HB2756 - 541R

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

Section 1. Section 35-115, Arizona Revised Statutes, is amended to read:

START_STATUTE35-115. Contents of budget report

Each budget report required by section 35‑114 shall include the following:

1. Summary statements of the financial condition of the state, including:

(a) A consolidated balance sheet showing all current assets and liabilities of the state at the close of the fiscal year last concluded.

(b) Summary statements of the actual income and expenditures of the fiscal year last concluded.

2. Schedules showing actual income from each source for the preceding fiscal year and the estimated income of the current fiscal year and for the next fiscal year for budget units. The statements of income and estimated income shall be itemized by source, by budget units and sources and by funds and shall show separately revenue from nonrevenue, all detailed by sources.

3. Detailed comparative statements of expenditures and requests for appropriations by funds, budget units, budget programs and budget classes, showing the expenditures for the fiscal year last concluded, the estimated expenditures for the current year, the request of each budget unit and the governor's recommendations for appropriations for the next fiscal year for budget units, all distributed according to budget programs and budget classes. The budget report shall include a detailed estimate of the cost to this state in the next fiscal year attributable to a county's, city's or town's establishment of a minimum wage if that minimum wage exceeds the minimum wage established by this state pursuant to section 23-363. In connection with each expenditure involving construction projects to be completed in one or more fiscal years, the budget report shall show the total estimated cost of each project and the amount recommended to be appropriated and expended in each ensuing fiscal year until completion of the project. The state capital improvement plan and the governor's recommendations concerning the plan shall be incorporated into the budget report.

4. A summary statement for each fund of the cash resources estimated to be available at the beginning of the next fiscal year for budget units and the estimated cash receipts for the next fiscal year for budget units, as compared with the total recommended amounts for appropriations for all budget programs and budget classes for the next fiscal year for budget units. If the total of the recommended expenditures exceeds the total of the estimated resources, the summary statement shall include recommendations as to how the deficiency is to be met and estimates of receipts from any proposed additional revenues.

5. A summary statement of expenditures and full‑time equivalent positions for each retirement system, delineated by fund source.

6. Each fiscal year for budget units, a delineation of requested expenditures for administrative costs, including administrative personnel salaries and employee-related expenses and direct, indirect and shared costs for administrative office space, equipment, supplies and overhead. For the purposes of this paragraph, "administrative" means any supportive activity relating to management, supervision, budget or execution of the affairs of the budget unit as distinguished from activities relating to the budget unit's primary direct service functions. The process of delineation and determination of what constitutes administrative costs for each budget unit shall be developed by the governor's office of strategic planning and budgeting in consultation with the director and staff of the joint legislative budget committee.

7. A summary on one page or less providing selected performance measures of the budget unit for the previous fiscal year and the budget years. The performance measures may be expressed as service level measures on a unit cost basis and shall be established by the governor's office of strategic planning and budgeting in consultation with the director and staff of the joint legislative budget committee. END_STATUTE

Sec. 2. Title 35, chapter 1, article 2, Arizona Revised Statutes, is amended by adding section 35-121.01, to read:

START_STATUTE35-121.01. Local minimum wage; reimbursement of state costs; collection; withholding

After considering the information in the budget report required by section 35-115, paragraph 3, the legislature may allocate and, if allocated, the department of administration shall collect from a county, city or town an amount to reimburse this state for the cost to this state in the next fiscal year attributable to the county's, city's or town's establishment of a minimum wage if that minimum wage exceeds the minimum wage established by this state pursuant to section 23-363. If the county, city or town does not pay to the department the amount allocated pursuant to this section on or before December 31 of the year the allocation is made, the department shall notify the state treasurer, who shall subtract the amount owed by the county, city or town from any payments required to be made by the state treasurer to that county, city or town pursuant to section 42-5029, subsection D, plus interest on that amount pursuant to section 44-1201, retroactive to the first day the amount was due. If the amount the state treasurer withholds is insufficient to meet the requirements of this section, the state treasurer shall withhold from any other monies payable to that county, city or town from whatever state funding source is available an amount necessary to fulfill the requirement. END_STATUTE

Sec. 3. Title 43, chapter 3, article 1, Arizona Revised Statutes, is amended by adding section 43-312, to read:

START_STATUTE43-312. Information return of sales; nonresident real estate transactions; escrow agents

A person licensed under section 6‑813 to conduct escrow business for the purchase and sale of real property located in this state shall file an information return of sales of real property located in this state that are reported pursuant to federal reporting requirements under section 6045(e) of the internal revenue code. The person shall file the information return required by this section:

1. On or before the thirty‑first day of March with respect to sales of real property located in this state that are closed on or before December 31 of the preceding calendar year.

