local jurisdictions to apply these requirements to all current agreements and review those agreements. Finally, it requires the local jurisdictions to post all the agreements on their official website. Estimated Impact This bill is estimated to have no General Fund impact. Local jurisdictions could incur additional costs as a result of the review requirements, but the JLBC Staff cannot estimate these impacts in advance. Analysis Arizona statute allows 2 or more public agencies to enter into agreements with one another to contract or to perform services specified in the contract or agreement. Current statute does not impose a time limit on these agreements. These agreements in cities, towns, and counties would need to be reviewed and go through the new process for approval. Local Government Impact Local jurisdictions could incur additional costs, as a result of the review requirements, but the JLBC Staff cannot estimate these impacts in advance. The League of Cities and Towns believes the fiscal impact would be millions of dollars, but could not provide a specific estimate. The County Supervisors Association (CSA) believes there will be a fiscal impact to local jurisdictions as a result of this bill, because these entities would be required to perform functions they currently do not perform. CSA could not estimate the cost to local jurisdictions. Both entities indicated that this bill would have unspecified additional costs associated with more staff time. 1/25/17 Fifty-third Legislature HB2179 First Regular Session Version 1: Local & International Affairs ARIZONA HOUSE OF REPRESENTATIVES HB 2179: municipalities; counties; intergovernmental agreements; requirements PRIME SPONSOR: Representative Ugenti-Rita, LD 23 BILL STATUS: Local & International Affairs Abstract Relating to the approval and extension of agreements entered into by a city, town or county. Provisions 1. Prohibits a city, town or county from entering into an agreement without an affirmative vote of the majority of the members of the governing body at a public hearing. (Sec. 1) 2. Prohibits an agreement to which a city, town or county is a party from lasting for more than eight years. (Sec. 1) 3. Permits a city, town or county to hold a public hearing and vote to extend an agreement. (Sec. 1) 4. Stipulates that an agreement is terminated if not extended by the governing body. (Sec. 1) 5. Requires the governing body of a city, town or county to review all agreements currently in place and hold a public hearing to reaffirm the agreements. (Sec. 1) a. Stipulates that any current agreement reaffirmed by the governing body is valid for a maximum of eight years. (Sec. 1) 6. Requires the governing body to post all agreements on the city's, town's or county's website. (Sec. 1) 7. Exempts agreements entered into for the purpose of: a. Joint-purchasing insurance; b. Pooling property, fidelity, liability, workers' compensation, life, health, accident or disability coverage; or c. Establishing a joint powers public safety committee for the purpose of sharing criminal justice information between law enforcement agencies. (Sec. 1) 8. Defines agreement. (Sec. 1) Current Law Two or more public agencies or public procurement units may enter into agreements to contract for services, jointly exercise any common powers or perform other joint or cooperative action. Agreements must be authorized by the legislative or other governing bodies of the public agencies or procurement units. The agreement may be extended as many times as desirable, but each extension is prohibited from being extended for longer than the duration of the previous agreement (A.R.S. § 11-952). Legend: Amendments – BOLD and Stricken (Committee) ☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal Note *REVISED* *REVISED* Fifty-third Legislature HB2179 First Regular Session Version 2: Caucus and COW ARIZONA HOUSE OF REPRESENTATIVES HB 2179: municipalities; counties; intergovernmental agreements; requirements PRIME SPONSOR: Representative Ugenti-Rita, LD 23 BILL STATUS: Caucus and COW LIA: DP (4-3-0-0) Abstract Relating to the approval and extension of agreements entered into by a city, town or county. Provisions 1. Prohibits a city, town or county from entering into an agreement without an affirmative vote of the majority of the members of the governing body at a public hearing. (Sec. 1) 2. Prohibits an agreement to which a city, town or county is a party from lasting for more than eight years. (Sec. 1) 3. Permits a city, town or county to hold a public hearing and vote to extend an agreement. (Sec. 1) 4. Stipulates that an agreement is terminated if not extended by the governing body. (Sec. 1) 5. Requires the governing body of a city, town or county to review all agreements currently in place and hold a public hearing to reaffirm the agreements. (Sec. 1) a. Stipulates that any current agreement reaffirmed by the governing body is valid for a maximum of eight years. (Sec. 1) 6. Requires the agreements to be posted on the municipality's or county's website. (Sec. 1) 7. Exempts agreements entered into for the purpose of: a. Joint-purchasing insurance; b. Pooling property, fidelity, liability, workers' compensation, life, health, accident or disability coverage; or c. Establishing a joint powers public safety committee for the purpose of sharing criminal justice information between law enforcement agencies. (Sec. 1) 8. Defines agreement. (Sec. 1) Current Law Two or more public agencies or public procurement units may enter into agreements to contract for services, jointly exercise any common powers or perform other joint or cooperative action. Agreements must be authorized by the legislative or other governing bodies of the public agencies or procurement units. The agreement may be extended as many times as desirable, but each extension is prohibited from being for longer than the duration of the previous agreement (A.R.S. § 11-952). Additional Information JLBC has prepared a fiscal note HB 2179. Legend: Amendments – BOLD and Stricken (Committee) ☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☒ Fiscal Note - i - REFERENCE TITLE: municipalities; counties; intergovernmental agreements; requirements State of Arizona House of Representatives Fifty-third Legislature First Regular Session 2017 HB 2179 Introduced by Representative Ugenti-Rita AN ACT AMENDING TITLE 11, CHAPTER 7, ARTICLE 3, ARIZONA REVISED STATUTES, BY ADDING SECTION 11-956; RELATING TO THE JOINT EXERCISE OF POWERS. (TEXT OF BILL BEGINS ON NEXT PAGE) HB 2179 - 1 - Be it enacted by the Legislature of the State of Arizona: 1 Section 1. Title 11, chapter 7, article 3, Arizona Revised 2 Statutes, is amended by adding section 11-956, to read: 3 11-956. City, town or county agreements; approval and 4 extension requirements; exceptions; definition 5 A. A CITY, TOWN OR COUNTY SHALL ENTER INTO AN AGREEMENT ONLY AFTER 6 AN AFFIRMATIVE VOTE OF THE MAJORITY OF THE MEMBERS OF THE GOVERNING BODY 7 OF THE CITY, TOWN OR COUNTY AT A PUBLIC HEARING. 8 B. THE DURATION OF AN AGREEMENT TO WHICH A CITY, TOWN OR COUNTY IS 9 A PARTY MAY NOT BE MORE THAN EIGHT YEARS. TO EXTEND AN AGREEMENT, THE 10 GOVERNING BODY OF THE CITY, TOWN OR COUNTY SHALL REVIEW THE AGREEMENT AND 11 HOLD A PUBLIC HEARING TO DETERMINE WHETHER TO EXTEND THE AGREEMENT. AN 12 AFFIRMATIVE VOTE OF THE MAJORITY OF THE MEMBERS OF THE GOVERNING BODY OF 13 THE CITY, TOWN OR COUNTY IS REQUIRED TO EXTEND THE AGREEMENT. IF THE 14 GOVERNING BODY OF THE CITY, TOWN OR COUNTY DOES NOT EXTEND THE AGREEMENT, 15 THE AGREEMENT IS TERMINATED. 16 C. THE GOVERNING BODY OF THE CITY, TOWN OR COUNTY SHALL REVIEW ALL 17 AGREEMENTS THAT ARE IN PLACE ON THE EFFECTIVE DATE OF THIS SECTION AND 18 HOLD A PUBLIC HEARING TO REAFFIRM THE AGREEMENTS. AN AFFIRMATIVE VOTE OF 19 THE MAJORITY OF THE MEMBERS OF THE GOVERNING BODY OF THE CITY, TOWN OR 20 COUNTY IS REQUIRED TO REAFFIRM THE AGREEMENTS. ANY AGREEMENT REAFFIRMED 21 PURSUANT TO THIS SUBSECTION IS VALID FOR A MAXIMUM OF EIGHT YEARS AFTER 22 THE DATE ON WHICH THE AGREEMENT IS REAFFIRMED BUT MAY BE EXTENDED AS 23 PROVIDED BY SUBSECTION B OF THIS SECTION. 24 D. THE GOVERNING BODY OF A CITY, TOWN OR COUNTY SHALL POST ALL 25 AGREEMENTS ON THE CITY, TOWN OR COUNTY WEBSITE. 26 E. THIS SECTION DOES NOT APPLY TO AGREEMENTS THAT A CITY, TOWN OR 27 COUNTY ENTERS INTO FOR THE PURPOSES OF SECTION 11-952.01 OR 11-955. 28 F. FOR THE PURPOSES OF THIS SECTION, "AGREEMENT" MEANS AN 29 INTERGOVERNMENTAL AGREEMENT ENTERED INTO PURSUANT TO THIS ARTICLE OR ANY 30 OTHER AGREEMENT, INCLUDING DEPARTMENT CHARTERS. 31 - i - CORRECTED REFERENCE TITLE: TPT reform; contractors State of Arizona House of Representatives Fifty-third Legislature First Regular Session 2017 HB 2521 Introduced by Representative Cobb: Senator Petersen AN ACT AMENDING SECTIONS 41-1516, 41-1532, 42-1103, 42-5001 AND 42-5006, ARIZONA REVISED STATUTES; REPEALING SECTIONS 42-5007 AND 42-5008.01, ARIZONA REVISED STATUTES; AMENDING SECTION 42-5009, ARIZONA REVISED STATUTES, AS AMENDED BY SENATE BILL 1010, SECTION 9, FIFTY-THIRD LEGISLATURE, FIRST REGULAR SESSION, AS TRANSMITTED TO THE GOVERNOR; AMENDING SECTIONS 42-5010, 42-5029, 42-5032.01, 42-5032.02 AND 42-5040, ARIZONA REVISED STATUTES; AMENDING SECTION 42-5061, ARIZONA REVISED STATUTES, AS AMENDED BY SENATE BILL 1010, SECTION 11, FIFTY-THIRD LEGISLATURE, FIRST REGULAR SESSION, AS TRANSMITTED TO THE GOVERNOR; REPEALING SECTION 42-5075, ARIZONA REVISED STATUTES; AMENDING TITLE 42, CHAPTER 5, ARTICLE 2, ARIZONA REVISED STATUTES, BY ADDING A NEW SECTION 42-5075 AND SECTION 42-5077; AMENDING SECTIONS 42-5151 AND 42-5155, ARIZONA REVISED STATUTES; AMENDING SECTION 42-5159, ARIZONA REVISED STATUTES, AS AMENDED BY SENATE BILL 1010, SECTION 13, FIFTY-THIRD LEGISLATURE, FIRST REGULAR SESSION, AS TRANSMITTED TO THE GOVERNOR; AMENDING SECTION 42-5160, ARIZONA REVISED STATUTES; AMENDING TITLE 42, CHAPTER 6, ARTICLE 1, ARIZONA REVISED STATUTES, BY ADDING SECTION 42-6001.01; AMENDING SECTIONS 42-6004, 42-6102, 43-1072.01, 44-1263 AND 49-290, ARIZONA REVISED STATUTES; RELATING TO STATE AND MUNICIPAL TRANSACTION PRIVILEGE AND USE TAXES. (TEXT OF BILL BEGINS ON NEXT PAGE) HB 2521 - 1 - Be it enacted by the Legislature of the State of Arizona: 1 Section 1. Section 41-1516, Arizona Revised Statutes, is amended to 2 read: 3 41-1516. Healthy forest enterprise incentives; definitions 4 A. The Arizona commerce authority shall: 5 1. Implement a program to encourage counties, cities and towns to 6 provide local incentives to economic enterprises that promote forest 7 health in this state. 8 2. Identify and certify to the department of revenue the names of 9 and relevant information relating to qualified businesses for the purposes 10 of available state tax incentives for economic enterprises that promote 11 forest health in this state. 12 B. To qualify for state tax incentives pursuant to this section, a 13 business: 14 1. Must be primarily engaged in a qualifying project. The business 15 shall submit to the authority evidence that it is engaged in a qualifying 16 project as follows: 17 (a) The business operation must enhance or sustain forest health, 18 sustain or recover watershed or improve public safety. 19 (b) If the qualifying forest product is on federal land, the 20 business shall submit a letter from the federal agency administering the 21 land, or official records or documents produced in connection with the 22 project, stating that the business is primarily engaged in the business of 23 harvesting or processing qualifying forest products for commercial use as 24 follows: 25 (i) At least seventy per cent PERCENT of the harvested or processed 26 products, measured by weight, must be qualifying forest products. 27 (ii) At least seventy-five per cent PERCENT of the qualifying 28 forest products, measured by weight, must be harvested from sources in 29 this state. 30 (c) If the qualifying forest product is not on federal land, the 31 business shall submit a letter from the state forester stating that the 32 business is primarily engaged in the business of harvesting or processing 33 qualifying forest products for commercial use as follows: 34 (i) At least seventy per cent PERCENT of the harvested or processed 35 products must be qualifying forest products. 36 (ii) At least seventy-five per cent PERCENT of the harvested or 37 processed products must be from areas in this state. 38 (d) If the business is engaged in transporting qualifying forest 39 products, it must submit a letter from the state forester or United States 40 forest service, or official records or documents produced in connection 41 with the project, stating that all of the qualifying forest products it 42 transports are harvested from areas in this state. In addition, the 43 business must submit evidence to the authority that at least seventy-five 44 per cent PERCENT of the mileage traveled by its units each year are for 45 HB 2521 - 2 - transporting qualifying forest products from or to qualifying projects 1 described in subdivision (b) or (c) of this paragraph, unless a lower 2 mileage is due to forest closures or weather conditions that are beyond 3 the control of the business. 4 2. Must employ at least one permanent full-time employee. 5 3. Must agree to furnish to the authority information relating to 6 the amount of state tax benefits that the business receives each year. 7 4. Must enter into a memorandum of understanding with the authority 8 containing: 9 (a) Employment goals. Each year the business must report in 10 writing to the authority its performance in achieving the goals. 11 (b) A commitment to continue in business and use the qualifying 12 equipment primarily on qualifying projects in this state as described in 13 paragraph 1 of this subsection, other than for reasons beyond the control 14 of the business. The authority shall consult with the department of 15 revenue in designing the memorandum of understanding to incorporate the 16 legal qualifications for the available tax incentives and shall include 17 the requirement that any qualifying equipment that is purchased or leased 18 free of transaction privilege or use tax must continue to be used in this 19 state for the term of the memorandum of understanding or the duration of 20 its operational life, whichever is shorter. 21 (c) Provisions considered necessary by the authority to ensure the 22 competency and responsibility of businesses that qualify under this 23 section, including registration or other accreditation with trade and 24 professional organizations and compliance with best management and 25 operational practices used by governmental agencies in awarding forestry 26 contracts. 27 (d) The authorization for the authority to terminate, adjust or 28 recapture all or part of the tax benefits provided to the business on 29 noncompliance with the law, noncompliance with the terms of the memorandum 30 or violation of the terms of any contracts with the federal or state 31 government relating to the qualifying project. The authority shall notify 32 the department of revenue of the conditions of noncompliance. The 33 department of revenue may also terminate the certification if it obtains 34 information indicating a failure to qualify and comply. The department of 35 revenue may require the business to file appropriate amended tax returns 36 or to file appropriate use tax returns reflecting the recapture of the 37 direct or indirect tax benefits. 38 5. Must submit a copy of the certification to the department of 39 revenue for approval before using the certification for purposes of any 40 tax incentive. The department of revenue shall review and approve the 41 certification in a timely manner if the business is in good standing with 42 the department and is not delinquent in the payment of any tax collected 43 by the department. A failure to approve or deny the certification within 44 HB 2521 - 3 - sixty days after the date the business submits it to the department 1 constitutes approval of the certification. 2 C. For the purposes of section 42-5075, subsection B, paragraph 18, 3 the authority shall certify prime contractors that contract for the 4 construction of any building, or other structure, project, development or 5 improvement owned by a qualified business for purposes of a qualifying 6 project described in subsection B, paragraph 1 of this section. 7 D. C. To obtain and maintain certification under this section, a 8 business must: 9 1. Apply to the authority. 10 2. Submit and retain copies of all required information, including 11 information relating to the actual or projected number of employees in 12 this state. 13 3. Allow inspections and audits to verify the qualification and 14 accuracy of information submitted to the authority. 15 E. D. Certification under this section is valid for sixty calendar 16 months from the date of issuance. A business must apply for 17 recertification at least thirty days before the current certification 18 expires. The application for recertification shall be in a form 19 prescribed by the authority and shall confirm that the business is 20 continuing in a qualifying project and is in compliance with all 21 requirements prescribed for certification. 22 F. E. Within sixty days after receiving a complete and correct 23 application and all required information as prescribed by this section, 24 the authority shall grant or deny certification and give written notice by 25 certified mail to the applicant. The applicant is certified as a 26 qualified business on the date the notice of certification is delivered to 27 the applicant. A failure to respond within sixty days after receiving a 28 complete and correct application constitutes approval of the application. 29 G. F. The certification shall state an effective date with respect 30 to each authorized tax incentive, which, in each case, must be at the 31 start of a taxable year or taxable period. 32 H. G. On or before March 1 of each year, each qualifying business 33 shall make a report to the authority on all business activity in the 34 preceding calendar year. Business information contained in the reports is 35 confidential and shall not be disclosed to the public except as provided 36 by this section and except that a copy of the report shall be transmitted 37 to the department of revenue. The report shall be in a form prescribed by 38 the authority and include: 39 1. Information prescribed by the authority with respect to both 40 qualifying projects and other projects and business activity that do not 41 qualify for purposes of this section. 42 2. Employment information necessary to confirm eligibility for 43 income tax credits as prescribed by sections 43-1076 and 43-1162. 44 HB 2521 - 4 - 3. The quantity, measured by weight, of qualifying forest products 1 harvested, transported or processed. 2 I. H. On or before May 1 of each year, the authority shall report 3 to the joint legislative budget committee: 4 1. The quantity, measured by weight, of qualifying forest products 5 reported by harvesters, by transporters and by processors in the preceding 6 calendar year. 7 2. The number of new full-time employees hired in qualified 8 employment positions in this state in the preceding calendar year and 9 reported for tax credit purposes. 10 3. The total number of all full-time employees employed in 11 qualified employment positions in this state in the preceding calendar 12 year and reported for tax credit purposes. 13 J. I. For purposes of administering and ensuring compliance with 14 this section, agents of the authority may enter, and a qualified business 15 shall allow access to, a qualifying project site at reasonable times and 16 on reasonable notice to: 17 1. Inspect the facilities at the site. 18 2. Obtain factual data and records pertinent to and required by law 19 to be kept for purposes of tax incentives. 20 3. Otherwise ascertain compliance with law and the terms of the 21 memorandum of understanding. 22 K. J. The authority shall revoke the business' certification and 23 notify the department of revenue and county assessor if either: 24 1. Within thirty days after a formal request from the authority or 25 the department of revenue the business fails or refuses to provide the 26 information or access for inspections required by this section. 27 2. The business no longer meets the terms and conditions required 28 for qualification for the applicable tax incentives. 29 L. K. For the purposes of this section: 30 1. "Forest health" means the degree to which the integrity of the 31 forest is sustained, including reducing the risk of catastrophic wildfire 32 and destructive insect infestation, benefiting wildland habitats, 33 watersheds and communities. 34 2. "Harvesting" means all operations relating to felling or 35 otherwise removing trees and other forest plant growth and preparing them 36 for transport for subsequent processing. 37 3. "Processing" means: 38 (a) Any change in the physical structure of qualifying forest 39 products removed from a qualifying project into a marketable commercial 40 product or component of a product that has commercial value to a consumer 41 or purchaser and that is ready to be used with or without further altering 42 its form. 43 (b) Burning qualifying forest products in the process of commercial 44 electrical generation or commercial thermal energy production for heating 45 HB 2521 - 5 - or cooling, regardless of the physical structure of the forest product 1 before burning. 2 4. "Qualifying equipment" means equipment used directly in 3 harvesting or processing qualifying forest products removed from a 4 qualifying project. Qualifying equipment does not include self-propelled 5 vehicles required to be licensed by this state, but may include other 6 licensed vehicles as provided by this paragraph. Qualifying equipment 7 includes: 8 (a) Forest thinning and residue removal equipment, including 9 mulching and masticating equipment, feller-bunchers, skidders, log 10 loaders, portable chippers and grinders, slash bundlers, delimbers, log 11 trailers, chip trailers and other trailers that are uniquely designed for 12 handling forest products and that are licensed for operation on public 13 highways. 14 (b) Forest residue receiving and handling equipment, including 15 truck dumpers, log unloaders, scales, log decking facilities and equipment 16 and chip pile facilities. 17 (c) Sorting and processing equipment, including portable and 18 stationary log loaders, front end FRONT-END loaders, fork lifts FORKLIFTS 19 and cranes, chippers and grinders, screens, decks and debarkers, saws and 20 sawmill equipment, firewood processing, wood residue baling and bagging 21 equipment, kilns, planing and molding equipment and laminating and joining 22 equipment. 23 (d) Forest waste and residue disposal and processing equipment, 24 including: 25 (i) Processing and sizing equipment, hogs, chippers, screens, 26 pelletizers and wood splitters. 27 (ii) Transporting and handling equipment, including loaders, 28 conveyors, blowers, receiving hoppers, truck dumpers and dozers. 29 (iii) Waste use equipment, including fuel feed, storage bins, 30 boilers and combustors. 31 (iv) Waste project use equipment, including generators, switchgear 32 and substations and on-site distribution systems. 33 (v) Generated waste disposal equipment, including ash silos and 34 wastewater treatment and disposal equipment. 35 (vi) Shop and maintenance equipment and major spares having a value 36 of more than five thousand dollars each. 37 5. "Qualifying forest products" means dead standing and fallen 38 timber, and forest thinnings associated with the harvest of small diameter 39 timber, slash, wood chips, peelings, brush and other woody vegetation, 40 removed from federal, state and other public forest land and from private 41 forest land. 42 6. "Qualifying project" means harvesting, transporting or 43 processing qualifying forest products as required for certification 44 pursuant to this section. 45 HB 2521 - 6 - Sec. 2. Section 41-1532, Arizona Revised Statutes, is amended to 1 read: 2 41-1532. Tax incentives; conditions 3 A. A prime contractor CONSTRUCTING A HIGHWAY, STREET OR BRIDGE IN A 4 MILITARY REUSE ZONE may qualify for an exemption from transaction 5 privilege tax with respect to activities in a military reuse zone as 6 provided, and subject to the terms and conditions prescribed, by section 7 42-5075, subsection B, paragraph 4 1. 8 B. A taxpayer that owns or leases income producing property located 9 in a military reuse zone is eligible for an income tax credit for net 10 increases in employment of full-time employees who are primarily engaged 11 in providing aviation or aerospace services or in manufacturing, 12 assembling or fabricating aviation or aerospace products as provided, and 13 subject to the terms and conditions prescribed, by section 43-1079 or 14 43-1167, as applicable. To qualify for a tax incentive under this 15 subsection, the taxpayer shall: 16 1. Agree with the Arizona commerce authority in writing to furnish 17 information relating to the amount of tax benefits the taxpayer receives 18 for each taxable year in which the taxpayer claims the credit. If the 19 taxpayer fails to provide the required information, the authority shall 20 immediately revoke the taxpayer's qualification and notify the department 21 of revenue. 22 2. Enter into a memorandum of understanding with this state through 23 the authority containing employment goals. Each year in which the 24 taxpayer claims the credit, the taxpayer shall report in writing to the 25 authority its performance in achieving the goals. The memorandum shall 26 contain provisions that allow: 27 (a) The authority to stop, readjust or recapture all or part of the 28 tax credit allowed to the taxpayer on noncompliance with the terms of the 29 memorandum. 30 (b) The authority to notify the department of revenue of the 31 conditions of noncompliance. 32 (c) The department of revenue to require the taxpayer to file 33 appropriate amended tax returns reflecting the recapture of the tax 34 credit. 35 C. Taxable property in a military reuse zone that is devoted to 36 providing aviation or aerospace services or to manufacturing, assembling 37 or fabricating aviation or aerospace products qualifies for assessment as 38 class six property as provided, and subject to the terms and conditions 39 prescribed, by sections 42-12006 and 42-15006. 40 D. To qualify for a tax incentive described in subsection A or C of 41 this section, the taxpayer shall provide to the authority information 42 relating to the amount of tax benefits the taxpayer receives each year for 43 each year in which the taxpayer claims the incentives on forms prescribed 44 by the authority. If the taxpayer fails to provide the required 45 HB 2521 - 7 - information, the authority shall immediately revoke the taxpayer's 1 certification of eligibility and notify the department of revenue. 2 E. Taxpayers who qualify for tax incentives under subsection B or C 3 of this section shall be certified by the authority as eligible for a five 4 year FIVE-YEAR period, subject to termination in the event of changed 5 circumstances rendering the taxpayer no longer eligible. 6 F. Notwithstanding subsection C of this section, an insurer located 7 in a military reuse zone is eligible for a premium tax credit under 8 section 20-224.04 for net increases in employment positions of residents 9 of this state. To qualify for a premium tax credit the insurer shall: 10 1. Agree with the authority in writing to furnish information 11 relating to the amount of premium tax credits the insurer receives each 12 year. If the insurer fails to provide the required information, the 13 authority shall immediately revoke the insurer's qualification and notify 14 the department of insurance. 15 2. Enter into a memorandum of understanding with this state through 16 the authority containing employment goals. Each year the insurer shall 17 report in writing to the authority its performance in achieving the goals. 18 The memorandum shall contain provisions that allow: 19 (a) The authority to stop, readjust or recapture all or part of the 20 premium tax credits provided to the insurer on noncompliance with the 21 terms of the memorandum. 22 (b) The authority to notify the department of insurance of the 23 conditions of noncompliance. 24 Sec. 3. Section 42-1103, Arizona Revised Statutes, is amended to 25 read: 26 42-1103. Enjoining delinquent taxpayer from engaging or 27 continuing in business 28 A. In order to ensure or to compel payment of taxes and to aid in 29 enforcing this article, the director may apply to the tax court to enjoin 30 any delinquent taxpayer or person who may be or may become liable for 31 payment of any tax from engaging or continuing in business until the 32 person ceases to be a delinquent taxpayer or complies with other 33 requirements which THAT are reasonably necessary to protect the revenues 34 of this state and which THAT are prescribed by the director. 35 B. On application for an injunction against a delinquent taxpayer, 36 the court may forthwith issue an order temporarily restraining the 37 taxpayer from doing business. The court shall hear the matter within 38 three days and, on a showing by a preponderance of evidence that the 39 taxpayer is delinquent and has been given notice of the hearing as 40 required by law, the court may enjoin the taxpayer from engaging or 41 continuing in business in this state until the taxpayer ceases to be 42 delinquent. On issuing an injunction, the court may also order the 43 sheriff to seal the taxpayer's business premises and may allow the 44 taxpayer access to the premises only on the approval of the court. 45 HB 2521 - 8 - C. On application for an injunction against a person other than a 1 delinquent taxpayer, the court may issue an order temporarily restraining 2 the person from engaging or continuing in business. The court shall hear 3 the matter within three days and, on a showing that the person has been 4 given notice of the hearing as required by law, that demand has been made 5 on the taxpayer to furnish security, that the taxpayer has not furnished 6 security and that the director considers the collection from the primarily 7 responsible person of the total amount of tax due or reasonably expected 8 to become due to be in jeopardy, the court may forthwith enjoin the person 9 from engaging or continuing in business until the person complies in full 10 with the demand of the director for furnishing security. 11 D. The court shall not issue a temporary restraining order or 12 injunction under this section against any person who has furnished 13 security pursuant to section 42-1102, OR 42-5006 or 42-5007. On a 14 showing to the court by any person against whom a temporary restraining 15 order or injunction has issued under this section that the person has 16 furnished such security, the court shall dissolve or set aside the 17 temporary restraining order or injunction. 18 Sec. 4. Section 42-5001, Arizona Revised Statutes, is amended to 19 read: 20 42-5001. Definitions 21 In this article and article 2 of this chapter, unless the context 22 otherwise requires: 23 1. "Business" includes all activities or acts, personal or 24 corporate, engaged in or caused to be engaged in with the object of gain, 25 benefit or advantage, either directly or indirectly, but does not include 26 either: 27 (a) Casual activities or sales. 28 (b) The transfer of electricity from a solar photovoltaic 29 generation system to an electric utility distribution system. 30 2. "CONTRACTING" MEANS ENGAGING IN BUSINESS AS A CONTRACTOR. 31 3. "CONTRACTOR" IS SYNONYMOUS WITH THE TERM "BUILDER" AND MEANS ANY 32 PERSON OR ORGANIZATION THAT UNDERTAKES TO OR OFFERS TO UNDERTAKE TO, OR 33 PURPORTS TO HAVE THE CAPACITY TO UNDERTAKE TO, OR SUBMITS A BID TO, OR 34 DOES PERSONALLY OR BY OR THROUGH OTHERS, MODIFY ANY BUILDING, HIGHWAY, 35 ROAD, RAILROAD, EXCAVATION OR OTHER STRUCTURE, PROJECT, DEVELOPMENT OR 36 IMPROVEMENT, OR TO DO ANY PART OF SUCH A PROJECT, INCLUDING THE ERECTION 37 OF SCAFFOLDING OR ANOTHER STRUCTURE OR WORKS IN CONNECTION WITH SUCH A 38 PROJECT, AND INCLUDES SUBCONTRACTORS AND SPECIALTY CONTRACTORS. FOR ALL 39 PURPOSES OF TAXATION OR DEDUCTION, THIS DEFINITION GOVERNS WITHOUT REGARD 40 TO WHETHER THE CONTRACTOR IS ACTING IN FULFILLMENT OF A CONTRACT. 41 2. 4. "Distribution base" means the portion of the revenues 42 derived from the tax levied by this article and articles 5 and 8 of this 43 chapter designated for distribution to counties, municipalities and other 44 purposes according to section 42-5029, subsection D. 45 HB 2521 - 9 - 3. 5. "Engaging", when used with reference to engaging or 1 continuing in business, includes the exercise of corporate or franchise 2 powers. 3 4. 6. "Gross income" means the gross receipts of a taxpayer 4 derived from trade, business, commerce or sales and the value proceeding 5 or accruing from the sale of tangible personal property or service, or 6 both, and without any deduction on account of losses. 7 5. 7. "Gross proceeds of sales" means the value proceeding or 8 accruing from the sale of tangible personal property without any deduction 9 on account of the cost of property sold, expense of any kind or losses, 10 but cash discounts allowed and taken on sales are not included as gross 11 income. 12 6. 8. "Gross income" and "gross proceeds of sales" do not 13 include goods, wares or merchandise, or value thereof, returned by 14 customers if the sale price is refunded either in cash or by credit, nor 15 the value of merchandise traded in on the purchase of new merchandise when 16 the trade-in allowance is deducted from the sales price of the new 17 merchandise before completion of the sale. 18 7. 9. "Gross receipts" means the total amount of the sale, lease 19 or rental price, as the case may be, of the retail sales of retailers, 20 including any services that are a part of the sales, valued in money, 21 whether received in money or otherwise, including all receipts, cash, 22 credits and property of every kind or nature, and any amount for which 23 credit is allowed by the seller to the purchaser without any deduction 24 from the amount on account of the cost of the property sold, materials 25 used, labor or service performed, interest paid, losses or any other 26 expense. Gross receipts do not include cash discounts allowed and taken 27 nor the sale price of property returned by customers if the full sale 28 price is refunded either in cash or by credit. 29 8. 10. "Person" or "company" includes an individual, firm, 30 partnership, joint venture, association, corporation, estate or trust, 31 this state, any county, city, town, district, other than a school 32 district, or other political subdivision and any other group or 33 combination acting as a unit, and the plural as well as the singular 34 number. 35 9. 11. "Qualifying community health center": 36 (a) Means an entity that is recognized as nonprofit under section 37 501(c)(3) of the United States internal revenue code, that is a 38 community-based, primary care clinic that has a community-based board of 39 directors and that is either: 40 (i) The sole provider of primary care in the community. 41 (ii) A nonhospital affiliated clinic that is located in a federally 42 designated medically underserved area in this state. 43 (b) Includes clinics that are being constructed as qualifying 44 community health centers. 45 HB 2521 - 10 - 10. 12. "Qualifying health care organization" means an entity that 1 is recognized as nonprofit under section 501(c) of the United States 2 internal revenue code and that uses, saves or invests at least eighty per 3 cent PERCENT of all monies that it receives from all sources each year 4 only for health and medical related educational and charitable services, 5 as documented by annual financial audits prepared by an independent 6 certified public accountant, performed according to generally accepted 7 auditing standards and filed annually with the department. Monies that 8 are used, saved or invested to lease, purchase or construct a facility for 9 health and medical related education and charitable services are included 10 in the eighty per cent PERCENT requirement. 