ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Please click on the blue text to access the areas described. TABLE OF CONTENTS Letter to the Governor DEPARTMENT ORGANIZATION Organization & Organization Chart Strategic Plan Highlights Administrative Services Audit Collections Information Technology Process Administration Property Tax Taxpayer and External Services Tax Policy & Research ARIZONA'S TAXES Revenue Summary (Table 1) Net Revenue to State General Fund (Table 2) Gross Collections of Audit Assessments and Delinquent Tax (Table 3) Transaction Privilege, Use and Severance Tax Income Tax Property Tax OTHER SOURCES OF REVENUE Bingo Estate Tax Luxury Tax Unclaimed Property & Escheated Estates Waste Tire Fee Legislative Summary Bills DEPARTMENT ORGANIZATION Organization and Organization Chart Strategic Plan Highlights Administrative Services Audit Collections Information Technology Process Administration Property Tax Taxpayer and External Services Tax Policy and Research Organization The mission statement of the Department of Revenue is to serve the people of Arizona by administering tax laws with integrity, fairness and efficiency. It is our vision that we set the standard for tax services. Tax laws that fall under the department’s purview are primarily in the areas of income, transaction privilege (sales), use, luxury, withholding, property, estate, fiduciary, bingo, and severance. The director is responsible for the direction, operation, and control of the department to ensure that the administration and collection of taxes are cost effective and performed with high quality to meet taxpayers’ needs. The chief deputy director and deputy director report to the director. The chief deputy director assists the director in the day-to-day operations of the department serving as acting director when the director is absent. Also reporting to the director is the problem resolution officer, who acts as the taxpayer advocate within the department. Reporting to both the director and the chief deputy director is the chief internal auditor, who oversees the internal audit team and acts as liaison with external auditors. The department is organized into eight divisions, each managed by an assistant director. Divisions include: Administrative Services, Audit, Collections, Information Technology, Process Administration, Property Tax, Taxpayer and External Services, and Tax Policy and Research. Each division performs specific functions which are integrated to achieve the department’s major external objectives of efficient tax collection and processing, timely enforcement of tax laws, and accurate valuation of property. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 1 ARIZONA DEPARTMENT OF REVENUE DIRECTOR CHIEF DEPUTY DIRECTOR DEPUTY DIRECTOR Sean Laux CHIEF LEGISLATIVE LIAISON Jorge Frank PROBLEM RESOLUTION OFFICER Office of Economic Research & Analysis Quality Executive COLLECTIONS FRANK BOUCHÉ ASST DIRECTOR Office Collections Special Operations Field Collections Vacant Chief Deputy Director David Raber Vince Perez TAXPAYER & EXTERNAL SERVICES PROPERTY TAX ANTHONY FORSCHINO ASST DIRECTOR FRANK BOUCEK ASST DIRECTOR Administrative Services Assessment Standards & Equalization Special Projects Criminal & Civil Investigations Tobacco Enforcement Debt Set-Off Administrative Support Taxpayer Information & Assistance Bankruptcy License & Registration Collections Information Technology Community Outreach & Education Centrally Valued Property Property Systems Development Unit INTERNAL AUDIT Loretta Bowdish RV EXEC. ASST. to the DIRECTOR TAX POLICY & RESEARCH MICHAEL KEMPNER ASST DIRECTOR ADMINISTRATIVE SERVICES AUDIT DIVISION INFORMATION TECHNOLOGY PROCESS ADMINISTRATION LISA CROSS ASST DIRECTOR TOM JOHNSON ASST DIRECTOR CAROLE MARTIN ASST DIRECTOR LYNETTE NOWLAN ASST DIRECTOR Tax Research & Analysis Budget Office Corporate Income Tax Appeals Accounting Individual Income Tax Appeals Purchasing Transaction Privilege Tax Appeals Disclosure & Federal Relations HUMAN RESOURCES Payroll Facilities Hearing Office Unclaimed Property Employee Development Unit Page 2 Corporate Income Tax Audit Application Support Processing Services Individual Income Tax Audit Business Analysis & Testing Error Resolution Special Taxes - Luxury - Nexus - Bingo Technical Operations & Security Transaction Privilege Tax Audit Project Management & Software Development Audit Information Technology Audit Processing Special Programs & Projects Section DOR Treasury Revenue Accounting Records Management Strategic Plan Highlights MISSION, VISION, VALUES The Mission Statement of the Department of Revenue is “to serve the people of Arizona by administering tax laws with integrity, fairness and efficiency”. This statement of purpose guides our direction, agency actions and decision making. Our Vision Statement, “to set the standard for tax services”, identifies the marker for the kind of agency we want to become and what we hope to achieve. Our company culture is defined by embracing values that are shared among all employees. Our Values are: • Accountability – in actions and work activities. We take responsibility for the work we do. • Accuracy – by exercising care in doing our jobs and following established policies and procedures. • Creativity – in the way we approach our work and serve our customers. • Integrity – we have high ethical standards and make decisions based on facts. • Respect – for co-workers, customers and our Mission. • Results – by setting expectations in our actions and operations to achieve desired outcomes. • Service – to our customers. We listen and try to resolve issues fairly and consistently. TOTAL GROSS REVENUES COLLECTED FY13 Transaction Privilege ........... $7,660,240,313 Income & Withholding ....... $4,630,465,343 Corporate ............................. $ 755,002,081 Other ................................... $ 554,243,318 Total ................................. $ 13,599,951,055 FY14 Transaction Privilege ........... $7,103,749,724 Income & Withholding ....... $4,712,050,380 Corporate ............................. $ 705,727,107 Other ................................... $ 534,154,984 Total ................................. $ 13,055,682,195 Detailed gross revenues are reported under Table 1. ~~~~~~~~~~~~~~~~~~~~~~~~~~~ TOTAL NUMBER OF TAX RETURNS PROCESSED BY TAX TYPE All tax returns are processed through the Taxpayer Accounting System (TAS). Transaction Privilege .....................1,691,958 Individual Income ..........................3,155,596 Withholding ......................................629,619 Corporate Income..............................200,477 Total Returns Processed.................5,677,650 Total Number of Tax Returns Processed by Tax Type 629,619 200,477 GOALS AND OBJECTIVES We continue to focus on our three core goals: • To maximize our return on investment. • To maximize customer and stakeholder satisfaction. • To maximize employee satisfaction. Corporate 1,691,958 Income 3,155,596 TPT W/H KEY MEASURE RESULT HIGHLIGHTS The results of these key measures for fiscal year 2014 are presented as well as comparisons to prior years. ~~~~~~~~~~~~~~~~~~~~~~~~~~~ ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 3 TOTAL NUMBER OF E-FILED INDIVIDUAL INCOME TAX RETURNS RECEIVED FY12 ............................................ 