Reference Title: tax relief act of 1998

AN ACT
AMENDING SECTIONS 28-5801, 28-5808, 41-1516, 42-13054, 43-1011, 43-1023, 43-1073, 43-1111, 43-1121, 43-1122, 43-1146, 49-543 AND 49-544, ARIZONA REVISED STATUTES; AMENDING SECTION 28-6991, ARIZONA REVISED STATUTES, AS AMENDED BY LAWS 1997, CHAPTER 292, SECTION 36; AMENDING SECTION 42-11127, ARIZONA REVISED STATUTES, AS AMENDED BY LAWS 1998, CHAPTER 1, SECTION 190; REPEALING LAWS 1996, SEVENTH SPECIAL SESSION, CHAPTER 6, SECTION 52; BLENDING MULTIPLE ENACTMENTS; RELATING TO TAXATION.

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 28-5801, Arizona Revised Statutes, is amended to read:

28-5801 . Vehicle license tax rate

A. At the time of application for and before registration each year of a vehicle, the registering officer shall collect the vehicle license tax imposed by article IX, section 11, Constitution of Arizona. THE REGISTERING OFFICER SHALL PROVIDE THE TAXPAYER WITH INFORMATION SHOWING THE DISTRIBUTION PURSUANT TO SECTION 28-5808 OF THE VEHICLE LICENSE TAX THAT IS OWED BY THE TAXPAYER.

B. Except as provided in subsection C of this section :

1. DURING THE FIRST TWELVE MONTHS OF THE LIFE OF A VEHICLE AS DETERMINED BY ITS INITIAL REGISTRATION, THE VEHICLE LICENSE TAX IS THREE DOLLARS THIRTY-FIVE CENTS ON EACH ONE HUNDRED DOLLARS IN VALUE AND THE VALUE OF THE VEHICLE IS SIXTY PER CENT OF THE MANUFACTURER'S BASE RETAIL PRICE OF THE VEHICLE.

2. DURING EACH SUCCEEDING TWELVE MONTH PERIOD, the vehicle license tax is four THREE dollars FORTY-FIVE CENTS on each one hundred dollars in value . During the first twelve months of the life of the vehicle as determined by its initial registration, the value of the vehicle is sixty per cent of the manufacturer's base retail price of the vehicle. During each succeeding twelve month period, AND the value of the vehicle is fifteen 16.25 per cent less than the value for the preceding twelve month period .

3. The minimum amount of the vehicle license tax computed under this section is ten dollars per year for each vehicle that is subject to the tax.

C. The vehicle license tax is as follows for noncommercial trailers that are not travel trailers and that are less than six thousand pounds gross vehicle weight:

1. On initial registration, a one-time vehicle license tax of one hundred five dollars.

2. On renewal of registration, a one-time vehicle license tax of seventy dollars.

D. For the purposes of subsection C of this section, "travel trailer" has the same meaning prescribed in section 28-2003.

Sec. 2. Section 28-5808, Arizona Revised Statutes, is amended to read:

28-5808 . Vehicle license tax distribution

A. On the first and the fifteenth calendar day of each month, The director shall distribute thirty-one and one-half per cent of the monies collected by the director pursuant to section 28-5801, except monies deposited in the state general fund, to the state treasurer for deposit in the highway user revenue fund. ON THE FIRST AND FIFTEENTH CALENDAR DAY OF EACH MONTH AS FOLLOWS:

1. On the first calendar day, the amount distributed THE DIRECTOR shall include DISTRIBUTE 37.61 PER CENT OF all monies received from the first through the fifteenth calendar day of the preceding month TO THE STATE TREASURER FOR DEPOSIT IN THE HIGHWAY USER REVENUE FUND .

2. On the fifteenth calendar day , :

1. The amount distributed shall include all monies received from the sixteenth through the last day of the preceding month.

2. the director shall distribute or deposit the remaining 37.61 PER CENT OF ALL MONIES RECEIVED FROM THE SIXTEENTH THROUGH THE LAST DAY OF THE PRECEDING MONTH TO THE STATE TREASURER FOR DEPOSIT IN THE HIGHWAY USER REVENUE FUND AND THE FOLLOWING AMOUNTS AS A PERCENTAGE OF ALL monies received pursuant to section 28-5801 during the entire preceding month as follows:

(a) For fiscal year 1997-1998, sixteen and six-tenths per cent to the state treasurer for deposit in the state general fund for general purposes.

(b) For fiscal year 1998-1999, fifteen per cent to the state treasurer for deposit in the state general fund for general purposes.

(c) For fiscal year 1999-2000 and each fiscal year thereafter, twelve per cent to the state treasurer for deposit in the state general fund for general purposes.

(d) (a) Two 1.64 per cent to the state treasurer for deposit in the state highway fund established by section 28-6991.

(e) (b) Twenty-five 20.45 per cent to the county general fund.

(f) For fiscal year 1997-1998, one and four-tenths per cent to the state treasurer to be apportioned among the counties for the same use as highway user revenue fund monies on the basis that the population of the unincorporated area of each county bears to the population of the unincorporated areas of all counties in this state as shown by the most recent United States decennial census.

(g) (c) For fiscal year 1998-1999, three 2.45 per cent to the state treasurer to be apportioned among the counties for the same use as highway user revenue fund monies on the basis that the population of the unincorporated area of each county bears to the population of the unincorporated areas of all counties in this state as shown by the most recent United States decennial census.