11 11. 13. "Qualifying health sciences educational institution" means 12 an entity that is recognized as nonprofit under section 501(c) of the 13 United States internal revenue code and that solely provides graduate and 14 postgraduate education in the health sciences. For the purposes of this 15 paragraph, "health sciences" includes medicine, nursing, physician's 16 assistant studies, pharmacy, physical therapy, occupational therapy, 17 biomedical sciences, podiatry, clinical psychology, cardiovascular 18 science, nurse anesthesia, dentistry, optometry and veterinary medicine. 19 12. 14. "Qualifying hospital" means any of the following: 20 (a) A licensed hospital which THAT is organized and operated 21 exclusively for charitable purposes, no part of the net earnings of which 22 inures to the benefit of any private shareholder or individual. 23 (b) A licensed nursing care institution or a licensed residential 24 care institution or a residential care facility THAT IS operated in 25 conjunction with a licensed nursing care institution or a licensed kidney 26 dialysis center, which provides medical services, nursing services or 27 health related services and is not used or held for profit. 28 (c) A hospital, nursing care institution or residential care 29 institution which THAT is operated by the federal government, this state 30 or a political subdivision of this state. 31 (d) A facility that is under construction and that on completion 32 will be a facility under subdivision (a), (b) or (c) of this paragraph. 33 13. 15. "Retailer" includes every person engaged in the business 34 classified under the retail classification pursuant to section 42-5061 35 and, when in the opinion of the department it is necessary for the 36 efficient administration of this article, includes dealers, distributors, 37 supervisors, employers and salesmen, representatives, peddlers or 38 canvassers as the agents of the dealers, distributors, supervisors or 39 employers under whom they operate or from whom they obtain the tangible 40 personal property sold by them, whether in making sales on their own 41 behalf or on behalf of the dealers, distributors, supervisors or 42 employers. 43 14. 16. "Sale" means any transfer of title or possession, or both, 44 exchange, barter, lease or rental, conditional or otherwise, in any manner 45 HB 2521 - 11 - or by any means whatever, including consignment transactions and auctions, 1 of tangible personal property or other activities taxable under this 2 chapter, for a consideration, and includes: 3 (a) Any transaction by which the possession of property is 4 transferred but the seller retains the title as security for the payment 5 of the price. 6 (b) Fabricating tangible personal property for consumers who 7 furnish either directly or indirectly the materials used in the 8 fabrication work. 9 (c) Furnishing, preparing or serving for a consideration any 10 tangible personal property consumed on the premises of the person 11 furnishing, preparing or serving the tangible personal property. 12 15. 17. "Solar daylighting" means a device that is specifically 13 designed to capture and redirect the visible portion of the solar beam, 14 while controlling the infrared portion, for use in illuminating interior 15 building spaces in lieu of artificial lighting. 16 16. 18. "Solar energy device" means a system or series of 17 mechanisms designed primarily to provide heating, to provide cooling, to 18 produce electrical power, to produce mechanical power, to provide solar 19 daylighting or to provide any combination of the foregoing by means of 20 collecting and transferring solar generated energy into such uses either 21 by active or passive means, including wind generator systems that produce 22 electricity. Solar energy systems may also have the capability of storing 23 solar energy for future use. Passive systems shall clearly be designed as 24 a solar energy device, such as a trombe wall, and not merely as a part of 25 a normal structure, such as a window. 26 17. 19. "Tangible personal property" means personal property which 27 THAT may be seen, weighed, measured, felt or touched or THAT is in any 28 other manner perceptible to the senses. 29 19. 20. "Taxpayer" means any person who is liable for any tax which 30 THAT is imposed by this article. 31 18. 21. "Tax year" or "taxable year" means either the calendar year 32 or the taxpayer's fiscal year, if permission is obtained from the 33 department to use a fiscal year as the tax period instead of the calendar 34 year. 35 20. 22. "Wholesaler" or "jobber" means any person who sells 36 tangible personal property for resale and not for consumption by the 37 purchaser. 38 Sec. 5. Section 42-5006, Arizona Revised Statutes, is amended to 39 read: 40 42-5006. Taxpayer bonds; out-of-state manufactured building 41 dealers 42 A. Notwithstanding section 42-1102, the department shall require a 43 surety bond for each taxpayer who is required to be licensed under title 44 32, chapter 10 or who is regulated under title 41, chapter 37, article 3, 45 HB 2521 - 12 - if the taxpayer's principal place of business is outside this state or if 1 the taxpayer has conducted business in this state for less than one year. 2 The department shall prescribe the form of the bond. The bond shall be 3 maintained for a period of at least two years. 4 B. The bond, duly executed by the applicant as principal and with a 5 corporation duly authorized to execute and write bonds in this state as 6 surety, shall be payable to this state and conditioned on the payment of 7 all transaction privilege taxes incurred and imposed on the taxpayer by 8 this state and its political subdivisions. The bond shall be in such AN 9 amount, but not less than two thousand dollars, as will assure TO ENSURE 10 the payment of the transaction privilege taxes which THAT may reasonably 11 be expected to be incurred by the licensed establishment for a period of 12 one hundred fifty days. 13 C. The director, by rule, may establish classes of expected tax 14 liability in five thousand dollar increments, beginning with the minimum 15 bond amount prescribed in subsection B of this section. The bond shall 16 provide that after notice and a hearing the director may order forfeited 17 to this state and any affected political subdivision part or all of the 18 bond for nonpayment of taxes, interest and penalties. 19 D. A licensee on application for a new license covered by 20 subsection A of this section, renewal of a license covered by subsection A 21 of this section or transfer of a license covered by subsection A of this 22 section is exempt from posting a bond if the licensee has for at least two 23 years immediately preceding the application made timely payment of all 24 transaction privilege taxes incurred. 25 E. If a licensee is not exempt from this section, the director may 26 exempt the licensee if the director finds that the surety bond is not 27 necessary to insure ENSURE payment of such taxes to the state and any 28 affected political subdivision or the licensee had good cause for the late 29 or insufficient payment of the transaction privilege tax and affiliated 30 excise taxes incurred. 31 Sec. 6. Repeal 32 Sections 42-5007 and 42-5008.01, Arizona Revised Statutes, are 33 repealed. 34 Sec. 7. Section 42-5009, Arizona Revised Statutes, as amended by 35 Senate Bill 1010, section 9, fifty-third legislature, first regular 36 session, as transmitted to the governor, is amended to read: 37 42-5009. Certificates establishing deductions; liability for 38 making false certificate 39 A. A person who conducts any business classified under article 2 of 40 this chapter may establish entitlement to the allowable deductions from 41 the tax base of that business by both: 42 1. Marking the invoice for the transaction to indicate that the 43 gross proceeds of sales or gross income derived from the transaction was 44 deducted from the tax base. 45 HB 2521 - 13 - 2. Obtaining a certificate executed by the purchaser indicating the 1 name and address of the purchaser, the precise nature of the business of 2 the purchaser, the purpose for which the purchase was made, the necessary 3 facts to establish the appropriate deduction and the tax license number of 4 the purchaser to the extent the deduction depends on the purchaser 5 conducting business classified under article 2 of this chapter and a 6 certification that the person executing the certificate is authorized to 7 do so on behalf of the purchaser. The certificate may be disregarded if 8 the seller has reason to believe that the information contained in the 9 certificate is not accurate or complete. 10 B. A person who does not comply with subsection A of this section 11 may establish entitlement to the deduction by presenting facts necessary 12 to support the entitlement, but the burden of proof is on that person. 13 C. The department may prescribe a form for the certificate 14 described in subsection A of this section. Under such rules as it may 15 prescribe, the department may also describe transactions with respect to 16 which a person is not entitled to rely solely on the information contained 17 in the certificate provided for in subsection A of this section but must 18 instead obtain such additional information as required by the rules in 19 order to be entitled to the deduction. 20 D. If a seller is entitled to a deduction by complying with 21 subsection A of this section, the department may require the purchaser 22 that caused the execution of the certificate to establish the accuracy and 23 completeness of the information required to be contained in the 24 certificate that would entitle the seller to the deduction. If the 25 purchaser cannot establish the accuracy and completeness of the 26 information, the purchaser is liable in an amount equal to any tax, 27 penalty and interest that the seller would have been required to pay under 28 this article if the seller had not complied with subsection A of this 29 section. Payment of the amount under this subsection exempts the 30 purchaser from liability for any tax imposed under article 4 of this 31 chapter. The amount shall be treated as tax revenues collected from the 32 seller in order to designate the distribution base for purposes of section 33 42-5029. 34 E. If a seller is entitled to a deduction by complying with 35 subsection B of this section, the department may require the purchaser to 36 establish the accuracy and completeness of the information provided to the 37 seller that entitled the seller to the deduction. If the purchaser cannot 38 establish the accuracy and completeness of the information, the purchaser 39 is liable in an amount equal to any tax, penalty and interest that the 40 seller would have been required to pay under this article if the seller 41 had not complied with subsection B of this section. Payment of the amount 42 under this subsection exempts the purchaser from liability for any tax 43 imposed under article 4 of this chapter. The amount shall be treated as 44 HB 2521 - 14 - tax revenues collected from the seller in order to designate the 1 distribution base for purposes of section 42-5029. 2 F. The department may prescribe a form for a certificate used to 3 establish entitlement to the deductions described in section 42-5061, 4 subsection A, paragraph 46 and section 42-5063, subsection B, paragraph 3. 5 Under rules the department may prescribe, the department may also require 6 additional information for the seller to be entitled to the deduction. If 7 a seller is entitled to the deductions described in section 42-5061, 8 subsection A, paragraph 46 and section 42-5063, subsection B, paragraph 3, 9 the department may require the purchaser who executed the certificate to 10 establish the accuracy and completeness of the information contained in 11 the certificate that would entitle the seller to the deduction. If the 12 purchaser cannot establish the accuracy and completeness of the 13 information, the purchaser is liable in an amount equal to any tax, 14 penalty and interest that the seller would have been required to pay under 15 this article. Payment of the amount under this subsection exempts the 16 purchaser from liability for any tax imposed under article 4 of this 17 chapter. The amount shall be treated as tax revenues collected from the 18 seller in order to designate the distribution base for purposes of section 19 42-5029. 20 G. If a seller claims a deduction under section 42-5061, 21 subsection A, paragraph 25 and establishes entitlement to the deduction 22 with an exemption letter that the purchaser received from the department 23 and the exemption letter was based on a contingent event, the department 24 may require the purchaser that received the exemption letter to establish 25 the satisfaction of the contingent event within a reasonable time. If the 26 purchaser cannot establish the satisfaction of the event, the purchaser is 27 liable in an amount equal to any tax, penalty and interest that the seller 28 would have been required to pay under this article if the seller had not 29 been furnished the exemption letter. Payment of the amount under this 30 subsection exempts the purchaser from liability for any tax imposed under 31 article 4 of this chapter. The amount shall be treated as tax revenues 32 collected from the seller in order to designate the distribution base for 33 purposes of section 42-5029. For the purposes of this subsection, 34 "reasonable time" means a time limitation that the department determines 35 and that does not exceed the time limitations pursuant to section 42-1104. 36 H. The department shall prescribe forms for certificates used to 37 establish the satisfaction of the criteria necessary to qualify the sale 38 of a motor vehicle for the deductions described in section 42-5061, 39 subsection A, paragraph 14, paragraph 28, subdivision (a) and paragraph 44 40 and subsection U. Except as provided in subsection J of this section, to 41 establish entitlement to these deductions, a motor vehicle dealer shall 42 retain: 43 HB 2521 - 15 - 1. A valid certificate as prescribed by this subsection completed 1 by the purchaser and obtained prior to the issuance of the nonresident 2 registration permit authorized by section 28-2154. 3 2. A copy of the nonresident registration permit authorized by 4 section 28-2154. 5 3. A legible copy of a current valid driver license issued to the 6 purchaser by another state or foreign country that indicates an address 7 outside of this state. For the sale of a motor vehicle to a nonresident 8 entity, the entity's representative must have a current valid driver 9 license issued by the same jurisdiction as that in which the entity is 10 located. 11 4. For the purposes of the deduction provided by section 42-5061, 12 subsection A, paragraph 14, a certificate documenting the delivery of the 13 motor vehicle to an out-of-state location. 14 I. Notwithstanding subsection A, paragraph 2 of this section, if a 15 motor vehicle dealer has established entitlement to a deduction by 16 complying with subsection H of this section, the department may require 17 the purchaser who executed the certificate to establish the accuracy and 18 completeness of the information contained in the certificate that entitled 19 the motor vehicle dealer to the deduction. If the purchaser cannot 20 establish the accuracy and completeness of the information, the purchaser 21 is liable in an amount equal to any tax, penalty and interest that the 22 motor vehicle dealer would have been required to pay under this article 23 and under articles IV and V of the model city tax code as defined in 24 section 42-6051. Payment of the amount under this subsection exempts the 25 purchaser from liability for any tax imposed under article 4 of this 26 chapter and any tax imposed under article VI of the model city tax code as 27 defined in section 42-6051. The amount shall be treated as tax revenues 28 collected from the motor vehicle dealer in order to designate the 29 distribution base for purposes of section 42-5029. 30 J. To establish entitlement to the deduction described in section 31 42-5061, subsection A, paragraph 44, a public consignment auction dealer 32 as defined in section 28-4301 shall submit the valid certificate 33 prescribed by subsection H of this section to the department and retain a 34 copy for its records. 35 K. Notwithstanding any other law, compliance with subsection H of 36 this section by a motor vehicle dealer entitles the motor vehicle dealer 37 to the exemption provided in section 42-6004, subsection A, paragraph 4. 38 L. The department shall prescribe a form for a certificate to be 39 used by a person that is not subject to tax under section 42-5075 when the 40 person is engaged by a contractor PERSON that is subject to tax under 41 section 42-5075 for a HIGHWAY, STREET OR BRIDGE CONSTRUCTION project that 42 is taxable under section 42-5075. The certificate permits the person 43 purchasing tangible personal property to be incorporated or fabricated by 44 the person into any real property, structure, THE HIGHWAY, STREET OR 45 HB 2521 - 16 - BRIDGE CONSTRUCTION project, development or improvement to provide 1 documentation to a retailer that the sale of tangible personal property 2 qualifies for the deduction under section 42-5061, subsection A, paragraph 3 27, subdivision (b). A prime contractor THE PERSON CONSTRUCTING THE 4 HIGHWAY, STREET OR BRIDGE shall obtain the certificate from the department 5 and shall provide a copy to any such person working on the project. The 6 prime contractor PERSON CONSTRUCTING THE HIGHWAY, STREET OR BRIDGE shall 7 obtain a new certificate for each project to which this subsection 8 applies. For the purposes of this subsection, the following apply: 9 1. The person that is not subject to tax under section 42-5075 may 10 use the certificate issued pursuant to this subsection only with respect 11 to tangible personal property that will be incorporated into a project for 12 which the gross receipts are subject to tax under section 42-5075. 13 2. The department shall issue the certificate to the prime 14 contractor PERSON CONSTRUCTING THE HIGHWAY, STREET OR BRIDGE on receiving 15 sufficient documentation to establish that the prime contractor PERSON 16 meets the requirements of this subsection. 17 3. If any person uses the certificate provided under this 18 subsection to purchase tangible personal property to be used in a project 19 that is not subject to tax under section 42-5075, the person is liable in 20 an amount equal to any tax, penalty and interest that the seller would 21 have been required to pay under this article if the seller had not 22 complied with subsection A of this section. Payment of the amount under 23 this section SUBSECTION exempts the person from liability for any tax 24 imposed under article 4 of this chapter. The amount shall be sourced 25 under section 42-5040, subsection A, paragraph 2. 26 M. Notwithstanding any other law, compliance with subsection L of 27 this section by a person that is not subject to tax under section 42-5075 28 entitles the person to the exemption allowed by section 465, 29 subsection (k) of the model city tax code when purchasing tangible 30 personal property to be incorporated or fabricated by the person into any 31 real property, structure, project, development or improvement HIGHWAY, 32 STREET OR BRIDGE CONSTRUCTION PROJECT. 33 N. The requirements of subsections A and B of this section do not 34 apply to owners, proprietors or tenants of agricultural lands or farms who 35 sell livestock or poultry feed that is grown or raised on their lands to 36 any of the following: 37 1. Persons who feed their own livestock or poultry. 38 2. Persons who are engaged in the business of producing livestock 39 or poultry commercially. 40 3. Persons who are engaged in the business of feeding livestock or 41 poultry commercially or who board livestock noncommercially. 42 O. A vendor who has reason to believe that a certificate prescribed 43 by this section is not accurate or complete will not be relieved of the 44 burden of proving entitlement to the exemption. A vendor that accepts a 45 HB 2521 - 17 - certificate in good faith will be relieved of the burden of proof and the 1 purchaser may be required to establish the accuracy of the claimed 2 exemption. If the purchaser cannot establish the accuracy and 3 completeness of the information provided in the certificate, the purchaser 4 is liable for an amount equal to the transaction privilege tax, penalty 5 and interest that the vendor would have been required to pay if the vendor 6 had not accepted the certificate. 7 P. Notwithstanding any other law, an online lodging operator, as 8 defined in section 42-5076, shall be entitled to an exclusion from any 9 applicable taxes for any online lodging transaction, as defined in section 10 42-5076, facilitated by an online lodging marketplace, as defined in 11 section 42-5076, for which the online lodging operator has obtained from 12 the online lodging marketplace written notice that the online lodging 13 marketplace is registered with the department to collect applicable taxes 14 for all online lodging transactions facilitated by the online lodging 15 marketplace, and transaction history documenting tax collected by the 16 online lodging marketplace, pursuant to section 42-5005, subsection L. 17 Q. The department shall prescribe the form of a certificate to be 18 used by a person purchasing an aircraft to document eligibility for a 19 deduction pursuant to section 42-5061, subsection B, paragraph 7, 20 subdivision (a), item (v) or an exemption pursuant to section 42-5159, 21 subsection B, paragraph 7, subdivision (a), item (v), relating to 22 aircraft. The person must provide this certificate and documentation 23 confirming that the operational control of the aircraft has been 24 transferred or will be transferred immediately after the purchase to one 25 or more persons described in section 42-5061, subsection B, paragraph 7, 26 subdivision (a), item (i), (ii), (iii) or (iv) or section 42-5159, 27 subsection B, paragraph 7, subdivision (a), item (i), (ii), (iii) or (iv). 28 Operational control of the aircraft must be transferred for at least fifty 29 percent of the aircraft's flight hours. If such operational control is 30 not transferred for at least fifty percent of the aircraft's flight hours 31 during the recapture period, the owner of the aircraft is liable for an 32 amount equal to any tax that the seller or purchaser would have been 33 required to pay under this chapter at the time of the sale, plus penalty 34 and interest. The recapture period begins on the date that operational 35 control of the aircraft is first transferred and ends on the later of the 36 date the aircraft is fully depreciated for federal income tax purposes or 37 five years after operational control was first transferred. For the 38 purposes of this subsection, operational control of the aircraft must be 39 within the meaning of federal aviation administration operations 40 specification A008, or its successor, except that: 41 1. If it is determined that operational control has been 42 transferred for less than fifty percent but more than forty percent of the 43 aircraft's flight hours, the owner of the aircraft is liable for an amount 44 HB 2521 - 18 - equal to any tax that the seller or purchaser would have been required to 1 pay under this chapter at the time of the sale, plus interest. 2 2. If the aircraft is sold during the recapture period, the seller 3 is not liable for the amount determined pursuant to this subsection unless 4 the operational control of the aircraft had not been transferred for at 5 least fifty percent of the aircraft's flight hours at the time of the 6 sale. 7 Sec. 8. Section 42-5010, Arizona Revised Statutes, is amended to 8 read: 9 42-5010. Rates; distribution base 10 A. The tax imposed by this article is levied and shall be collected 11 at the following rates: 12 1. Five percent of the tax base as computed for the business of 13 every person engaging or continuing in this state in the following 14 business classifications described in article 2 of this chapter: 15 (a) Transporting classification. 16 (b) Utilities classification. 17 (c) Telecommunications classification. 18 (d) Pipeline classification. 19 (e) Private car line classification. 20 (f) Publication classification. 21 (g) Job printing classification. 22 (h) Prime contracting classification. 23 (h) HIGHWAY, STREET OR BRIDGE CONSTRUCTION CLASSIFICATION. 24 (i) MANUFACTURED BUILDING DEALER CLASSIFICATION. 25 (i) (j) Amusement classification. 26 (j) (k) Restaurant classification. 27 (k) (l) Personal property rental classification. 28 (l) (m) Retail classification and amounts equal to retail 29 transaction privilege tax due pursuant to section 42-5008.01. 30 2. Five and one-half percent of the tax base as computed for the 31 business of every person engaging or continuing in this state in: 32 (a) The transient lodging classification described in section 33 42-5070. 34 (b) The online lodging marketplace classification described in 35 section 42-5076 who has entered into an agreement with the department to 36 register for, or has otherwise obtained from the department, a license to 37 collect tax pursuant to section 42-5005, subsection L. 38 3. Three and one-eighth percent of the tax base as computed for the 39 business of every person engaging or continuing in this state in the 40 mining classification described in section 42-5072. 41 4. Zero percent of the tax base as computed for the business of 42 every person engaging or continuing in this state in the commercial lease 43 classification described in section 42-5069. 44 HB 2521 - 19 - B. Except as provided by subsection J of this section, twenty 1 percent of the tax revenues collected at the rate prescribed by subsection 2 A, paragraph 1 of this section from persons on account of engaging in 3 business under the business classifications listed in subsection A, 4 paragraph 1, subdivisions (a) through (h) (i) of this section is 5 designated as distribution base for purposes of section 42-5029. 6 C. Forty percent of the tax revenues collected at the rate 7 prescribed by subsection A, paragraph 1 of this section from persons on 8 account of engaging in business under the business classifications listed 9 in subsection A, paragraph 1, subdivisions (i) (j) through (l) (m) of this 10 section is designated as distribution base for purposes of section 11 42-5029. 12 D. Thirty-two percent of the tax revenues collected from persons on 13 account of engaging in business under the business classification listed 14 in subsection A, paragraph 3 of this section is designated as distribution 15 base for purposes of section 42-5029. 16 E. Fifty-three and one-third percent of the tax revenues collected 17 from persons on account of engaging in business under the business 18 classification listed in subsection A, paragraph 4 of this section is 19 designated as distribution base for purposes of section 42-5029. 20 F. Fifty percent of the tax revenues collected from persons on 21 account of engaging in business under the business classification listed 22 in subsection A, paragraph 2 of this section is designated as distribution 23 base for purposes of section 42-5029. 24 G. In addition to the rates prescribed by subsection A of this 25 section, if approved by the qualified electors voting at a statewide 26 general election, an additional rate increment is imposed and shall be 27 collected through June 30, 2021. The taxpayer shall pay taxes pursuant to 28 this subsection at the same time and in the same manner as under 29 subsection A of this section. The department shall separately account for 30 the revenues collected with respect to the rates imposed pursuant to this 31 subsection and the state treasurer shall distribute all of those revenues 32 in the manner prescribed by section 42-5029, subsection E. The rates 33 imposed pursuant to this subsection shall not be considered local revenues 34 for purposes of article IX, section 21, Constitution of Arizona. The 35 additional tax rate increment is levied at the rate of six-tenths of one 36 per cent of the tax base of every person engaging or continuing in this 37 state in a business classification listed in subsection A, paragraph 1 of 38 this section. 39 H. Any increase in the rate of tax that is imposed by this chapter 40 and that is enacted by the legislature or by a vote of the people does not 41 apply with respect to GROSS INCOME DERIVED FROM contracts entered into by 42 prime contractors or pursuant to written bids made by prime contractors 43 SUBMITTED on or before the effective date of the legislation or the date 44 of the election enacting the increase. To qualify for the exemption under 45 HB 2521 - 20 - this subsection, the prime contractor TAXPAYER must maintain sufficient 1 documentation, in a manner and form prescribed by the department, to 2 verify the date of the contract or written bid. 3 I. For taxpayers taxable under this chapter other than prime 4 contractors taxable pursuant to section 42-5075: 5 1. Any increase in the rate of tax that is levied by this article 6 or article 2 of this chapter enacted by the legislature or by a vote of 7 the people does not apply for a period of one hundred twenty days from 8 AFTER the date of the tax rate increase to the gross proceeds of sales or 9 gross income from the business of the taxpayer with respect to written 10 contracts entered into before the effective date of the tax rate increase 11 unless the taxpayer has entered into a contract that contains a provision 12 that entitles the taxpayer to recover from the purchaser the amount of the 13 additional tax levied. 14 2. The provisions of this subsection apply without regard to the 15 accounting method used by the taxpayer to report the taxes imposed under 16 article 2 of this chapter. 17 3. The provisions of this subsection shall not be considered in 18 determining the rate of tax imposed under chapter 6, article 3 of this 19 title. 20 J. Zero percent of the tax revenues that are collected at the rate 21 prescribed by subsection A, paragraph 1 of this section from persons on 22 account of engaging in business under the business classification listed 23 in subsection A, paragraph 1, subdivision SUBDIVISIONS (h) AND (i) of this 24 section, and that are subject to any distribution required by section 25 42-5032.02, is designated as distribution base for the purposes of section 26 42-5029 until the total amount subject to distribution pursuant to section 27 42-5032.02 has reached the maximum amount prescribed by section 28 42-5032.02, subsection C. Thereafter, twenty percent of the remaining tax 29 revenues is designated as distribution base for the purposes of section 30 42-5029 as provided by subsection B of this section. 31 Sec. 9. Subject to the requirements of article IV, part 1, section 32 1, Constitution of Arizona, section 42-5029, Arizona Revised Statutes, is 33 amended to read: 34 42-5029. Remission and distribution of monies; withholding; 35 definition 36 A. The department shall deposit, pursuant to sections 35-146 and 37 35-147, all revenues collected under this article and articles 4, 5 and 8 38 of this chapter pursuant to section 42-1116, separately accounting for: 39 1. Payments of estimated tax under section 42-5014, subsection D. 40 2. Revenues collected pursuant to section 42-5070. 41 3. Revenues collected under this article and article 5 of this 42 chapter from and after June 30, 2000 from sources located on Indian 43 reservations in this state. 44 HB 2521 - 21 - 4. Revenues collected pursuant to section 42-5010, subsection G and 1 section 42-5155, subsection D E. 2 B. The department shall credit payments of estimated tax to an 3 estimated tax clearing account and each month shall transfer all monies in 4 the estimated tax clearing account to a fund designated as the transaction 5 privilege and severance tax clearing account. The department shall credit 6 all other payments to the transaction privilege and severance tax clearing 7 account, separately accounting for the monies designated as distribution 8 base under sections 42-5010, 42-5164, 42-5205 and 42-5353. Each month the 9 department shall report to the state treasurer the amount of monies 10 collected pursuant to this article and articles 4, 5 and 8 of this 11 chapter. 12 C. On notification by the department, the state treasurer shall 13 distribute the monies deposited in the transaction privilege and severance 14 tax clearing account in the manner prescribed by this section and by 15 sections 42-5164, 42-5205 and 42-5353, after deducting warrants drawn 16 against the account pursuant to sections 42-1118 and 42-1254. 17 D. Of the monies designated as distribution base, and subject to 18 the requirements of section 42-5041, the department shall: 19 1. Pay twenty-five percent to the various incorporated 20 municipalities in this state in proportion to their population to be used 21 by the municipalities for any municipal purpose. 22 2. Pay 38.08 percent to the counties in this state by averaging the 23 following proportions: 24 (a) The proportion that the population of each county bears to the 25 total state population. 26 (b) The proportion that the distribution base monies collected 27 during the calendar month in each county under this article, section 28 42-5164, subsection B, section 42-5205, subsection B and section 42-5353 29 bear to the total distribution base monies collected under this article, 30 section 42-5164, subsection B, section 42-5205, subsection B and section 31 42-5353 throughout the state for the calendar month. 32 3. Pay an additional 2.43 percent to the counties in this state as 33 follows: 34 (a) Average the following proportions: 35 (i) The proportion that the assessed valuation used to determine 36 secondary property taxes of each county, after deducting that part of the 37 assessed valuation that is exempt from taxation at the beginning of the 38 month for which the amount is to be paid, bears to the total assessed 39 valuations used to determine secondary property taxes of all the counties 40 after deducting that portion of the assessed valuations that is exempt 41 from taxation at the beginning of the month for which the amount is to be 42 paid. Property of a city or town that is not within or contiguous to the 43 municipal corporate boundaries and from which water is or may be withdrawn 44 or diverted and transported for use on other property is considered to be 45 HB 2521 - 22 - taxable property in the county for purposes of determining assessed 1 valuation in the county under this item. 2 (ii) The proportion that the distribution base monies collected 3 during the calendar month in each county under this article, section 4 42-5164, subsection B, section 42-5205, subsection B and section 42-5353 5 bear to the total distribution base monies collected under this article, 6 section 42-5164, subsection B, section 42-5205, subsection B and section 7 42-5353 throughout the state for the calendar month. 8 (b) If the proportion computed under subdivision (a) of this 9 paragraph for any county is greater than the proportion computed under 10 paragraph 2 of this subsection, the department shall compute the 11 difference between the amount distributed to that county under paragraph 2 12 of this subsection and the amount that would have been distributed under 13 paragraph 2 of this subsection using the proportion computed under 14 subdivision (a) of this paragraph and shall pay that difference to the 15 county from the amount available for distribution under this paragraph. 