ARIZONA STATE SENATE
Forty-seventh Legislature, Second Regular Session
FACT SHEET FOR H.B. 2711
tax incentives; biodiesel; ethanol E85
(NOW: property tax classification; biodiesel)
Purpose
Includes real and personal property and improvements used to produce ethanol or biodiesel fuel in the class six property classification.
Background
Essentially 100 percent pure grain alcohol that is unfit to drink, ethanol is produced by fermenting plant sugars. It can be made from corn, potatoes, wood, waste paper, wheat, brewery waste, and many other agricultural products and food wastes. Anything containing sugar, starch, or cellulose can be fermented and distilled into ethanol. More than 90 percent of U.S. ethanol production comes from corn. Pure ethanol is rarely used for transportation; usually it is mixed with gasoline. The most popular blend for light-duty vehicles is known as E85, which is 85 percent ethanol and 15 percent gasoline. Heavy-duty trucks typically use E95 (ethanol blended with five percent unleaded gasoline) and E93 (ethanol blended with five percent methanol and two percent kerosene). For many years, ethanol has also been used as a 10 percent mixture with gasoline in a blend called “gasohol” or E10 to reduce carbon monoxide emissions during winter. Finally, ethanol is often blended in gasoline as an oxygenate to meet clean fuel requirements.
Biodiesel is an alternative fuel, which can be produced from a variety of renewable sources, including soybean oil, canola oil, sunflower oil, cottonseed oil, and animal fats. These sources can be obtained from agricultural feedstocks or by recycling used oil such as cooking grease. The Environmental Protection Agency (EPA) reports that most biodiesel produced in the United States is made from soybean oil due to this feedstock’s abundance. Biodiesel is usable in its pure form, known as “neat biodiesel” or B100. In addition, it is available in various blends with petrodiesel, the most common of which is known as B20 (20 percent biodiesel and 80 percent petrodiesel). It is also used in smaller percentages as a lubricating fuel additive.
According to the EPA, biodiesel is one of the only alternative fuels usable in any conventional diesel engine with little or no modification to the engine or fuel system. More than 40 federal and state fleets are already using biodiesel blends in their existing diesel engines.
Property in Arizona is classified for assessment purposes into nine legal classes, with sub-classifications in many of those classes. The classification is based on the current use of the property by its owner, such as commercial, agricultural, or residential. Each legal class has an assessment ratio, which is specified by statute. The assessment ratio, which currently ranges from 1 percent to 25 percent, is used to calculate the assessed value of a property. Class six properties include noncommercial historic, foreign trade zone, qualifying military reuse zone, qualifying enterprise zone, qualifying environmental technology and qualifying environmental remediation properties. Properties designated class six have a 5 percent assessment ratio.
According to the Joint Legislative Budget Committee fiscal note, H.B. 2711 would not have a fiscal impact relative to the current revenue base as there are no existing biodiesel or ethanol fuel production facilities in the state. There is a facility being constructed so the bill would result in future foregone increases in net assessed value (NAV). The foregone increases in NAV would have reduced the state’s K-12 education formula cost.
Provisions
1. Classifies real and personal property and improvements used specifically and solely to produce ethanol or biodiesel fuel and that are valued at full cash value as class six, for property tax purposes.
2. Becomes effective on the general effective date.
House Action
ENV 2/15/06 DPA/SE 7-0-0-2
APPROP(B) 2/21/06 W/D
3rd Read 3/13/06 49-11-0-0
Prepared by Senate Research
March 28, 2006
SL/ac