1,959,352 FY13 ............................................ 2,146,479 FY14 ............................................ 2,490,000 Number of E-Filed Income Tax Returns (in Millions) 3.00 2.50 2.00 1.96 2.14 AVERAGE TIME TO ISSUE INCOME TAX REFUNDS The average time to process an income tax refund is measured in calendar days. The data includes cycle times for both paper and electronic refunds. A portion of those electronic filers also elect to receive their refunds electronically via direct deposit. FY12 ............................................ 9.81 days FY13 ............................................ 7.40 days FY14 ............................................ 9.38 days 2.49 Average Time to Issue Income Tax Refunds (in Calendar Days) 1.50 12.00 1.00 7.40 8.00 0.00 FY12 FY13 FY14 9.38 9.81 10.00 0.50 6.00 4.00 2.00 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 0.00 TOTAL NUMBER OF INDIVIDUAL INCOME TAX REFUNDS The total number of income tax refunds processed includes both electronic direct deposits and paper refund warrants. FY12 ............................................ 2,031,879 FY13 ............................................ 1,998,845 FY14 ............................................ 2,053,037 Number of Individual Income Tax Refunds Processed (in Millions) 2.06 2.04 FY12 NUMBER OF NEW BUSINESS LICENSES PROCESSED New business licenses are processed at walk-in counters, through the mail and via on-line services. FY12 ...................................................40,919 FY13 ...................................................41,604 FY14 ...................................................40,269 Number of New Business Licenses Processed 42,000 2.02 2.00 41,604 41,500 1.99 41,000 1.98 40,919 40,269 40,500 1.96 FY12 FY13 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ FY14 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 2.05 2.03 FY13 FY14 40,000 39,500 FY12 FY13 FY14 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 4 AVERAGE NEW BUSINESS LICENSE TURNAROUND TIME License turnaround time is defined as the point from when the initial application or request is received via walk-in, mail or electronically and ending when the approved license is mailed to the taxpayer. FY12 ................................................ 7.9 days FY13 ................................................ 5.0 days FY14 ................................................ 8.0 days New Business License Turnaround Times (in Calendar Days) 10.0 8.0 8.0 7.9 6.0 5.0 4.0 NET ENFORCEMENT REVENUE WITH GENERAL FUND TOTALS The enforcement program generated results at 112.6% of goal, surpassing fiscal year 2014 targets. This chart also shows how much of the enforcement revenues went to the General Fund. FY14 Net Targets Collections ...................................... $229.2M Accounts Receivable ...................... $124.1M All Audit ......................................... $135.1M Total Revenue ................................ $488.4M General Fund Revenue ................... $324.2M FY14 Net Actual Collections ...................................... $232.2M Accounts Receivable ...................... $152.8M All Audit ......................................... $140.5M Total Revenue ................................ $525.5M General Fund Revenue ................... $363.4M 2.0 0.0 FY12 FY13 FY14 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ TOTAL NET ENFORCEMENT DOLLARS Total net enforcement dollars represent all revenue collected by collectors and auditors through various enforcement programs. Net Enforcement Dollars Compared to Targets (in Millions) $600.0 $500.0 $400.0 $300.0 $200.0 $100.0 $0.0 FY12 ......................................$ 483,890,612 FY13 ......................................$ 503,986,414 FY14 ......................................$ 525,555,010 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Net Enforcement Dollars (in Millions) $530.0 $520.0 $510.0 $500.0 $490.0 $480.0 $470.0 $460.0 $525.6 $503.9 $483.8 FY12 FY13 FY14 ~~~~~~~~~~~~~~~~~~~~~~~~~~~ ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 5 RETURN ON INVESTMENT Return on investment is calculated by dividing the total number of gross revenue dollars received and processed by the department’s total operating budget. For fiscal year 2014, $176.90 was produced for each dollar spent in the total DOR budget. FY12 .................................................$179.80 FY13 .................................................$191.57 FY14 .................................................$176.90 Return on Investment AVERAGE GROSS COLLECTIONS GENERATED BY COLLECTORS AND AUDITORS Collector ......................................$1,678,378 TPT Auditor ................................$1,962,419 Corporate Auditor .......................$ 686,693 Individual Income Auditor ..........$ 1,117667 Collections averaged $1.7 million dollars collected per collector in fiscal year 2014. Auditors collected at different levels depending upon the type of audit work they performed; ranging from a little over $2.0 million per TPT auditor to $687 thousand per corporate income auditor. $1,000.00 $179.80 $191.56 $176.90 Average Gross Collections Generated by Collectors and Auditors (in Millions) $100.00 Millions $10.00 $1.00 FY12 FY13 FY14 $2.50 $2.00 RETURN ON INVESTMENT FOR ENFORCEMENT PROGRAM The return on investment for the enforcement program is calculated by dividing the total number of net enforcement dollars collected by the department’s total operating budget. For fiscal year 2014, $7.12 of enforcement revenue was collected for each dollar spent in the total DOR budget. $1.96 $1.12 $1.50 $1.00 $0.69 $0.50 $0.00 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ $1.68 Collector TPT Auditor IIT Corporate Auditor Auditor ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ FY12 .....................................................