(h) (d) For fiscal year 1999-2000 and each fiscal year thereafter, six 4.91 per cent to the state treasurer to be apportioned among the counties for the same use as highway user revenue fund monies on the basis that the population of the unincorporated area of each county bears to the population of the unincorporated areas of all counties in this state as shown by the most recent United States decennial census.

(i) (e) Twenty-five FOR FISCAL YEAR 1998-1999, 13.31 per cent to the state treasurer for deposit in the state general fund to aid school financial assistance.

(f) FOR FISCAL YEAR 1999-2000 AND EACH FISCAL YEAR THEREAFTER, 10.85 PER CENT TO THE STATE TREASURER FOR DEPOSIT IN THE STATE GENERAL FUND TO AID SCHOOL FINANCIAL ASSISTANCE.

(j) (g) Twenty-five 20.45 per cent to the county treasurer to be distributed to the incorporated cities and towns of the county apportioned in proportion to the population of each as shown by the most recent United States census.

(k) (h) Five 4.09 per cent in the state highway fund established pursuant to section 28-6991.

B. If an incorporated city or town has had no federal enumeration, the supervisors shall both:

1. Appoint a qualified person to take an accurate census of the incorporated city or town.

2. Certify the results to the county treasurer, and the incorporated city or town shall share in the distribution as provided by this section.

Sec. 3. Section 28-6991, Arizona Revised Statutes, as amended by Laws 1997, chapter 292, section 36, is amended to read:

28-6991 . State highway fund; sources

A state highway fund is established in the state treasury that consists of:

1. Monies distributed from the Arizona highway user revenue fund pursuant to chapter 18 of this title.

2. Monies appropriated by the legislature.

3. Monies received from donations for the construction, improvement or maintenance of state highways or bridges. These monies shall be credited to a special account and shall be spent only for the purpose indicated by the donor.

4. Monies received from counties under cooperative agreements, including proceeds from bond issues. The state treasurer shall deposit these monies to the credit of the fund in a special account on delivery to the treasurer of a concise written agreement between the department and the county stating the purposes for which the monies are surrendered by the county, and these monies shall be spent only as stated in the agreement.

5. Monies received from the United States under an act of Congress to provide aid for the construction of rural post roads, but monies received on projects for which the monies necessary to be provided by this state are wholly derived from sources mentioned in paragraphs 2 and 3 of this section shall be allotted by the department and deposited by the state treasurer in the special account within the fund established for each project. On completion of the project, on the satisfaction and discharge in full of all obligations of any kind created and on request of the department, the treasurer shall transfer the unexpended balance in the special account for the project into the state highway fund, and the unexpended balance and any further federal aid thereafter received on account of the project may be spent under the general provisions of this title.

6. Monies in the custody of an officer or agent of this state from any source that is to be used for the construction, improvement or maintenance of state highways or bridges.

7. Monies deposited in the state general fund and arising from the disposal of state personal property belonging to the department.

8. Receipts from the sale or disposal of any or all other property held by the department and purchased with state highway monies.

9. Monies generated pursuant to section 28-410.

10. Monies distributed pursuant to section 28-5808, subsection A, paragraph 2, subdivision (d) ( a ) .

11. Monies deposited pursuant to sections 28-1143, 28-2010, 28-2353 and 28-3003.

12. Monies deposited pursuant to section 28-4302, subsection A, paragraph 3 and sections 28-5105 and 28-5135.

13. The following monies:

(a) Monies deposited pursuant to sections 28-2202 and 28-2206 and section 28-5808, subsection A, paragraph 2, subdivision (k) ( h ) .

(b) One dollar of each registration fee and one dollar of each title fee collected pursuant to section 28-2003.

(c) Two dollars of each late registration penalty collected by the director pursuant to section 28-2162.

(d) The air quality compliance fee collected pursuant to section 49-542.

(e) The eight dollar special plate administration fees collected pursuant to sections 28-2404, 28-2412, 28-2413, 28-2414, 28-2415, 28-2416 and 28-2514.

(f) The windshield sticker fee collected pursuant to section 28-2355.

(g) Monies collected pursuant to sections 28-372, 28-2155 and 28-2156 if the director is the registering officer.

14. Monies deposited pursuant to chapter 5, article 5 of this title.

15. Donations received pursuant to section 28-2269.

16. DEALER AND REGISTRATION MONIES COLLECTED PURSUANT TO SECTION 28-4304.

17. ABANDONED VEHICLE ADMINISTRATION MONIES COLLECTED PURSUANT TO SECTION 28-4804.

Sec. 4. Section 41-1516, Arizona Revised Statutes, is amended to read:

41-1516 . Arizona clean air fund; purposes; vehicle certification program; definition

A. The Arizona clean air fund is established consisting of the following:

1. Monies appropriated by the legislature.

2. Monies from the air quality fund pursuant to section 49-551, subsection C, paragraph 2.

3. Any monies that are appropriated to state agencies for alternative fuel vehicles or conversion of conventional vehicles to operate on alternative fuels and that have not been spent by the state agency at the end of each fiscal year.

4. Any monies that are allocated from the emissions inspection fund established by section 49-544 to the vehicle repair grant program established pursuant to section 49-542 and that have not been spent at the end of each fiscal year.