2. Using the same form and format of the return filed with the internal revenue service under section 6045(e) of the internal revenue code. END_STATUTE

Sec. 4. Section 43-1147, Arizona Revised Statutes, as amended by Laws 2013, chapter 236, section 10, is amended to read:

START_STATUTE43-1147. Situs of sales of other than tangible personal property; definitions

A. Except as provided by subsection B of this section, sales, other than sales of tangible personal property, are in this state if either of the following applies:

1. The income producing activity is performed in this state.

2. The income producing activity is performed both in and outside this state and a greater proportion of the income producing activity is performed in this state than in any other state, based on costs of performance.

B. For taxable years beginning from and after December 31, 2013, a multistate service provider may elect to treat sales from services as being in this state based on a combination of income producing activity sales and market sales. If the election under this subsection is made pursuant to subsection C of this section, the sales of services that are in this state shall be determined for taxable years beginning from and after:

1. December 31, 2013 through December 31, 2014 by the sum of the following:

(a) Eighty‑five per cent percent of the market sales.

(b) Fifteen per cent percent of the income producing activity sales.

2. December 31, 2014 through December 31, 2015 by the sum of the following:

(a) Ninety per cent percent of the market sales.

(b) Ten per cent percent of the income producing activity sales.

3. December 31, 2015 through December 31, 2016 by the sum of the following:

(a) Ninety‑five per cent percent of the market sales.

(b) Five per cent percent of the income producing activity sales.

4. December 31, 2016 by one hundred per cent percent of the market sales.

C. A multistate service provider may elect to treat sales from services as being in this state under subsection B of this section as follows:

1. The election must be made on the taxpayer's timely filed original income tax return. The election is:

(a) Effective retroactively for the full taxable year of the income tax return on which the election is made.

(b) Binding on the taxpayer for at least five consecutive taxable years, regardless of whether the taxpayer no longer meets the percentage threshold of a multistate service provider during that time period, except as provided by paragraph 2 of this subsection. To continue with the election after the five consecutive taxable years, the taxpayer must meet the qualifications to be considered a multistate service provider and renew the election for another five consecutive taxable years.

2. During the election period, the election may be terminated as follows:

(a) Without the permission of the department on the acquisition or merger of the taxpayer.

(b) With the permission of the department before the expiration of five consecutive taxable years.

D. For a multistate service provider under subsection E, paragraph 3, subdivision (b) of this section, an election under subsection B of this section is limited to the treatment of sales for educational services. For a multistate service provider under subsection E, paragraph 3, subdivision (c) of this section, an election under subsection B of this section is limited to the treatment of sales for support services, the payment for which is a percentage of the sales generated by a regionally accredited institution of higher education.

E. For the purposes of this section:

1. "Income producing activity sales" means the total sales from services that are sales in this state under subsection A of this section.

2. "Market sales" means the total sales from services for which the purchaser received the benefit of the service in this state.

3. "Multistate service provider" means either any of the following:

(a) A taxpayer that derives more than eighty‑five per cent percent of its sales from services provided to purchasers who receive the benefit of the service outside this state in the taxable year of election, and includes all taxpayers required to file a combined report pursuant to section 43‑942 and all members of an affiliated group included in a consolidated return pursuant to section 43‑947. In calculating the eighty‑five per cent percent, sales to students receiving educational services at campuses physically located in this state shall be excluded from the calculation.

(b) A taxpayer that is a regionally accredited institution of higher education with at least one university campus in this state that has more than two thousand students residing on the campus, and includes all taxpayers required to file a combined report pursuant to section 43‑942 and all members of an affiliated group included in a consolidated return pursuant to section 43‑947.

(c) A taxpayer that has more than two thousand employees in this state and that derives more than eighty-five percent of its sales from support services provided to a regionally accredited institution of higher education, and includes all taxpayers required to file a combined report pursuant to section 43-942 and all members of an affiliated group included in a consolidated return pursuant to section 43-947.

4. "Received the benefit of the service in this state" means the services are received by the purchaser in this state. If the state where the services are received cannot be readily determined, the services are considered to be received at the home of the customer or, in the case of a business, the office of the customer from which the services were ordered in the regular course of the customer's trade or business. If the ordering location cannot be determined, the services are considered to be received at the home or office of the customer to which the services were billed. In the case of a multistate service provider under paragraph 3, subdivision (c) of this subsection, the benefit of support services shall be deemed received at the billing address of the student to which the services relate.

