ARIZONA STATE LEGISLATURE
Forty-ninth Legislature – Second Regular Session
JOINT LEGISLATIVE INCOME TAX CREDIT REVIEW COMMITTEE
Minutes of Interim Meeting
House Hearing Room 3 -- 10:00 a.m.
Chairman Murphy called the meeting to order at 10:08 a.m. and attendance was noted by the secretary.
Members Present
Senator Ed Bunch, Co-Chairman Representative Rick Murphy, Co-Chairman
Senator Ron Gould Representative Jack Brown
Senator Jack Harper Representative Tom Chabin
Senator Richard Miranda Representative Michele Reagan
Representative Steven Yarbrough
Members Absent
Senator Ken Cheuvront
OPEN SESSION – CONSIDERATION OF INCOME TAX CREDITS ON THE 2010 REVIEW SCHEDULE
Hans Olofsson, Chief Economist, Joint Legislative Budget Committee (JLBC), reviewed a handout containing background information on the tax credits to be reviewed, the charge of the Committee, and specifics on the Credit for Contributions to Qualifying Charitable Organizations. He indicated that it is the only tax credit scheduled for a review in 2010 that does not include confidential information, and therefore, can be reviewed in Open Session (Attachment 1). In response to a question, he advised that in 2005 the Legislature increased the credit from $200 to $300 for married couples; in 2006 it was increased to $400. In 2009 when the baseline requirement was removed, the credit amount increased from $11.1 million to $12.9 million.
Senator Harper opined that the
baseline requirement should not have been removed.
Co-Chairman Murphy surmised that it was removed, not to impact the number or
amount of donations, but to make the process simpler to understand as it was
fairly complex. If the Committee wants to do something to offset that, it
should be discussed, but having such a complicated process is not good for
taxpayers.
Senator Harper submitted that charity is an individual responsibility and not a role of government.
Mr. Olofsson completed the review of the handout (Attachment 1).
Senator Harper asked for point of personal privilege to make a comment about a tax credit that is not on the agenda. He expressed the intent to sponsor a bill during the 2011 Session to repeal the public school extracurricular tax credit, which he believes has resulted in more expensive field trips.
THE COMMITTEE RECESSED AT 10:26 A.M. TO RESOLVE ITSELF INTO EXECUTIVE SESSION.
THE COMMITTEE RECONVENED IN OPEN SESSION AT 11:10 A.M. ALL MEMBERS WERE PRESENT EXCEPT SENATOR KEN CHEUVRONT.
PUBLIC TESTIMONY
Greg Patterson, Foundation for Blind Children, introduced Marc Ashton.
Marc Ashton, Chief Executive Officer, Foundation for Blind Children, testified that the Foundation is a recipient of a charitable tax credit. It not only serves the working poor, but also disabled children. The tax credit supplants some of the drastic reductions in funding the Foundation has had from various agencies; however, it is held accountable to the board, donors and the Arizona Department of Revenue, so the money is being used wisely. About $33,000 to $43,000 per year is raised through this process. In response to a query, he advised that his salary is $130,000 per year.
Jeremy Schmidt, Foundation for Blind Children, related that he received services from the Foundation about four years ago when he woke up one morning and could not read his alarm clock. He was also on many other assistance programs. He is now employed, receives no assistance of any kind and pays taxes because of the help he received from the Foundation.
Joyce Lopez-Powell, Vice President,
Community Initiatives, Valley of the Sun United Way, stated that a few
issues arose early in the process about how to be held accountable for these funds,
so the Morrison Institute of Public Policy was asked to conduct a study about
what keeps people whole. The Institute came up with five areas a family needs
to be self-sufficient: food and shelter; job training, education and placement;
transportation; child care; and food.
United Way designed a program for organizations on the list at the Department
of Revenue that qualify for the tax credit on how they will help families in
those five areas. From the matrix instituted, it is known that 48 percent of
families remain in their job after training for more than six months, which
corresponds to federal programs that record every three months. United Way
conducts follow-ups in a year. Also, 26 percent increased their income to an
average of $10.50.
Steve Zabilski, Executive
Director, St. Vincent de Paul, representing self, stated that he is in
favor of continuing the tax credit. For the fiscal year ending June 30, 2010, St. Vincent received $124,000 in donations from 541 individuals. He said he believes the
organization does a good job of utilizing the funds for items like food, rent, clothing,
medical and housing assistance, etc.