16 Any monies remaining after all payments under this subdivision shall be 17 distributed among the counties according to the proportions computed under 18 paragraph 2 of this subsection. 19 4. After any distributions required by sections 42-5030, 20 42-5030.01, 42-5031, 42-5032, 42-5032.01 and 42-5032.02, and after making 21 any transfer to the water quality assurance revolving fund as required by 22 section 49-282, subsection B, credit the remainder of the monies 23 designated as distribution base to the state general fund. From this 24 amount the legislature shall annually appropriate to: 25 (a) The department of revenue sufficient monies to administer and 26 enforce this article and articles 5 and 8 of this chapter. 27 (b) The department of economic security monies to be used for the 28 purposes stated in title 46, chapter 1. 29 (c) The firearms safety and ranges fund established by section 30 17-273, fifty thousand dollars derived from the taxes collected from the 31 retail classification pursuant to section 42-5061 for the current fiscal 32 year. 33 E. If approved by the qualified electors voting at a statewide 34 general election, all monies collected pursuant to section 42-5010, 35 subsection G and section 42-5155, subsection D E shall be distributed 36 each fiscal year pursuant to this subsection. The monies distributed 37 pursuant to this subsection are in addition to any other appropriation, 38 transfer or other allocation of public or private monies from any other 39 source and shall not supplant, replace or cause a reduction in other 40 school district, charter school, university or community college funding 41 sources. The monies shall be distributed as follows: 42 1. If there are outstanding state school facilities revenue bonds 43 pursuant to title 15, chapter 16, article 7, each month one-twelfth of the 44 amount that is necessary to pay the fiscal year's debt service on 45 HB 2521 - 23 - outstanding state school improvement revenue bonds for the current fiscal 1 year shall be transferred each month to the school improvement revenue 2 bond debt service fund established by section 15-2084. The total amount 3 of bonds for which these monies may be allocated for the payment of debt 4 service shall not exceed a principal amount of eight hundred million 5 dollars exclusive of refunding bonds and other refinancing obligations. 6 2. After any transfer of monies pursuant to paragraph 1 of this 7 subsection, twelve per cent PERCENT of the remaining monies collected 8 during the preceding month shall be transferred to the technology and 9 research initiative fund established by section 15-1648 to be distributed 10 among the universities for the purpose of investment in technology and 11 research-based initiatives. 12 3. After the transfer of monies pursuant to paragraph 1 of this 13 subsection, three per cent PERCENT of the remaining monies collected 14 during the preceding month shall be transferred to the workforce 15 development account established in each community college district 16 pursuant to section 15-1472 for the purpose of investment in workforce 17 development programs. 18 4. After transferring monies pursuant to paragraphs 1, 2 and 3 of 19 this subsection, one-twelfth of the amount a community college that is 20 owned, operated or chartered by a qualifying Indian tribe on its own 21 Indian reservation would receive pursuant to section 15-1472, subsection 22 D, paragraph 2 if it were a community college district shall be 23 distributed each month to the treasurer or other designated depository of 24 a qualifying Indian tribe. Monies distributed pursuant to this paragraph 25 are for the exclusive purpose of providing support to one or more 26 community colleges owned, operated or chartered by a qualifying Indian 27 tribe and shall be used in a manner consistent with section 15-1472, 28 subsection B. For the purposes of this paragraph, "qualifying Indian 29 tribe" has the same meaning as defined in section 42-5031.01, 30 subsection D. 31 5. After transferring monies pursuant to paragraphs 1, 2 and 3 of 32 this subsection, one-twelfth of the following amounts shall be transferred 33 each month to the department of education for the increased cost of basic 34 state aid under section 15-971 due to added school days and associated 35 teacher salary increases enacted in 2000: 36 (a) In fiscal year 2001-2002, $15,305,900. 37 (b) In fiscal year 2002-2003, $31,530,100. 38 (c) In fiscal year 2003-2004, $48,727,700. 39 (d) In fiscal year 2004-2005, $66,957,200. 40 (e) In fiscal year 2005-2006 and each fiscal year thereafter, 41 $86,280,500. 42 6. After transferring monies pursuant to paragraphs 1, 2 and 3 of 43 this subsection, seven million eight hundred thousand dollars is 44 appropriated each fiscal year, to be paid in monthly installments, to the 45 HB 2521 - 24 - department of education to be used for school safety as provided in 1 section 15-154 and two hundred thousand dollars is appropriated each 2 fiscal year, to be paid in monthly installments to the department of 3 education to be used for the character education matching grant program as 4 provided in section 15-154.01. 5 7. After transferring monies pursuant to paragraphs 1, 2 and 3 of 6 this subsection, no more than seven million dollars may be appropriated by 7 the legislature each fiscal year to the department of education to be used 8 for accountability purposes as described in section 15-241 and title 15, 9 chapter 9, article 8. 10 8. After transferring monies pursuant to paragraphs 1, 2 and 3 of 11 this subsection, one million five hundred thousand dollars is appropriated 12 each fiscal year, to be paid in monthly installments, to the failing 13 schools tutoring fund established by section 15-241. 14 9. After transferring monies pursuant to paragraphs 1, 2 and 3 of 15 this subsection, twenty-five million dollars shall be transferred each 16 fiscal year to the state general fund to reimburse the general fund for 17 the cost of the income tax credit allowed by section 43-1072.01. 18 10. After the payment of monies pursuant to paragraphs 1 through 9 19 of this subsection, the remaining monies collected during the preceding 20 month shall be transferred to the classroom site fund established by 21 section 15-977. The monies shall be allocated as follows in the manner 22 prescribed by section 15-977: 23 (a) Forty per cent PERCENT shall be allocated for teacher 24 compensation based on performance. 25 (b) Twenty per cent PERCENT shall be allocated for increases in 26 teacher base compensation and employee related expenses. 27 (c) Forty per cent PERCENT shall be allocated for maintenance and 28 operation purposes. 29 F. The department shall credit the remainder of the monies in the 30 transaction privilege and severance tax clearing account to the state 31 general fund, subject to any distribution required by section 42-5030.01. 32 G. Notwithstanding subsection D of this section, if a court of 33 competent jurisdiction finally determines that tax monies distributed 34 under this section were illegally collected under this article or articles 35 5 and 8 of this chapter and orders the monies to be refunded to the 36 taxpayer, the department shall compute the amount of such monies that was 37 distributed to each city, town and county under this section. Each 38 city's, town's and county's proportionate share of the costs shall be 39 based on the amount of the original tax payment each municipality and 40 county received. Each month the state treasurer shall reduce the amount 41 otherwise distributable to the city, town and county under this section by 42 one thirty-sixth of the total amount to be recovered from the city, town 43 or county until the total amount has been recovered, but the monthly 44 reduction for any city, town or county shall not exceed ten per cent 45 HB 2521 - 25 - PERCENT of the full monthly distribution to that entity. The reduction 1 shall begin for the first calendar month after the final disposition of 2 the case and shall continue until the total amount, including interest and 3 costs, has been recovered. 4 H. On receiving a certificate of default from the greater Arizona 5 development authority pursuant to section 41-2257 or 41-2258 and to the 6 extent not otherwise expressly prohibited by law, the state treasurer 7 shall withhold from the next succeeding distribution of monies pursuant to 8 this section due to the defaulting political subdivision the amount 9 specified in the certificate of default and immediately deposit the amount 10 withheld in the greater Arizona development authority revolving fund. The 11 state treasurer shall continue to withhold and deposit the monies until 12 the greater Arizona development authority certifies to the state treasurer 13 that the default has been cured. In no event may the state treasurer 14 withhold any amount that the defaulting political subdivision certifies to 15 the state treasurer and the authority as being necessary to make any 16 required deposits then due for the payment of principal and interest on 17 bonds of the political subdivision that were issued before the date of the 18 loan repayment agreement or bonds and that have been secured by a pledge 19 of distributions made pursuant to this section. 20 I. Except as provided by sections 42-5033 and 42-5033.01, the 21 population of a county, city or town as determined by the most recent 22 United States decennial census plus any revisions to the decennial census 23 certified by the United States bureau of the census shall be used as the 24 basis for apportioning monies pursuant to subsection D of this section. 25 J. Except as otherwise provided by this subsection, on notice from 26 the department of revenue pursuant to section 42-6010, subsection B, the 27 state treasurer shall withhold from the distribution of monies pursuant to 28 this section to the affected city or town the amount of the penalty for 29 business location municipal tax incentives provided by the city or town to 30 a business entity that locates a retail business facility in the city or 31 town. The state treasurer shall continue to withhold monies pursuant to 32 this subsection until the entire amount of the penalty has been withheld. 33 The state treasurer shall credit any monies withheld pursuant to this 34 subsection to the state general fund as provided by subsection D, 35 paragraph 4 of this section. The state treasurer shall not withhold any 36 amount that the city or town certifies to the department of revenue and 37 the state treasurer as being necessary to make any required deposits or 38 payments for debt service on bonds or other long-term obligations of the 39 city or town that were issued or incurred before the location incentives 40 provided by the city or town. 41 K. On notice from the auditor general pursuant to section 9-626, 42 subsection D, the state treasurer shall withhold from the distribution of 43 monies pursuant to this section to the affected city the amount computed 44 pursuant to section 9-626, subsection D. The state treasurer shall 45 HB 2521 - 26 - continue to withhold monies pursuant to this subsection until the entire 1 amount specified in the notice has been withheld. The state treasurer 2 shall credit any monies withheld pursuant to this subsection to the state 3 general fund as provided by subsection D, paragraph 4 of this section. 4 L. Except as otherwise provided by this subsection, on notice from 5 the attorney general pursuant to section 41-194.01, subsection B, 6 paragraph 1 that an ordinance, regulation, order or other official action 7 adopted or taken by the governing body of a county, city or town violates 8 state law or the Constitution of Arizona, the state treasurer shall 9 withhold the distribution of monies pursuant to this section to the 10 affected county, city or town and shall continue to withhold monies 11 pursuant to this subsection until the attorney general certifies to the 12 state treasurer that the violation has been resolved. The state treasurer 13 shall redistribute the monies withheld pursuant to this subsection among 14 all other counties, cities and towns in proportion to their population as 15 provided by subsection D of this section. The state treasurer shall not 16 withhold any amount that the county, city or town certifies to the 17 attorney general and the state treasurer as being necessary to make any 18 required deposits or payments for debt service on bonds or other long-term 19 obligations of the county, city or town that were issued or incurred 20 before committing the violation. 21 M. For the purposes of this section, "community college district" 22 means a community college district that is established pursuant to 23 sections 15-1402 and 15-1403 and that is a political subdivision of this 24 state and, unless otherwise specified, includes a community college 25 tuition financing district established pursuant to section 15-1409. 26 Sec. 10. Section 42-5032.01, Arizona Revised Statutes, is amended 27 to read: 28 42-5032.01. Distribution of revenues for tourism and sports 29 authority 30 A. Each month the state treasurer shall pay, from the amount 31 designated as distribution base pursuant to section 42-5029, subsection D, 32 the amount determined under subsection B of this section to the tourism 33 and sports authority for deposit in the authority's facility revenue 34 clearing account established by section 5-834. 35 B. The amount to be paid under subsection A of this section is the 36 total amount of state transaction privilege tax revenues received from 37 persons conducting business under: 38 1. The retail, amusement and restaurant classifications at, or with 39 respect to events held at, a multipurpose facility that is owned or 40 operated by the authority pursuant to title 5, chapter 8. 41 2. The retail, amusement and restaurant classifications at, or with 42 respect to, professional football contests that are held beginning July 43 2001 in a stadium located on the campus of an institution under the 44 jurisdiction of the Arizona board of regents. 45 HB 2521 - 27 - C. Each month the state treasurer shall pay, from the amount 1 designated as distribution base pursuant to section 42-5029, subsection D, 2 the total amount of state transaction privilege tax revenues received from 3 persons conducting business under the prime contracting classification at 4 a multipurpose facility that is owned or operated by the tourism and 5 sports authority pursuant to title 5, chapter 8 for deposit in the 6 authority's construction account established by section 5-833. 7 Sec. 11. Section 42-5032.02, Arizona Revised Statutes, is amended 8 to read: 9 42-5032.02. Distribution of revenues for city, town or county 10 infrastructure improvements related to 11 manufacturing facilities; definitions 12 A. Subject to subsection B of this section, from and after 13 September 30, 2013 through September 30, 2023, each month the state 14 treasurer shall pay a city, town or county the amount determined under 15 subsection C of this section for the purpose of funding up to eighty per 16 cent PERCENT of the cost of public infrastructure improvements for the 17 benefit of a manufacturing facility. 18 B. The state treasurer shall not make any payments under subsection 19 C of this section until both of the following apply: 20 1. Twenty-five per cent PERCENT of the capital investment that is 21 certified under subsection D of this section and that constitutes 22 construction phase services, as defined in section 42-5075, CONTRACTING 23 ACTIVITY has been made by the manufacturing facility. 24 2. From and after June 30, 2014. 25 C. The amount to be paid to a city, town or county under subsection 26 A of this section is the total amount of state transaction privilege tax 27 revenues collected under section 42-5010, subsection A from persons 28 conducting business under section 42-5075 derived from FOR SALES OF 29 MATERIALS USED IN contracts to construct buildings and associated 30 improvements for the benefit of a manufacturing facility. THE AMOUNT TO 31 BE DISTRIBUTED EACH MONTH SHALL BE PAID IN EQUAL INSTALLMENTS OVER THE 32 LIFE OF THE CONTRACT TO CONSTRUCT BUILDINGS AND ASSOCIATED IMPROVEMENTS 33 FOR THE BENEFIT OF THE MANUFACTURING FACILITY. The total amount paid to 34 all cities, towns and counties under this subsection shall not exceed a 35 maximum of fifty million dollars. 36 D. Before the commencement of the construction of buildings and 37 associated improvements for the benefit of a manufacturing facility that 38 will require a city, town or county to make infrastructure improvements, 39 the manufacturing facility shall file a sworn certification with the 40 Arizona commerce authority, and submit a copy of this sworn certification 41 to the applicable city, town or county, that the manufacturing facility 42 agrees TO PROVIDE A COPY OF THE CONSTRUCTION CONTRACT SHOWING THE COST OF 43 THE MATERIALS TO BE USED IN THE CONSTRUCTION OF BUILDINGS AND ASSOCIATED 44 IMPROVEMENTS FOR THE BENEFIT OF THE MANUFACTURING FACILITY AND to either: 45 HB 2521 - 28 - 1. Make at least five hundred million dollars in capital investment 1 if the manufacturing facility is located in a county that has a population 2 of eight hundred thousand persons or more. 3 2. Make at least fifty million dollars in capital investment if the 4 manufacturing facility is located in a county that has a population of 5 less than eight hundred thousand persons. 6 E. The certification under subsection D of this section shall 7 contain a sworn statement or certification, signed by an officer of the 8 manufacturing facility under penalty of perjury, that the information 9 contained is true and correct according to the best belief and knowledge 10 of the person submitting the information to the department after a 11 reasonable investigation of the facts. 12 F. On receipt of a sworn certification from a manufacturing 13 facility pursuant to subsection D of this section and before the 14 commencement of the construction of buildings and associated improvements 15 for the benefit of a manufacturing facility that will require a city, town 16 or county to make infrastructure improvements, the city, town or county 17 shall enter into a written agreement with the department. This agreement 18 and any amendments or changes to the agreement shall: 19 1. State the cost of the public infrastructure improvements and 20 separately identify the particular improvements that will be made, 21 INCLUDING SPECIFICALLY IDENTIFYING THE COST OF MATERIALS USED. 22 2. State that the monies received under this section will be used 23 exclusively to pay for public infrastructure improvements that are 24 necessary to support the activities of the manufacturing facility. 25 3. State that the city, town or county will pay a minimum of twenty 26 per cent PERCENT of the cost of the public infrastructure improvements 27 with its own monies or with monies from the manufacturing facility. 28 4. State that the city, town or county will immediately notify the 29 department when monies received under this section exceed eighty per cent 30 PERCENT of the cost of the infrastructure improvements and will return the 31 amount of the excess to the state treasurer for deposit to the state 32 general fund. 33 5. Stipulate the actual amount of the construction funding that 34 will be derived from sources other than the state. 35 6. Identify the persons who will be prime contractors on the 36 construction of buildings and associated improvements for the benefit of a 37 manufacturing facility and state that each prime contractor has been 38 notified as to which portion of the contractor's income shall be 39 separately identified to the department pursuant to section 42-5075, 40 subsection H. 41 7. 6. State that the city, town or county agrees that any amounts 42 paid by the department to a prime contractor as identified under paragraph 43 6 of this subsection resulting from an audit adjustment or claim for 44 credit or refund of taxes described in subsection C of this section THE 45 HB 2521 - 29 - CITY, TOWN OR COUNTY THAT EXCEED THE AMOUNT OF THE TRANSACTION PRIVILEGE 1 TAX PAID ON THE SALE OF MATERIALS USED IN THE CONSTRUCTION OF BUILDINGS OR 2 OTHER ASSOCIATED IMPROVEMENTS FOR THE BENEFIT OF THE MANUFACTURING 3 FACILITY shall be recovered by the department from the city, town or 4 county by reducing the amount paid to the city, town or county under 5 section 42-5029 from monies designated as distribution base in the month 6 next succeeding the month in which the adjustment or claim is paid. 7 8. 7. State that the city, town or county agrees that the 8 department will use the amounts subject to any distribution required under 9 subsection A of this section in calculating the maximum amount set by 10 subsection C of this section. 11 9. State that the city, town or county agrees that if, on 12 notification by the department, the state treasurer ceases payments 13 because of the condition described in subsection G of this section, the 14 city, town or county has no claim to additional payments if the department 15 subsequently pays amounts to a prime contractor identified in an agreement 16 with any city, town or county, as described in paragraph 6 of this 17 subsection, due to an audit adjustment or claim for credit or refund of 18 taxes described in subsection C of this section. 19 10. 8. Provide any other information deemed necessary by the 20 department. 21 G. EACH YEAR AND ON COMPLETION OF THE CONTRACT TO CONSTRUCT 22 BUILDINGS AND OTHER ASSOCIATED IMPROVEMENTS FOR THE BENEFIT OF A 23 MANUFACTURING FACILITY, THE MANUFACTURING FACILITY SHALL PROVIDE A 24 RECONCILIATION OF THE COST OF MATERIALS USED IN THE CONSTRUCTION OF THE 25 BUILDINGS AND OTHER ASSOCIATED IMPROVEMENTS, INCLUDING AMOUNTS 26 REPRESENTING A REIMBURSEMENT OF TRANSACTION PRIVILEGE TAXES PAID BY THE 27 RETAILER. 28 G. H. On notification by the department, the state treasurer shall 29 cease payments under subsection A of this section if either of the 30 following occurs: 31 1. A city, town or county has received monies that meet or exceed 32 eighty per cent PERCENT of the cost of the public infrastructure 33 improvements that are necessary to support the activities related to the 34 manufacturing facility as described in the written agreement pursuant to 35 subsection F of this section. 36 2. The total amount subject to any distribution required under 37 subsection A of this section has met the maximum amount set by subsection 38 C of this section. 39 H. I. For the purposes of this section: 40 1. "Associated improvement" includes any public infrastructure 41 improvement that is made for the benefit of the manufacturing facility 42 outside of the parcel or parcels of real property where the manufacturing 43 facility is located. 44 HB 2521 - 30 - 2. "Capital investment" means an expenditure to acquire, lease or 1 improve property that is used for the benefit of a manufacturing facility, 2 including land, buildings, machinery and fixtures. 3 3. "Manufacturing facility": 4 (a) Means an establishment that is engaged in the mechanical, 5 physical or chemical transformation or fabrication of materials, 6 substances or components into new products in this state, that is 7 classified within sections 31 through 33 inclusive of the 2007 edition of 8 the north American industry classification system as published by the 9 national technical information service of the United States department of 10 commerce and that agrees to either: 11 (i) Make at least five hundred million dollars in capital 12 investment if the manufacturing facility is located in a county that has a 13 population of eight hundred thousand persons or more. 14 (ii) Make at least fifty million dollars in capital investment if 15 the manufacturing facility is located in a county that has a population of 16 less than eight hundred thousand persons. 17 (b) Does not include mining, milling or smelting mineral ore or 18 generating electricity. 19 4. "Population" means the population determined in the most recent 20 United States decennial census or the most recent special census as 21 provided in section 28-6532. 22 5. "Public infrastructure" means water facilities, wastewater 23 facilities and roads that are necessary to support the activities of the 24 manufacturing facility. 25 Sec. 12. Section 42-5040, Arizona Revised Statutes, is amended to 26 read: 27 42-5040. Sourcing of certain transactions involving tangible 28 personal property; definitions 29 A. Except as provided in section 42-5075, retail sales of tangible 30 personal property shall be sourced as follows: 31 1. To the seller's business location if the seller receives the 32 order at a business location in this state. 33 2. Except as provided in section 42-5008.01, To the purchaser's 34 location in this state if the seller receives the order at a business 35 location outside this state. 36 B. For the purposes of this section, an order is received when all 37 of the information necessary to accept the order has been received by or 38 on behalf of the seller, regardless of where the order is accepted or 39 approved. The place of business or residence of the purchaser does not 40 determine where the order is received. 41 C. The gross receipts from leasing or renting tangible personal 42 property shall be sourced as follows: 43 1. To the lessor's business location if the lessor has a business 44 location in this state. 45 HB 2521 - 31 - 2. To the lessee's address if the lessor does not have a business 1 location in this state. The gross receipts are taxable when the property 2 is shipped, delivered or otherwise brought into this state for use in this 3 state. 4 D. For the purposes of this section: 5 1. "Lessee's address" means the residential address of an 6 individual lessee and the primary business address of any other lessee. 7 2. "Lessor's business location" means the business address that 8 appears on the lessor's transaction privilege tax license. 9 Sec. 13. Section 42-5061, Arizona Revised Statutes, as amended by 10 Senate Bill 1010, section 11, fifty-third legislature, first regular 11 session, as transmitted to the governor, is amended to read: 12 42-5061. Retail classification; definitions 13 A. The retail classification is comprised of the business of 14 selling tangible personal property at retail. The tax base for the retail 15 classification is the gross proceeds of sales or gross income derived from 16 the business. The tax imposed on the retail classification does not apply 17 to the gross proceeds of sales or gross income from: 18 1. Professional or personal service occupations or businesses that 19 involve sales or transfers of tangible personal property only as 20 inconsequential elements. 21 2. Services rendered in addition to selling tangible personal 22 property at retail. 23 3. Sales of warranty or service contracts. The storage, use or 24 consumption of tangible personal property provided under the conditions of 25 such contracts is subject to tax under section 42-5156. 26 4. Sales of tangible personal property by any nonprofit 27 organization organized and operated exclusively for charitable purposes 28 and recognized by the United States internal revenue service under section 29 501(c)(3) of the internal revenue code. 30 5. Sales to persons engaged in business classified under the 31 restaurant classification of articles used by human beings for food, drink 32 or condiment, whether simple, mixed or compounded. 33 6. Business activity that is properly included in any other 34 business classification that is taxable under this article. 35 7. The sale of stocks and bonds. 36 8. Drugs and medical oxygen, including delivery hose, mask or tent, 37 regulator and tank, on the prescription of a member of the medical, dental 38 or veterinarian profession who is licensed by law to administer such 39 substances. 40 9. Prosthetic appliances as defined in section 23-501 and as 41 prescribed or recommended by a health professional who is licensed 42 pursuant to title 32, chapter 7, 8, 11, 13, 14, 15, 16, 17 or 29. 43 10. Insulin, insulin syringes and glucose test strips. 44 11. Prescription eyeglasses or contact lenses. 45 HB 2521 - 32 - 12. Hearing aids as defined in section 36-1901. 1 13. Durable medical equipment that has a centers for medicare and 2 medicaid services common procedure code, is designated reimbursable by 3 medicare, is prescribed by a person who is licensed under title 32, 4 chapter 7, 8, 13, 14, 15, 17 or 29, can withstand repeated use, is 5 primarily and customarily used to serve a medical purpose, is generally 6 not useful to a person in the absence of illness or injury and is 7 appropriate for use in the home. 8 14. Sales of motor vehicles to nonresidents of this state for use 9 outside this state if the motor vehicle dealer ships or delivers the motor 10 vehicle to a destination out of this state. 11 15. Food, as provided in and subject to the conditions of article 3 12 of this chapter and section 42-5074. 13 16. Items purchased with United States department of agriculture 14 food stamp coupons issued under the food stamp act of 1977 (P.L. 95-113; 15 91 Stat. 958) or food instruments issued under section 17 of the child 16 nutrition act (P.L. 95-627; 92 Stat. 3603; P.L. 99-661, section 4302; 42 17 United States Code section 1786). 18 17. Textbooks by any bookstore that are required by any state 19 university or community college. 20 18. Food and drink to a person that is engaged in a business that 21 is classified under the restaurant classification and that provides such 22 food and drink without monetary charge to its employees for their own 23 consumption on the premises during the employees' hours of employment. 24 19. Articles of food, drink or condiment and accessory tangible 25 personal property to a school district or charter school if such articles 26 and accessory tangible personal property are to be prepared and served to 27 persons for consumption on the premises of a public school within the 28 district or on the premises of the charter school during school hours. 29 20. Lottery tickets or shares pursuant to title 5, chapter 5.1, 30 article 1. 31 21. The sale of cash equivalents and the sale of precious metal 32 bullion and monetized bullion to the ultimate consumer, but the sale of 33 coins or other forms of money for manufacture into jewelry or works of art 34 is subject to the tax and the gross proceeds of sales or gross income 35 derived from the redemption of any cash equivalent by the holder as a 36 means of payment for goods or services that are taxable under this article 37 is subject to the tax. For the purposes of this paragraph: 38 (a) "Cash equivalents" means items or intangibles, whether or not 39 negotiable, that are sold to one or more persons, through which a value 40 denominated in money is purchased in advance and may be redeemed in full 41 or in part for tangible personal property, intangibles or services. Cash 42 equivalents include gift cards, stored value cards, gift certificates, 43 vouchers, traveler's checks, money orders or other instruments, orders or 44 electronic mechanisms, such as an electronic code, personal identification 45 HB 2521 - 33 - number or digital payment mechanism, or any other prepaid intangible right 1 to acquire tangible personal property, intangibles or services in the 2 future, whether from the seller of the cash equivalent or from another 3 person. Cash equivalents do not include either of the following: 4 (i) Items or intangibles that are sold to one or more persons, 5 through which a value is not denominated in money. 6 (ii) Prepaid calling cards or prepaid authorization numbers for 7 telecommunications services made taxable by subsection P of this section. 8 (b) "Monetized bullion" means coins and other forms of money that 9 are manufactured from gold, silver or other metals and that have been or 10 are used as a medium of exchange in this or another state, the United 11 States or a foreign nation. 12 (c) "Precious metal bullion" means precious metal, including gold, 13 silver, platinum, rhodium and palladium, that has been smelted or refined 14 so that its value depends on its contents and not on its form. 15 22. Motor vehicle fuel and use fuel that are subject to a tax 16 imposed under title 28, chapter 16, article 1, sales of use fuel to a 17 holder of a valid single trip use fuel tax permit issued under section 18 28-5739, sales of aviation fuel that are subject to the tax imposed under 19 section 28-8344 and sales of jet fuel that are subject to the tax imposed 20 under article 8 of this chapter. 21 23. Tangible personal property sold to a person engaged in the 22 business of leasing or renting such property under the personal property 23 rental classification if such property is to be leased or rented by such 24 person. 25 24. Tangible personal property sold in interstate or foreign 26 commerce if prohibited from being so taxed by the constitution of the 27 United States or the constitution of this state. 28 25. Tangible personal property sold to: 29 (a) A qualifying hospital as defined in section 42-5001. 30 (b) A qualifying health care organization as defined in section 31 42-5001 if the tangible personal property is used by the organization 32 solely to provide health and medical related educational and charitable 33 services. 34 (c) A qualifying health care organization as defined in section 35 42-5001 if the organization is dedicated to providing educational, 36 therapeutic, rehabilitative and family medical education training for 37 blind and visually impaired children and children with multiple 38 disabilities from the time of birth to age twenty-one. 39 (d) A qualifying community health center as defined in section 40 42-5001. 41 (e) A nonprofit charitable organization that has qualified under 42 section 501(c)(3) of the internal revenue code and that regularly serves 43 meals to the needy and indigent on a continuing basis at no cost. 44 HB 2521 - 34 - (f) For taxable periods beginning from and after June 30, 2001, a 1 nonprofit charitable organization that has qualified under section 2 501(c)(3) of the internal revenue code and that provides residential 3 apartment housing for low income persons over sixty-two years of age in a 4 facility that qualifies for a federal housing subsidy, if the tangible 5 personal property is used by the organization solely to provide 6 residential apartment housing for low income persons over sixty-two years 7 of age in a facility that qualifies for a federal housing subsidy. 8 (g) A qualifying health sciences educational institution as defined 9 in section 42-5001. 10 (h) Any person representing or working on behalf of another person 11 described in subdivisions (a) through (g) of this paragraph if the 12 tangible personal property is incorporated or fabricated into a project 13 described in section 42-5075, subsection O. 14 26. Magazines or other periodicals or other publications by this 15 state to encourage tourist travel. 16 27. Tangible personal property sold to: 17 (a) A person that is subject to tax under this article by reason of 18 being engaged in business classified under section 42-5075 OR 42-5077 or 19 to a subcontractor working under the control of a person engaged in 20 business classified under section 42-5075 OR 42-5077, if the property so 21 sold is any of the following: INCORPORATED INTO ANY HIGHWAY, STREET OR 22 BRIDGE CONSTRUCTION PROJECT OR INTO A MANUFACTURED BUILDING. 23 (i) Incorporated or fabricated by the person into any real 24 property, structure, project, development or improvement as part of the 25 business. 