$6.69 FY13 .....................................................$7.10 FY14 .....................................................$7.12 Return on Investment for Enforcement Program $8.00 $6.69 $7.10 $7.12 FY13 FY14 $4.00 $2.00 $1.00 FY12 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 6 TAXPAYER SATISFACTION RATINGS FOR THE TAXPAYER & EXTERNAL SERVICES DIVISION These scores were received from taxpayers rating the services of the employees in the Taxpayer & External Services division’s Taxpayer Information & Assistance call center. (All satisfaction ratings tracked at the department have a 1 to 5 scale, 5 being the highest rating.) FY12 ..................................................... 4.49 FY13 ..................................................... 4.44 FY14 ..................................................... 4.60 Satisfaction Ratings for Taxpayer & External Services Division 5.00 4.49 4.00 PERCENT OF TIME THE LOCAL AND WIDE AREA NETWORK (LAN/WAN) IS AVAILABLE. Local and wide area network availability is a measure for the Information Technology Division to assess their ability as a service provider. FY12 ............................................... 100.0 % FY13 ............................................... 100.0 % FY14 ............................................... 100.0 % Computer System Availability 100.00% 100.00% 100.00% FY12 FY13 FY14 4.60 4.44 3.00 2.00 1.00 FY12 FY13 FY14 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ The key measures reported here serve as a general overview of how the department is progressing in line with the strategic plan. The strategic plan keeps us aligned with our Mission, Values, Vision, and our day to day performance as a department. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 7 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 8 ADMINISTRATIVE SERVICES Mission Statement: To provide support and expertise in delivering excellent services by understanding our products and customers. The vision of the Administrative Services Division is to be the leader in innovative and proactive customer support. The Administrative Services Division is responsible for the oversight of the department’s financial and employee services. The division consists of the following sections/units: Accounting The Accounting Unit processes accounts payable invoices, provides travel services including employee reimbursement, and oversees the fixed assets inventory. Budget Office The Budget Office is responsible for monitoring current year expenditures against the approved budget, coordinating preparation of the department’s budget, providing budget information and analysis to the Director and the department’s Leadership Team. Education Development The Employee Development Unit (EDU) plans, develops, organizes, and executes training for employees throughout the agency. The unit is responsible for providing training for all new employees, interns and other state agency personnel, who will be conducting business in collaboration with the Department. The unit staff is responsible for developing and delivering both classroom and computer-based courses. The EDU collaborates with other units throughout the Agency, such as Community Outreach and Education, Human Resources, and Information Technology, to streamline resources and training. The unit is also charged with managing or conducting courses coordinated by the Department of Administration, e.g., Leadership Arizona and MAP Training for Supervisors. Facilities Management The Facilities Management Section coordinates building facility maintenance, including troubleshooting building utility issues (i.e. chillers, UPS, elevators etc.) remodeling office areas at the department’s four buildings and coordinating tenant improvements to the buildings in cooperation with ADOA or the landlord. Facilities Management receives and logs all goods and supplies purchased by the department, manages building security access and the security guards. The section oversees safety issues such as fire drills, safety inspections, risk management issues and interaction with the State Fire Marshall. The section also oversees the mailroom which is responsible for the receipt and sorting of all mail received at the 1600 W Monroe address. Hearing Office The Hearing Office holds hearings and issues written decisions on protests of department assessments and refund denials relating to income tax, withholding tax and estate tax. Payroll The Payroll Unit is responsible for oversight of the department’s employee payroll, which includes accurate tracking of hours worked, leave taken and payroll deductions through HRIS, ASRS and RASL Retirement processing. Purchasing The Purchasing Unit is responsible for contracting and purchasing all goods and services required by the department. The unit oversees all contract and maintenance agreements and is the program administration area for the State Purchasing Card Program (P-Card). Unclaimed Property This program is administered to return abandoned property such as dormant bank accounts, insurance policy proceeds, security deposits, unclaimed stocks, bonds, and mutual fund accounts, safe deposit box contents and all types of un-cashed checks to the property’s rightful owners. Through a variety of methods, the unclaimed property staff locates the owners and processes claims in order to return the property. The staff facilitates the reporting and remitting of abandoned property from businesses, financial institutions and other entities that hold the property. The unit is also responsible for promoting compliance with the Revised Arizona Unclaimed Property Act. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 9 HIGHLIGHTS IN FISCAL YEAR 2014 Accounting  The Accounting Unit processed 97% of all invoices within 30 days. Budget  Coordinated the efforts of each division with IT to ensure that adequate resources were available to implement several legislatively-mandated new programs, such as TPT Reform and TAS/AZ Taxes Upgrades.  Employed zero-based budgeting principles within several major cost centers to appropriately allocate agency resources in critical areas.  Delegated Budget Manager to the agency Strategic Planning Team to provide fiscal expertise for ongoing strategic planning efforts. Education Development  Updated computer-based training modules.  Conducted Agency-wide training on Windows 7 & Microsoft Office 2010 applications.  Reinstituted Lunch & Learn opportunities for employees.  Developed a training module and trained over 50% of employees on a voluntary basis on how to write a self-appraisal as part of the annual performance evaluation process.  