St. Vincent is very efficient and has thousands of volunteers. The tax credit
is very important to St. Vincent and other nonprofit organizations. In
response to a query, he advised that his salary is $96,000 per year.
Representative Chabin remarked
that the St. Vincent’s operation in Flagstaff has one full-time employee and
about 50 volunteers. To keep all of the facilities going takes a lot of
organization, so he does not believe Mr. Zabilski’s salary is out of line. Mr.
Zabilski responded that
St. Vincent’s overall cash budget is more than $15 million, including all the
in-kind services that are donated, primarily food, but in fact, he has been
accused of keeping his salary too low.
Michael McDonald, Executive Director, Habitat for Humanity Tucson, stated that Habitat volunteers built about 100 homes last year statewide, half of which were rehab and half were new; they work in distressed and foreclosed areas, which is beneficial to the neighborhoods. The organization has a tradition of obtaining a $3 match for every $1 contributed by working with faith communities, other philanthropists and corporations, so the tax credit leverages additional investment into communities. About 20 to 25 percent of $1 is spent on subcontractors, and many concrete subcontractors, for example, said Habitat helped keep their doors open, so there is benefit to the homeowners who become property taxpaying citizens and the subcontractors and building community. In Habitat Tucson 89 cents of $1 goes to home building and home rehab; his salary is $108,000, which represents less than two percent of total expenses. He encouraged continuation of the tax credit. In response to a question, he related that Habitat pays a state transaction privilege tax on materials when a home is sold at zero percent interest.
Marguerite Harmon, Chief Executive Officer, Catholic Community Services of Southern Arizona, Inc., advised that the organization serves nine southern counties in Arizona. Services range from primary medical and dental care, obstetrical services for women, homes for young women who choose to place or adopt babies, 500,000 seniors are served lunch every day, domestic crisis shelters, transitional homes for families, programs for young people and adults with disabilities, and programs that emphasize the ability for a person to obtain a job, a home and an education. She added that her salary, after 32 years, is $120,000 per year, which is a fraction of the $27 million per year budget.
Senator Harper cited salaries of CEOs of other charitable organizations according to About.com.
DISCUSSION AND RECOMMENDATIONS BY THE COMMITTEE
Senator Harper stated that he has no problem with any of the tax credits after discussing the charitable tax credit with another legislator, but reiterated his intent to attempt to repeal the extracurricular tax credit during the upcoming Session.
Senator Miranda suggested one motion for approval of all of the tax credits.
Representative Chabin remarked that the arguments for the Motion Picture Credits are weak. The National Guard Tax Credit, while seldom used, is a reflection of state value and should be retained. The Tax Credit for Temporary Assistance for Needy Families and Charitable Organizations are worthy and should be retained. The Credits for Water Conservation Systems and Water Conservation System Plumbing Stub Outs are seldom used and the arguments are weak.
Co-Chairman Murphy pointed out that the Motion Picture Tax Credit will be eliminated unless the Committee believes it should be reenacted.
Senator Gould suggested that the items be considered individually rather than collectively to which Co-Chairman Murphy agreed.
Co-Chairman Bunch moved that the Committee recommend the continuation of the Credit for Contribution to Qualifying Charitable Organizations. The motion carried.
Co-Chairman Bunch moved that the Committee recommend the continuation of the Credit for Motion Picture Production Costs. The motion failed.
Co-Chairman Bunch moved that the Committee recommend the continuation of the Motion Picture Infrastructure Projects Tax Credit. The motion failed.
Co-Chairman Bunch moved that the Committee recommend the continuation of the Employing National Guard Members Credit. The motion carried.
Co-Chairman Bunch moved that the Committee recommend the continuation of the Credit for Employment of Temporary Assistance for Needy Families Recipients. The motion carried.
Co-Chairman Bunch moved that the Committee recommend the continuation of the Credit for Water Conservation Systems. The motion failed.
Co-Chairman Bunch moved that the Committee recommend the continuation of the Credit for Water Conservation System Plumbing Stub Outs. The motion failed.
Without objection, the meeting adjourned at 11:40 a.m.
_______________________________
Linda Taylor, Committee Secretary
December 20, 2010
(Original minutes, attachments and audio on file in the Chief Clerk’s Office; video archives available at http://www.azleg.gov)
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JT LEGISLATIVE INCOME TAX
CREDIT REVIEW COMMITTEE
December 14, 2010
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