26 (ii) Incorporated or fabricated by the person into any project 27 described in section 42-5075, subsection O. 28 (iii) Used in environmental response or remediation activities 29 under section 42-5075, subsection B, paragraph 6. 30 (b) A person that is not subject to tax under section 42-5075 and 31 that has been provided a copy of a certificate under section 42-5009, 32 subsection L, if the property so sold is incorporated or fabricated by the 33 person into the real property, structure, project, development or 34 improvement INTO A HIGHWAY, STREET OR BRIDGE CONSTRUCTION PROJECT 35 described in the certificate. 36 28. The sale of a motor vehicle to: 37 (a) A nonresident of this state if the purchaser's state of 38 residence does not allow a corresponding use tax exemption to the tax 39 imposed by article 1 of this chapter and if the nonresident has secured a 40 special ninety day nonresident registration permit for the vehicle as 41 prescribed by sections 28-2154 and 28-2154.01. 42 (b) An enrolled member of an Indian tribe who resides on the Indian 43 reservation established for that tribe. 44 HB 2521 - 35 - 29. Tangible personal property purchased in this state by a 1 nonprofit charitable organization that has qualified under section 2 501(c)(3) of the United States internal revenue code and that engages in 3 and uses such property exclusively in programs for persons with mental or 4 physical disabilities if the programs are exclusively for training, job 5 placement, rehabilitation or testing. 6 30. Sales of tangible personal property by a nonprofit organization 7 that is exempt from taxation under section 501(c)(3), 501(c)(4) or 8 501(c)(6) of the internal revenue code if the organization is associated 9 with a major league baseball team or a national touring professional 10 golfing association and no part of the organization's net earnings inures 11 to the benefit of any private shareholder or individual. 12 31. Sales of commodities, as defined by title 7 United States Code 13 section 2, that are consigned for resale in a warehouse in this state in 14 or from which the commodity is deliverable on a contract for future 15 delivery subject to the rules of a commodity market regulated by the 16 United States commodity futures trading commission. 17 32. Sales of tangible personal property by a nonprofit organization 18 that is exempt from taxation under section 501(c)(3), 501(c)(4), 19 501(c)(6), 501(c)(7) or 501(c)(8) of the internal revenue code if the 20 organization sponsors or operates a rodeo featuring primarily farm and 21 ranch animals and no part of the organization's net earnings inures to the 22 benefit of any private shareholder or individual. 23 33. Sales of seeds, seedlings, roots, bulbs, cuttings and other 24 propagative material to persons who use those items to commercially 25 produce agricultural, horticultural, viticultural or floricultural crops 26 in this state. 27 34. Machinery, equipment, technology or related supplies that are 28 only useful to assist a person with a physical disability as defined in 29 section 46-191 or a person who has a developmental disability as defined 30 in section 36-551 or has a head injury as defined in section 41-3201 to be 31 more independent and functional. 32 35. Sales of natural gas or liquefied petroleum gas used to propel 33 a motor vehicle. 34 36. Paper machine clothing, such as forming fabrics and dryer 35 felts, sold to a paper manufacturer and directly used or consumed in paper 36 manufacturing. 37 37. Coal, petroleum, coke, natural gas, virgin fuel oil and 38 electricity sold to a qualified environmental technology manufacturer, 39 producer or processor as defined in section 41-1514.02 and directly used 40 or consumed in the generation or provision of on-site power or energy 41 solely for environmental technology manufacturing, producing or processing 42 or environmental protection. This paragraph shall apply for twenty full 43 consecutive calendar or fiscal years from the date the first paper 44 manufacturing machine is placed in service. In the case of an 45 HB 2521 - 36 - environmental technology manufacturer, producer or processor who does not 1 manufacture paper, the time period shall begin with the date the first 2 manufacturing, processing or production equipment is placed in service. 3 38. Sales of liquid, solid or gaseous chemicals used in 4 manufacturing, processing, fabricating, mining, refining, metallurgical 5 operations, research and development and, beginning on January 1, 1999, 6 printing, if using or consuming the chemicals, alone or as part of an 7 integrated system of chemicals, involves direct contact with the materials 8 from which the product is produced for the purpose of causing or 9 permitting a chemical or physical change to occur in the materials as part 10 of the production process. This paragraph does not include chemicals that 11 are used or consumed in activities such as packaging, storage or 12 transportation but does not affect any deduction for such chemicals that 13 is otherwise provided by this section. For the purposes of this 14 paragraph, "printing" means a commercial printing operation and includes 15 job printing, engraving, embossing, copying and bookbinding. 16 39. Through December 31, 1994, personal property liquidation 17 transactions, conducted by a personal property liquidator. From and after 18 December 31, 1994, personal property liquidation transactions shall be 19 taxable under this section provided that nothing in this subsection shall 20 be construed to authorize the taxation of casual activities or 21 transactions under this chapter. For the purposes of this paragraph: 22 (a) "Personal property liquidation transaction" means a sale of 23 personal property made by a personal property liquidator acting solely on 24 behalf of the owner of the personal property sold at the dwelling of the 25 owner or on the death of any owner, on behalf of the surviving spouse, if 26 any, any devisee or heir or the personal representative of the estate of 27 the deceased, if one has been appointed. 28 (b) "Personal property liquidator" means a person who is retained 29 to conduct a sale in a personal property liquidation transaction. 30 40. Sales of food, drink and condiment for consumption within the 31 premises of any prison, jail or other institution under the jurisdiction 32 of the state department of corrections, the department of public safety, 33 the department of juvenile corrections or a county sheriff. 34 41. A motor vehicle and any repair and replacement parts and 35 tangible personal property becoming a part of such motor vehicle sold to a 36 motor carrier who is subject to a fee prescribed in title 28, chapter 16, 37 article 4 and who is engaged in the business of leasing or renting such 38 property. 39 42. Sales of: 40 (a) Livestock and poultry to persons engaging in the businesses of 41 farming, ranching or producing livestock or poultry. 42 (b) Livestock and poultry feed, salts, vitamins and other additives 43 for livestock or poultry consumption that are sold to persons for use or 44 consumption by their own livestock or poultry, for use or consumption in 45 HB 2521 - 37 - the businesses of farming, ranching and producing or feeding livestock, 1 poultry, or livestock or poultry products or for use or consumption in 2 noncommercial boarding of livestock. For the purposes of this paragraph, 3 "poultry" includes ratites. 4 43. Sales of implants used as growth promotants and injectable 5 medicines, not already exempt under paragraph 8 of this subsection, for 6 livestock or poultry owned by or in possession of persons who are engaged 7 in producing livestock, poultry, or livestock or poultry products or who 8 are engaged in feeding livestock or poultry commercially. For the 9 purposes of this paragraph, "poultry" includes ratites. 10 44. Sales of motor vehicles at auction to nonresidents of this 11 state for use outside this state if the vehicles are shipped or delivered 12 out of this state, regardless of where title to the motor vehicles passes 13 or its free on board point. 14 45. Tangible personal property sold to a person engaged in business 15 and subject to tax under the transient lodging classification if the 16 tangible personal property is a personal hygiene item or articles used by 17 human beings for food, drink or condiment, except alcoholic beverages, 18 that are furnished without additional charge to and intended to be 19 consumed by the transient during the transient's occupancy. 20 46. Sales of alternative fuel, as defined in section 1-215, to a 21 used oil fuel burner who has received a permit to burn used oil or used 22 oil fuel under section 49-426 or 49-480. 23 47. Sales of materials that are purchased by or for publicly funded 24 libraries including school district libraries, charter school libraries, 25 community college libraries, state university libraries or federal, state, 26 county or municipal libraries for use by the public as follows: 27 (a) Printed or photographic materials, beginning August 7, 1985. 28 (b) Electronic or digital media materials, beginning July 17, 1994. 29 48. Tangible personal property sold to a commercial airline and 30 consisting of food, beverages and condiments and accessories used for 31 serving the food and beverages, if those items are to be provided without 32 additional charge to passengers for consumption in flight. For the 33 purposes of this paragraph, "commercial airline" means a person holding a 34 federal certificate of public convenience and necessity or foreign air 35 carrier permit for air transportation to transport persons, property or 36 United States mail in intrastate, interstate or foreign commerce. 37 49. Sales of alternative fuel vehicles if the vehicle was 38 manufactured as a diesel fuel vehicle and converted to operate on 39 alternative fuel and equipment that is installed in a conventional diesel 40 fuel motor vehicle to convert the vehicle to operate on an alternative 41 fuel, as defined in section 1-215. 42 50. Sales of any spirituous, vinous or malt liquor by a person that 43 is licensed in this state as a wholesaler by the department of liquor 44 licenses and control pursuant to title 4, chapter 2, article 1. 45 HB 2521 - 38 - 51. Sales of tangible personal property to be incorporated or 1 installed as part of environmental response or remediation activities 2 under section 42-5075, subsection B, paragraph 6 SITE PREPARATION, 3 CONSTRUCTING, FURNISHING OR INSTALLING MACHINERY, EQUIPMENT OR OTHER 4 TANGIBLE PERSONAL PROPERTY, INCLUDING STRUCTURES NECESSARY TO PROTECT 5 EXEMPT INCORPORATED MATERIALS OR INSTALLED MACHINERY OR EQUIPMENT, AND 6 TANGIBLE PERSONAL PROPERTY INCORPORATED INTO THE PROJECT, TO PERFORM ONE 7 OR MORE OF THE FOLLOWING ACTIONS IN RESPONSE TO A RELEASE OR SUSPECTED 8 RELEASE OF A HAZARDOUS SUBSTANCE, POLLUTANT OR CONTAMINANT FROM A FACILITY 9 TO THE ENVIRONMENT, UNLESS THE RELEASE WAS AUTHORIZED BY A PERMIT ISSUED 10 BY A GOVERNMENTAL AUTHORITY: 11 (a) ACTIONS TO MONITOR, ASSESS AND EVALUATE SUCH A RELEASE OR A 12 SUSPECTED RELEASE. 13 (b) EXCAVATION, REMOVAL AND TRANSPORTATION OF CONTAMINATED SOIL AND 14 ITS TREATMENT OR DISPOSAL. 15 (c) TREATMENT OF CONTAMINATED SOIL BY VAPOR EXTRACTION, CHEMICAL OR 16 PHYSICAL STABILIZATION, SOIL WASHING OR BIOLOGICAL TREATMENT TO REDUCE THE 17 CONCENTRATION, TOXICITY OR MOBILITY OF A CONTAMINANT. 18 (d) PUMPING AND TREATMENT OR IN SITU TREATMENT OF CONTAMINATED 19 GROUNDWATER OR SURFACE WATER TO REDUCE THE CONCENTRATION OR TOXICITY OF A 20 CONTAMINANT. 21 (e) THE INSTALLATION OF STRUCTURES, SUCH AS CUTOFF WALLS OR CAPS, 22 TO CONTAIN CONTAMINANTS PRESENT IN GROUNDWATER OR SOIL AND PREVENT THEM 23 FROM REACHING A LOCATION WHERE THEY COULD THREATEN HUMAN HEALTH OR WELFARE 24 OR THE ENVIRONMENT. 25 THIS PARAGRAPH DOES NOT INCLUDE ASBESTOS REMOVAL OR THE CONSTRUCTION OR 26 USE OF ANCILLARY STRUCTURES SUCH AS MAINTENANCE SHEDS, OFFICES OR STORAGE 27 FACILITIES FOR UNATTACHED EQUIPMENT, POLLUTION CONTROL EQUIPMENT, 28 FACILITIES OR OTHER CONTROL ITEMS REQUIRED OR TO BE USED BY A PERSON TO 29 PREVENT OR CONTROL CONTAMINATION BEFORE IT REACHES THE ENVIRONMENT. 30 52. Sales of tangible personal property by a nonprofit organization 31 that is exempt from taxation under section 501(c)(6) of the internal 32 revenue code if the organization produces, organizes or promotes cultural 33 or civic related festivals or events and no part of the organization's net 34 earnings inures to the benefit of any private shareholder or individual. 35 53. Application services that are designed to assess or test 36 student learning or to promote curriculum design or enhancement purchased 37 by or for any school district, charter school, community college or state 38 university. For the purposes of this paragraph: 39 (a) "Application services" means software applications provided 40 remotely using hypertext transfer protocol or another network protocol. 41 (b) "Curriculum design or enhancement" means planning, implementing 42 or reporting on courses of study, lessons, assignments or other learning 43 activities. 44 HB 2521 - 39 - 54. Sales of motor vehicle fuel and use fuel to a qualified 1 business under section 41-1516 for off-road use in harvesting, processing 2 or transporting qualifying forest products removed from qualifying 3 projects as defined in section 41-1516. 4 55. Sales of repair parts installed in equipment used directly by a 5 qualified business under section 41-1516 in harvesting, processing or 6 transporting qualifying forest products removed from qualifying projects 7 as defined in section 41-1516. 8 56. Sales or other transfers of renewable energy credits or any 9 other unit created to track energy derived from renewable energy 10 resources. For the purposes of this paragraph, "renewable energy credit" 11 means a unit created administratively by the corporation commission or 12 governing body of a public power utility to track kilowatt hours of 13 electricity derived from a renewable energy resource or the kilowatt hour 14 equivalent of conventional energy resources displaced by distributed 15 renewable energy resources. 16 57. Computer data center equipment sold to the owner, operator or 17 qualified colocation tenant of a computer data center that is certified by 18 the Arizona commerce authority under section 41-1519 or an authorized 19 agent of the owner, operator or qualified colocation tenant during the 20 qualification period for use in the qualified computer data center. For 21 the purposes of this paragraph, "computer data center", "computer data 22 center equipment", "qualification period" and "qualified colocation 23 tenant" have the same meanings prescribed in section 41-1519. 24 58. Orthodontic devices dispensed by a dental professional who is 25 licensed under title 32, chapter 11 to a patient as part of the practice 26 of dentistry. 27 59. Sales of tangible personal property incorporated or fabricated 28 into a project described in section 42-5075, subsection O, that is located 29 within the exterior boundaries of an Indian reservation for which the 30 owner, as defined in section 42-5075, of the project is an Indian tribe or 31 an affiliated Indian. For the purposes of this paragraph: 32 (a) "Affiliated Indian" means an individual native American Indian 33 who is duly registered on the tribal rolls of the Indian tribe for whose 34 benefit the Indian reservation was established. 35 (b) "Indian reservation" means all lands that are within the limits 36 of areas set aside by the United States for the exclusive use and 37 occupancy of an Indian tribe by treaty, law or executive order and that 38 are recognized as Indian reservations by the United States department of 39 the interior. 40 (c) "Indian tribe" means any organized nation, tribe, band or 41 community that is recognized as an Indian tribe by the United States 42 department of the interior and includes any entity formed under the laws 43 of the Indian tribe. 44 HB 2521 - 40 - 59. TANGIBLE PERSONAL PROPERTY SOLD TO A QUALIFIED BUSINESS UNDER 1 SECTION 41-1516 IF THE PROPERTY SOLD IS TO BE INCORPORATED OR FABRICATED 2 INTO A BUILDING, OR OTHER STRUCTURE, PROJECT, DEVELOPMENT OR IMPROVEMENT 3 OWNED BY THE QUALIFIED BUSINESS FOR HARVESTING OR PROCESSING QUALIFYING 4 FOREST PRODUCTS. TO QUALIFY FOR THIS DEDUCTION, THE QUALIFIED BUSINESS 5 MUST PRESENT, AT THE TIME OF PURCHASE, ITS CERTIFICATION APPROVED BY THE 6 DEPARTMENT. 7 60. Sales of works of fine art, as defined in section 44-1771, at 8 an art auction or gallery in this state to nonresidents of this state for 9 use outside this state if the vendor ships or delivers the work of fine 10 art to a destination outside this state. 11 B. In addition to the deductions from the tax base prescribed by 12 subsection A of this section, the gross proceeds of sales or gross income 13 derived from sales of the following categories of tangible personal 14 property shall be deducted from the tax base: 15 1. Machinery, or equipment, used directly in manufacturing, 16 processing, fabricating, job printing, refining or metallurgical 17 operations. The terms "manufacturing", "processing", "fabricating", "job 18 printing", "refining" and "metallurgical" as used in this paragraph refer 19 to and include those operations commonly understood within their ordinary 20 meaning. "Metallurgical operations" includes leaching, milling, 21 precipitating, smelting and refining. 22 2. Mining machinery, or equipment, used directly in the process of 23 extracting ores or minerals from the earth for commercial purposes, 24 including equipment required to prepare the materials for extraction and 25 handling, loading or transporting such extracted material to the surface. 26 "Mining" includes underground, surface and open pit operations for 27 extracting ores and minerals. 28 3. Tangible personal property sold to persons engaged in business 29 classified under the telecommunications classification, including a person 30 representing or working on behalf of such a person in a manner described 31 in section 42-5075, subsection O, and consisting of central office 32 switching equipment, switchboards, private branch exchange equipment, 33 microwave radio equipment and carrier equipment including optical fiber, 34 coaxial cable and other transmission media that are components of carrier 35 systems. 36 4. Machinery, equipment or transmission lines used directly in 37 producing or transmitting electrical power, but not including 38 distribution. Transformers and control equipment used at transmission 39 substation sites constitute equipment used in producing or transmitting 40 electrical power. 41 5. Neat animals, horses, asses, sheep, ratites, swine or goats used 42 or to be used as breeding or production stock, including sales of 43 breedings or ownership shares in such animals used for breeding or 44 production. 45 HB 2521 - 41 - 6. Pipes or valves four inches in diameter or larger used to 1 transport oil, natural gas, artificial gas, water or coal slurry, 2 including compressor units, regulators, machinery and equipment, fittings, 3 seals and any other part that is used in operating the pipes or valves. 4 7. Aircraft, navigational and communication instruments and other 5 accessories and related equipment sold to: 6 (a) A person: 7 (i) Holding, or exempted by federal law from obtaining, a federal 8 certificate of public convenience and necessity for use as, in conjunction 9 with or becoming part of an aircraft to be used to transport persons for 10 hire in intrastate, interstate or foreign commerce. 11 (ii) That is certificated or licensed under federal aviation 12 ADMINISTRATION regulations (14 Code of Federal Regulations part 121 or 13 135) as a scheduled or unscheduled carrier of persons for hire for use as 14 or in conjunction with or becoming part of an aircraft to be used to 15 transport persons for hire in intrastate, interstate or foreign commerce. 16 (iii) Holding a foreign air carrier permit for air transportation 17 for use as or in conjunction with or becoming a part of aircraft to be 18 used to transport persons, property or United States mail in intrastate, 19 interstate or foreign commerce. 20 (iv) Operating an aircraft to transport persons in any manner for 21 compensation or hire including as an air carrier, a foreign air carrier or 22 a commercial operator or under a restricted category, within the meaning 23 of 14 Code of Federal Regulations, regardless of whether the operation or 24 aircraft is regulated or certified under part 91, 119, 121, 133, 135, 136 25 or 137, or another part of 14 Code of Federal Regulations. 26 (v) That will lease or otherwise transfer operational control, 27 within the meaning of Federal Aviation Administration Operations 28 Specification A008, or its successor, of the aircraft, instruments or 29 accessories to one or more persons described in item (i), (ii), (iii) or 30 (iv) of this subdivision, subject to section 42-5009, subsection Q. 31 (b) Any foreign government. 32 (c) Persons who are not residents of this state and who will not 33 use such property in this state other than in removing such property from 34 this state. This subdivision also applies to corporations that are not 35 incorporated in this state, regardless of maintaining a place of business 36 in this state, if the principal corporate office is located outside this 37 state and the property will not be used in this state other than in 38 removing the property from this state. 39 8. Machinery, tools, equipment and related supplies used or 40 consumed directly in repairing, remodeling or maintaining aircraft, 41 aircraft engines or aircraft component parts by or on behalf of a 42 certificated or licensed carrier of persons or property. 43 9. Railroad rolling stock, rails, ties and signal control equipment 44 used directly to transport persons or property. 45 HB 2521 - 42 - 10. Machinery or equipment used directly to drill for oil or gas or 1 used directly in the process of extracting oil or gas from the earth for 2 commercial purposes. 3 11. Buses or other urban mass transit vehicles that are used 4 directly to transport persons or property for hire or pursuant to a 5 governmentally adopted and controlled urban mass transportation program 6 and that are sold to bus companies holding a federal certificate of 7 convenience and necessity or operated by any city, town or other 8 governmental entity or by any person contracting with such governmental 9 entity as part of a governmentally adopted and controlled program to 10 provide urban mass transportation. 11 12. Groundwater measuring devices required under section 45-604. 12 13. New machinery and equipment consisting of agricultural 13 aircraft, tractors, tractor-drawn implements, self-powered implements, 14 machinery and equipment necessary for extracting milk, and machinery and 15 equipment necessary for cooling milk and livestock, and drip irrigation 16 lines not already exempt under paragraph 6 of this subsection and that are 17 used for commercial production of agricultural, horticultural, 18 viticultural and floricultural crops and products in this state. For the 19 purposes of this paragraph: 20 (a) "New machinery and equipment" means machinery and equipment 21 that have never been sold at retail except pursuant to leases or rentals 22 that do not total two years or more. 23 (b) "Self-powered implements" includes machinery and equipment that 24 are electric-powered. 25 14. Machinery or equipment used in research and development. For 26 the purposes of this paragraph, "research and development" means basic and 27 applied research in the sciences and engineering, and designing, 28 developing or testing prototypes, processes or new products, including 29 research and development of computer software that is embedded in or an 30 integral part of the prototype or new product or that is required for 31 machinery or equipment otherwise exempt under this section to function 32 effectively. Research and development do not include manufacturing 33 quality control, routine consumer product testing, market research, sales 34 promotion, sales service, research in social sciences or psychology, 35 computer software research that is not included in the definition of 36 research and development, or other nontechnological activities or 37 technical services. 38 15. Tangible personal property that is used by either of the 39 following to receive, store, convert, produce, generate, decode, encode, 40 control or transmit telecommunications information: 41 (a) Any direct broadcast satellite television or data transmission 42 service that operates pursuant to 47 Code of Federal Regulations part 25. 43 (b) Any satellite television or data transmission facility, if both 44 of the following conditions are met: 45 HB 2521 - 43 - (i) Over two-thirds of the transmissions, measured in megabytes, 1 transmitted by the facility during the test period were transmitted to or 2 on behalf of one or more direct broadcast satellite television or data 3 transmission services that operate pursuant to 47 Code of Federal 4 Regulations part 25. 5 (ii) Over two-thirds of the transmissions, measured in megabytes, 6 transmitted by or on behalf of those direct broadcast television or data 7 transmission services during the test period were transmitted by the 8 facility to or on behalf of those services. 9 For the purposes of subdivision (b) of this paragraph, "test period" means 10 the three hundred sixty-five day period beginning on the later of the date 11 on which the tangible personal property is purchased or the date on which 12 the direct broadcast satellite television or data transmission service 13 first transmits information to its customers. 14 16. Clean rooms that are used for manufacturing, processing, 15 fabrication or research and development, as defined in paragraph 14 of 16 this subsection, of semiconductor products. For the purposes of this 17 paragraph, "clean room" means all property that comprises or creates an 18 environment where humidity, temperature, particulate matter and 19 contamination are precisely controlled within specified parameters, 20 without regard to whether the property is actually contained within that 21 environment or whether any of the property is affixed to or incorporated 22 into real property. Clean room: 23 (a) Includes the integrated systems, fixtures, piping, movable 24 partitions, lighting and all property that is necessary or adapted to 25 reduce contamination or to control airflow, temperature, humidity, 26 chemical purity or other environmental conditions or manufacturing 27 tolerances, as well as the production machinery and equipment operating in 28 conjunction with the clean room environment. 29 (b) Does not include the building or other permanent, nonremovable 30 component of the building that houses the clean room environment. 31 17. Machinery and equipment used directly in the feeding of 32 poultry, the environmental control of housing for poultry, the movement of 33 eggs within a production and packaging facility or the sorting or cooling 34 of eggs. This exemption does not apply to vehicles used for transporting 35 eggs. 36 18. Machinery or equipment, including related structural 37 components, that is employed in connection with manufacturing, processing, 38 fabricating, job printing, refining, mining, natural gas pipelines, 39 metallurgical operations, telecommunications, producing or transmitting 40 electricity or research and development and that is used directly to meet 41 or exceed rules or regulations adopted by the federal energy regulatory 42 commission, the United States environmental protection agency, the United 43 States nuclear regulatory commission, the Arizona department of 44 HB 2521 - 44 - environmental quality or a political subdivision of this state to prevent, 1 monitor, control or reduce land, water or air pollution. 2 19. Machinery and equipment that are sold to a person engaged in 3 the commercial production of livestock, livestock products or 4 agricultural, horticultural, viticultural or floricultural crops or 5 products in this state, including a person representing or working on 6 behalf of such a person in a manner described in section 42-5075, 7 subsection O, if the machinery and equipment are used directly and 8 primarily to prevent, monitor, control or reduce air, water or land 9 pollution. 10 20. Machinery or equipment that enables a television station to 11 originate and broadcast or to receive and broadcast digital television 12 signals and that was purchased to facilitate compliance with the 13 telecommunications act of 1996 (P.L. 104-104; 110 Stat. 56; 47 United 14 States Code section 336) and the federal communications commission order 15 issued April 21, 1997 (47 Code of Federal Regulations part 73). This 16 paragraph does not exempt any of the following: 17 (a) Repair or replacement parts purchased for the machinery or 18 equipment described in this paragraph. 19 (b) Machinery or equipment purchased to replace machinery or 20 equipment for which an exemption was previously claimed and taken under 21 this paragraph. 22 (c) Any machinery or equipment purchased after the television 23 station has ceased analog broadcasting, or purchased after November 1, 24 2009, whichever occurs first. 25 21. Qualifying equipment that is purchased from and after June 30, 26 2004 through June 30, 2024 by a qualified business under section 41-1516 27 for harvesting or processing qualifying forest products removed from 28 qualifying projects as defined in section 41-1516. To qualify for this 29 deduction, the qualified business at the time of purchase must present its 30 certification approved by the department. 31 C. The deductions provided by subsection B of this section do not 32 include sales of: 33 1. Expendable materials. For the purposes of this paragraph, 34 expendable materials do not include any of the categories of tangible 35 personal property specified in subsection B of this section regardless of 36 the cost or useful life of that property. 37 2. Janitorial equipment and hand tools. 38 3. Office equipment, furniture and supplies. 39 4. Tangible personal property used in selling or distributing 40 activities, other than the telecommunications transmissions described in 41 subsection B, paragraph 15 of this section. 42 5. Motor vehicles required to be licensed by this state, except 43 buses or other urban mass transit vehicles specifically exempted pursuant 44 HB 2521 - 45 - to subsection B, paragraph 11 of this section, without regard to the use 1 of such motor vehicles. 2 6. Shops, buildings, docks, depots and all other materials of 3 whatever kind or character not specifically included as exempt. 4 7. Motors and pumps used in drip irrigation systems. 5 8. Machinery and equipment or other tangible personal property used 6 by a contractor in the performance of a contract. 7 D. In addition to the deductions from the tax base prescribed by 8 subsection A of this section, there shall be deducted from the tax base 9 the gross proceeds of sales or gross income derived from sales of 10 machinery, equipment, materials and other tangible personal property used 11 directly and predominantly to construct a qualified environmental 12 technology manufacturing, producing or processing facility as described in 13 section 41-1514.02. This subsection applies for ten full consecutive 14 calendar or fiscal years after the start of initial construction. 15 E. In computing the tax base, gross proceeds of sales or gross 16 income from retail sales of heavy trucks and trailers does not include any 17 amount attributable to federal excise taxes imposed by 26 United States 18 Code section 4051. 19 F. If a person is engaged in an occupation or business to which 20 subsection A of this section applies, the person's books shall be kept so 21 as to show separately the gross proceeds of sales of tangible personal 22 property and the gross income from sales of services, and if not so kept 23 the tax shall be imposed on the total of the person's gross proceeds of 24 sales of tangible personal property and gross income from services. 25 G. If a person is engaged in the business of selling tangible 26 personal property at both wholesale and retail, the tax under this section 27 applies only to the gross proceeds of the sales made other than at 28 wholesale if the person's books are kept so as to show separately the 29 gross proceeds of sales of each class, and if the books are not so kept, 30 the tax under this section applies to the gross proceeds of every sale so 31 made. 32 H. A person who engages in manufacturing, baling, crating, boxing, 33 barreling, canning, bottling, sacking, preserving, processing or otherwise 34 preparing for sale or commercial use any livestock, agricultural or 35 horticultural product or any other product, article, substance or 36 commodity and who sells the product of such business at retail in this 37 state is deemed, as to such sales, to be engaged in business classified 38 under the retail classification. This subsection does not apply to: 39 1. Agricultural producers who are owners, proprietors or tenants of 40 agricultural lands, orchards, farms or gardens where agricultural products 41 are grown, raised or prepared for market and who are marketing their own 42 agricultural products. 43 2. Businesses classified under the: 44 (a) Transporting classification. 45 HB 2521 - 46 - (b) Utilities classification. 1 (c) Telecommunications classification. 2 (d) Pipeline classification. 3 (e) Private car line classification. 4 (f) Publication classification. 5 (g) Job printing classification. 6 (h) Prime contracting classification. 7 (h) HIGHWAY, STREET AND BRIDGE CONSTRUCTION CLASSIFICATION. 8 (i) MANUFACTURED BUILDING DEALER CLASSIFICATION. 9 (i) (j) Restaurant classification. 10 I. The gross proceeds of sales or gross income derived from the 11 following shall be deducted from the tax base for the retail 12 classification: 13 1. Sales made directly to the United States government or its 14 departments or agencies by a manufacturer, modifier, assembler or 15 repairer. 16 2. Sales made directly to a manufacturer, modifier, assembler or 17 repairer if such sales are of any ingredient or component part of products 18 sold directly to the United States government or its departments or 19 agencies by the manufacturer, modifier, assembler or repairer. 20 3. Overhead materials or other tangible personal property that is 21 used in performing a contract between the United States government and a 22 manufacturer, modifier, assembler or repairer, including property used in 23 performing a subcontract with a government contractor who is a 24 manufacturer, modifier, assembler or repairer, to which title passes to 25 the government under the terms of the contract or subcontract. 26 4. Sales of overhead materials or other tangible personal property 27 to a manufacturer, modifier, assembler or repairer if the gross proceeds 28 of sales or gross income derived from the property by the manufacturer, 29 modifier, assembler or repairer will be exempt under paragraph 3 of this 30 subsection. 31 J. There shall be deducted from the tax base fifty percent of the 32 gross proceeds or gross income from any sale of tangible personal property 33 made directly to the United States government or its departments or 34 agencies that is not deducted under subsection I of this section. 35 K. The department shall require every person claiming a deduction 36 provided by subsection I or J of this section to file on forms prescribed 37 by the department at such times as the department directs a sworn 38 statement disclosing the name of the purchaser and the exact amount of 39 sales on which the exclusion or deduction is claimed. 