Collaborated with CORE on a TPT Simplification training plan. Facilities  Relocated the warehouse and Process Administration section to a new location.  Closed the old warehouse location.  Completed Tennant Improvements on a building shared with the Arizona Department of Motor Vehicles in Mesa, AZ. Constructed a secure area to house four License and Registration employees to complete licensing transactions.  Removed all modular equipment from the existing East Valley Office in Gilbert, AZ and moved all employees to the Phoenix and Mesa locations. Closed the Gilbert location.  Hired an additional Building Maintenance Technician for the Facilities Department. Carpeted and painted the third floor that was vacated due to the Process Administration move.  Painted the second floor that was vacated due to the Process Administration move.  The mailroom duties for all mail received at the 1600 W. Monroe address were transitioned from the Process Administration Division to Facilities in December 2013.  Completed 98% of all work orders within 24 hours and received an average customer survey rating of 4.75 out of a possible 5 for the year. Payroll  DOR completed its first year using ETE (Employee Time Entry).  Purchasing  All procurement such as solicitations, contracts and purchase orders are issued through the new statewide ProcureAZ. Procurement reform was implemented resulting in a reduction in DOR’s procurement authority and a new relationship with the State Procurement Office was developed to address procurements above DOR’s authority. Hearing Office  The Hearing Office workload had increased significantly starting in fiscal year 2010. For fiscal year 2014 the Hearing Office continues to handle nearly as many cases as it did in fiscal year 2000 and 2001 when the Hearing Office had twice the staff. Unclaimed Property  Unclaimed property staff returned over $34 million to current and former Arizona residents.  More than 46,000 properties were returned to over 17,000 owners.  The average time to process and pay a claim was 43 days, and reports were processed, on average, within 30 days.  Nearly $110 million in new property was added to the database, and over 18,000 claims for property were received.  Nearly 9,000 reports were processed by the Unit’s compliance staff and over 658,000 new properties were added to the database. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 10 AUDIT Mission Statement: To promote voluntary compliance by auditing, identifying common areas of non-compliance and educating taxpayers. The Audit Division consists of the Corporate Income Tax Audit, Individual Income Tax Audit, Transaction Privilege and Use Tax Audit, Special Taxes, Processing and Information Technology sections. The division’s major emphasis is to treat taxpayers equitably, fairly and respectfully. Training and educating our employees is instrumental in developing skilled auditors. Staff members are professional, courteous employees whose expertise is reflected in their performance and achievement of audit goals and objectives. We take pride in our accomplishments and consistently strive to be more efficient, exceed expectations and be viewed as a model audit program. The auditor is allowed to work in a more efficient and expedient manner by using all available data sources in the Audit process which allows for a more complete file to be created on audit cases. Receiving electronic data from the Internal Revenue Service allows the Department to match with all other resources on the taxpayers and tax years involved without requiring manual research by our administrative support staff. Audit files now contain all relevant information that an auditor would need in order to process the audit case and make all necessary adjustments. This results in an audit being issued in a timelier manner since manual clerical support research is not required. Corporate Income Tax (CIT) Audit The Corporate Income Tax Audit Section is responsible for all original and amended corporate income tax filings. Returns selected for audits are researched and examined at State offices or the taxpayer’s corporate headquarters. This is accomplished by reviewing available public information and supporting documentation furnished by the taxpayer. The goal is to operate in the most effective and efficient manner, for both the taxpayer and the State. Audit activities include analyzing and verifying returns, refund claims, net operating losses, tax credits and adjustments based upon federal revenue agent reports. Transaction Privilege and Use Tax (TPT) Audit The Transaction Privilege and Use Tax Audit Section is comprised of the Field Audit and License Compliance Units. The overall goal of the Section is to improve voluntary compliance by providing education to the taxpayers. The Field Audit Unit conducts the majority of its audits within Arizona but out-of-state audits are conducted as well. The determining factor is the location of the taxpayer’s books and records. The Field Audit Unit also handles refund requests. The License Compliance Unit continues to prove to be a successful unit. The License Compliance officers do both office research and field work. Their goal is to seek out those businesses that are not licensed for transaction privilege and/or withholding tax, so taxpayers can voluntarily comply with the tax laws. Individual Income Tax (IIT) Audit The Individual Income Tax Audit Section has a primary goal of providing quality service by using the audit process as an educational and cooperative process that helps to improve voluntary compliance by ensuring taxpayers report and pay the correct amount of tax due. Most taxpayers can be confused, frustrated and overwhelmed by the process of an audit and the Section works to reduce the stress by placing emphasis on treating taxpayers in a courteous and professional manner with as little disruption as possible. Special Programs and Projects The Special Program and Projects section is comprised of three units: Program Cities Unit, Withholding Tax Unit, and Penalty Review Unit. The Program Cities Unit is the liaison between Department of Revenue and all cities. The unit assists cities and towns contracted with DOR regarding the administration, collection and audit of TPT. This unit is responsible for maintaining the Model City Tax Code. The Penalty Review Unit responds to taxpayer requests for abatement of penalties for all tax types. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 11 The Withholding Tax unit is responsible for withholding tax filings. Returns selected for audits are researched and examined. In some cases, federal information is utilized and confirmed before proceeding with an audit. Upon confirmation of federal information, taxpayer information and supporting documentation are reviewed. Special Taxes (ST) Special Taxes comprises four separate units: Bingo, Luxury Tax, Nexus, and Desk Audit. The Bingo Unit is responsible for administering the Bingo laws pursuant to Title 5 of the Arizona Revised Statutes. The Unit issues licenses, processes monthly financial reports (returns) and provides customer service to Bingo licensees and patrons. The Luxury Tax Unit administers the excise tax imposed on tobacco distributors and liquor wholesalers. The Unit is responsible for customer service, licensing, auditing and ensuring that the department is in compliance with the tobacco manufacturers’ Master Settlement Agreement. Cigarette distributors pay tobacco taxes by purchasing tax stamps from the department to affix to the cigarettes, thereby reflecting that the tax has been paid. Tax is paid on other tobacco products based on weight. The Unit is also responsible for auditing and providing customer service to liquor wholesalers. The Nexus Unit is responsible for identifying outof-state companies and individuals who have an obligation to file tax returns with the State of Arizona. Nexus is the connection required to exist between a State and potential taxpayer such that the State has the constitutional right to impose the tax. The United States constitution limits the State’s right to impose a tax through the Due Process and the Commerce Clause. Non-resident individuals are required to pay tax on all income derived from Arizona sources provided they meet the filing threshold. The unit operates various out-of-state non-filer programs for Transaction Privilege Tax, Corporate Income Tax, and Individual Income Tax. The Unit is also responsible for responding to nexus inquiries and various other nexus programs that identify taxpayers that may have a filing requirement. The department’s Voluntary Disclosure Program is administered by the Nexus Unit. This program consists of taxpayers voluntarily coming forward to file tax returns for Transaction Privilege/Use Tax, Corporate, Partnership, Individual, and Withholding. The program facilitates the process for taxpayers who have determined a filing requirement exists, and therefore, wish to be in compliance with Arizona tax laws. The Desk Audit Unit is responsible for identifying taxpayers that may have a use tax filing requirement. The Unit receives data from several sources related to taxable transactions and issues the taxpayers a billing or a notice of proposed assessment. During this fiscal year, it was decided that the Nexus Unit and Desk Audit Unit have similar responsibilities and processes. Therefore, the Desk Audit Unit was transferred from the Transaction Privilege Tax Section to the Special Taxes Section. Audit Processing Audit Processing handles the audit support for all audit operations; TPT Audit, Corporate Income Tax, Individual Income Tax, Bingo, and Special Taxes. The Section keys all of the audit assessments into the system (TAS) and audit data bases, hand stuffs and mails all assessments, opens all mail and correspondence received, maintains all audit files and researches and corrects system issues. Audit Information Technology (AIT) The Audit IT Section is made up of tax specialists from the three major tax types, Individual Income Tax, Corporate Income Tax and Transaction Privilege Tax. These personnel have acquired the technical backgrounds in the various software and hardware that the department uses to support the daily functions of the Audit Division. They utilize their tax backgrounds with their IT technical backgrounds to support the large volume of data that the Audit Division needs to perform their function of auditing under the various taxing sections. The Audit IT Team creates, develops, and supports the various tracking databases which retain all the information on the activities which take place in each of the taxing section. This includes but is not limited to the selection of the audits, the assignment of the audits, and the capturing of the final data of each of the audits. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 12 HIGHLIGHTS IN FISCAL YEAR 2014 Corporate Income Tax Audit Section  Assessed over $45 million.  Collected $10 million.  Denied $10 million in refund claims.  Processed 500 Federal Revenue Agent Reports.  Revised filters used in data analytics to improve outcomes from audit selection.  Enhanced training practices and content for new auditors.  Assisted with efforts to combat fraud. Individual Income Tax Audit  Completed over 123,000 audits for total assessments of $32.6 million and collected $24.6 million in additional revenue.  The computer generated assessment (CGA) program continues to be an extremely successful program. The results were the issuance of 59,150 audits for total assessments of $6.8 million.  Initial audit assessment quality is constantly improving. For the fiscal year, over 96.8% of our initial audit assessments required no further changes. The goal was to achieve a rate of 88%.  Provided resources to the Department’s Fraud Team which helped in preventing refunds deemed to be fraudulent from being issued. Transaction Privilege and Use Tax Audit  Field Audit Unit audited 341 taxpayers, produced 1,957 units, assessed over $28 million and collected in excess of $18.5 million in tax revenue.  License Compliance Unit licensed 1,716 new taxpayers and collected over $77 million.  Customer surveys averaged a score of 4.48, using a scale of 1 to 5 with 5 being excellent.  Employees from both units served on committees for the implementation of HB2111 – TPT Reform/Simplification. Special Programs and Projects  The Penalty Review Unit closed 2,380 cases. Special Taxes  The Luxury Tax Unit reviewed tobacco distributor reports for compliance with the Master Settlement Agreement and the Unit began the distributor outreach program by visiting individual distributors and inviting distributors to the Tobacco Symposium that is scheduled for October 2014.  The Luxury Tax Unit assessed $2.7 million and collected $1.6 million this fiscal year.  There were 465 taxpayers that came forward in the department’s Voluntary Disclosure program and the Nexus Unit collected approximately $32 million.  The Desk Audit Unit collected $4.2 million from 2,599 taxpayers. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 13 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 14 COLLECTIONS Mission Statement: To collect delinquent tax liabilities in a fair manner, to promote voluntary compliance through the impartial enforcement of tax laws, and to provide efficient service to the taxpayers of this state. Office Collections After the Accounts Receivable system has completed the prescribed billing cycle, cases are referred to Office Collections. Collectors attempt to reach account resolution on mostly income tax cases, via the telephone and with targeted mailings. Office Collections uses an Automatic Call Distribution (ACD) system to process and handle incoming calls. This system has an Interactive Voice Response (IVR) module that provides automated responses for some basic collections questions such as account balances. Office Collectors can request that liens and levies be filed and can negotiate installment payment plans. If they are not able to resolve a case, it might be referred to Field Collections or the Attorney General’s Office for further action. Field Collections If an Office Collector determines that a case cannot be resolved by phone and that a field (on-site) approach is warranted, the case is referred to the Field Collections section. Field collectors are assigned a territory (by ZIP code) and are responsible for all types of tax cases (mostly large balance business cases) in the territory. Field collectors use a combination of telephone and field visits. In addition to recommending lien and levy action, Field collectors may subpoena records, investigate Offers-in-Compromise, conduct seizures and write off cases if they are determined to be uncollectible. The objective in Field Collections is to reach closure in the least intrusive manner. Seizure actions are only used as a last resort after all other more reasonable actions have failed. Administrative Support Provides all support functions for the division: payroll, mail, maintenance on collection accounts, request levies, filing and releasing of tax liens and providing Certificates of Compliance. Debt Set-Off The area is responsible for the offset of income tax refunds to debts owed to other state agencies, the courts and political subdivisions of the state. The process involves matching data received from other agencies against refund data, notifying participating agencies and taxpayers when matches are made, validating the information, and paying the claims when warranted. The unit’s duties also include qualifying agencies and courts for participation in the program and resolving discrepancies as necessary to protect the rights of both taxpayers and claimants. HIGHLIGHTS IN FISCAL YEAR 2014 • • The division was responsible for the generation of total revenues of $232 million, a $7 million (3%) increase over the prior fiscal year. Outsourcing / Business Re-alignment - In fiscal year 2013, Collections began sending income accounts to outside collections agencies under our contract for outsource collections activities. During fiscal year 2014, in anticipation of TPT reform, the division undertook a major realignment of staff to focus on business taxes, which makes up 65% of inventory and 71% of collection revenue. As a result, the majority of our staff is now dedicated to collection of business taxes or answering inbound taxpayer calls. In order to facilitate that change, the majority of our income tax inventory is now assigned to outside collections agencies for collections. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 15 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 16 INFORMATION TECHNOLOGY Mission Statement: The IT Division provides the department with an integrated technology environment and automated business processes which allow for timely, efficient, and secure transfer of information to employees, taxpayers, and other agencies. The IT Division provides technology and services to all Divisions. All teams in the Division strive to continually improve processes, tools, and standards in order to provide improved service to our internal customers and the Arizona taxpayers. Applications Support Application Services is responsible for providing both software development and application support services to all Divisions. The Application Software Development team is responsible for building high quality, cost effective, sustainable software solutions for the taxpayers, the department and to meet legislative mandates. This team also provides on-going enhancements to improve efficiency of the department’s information systems. The Application Support teams work with the various divisions to resolve defects, and support technology-enabled business processes. Application support provides operational, support and maintenance services for all department tax processing systems, including: • All tax processing systems, including: Taxpayer Administration System (TAS), AZTaxes (www.AZTaxes.gov), electronic filing (MeFile), Data Entry systems, Cashier, and Remittance. • Property and Audit mainframe applications. • System scheduling and processing services, ensuring system processes are completed successfully. • Support, management and monitoring of the tax systems infrastructure, application services and more than 200 system and inter-agency interfaces. Managed Services Group The Managed Services Group (MSG) acts as a liaison between IT and the functional areas within DOR (Collections, Audit, Taxpayer and External Services, etc.). MSG administers all System Investigation Reports (SIRs) and ensures requests are properly tracked and prioritized. MSG is responsible for establishing policies, standards, methodologies, and guidelines pertaining to business requirements gathering and application testing, and the Help Desk. MSG works closely with the functional areas to better understand their business and IT requirements and seek ways to improve efficiencies through the use of application technology. MSG is responsible for testing all software applications prior to deployment, which includes implementing changes or fixes to new and existing applications. Operations and Security The Operations and Security team consists of the Server and Network Engineering, Database Administration, and Information Security. Network Engineering and Server Support is responsible for operations and oversight of all of the agency’s data centers including all servers, storage systems, infrastructure and networks. The Database Administration Team assures availability, reliability, capacity and performance management of the department’s databases. The databases include tax process Analytic and Reporting systems. Information Security (InfoSec) ensures a sound security