5. "Sales for educational services" means tuition and fees required for enrollment and fees required for courses of instruction, transcripts and graduation. END_STATUTE

Sec. 5. Section 43-1147, Arizona Revised Statutes, as amended by Laws 2018, chapter 106, section 1, is amended to read:

START_STATUTE43-1147. Situs of sales of other than tangible personal property; definitions

A. Except as provided by subsection B of this section, sales, other than sales of tangible personal property, are in this state if either of the following applies:

1. The income-producing activity is performed in this state.

2. The income-producing activity is performed both in and outside this state and a greater proportion of the income-producing activity is performed in this state than in any other state, based on costs of performance.

B. For taxable years beginning from and after December 31, 2013, a multistate service provider may elect to treat sales from services as being in this state based on a combination of income‑producing activity sales and market sales. If the election under this subsection is made pursuant to subsection C of this section, the sales of services that are in this state shall be determined for taxable years beginning from and after:

1. December 31, 2013 through December 31, 2014, by the sum of the following:

(a) Eighty‑five percent of the market sales.

(b) Fifteen percent of the income‑producing activity sales.

2. December 31, 2014 through December 31, 2015, by the sum of the following:

(a) Ninety percent of the market sales.

(b) Ten percent of the income-producing activity sales.

3. December 31, 2015 through December 31, 2016, by the sum of the following:

(a) Ninety‑five percent of the market sales.

(b) Five percent of the income-producing activity sales.

4. December 31, 2016, by one hundred percent of the market sales.

C. A multistate service provider may elect to treat sales from services as being in this state under subsection B of this section as follows:

1. The election must be made on the taxpayer's timely filed original income tax return. The election is:

(a) Effective retroactively for the full taxable year of the income tax return on which the election is made.

2. During the election period, the election may be terminated as follows:

(a) Without the permission of the department on the acquisition or merger of the taxpayer.

(b) With the permission of the department before the expiration of five consecutive taxable years.

E. For the purposes of this section:

1. "Income-producing activity sales" means the total sales from services that are sales in this state under subsection A of this section.

2. "Market sales" means the total sales from services for which the purchaser received the benefit of the service in this state.

3. "Multistate service provider" means either any of the following:

(a) A taxpayer that derives more than eighty‑five percent of its sales from services or sales from intangibles provided to purchasers who receive the benefit of the service outside this state in the taxable year of election, and includes all taxpayers required to file a combined report pursuant to section 43‑942 and all members of an affiliated group included in a consolidated return pursuant to section 43‑947. In calculating the eighty‑five percent, sales to students receiving educational services at campuses physically located in this state shall be excluded from the calculation. For the purposes of this subdivision, "sales from intangibles" means sales derived from credit and charge card receivables, including fees, merchant discounts, interchanges, interest and related revenue.

5. "Sales for educational services" means tuition and fees required for enrollment and fees required for courses of instruction, transcripts and graduation. END_STATUTE

Sec. 6. Department of gaming; regulatory assessment; pari‑mutuel pool

Notwithstanding any other law, in fiscal year 2019‑2020, the department of gaming shall establish and collect a regulatory assessment from each commercial racing permittee, payable from amounts deducted from pari‑mutuel pools by the permittee, in addition to the amounts the permittee is authorized to deduct pursuant to section 5‑111, subsection B, Arizona Revised Statutes, from amounts wagered on live and simulcast races from in‑state and out‑of‑state wagering handled by the permittee, in the amount of 0.5 percent of the amounts wagered.

Sec. 7. Department of insurance; fee and assessment adjustment suspension

Notwithstanding section 20-167, subsection E, Arizona Revised Statutes, and section 20-466, subsection J, Arizona Revised Statutes, the director of insurance may not revise fees or assessments in fiscal year 2019‑2020 for the purpose of meeting the requirement to recover at least ninety-five percent but not more than one hundred ten percent of the department of insurance's appropriated budget.

Sec. 8. Agricultural fees; continuation; intent; rulemaking exemption

A. Notwithstanding any other law, the director of the Arizona department of agriculture, with the assistance of the department of agriculture advisory council, may continue, increase or lower existing fees from fiscal years 2017‑2018 and 2018-2019 in fiscal year 2019-2020 for services provided in fiscal year 2019‑2020.

B. The legislature intends that the additional revenue generated by the fees prescribed in subsection A of this section not exceed $218,000 to the state general fund, $113,000 to the pesticide trust fund established by section 3-350, Arizona Revised Statutes, and $26,000 to the dangerous plants, pests and diseases trust fund established by section 3‑214.01, Arizona Revised Statutes, in fiscal year 2019-2020.

C. The Arizona department of agriculture is exempt from the rulemaking requirements of title 41, chapter 6, Arizona Revised Statutes, until July 1, 2020 for the purpose of establishing fees pursuant to this section.