5. Monies collected pursuant to section 49-543, subsection C B .

6. Monies from the state lottery fund pursuant to section 5-522, subsection A, paragraph 4.

7. Any other monies received through gifts, grants and donations.

B. The director shall administer the fund.

C. Monies in the fund may be used for any of the following:

1. To promote public use of alternative fuels by providing individual grants that do not exceed one hundred thousand dollars each for alternative fuel systems that have had their equipment certified by the department of commerce energy office. A recipient of a grant for an alternative fuel delivery system pursuant to this paragraph is not eligible to claim a tax credit for that alternative fuel delivery system pursuant to section 43-1086 or 43-1174. Alternative fuel delivery systems that are established using grant monies shall be accessible to the general public.

2. Not more than one-half of the monies deposited into the fund shall be used by the department to establish a program that would provide a maximum of a one thousand dollar grant for individuals or small businesses for the purchase and installation of an alternative fuel delivery system for use on the individual's or small business' property in this state. An individual or small business that receives a grant pursuant to this paragraph is not eligible to claim a tax credit pursuant to section 43-1086 or 43-1174 for the amount of the grant. The department of commerce shall promptly notify the department of revenue of individuals and small businesses that have received a grant and the amount of the grant. For the purposes of this paragraph, "small business" has the same meaning prescribed in section 41-1001.

3. Grants to school districts to pay a portion of the cost incurred for the alternative fuels program prescribed in section 15-349.

4. Grants to cities and towns to pay a portion of the cost incurred for the alternative fuels vehicle program and for the incremental cost of alternative fuel buses pursuant to section 9-500.04.

5. To pay the costs of high occupancy vehicle lane sign markings required by section 28-2416.

6. Administrative costs incurred by the department in administering the programs prescribed in this subsection.

7. After current obligations of the fund are satisfied and if appropriated by the legislature, for the vehicle emissions inspection program.

D. The department shall establish a certification program for new alternative fuel vehicles, the equipment used in the conversion to an alternative fuel vehicle and equipment installed in alternative fuel delivery systems. The certification program may include minimum specifications, nationally recognized standards and warranties for equipment, performance and safety requirements. Tax credits or subtractions pursuant to section 43-1026, 43-1086, 43-1128.01 or 43-1174 shall only be allowed if the vehicle or equipment is certified pursuant to this subsection. By December 31 of each year, the department of commerce shall provide to the department of revenue a list of all vehicles and equipment certified pursuant to this subsection.

E. The director shall report annually to the legislature on the status of the Arizona clean air fund. The report shall include a summary of alternative fuel delivery systems for which funding was provided during the preceding fiscal year. The report shall be submitted to the president of the senate and the speaker of the house of representatives no later than September 1 of each year.

F. Monies in the Arizona clean air fund are exempt from the provisions of section 35-190 relating to lapsing of appropriations. The state treasurer shall invest and divest monies in the fund pursuant to section 35-313.

G. For the purposes of this section, "alternative fuel delivery system" means any facility that provides for the fueling of an alternative fuel vehicle.

Sec. 5. Section 42-11127, Arizona Revised Statutes, as amended by Laws 1998, chapter 1, section 190, is amended to read:

42-11127 . Exemption for commercial and agricultural personal property; definition

A. Pursuant to article IX, section 2, subsection (6), Constitution of Arizona, personal property that is class four property used for agricultural purposes or that is class three property used in a trade or business is exempt from taxation up to a maximum amount of fifty thousand dollars of full cash value for OF each taxpayer ASSESSMENT ACCOUNT .

B. THE EXEMPTION UNDER SUBSECTION A IS ALLOWED FOR ALL OF THE FOLLOWING ONE TIME EACH YEAR, REGARDLESS OF THE NUMBER OF BUSINESS LOCATIONS OR PLACES WHERE THE PERSON IS LEASING THE PROPERTY:

1. A PERSON WHO OWNS BUSINESS OR AGRICULTURAL PERSONAL PROPERTY AND WHO IS IN THE BUSINESS OF LEASING THE PERSONAL PROPERTY IN MORE THAN ONE LOCATION IN THIS STATE.

2. A PERSON WHOSE BUSINESS PERSONAL PROPERTY IS VALUED BY THE DEPARTMENT AND IS CLASSIFIED AS CLASS THREE PROPERTY.

3. BUSINESSES THAT REPORT EQUIPMENT FOR WHICH THE LEASING ACTIVITY IS INCIDENTAL TO THEIR PRIMARY BUSINESS.

B. C. On or before December 31 of each year, the department shall increase the maximum amount of the exemption for the following tax year based on the average annual percentage increase, if any, in the GDP price deflator for the two most recent complete state fiscal years.

D. FOR PURPOSES OF THIS SECTION AND ARTICLE IX, SECTION 2, SUBSECTION (6), CONSTITUTION OF ARIZONA, AN ASSESSMENT ACCOUNT IS CONSIDERED TO BE A TAXPAYER.

C. E. In this section, "GDP price deflator" means the average of the four implicit price deflators for the gross domestic product reported by the United States department of commerce or its successor for the four quarters of the state fiscal year.

Sec. 6. Section 42-13054, Arizona Revised Statutes, is amended to read:

42-13054 . Taxable value of personal property; depreciated values of personal property in classes three and four

A. THE TAXABLE VALUE OF PERSONAL PROPERTY IS THE RESULT OF ACQUISITION COST LESS ANY APPROPRIATE DEPRECIATION AS PRESCRIBED BY TABLES ADOPTED BY THE DEPARTMENT. THE TAXABLE VALUE SHALL NOT EXCEED THE MARKET VALUE.