40 L. In computing the tax base, gross proceeds of sales or gross 41 income does not include: 42 1. A manufacturer's cash rebate on the sales price of a motor 43 vehicle if the buyer assigns the buyer's right in the rebate to the 44 retailer. 45 HB 2521 - 47 - 2. The waste tire disposal fee imposed pursuant to section 44-1302. 1 M. There shall be deducted from the tax base the amount received 2 from sales of solar energy devices. The retailer shall register with the 3 department as a solar energy retailer. By registering, the retailer 4 acknowledges that it will make its books and records relating to sales of 5 solar energy devices available to the department for examination. 6 N. In computing the tax base in the case of the sale or transfer of 7 wireless telecommunications equipment as an inducement to a customer to 8 enter into or continue a contract for telecommunications services that are 9 taxable under section 42-5064, gross proceeds of sales or gross income 10 does not include any sales commissions or other compensation received by 11 the retailer as a result of the customer entering into or continuing a 12 contract for the telecommunications services. 13 O. For the purposes of this section, a sale of wireless 14 telecommunications equipment to a person who holds the equipment for sale 15 or transfer to a customer as an inducement to enter into or continue a 16 contract for telecommunications services that are taxable under section 17 42-5064 is considered to be a sale for resale in the regular course of 18 business. 19 P. Retail sales of prepaid calling cards or prepaid authorization 20 numbers for telecommunications services, including sales of 21 reauthorization of a prepaid card or authorization number, are subject to 22 tax under this section. 23 Q. For the purposes of this section, the diversion of gas from a 24 pipeline by a person engaged in the business of: 25 1. Operating a natural or artificial gas pipeline, for the sole 26 purpose of fueling compressor equipment to pressurize the pipeline, is not 27 a sale of the gas to the operator of the pipeline. 28 2. Converting natural gas into liquefied natural gas, for the sole 29 purpose of fueling compressor equipment used in the conversion process, is 30 not a sale of gas to the operator of the compressor equipment. 31 R. For the purposes of this section, the transfer of title or 32 possession of coal from an owner or operator of a power plant to a person 33 in the business of refining coal is not a sale of coal if both of the 34 following apply: 35 1. The transfer of title or possession of the coal is for the 36 purpose of refining the coal. 37 2. The title or possession of the coal is transferred back to the 38 owner or operator of the power plant after completion of the coal refining 39 process. For the purposes of this paragraph, "coal refining process" 40 means the application of a coal additive system that aids in the reduction 41 of power plant emissions during the combustion of coal and the treatment 42 of flue gas. 43 S. If a seller is entitled to a deduction pursuant to subsection B, 44 paragraph 15, subdivision (b) of this section, the department may require 45 HB 2521 - 48 - the purchaser to establish that the requirements of subsection B, 1 paragraph 15, subdivision (b) of this section have been satisfied. If the 2 purchaser cannot establish that the requirements of subsection B, 3 paragraph 15, subdivision (b) of this section have been satisfied, the 4 purchaser is liable in an amount equal to any tax, penalty and interest 5 that the seller would have been required to pay under article 1 of this 6 chapter if the seller had not made a deduction pursuant to subsection B, 7 paragraph 15, subdivision (b) of this section. Payment of the amount 8 under this subsection exempts the purchaser from liability for any tax 9 imposed under article 4 of this chapter and related to the tangible 10 personal property purchased. The amount shall be treated as transaction 11 privilege tax to the purchaser and as tax revenues collected from the 12 seller to designate the distribution base pursuant to section 42-5029. 13 T. For the purposes of section 42-5032.01, the department shall 14 separately account for revenues collected under the retail classification 15 from businesses selling tangible personal property at retail: 16 1. On the premises of a multipurpose facility that is owned, leased 17 or operated by the tourism and sports authority pursuant to title 5, 18 chapter 8. 19 2. At professional football contests that are held in a stadium 20 located on the campus of an institution under the jurisdiction of the 21 Arizona board of regents. 22 U. In computing the tax base for the sale of a motor vehicle to a 23 nonresident of this state, if the purchaser's state of residence allows a 24 corresponding use tax exemption to the tax imposed by article 1 of this 25 chapter and the rate of the tax in the purchaser's state of residence is 26 lower than the rate prescribed in article 1 of this chapter or if the 27 purchaser's state of residence does not impose an excise tax, and the 28 nonresident has secured a special ninety day nonresident registration 29 permit for the vehicle as prescribed by sections 28-2154 and 28-2154.01, 30 there shall be deducted from the tax base a portion of the gross proceeds 31 or gross income from the sale so that the amount of transaction privilege 32 tax that is paid in this state is equal to the excise tax that is imposed 33 by the purchaser's state of residence on the nonexempt sale or use of the 34 motor vehicle. 35 V. THE SALE OF TANGIBLE PERSONAL PROPERTY TO A CONTRACTOR, 36 REGARDLESS OF WHETHER THE PROPERTY WILL BE INCORPORATED INTO A BUILDING OR 37 STRUCTURE, IS CONSIDERED TO BE A SALE AT RETAIL AND IS SUBJECT TO TAXATION 38 UNDER THIS SECTION UNLESS THE CONTRACTOR PROVIDES TO THE RETAILER A 39 CERTIFICATE THAT IS SIGNED BY THE OWNER OF THE PROPERTY TO BE IMPROVED AND 40 THAT STATES THAT THE PERSONAL PROPERTY PURCHASED BY THE CONTRACTOR WILL BE 41 USED FOR A PURPOSE IDENTIFIED IN SUBSECTION A OR B OF THIS SECTION. IF A 42 PERSON WHO IS IN THE BUSINESS OF SELLING TANGIBLE PERSONAL PROPERTY AT 43 RETAIL ALSO ENGAGES IN BUSINESS AS A CONTRACTOR AND REMOVES TANGIBLE 44 PERSONAL PROPERTY FROM RETAIL STOCK FOR USE IN CONTRACTING ACTIVITIES, THE 45 HB 2521 - 49 - PURCHASE PRICE OF THAT PERSONAL PROPERTY IS SUBJECT TO USE TAX UNDER 1 SECTION 42-5155. 2 V. W. For the purposes of this section: 3 1. "Agricultural aircraft" means an aircraft that is built for 4 agricultural use for the aerial application of pesticides or fertilizer or 5 for aerial seeding. 6 2. "Aircraft" includes: 7 (a) An airplane flight simulator that is approved by the federal 8 aviation administration for use as a phase II or higher flight simulator 9 under appendix H, 14 Code of Federal Regulations part 121. 10 (b) Tangible personal property that is permanently affixed or 11 attached as a component part of an aircraft that is owned or operated by a 12 certificated or licensed carrier of persons or property. 13 3. "Other accessories and related equipment" includes aircraft 14 accessories and equipment such as ground service equipment that physically 15 contact aircraft at some point during the overall carrier operation. 16 4. "Selling at retail" means a sale for any purpose other than for 17 resale in the regular course of business in the form of tangible personal 18 property, but transfer of possession, lease and rental as used in the 19 definition of sale mean only such transactions as are found on 20 investigation to be in lieu of sales as defined without the words lease or 21 rental. 22 W. X. For the purposes of subsection I of this section: 23 1. "Assembler" means a person who unites or combines products, 24 wares or articles of manufacture so as to produce a change in form or 25 substance without changing or altering the component parts. 26 2. "Manufacturer" means a person who is principally engaged in the 27 fabrication, production or manufacture of products, wares or articles for 28 use from raw or prepared materials, imparting to those materials new 29 forms, qualities, properties and combinations. 30 3. "Modifier" means a person who reworks, changes or adds to 31 products, wares or articles of manufacture. 32 4. "Overhead materials" means tangible personal property, the gross 33 proceeds of sales or gross income derived from that would otherwise be 34 included in the retail classification, and that are used or consumed in 35 the performance of a contract, the cost of which is charged to an overhead 36 expense account and allocated to various contracts based on generally 37 accepted accounting principles and consistent with government contract 38 accounting standards. 39 5. "Repairer" means a person who restores or renews products, wares 40 or articles of manufacture. 41 6. "Subcontract" means an agreement between a contractor and any 42 person who is not an employee of the contractor for furnishing of supplies 43 or services that, in whole or in part, are necessary to the performance of 44 one or more government contracts, or under which any portion of the 45 HB 2521 - 50 - contractor's obligation under one or more government contracts is 1 performed, undertaken or assumed and that includes provisions causing 2 title to overhead materials or other tangible personal property used in 3 the performance of the subcontract to pass to the government or that 4 includes provisions incorporating such title passing clauses in a 5 government contract into the subcontract. FOR THE PURPOSES OF THIS 6 PARAGRAPH, "CONTRACTOR" HAS ITS ORDINARY AND COMMON MEANING AND DOES NOT 7 HAVE THE MEANING PRESCRIBED BY SECTION 42-5001. 8 Sec. 14. Repeal 9 Section 42-5075, Arizona Revised Statutes, is repealed. 10 Sec. 15. Title 42, chapter 5, article 2, Arizona Revised Statutes, 11 is amended by adding a new section 42-5075 and section 42-5077, to read: 12 42-5075. Highway, street and bridge construction 13 classification; exemptions; definitions 14 A. THE HIGHWAY, STREET AND BRIDGE CONSTRUCTION CLASSIFICATION IS 15 COMPRISED OF THE BUSINESS OF CONSTRUCTION, ALTERATION OR REPAIR OF 16 HIGHWAYS, STREETS AND BRIDGES THAT PRIMARILY INVOLVE SURFACE OR SUBSURFACE 17 IMPROVEMENTS TO LAND PURSUANT TO CONTRACTS THAT ARE SUBJECT TO THE 18 PROCUREMENT REQUIREMENTS OF TITLE 28, CHAPTER 19, 20 OR 22 OR OF TITLE 34, 19 CHAPTER 2 OR 6, EVEN IF A CONTRACT MAY INCIDENTALLY INCLUDE VERTICAL 20 IMPROVEMENTS. 21 B. THE TAX BASE FOR THE HIGHWAY, STREET AND BRIDGE CONSTRUCTION 22 CLASSIFICATION IS SIXTY-FIVE PERCENT OF THE GROSS PROCEEDS OF SALES OR 23 GROSS INCOME DERIVED FROM THE BUSINESS. THE FOLLOWING AMOUNTS SHALL BE 24 DEDUCTED FROM THE GROSS PROCEEDS OF SALES OR GROSS INCOME BEFORE COMPUTING 25 THE TAX BASE: 26 1. INCOME RECEIVED FROM A CONTRACT ENTERED INTO FOR THE 27 CONSTRUCTION, MODIFICATION OR REPAIR OF ANY HIGHWAY, ROAD, BRIDGE OR 28 EXCAVATION LOCATED IN AN ACTIVE MILITARY REUSE ZONE AFTER THE ZONE IS 29 INITIALLY ESTABLISHED OR RENEWED UNDER SECTION 41-1531. TO BE ELIGIBLE TO 30 QUALIFY FOR THIS DEDUCTION, BEFORE BEGINNING WORK UNDER THE CONTRACT, THE 31 CONTRACTOR MUST APPLY FOR A LETTER OF QUALIFICATION FROM THE DEPARTMENT. 32 2. INCOME ATTRIBUTABLE TO A SEPARATE WRITTEN CONTRACT FOR DESIGN 33 PHASE SERVICES OR PROFESSIONAL SERVICES, EXECUTED BEFORE THE CONSTRUCTION, 34 ALTERATION OR REPAIR BEGINS AND WITH TERMS, CONDITIONS AND PRICING OF ALL 35 OF THESE SERVICES SEPARATELY STATED IN THE CONTRACT FROM THOSE FOR 36 CONSTRUCTION PHASE SERVICES, REGARDLESS OF WHETHER THE SERVICES ARE 37 PROVIDED SEQUENTIALLY TO OR CONCURRENT WITH CONSTRUCTION ACTIVITIES THAT 38 ARE SUBJECT TO TAX UNDER THIS SECTION. THE DEDUCTION UNDER THIS PARAGRAPH 39 DOES NOT INCLUDE INCOME ATTRIBUTABLE TO CONSTRUCTION PHASE SERVICES. 40 3. INCOME ATTRIBUTABLE TO THE ACTUAL DIRECT COSTS OF PROVIDING 41 ARCHITECTURAL OR ENGINEERING SERVICES THAT ARE INCORPORATED IN A CONTRACT. 42 FOR THE PURPOSES OF THIS PARAGRAPH, "DIRECT COSTS" MEANS THE PORTION OF 43 THE ACTUAL COSTS THAT IS DIRECTLY EXPENDED IN PROVIDING ARCHITECTURAL OR 44 ENGINEERING SERVICES. 45 HB 2521 - 51 - C. SUBCONTRACTORS WHO PERFORM SERVICES WITH RESPECT TO THE 1 CONSTRUCTION, ALTERATION OR REPAIR OF HIGHWAYS, STREETS OR BRIDGES ARE NOT 2 SUBJECT TO TAX PURSUANT TO THIS SECTION IF THEY CAN DEMONSTRATE THAT THE 3 JOB WAS WITHIN THE CONTROL OF A PRIME CONTRACTOR OR CONTRACTORS AND THAT 4 THE PRIME CONTRACTOR IS LIABLE FOR THE TAX ON THE GROSS PROCEEDS OF SALES 5 OR GROSS INCOME ATTRIBUTABLE TO THE JOB AND FROM WHICH THE SUBCONTRACTORS 6 WERE PAID. 7 D. AMOUNTS RECEIVED BY A CONTRACTOR FOR A PROJECT ARE EXCLUDED FROM 8 THAT CONTRACTOR'S GROSS PROCEEDS OF SALES OR GROSS INCOME DERIVED FROM THE 9 BUSINESS IF THE PERSON WHO HIRED THE CONTRACTOR EXECUTES AND PROVIDES A 10 CERTIFICATE TO THE CONTRACTOR STATING THAT THE PERSON PROVIDING THE 11 CERTIFICATE IS A PRIME CONTRACTOR IN THE BUSINESS OF CONSTRUCTION, 12 ALTERATION OR REPAIR OF HIGHWAYS, STREETS AND BRIDGES AND IS THUS LIABLE 13 FOR THE TAX UNDER THIS SECTION. THE DEPARTMENT SHALL PRESCRIBE THE FORM 14 OF THE CERTIFICATE. IF THE CONTRACTOR HAS REASON TO BELIEVE THAT THE 15 INFORMATION CONTAINED ON THE CERTIFICATE IS ERRONEOUS OR INCOMPLETE, THE 16 DEPARTMENT MAY DISREGARD THE CERTIFICATE. IF THE PERSON WHO PROVIDES THE 17 CERTIFICATE IS NOT LIABLE FOR THE TAX AS A PRIME CONTRACTOR, THAT PERSON 18 IS NEVERTHELESS DEEMED TO BE THE PRIME CONTRACTOR IN LIEU OF THE 19 CONTRACTOR AND IS SUBJECT TO THE TAX UNDER THIS SECTION ON THE GROSS 20 RECEIPTS OR GROSS PROCEEDS RECEIVED BY THE CONTRACTOR. 21 E. AGENCIES OF THIS STATE AND COUNTIES, CITIES AND TOWNS THAT ARE 22 SUBJECT TO PROCUREMENT PROCESSES UNDER TITLE 28, CHAPTER 19, 20 OR 22 OR 23 OF TITLE 34, CHAPTER 2 OR 6 SHALL INCLUDE IN THE REQUEST FOR PROPOSALS A 24 NOTICE TO BIDDERS WHEN THOSE PROJECTS ARE SUBJECT TO THIS SECTION. THIS 25 SUBSECTION DOES NOT APPLY TO CONTRACTS WITH COMMUNITY COLLEGE DISTRICTS, 26 SCHOOL DISTRICTS AND ANY SPECIAL TAXING DISTRICT UNDER TITLE 48 IF THE 27 DISTRICT DOES NOT SUBSTANTIALLY ENGAGE IN THE CONSTRUCTION, ALTERATION OR 28 REPAIR OF HIGHWAYS, STREETS AND BRIDGES. 29 F. FOR THE PURPOSES OF THIS SECTION: 30 1. "CONSTRUCTION PHASE SERVICES" MEANS SERVICES FOR THE EXECUTION 31 AND COMPLETION OF ANY CONSTRUCTION, ALTERATION OR REPAIR OF A HIGHWAY, 32 STREET OR BRIDGE, INCLUDING THE FOLLOWING: 33 (a) ADMINISTRATION OR SUPERVISION OF ANY WORK PERFORMED WITH 34 RESPECT TO THE PROJECT, INCLUDING TEAM MANAGEMENT AND COORDINATION, 35 SCHEDULING, COST CONTROLS, SUBMITTAL PROCESS MANAGEMENT, FIELD MANAGEMENT, 36 SAFETY PROGRAM, CLOSE-OUT PROCESS AND WARRANTY PERIOD SERVICES. 37 (b) ADMINISTRATION OR SUPERVISION OF ANY WORK PERFORMED PURSUANT TO 38 A PUNCH LIST. FOR THE PURPOSES OF THIS SUBDIVISION, "PUNCH LIST" MEANS 39 MINOR ITEMS OF WORK PERFORMED AFTER SUBSTANTIAL COMPLETION AND BEFORE 40 FINAL COMPLETION OF THE PROJECT. 41 (c) ADMINISTRATION OR SUPERVISION OF ANY WORK PERFORMED PURSUANT TO 42 A CHANGE ORDER. FOR THE PURPOSES OF THIS SUBDIVISION, "CHANGE ORDER" 43 MEANS A WRITTEN INSTRUMENT ISSUED AFTER EXECUTION OF A CONTRACT PROVIDING 44 FOR ALL OF THE FOLLOWING: 45 HB 2521 - 52 - (i) THE SCOPE OF A CHANGE IN THE WORK, CONTRACT FOR WORK OR OTHER 1 CONTRACT DOCUMENTS. 2 (ii) THE AMOUNT OF AN ADJUSTMENT, IF ANY, TO THE GUARANTEED MAXIMUM 3 PRICE AS SET IN THE CONTRACT. FOR THE PURPOSES OF THIS ITEM, "GUARANTEED 4 MAXIMUM PRICE" MEANS THE AMOUNT GUARANTEED TO BE THE MAXIMUM AMOUNT DUE TO 5 A CONTRACTOR FOR THE PERFORMANCE OF ALL WORK FOR THE PROJECT. 6 (iii) THE EXTENT OF AN ADJUSTMENT, IF ANY, TO THE CONTRACT TIME OF 7 PERFORMANCE SET FORTH IN THE CONTRACT. 8 (d) ADMINISTRATION OR SUPERVISION OF ANY WORK PERFORMED PURSUANT TO 9 A CHANGE DIRECTIVE. FOR THE PURPOSES OF THIS SUBDIVISION, "CHANGE 10 DIRECTIVE" MEANS A WRITTEN ORDER DIRECTING A CHANGE IN WORK BEFORE 11 AGREEMENT ON AN ADJUSTMENT OF THE GUARANTEED MAXIMUM PRICE OR CONTRACT 12 TIME. 13 (e) INSPECTION TO DETERMINE THE DATES OF SUBSTANTIAL COMPLETION OR 14 FINAL COMPLETION. 15 (f) PREPARATION OF ANY MANUAL, WARRANTY, AS-BUILT DRAWING, SPARE OR 16 OTHER ITEM THE CONTRACTOR MUST FURNISH PURSUANT TO THE CONTRACT. FOR THE 17 PURPOSES OF THIS SUBDIVISION, "AS-BUILT DRAWING" MEANS A DRAWING THAT 18 INDICATES FIELD CHANGES MADE TO ADAPT TO FIELD CONDITIONS, FIELD CHANGES 19 RESULTING FROM CHANGE ORDERS OR BURIED AND CONCEALED INSTALLATION OF 20 PIPING, CONDUIT AND UTILITY SERVICES. 21 (g) PREPARATION OF STATUS REPORTS AFTER WORK HAS BEGUN DETAILING 22 THE PROGRESS OF WORK PERFORMED, INCLUDING PREPARATION OF ANY OF THE 23 FOLLOWING: 24 (i) MASTER SCHEDULE UPDATES. 25 (ii) MODIFICATION WORK CASH FLOW PROJECTION UPDATES. 26 (iii) SITE REPORTS MADE ON A PERIODIC BASIS. 27 (iv) IDENTIFICATION OF DISCREPANCIES, CONFLICTS OR AMBIGUITIES IN 28 WORK DOCUMENTS THAT REQUIRE RESOLUTION. 29 (v) IDENTIFICATION OF ANY HEALTH AND SAFETY ISSUES THAT ARISE IN 30 CONNECTION WITH THE WORK. 31 (h) PREPARATION OF DAILY LOGS, INCLUDING DOCUMENTATION OF 32 PERSONNEL, WEATHER CONDITIONS AND ON-SITE OCCURRENCES. 33 (i) PREPARATION OF ANY SUBMITTALS OR SHOP DRAWINGS USED BY THE 34 CONTRACTOR TO ILLUSTRATE DETAILS OF THE WORK PERFORMED. 35 (j) ADMINISTRATION OR SUPERVISION OF ANY OTHER ACTIVITIES FOR WHICH 36 A CONTRACTOR RECEIVES A CERTIFICATE FOR PAYMENT OR CERTIFICATE FOR FINAL 37 PAYMENT BASED ON THE PROGRESS OF THE WORK PERFORMED ON THE PROJECT. 38 2. "DESIGN PHASE SERVICES" MEANS SERVICES FOR DEVELOPING AND 39 COMPLETING A DESIGN FOR A PROJECT THAT ARE NOT CONSTRUCTION PHASE 40 SERVICES, INCLUDING THE FOLLOWING: 41 (a) EVALUATING SURVEYS, REPORTS, TEST RESULTS OR ANY OTHER 42 INFORMATION ON SITE CONDITIONS FOR THE PROJECT, INCLUDING PHYSICAL 43 CHARACTERISTICS, LEGAL LIMITATIONS AND UTILITY LOCATIONS FOR THE SITE. 44 HB 2521 - 53 - (b) EVALUATING ANY CRITERIA OR PROGRAMMING OBJECTIVES FOR THE 1 PROJECT TO ASCERTAIN REQUIREMENTS FOR THE PROJECT, SUCH AS PHYSICAL 2 REQUIREMENTS AFFECTING COST OR PROJECTED USE OF THE PROJECT. 3 (c) PREPARING DRAWINGS AND SPECIFICATIONS FOR ARCHITECTURAL PROGRAM 4 DOCUMENTS, SCHEMATIC DESIGN DOCUMENTS, DESIGN DEVELOPMENT DOCUMENTS, 5 CONSTRUCTION, ALTERATION OR REPAIR DOCUMENTS OR DOCUMENTS THAT IDENTIFY 6 THE SCOPE OF OR MATERIALS FOR THE PROJECT. 7 (d) PREPARING AN INITIAL SCHEDULE FOR THE PROJECT, EXCLUDING THE 8 PREPARATION OF UPDATES TO THE MASTER SCHEDULE AFTER WORK HAS BEGUN. 9 (e) PREPARING PRELIMINARY ESTIMATES OF COSTS OF CONSTRUCTION, 10 ALTERATION OR REPAIR WORK BEFORE COMPLETION OF THE FINAL DESIGN OF THE 11 PROJECT, INCLUDING AN ESTIMATE OR SCHEDULE OF VALUES FOR ANY OF THE 12 FOLLOWING: 13 (i) LABOR, MATERIALS, MACHINERY AND EQUIPMENT, TOOLS, WATER, HEAT, 14 UTILITIES, TRANSPORTATION AND OTHER FACILITIES AND SERVICES USED IN THE 15 EXECUTION AND COMPLETION OF THE WORK, REGARDLESS OF WHETHER THEY ARE 16 TEMPORARY OR PERMANENT OR WHETHER THEY ARE INCORPORATED IN THE WORK. 17 (ii) THE COST OF LABOR AND MATERIALS TO BE FURNISHED BY THE OWNER 18 OF THE REAL PROPERTY. 19 (iii) THE COST OF ANY LABOR OR MATERIALS TO BE FURNISHED BY THE 20 OWNER OF THE REAL PROPERTY. 21 (iv) ANY FEE PAID BY THE OWNER OF THE REAL PROPERTY TO THE 22 CONTRACTOR PURSUANT TO THE CONTRACT. 23 (v) ANY BOND AND INSURANCE PREMIUMS. 24 (vi) ANY APPLICABLE TAXES. 25 (vii) ANY CONTINGENCY FEES FOR THE CONTRACTOR THAT MAY BE USED 26 BEFORE FINAL COMPLETION OF THE PROJECT. 27 (f) REVIEWING AND EVALUATING COST ESTIMATES AND PROJECT DOCUMENTS 28 TO PREPARE RECOMMENDATIONS ON SITE USE, SITE IMPROVEMENTS, SELECTION OF 29 MATERIALS, BUILDING SYSTEMS AND EQUIPMENT, CONSTRUCTION, ALTERATION OR 30 REPAIR FEASIBILITY, AVAILABILITY OF MATERIALS AND LABOR, LOCAL 31 CONSTRUCTION, ALTERATION OR REPAIR ACTIVITY AS RELATED TO SCHEDULES AND 32 TIME REQUIREMENTS FOR CONSTRUCTION, ALTERATION OR REPAIR WORK. 33 (g) PREPARING THE PLAN AND PROCEDURES FOR SELECTION OF 34 SUBCONTRACTORS, INCLUDING ANY PREQUALIFICATION OF SUBCONTRACTOR 35 CANDIDATES. 36 42-5077. Manufactured building dealer classification; 37 exemptions; definitions 38 A. THE MANUFACTURED BUILDING DEALER CLASSIFICATION IS COMPRISED OF 39 THE BUSINESS OF SELLING MANUFACTURED BUILDINGS. SALES FOR RESALE TO 40 ANOTHER MANUFACTURED BUILDING DEALER ARE NOT SUBJECT TO THIS TAX. SALES 41 FOR RESALE DO NOT INCLUDE SALES TO A LESSOR OF MANUFACTURED BUILDINGS. 42 THE SALE OF A USED MANUFACTURED BUILDING IS NOT TAXABLE UNDER THIS 43 CHAPTER. 44 HB 2521 - 54 - B. THE TAX BASE FOR THE MANUFACTURED BUILDING DEALER CLASSIFICATION 1 IS SIXTY-FIVE PERCENT OF THE GROSS PROCEEDS OF SALES OR GROSS INCOME 2 DERIVED FROM THE BUSINESS. THE FOLLOWING AMOUNTS SHALL BE DEDUCTED FROM 3 THE GROSS PROCEEDS OF SALES OR GROSS INCOME BEFORE COMPUTING THE TAX BASE: 4 1. THE SALES PRICE OF LAND, WHICH MAY NOT EXCEED THE FAIR MARKET 5 VALUE. 6 2. THE SALES PRICE OF FURNITURE, FURNISHINGS, FIXTURES, APPLIANCES 7 AND ATTACHMENTS THAT ARE NOT INCORPORATED AS COMPONENT PARTS OF OR 8 ATTACHED TO A MANUFACTURED BUILDING OR THE SETUP SITE. THE SALE OF SUCH 9 ITEMS MAY BE SUBJECT TO THE TAXES IMPOSED BY ARTICLE 1 OF THIS CHAPTER 10 SEPARATELY AND DISTINCTLY FROM THE SALE OF THE MANUFACTURED BUILDING. 11 C. EVERY PERSON ENGAGING OR CONTINUING IN THIS STATE IN THE 12 BUSINESS OF A MANUFACTURED BUILDING DEALER SHALL PRESENT TO THE PURCHASER 13 OF THE MANUFACTURED BUILDING A WRITTEN RECEIPT OF THE GROSS INCOME OR 14 GROSS PROCEEDS OF SALES FROM SUCH ACTIVITY AND SHALL SEPARATELY STATE THE 15 TAXES TO BE PAID PURSUANT TO THIS SECTION. 16 D. THE FOLLOWING APPLY IN DETERMINING THE TAXABLE SITUS OF SALES OF 17 MANUFACTURED BUILDINGS: 18 1. FOR SALES IN THIS STATE FOR WHICH THE MANUFACTURED BUILDING 19 DEALER CONTRACTS TO DELIVER THE BUILDING TO A SETUP SITE OR TO PERFORM THE 20 SETUP IN THIS STATE, THE TAXABLE SITUS IS THE SETUP SITE. 21 2. FOR SALES IN THIS STATE FOR WHICH THE MANUFACTURED BUILDING 22 DEALER DOES NOT CONTRACT TO DELIVER THE BUILDING TO A SETUP SITE OR DOES 23 NOT PERFORM THE SETUP, THE TAXABLE SITUS IS THE LOCATION OF THE DEALERSHIP 24 WHERE THE BUILDING IS DELIVERED TO THE BUYER. 25 3. FOR SALES IN THIS STATE FOR WHICH THE MANUFACTURED BUILDING 26 DEALER CONTRACTS TO DELIVER THE BUILDING TO A SETUP SITE THAT IS OUTSIDE 27 THIS STATE, THE SITUS IS OUTSIDE THIS STATE AND THE TRANSACTION IS 28 EXCLUDED FROM TAX. 29 E. FOR THE PURPOSES OF THIS SECTION: 30 1. "MANUFACTURED BUILDING" MEANS A MANUFACTURED HOME, MOBILE HOME 31 OR FACTORY-BUILT BUILDING, AS DEFINED IN SECTION 41-4001. 32 2. "MANUFACTURED BUILDING DEALER" MEANS A DEALER WHO EITHER: 33 (a) IS LICENSED PURSUANT TO TITLE 41, CHAPTER 37, ARTICLE 4 AND WHO 34 SELLS MANUFACTURED BUILDINGS TO THE FINAL CONSUMER. 35 (b) SUPERVISES, PERFORMS OR COORDINATES THE EXCAVATION AND 36 COMPLETION OF SITE IMPROVEMENTS OR THE SETUP OF A MANUFACTURED BUILDING, 37 INCLUDING THE CONTRACTING, IF ANY, WITH ANY SUBCONTRACTOR OR SPECIALTY 38 CONTRACTOR FOR THE COMPLETION OF THE CONTRACT. 39 3. SALE OF A USED MANUFACTURED BUILDING DOES NOT INCLUDE A LEASE OF 40 A USED MANUFACTURED BUILDING. 41 Sec. 16. Section 42-5151, Arizona Revised Statutes, is amended to 42 read: 43 42-5151. Definitions 44 In this article, unless the context otherwise requires: 45 HB 2521 - 55 - 1. "Ancillary services" means those services so designated in 1 federal energy regulatory commission order 888 adopted in 1996 that 2 include the services necessary to support the transmission of electricity 3 from resources to loads while maintaining reliable operation of the 4 transmission system according to good utility practice. 5 2. "CONTRACTING" MEANS ENGAGING IN BUSINESS AS A CONTRACTOR. 6 3. "CONTRACTOR" IS SYNONYMOUS WITH THE TERM "BUILDER" AND MEANS ANY 7 PERSON OR ORGANIZATION THAT UNDERTAKES TO OR OFFERS TO UNDERTAKE TO, OR 8 PURPORTS TO HAVE THE CAPACITY TO UNDERTAKE TO, OR SUBMITS A BID TO, OR 9 DOES PERSONALLY OR BY OR THROUGH OTHERS, MODIFY ANY BUILDING, HIGHWAY, 10 ROAD, RAILROAD, EXCAVATION, MANUFACTURED BUILDING OR OTHER STRUCTURE, 11 PROJECT, DEVELOPMENT OR IMPROVEMENT, OR TO DO ANY PART OF SUCH A PROJECT, 12 INCLUDING THE ERECTION OF SCAFFOLDING OR ANOTHER STRUCTURE OR WORKS IN 13 CONNECTION WITH SUCH A PROJECT, AND INCLUDES SUBCONTRACTORS AND SPECIALTY 14 CONTRACTORS. FOR ALL PURPOSES OF TAXATION OR DEDUCTION, THIS DEFINITION 15 GOVERNS WITHOUT REGARD TO WHETHER THE CONTRACTOR IS ACTING IN FULFILLMENT 16 OF A CONTRACT. 17 2. 4. "Electric distribution service" means distributing 18 electricity to retail electric customers through the use of electric 19 distribution facilities. 20 3. 5. "Electric generation service" means providing electricity 21 for sale to retail electric customers but excluding electric distribution 22 or transmission services. 23 6. "Electricity" means electric energy, electric capacity or 24 electric capacity and energy. 25 7. "Electricity supplier" means a person, whether acting in a 26 principal, agent or other capacity, that offers to sell electricity to a 27 retail electric customer in this state. 28 4. 8. "Electric transmission service" means transmitting 29 electricity to retail electric customers or to electric distribution 30 facilities so classified by the federal energy regulatory commission or, 31 to the extent permitted by law, so classified by the Arizona corporation 32 commission. 33 5. 9. "Electric utility services" means the business of providing 34 electric ancillary services, electric distribution services, electric 35 generation services, electric transmission services and other services 36 related to providing electricity. 37 8. 10. "Natural gas" means natural or artificial gas, and includes 38 methane and propane gas, the natural gas commodity, natural gas pipeline 39 capacity or natural gas commodity and pipeline capacity. 40 9. 11. "Natural gas utility services" means the business of 41 selling natural gas or providing natural gas transportation services or 42 other services related to providing natural gas. 43 HB 2521 - 56 - 10. 12. "Notice" means written notice served personally or by 1 certified mail and addressed to the last known address of the person to 2 whom such notice is given. 3 11. 13. "Other services" includes metering, meter reading services, 4 billing and collecting services. 5 12. 14. "Person" means an individual, firm, partnership, joint 6 venture, association, corporation, estate, trust, receiver or syndicate, 7 this state or a county, city, municipality, district or other political 8 subdivision or agency thereof. 9 13. 15. "Purchase" means any transfer, exchange or barter, 10 conditional or otherwise, in any manner or by any means, of tangible 11 personal property for a consideration, including transactions by which the 12 possession of property is transferred but the seller retains the title as 13 security for payment. 14 14. 16. "Purchase price" or "sales price" means the total amount 15 for which tangible personal property is sold, including any services that 16 are a part of the sale, valued in money, whether paid in money or 17 otherwise, and any amount for which credit is given to the purchaser by 18 the seller without any deduction on account of the cost of the property 19 sold, materials used, labor or services performed, interest charged, 20 losses or other expenses, but does not include: 21 (a) Discounts allowed and taken. 22 (b) Charges for labor or services in installing, remodeling or 23 repairing. 24 (c) Freight costs billed to and collected from a purchaser by a 25 retailer for tangible personal property which, on the order of the 26 retailer, is shipped directly from a manufacturer or wholesaler to the 27 purchaser. 28 (d) Amounts attributable to federal excise taxes imposed by 26 29 United States Code section 4001, 4051 or 4081 on sales of heavy trucks and 30 trailers and automobiles or on sales of use fuel, as defined in section 31 28-5601. 32 (e) The value of merchandise that is traded in on the purchase of 33 new or pre-owned merchandise when the trade-in allowance is deducted from 34 the sales price of the new or pre-owned merchandise before the completion 35 of the sale. 36 15. 17. "Retail electric customer" means a person who purchases 37 electricity for that person's own use, including use in that person's 38 trade or business, and not for resale, redistribution or retransmission. 39 17. 18. "Retailer" includes: 40 (a) Every person engaged in the business of making sales of 41 tangible personal property for storage, use or other consumption or in the 42 business of making sales at auction of tangible personal property owned by 43 that person or others for storage, use or other consumption. If in the 44 opinion of the department it is necessary for the efficient administration 45 HB 2521 - 57 - of this article to regard any salesmen, representatives, peddlers or 1 canvassers as the agents of the dealers, distributors, supervisors or 2 employers under whom they operate or from whom they obtain the tangible 3 personal property sold by them, regardless of whether they are making 4 sales on their own behalf or on behalf of such dealers, distributors, 5 supervisors or employers, the department may so regard them and may regard 6 the dealers, distributors, supervisors or employers as retailers for 7 purposes of this article. 8 (b) A person who solicits orders for tangible personal property by 9 mail if the solicitations are substantial and recurring or if the retailer 10 benefits from any banking, financing, debt collection, telecommunication, 11 television shopping system, cable, optic, microwave or other communication 12 system or marketing activities occurring in this state or benefits from 13 the location in this state of authorized installation, servicing or repair 14 facilities. 15 16. 19. "Retail natural gas customer" means a person who purchases 16 natural gas for that person's own use, including use in that person's 17 trade or business, and not for resale, redistribution or retransmission. 18 18. 20. "Solar daylighting" means a device that is specifically 19 designed to capture and redirect the visible portion of the solar beam, 20 while controlling the infrared portion, for use in illuminating interior 21 building spaces in lieu of artificial lighting. 22 19. 21. "Solar energy device" means a system or series of 23 mechanisms designed primarily to provide heating, to provide cooling, to 24 produce electrical power, to produce mechanical power, to provide solar 25 daylighting or to provide any combination of the foregoing by means of 26 collecting and transferring solar generated energy into such uses by 27 either active or passive means, including wind generator systems that 28 produce electricity. Solar energy systems may also have the capability of 29 storing solar energy for future use. Passive systems shall clearly be 30 designed as a solar energy device, such as a trombe wall, and not merely 31 as a part of a normal structure, such as a window. 32 20. 22. "Storage" means keeping or retaining tangible personal 33 property purchased from a retailer for any purpose except sale in the 34 regular course of business or subsequent use solely outside this state. 35 For the purposes of this paragraph, sale in the regular course of business 36 does not include the transfer of title or possession of coal back and 37 forth between an owner or operator of a power plant and a person who is 38 responsible for refining coal if both of the following apply: 39 (a) The transfer of title or possession of the coal is for the 40 purpose of refining the coal. 41 (b) The title or possession of the coal is transferred back to the 42 owner or operator of the power plant after completion of the coal refining 43 process. For the purposes of this subdivision, "coal refining process" 44 means the application of a coal additive system that aids the reduction of 45 HB 2521 - 58 - power plant emissions during the combustion of coal and the treatment of 1 flue gas. 2 21. 23. "Taxpayer" means any retailer or person storing, using or 3 consuming tangible personal property the storage, use or consumption of 4 which is subject to the tax imposed by this article when such tax was not 5 paid to a retailer. 6 22. 24. "Use or consumption" means the exercise of any right or 7 power over tangible personal property incidental to owning the property 8 except holding for sale or selling the property in the regular course of 9 business. For the purposes of this paragraph, selling the property in the 10 regular course of business does not include the transfer of title or 11 possession of coal back and forth between an owner or operator of a power 12 plant and a person who is responsible for refining coal if both of the 13 following apply: 14 (a) The transfer of title or possession of the coal is for the 15 purpose of refining the coal. 16 (b) The title or possession of the coal is transferred back to the 17 owner or operator of the power plant after completion of the coal refining 18 process. For the purposes of this subdivision, "coal refining process" 19 means the application of a coal additive system that aids the reduction of 20 power plant emissions during the combustion of coal and the treatment of 21 flue gas. 22 23. 25. "Utility business" means a person that is engaged in the 23 business of providing electric utility services to retail electric 24 customers or natural gas utility services to retail natural gas customers. 25 Sec. 17. Subject to the requirements of article IV, part 1, section 26 1, Constitution of Arizona, section 42-5155, Arizona Revised Statutes, is 27 amended to read: 28 42-5155. Levy of tax; tax rate; purchaser's liability 29 A. There is levied and imposed an excise tax on the storage, use or 30 consumption in this state of tangible personal property purchased from a 31 retailer or utility business, as a percentage of the sales price. A 32 manufactured building purchased outside this state and set up in this 33 state is subject to tax under this section and in this case the RATE IS A 34 percentage is OF sixty-five per cent PERCENT of the sales price. 35 B. The tax imposed by this section applies to any purchaser which 36 THAT purchased tangible personal property for resale but subsequently uses 37 or consumes the property. 38 C. THE PURCHASE OF TANGIBLE PERSONAL PROPERTY BY A CONTRACTOR, 39 REGARDLESS OF WHETHER IT WILL BE INCORPORATED INTO A BUILDING OR 40 STRUCTURE, IS CONSIDERED TO BE A PURCHASE AT RETAIL AND IS SUBJECT TO 41 TAXATION UNDER THIS SECTION UNLESS THE CONTRACTOR PROVIDES TO THE RETAILER 42 A CERTIFICATE THAT IS SIGNED BY THE OWNER OF THE PROPERTY TO BE IMPROVED 43 AND THAT STATES THAT THE PERSONAL PROPERTY PURCHASED BY THE CONTRACTOR 44 WILL BE USED FOR A PURPOSE IDENTIFIED IN SECTION 42-5159, SUBSECTION A 45 HB 2521 - 59 - OR B. IF A PERSON WHO IS IN THE BUSINESS OF SELLING TANGIBLE PERSONAL 1 PROPERTY AT RETAIL ALSO ENGAGES IN BUSINESS AS A CONTRACTOR AND REMOVES 2 TANGIBLE PERSONAL PROPERTY FROM RETAIL STOCK FOR USE IN CONTRACTING 3 ACTIVITIES, THE PURCHASE PRICE OF THAT PERSONAL PROPERTY IS SUBJECT TO TAX 4 UNDER SUBSECTION B OF THIS SECTION. 5 C. D. The tax rate shall equal the rate of tax prescribed by 6 section 42-5010, subsection A as applied to retailers and utility 7 businesses according to the respective classification under articles 1 and 8 2 of this chapter for the same type of transaction or business activity. 9 D. E. In addition to the rate prescribed by subsection C D of 10 this section, if approved by the qualified electors voting at a statewide 11 general election, an additional rate increment of six-tenths of one per 12 cent PERCENT is imposed and shall be collected through June 30, 2021. The 13 taxpayer shall pay taxes pursuant to this subsection at the same time and 14 in the same manner as under subsection C D of this section. The 15 department shall separately account for the revenues collected with 16 respect to the rate imposed pursuant to this subsection, and the state 17 treasurer shall pay all of those revenues in the manner prescribed by 18 section 42-5029, subsection E. 19 E. F. Every person storing, using or consuming in this state 20 tangible personal property purchased from a retailer or utility business 21 is liable for the tax. The person's liability is not extinguished until 22 the tax has been paid to this state. 