Sec. 9. County fiscal obligations; report

A. Notwithstanding any other law, for fiscal year 2019-2020, a county with a population of less than two hundred fifty thousand persons according to the 2010 United States decennial census may meet any county fiscal obligation from any source of county revenue designated by the county, including monies of any countywide special taxing jurisdiction of which the board of supervisors serves as the board of directors. Under the authority provided in this subsection, a county may not use more than $1,250,000 for purposes other than the purposes of the revenue source.

B. On or before October 1, 2019, all counties with a population of less than two hundred fifty thousand persons according to the 2010 United States decennial census shall report to the director of the joint legislative budget committee whether the county used a revenue source for purposes other than the purposes of the revenue source to meet a county fiscal obligation pursuant to subsection A of this section and, if so, the specific source and amount of revenues that the county intends to use in fiscal year 2019-2020.

Sec. 10. Legislative intent

The legislature intends that in fiscal year 2019-2020 the fee prescribed in section 42‑5041, subsection B, Arizona Revised Statutes, be assessed and collected pursuant to the following guidelines:

1. The total amount of fees for all counties, cities, towns, councils of governments and regional transportation authorities may not exceed $20,755,835 in any fiscal year.

2. The share of fees assessed to all counties pursuant to paragraph 1 of this section shall be in proportion to the aggregate amount of monies distributed to counties for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6103, 42-6107, 42‑6108, 42‑6108.01, 42-6109, 42-6109.01, 42-6110, 42-6111 and 42-6112, Arizona Revised Statutes, as a percentage of aggregate distributions to all counties, cities, towns, councils of governments and regional transportation authorities located in a county with a population of more than four hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to sections 42‑5029, 42-6001, 42-6103, 42‑6105, 42‑6106, 42‑6107, 42-6108, 42-6108.01, 42-6109, 42-6109.01, 42‑6110, 42-6111, 42-6112 and 43‑206, Arizona Revised Statutes.

3. The share of fees assessed to all cities and towns pursuant to paragraph 1 of this section shall be in proportion to the aggregate amount of monies distributed to cities and towns for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42‑6001 and 43‑206, Arizona Revised Statutes, as a percentage of aggregate distributions to all counties, cities, towns, councils of governments and regional transportation authorities located in a county with a population of more than four hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6001, 42-6103, 42‑6105, 42‑6106, 42-6107, 42-6108, 42-6108.01, 42-6109, 42‑6109.01, 42-6110, 42-6111, 42-6112 and 43-206, Arizona Revised Statutes.

4. The share of fees assessed to all councils of governments pursuant to paragraph 1 of this section shall be in proportion to the aggregate amount of monies distributed to all councils of governments for the fiscal year two years preceding the current fiscal year pursuant to section 42-6105, Arizona Revised Statutes, as a percentage of aggregate distributions to all counties, cities, towns, councils of governments and regional transportation authorities located in a county with a population of more than four hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42-6001, 42-6103, 42-6105, 42-6106, 42‑6107, 42-6108, 42-6108.01, 42-6109, 42‑6109.01, 42-6110, 42-6111, 42-6112 and 43-206, Arizona Revised Statutes.

5. The share of fees assessed to all regional transportation authorities located in a county with a population of more than four hundred thousand persons pursuant to paragraph 1 of this section shall be in proportion to the aggregate amount of monies distributed to all regional transportation authorities located in a county with a population of more than four hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to section 42-6106, Arizona Revised Statutes, as a percentage of aggregate distributions to all counties, cities, towns, councils of governments and regional transportation authorities located in a county with a population of more than four hundred thousand persons for the fiscal year two years preceding the current fiscal year pursuant to sections 42-5029, 42‑6001, 42-6103, 42-6105, 42-6106, 42-6107, 42-6108, 42-6108.01, 42-6109, 42-6109.01, 42‑6110, 42-6111, 42-6112 and 43-206, Arizona Revised Statutes.

6. Except as provided by sections 42-5033 and 42-5033.01, Arizona Revised Statutes, the population of a county as determined by the most recent United States decennial census plus any revision to the decennial census certified by the United States census bureau shall be used as the basis for apportioning monies pursuant to paragraph 2 of this section.

7. Except as provided by sections 42-5033 and 42-5033.01, Arizona Revised Statutes, the population of a city or town as determined by the most recent United States decennial census plus any revision to the decennial census certified by the United States census bureau shall be used as the basis for apportioning monies pursuant to paragraph 3 of this section.

Sec. 11. Retroactivity

Section 43-1147, Arizona Revised Statutes, as amended by Laws 2013, chapter 236, section 10 and this act, applies retroactively to from and after December 31, 2018.

Sec. 12. Effective date

Section 43-1147, Arizona Revised Statutes, as amended by Laws 2018, chapter 106, section 1 and this act, is effective from and after December 31, 2019.