A. B. Except as provided in subsection B C of this section and notwithstanding any other statute, the assessor shall adjust the depreciation schedules prescribed by the department as follows to determine the valuation of personal property that is initially assessed during or after tax year 1994 as class three (P) pursuant to section 42-15003 and personal property that is initially assessed during or after tax year 1995 as class four (P) pursuant to section 42-15004:

1. For the first tax year of assessment, the assessor shall use forty THIRTY-FIVE per cent of the scheduled depreciated value.

2. For the second tax year of assessment, the assessor shall use fifty-six FIFTY-ONE per cent of the scheduled depreciated value.

3. For the third tax year of assessment, the assessor shall use seventy-two SIXTY-SEVEN per cent of the scheduled depreciated value.

4. For the fourth tax year of assessment, the assessor shall use eighty-eight EIGHTY-THREE per cent of the scheduled depreciated value.

5. For the fifth and subsequent tax years of assessment, the assessor shall use the scheduled depreciated value as prescribed in the department's guidelines.

B. C. The additional depreciation prescribed in subsection A B of this section shall not reduce the valuation below the minimum value prescribed by the department for property in use.

Sec. 7. Section 43-1011, Arizona Revised Statutes, is amended to read:

43-1011 . Taxes and tax rates

There shall be levied, collected and paid for each taxable year upon the entire taxable income of every resident of this state and upon the entire taxable income of every nonresident which is derived from sources within this state taxes determined in the following manner:

1. FOR TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 1998:

1. (a) In the case of a single person or a married person filing separately:

If taxable income is:	The tax is:
$0 - $10,000	2.90% of taxable income
$10,001 - $25,000	$290, plus 3.30% of the excess over $10,000
$25,001 - $50,000	$785, plus 3.90% of the excess over $25,000
$50,001 - $150,000	$1,760, plus 4.80% of the excess over $50,000
$150,001 and over	$6,560, plus 5.17% of the excess over $150,000

2. (b) In the case of a married couple filing a joint return or a single person who is a head of a household:

If taxable income is:	The tax is:
$0 - $20,000	2.90% of taxable income
$20,001 - $50,000	$580, plus 3.30% of the excess over $20,000
$50,001 - $100,000	$1,570, plus 3.90% of the excess over $50,000
$100,001 - $300,000	$3,520, plus 4.80% of the excess over $100,000
$300,001 and over	$13,120, plus 5.17% of the excess over $300,000

2. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 1997 THROUGH DECEMBER 31, 1998:

(a) IN THE CASE OF A SINGLE PERSON OR A MARRIED PERSON FILING SEPARATELY:

IF TAXABLE INCOME IS:	THE TAX IS:
$0 - $10,000	2.88% OF TAXABLE INCOME
$10,001 - $25,000	$288, PLUS 3.24% OF THE EXCESS OVER $10,000
$25,001 - $50,000	$774, PLUS 3.82% OF THE EXCESS OVER $25,000
$50,001 - $150,000	$1,729, PLUS 4.74% OF THE EXCESS OVER $50,000
$150,001 AND OVER	$6,469, PLUS 5.10% OF THE EXCESS OVER $150,000

(b) IN THE CASE OF A MARRIED COUPLE FILING A JOINT RETURN OR A SINGLE PERSON WHO IS A HEAD OF A HOUSEHOLD:

IF TAXABLE INCOME IS:	THE TAX IS:
$0 - $20,000	2.88% OF TAXABLE INCOME
$20,001 - $50,000	$576, PLUS 3.24% OF THE EXCESS OVER $20,000
$50,001 - $100,000	$1,548, PLUS 3.82% OF THE EXCESS OVER $50,000
$100,001 - $300,000	$3,458, PLUS 4.74% OF THE EXCESS OVER $100,000
$300,001 AND OVER	$12,938, PLUS 5.10% OF THE EXCESS OVER $300,000

3. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 1998:

(a) IN THE CASE OF A SINGLE PERSON OR A MARRIED PERSON FILING SEPARATELY:

IF TAXABLE INCOME IS:	THE TAX IS:
$0 - $10,000	2.87% OF TAXABLE INCOME
$10,001 - $25,000	$287, PLUS 3.20% OF THE EXCESS OVER $10,000
$25,001 - $50,000	$767, PLUS 3.74% OF THE EXCESS OVER $25,000
$50,001 - $150,000	$1,702, PLUS 4.72% OF THE EXCESS OVER $50,000
$150,001 AND OVER	$6,422, PLUS 5.04% OF THE EXCESS OVER $150,000

(b) IN THE CASE OF A MARRIED COUPLE FILING A JOINT RETURN OR A SINGLE PERSON WHO IS A HEAD OF A HOUSEHOLD:

IF TAXABLE INCOME IS:	THE TAX IS:
$0 - $20,000	2.87% OF TAXABLE INCOME
$20,001 - $50,000	$574, PLUS 3.20% OF THE EXCESS OVER $20,000
$50,001 - $100,000	$1,534, PLUS 3.74% OF THE EXCESS OVER $50,000
$100,001 - $300,000	$3,404, PLUS 4.72% OF THE EXCESS OVER $100,000
$300,001 AND OVER	$12,844, PLUS 5.04% OF THE EXCESS OVER $300,000

Sec. 8. Section 43-1023, Arizona Revised Statutes, is amended to read:

43-1023 . Exemptions for blind persons, persons over sixty-five years of age and dependents

A. There shall be allowed an exemption of one thousand five hundred dollars:

1. For a taxpayer who is blind or if either his central visual acuity does not exceed 20/200 in the better eye with correcting lenses or his visual acuity is greater than 20/200 but is accompanied by a limitation in the fields of vision such that the widest diameter of the visual field subtends an angle no greater than twenty degrees.