23 F. G. A receipt from a retailer or utility business that maintains 24 a place of business in this state or from a retailer or utility business 25 that is authorized by the department to collect the tax, under such rules 26 as it may prescribe, and that is for the purposes of this article regarded 27 as a retailer or utility business maintaining a place of business in this 28 state, given to the purchaser as provided in section 42-5161 is sufficient 29 to relieve the purchaser from further liability for the tax to which the 30 receipt refers. 31 Sec. 18. Section 42-5159, Arizona Revised Statutes, as amended by 32 Senate Bill 1010, section 13, fifty-third legislature, first regular 33 session, as transmitted to the governor, is amended to read: 34 42-5159. Exemptions 35 A. The tax levied by this article does not apply to the storage, 36 use or consumption in this state of the following described tangible 37 personal property: 38 1. Tangible personal property, sold in this state, the gross 39 receipts from the sale of which are included in the measure of the tax 40 imposed by articles 1 and 2 of this chapter. 41 2. Tangible personal property, the sale or use of which has already 42 been subjected to an excise tax at a rate equal to or exceeding the tax 43 imposed by this article under the laws of another state of the United 44 States. If the excise tax imposed by the other state is at a rate less 45 HB 2521 - 60 - than the tax imposed by this article, the tax imposed by this article is 1 reduced by the amount of the tax already imposed by the other state. 2 3. Tangible personal property, the storage, use or consumption of 3 which the constitution or laws of the United States prohibit this state 4 from taxing or to the extent that the rate or imposition of tax is 5 unconstitutional under the laws of the United States. 6 4. Tangible personal property that directly enters into and becomes 7 an ingredient or component part of any manufactured, fabricated or 8 processed article, substance or commodity for sale in the regular course 9 of business. 10 5. Motor vehicle fuel and use fuel, the sales, distribution or use 11 of which in this state is subject to the tax imposed under title 28, 12 chapter 16, article 1, use fuel that is sold to or used by a person 13 holding a valid single trip use fuel tax permit issued under 14 section 28-5739, aviation fuel, the sales, distribution or use of which in 15 this state is subject to the tax imposed under section 28-8344, and jet 16 fuel, the sales, distribution or use of which in this state is subject to 17 the tax imposed under article 8 of this chapter. 18 6. Tangible personal property brought into this state by an 19 individual who was a nonresident at the time the property was purchased 20 for storage, use or consumption by the individual if the first actual use 21 or consumption of the property was outside this state, unless the property 22 is used in conducting a business in this state. 23 7. Purchases of implants used as growth promotants and injectable 24 medicines, not already exempt under paragraph 16 of this subsection, for 25 livestock and poultry owned by, or in possession of, persons who are 26 engaged in producing livestock, poultry, or livestock or poultry products, 27 or who are engaged in feeding livestock or poultry commercially. For the 28 purposes of this paragraph, "poultry" includes ratites. 29 8. Purchases of: 30 (a) Livestock and poultry to persons engaging in the businesses of 31 farming, ranching or producing livestock or poultry. 32 (b) Livestock and poultry feed, supplies, salts, vitamins and other 33 additives sold to persons for use or consumption in the businesses of 34 farming, ranching and producing or feeding livestock or poultry or for use 35 or consumption in noncommercial boarding of livestock. For the purposes 36 of this paragraph, "poultry" includes ratites. 37 9. Seeds, seedlings, roots, bulbs, cuttings and other propagative 38 material for use in commercially producing agricultural, horticultural, 39 viticultural or floricultural crops in this state. 40 10. Tangible personal property not exceeding two hundred dollars in 41 any one month purchased by an individual at retail outside the continental 42 limits of the United States for the individual's own personal use and 43 enjoyment. 44 HB 2521 - 61 - 11. Advertising supplements that are intended for sale with 1 newspapers published in this state and that have already been subjected to 2 an excise tax under the laws of another state in the United States that 3 equals or exceeds the tax imposed by this article. 4 12. Materials that are purchased by or for publicly funded 5 libraries including school district libraries, charter school libraries, 6 community college libraries, state university libraries or federal, state, 7 county or municipal libraries for use by the public as follows: 8 (a) Printed or photographic materials, beginning August 7, 1985. 9 (b) Electronic or digital media materials, beginning July 17, 1994. 10 13. Tangible personal property purchased by: 11 (a) A hospital organized and operated exclusively for charitable 12 purposes, no part of the net earnings of which inures to the benefit of 13 any private shareholder or individual. 14 (b) A hospital operated by this state or a political subdivision of 15 this state. 16 (c) A licensed nursing care institution or a licensed residential 17 care institution or a residential care facility operated in conjunction 18 with a licensed nursing care institution or a licensed kidney dialysis 19 center, which provides medical services, nursing services or health 20 related services and is not used or held for profit. 21 (d) A qualifying health care organization, as defined in section 22 42-5001, if the tangible personal property is used by the organization 23 solely to provide health and medical related educational and charitable 24 services. 25 (e) A qualifying health care organization as defined in section 26 42-5001 if the organization is dedicated to providing educational, 27 therapeutic, rehabilitative and family medical education training for 28 blind and visually impaired children and children with multiple 29 disabilities from the time of birth to age twenty-one. 30 (f) A nonprofit charitable organization that has qualified under 31 section 501(c)(3) of the United States internal revenue code and that 32 engages in and uses such property exclusively in programs for persons with 33 mental or physical disabilities if the programs are exclusively for 34 training, job placement, rehabilitation or testing. 35 (g) A person that is subject to tax under this chapter by reason of 36 being engaged in business classified under section 42-5075 OR 42-5077, or 37 a subcontractor working under the control of a person that is engaged in 38 business classified under section 42-5075 OR 42-5077, if the tangible 39 personal property is any of the following: INCORPORATED INTO ANY HIGHWAY, 40 STREET OR BRIDGE CONSTRUCTION PROJECT OR INTO A MANUFACTURED BUILDING. 41 (i) Incorporated or fabricated by the person into a structure, 42 project, development or improvement in fulfillment of a contract. 43 (ii) Incorporated or fabricated by the person into any project 44 described in section 42-5075, subsection O. 45 HB 2521 - 62 - (iii) Used in environmental response or remediation activities 1 under section 42-5075, subsection B, paragraph 6. 2 (h) A person that is not subject to tax under section 42-5075 and 3 that has been provided a copy of a certificate described in section 4 42-5009, subsection L, if the property purchased is incorporated or 5 fabricated by the person into the real property, structure, project, 6 development or improvement INTO A HIGHWAY, STREET OR BRIDGE CONSTRUCTION 7 PROJECT described in the certificate. 8 (i) A nonprofit charitable organization that has qualified under 9 section 501(c)(3) of the internal revenue code if the property is 10 purchased from the parent or an affiliate organization that is located 11 outside this state. 12 (j) A qualifying community health center as defined in section 13 42-5001. 14 (k) A nonprofit charitable organization that has qualified under 15 section 501(c)(3) of the internal revenue code and that regularly serves 16 meals to the needy and indigent on a continuing basis at no cost. 17 (l) A person engaged in business under the transient lodging 18 classification if the property is a personal hygiene item or articles used 19 by human beings for food, drink or condiment, except alcoholic beverages, 20 which are furnished without additional charge to and intended to be 21 consumed by the transient during the transient's occupancy. 22 (m) For taxable periods beginning from and after June 30, 2001, a 23 nonprofit charitable organization that has qualified under section 24 501(c)(3) of the internal revenue code and that provides residential 25 apartment housing for low income persons over sixty-two years of age in a 26 facility that qualifies for a federal housing subsidy, if the tangible 27 personal property is used by the organization solely to provide 28 residential apartment housing for low income persons over sixty-two years 29 of age in a facility that qualifies for a federal housing subsidy. 30 (n) A qualifying health sciences educational institution as defined 31 in section 42-5001. 32 (o) A person representing or working on behalf of any person 33 described in subdivision (a), (b), (c), (d), (e), (f), (i), (j), (k), (m) 34 or (n) of this paragraph, if the tangible personal property is 35 incorporated or fabricated into a project described in section 42-5075, 36 subsection O. 37 14. Commodities, as defined by title 7 United States Code 38 section 2, that are consigned for resale in a warehouse in this state in 39 or from which the commodity is deliverable on a contract for future 40 delivery subject to the rules of a commodity market regulated by the 41 United States commodity futures trading commission. 42 HB 2521 - 63 - 15. Tangible personal property sold by: 1 (a) Any nonprofit organization organized and operated exclusively 2 for charitable purposes and recognized by the United States internal 3 revenue service under section 501(c)(3) of the internal revenue code. 4 (b) A nonprofit organization that is exempt from taxation under 5 section 501(c)(3), 501(c)(4) or 501(c)(6) of the internal revenue code if 6 the organization is associated with a major league baseball team or a 7 national touring professional golfing association and no part of the 8 organization's net earnings inures to the benefit of any private 9 shareholder or individual. 10 (c) A nonprofit organization that is exempt from taxation under 11 section 501(c)(3), 501(c)(4), 501(c)(6), 501(c)(7) or 501(c)(8) of the 12 internal revenue code if the organization sponsors or operates a rodeo 13 featuring primarily farm and ranch animals and no part of the 14 organization's net earnings inures to the benefit of any private 15 shareholder or individual. 16 16. Drugs and medical oxygen, including delivery hose, mask or 17 tent, regulator and tank, on the prescription of a member of the medical, 18 dental or veterinarian profession who is licensed by law to administer 19 such substances. 20 17. Prosthetic appliances, as defined in section 23-501, prescribed 21 or recommended by a person who is licensed, registered or otherwise 22 professionally credentialed as a physician, dentist, podiatrist, 23 chiropractor, naturopath, homeopath, nurse or optometrist. 24 18. Prescription eyeglasses and contact lenses. 25 19. Insulin, insulin syringes and glucose test strips. 26 20. Hearing aids as defined in section 36-1901. 27 21. Durable medical equipment that has a centers for medicare and 28 medicaid services common procedure code, is designated reimbursable by 29 medicare, is prescribed by a person who is licensed under title 32, 30 chapter 7, 13, 17 or 29, can withstand repeated use, is primarily and 31 customarily used to serve a medical purpose, is generally not useful to a 32 person in the absence of illness or injury and is appropriate for use in 33 the home. 34 22. Food, as provided in and subject to the conditions of article 3 35 of this chapter and section 42-5074. 36 23. Items purchased with United States department of agriculture 37 food stamp coupons issued under the food stamp act of 1977 (P.L. 95-113; 38 91 Stat. 958) or food instruments issued under section 17 of the child 39 nutrition act (P.L. 95-627; 92 Stat. 3603; P.L. 99-661, section 4302; 42 40 United States Code section 1786). 41 24. Food and drink provided without monetary charge by a taxpayer 42 that is subject to section 42-5074 to its employees for their own 43 consumption on the premises during the employees' hours of employment. 44 HB 2521 - 64 - 25. Tangible personal property that is used or consumed in a 1 business subject to section 42-5074 for human food, drink or condiment, 2 whether simple, mixed or compounded. 3 26. Food, drink or condiment and accessory tangible personal 4 property that are acquired for use by or provided to a school district or 5 charter school if they are to be either served or prepared and served to 6 persons for consumption on the premises of a public school in the school 7 district or on the premises of the charter school during school hours. 8 27. Lottery tickets or shares purchased pursuant to title 5, 9 chapter 5.1, article 1. 10 28. Textbooks, sold by a bookstore, that are required by any state 11 university or community college. 12 29. Magazines, other periodicals or other publications produced by 13 this state to encourage tourist travel. 14 30. Paper machine clothing, such as forming fabrics and dryer 15 felts, purchased by a paper manufacturer and directly used or consumed in 16 paper manufacturing. 17 31. Coal, petroleum, coke, natural gas, virgin fuel oil and 18 electricity purchased by a qualified environmental technology 19 manufacturer, producer or processor as defined in section 41-1514.02 and 20 directly used or consumed in the generation or provision of on-site power 21 or energy solely for environmental technology manufacturing, producing or 22 processing or environmental protection. This paragraph shall apply for 23 twenty full consecutive calendar or fiscal years from the date the first 24 paper manufacturing machine is placed in service. In the case of an 25 environmental technology manufacturer, producer or processor who does not 26 manufacture paper, the time period shall begin with the date the first 27 manufacturing, processing or production equipment is placed in service. 28 32. Motor vehicles that are removed from inventory by a motor 29 vehicle dealer as defined in section 28-4301 and that are provided to: 30 (a) Charitable or educational institutions that are exempt from 31 taxation under section 501(c)(3) of the internal revenue code. 32 (b) Public educational institutions. 33 (c) State universities or affiliated organizations of a state 34 university if no part of the organization's net earnings inures to the 35 benefit of any private shareholder or individual. 36 33. Natural gas or liquefied petroleum gas used to propel a motor 37 vehicle. 38 34. Machinery, equipment, technology or related supplies that are 39 only useful to assist a person with a physical disability as defined in 40 section 46-191 or a person who has a developmental disability as defined 41 in section 36-551 or has a head injury as defined in section 41-3201 to be 42 more independent and functional. 43 35. Liquid, solid or gaseous chemicals used in manufacturing, 44 processing, fabricating, mining, refining, metallurgical operations, 45 HB 2521 - 65 - research and development and, beginning on January 1, 1999, printing, if 1 using or consuming the chemicals, alone or as part of an integrated system 2 of chemicals, involves direct contact with the materials from which the 3 product is produced for the purpose of causing or permitting a chemical or 4 physical change to occur in the materials as part of the production 5 process. This paragraph does not include chemicals that are used or 6 consumed in activities such as packaging, storage or transportation but 7 does not affect any exemption for such chemicals that is otherwise 8 provided by this section. For the purposes of this paragraph, "printing" 9 means a commercial printing operation and includes job printing, 10 engraving, embossing, copying and bookbinding. 11 36. Food, drink and condiment purchased for consumption within the 12 premises of any prison, jail or other institution under the jurisdiction 13 of the state department of corrections, the department of public safety, 14 the department of juvenile corrections or a county sheriff. 15 37. A motor vehicle and any repair and replacement parts and 16 tangible personal property becoming a part of such motor vehicle sold to a 17 motor carrier who is subject to a fee prescribed in title 28, chapter 16, 18 article 4 and who is engaged in the business of leasing or renting such 19 property. 20 38. Tangible personal property that is or directly enters into and 21 becomes an ingredient or component part of cards used as prescription plan 22 identification cards. 23 39. Overhead materials or other tangible personal property that is 24 used in performing a contract between the United States government and a 25 manufacturer, modifier, assembler or repairer, including property used in 26 performing a subcontract with a government contractor who is a 27 manufacturer, modifier, assembler or repairer, to which title passes to 28 the government under the terms of the contract or subcontract. For the 29 purposes of this paragraph: 30 (a) "Overhead materials" means tangible personal property, the 31 gross proceeds of sales or gross income derived from which would otherwise 32 be included in the retail classification, that is used or consumed in the 33 performance of a contract, the cost of which is charged to an overhead 34 expense account and allocated to various contracts based on generally 35 accepted accounting principles and consistent with government contract 36 accounting standards. 37 (b) "Subcontract" means an agreement between a contractor and any 38 person who is not an employee of the contractor for furnishing of supplies 39 or services that, in whole or in part, are necessary to the performance of 40 one or more government contracts, or under which any portion of the 41 contractor's obligation under one or more government contracts is 42 performed, undertaken or assumed, and that includes provisions causing 43 title to overhead materials or other tangible personal property used in 44 the performance of the subcontract to pass to the government or that 45 HB 2521 - 66 - includes provisions incorporating such title passing clauses in a 1 government contract into the subcontract. FOR THE PURPOSES OF THIS 2 SUBDIVISION, "CONTRACTOR" HAS ITS ORDINARY AND COMMON MEANING AND DOES NOT 3 HAVE THE MEANING PRESCRIBED IN SECTION 42-5151. 4 40. Through December 31, 1994, tangible personal property sold 5 pursuant to a personal property liquidation transaction, as defined in 6 section 42-5061. From and after December 31, 1994, tangible personal 7 property sold pursuant to a personal property liquidation transaction, as 8 defined in section 42-5061, if the gross proceeds of the sales were 9 included in the measure of the tax imposed by article 1 of this chapter or 10 if the personal property liquidation was a casual activity or transaction. 11 41. Wireless telecommunications equipment that is held for sale or 12 transfer to a customer as an inducement to enter into or continue a 13 contract for telecommunications services that are taxable under section 14 42-5064. 15 42. Alternative fuel, as defined in section 1-215, purchased by a 16 used oil fuel burner who has received a permit to burn used oil or used 17 oil fuel under section 49-426 or 49-480. 18 43. Tangible personal property purchased by a commercial airline 19 and consisting of food, beverages and condiments and accessories used for 20 serving the food and beverages, if those items are to be provided without 21 additional charge to passengers for consumption in flight. For the 22 purposes of this paragraph, "commercial airline" means a person holding a 23 federal certificate of public convenience and necessity or foreign air 24 carrier permit for air transportation to transport persons, property or 25 United States mail in intrastate, interstate or foreign commerce. 26 44. Alternative fuel vehicles if the vehicle was manufactured as a 27 diesel fuel vehicle and converted to operate on alternative fuel and 28 equipment that is installed in a conventional diesel fuel motor vehicle to 29 convert the vehicle to operate on an alternative fuel, as defined in 30 section 1-215. 31 45. Gas diverted from a pipeline, by a person engaged in the 32 business of: 33 (a) Operating a natural or artificial gas pipeline, and used or 34 consumed for the sole purpose of fueling compressor equipment that 35 pressurizes the pipeline. 36 (b) Converting natural gas into liquefied natural gas, and used or 37 consumed for the sole purpose of fueling compressor equipment used in the 38 conversion process. 39 46. Tangible personal property that is excluded, exempt or 40 deductible from transaction privilege tax pursuant to section 42-5063. 41 47. Tangible personal property purchased to be incorporated or 42 installed as part of environmental response or remediation activities 43 under section 42-5075, subsection B, paragraph 6 SITE PREPARATION, 44 CONSTRUCTING, FURNISHING OR INSTALLING MACHINERY, EQUIPMENT OR OTHER 45 HB 2521 - 67 - TANGIBLE PERSONAL PROPERTY, INCLUDING STRUCTURES NECESSARY TO PROTECT 1 EXEMPT INCORPORATED MATERIALS OR INSTALLED MACHINERY OR EQUIPMENT, AND 2 TANGIBLE PERSONAL PROPERTY INCORPORATED INTO THE PROJECT, TO PERFORM ONE 3 OR MORE OF THE FOLLOWING ACTIONS IN RESPONSE TO A RELEASE OR SUSPECTED 4 RELEASE OF A HAZARDOUS SUBSTANCE, POLLUTANT OR CONTAMINANT FROM A FACILITY 5 TO THE ENVIRONMENT, UNLESS THE RELEASE WAS AUTHORIZED BY A PERMIT ISSUED 6 BY A GOVERNMENTAL AUTHORITY: 7 (a) ACTIONS TO MONITOR, ASSESS AND EVALUATE SUCH A RELEASE OR A 8 SUSPECTED RELEASE. 9 (b) EXCAVATION, REMOVAL AND TRANSPORTATION OF CONTAMINATED SOIL AND 10 ITS TREATMENT OR DISPOSAL. 11 (c) TREATMENT OF CONTAMINATED SOIL BY VAPOR EXTRACTION, CHEMICAL OR 12 PHYSICAL STABILIZATION, SOIL WASHING OR BIOLOGICAL TREATMENT TO REDUCE THE 13 CONCENTRATION, TOXICITY OR MOBILITY OF A CONTAMINANT. 14 (d) PUMPING AND TREATMENT OR IN SITU TREATMENT OF CONTAMINATED 15 GROUNDWATER OR SURFACE WATER TO REDUCE THE CONCENTRATION OR TOXICITY OF A 16 CONTAMINANT. 17 (e) THE INSTALLATION OF STRUCTURES, SUCH AS CUTOFF WALLS OR CAPS, 18 TO CONTAIN CONTAMINANTS PRESENT IN GROUNDWATER OR SOIL AND PREVENT THEM 19 FROM REACHING A LOCATION WHERE THEY COULD THREATEN HUMAN HEALTH OR WELFARE 20 OR THE ENVIRONMENT. 21 THIS PARAGRAPH DOES NOT INCLUDE ASBESTOS REMOVAL OR THE CONSTRUCTION OR 22 USE OF ANCILLARY STRUCTURES SUCH AS MAINTENANCE SHEDS, OFFICES OR STORAGE 23 FACILITIES FOR UNATTACHED EQUIPMENT, POLLUTION CONTROL EQUIPMENT, 24 FACILITIES OR OTHER CONTROL ITEMS REQUIRED OR TO BE USED BY A PERSON TO 25 PREVENT OR CONTROL CONTAMINATION BEFORE IT REACHES THE ENVIRONMENT. 26 48. Tangible personal property sold by a nonprofit organization 27 that is exempt from taxation under section 501(c)(6) of the internal 28 revenue code if the organization produces, organizes or promotes cultural 29 or civic related festivals or events and no part of the organization's net 30 earnings inures to the benefit of any private shareholder or individual. 31 49. Prepared food, drink or condiment donated by a restaurant as 32 classified in section 42-5074, subsection A to a nonprofit charitable 33 organization that has qualified under section 501(c)(3) of the internal 34 revenue code and that regularly serves meals to the needy and indigent on 35 a continuing basis at no cost. 36 50. Application services that are designed to assess or test 37 student learning or to promote curriculum design or enhancement purchased 38 by or for any school district, charter school, community college or state 39 university. For the purposes of this paragraph: 40 (a) "Application services" means software applications provided 41 remotely using hypertext transfer protocol or another network protocol. 42 (b) "Curriculum design or enhancement" means planning, implementing 43 or reporting on courses of study, lessons, assignments or other learning 44 activities. 45 HB 2521 - 68 - 51. Motor vehicle fuel and use fuel to a qualified business under 1 section 41-1516 for off-road use in harvesting, processing or transporting 2 qualifying forest products removed from qualifying projects as defined in 3 section 41-1516. 4 52. Repair parts installed in equipment used directly by a 5 qualified business under section 41-1516 in harvesting, processing or 6 transporting qualifying forest products removed from qualifying projects 7 as defined in section 41-1516. 8 53. Renewable energy credits or any other unit created to track 9 energy derived from renewable energy resources. For the purposes of this 10 paragraph, "renewable energy credit" means a unit created administratively 11 by the corporation commission or governing body of a public power entity 12 to track kilowatt hours of electricity derived from a renewable energy 13 resource or the kilowatt hour equivalent of conventional energy resources 14 displaced by distributed renewable energy resources. 15 54. Computer data center equipment sold to the owner, operator or 16 qualified colocation tenant of a computer data center that is certified by 17 the Arizona commerce authority under section 41-1519 or an authorized 18 agent of the owner, operator or qualified colocation tenant during the 19 qualification period for use in the qualified computer data center. For 20 the purposes of this paragraph, "computer data center", "computer data 21 center equipment", "qualification period" and "qualified colocation 22 tenant" have the same meanings prescribed in section 41-1519. 23 55. Coal acquired from an owner or operator of a power plant by a 24 person who is responsible for refining coal if both of the following 25 apply: 26 (a) The transfer of title or possession of the coal is for the 27 purpose of refining the coal. 28 (b) The title or possession of the coal is transferred back to the 29 owner or operator of the power plant after completion of the coal refining 30 process. For the purposes of this subdivision, "coal refining process" 31 means the application of a coal additive system that aids the reduction of 32 power plant emissions during the combustion of coal and the treatment of 33 flue gas. 34 56. Tangible personal property incorporated or fabricated into a 35 project described in section 42-5075, subsection O, that is located within 36 the exterior boundaries of an Indian reservation for which the owner, as 37 defined in section 42-5075, of the project is an Indian tribe or an 38 affiliated Indian. For the purposes of this paragraph: 39 (a) "Affiliated Indian" means an individual native American Indian 40 who is duly registered on the tribal rolls of the Indian tribe for whose 41 benefit the Indian reservation was established. 42 (b) "Indian reservation" means all lands that are within the limits 43 of areas set aside by the United States for the exclusive use and 44 occupancy of an Indian tribe by treaty, law or executive order and that 45 HB 2521 - 69 - are recognized as Indian reservations by the United States department of 1 the interior. 2 (c) "Indian tribe" means any organized nation, tribe, band or 3 community that is recognized as an Indian tribe by the United States 4 department of the interior and includes any entity formed under the laws 5 of the Indian tribe. 6 56. TANGIBLE PERSONAL PROPERTY PURCHASED BY A QUALIFIED BUSINESS 7 UNDER SECTION 41-1516 IF THE PROPERTY SOLD IS TO BE INCORPORATED OR 8 FABRICATED INTO A BUILDING, OR OTHER STRUCTURE, PROJECT, DEVELOPMENT OR 9 IMPROVEMENT OWNED BY THE QUALIFIED BUSINESS FOR HARVESTING OR PROCESSING 10 QUALIFYING FOREST PRODUCTS. TO QUALIFY FOR THIS EXEMPTION, THE QUALIFIED 11 BUSINESS MUST PRESENT, AT THE TIME OF PURCHASE, ITS CERTIFICATION APPROVED 12 BY THE DEPARTMENT. 13 57. Cash equivalents, precious metal bullion and monetized bullion 14 purchased by the ultimate consumer, but coins or other forms of money for 15 manufacture into jewelry or works of art are subject to tax, and tangible 16 personal property that is purchased through the redemption of any cash 17 equivalent by the holder as a means of payment for goods that are subject 18 to tax under this article is subject to tax. For the purposes of this 19 paragraph: 20 (a) "Cash equivalents" means items, whether or not negotiable, that 21 are sold to one or more persons, through which a value denominated in 22 money is purchased in advance and that may be redeemed in full or in part 23 for tangible personal property, intangibles or services. Cash equivalents 24 include gift cards, stored value cards, gift certificates, vouchers, 25 traveler's checks, money orders or other tangible instruments or orders. 26 Cash equivalents do not include either of the following: 27 (i) Items that are sold to one or more persons and through which a 28 value is not denominated in money. 29 (ii) Prepaid calling cards for telecommunications services. 30 (b) "Monetized bullion" means coins and other forms of money that 31 are manufactured from gold, silver or other metals and that have been or 32 are used as a medium of exchange in this or another state, the United 33 States or a foreign nation. 34 (c) "Precious metal bullion" means precious metal, including gold, 35 silver, platinum, rhodium and palladium, that has been smelted or refined 36 so that its value depends on its contents and not on its form. 37 B. In addition to the exemptions allowed by subsection A of this 38 section, the following categories of tangible personal property are also 39 exempt: 40 1. Machinery, or equipment, used directly in manufacturing, 41 processing, fabricating, job printing, refining or metallurgical 42 operations. The terms "manufacturing", "processing", "fabricating", "job 43 printing", "refining" and "metallurgical" as used in this paragraph refer 44 to and include those operations commonly understood within their ordinary 45 HB 2521 - 70 - meaning. "Metallurgical operations" includes leaching, milling, 1 precipitating, smelting and refining. MANUFACTURING AND PROCESSING DO NOT 2 INCLUDE ENGAGING IN THE BUSINESS OF CONTRACTING. 3 2. Machinery, or equipment, used directly in the process of 4 extracting ores or minerals from the earth for commercial purposes, 5 including equipment required to prepare the materials for extraction and 6 handling, loading or transporting such extracted material to the surface. 7 "Mining" includes underground, surface and open pit operations for 8 extracting ores and minerals. 9 3. Tangible personal property sold to persons engaged in business 10 classified under the telecommunications classification under section 11 42-5064, including a person representing or working on behalf of such a 12 person in a manner described in section 42-5075, subsection O, and 13 consisting of central office switching equipment, switchboards, private 14 branch exchange equipment, microwave radio equipment and carrier equipment 15 including optical fiber, coaxial cable and other transmission media that 16 are components of carrier systems. 17 4. Machinery, equipment or transmission lines used directly in 18 producing or transmitting electrical power, but not including 19 distribution. Transformers and control equipment used at transmission 20 substation sites constitute equipment used in producing or transmitting 21 electrical power. 22 5. Neat animals, horses, asses, sheep, ratites, swine or goats used 23 or to be used as breeding or production stock, including sales of 24 breedings or ownership shares in such animals used for breeding or 25 production. 26 6. Pipes or valves four inches in diameter or larger used to 27 transport oil, natural gas, artificial gas, water or coal slurry, 28 including compressor units, regulators, machinery and equipment, fittings, 29 seals and any other part that is used in operating the pipes or valves. 30 7. Aircraft, navigational and communication instruments and other 31 accessories and related equipment sold to: 32 (a) A person: 33 (i) Holding, or exempted by federal law from obtaining, a federal 34 certificate of public convenience and necessity for use as, in conjunction 35 with or becoming part of an aircraft to be used to transport persons for 36 hire in intrastate, interstate or foreign commerce. 37 (ii) That is certificated or licensed under federal aviation 38 ADMINISTRATION regulations (14 Code of Federal Regulations part 121 or 39 135) as a scheduled or unscheduled carrier of persons for hire for use as 40 or in conjunction with or becoming part of an aircraft to be used to 41 transport persons for hire in intrastate, interstate or foreign commerce. 42 (iii) Holding a foreign air carrier permit for air transportation 43 for use as or in conjunction with or becoming a part of aircraft to be 44 HB 2521 - 71 - used to transport persons, property or United States mail in intrastate, 1 interstate or foreign commerce. 2 (iv) Operating an aircraft to transport persons in any manner for 3 compensation or hire including as an air carrier, a foreign air carrier or 4 a commercial operator or under a restricted category, within the meaning 5 of 14 Code of Federal Regulations, regardless of whether the operation or 6 aircraft is regulated or certified under part 91, 119, 121, 133, 135, 136 7 or 137, or another part of 14 Code of Federal Regulations. 8 (v) That will lease or otherwise transfer operational control, 9 within the meaning of Federal Aviation Administration Operations 10 Specification A008, or its successor, of the aircraft, instruments or 11 accessories to one or more persons described in item (i), (ii), (iii) or 12 (iv) of this subdivision, subject to section 42-5009, subsection Q. 13 (b) Any foreign government. 14 (c) Persons who are not residents of this state and who will not 15 use such property in this state other than in removing such property from 16 this state. This subdivision also applies to corporations that are not 17 incorporated in this state, regardless of maintaining a place of business 18 in this state, if the principal corporate office is located outside this 19 state and the property will not be used in this state other than in 20 removing the property from this state. 21 8. Machinery, tools, equipment and related supplies used or 22 consumed directly in repairing, remodeling or maintaining aircraft, 23 aircraft engines or aircraft component parts by or on behalf of a 24 certificated or licensed carrier of persons or property. 25 9. Rolling stock, rails, ties and signal control equipment used 26 directly to transport persons or property. 27 10. Machinery or equipment used directly to drill for oil or gas or 28 used directly in the process of extracting oil or gas from the earth for 29 commercial purposes. 30 11. Buses or other urban mass transit vehicles that are used 31 directly to transport persons or property for hire or pursuant to a 32 governmentally adopted and controlled urban mass transportation program 33 and that are sold to bus companies holding a federal certificate of 34 convenience and necessity or operated by any city, town or other 35 governmental entity or by any person contracting with such governmental 36 entity as part of a governmentally adopted and controlled program to 37 provide urban mass transportation. 38 12. Groundwater measuring devices required under section 45-604. 39 13. New machinery and equipment consisting of agricultural 40 aircraft, tractors, tractor-drawn implements, self-powered implements, 41 machinery and equipment necessary for extracting milk, and machinery and 42 equipment necessary for cooling milk and livestock, and drip irrigation 43 lines not already exempt under paragraph 6 of this subsection and that are 44 used for commercial production of agricultural, horticultural, 45 HB 2521 - 72 - viticultural and floricultural crops and products in this state. For the 1 purposes of this paragraph: 2 (a) "New machinery and equipment" means machinery or equipment that 3 has never been sold at retail except pursuant to leases or rentals that do 4 not total two years or more. 5 (b) "Self-powered implements" includes machinery and equipment that 6 are electric-powered. 7 14. Machinery or equipment used in research and development. For 8 the purposes of this paragraph, "research and development" means basic and 9 applied research in the sciences and engineering, and designing, 10 developing or testing prototypes, processes or new products, including 11 research and development of computer software that is embedded in or an 12 integral part of the prototype or new product or that is required for 13 machinery or equipment otherwise exempt under this section to function 14 effectively. Research and development do not include manufacturing 15 quality control, routine consumer product testing, market research, sales 16 promotion, sales service, research in social sciences or psychology, 17 computer software research that is not included in the definition of 18 research and development, or other nontechnological activities or 19 technical services. 20 15. Tangible personal property that is used by either of the 21 following to receive, store, convert, produce, generate, decode, encode, 22 control or transmit telecommunications information: 23 (a) Any direct broadcast satellite television or data transmission 24 service that operates pursuant to 47 Code of Federal Regulations part 25. 25 (b) Any satellite television or data transmission facility, if both 26 of the following conditions are met: 27 (i) Over two-thirds of the transmissions, measured in megabytes, 28 transmitted by the facility during the test period were transmitted to or 29 on behalf of one or more direct broadcast satellite television or data 30 transmission services that operate pursuant to 47 Code of Federal 31 Regulations part 25. 32 (ii) Over two-thirds of the transmissions, measured in megabytes, 33 transmitted by or on behalf of those direct broadcast television or data 34 transmission services during the test period were transmitted by the 35 facility to or on behalf of those services. 36 For the purposes of subdivision (b) of this paragraph, "test period" means 37 the three hundred sixty-five day period beginning on the later of the date 38 on which the tangible personal property is purchased or the date on which 39 the direct broadcast satellite television or data transmission service 40 first transmits information to its customers. 41 16. Clean rooms that are used for manufacturing, processing, 42 fabrication or research and development, as defined in paragraph 14 of 43 this subsection, of semiconductor products. For the purposes of this 44 paragraph, "clean room" means all property that comprises or creates an 45 HB 2521 - 73 - environment where humidity, temperature, particulate matter and 1 contamination are precisely controlled within specified parameters, 2 without regard to whether the property is actually contained within that 3 environment or whether any of the property is affixed to or incorporated 4 into real property. Clean room: 5 (a) Includes the integrated systems, fixtures, piping, movable 6 partitions, lighting and all property that is necessary or adapted to 7 reduce contamination or to control airflow, temperature, humidity, 8 chemical purity or other environmental conditions or manufacturing 9 tolerances, as well as the production machinery and equipment operating in 10 conjunction with the clean room environment. 11 (b) Does not include the building or other permanent, nonremovable 12 component of the building that houses the clean room environment. 13 17. Machinery and equipment that are used directly in the feeding 14 of poultry, the environmental control of housing for poultry, the movement 15 of eggs within a production and packaging facility or the sorting or 16 cooling of eggs. This exemption does not apply to vehicles used for 17 transporting eggs. 18 18. Machinery or equipment, including related structural 19 components, that is employed in connection with manufacturing, processing, 20 fabricating, job printing, refining, mining, natural gas pipelines, 21 metallurgical operations, telecommunications, producing or transmitting 22 electricity or research and development and that is used directly to meet 23 or exceed rules or regulations adopted by the federal energy regulatory 24 commission, the United States environmental protection agency, the United 25 States nuclear regulatory commission, the Arizona department of 26 environmental quality or a political subdivision of this state to prevent, 27 monitor, control or reduce land, water or air pollution. 28 19. Machinery and equipment that are used in the commercial 29 production of livestock, livestock products or agricultural, 30 horticultural, viticultural or floricultural crops or products in this 31 state, including production by a person representing or working on behalf 32 of such a person in a manner described in section 42-5075, subsection O, 33 if the machinery and equipment are used directly and primarily to prevent, 34 monitor, control or reduce air, water or land pollution. 35 20. Machinery or equipment that enables a television station to 36 originate and broadcast or to receive and broadcast digital television 37 signals and that was purchased to facilitate compliance with the 38 telecommunications act of 1996 (P.L. 104-104; 110 Stat. 56; 47 United 39 States Code section 336) and the federal communications commission order 40 issued April 21, 1997 (47 Code of Federal Regulations part 73). This 41 paragraph does not exempt any of the following: 42 (a) Repair or replacement parts purchased for the machinery or 43 equipment described in this paragraph. 44 HB 2521 - 74 - (b) Machinery or equipment purchased to replace machinery or 1 equipment for which an exemption was previously claimed and taken under 2 this paragraph. 3 (c) Any machinery or equipment purchased after the television 4 station has ceased analog broadcasting, or purchased after November 1, 5 2009, whichever occurs first. 6 21. Qualifying equipment that is purchased from and after June 30, 7 2004 through June 30, 2024 by a qualified business under section 41-1516 8 for harvesting or processing qualifying forest products removed from 9 qualifying projects as defined in section 41-1516. To qualify for this 10 exemption, the qualified business must obtain and present its 11 certification from the Arizona commerce authority at the time of purchase. 12 C. The exemptions provided by subsection B of this section do not 13 include: 14 1. Expendable materials. For the purposes of this paragraph, 15 expendable materials do not include any of the categories of tangible 16 personal property specified in subsection B of this section regardless of 17 the cost or useful life of that property. 18 2. Janitorial equipment and hand tools. 19 3. Office equipment, furniture and supplies. 20 4. Tangible personal property used in selling or distributing 21 activities, other than the telecommunications transmissions described in 22 subsection B, paragraph 15 of this section. 23 5. Motor vehicles required to be licensed by this state, except 24 buses or other urban mass transit vehicles specifically exempted pursuant 25 to subsection B, paragraph 11 of this section, without regard to the use 26 of such motor vehicles. 27 6. Shops, buildings, docks, depots and all other materials of 28 whatever kind or character not specifically included as exempt. 29 7. Motors and pumps used in drip irrigation systems. 30 8. Machinery and equipment or tangible personal property used by a 31 contractor in the performance of a contract. 32 9. MACHINERY AND EQUIPMENT OR TANGIBLE PERSONAL PROPERTY USED BY A 33 CONTRACTOR IN THE PERFORMANCE OF A CONTRACT. 34 D. The following shall be deducted in computing the purchase price 35 of electricity by a retail electric customer from a utility business: 36 1. Revenues received from sales of ancillary services, electric 37 distribution services, electric generation services, electric transmission 38 services and other services related to providing electricity to a retail 39 electric customer who is located outside this state for use outside this 40 state if the electricity is delivered to a point of sale outside this 41 state. 42 2. Revenues received from providing electricity, including 43 ancillary services, electric distribution services, electric generation 44 services, electric transmission services and other services related to 45 HB 2521 - 75 - providing electricity with respect to which the transaction privilege tax 1 imposed under section 42-5063 has been paid. 2 E. The tax levied by this article does not apply to the purchase of 3 solar energy devices from a retailer that is registered with the 4 department as a solar energy retailer or a solar energy contractor. 5 F. The following shall be deducted in computing the purchase price 6 of electricity by a retail electric customer from a utility business: 7 1. Fees charged by a municipally owned utility to persons 8 constructing residential, commercial or industrial developments or 9 connecting residential, commercial or industrial developments to a 10 municipal utility system or systems if the fees are segregated and used 11 only for capital expansion, system enlargement or debt service of the 12 utility system or systems. 13 2. Reimbursement or contribution compensation to any person or 14 persons owning a utility system for property and equipment installed to 15 provide utility access to, on or across the land of an actual utility 16 consumer if the property and equipment become the property of the utility. 17 This deduction shall not exceed the value of such property and equipment. 18 G. The tax levied by this article does not apply to the purchase 19 price of electricity, natural gas or liquefied petroleum gas by: 20 1. A qualified manufacturing or smelting business. A utility that 21 claims this deduction shall report each month, on a form prescribed by the 22 department, the name and address of each qualified manufacturing or 23 smelting business for which this deduction is taken. This paragraph 24 applies to gas transportation services. For the purposes of this 25 paragraph: 26 (a) "Gas transportation services" means the services of 27 transporting natural gas to a natural gas customer or to a natural gas 28 distribution facility if the natural gas was purchased from a supplier 29 other than the utility. 30 (b) "Manufacturing" means the performance as a business of an 31 integrated series of operations that places tangible personal property in 32 a form, composition or character different from that in which it was 33 acquired and transforms it into a different product with a distinctive 34 name, character or use. Manufacturing does not include job printing, 35 publishing, packaging, mining, generating electricity or operating a 36 restaurant. 37 (c) "Qualified manufacturing or smelting business" means one of the 38 following: 39 (i) A business that manufactures or smelts tangible products in 40 this state, of which at least fifty-one percent of the manufactured or 41 smelted products will be exported out of state for incorporation into 42 another product or sold out of state for a final sale. 43 HB 2521 - 76 - (ii) A business that derives at least fifty-one percent of its 1 gross income from the sale of manufactured or smelted products 2 manufactured or smelted by the business. 3 (iii) A business that uses at least fifty-one percent of its square 4 footage in this state for manufacturing or smelting and business 5 activities directly related to manufacturing or smelting. 6 (iv) A business that employs at least fifty-one percent of its 7 workforce in this state in manufacturing or smelting and business 8 activities directly related to manufacturing or smelting. 9 (v) A business that uses at least fifty-one percent of the value of 10 its capitalized assets in this state, as reflected on the business's books 11 and records, for manufacturing or smelting and business activities 12 directly related to manufacturing or smelting. 13 (d) "Smelting" means to melt or fuse a metalliferous mineral, often 14 with an accompanying chemical change, usually to separate the metal. 15 2. A business that operates an international operations center in 16 this state and that is certified by the Arizona commerce authority 17 pursuant to section 41-1520. 18 H. For the purposes of subsection B of this section: 19 1. "Agricultural aircraft" means an aircraft that is built for 20 agricultural use for the aerial application of pesticides or fertilizer or 21 for aerial seeding. 22 2. "Aircraft" includes: 23 (a) An airplane flight simulator that is approved by the federal 24 aviation administration for use as a phase II or higher flight simulator 25 under appendix H, 14 Code of Federal Regulations part 121. 26 (b) Tangible personal property that is permanently affixed or 27 attached as a component part of an aircraft that is owned or operated by a 28 certificated or licensed carrier of persons or property. 29 3. "Other accessories and related equipment" includes aircraft 30 accessories and equipment such as ground service equipment that physically 31 contact aircraft at some point during the overall carrier operation. 32 I. For the purposes of subsection D of this section, "ancillary 33 services", "electric distribution service", "electric generation service", 34 "electric transmission service" and "other services" have the same 35 meanings prescribed in section 42-5063. 36 Sec. 19. Section 42-5160, Arizona Revised Statutes, is amended to 37 read: 38 42-5160. Liability for tax 39 Any person who uses, stores or consumes any tangible personal 40 property upon ON which a tax is imposed by this article and upon ON which 41 the tax has not been collected by a registered retailer or utility 42 business shall pay the tax as provided by this article, but every retailer 43 and utility business maintaining a place of business in this state and 44 making sales of tangible personal property for storage, use or other 45 HB 2521 - 77 - consumption in this state shall collect the tax from the purchaser or user 1 unless the property is exempt under this article or the purchaser or user 2 pays the tax directly to the department as provided by section 42-5167. 3 In the case of a manufactured building that is purchased from a dealer 4 outside this state and brought into this state, any person who is hired to 5 set up the manufactured building and who is licensed pursuant to title 41, 6 chapter 37, article 4 shall collect the tax from the owner and remit the 7 tax with any tax that is due under the prime contracting MANUFACTURED 8 BUILDING DEALER classification PURSUANT TO SECTION 42-5077. 9 Sec. 20. Title 42, chapter 6, article 1, Arizona Revised Statutes, 10 is amended by adding section 42-6001.01, to read: 11 42-6001.01. Municipal revenue sharing pool; allocation of 12 monies 13 A. BEGINNING FROM AND AFTER DECEMBER 31, 2017, THE DEPARTMENT SHALL 14 ESTABLISH AND MAINTAIN A MUNICIPAL REVENUE SHARING POOL AS PROVIDED BY 15 THIS SECTION CONSISTING OF A PORTION OF MUNICIPAL TRANSACTION PRIVILEGE 16 TAX REVENUES LEVIED ON AND COLLECTED EACH MONTH FROM MUNICIPAL TAXPAYERS 17 ENGAGED IN RETAIL BUSINESS. THE AMOUNT DEPOSITED IN THE POOL EACH MONTH 18 SHALL BE DETERMINED AS FOLLOWS: 19 1. EACH MONTH DURING CALENDAR YEAR 2018, THE DEPARTMENT SHALL 20 DEPOSIT FOUR PERCENT OF THE MONTHLY RETAIL TRANSACTION PRIVILEGE TAX 21 REVENUES FROM EACH CITY AND TOWN COLLECTED PURSUANT TO SECTION 42-6001. 22 2. THE DEPARTMENT SHALL DETERMINE THE MOST RECENT AMOUNT REPORTED 23 AS OF JANUARY 1, 2018, JULY 1, 2018, AND SEMIANNUALLY THEREAFTER, BY THE 24 UNITED STATES DEPARTMENT OF LABOR FOR CONSTRUCTION AS A PERCENTAGE OF 25 ARIZONA STATE GROSS DOMESTIC PRODUCT. 26 3. BEGINNING JANUARY 1, 2019 AND ANNUALLY THEREAFTER, THE 27 DEPARTMENT SHALL ADJUST THE MONTHLY PERCENTAGE AMOUNT DEPOSITED IN THE 28 POOL PURSUANT TO PARAGRAPH 1 OF THIS SUBSECTION TO THE AVERAGE OF THE TWO 29 PERCENTAGES DETERMINED IN THE PRECEDING CALENDAR YEAR PURSUANT TO 30 PARAGRAPH 2 OF THIS SUBSECTION. 31 B. EACH MONTH EACH CITY AND TOWN SHALL REPORT TO, AND IN A FORM 32 PRESCRIBED BY, THE DEPARTMENT: 33 1. THE VALUE OF BUILDING PERMITS ISSUED BY THE CITY OR TOWN DURING 34 THE PRECEDING MONTH. 35 2. THE VALUE OF BUILDING PERMITS CANCELED BY THE CITY OR TOWN 36 DURING THE PRECEDING MONTH. 37 C. EACH MONTH THE DEPARTMENT SHALL: 38 1. COMPILE THE NET VALUE OF THE BUILDING PERMITS FOR EACH CITY AND 39 TOWN, AVERAGED OVER THE PRECEDING THIRTY-SIX MONTHS. 40 2. ALLOCATE AND PAY THE MONIES IN THE REVENUE SHARING POOL AMONG 41 THE CITIES AND TOWNS IN PROPORTION TO EACH CITY'S AND TOWN'S 42 THIRTY-SIX-MONTH AVERAGE NET VALUE OF BUILDING PERMITS. 43 HB 2521 - 78 - Sec. 21. Section 42-6004, Arizona Revised Statutes, is amended to 1 read: 2 42-6004. Exemption from municipal tax; definitions 3 A. A city, town or special taxing district shall not levy a 4 transaction privilege, sales, use or other similar tax on: 5 1. Exhibition events in this state sponsored, conducted or operated 6 by a nonprofit organization that is exempt from taxation under section 7 501(c)(3), 501(c)(4) or 501(c)(6) of the internal revenue code if the 8 organization is associated with a major league baseball team or a national 9 touring professional golfing association and no part of the organization's 10 net earnings inures to the benefit of any private shareholder or 11 individual. 12 2. Interstate telecommunications services, which include that 13 portion of telecommunications services, such as subscriber line service, 14 allocable by federal law to interstate telecommunications service. 15 3. Sales of warranty or service contracts. 16 4. Sales of motor vehicles to nonresidents of this state for use 17 outside this state if the motor vehicle dealer ships or delivers the motor 18 vehicle to a destination outside this state. 19 5. Interest on finance contracts. 20 6. Dealer documentation fees on the sales of motor vehicles. 21 7. Sales of food or other items purchased with United States 22 department of agriculture food stamp coupons issued under the food stamp 23 act of 1977 (P.L. 95-113; 91 Stat. 958) or food instruments issued under 24 section 17 of the child nutrition act (P.L. 95-627; 92 Stat. 3603; 25 P.L. 99-661, section 4302; 42 United States Code section 1786) but may 26 impose such a tax on other sales of food. If a city, town or special 27 taxing district exempts sales of food from its tax or imposes a different 28 transaction privilege rate on the gross proceeds of sales or gross income 29 from sales of food and nonfood items, it shall use the definition of food 30 prescribed by rule adopted by the department pursuant to section 42-5106. 31 8. Orthodontic devices dispensed by a dental professional who is 32 licensed under title 32, chapter 11 to a patient as part of the practice 33 of dentistry. 34 9. Sales of internet access services to the person's subscribers 35 and customers. For the purposes of this paragraph: 36 (a) "Internet" means the computer and telecommunications facilities 37 that comprise the interconnected worldwide network of networks that employ 38 the transmission control protocol or internet protocol, or any predecessor 39 or successor protocol, to communicate information of all kinds by wire or 40 radio. 41 (b) "Internet access" means a service that enables users to access 42 content, information, electronic mail or other services over the internet. 43 Internet access does not include telecommunication services provided by a 44 common carrier. 45 HB 2521 - 79 - 10. The gross proceeds of sales or gross income retained by the 1 Arizona exposition and state fair board from ride ticket sales at the 2 annual Arizona state fair. 3 11. Leasing real property between affiliated companies, businesses, 4 persons or reciprocal insurers. For the purposes of this paragraph: 5 (a) "Affiliated companies, businesses, persons or reciprocal 6 insurers" means the lessor holds a controlling interest in the lessee, the 7 lessee holds a controlling interest in the lessor, affiliated persons hold 8 a controlling interest in both the lessor and the lessee, or an unrelated 9 person holds a controlling interest in both the lessor and lessee. 10 (b) "Affiliated persons" means members of the individual's family 11 or persons who have ownership or control of a business entity. 12 (c) "Controlling interest" means direct or indirect ownership of at 13 least eighty percent of the voting shares of a corporation or of the 14 interests in a company, business or person other than a corporation. 15 (d) "Members of the individual's family" means the individual's 16 spouse and brothers and sisters, whether by whole or half blood, including 17 adopted persons, ancestors and lineal descendants. 18 (e) "Reciprocal insurer" has the same meaning prescribed in section 19 20-762. 20 12. The gross proceeds of sales or gross income derived from a 21 contract for the installation, assembly, repair or maintenance of 22 machinery, equipment or other tangible personal property that is described 23 in section 42-5061, subsection B and that has independent functional 24 utility, pursuant to the following provisions: 25 (a) The deduction provided in this paragraph includes the gross 26 proceeds of sales or gross income derived from all of the following: 27 (i) Any activity performed on machinery, equipment or other 28 tangible personal property with independent functional utility. 29 (ii) Any activity performed on any tangible personal property 30 relating to machinery, equipment or other tangible personal property with 31 independent functional utility in furtherance of any of the purposes 32 provided for under subdivision (d) of this paragraph. 33 (iii) Any activity that is related to the activities described in 34 items (i) and (ii) of this subdivision, including inspecting the 35 installation of or testing the machinery, equipment or other tangible 36 personal property. 37 (b) The deduction provided in this paragraph does not include gross 38 proceeds of sales or gross income from the portion of any contracting 39 activity that consists of the development of, or modification to, real 40 property in order to facilitate the installation, assembly, repair, 41 maintenance or removal of machinery, equipment or other tangible personal 42 property described in section 42-5061, subsection B. 43 HB 2521 - 80 - (c) The deduction provided in this paragraph shall be determined 1 without regard to the size or useful life of the machinery, equipment or 2 other tangible personal property. 3 (d) For the purposes of this paragraph, "independent functional 4 utility" means that the machinery, equipment or other tangible personal 5 property can independently perform its function without attachment to real 6 property, other than attachment for any of the following purposes: 7 (i) Assembling the machinery, equipment or other tangible personal 8 property. 9 (ii) Connecting items of machinery, equipment or other tangible 10 personal property to each other. 11 (iii) Connecting the machinery, equipment or other tangible 12 personal property, whether as an individual item or as a system of items, 13 to water, power, gas, communication or other services. 14 (iv) Stabilizing or protecting the machinery, equipment or other 15 tangible personal property during operation by bolting, burying or 16 performing other dissimilar nonpermanent connections to either real 17 property or real property improvements. 18 13. The leasing or renting of certified ignition interlock devices 19 installed pursuant to the requirements prescribed by section 28-1461. For 20 the purposes of this paragraph, "certified ignition interlock device" has 21 the same meaning prescribed in section 28-1301. 22 14. Computer data center equipment sold to the owner, operator or 23 qualified colocation tenant of a computer data center that is certified by 24 the Arizona commerce authority under section 41-1519 or an authorized 25 agent of the owner, operator or qualified colocation tenant during the 26 qualification period for use in the qualified computer data center. For 27 the purposes of this paragraph, "computer data center", "computer data 28 center equipment", "qualification period" and "qualified colocation 29 tenant" have the same meanings prescribed in section 41-1519. 30 15. The gross proceeds of sales or gross income derived from a 31 contract with the owner of real property or improvements to real property 32 for the maintenance, repair, replacement or alteration of existing 33 property, except as specified in this paragraph. The gross proceeds of 34 sales or gross income derived from a de minimis amount of modification 35 activity does not subject the contract or any part of the contract to tax. 36 For the purposes of this paragraph: 37 (a) Each contract is independent of another contract, except that 38 any change order that directly relates to the scope of work of the 39 original contract shall be treated the same as the original contract under 40 this paragraph, regardless of the amount of modification activities 41 included in the change order. If a change order does not directly relate 42 to the scope of work of the original contract, the change order shall be 43 treated as a new contract, with the tax treatment of any subsequent change 44 HB 2521 - 81 - order to follow the tax treatment of the contract to which the scope of 1 work of the subsequent change order directly relates. 2 (b) Any term not defined in this paragraph that is defined in 3 section 42-5075 has the same meaning prescribed in section 42-5075. 4 (c) This paragraph does not apply to a contract that primarily 5 involves surface or subsurface improvements to land and that is subject to 6 title 28, chapter 19, 20 or 22 or title 34, chapter 2 or 6 even if the 7 contract also includes vertical improvements. If a city or town imposes a 8 tax on contracts that are subject to procurement processes under those 9 provisions, the city or town shall include in the request for proposals a 10 notice to bidders when those projects are subject to the tax. This 11 subdivision does not apply to contracts with: 12 (i) Community facilities districts, fire districts, county 13 television improvement districts, community park maintenance districts, 14 cotton pest control districts, hospital districts, pest abatement 15 districts, health service districts, agricultural improvement districts, 16 county free library districts, county jail districts, county stadium 17 districts, special health care districts, public health services 18 districts, theme park districts, regional attraction districts or 19 revitalization districts. 20 (ii) Any special taxing district not specified in item (i) of this 21 subdivision if the district does not substantially engage in the 22 modification, maintenance, repair, replacement or alteration of surface or 23 subsurface improvements to land. 24 16. 15. Monitoring services relating to an alarm system as defined 25 in section 32-101. 26 17. 16. Tangible personal property, job printing or publications 27 sold to or purchased by, or tangible personal property leased, rented or 28 licensed for use to or by, a qualifying health sciences educational 29 institution as defined in section 42-5001. 30 18. 17. The transfer of title or possession of coal back and forth 31 between an owner or operator of a power plant and a person who is 32 responsible for refining coal if both of the following apply: 33 (a) The transfer of title or possession of the coal is for the 34 purpose of refining the coal. 35 (b) The title or possession of the coal is transferred back to the 36 owner or operator of the power plant after completion of the coal refining 37 process. For the purposes of this subdivision, "coal refining process" 38 means the application of a coal additive system that aids the reduction of 39 power plant emissions during the combustion of coal and the treatment of 40 flue gas. 41 19. 18. The gross proceeds of sales or gross income from sales of 42 low or reduced cost articles of food or drink to eligible elderly or 43 homeless persons or persons with a disability by a business subject to tax 44 under section 42-5074 that contracts with the department of economic 45 HB 2521 - 82 - security and that is approved by the food and nutrition service of the 1 United States department of agriculture pursuant to the supplemental 2 nutrition assistance program established by the food and nutrition act of 3 2008 (P.L. 110-246; 122 Stat. 1651; 7 United States Code sections 2011 4 through 2036a), if the purchases are made with the benefits issued 5 pursuant to the supplemental nutrition assistance program. 6 20. Tangible personal property incorporated or fabricated into a 7 project described in paragraph 15 of this subsection, that is located 8 within the exterior boundaries of an Indian reservation for which the 9 owner, as defined in section 42-5075, of the project is an Indian tribe or 10 an affiliated Indian. For the purposes of this paragraph: 11 (a) "Affiliated Indian" means an individual native American Indian 12 who is duly registered on the tribal rolls of the Indian tribe for whose 13 benefit the Indian reservation was established. 14 (b) "Indian reservation" means all lands that are within the limits 15 of areas set aside by the United States for the exclusive use and 16 occupancy of an Indian tribe by treaty, law or executive order and that 17 are recognized as Indian reservations by the United States department of 18 the interior. 19 (c) "Indian tribe" means any organized nation, tribe, band or 20 community that is recognized as an Indian tribe by the United States 21 department of the interior and includes any entity formed under the laws 22 of that Indian tribe. 23 21. 19. The charges for the leasing or renting of space to make 24 attachments to utility poles as follows: 25 (a) By a person that is engaged in the business of providing or 26 furnishing electrical services or telecommunication services or that is a 27 cable operator. 28 (b) To a person that is engaged in the business of providing or 29 furnishing electrical services or telecommunication services or that is a 30 cable operator. 31 22. 20. Until March 1, 2017, the gross proceeds of sales or gross 32 income derived from entry fees paid by participants for events that 33 consist of a run, walk, swim or bicycle ride or a similar event, or any 34 combination of these events. 35 23. 21. The gross proceeds of sales or gross income derived from 36 entry fees paid by participants for events that are operated or conducted 37 by nonprofit organizations that are exempt from taxation under section 38 501(c)(3) of the internal revenue code and of which no part of the 39 organization's net earnings inures to the benefit of any private 40 shareholder or individual, if the event consists of a run, walk, swim or 41 bicycle ride or a similar event, or any combination of these events. 42 B. A city, town or other taxing jurisdiction shall not levy a 43 transaction privilege, sales, use, franchise or other similar tax or fee, 44 HB 2521 - 83 - however denominated, on natural gas or liquefied petroleum gas used to 1 propel a motor vehicle. 2 C. A city, town or other taxing jurisdiction shall not levy a 3 transaction privilege, sales, gross receipts, use, franchise or other 4 similar tax or fee, however denominated, on gross proceeds of sales or 5 gross income derived from any of the following: 6 1. A motor carrier's use on the public highways in this state if 7 the motor carrier is subject to a fee prescribed in title 28, chapter 16, 8 article 4. 9 2. Leasing, renting or licensing a motor vehicle subject to and on 10 which the fee has been paid under title 28, chapter 16, article 4. 11 3. The sale of a motor vehicle and any repair and replacement parts 12 and tangible personal property becoming a part of such motor vehicle to a 13 motor carrier who is subject to a fee prescribed in title 28, chapter 16, 14 article 4 and who is engaged in the business of leasing, renting or 15 licensing such property. 16 4. Incarcerating or detaining in a privately operated prison, jail 17 or detention facility prisoners who are under the jurisdiction of the 18 United States, this state or any other state or a political subdivision of 19 this state or of any other state. 20 5. Transporting for hire persons, freight or property by light 21 motor vehicles subject to a fee under title 28, chapter 15, article 4. 22 6. Any amount attributable to development fees that are incurred in 23 relation to the construction, development or improvement of real property 24 and paid by the taxpayer as defined in the model city tax code or by a 25 contractor providing services to the taxpayer. For the purposes of this 26 paragraph: 27 (a) The attributable amount shall not exceed the value of the 28 development fees actually imposed. 29 (b) The attributable amount is equal to the total amount of 30 development fees paid by the taxpayer or by a contractor providing 31 services to the taxpayer and the total development fees credited in 32 exchange for the construction of, contribution to or dedication of real 33 property for providing public infrastructure, public safety or other 34 public services necessary to the development. The real property must be 35 the subject of the development fees. 36 (c) "Development fees" means fees imposed to offset capital costs 37 of providing public infrastructure, public safety or other public services 38 to a development and authorized pursuant to section 9-463.05, section 39 11-1102 or title 48 regardless of the jurisdiction to which the fees are 40 paid. 41 6. SALES OF TANGIBLE PERSONAL PROPERTY TO A PERSON THAT IS SUBJECT 42 TO TAX BY REASON OF BEING ENGAGED IN BUSINESS CLASSIFIED UNDER THE 43 HIGHWAY, STREET AND BRIDGE CONSTRUCTION CLASSIFICATION UNDER SECTION 44 42-5075, OR TO A SUBCONTRACTOR WORKING UNDER THE CONTROL OF A HIGHWAY, 45 HB 2521 - 84 - STREET OR BRIDGE CONTRACTOR THAT IS SUBJECT TO TAX UNDER SECTION 42-5075, 1 IF THE PROPERTY SOLD IS TO BE INCORPORATED BY THE PERSON INTO A HIGHWAY, 2 STREET OR BRIDGE. 3 7. Any amount attributable to fees collected by transportation 4 network companies issued a permit pursuant to section 28-9552. 5 8. Transporting for hire persons by transportation network company 6 drivers on transactions involving transportation network services as 7 defined in section 28-9551. 8 9. Transporting for hire persons by vehicle for hire companies that 9 are issued permits pursuant to section 28-9503. 10 10. Transporting for hire persons by vehicle for hire drivers on 11 transactions involving vehicle for hire services as defined in section 12 28-9501. 13 D. A city, town or other taxing jurisdiction shall not levy a 14 transaction privilege, sales, use, franchise or other similar tax or fee, 15 however denominated, in excess of one-tenth of one percent of the value of 16 the entire product mined, smelted, extracted, refined, produced or 17 prepared for sale, profit or commercial use, on persons engaged in the 18 business of mineral processing, except to the extent that the tax is 19 computed on the gross proceeds or gross income from sales at retail. 