2. For the spouse of a taxpayer if a separate return is made by the taxpayer, if the spouse is blind, as defined in paragraph 1 of this subsection, has no Arizona adjusted gross income for the calendar year in which the taxable year of the taxpayer begins and is not the dependent of another taxpayer. For the purposes of this paragraph, the determination of whether the spouse is blind shall be made at the close of the taxable year of the taxpayer. If the spouse dies during such taxable year, such determination shall be made as of the time of such death.

B. There shall be allowed an exemption of two thousand three hundred dollars for:

1. Each dependent, as defined in section 43-1001.

2. Each person age sixty-five or older regardless of his relationship to the taxpayer:

(a) If the taxpayer pays more than one-fourth of the total cost of maintaining such person in a nursing care institution or supervisory care home licensed pursuant to title 36, chapter 4, or an adult foster care home provider of a type certified pursuant to title 11, chapter 2, article 7, if such payments exceed eight hundred dollars in the taxable year.

(b) If the taxpayer otherwise makes payments exceeding eight hundred dollars in the taxable year for home health care or other types of medical care.

C. FOR TAXABLE YEARS BEGINNING FROM AND AFTER DECEMBER 31, 1998, AN EXEMPTION OF TEN THOUSAND DOLLARS IS ALLOWED FOR EACH PARENT OR ANCESTOR OF A PARENT OF A RESIDENT TAXPAYER, WHO IS AGE SIXTY-FIVE OR OLDER, WHO REQUIRES ASSISTANCE WITH ACTIVITIES OF DAILY LIVING AND WHO LIVES IN THE TAXPAYER'S PRINCIPAL RESIDENCE FOR THE ENTIRE TAXABLE YEAR, IF THE TAXPAYER PAYS MORE THAN ONE-HALF OF THE PERSON'S TOTAL SUPPORT AND MAINTENANCE COSTS. AN EXEMPTION UNDER THIS SUBSECTION IS IN LIEU OF AN EXEMPTION UNDER SUBSECTION B OF THIS SECTION FOR THE SAME PERSON.

C. D. A taxpayer shall not take more than one exemption for any one THE SAME person under EITHER subsection B OR C of this section.

D. E. An exemption of two thousand one hundred dollars is allowed for:

1. A taxpayer who has attained the age of sixty-five before the close of the taxable year filing a separate or joint return and the taxpayer is not claimed as a dependent by another taxpayer.

2. The spouse of the taxpayer if the spouse has attained the age of sixty-five before the close of the taxable year, a joint return is filed and the spouse is not a dependent of another taxpayer.

Sec. 9. Section 43-1073, Arizona Revised Statutes, is amended to read:

43-1073 . Family income tax credit

A. Subject to the conditions prescribed by this section, a credit is allowed against the taxes imposed by this chapter for a taxable year for taxpayers whose Arizona ADJUSTED gross income , PLUS THE AMOUNT SUBTRACTED FOR EXEMPTIONS UNDER SECTION 43-1023, is:

1. Twenty thousand dollars or less in the case of a married couple filing a joint return WITH NO MORE THAN ONE DEPENDENT or a single person who is a head of a household WITH NO MORE THAN ONE DEPENDENT .

2. TWENTY-THREE THOUSAND SIX HUNDRED DOLLARS OR LESS IN THE CASE OF A MARRIED COUPLE FILING A JOINT RETURN WITH TWO DEPENDENTS.

3. TWENTY-SEVEN THOUSAND THREE HUNDRED DOLLARS OR LESS IN THE CASE OF A MARRIED COUPLE FILING A JOINT RETURN WITH THREE DEPENDENTS.

4. THIRTY-ONE THOUSAND DOLLARS OR LESS IN THE CASE OF A MARRIED COUPLE FILING A JOINT RETURN WITH FOUR OR MORE DEPENDENTS.

5. TWENTY THOUSAND ONE HUNDRED THIRTY-FIVE DOLLARS OR LESS IN THE CASE OF A SINGLE PERSON WHO IS A HEAD OF A HOUSEHOLD WITH TWO DEPENDENTS.

6. TWENTY-THREE THOUSAND EIGHT HUNDRED DOLLARS OR LESS IN THE CASE OF A SINGLE PERSON WHO IS A HEAD OF A HOUSEHOLD WITH THREE DEPENDENTS.

7. TWENTY-FIVE THOUSAND TWO HUNDRED DOLLARS OR LESS IN THE CASE OF A SINGLE PERSON WHO IS A HEAD OF A HOUSEHOLD WITH FOUR DEPENDENTS.

8. TWENTY-SIX THOUSAND FIVE HUNDRED SEVENTY-FIVE DOLLARS OR LESS IN THE CASE OF A SINGLE PERSON WHO IS A HEAD OF A HOUSEHOLD WITH FIVE OR MORE DEPENDENTS.

2. 9. Ten thousand dollars or less in the case of a single person or a married person filing separately WITH NO DEPENDENTS .

B. The amount of the credit is equal to thirty FORTY dollars for each person who is a resident of this state and for whom a personal or dependent exemption is allowed with respect to the taxpayer pursuant to section 43-1043 and 43-1023, subsection B, paragraph 1, but not to exceed:

1. One TWO hundred twenty FORTY dollars in the case of a married couple filing a joint return or a single person who is a head of a household.