20 E. A CITY, TOWN OR OTHER TAXING JURISDICTION SHALL NOT LEVY A 21 TRANSACTION PRIVILEGE, SALES, USE, FRANCHISE OR OTHER SIMILAR TAX OR FEE, 22 HOWEVER DENOMINATED, ON THE GROSS PROCEEDS OR GROSS INCOME DERIVED FROM 23 THE BUSINESS OF A PERSON THAT IS SUBJECT TO TAX BY REASON OF BEING ENGAGED 24 IN BUSINESS CLASSIFIED UNDER THE HIGHWAY, STREET AND BRIDGE CONSTRUCTION 25 CLASSIFICATION UNDER SECTION 42-5075, OR TO A SUBCONTRACTOR WORKING UNDER 26 THE CONTROL OF A HIGHWAY, STREET OR BRIDGE CONTRACTOR THAT IS SUBJECT TO 27 TAX UNDER SECTION 42-5075. IF A CITY OR TOWN IMPOSES A TAX ON CONTRACTS 28 THAT ARE SUBJECT TO PROCUREMENT PROCESSES UNDER TITLE 28, CHAPTER 19, 20 29 OR 22 OR TITLE 34, CHAPTER 2 OR 6, THE CITY OR TOWN SHALL INCLUDE IN THE 30 REQUEST FOR PROPOSALS A NOTICE TO BIDDERS WHEN THOSE PROJECTS ARE SUBJECT 31 TO THE TAX. 32 E. F. In computing the tax base, any city, town or other taxing 33 jurisdiction shall not include in the gross proceeds of sales or gross 34 income: 35 1. A manufacturer's cash rebate on the sales price of a motor 36 vehicle if the buyer assigns the buyer's right in the rebate to the 37 retailer. 38 2. The waste tire disposal fee imposed pursuant to section 44-1302. 39 F. G. A city or town shall not levy a use tax on the storage, use 40 or consumption of tangible personal property in the city or town by a 41 school district or charter school. 42 G. H. For the purposes of this section: 43 1. "Cable operator" has the same meaning prescribed in section 44 9-505. 45 HB 2521 - 85 - 2. "Electrical services" means transmitting or distributing 1 electricity, electric lights, current or power over lines, wires or 2 cables. 3 3. "Telecommunication services" means transmitting or relaying 4 sound, visual image, data, information, images or material over lines, 5 wires or cables by radio signal, light beam, telephone, telegraph or other 6 electromagnetic means. 7 4. "Utility pole" means any wooden, metal or other pole used for 8 utility purposes and the pole's appurtenances that are attached or 9 authorized for attachment by the person controlling the pole. 10 Sec. 22. Section 42-6102, Arizona Revised Statutes, is amended to 11 read: 12 42-6102. Administration; exception 13 A. Unless the context otherwise requires, chapter 5, article 1 of 14 this title governs the administration of the taxes imposed by this 15 article, except that: 16 1. A separate license is not required for the taxes imposed by this 17 article, and the taxes due under this article shall be included, reported 18 and paid with the transaction privilege tax. 19 2. A separate bond is not required of employees of the department 20 in administering this article. 21 3. The taxes imposed by this article may be included without 22 segregation in any notice and lien filed for unpaid transaction privilege 23 taxes. 24 B. The taxes imposed pursuant to this article do not apply to the 25 gross proceeds of sales or gross income derived pursuant to contracts 26 entered into before the date of the election to authorize the tax by prime 27 contractors and owner builders HIGHWAY, STREET AND BRIDGE CONSTRUCTION 28 CONTRACTORS who are classified under sections SECTION 42-5075 and 42-5076 29 unless the contract contains a provision which THAT entitles the 30 contractor to recover the amount of the tax from a purchaser. In order to 31 qualify for this exemption, the contractor shall provide sufficient 32 documentation, in a manner and form prescribed by the department, to 33 verify that a contract was entered into before the date of the election to 34 authorize the tax. 35 Sec. 23. Subject to the requirements of article IV, part 1, section 36 1, Constitution of Arizona, section 43-1072.01, Arizona Revised Statutes, 37 is amended to read: 38 43-1072.01. Credit for increased excise taxes paid 39 A. Subject to the conditions prescribed by this section and if 40 approved by the qualified electors voting at a statewide general election, 41 for taxable years beginning from and after December 31, 2000 a credit is 42 allowed against the taxes imposed by this chapter for a taxable year for a 43 taxpayer who is not claimed as a dependent by any other taxpayer and whose 44 federal adjusted gross income is: 45 HB 2521 - 86 - 1. Twenty-five thousand dollars or less for a married couple or a 1 single person who is a head of a household. 2 2. Twelve thousand five hundred dollars or less for a single person 3 or a married person filing separately. 4 B. The credit is considered to be in mitigation of increased tax 5 rates pursuant to section 42-5010, subsection G and section 42-5155, 6 subsection D E. 7 C. The amount of the credit shall not exceed twenty-five dollars 8 for each person who is a resident of this state and for whom a personal or 9 dependent exemption is allowed with respect to the taxpayer pursuant to 10 section 43-1023, subsection B, paragraph 1 and section 43-1043, but not 11 more than one hundred dollars for all persons in the taxpayer's household, 12 as defined in section 43-1072. 13 D. If the allowable amount of the credit exceeds the income taxes 14 otherwise due on the claimant's income, the amount of the claim not used 15 as an offset against income taxes shall be paid in the same manner as a 16 refund granted under section 42-1118. Refunds made pursuant to this 17 subsection are subject to setoff under section 42-1122. 18 E. The department shall make available suitable forms with 19 instructions for claimants. Claimants who certify on the prescribed form 20 that they have no income tax liability for the taxable year and who do not 21 meet the filing requirements of section 43-301 are not required to file an 22 individual income tax return. The claim shall be in a form prescribed by 23 the department. 24 F. For taxable years beginning from and after December 31, 2002, a 25 person who is sentenced for at least sixty days of the taxable year to the 26 custody of the federal bureau of prisons, the state department of 27 corrections or a county jail is not eligible to claim a credit pursuant to 28 this section. 29 G. For taxable years beginning from and after December 31, 2014, 30 any tax return or form prescribed by subsection E of this section must 31 have: 32 1. A social security number that is valid for employment for the 33 claimant. 34 2. Either a valid social security number or an individual taxpayer 35 identification number issued by the internal revenue service for the 36 claimant's spouse and any qualifying children of the claimant. 37 Sec. 24. Section 44-1263, Arizona Revised Statutes, is amended to 38 read: 39 44-1263. Inability to conform motor vehicle to express 40 warranty; replacement of vehicle or refund of 41 monies; affirmative defenses; tax refund 42 A. If the manufacturer, its agents or its authorized dealers are 43 unable to conform the motor vehicle to any applicable express warranty by 44 repairing or correcting any defect or condition which THAT substantially 45 HB 2521 - 87 - impairs the use and value of the motor vehicle to the consumer after a 1 reasonable number of attempts, the manufacturer shall replace the motor 2 vehicle with a new motor vehicle or accept return of the motor vehicle 3 from the consumer and refund to the consumer the full purchase price, 4 including all collateral charges, less a reasonable allowance for the 5 consumer's use of the vehicle. The manufacturer shall make refunds to the 6 consumer and lienholder, if any, as their interests appear. A reasonable 7 allowance for use is that amount directly attributable to use by the 8 consumer before his first written report of the nonconformity to the 9 manufacturer, agent or dealer and during any subsequent period when the 10 vehicle is not out of service by reason of repair. 11 B. It is an affirmative defense to any claim under this article 12 that either: 13 1. An alleged nonconformity does not substantially impair the use 14 and market value of the motor vehicle. 15 2. A nonconformity is the result of abuse, neglect or unauthorized 16 modifications or alterations of the motor vehicle. 17 C. In the case of taxes paid pursuant to title 42, chapter 5, if 18 the manufacturer: 19 1. Accepts return of a motor vehicle from a consumer without 20 replacing the motor vehicle, the manufacturer shall refund the amount of 21 tax attributed to the sale of the vehicle to that consumer. 22 2. Replaces a motor vehicle with a new motor vehicle of lesser 23 value, the manufacturer shall refund the difference between the original 24 amount of tax attributed to the sale of that vehicle and the amount of tax 25 attributed to the sale of the replacement vehicle, excluding the value of 26 the motor vehicle being replaced. 27 3. Replaces a motor vehicle with a new motor vehicle of greater 28 value, the manufacturer shall calculate the gross proceeds of sales 29 pursuant to section 42-5001, paragraph 6 8. 30 D. Pursuant to section 42-1118, subsection F, the manufacturer may 31 apply to the department of revenue for a refund for the amount of tax that 32 the manufacturer properly refunds to the consumer. 33 Sec. 25. Section 49-290, Arizona Revised Statutes, is amended to 34 read: 35 49-290. Exemption from permit requirements; definition 36 A. Notwithstanding any other statute, a person who performs a 37 remedial action or a portion of a remedial action that has been approved 38 by the department if that action or portion is conducted in compliance 39 with this article is not subject to any requirement to obtain any permit 40 or approval that may otherwise be required by the department. 41 B. Except as prescribed in subsection D of this section, a person 42 who conducts a portion of a remedial action, where that portion is 43 entirely on site and is conducted in compliance with this article, may be 44 exempted from a requirement to obtain any other state or local permit or 45 HB 2521 - 88 - approval, other than any requirement of title 45, at the written request 1 of the person conducting the remedial action. The written request shall 2 identify the specific permit to be exempted and the reasons the exemption 3 is requested. The permit may be exempted if the director finds both of 4 the following: 5 1. The requirement does not arise out of any permit or regulatory 6 program that is required pursuant to the laws of the United States. 7 2. The requirement presents a substantial impediment to effective 8 performance of the remedial action selected by the department. 9 C. The director may waive any regulatory requirement adopted 10 pursuant to this title with respect to a site or portion of a site as part 11 of a record of decision adopted pursuant to section 49-287.04 for that 12 site or portion of a site if the regulatory requirement conflicts with the 13 implementation of the selected remedy, provided that the waiver does not 14 result in adverse impacts to public health or the environment. No waiver 15 may be granted under this subsection if it is prohibited by federal law or 16 if the waiver would jeopardize the continued delegation to the state of 17 authority to implement a federal environmental program. 18 D. Discharge of wastewater to off-site publicly owned treatment 19 works and sewer systems does not constitute an activity conducted entirely 20 on site for purposes of subsection B of this section. 21 E. The director shall give written notice of any request for 22 exemption made pursuant to subsection B of this section to the remedial 23 action coordinator designated pursuant to subsection G of this section by 24 the governmental entity whose permit requirements are the subject of the 25 request. Before making any finding pursuant to subsection B of this 26 section, the director or the director's designee shall meet and confer 27 with the remedial action coordinator and the person conducting the 28 remedial action to identify alternatives to exemption. 29 F. Any finding made by the director pursuant to subsection B of 30 this section shall be in writing. The governmental entity whose permit 31 requirement is preempted as a result of such finding is not liable for 32 property damage, personal injury damage or violations of state or local 33 law resulting from the exemption. The director shall notify the affected 34 governmental entity of any finding made pursuant to subsection B of this 35 section. A finding of the director made pursuant to subsection B of this 36 section is a final administrative decision as defined in section 41-1092 37 and is subject to judicial review pursuant to title 12, chapter 7, 38 article 6. 39 G. Each city, town and county shall designate a remedial action 40 coordinator who shall have responsibility for monitoring and facilitating 41 any remedial actions conducted within its jurisdiction. The designated 42 remedial action coordinator shall: 43 HB 2521 - 89 - 1. Regularly consult, as needed, with the department and the person 1 conducting a remedial action throughout the duration of the remedial 2 action. 3 2. Expedite the processing and issuance of permits, approvals or 4 other authorizations required by the governmental entity represented by 5 the remedial action coordinator, to facilitate the prompt conduct of a 6 remedial action. 7 3. Provide information to the department and the person conducting 8 the remedial action regarding applicable requirements of the governmental 9 entity represented by the remedial action coordinator and the potential 10 for waiver of such requirements. 11 H. In order to encourage remediation activities under this article 12 and to conserve the fund, neither this state nor any county that imposes 13 an excise or similar tax that is levied at a rate applied as a percentage 14 of the rates on each business class subject to the tax imposed by title 15 42, chapter 5, article 1 may impose a tax on the sale or purchase of 16 tangible personal property incorporated or fabricated into any real 17 property, structure, project, development or improvement under a contract 18 specified in section 42-5075, subsection B, paragraph 6. 19 I. H. For purposes of this section, "on site" means the areal 20 extent of contamination and all suitable areas in close proximity to the 21 contamination that are reasonably necessary for implementation of the 22 remedial action. 23 Sec. 26. Exemption from rulemaking 24 For the purposes of this act, the department of revenue is exempt 25 from the rulemaking requirements of title 41, chapter 6, Arizona Revised 26 Statutes, through December 31, 2017. 27 Sec. 27. Transition; application of taxes to preexisting and 28 subsequent contracts 29 A. This act does not apply to or affect the tax and other 30 contractual liabilities with respect to contracts that were entered into 31 before January 1, 2018 by a person who engaged in business under the prime 32 contracting classification pursuant to section 42-5075, Arizona Revised 33 Statutes, before that date. The tax imposed by title 42, chapter 5, 34 article 1, Arizona Revised Statutes, is levied and shall be collected with 35 respect to those contracts at the same rate applied to the same tax base 36 and subject to the same distribution of revenues, as determined pursuant 37 to sections 42-5010 and 42-5075, Arizona Revised Statutes, as in effect on 38 December 31, 2017. 39 B. From and after December 31, 2017, the sale of tangible personal 40 property to a contractor for incorporation or fabrication, pursuant to a 41 contract entered into before January 1, 2018, into any project that was 42 subject to a deduction under section 42-5075, subsection B, Arizona 43 Revised Statutes, as in effect on December 31, 2017, is not subject to tax 44 under section 42-5061, Arizona Revised Statutes, as amended by this act. 45 HB 2521 - 90 - C. Tangible personal property that was purchased before January 1, 1 2018 by a person who engaged in business under the prime contracting 2 classification, or who performed contracting services within the control 3 of a prime contractor pursuant to section 42-5075, Arizona Revised 4 Statutes, in effect before January 1, 2018, and that was not incorporated 5 into a project for which the contract was entered into before January 1, 6 2018 is subject to use taxation pursuant to section 42-5155, Arizona 7 Revised Statutes, as amended by this act. 8 D. This act applies with respect to any contract entered into by a 9 highway, street or bridge construction contractor, or any contract entered 10 into pursuant to a written bid made by a highway, street or bridge 11 construction contractor, from and after December 31, 2017 as provided by 12 section 42-5075, Arizona Revised Statutes, as added by this act. 13 E. To verify the application of this section to any contract, a 14 contractor must maintain, and provide to the department of revenue on 15 request, sufficient documentation of the date of the contract or the 16 written bid. 17 Sec. 28. Effective date; compilation of building permit data 18 A. Except as provided in section 29 of this act and except for 19 section 42-6001.01, Arizona Revised Statutes, as added by this act, this 20 act is effective from and after December 31, 2017. 21 B. In preparation for allocation and payments of monies from the 22 municipal revenue sharing pool pursuant to section 42-6001.01, Arizona 23 Revised Statutes, as added by this act, before January 1, 2018 the 24 department of revenue shall compile and compute the net value of building 25 permits for each city and town for each month from January 2015 through 26 December 2017. The department shall use these values for the purposes 27 stated in section 42-6001.01, subsection C, Arizona Revised Statutes, as 28 added by this act. 29 Sec. 29. Conditional enactment 30 Sections 42-5009, 42-5061 and 42-5159, Arizona Revised Statutes, as 31 amended by this act, become effective from and after December 31, 2017 32 only if Senate Bill 1010, fifty-third legislature, first regular session, 33 relating to multiple, defective and conflicting legislative dispositions 34 of statutory text, becomes law. 35 Sec. 30. Requirements for enactment; three-fourths vote 36 Pursuant to article IV, part 1, section 1, Constitution of Arizona, 37 sections 42-5029, 42-5155 and 43-1072.01, Arizona Revised Statutes, as 38 amended by this act, are effective only on the affirmative vote of at 39 least three-fourths of the members of each house of the legislature. 40 Issue 4 - February 3, 2017 Legislative Overview The week has been a busy one. This is the time of the session when League staff is spending much of their day in committee or in one stakeholder meeting or another. It is also when we are making many requests for information from all of you. Our ability to represent you well is largely based on the feedback we get from you about the impact these bills will have on your communities. We appreciate your timely responses. Today is the 26th day of the legislative session. The House deadline for introducing legislation is next Friday, February 10 at 5 p.m. The last day for committees to hear bills in the chamber of origin is Friday, February 17. The following are some of the bills of note: Small Cell League staff is tracking two bills working through the process at the Arizona State Legislature relating to small cell deployment. Small cells are low-powered wireless base stations that typically provide coverage for targeted indoor or localized outdoor areas ranging in size from homes and offices to stadiums, shopping malls, hospitals and metropolitan outdoor spaces. The installations of this equipment in city and town rights-of-way help wireless carriers add capacity to their networks to provide better access to cell phone coverage and high-speed wireless data services in areas that are not being served by traditional cell sites. SB 1214 local governments; smallcell equipment permitting, sponsored by Senator Karen Fann R-Prescott, LD 1, allows for streamlined deployment while maintaining the ability of cities and towns to manage rights-of-way within their jurisdiction. SB 1214 allows cable operators such as Cox Communications to install, operate and maintain small cell equipment in rights-of- way. This equipment will be used by wireless providers such as Verizon, AT&T and T-Mobile. League staff worked with Cox to address the critical needs for our communities, including maintaining the ability of cities and towns to exercise police and land use powers in the right-of-way and require stealth and concealment elements for small cell equipment. The League is supporting SB 1214 and the bill is expected to be heard in the Senate Government Committee next week. The League is also tracking HB 2365 wireless facilities; collocation; rights of way. Representative Jeff Weninger R-Chandler, LD 17, is sponsoring this bill on behalf of four major wireless providers: Verizon; AT&T; T-Mobile and Sprint. The League has several concerns with this bill including provisions that 1) allow all locations in the right-of-way for small cell deployment with little to no coordination with the city or town; 2) limit the ability of cities and towns to impose reasonable restrictions on appearance and size of small cell equipment; 3) impair existing small cells agreements negotiated with wireless providers; and 4) invalidates existing fees for small cell collocations. The League will be neutral on the bill while the wireless industry is currently working to address these concerns. HB 2365 is scheduled for a hearing on Tuesday, February 2, in the House Commerce Committee. Liquor Omnibus HB 2337 liquor omnibus, sponsored by Representative Jeff Weninger R-Chandler, LD 17, was heard in the House Commerce Committee on Tuesday. The League was invited early on by the liquor stakeholders group to review draft legislation and provide feedback. After receiving input from our members the League requested changes to the bill to address concerns that were raised. Those changes were included in a committee amendment that was adopted unanimously and the League took a neutral position on the bill. It passed out of committee on a unanimous vote and now moves on to the Rules Committee. Guns in Public Buildings SB 1243 misconduct involving weapons; public places, sponsored by Senator John Kavanagh R-Fountain Hills, LD 23, was heard on Wednesday in Senate Government. The bill requires all public facilities, including publicly sponsored or permitted events, to allow Concealed Carry Weapons permit (CCW) holders to carry firearms inside if the facility or event does not have metal detectors and armed guards at each entrance. The League testified in opposition to the bill because it would preempt local authority on this issue. The bill also imposes an unfunded mandate on communities that wish to continue prohibiting firearms in their facilities. Municipalities that cannot afford to install and maintain the mandated security would not have a choice but to allow guns in their facilities. Furthermore, the bill does not specify that any weapon that the person carries be concealed, only that CCW permit holders be granted access. As such it could potentially require local governments to allow open-carry in their buildings. Since the bill exempts a number of public facilities, the League requested that cities and towns be exempted as well on the grounds that we share the same concerns and would like the same local authority to make decisions about public safety in our buildings. The bill passed out of committee 4-3 and moves on to the Rules Committee. Transportation Liability The Arizona Department of Transportation approached Senator Judy Burges, R-Sun City West, LD 22, about sponsoring SB 1025 public entities; absolute immunity; defenses with the impetus of providing legal protection for the state with regard to road engineering lawsuits. Under current law public entities are not liable for the acts or omissions of their employees related to the establishment, implementation, and enforcement of minimum safety standards for light rail systems. SB 1025 would extend that immunity to all other transportation facilities (highways, roads, bridges, streets, etc.) but would still allow a public entity or employee to be liable where there is gross negligence in providing reasonably adequate warning of unreasonably dangerous hazards. The bill's protections would cover local governments as well. It was heard in Senate Government on Thursday and the League signed in support of the bill. It passed out of committee on a 5-2 vote and now moves to the Rules Committee. Economic Development HB 2177 municipalities; development; reimbursement zones (Doug Coleman R-Apache Junction, LD 16) This League resolution was heard in the House Government Committee on Thursday. The bill allows cities and towns to establish an economic development reimbursement authority (EDRA) to stimulate new development by using the increase in property tax collection attributable to the project to reimburse developers for eligible costs related to infrastructure and other improvements. Reimbursement is only authorized if certain conditions are met and an oversight committee made up of city, county and school district representatives approves the costs. The League signed in support of the bill and it passed with a vote of 7-1. Forest Health SB 1202 forestry and fire management; conformity (Gail Griffin R-Hereford, LD 14) This bill was heard on Monday in the Senate Natural Resources, Environment and Water Committee. The bill makes conforming changes to statute consistent with legislation passed last session that established the Department of Forestry and Fire Management and modified the duties of the state forester. Among other changes, the bill removes statute limiting the state forester to only prevent and suppress wildfires on lands covered by cooperative fire agreements. The League signed in support of the bill and it passed with no opposition. Fire Code Preemption SB 1329 fire flow requirements; rural applicability (Sylvia Allen R-Snowflake, LD 6) This bill was heard in the Senate Government Committee on Wednesday. The bill preempts state, municipal, county and fire district fire codes in counties other than Pima and Maricopa Counties relating to water and fire flow for single-family residential lots and subdivisions with lots that are 1/2 acre or greater if the adjacent water distribution system is not able to provide water and fire flow. The League signed in opposition to the bill and it passed with a vote of 5-2. CALL TO ACTION CALL TO ACTION The Bulletin typically focuses on bills that have had some action during the past week. However, occasionally we need to draw your attention to a piece of legislation that will be heard the following week. HB 2143 public contracts; procurement (Rep. Vince Leach R-Tucson, LD 11) is scheduled for Tuesday in the House Federalism, Property Rights and Public Policy Committee (FPRPP) at 2 p.m. This bill would require all maintenance work on our local streets that is valued above $25,000 be bid out. Currently all maintenance jobs below $216,000 are not required to be bid. Additionally, it specifically cites a SB 1487 lawsuit as the penalty for violating the statute. The chairman of FPRPP is Rep. Bob Thorpe R-Flagstaff, LD 6, we ask that you contact him and urge him to hold the bill. You may also want to contact other members of the committee or the Representatives from your district to explain your concerns about the bill, the impacts it will have on your community and ask them to vote NO. Legislative Bill Monitoring All bills being actively monitored by the League can be found here. Legislative Bulletin is published by the League of Arizona Cities and Towns. Forward your comments or suggestions to league@azleague.org. Issue 5 - February 10, 2017 Legislative Overview The Legislature is about to embark on one of the toughest weeks of session: the last week to hear bills in the chamber of origin. This is the time of session when committee agendas have 10 or more bills for consideration and hearings last for many hours. League staff will be in these committee hearings and in stakeholder meetings to represent the interests of local government. We appreciate all your support and look forward to a successful week. As of today, all deadlines for bill introductions have lapsed. While next week is the last week to hear bills in the chamber of origin, keep in mind the Appropriations Committees in both chambers have an additional week to hear bills from their respective chamber. We will likely see bills strategically reassigned to these committees by House and Senate leadership to keep them moving through the process. League staff will monitor these agendas closely to see if any of the bills impact local government. Small Cell Bills League staff is continuing to monitor and negotiate with the wireless industry on HB 2365 wireless facilities; collocation; rights of way sponsored by Rep. Jeff Weninger R-Chandler, LD 17. The bill was heard in the House Commerce committee on Tuesday where a strike-everything amendment was offered to address some of the concerns expressed by the League. The League signed in neutral on the bill with the understanding the industry will continue to address our concerns. While the strike-everything amendment was a good faith effort to address our concerns, the language of the bill needs to be modified to ensure cities and towns retain police and land use powers over the right-of-way in regard to small cell deployment; the application processes and review timeframes are adjusted to ensure city and town staff are able to take action on applications appropriately; and the insurance and indemnification provisions are revised to guarantee cities and towns are held harmless in the event an incident occurs where the city or town is not at fault; among other concerns. On Wednesday, the Senate Government Committee heard SB 1214 local governments; smallcell equipment permitting sponsored by Senator Karen Fann R-Prescott, LD 1. The bill allows cable operators such as Cox Communications to install, operate and maintain small cell equipment in rights-of-way while maintaining the ability of cities and towns to exercise police and land use powers in the right-of-way and require stealth and concealment elements for small cell equipment. The League signed in support of the bill and it passed with no opposition. Force Account Labor Bill Held HB 2143 public contracts; procurement sponsored by Rep. Vince Leach R-Tucson, LD 11, was scheduled to be heard on Wednesday in the House Federalism, Property Rights and Public Policy Committee but was held by the chairman of the committee Rep. Bob Thorpe R-Flagstaff, LD 6. The bill was proposed by the Arizona Association of General Contractors (AGC). It would have amended state law related to the construction, reconstruction, repair and maintenance of streets and roads by city or town personnel. The change would reduce the threshold amount that determines whether a road project has to be bid out to private contractors from $216,000 to $25,000 and includes a penalty clause that makes a violation of the new law subject to a SB 1487 claim. We appreciate the actions of Rep. Thorpe in helping the League and its members on this issue. League staff, other representatives of municipalities and representatives of county governments met with the Rep. Leach, Rep. Bob Thorpe and the president of the AGC to discuss the potential of finding compromise on the legislation. The League raised strong objections to the bill and urged the sponsor to abandon it for this session. After the meeting, Rep. Bob Thorpe informed us that he and the sponsor agreed not to pursue the legislation this session. Please contact Rep. Thorpe to tell him thank you for holding the bill from consideration. Federal Funds League staff is monitoring HB 2212 federal financial assistance; reports sponsored by Rep. Vince Leach R-Tucson, LD 11. The bill was assigned to the House Appropriations Committee and has been on an agenda for the previous two hearings; however, the committee has not officially taken action. The bill requires political subdivisions of the state, including cities and towns, to compile annually a financial report that contains the aggregate amount of federal funds received in the previous fiscal year, the percentage of the city or town budget that constitutes federal funds and a plan if federal funds are reduced. This report is to be sent to the Arizona Department of Administration and to the chairmen of the Appropriations Committees of the state legislature. An amendment was offered on Wednesday that would exempt certain special taxing districts in Title 5 and Title 48 from the requirements in the bill. The League signed in opposed and the bill was held from consideration. However, the bill has been placed again on an Appropriations Committee agenda for next Wednesday. Presumption Bills Two bills expanding the list of health conditions that are presumed to arise from employment in public safety for the purposes of Workers' Compensation claims were heard in the House Health Committee on Thursday. Current statute lists brain, bladder, rectal or colon cancer, lymphoma, leukemia, adenocarcinoma and mesothelioma of the respiratory tract as conditions that are presumed to be a result of employment as a peace officer or firefighter. HB 2161 adds 12 additional types of cancers to the list of conditions that are presumed to be a result of employment as a firefighter. HB 2410 extends the presumption of compensability to all forms of heart disease for firefighters. The League testified at the hearing to express the concerns of our members. Both bills were voted out of committee 9-0. CALL TO ACTION The Governor's budget proposal contains a provision that would allow the three state universities to keep the TPT revenues they currently pay including the shared portion that goes to local governments. The universities would use these revenues would for bonding as well as general operating expenses and student assistance. Representatives of the Board of Regents made presentations to both the House and Senate Appropriations committees this week and advocated for this proposal. Although it does not represent a significant loss in revenues to cities and towns (approximately $6.5 million statewide), it is a dangerous precedent since it will likely lead other entities (school districts, community colleges, etc.) to seek the same opportunity to recapture their taxes and it violates a core principle of the League by making a change to the shared revenue system formula. The erosion of the tax base, the violation of the shared revenue formula and the continuation of the shift of state responsibility to local governments are all legitimate reasons to oppose this proposal. We know budget discussions have likely started so it will be important to contact your delegation members soon to tell them to reject the taking of local revenue for the university system. The League Executive Committee at its meeting today voted to adopt a resolution in opposition to the proposal providing additional funding to the higher education system at the expense of city and town revenue that is already budgeted to provide basic, daily services to all of our residents statewide. The Committee voted to modify the resolution to state the proposal will trigger concerns about Proposition 108, which would require a two-thirds vote of the Legislature to enact. A formal copy of the resolution will be provided at a later date. Legislative Bill Monitoring All bills being actively monitored by the League can be found here. Legislative Bulletin is published by the League of Arizona Cities and Towns. Forward your comments or suggestions to league@azleague.org.