2. Sixty ONE HUNDRED TWENTY dollars in the case of a single person or a married couple filing separately.

3. For any taxpayer, the amount of taxes due under this chapter for the taxable year.

Sec. 10. Section 43-1111, Arizona Revised Statutes, is amended to read:

43-1111 . Tax rates for corporations

There shall be levied, collected and paid for each taxable year upon the entire Arizona taxable income of every corporation, unless exempt under section 43-1126 or 43-1201 or as otherwise provided in this title or by law, taxes in an amount of nine EIGHT per cent of net income or fifty dollars, whichever is greater.

Sec. 11. Section 43-1121, Arizona Revised Statutes, is amended to read:

43-1121 . Additions to Arizona gross income; corporations

In computing Arizona taxable income for a corporation, the following amounts shall be added to Arizona gross income:

1. The amounts computed pursuant to section 43-1021, paragraphs 4 through 10 and 14.

2. The amount of dividend income received from corporations and allowed as a deduction pursuant to sections 243, 244 and 245 of the internal revenue code.

3. Taxes which are based on income paid to other states, local governments or foreign governments and which were deducted in computing federal taxable income.

4. Expenses and interest relating to tax-exempt income on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from the tax imposed by this title. Financial institutions, as defined in section 6-101, shall be governed by section 43-961, paragraph 2.

5. Commissions, rentals and other amounts paid or accrued to a domestic international sales corporation controlled by the payor corporation if the domestic international sales corporation is not required to report its taxable income to this state because its income is not derived from or attributable to sources within this state. If the domestic international sales corporation is subject to article 4 of this chapter, the department shall prescribe by rule the method of determining the portion of the commissions, rentals and other amounts which are paid or accrued to the controlled domestic international sales corporation and which shall be deducted by the payor. "Control" for purposes of this paragraph means direct or indirect ownership or control of fifty per cent or more of the voting stock of the domestic international sales corporation by the payor corporation.

6. Federal income tax refunds received during the taxable year to the extent they were deducted in arriving at Arizona taxable income in a previous year.

7. The amount of net operating loss taken pursuant to section 172 of the internal revenue code.

8. The amount of exploration expenses determined pursuant to section 617 of the internal revenue code to the extent that they exceed seventy-five thousand dollars and to the extent that the election is made to defer those expenses not in excess of seventy-five thousand dollars.

9. Amortization of costs incurred to install pollution control devices and deducted pursuant to the internal revenue code or the amount of deduction for depreciation taken pursuant to the internal revenue code on pollution control devices for which an election is made pursuant to section 43-1129.

10. The amount of depreciation or amortization of costs of child care facilities deducted pursuant to section 167 or 188 of the internal revenue code for which an election is made to amortize pursuant to section 43-1130 or for which a credit is taken under section 43-1163, subsection A, paragraph 1.

11. Arizona state income tax refunds received, to the extent the amount of the refunds is not already included in Arizona gross income, if a tax benefit was derived by deduction of this amount in a prior year.

12. The amount of depreciation or amortization of costs of recycling equipment deducted pursuant to the internal revenue code for which an election is made pursuant to section 43-1164.

13. The amount paid as taxes on property in this state by a qualified defense contractor with respect to which a credit is claimed under section 43-1166.

14. The loss of an insurance company that is exempt under section 43-1201 to the extent that it is included in computing Arizona gross income on a consolidated return pursuant to section 43-947.

15. Any amount of agricultural water conservation expenses that were deducted pursuant to the internal revenue code for which a credit is claimed under section 43-1172.

16. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43-1169 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.

17. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43-1169 and which is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43-1169.

18. The amount by which the depreciation or amortization computed under the internal revenue code with respect to property for which a credit was taken under section 43-1170 exceeds the amount of depreciation or amortization computed pursuant to the internal revenue code on the Arizona adjusted basis of the property.

19. The amount by which the adjusted basis computed under the internal revenue code with respect to property for which a credit was claimed under section 43-1170 and which is sold or otherwise disposed of during the taxable year exceeds the adjusted basis of the property computed under section 43-1170.

20. The deduction referred to in section 1341(a)(4) of the internal revenue code for restoration of a substantial amount held under a claim of right.

21. The amount by which a capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds the capital loss carryover allowable pursuant to section 43-1130.01, subsection F.

22. Any amount deducted in computing Arizona taxable income as expenses for installing solar stub outs or electric vehicle recharge outlets in this state with respect to which a credit is claimed pursuant to section 43-1176.

23. Any wage expenses deducted pursuant to the internal revenue code for which a credit is claimed under section 43-1175 and representing net increases in qualified employment positions for employment of temporary assistance for needy families recipients.

Sec. 12. Section 43-1122, Arizona Revised Statutes, is amended to read:

43-1122 . Subtractions from Arizona gross income; corporations

In computing Arizona taxable income for a corporation, the following amounts shall be subtracted from Arizona gross income:

1. The amounts computed pursuant to section 43-1022, paragraphs 8 through 15.

2. The amount of dividend income received from Arizona corporations as prescribed by section 43-1128.

3. The amount of Arizona capital loss carryover as defined in section 43-1124 in an amount not to exceed one thousand dollars.

4. With respect to a financial institution as defined in section 6-101, expenses and interest relating to tax-exempt income disallowed pursuant to section 265 of the internal revenue code.

5. Dividends received from another corporation owned or controlled directly or indirectly by a recipient corporation. "Control" for purposes of this paragraph means direct or indirect ownership or control of fifty per cent or more of the voting stock of the payor corporation by the recipient corporation. Dividends shall have the meaning provided in section 316 of the internal revenue code. This subtraction shall apply without regard to the provisions of section 43-961, paragraph 2 and article 4 of this chapter. A corporation that has its commercial domicile, as defined in section 43-1131, in this state may subtract the full amount of the dividends. A corporation that does not have its commercial domicile in this state may subtract:

(a) For its taxable year beginning in 1990, an amount equal to one-half of the dividends.

(b) For taxable years beginning in 1991 and thereafter, the full amount of the dividends.

6. Interest income received on obligations of the United States.

7. The amount of dividend income from foreign corporations.

8. The amount of net operating loss allowed by section 43-1123.

9. The amount of any STATE income tax refunds received from states other than Arizona which were included as income in computing federal taxable income.

10. The amount of expense recapture included in income pursuant to section 617 of the internal revenue code for mine exploration expenses.

11. The amount of deferred exploration expenses allowed by section 43-1127.

12. The amount of exploration expenses related to the exploration of oil, gas or geothermal resources, computed in the same manner and on the same basis as a deduction for mine exploration pursuant to section 617 of the internal revenue code. This computation is subject to the adjustments contained in section 43-1121, paragraph 8 and paragraphs 10 and 11 of this section relating to exploration expenses.

13. The amortization of pollution control devices allowed by section 43-1129.

14. The amount of amortization of the cost of child care facilities pursuant to section 43-1130.

15. The amount of income from a domestic international sales corporation required to be included in the income of its shareholders pursuant to section 995 of the internal revenue code.

16. The amount authorized by section 43-1128.01 for the taxable year for purchases of, and equipment relating to, alternative fuel vehicles.

17. The income of an insurance company that is exempt under section 43-1201 to the extent that it is included in computing Arizona gross income on a consolidated return pursuant to section 43-947.

18. The amount of contributions by the taxpayer during the taxable year to medical savings accounts established on behalf of the taxpayer's employees as provided by section 43-1028, to the extent that the contributions are not deductible under the internal revenue code.

19. The amount by which a capital loss carryover allowable pursuant to section 43-1130.01, subsection F exceeds the capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code.

Sec. 13. Section 43-1146, Arizona Revised Statutes, is amended to read:

43-1146 . Situs of sales of tangible personal property

Sales of tangible personal property are CONSIDERED TO BE in this state if any of the following apply:

1. the property is delivered or shipped to a purchaser, other than the United States government, within this state regardless of the F.O.B. point or other conditions of the sale.

2. The property is shipped from an office, store, warehouse, factory or other place of storage in this state and the purchaser is the United States government or the taxpayer is not taxable in the state of the purchaser.

Sec. 14. Section 49-543, Arizona Revised Statutes, is amended to read:

49-543 . Emissions inspection costs; disposition; fleet inspection; certificates

A. The director shall fix, regulate and alter in accordance with this section the fees required to be paid for the FULL COSTS OF THE VEHICLE EMISSIONS inspection of every vehicle inspected PROGRAM pursuant to this article INCLUDING ADMINISTRATION, IMPLEMENTATION AND ENFORCEMENT .

B. The director shall fix the fees, not to exceed ten dollars annually, except that the director may fix a fee for the emissions inspection of a diesel powered vehicle with a gross weight in excess of twenty-six thousand pounds or for the emissions inspection of a diesel powered vehicle with tandem axles at more than ten dollars but not more than twenty-five dollars per inspection. Such fees shall be fixed by the director and shall not exceed the contractual charge payable to any independent contractor.

C. B. In lieu of the first emissions inspection after purchase OR LEASE of a new vehicle, the owner of the vehicle may pay a fee that is equal to the fee charged for an emissions inspection for that type of vehicle. The owner shall pay this fee together with the annual registration fee for the vehicle to the registering officer. The registering officer shall transmit the fee to the state treasurer for deposit in the Arizona clean air fund established by section 41-1516. The registering officer may enter into an intergovernmental agreement with another department of this state to collect and transmit the fee.

D. C. The registration renewal notice required for the second registration year of a new vehicle shall include:

1. A notice to the vehicle owner of the option prescribed in subsection C B of this section.

2. A notice to the vehicle owner that even though an emissions inspection test is not required pursuant to subsection C B of this section the owner may choose to have an emissions inspection because of vehicle emissions performance warranty limitations on emissions components of the vehicle.

E. D. The fees charged for official emissions inspection shall be uniform as applied to each class of vehicle which shall be defined by the director. Except for fees collected by the director pursuant to section 49-546, the inspection fees required to be paid pursuant to this article may be collected with the registration fee by the county assessor at the time and place of motor vehicle registration pursuant to title 28, chapter 7, article 5 and transferred to the state treasurer for deposit in the emissions inspection fund in accordance with the rules adopted by the director or may be collected by the independent contractor at the time of inspection by means of an approved check or cash.

F. E. Any person, except a person who has been issued a certificate of waiver pursuant to section 49-542, subsection L, whose vehicle has been inspected at an official emissions inspection station shall, if such vehicle was not found to comply with the minimum standards, have his vehicle repaired, including recommended repair or replacement of emissions control devices as a result of tampering, and have the right within sixty consecutive calendar days but not thereafter to return such vehicle for one reinspection without charge. The department may provide for additional reinspections without charge. A vehicle shall not be deemed to pass a reinspection unless the tampering discovered during the tampering inspection is repaired with new or reconditioned emissions control devices.

G. F. The department shall issue certificates of inspection to owners of fleet emissions inspection stations. Each certificate shall be validated by the fleet emissions inspection stations in a manner required by the director at the time that each owner's fleet vehicle has been inspected or has passed inspection. The validated certificate of inspection shall indicate at the time of registration that the owner's fleet vehicle has been inspected and that the vehicle has passed inspection.

H. G. The director shall fix an emissions inspection fee before inspection certificates may be issued to the owner of any fleet emissions inspection station. Such fee shall be uniform for each inspection certificate issued and shall be based upon the director's estimated costs to the state of administering and enforcing the provisions of this article as they apply to fleet emissions inspection stations and the vehicles inspected therein. The director shall promptly transmit all such monies collected by him pursuant to this article to the state treasurer who shall deposit them in the emissions inspection fund.

I. The director may fix an administrative fee to cover the costs of issuing exemptions or certificates of waiver pursuant to section 49-542, but such fee shall not exceed five dollars.

Sec. 15. Section 49-544, Arizona Revised Statutes, is amended to read:

49-544 . Emissions inspection fund; composition; authorized expenditures; exemptions; investment

A. An emissions inspection fund is established in the state treasury and is subject to legislative appropriation. The emissions inspection fund shall consist of:

1. Monies appropriated to the fund by the legislature.

2. All monies which are remitted by owners of vehicles and which are collected for emissions inspection COLLECTED PURSUANT TO SECTION 49-543, SUBSECTION A .

3. All monies collected by the director for the issuance of inspection certificates to owners of fleet emissions inspection stations.

4. Monies received from private grants or donations when so designated by the grantor or donor.

5. Monies received from the United States by grant or otherwise to assist the state in any emissions inspection program.

6. All monies collected pursuant to section 49-543, subsection I.

B. Monies in the emissions inspection fund may be used for the following:

1. Enforcement of the provisions of this article related to fleet emissions inspections, exemptions, and certificates of waiver . , except that beginning on July 1, 1997 the in lieu fee monies collected from vehicles that are identified as complying with random on-road testing pursuant to section 49-542.01 shall be spent only to operate the random on-road testing program and to pay the costs of administering the annual and biennial vehicle emissions inspection program established pursuant to section 49-542.

2. Payment of contractual charges to independent contractors pursuant to section 49-545.

3. Costs to the state of administering the emissions inspection services performed by the independent contractor, including inspection station auditing, contractor training and certification, and motorist assistance.

4. Funding the state's portion of the catalytic converter program costs prescribed by section 49-542.

5. Funding the vehicle repair grant program prescribed by section 49-542.

6. Funding the costs in excess of ten dollars per year for the transient loaded emissions test as authorized under section 49-542.

7. 6. Other costs of administering and enforcing the provisions of this article.

C. The director of the department of administration shall approve properly certified claims submitted by the department of environmental quality for the payment of contractual charges to independent contractors and for enforcement of the provisions of this article related to fleet emissions inspections, exemptions and certificates of waiver. When such claims are approved by the director of the department of administration and transmitted to the state treasurer, he shall transfer the amounts claimed to the director of environmental quality.

D. Monies in the emissions inspection fund are exempt from the provisions of section 35-190, relating to lapsing of appropriations.

E. The state treasurer shall invest inactive monies in the emissions inspection fund pursuant to laws governing such deposits. All interest earned on emissions inspection fund monies shall be credited by the state treasurer to the emissions inspection fund.

Sec. 16. Vehicle license tax rate reduction notification

Beginning with vehicle registration renewals that are due in August 1998 through vehicle registration renewals that are due in July 1999, the department of transportation shall include an insert in each vehicle registration renewal notice that notifies the taxpayer that, in addition to the regular reduction in vehicle license tax associated with depreciation and except for vehicles that currently pay the statutory minimum of ten dollars, the vehicle license tax rate reflected in the registration renewal notice includes an additional reduction enacted by the legislature and signed by the governor of approximately sixteen per cent.

Sec. 17. Individual income tax instructions

The department of revenue shall include instructions and worksheets with individual income tax returns explaining the income levels for each filing status at which there is no liability for income tax.

Sec. 18. Prospective application of accelerated depreciation provisions

Section 42-13054, Arizona Revised Statutes, as amended by this act, applies prospectively from and after December 31, 1998 and may not be used as the basis of any claim for refund on previous years' assessments.

Sec. 19. Retroactivity

A. Sections 43-1011, 43-1073, 43-1111, 43-1121 and 43-1146, Arizona Revised Statutes, as amended by this act, apply retroactively to taxable years beginning from and after December 31, 1997.

B. Section 28-5801, Arizona Revised Statutes, as amended by this act, applies retroactively to from and after July 31, 1998.

Sec. 20. Effective date

A. Sections 28-5808 and 28-6991, Arizona Revised Statutes, as amended by this act, are effective from and after August 31, 1998.

B. Sections 42-11127, 42-13054 and 43-1023, Arizona Revised Statutes, as amended by this act, are effective from and after December 31, 1998.

Sec. 21. Repeal

Laws 1996, seventh special session, chapter 6, section 52 is repealed.

APPROVED BY THE GOVERNOR MAY 20, 1998.

FILED IN THE OFFICE OF THE SECRETARY OF STATE MAY 20, 1998.

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