program is in place throughout the department, with the primary focus of protecting the information and systems based upon governance and security best practices. The InfoSec Program includes: • Ensure compliance to policy & regulatory mandates • Manage risks & vulnerabilities in accordance with NIST800-53 & IRS Pub1075 • Participate in Vendor Oversight Committee Audits employing BS27001 • Coordinate/Perform InfoSec Forensics activities • Assist & review Information security policies standards and procedures • Provide Employee Awareness of Information Security ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 17 Business Solutions Group The Business Solutions Group (BSG) is responsible for information technology governance and project management. The Project Management Office is responsible for establishing, maintaining, and enforcing project management processes, procedures, and standards for IT projects. It also leads the governance of projects through a steering committee consisting of top tier business leaders. The Vendor Management Office The Vendor Management Office (VMO) is responsible for building and managing relationships with the department’s IT suppliers and service providers to increase customer satisfaction, reduce cost, and improve services. The primary goal of the VMO is to partner with vendors, not only to negotiate the best terms possible, but to gain commitment to assist and support operations of the department. HIGHLIGHTS IN FISCAL YEAR 2014 • • • • • • Supported a new processing record of more than 2,284,735 electronic returns using the MeFile system. Upgraded core tax system web servers and application. Sustained and improved the technical environments that support core business processes and are used to process all tax filings, payments and returns for the taxpayers. Continued upgrades to key system databases increasing reliability, availability and performance during the primary tax season. Implemented more than 89 business-driven changes to the tax systems. Addressed critical legislative mandate from the legislative session including: o Prepaid wireless E911 Excise Tax (HB2094) ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 18 PROCESS ADMINISTRATION Mission Statement: To provide quality service by processing all tax returns and payments accurately and timely for Arizona taxpayers. revenue and taxpayer accounting services, including accounts receivable management and refund/warrant management. The Process Administration Division serves as the catalyst and cornerstone of the Department of Revenue. The division is responsible for the initial processing of all tax returns, remittances, supporting documentation, and correspondence received by the department. This includes opening, sorting, and reviewing all returns and accompanying mail, performing archival capture functions, remittance deposit preparation, and data entry into the computer systems. These functions are performed using both manual input of documents and imaging technologies. The division processes over five million returns and remittances each year. Individual unit roles and responsibilities are defined below. Records Management Records Management is responsible for the filing, maintaining, storing and disposal of all tax documents as well as providing access to tax returns and license applications within the department. Records Management is also the source of assistance when developing customized records retention and disposition schedules for the department. Processing Services Processing Services is responsible for the opening, batching and processing of tax documents for the largest four tax types: Individual Income, Transaction Privilege Tax, Withholding, and Corporate. Mail Services is responsible for the receipt, sorting and delivery of tax documents, payments and correspondence received by the agency. Processing is responsible for batching documents and identifying any documents missing proper information prior to data being entered for all taxes. HIGHLIGHTS IN FISCAL YEAR 2014 • • DOR Treasury Treasury is responsible for processing taxpayer payments and entering taxpayer data using several different computer systems. Error Resolution Error Resolution, which includes the Review unit, is responsible for ensuring accuracy in the processing of returns and payments for the largest four tax types. Revenue Accounting Revenue Accounting is responsible for providing financial services for the department. This includes the reconciliation and reporting of tax dollars deposited to the State’s financial institution, • • • The volume continues to grow and the Process Administration Division continues to respond. In comparing fiscal year 2013 to fiscal year 2014, the number of returns increased by 4.43% and the payments by 4.25%. The division managed to process the additional volume without increased resources and very minimal impact to the time it takes to process a return or deposit the money to the bank. The Process Administration Division began working with the Governors Transformation Office on a project to review the current procedures for handling the returns and payments. The goal is to make the process more efficient while still maintaining a quality of work. A team was formed with employees from various units across the division. During this fiscal year the team began to examine the processing of the 2D Bar Code Income Tax Returns and have identified several improvements that will be implemented during fiscal year 2014. Received and processed 5.7 million tax documents for the main four tax types. Received, processed, and deposited 4.3 million payments with an average deposit time of 0.74 days. Issued 2.1 million refunds to individual income taxpayers. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 19 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 20 PROPERTY TAX MISSION STATEMENT: To ensure fair and uniform property values for Arizona taxpayers. The vision of the Property Tax Division is to deliver excellent property tax services. The Property Tax Division is responsible for general oversight of the county assessors in the administration of Arizona’s property tax laws and for the valuation of complex, geographically disbursed properties. Functional areas of the Property Tax Division and primary responsibilities of each are discussed below. Centrally Valued Properties The Centrally Valued Properties Team annually determines the full cash value of all utilities, railroads, mines and other complex or geographically dispersed properties (see page 77 for a list of the industries the department values). Values determined for such properties, with the exception of flight property and private rail cars, are transmitted to the appropriate county treasurers for collection of property taxes. The department collects taxes levied on flight property and private rail cars and deposits the taxes with the State Aviation Fund and the General Fund, respectively. In addition, the team assists county assessors with maintaining and updating a standardized cadastral mapping system. The team prepares tax area code maps that depict boundaries of taxing jurisdictions authorized to levy property taxes. Assessment Standards and Training The Assessment Standards and Training Team oversees and ensures the application of uniform appraisal methods and techniques used by county assessors to determine the value of locally assessed property. The team also presents technical workshops to county assessors and provides an appraiser/assessor certification program for appraisal staff. Personal Property/Manuals The Personal Property/Manuals Team oversees the development and application of personal property valuation procedures and manuals and provides technical workshops to county personnel. The Manuals Team updates and produces manuals and guidelines. They also review legislative enactments and changes to existing property tax statutes, and prepare an extract of the property tax statutes found in Title 42. CAMA / Construction Cost The Computer-Assisted Mass Appraisal (CAMA) and Construction Cost Team maintains the Supplemental Component Costs as well as the Residential and Commercial Depreciation schedules in order to promote the use of uniform component costs throughout the State when counties value property using the cost approach. The team also provides training and assistance for county appraisers in the use of the cost and market approaches to value, including sales based valuation models. Central Information Services The Central Information Services Team coordinates the data processing services necessary to support property tax administration. The support services provided include management of automated systems used in the preparation of assessment and tax rolls, the preparation of valuation abstracts, property tax notices of value and statements of taxes due. The team verifies County Property Tax Rates, including Additional State Aid to Education calculations. Computer-Assisted Valuation The Computer-Assisted Mass Appraisal Team develops sales-based models for residential properties and maintains and assists county assessors with the Land Valuation System. Forms The Forms Team is responsible for producing forms prescribed for use in the administration of the property tax system. Training and Certification The Training and Certification Team provides an appraiser/assessor certification program for county appraisal staff. They also present additional classes on varied appraisal topics to assist with continuing education for those certified appraisers. Equalization The Equalization Team is responsible for annually measuring county assessor performance for compliance with established full cash/market value standards. The team conducts sales ratio studies ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 21 throughout the yearly valuation cycle to assist counties in complying with valuation standards. • HIGHLIGHTS IN FISCAL YEAR 2014 • • • • The Centrally Valued Property Team valued approximately 860 taxpayers totaling $38 billion in full cash value. There were 27 taxpayers (approximately 3%) who appealed their values to the department in the first level of appeal; 10 taxpayers went on to file petitions with the State Board of Equalization. Of those 10 petitions, three were settled and seven were heard before the Board. The Board decided in favor of the Department in all seven cases. The Assessment Procedures Team handled 14 property tax appeals for the 2014 tax year as the result of conflicts of interest in a county assessor’s office. Eight of the appeals involved administrative level appeals to the Assessor and the Board of Equalization. Five of the appeals progressed to superior court. Two appeals were settled, one was reduced at the Board of Equalization, and the Department prevailed on behalf of the county in 11 cases. The Assessment Procedures Team published the Commercial Property Market Study which compiles sales, income and expense data, and capitalization rate data for 10 income producing types of property in the 13 non-metro counties statewide. The Forms Team reviewed and updated 20 property tax forms and added a revision date field for each property tax form listed on the DOR website. The Team also held a Property Tax Forms Review Committee meeting with representatives of 12 county assessors’ offices, reviewing the DOR forms used in administering the property tax program statewide. The Forms Team also updated return forms, instructions, and tax rate charts for use with the GPLET program for the 2013 tax year. • The Training and Certification Team launched a cloud-based education tracking software system and trained liaisons from each of the 15 counties in the use of the software in order to automate registration, reporting of grades and communication associated with courses provided to the appraisal students. The Training and Certification Team provided training to 59 students participating in Provisional courses, 49 students attending Level 1 certification courses and 25 students attending Level 2 certification courses in the DOR Appraiser Training and Certification Program this year. After a completion of 18 months work experience or the equivalent toward work experience, a total of 41 students received their Level 1, Level 2 or Level 3 certification during the fiscal year. The Property Tax Division continued its partnership with Rio Salado Community College this fiscal year. The partnership allows students attending DOR appraiser training courses to receive nine semester hours of college credit for completing Level 1 courses and six additional semester hours of credit for Level 2 courses. A total of 28 students completed the Level 1 series of courses and 14 students completed the Level 2 series of courses in the Rio Salado program this fiscal year. The Personal Property Team conducted five personal property workshops throughout the state, providing continuing education via training on topics related to legislative updates, new mobile home identification insignia, statewide exemption tracking, and personal property valuation in conjunction with real property models. The team redesigned the personal property manual and updated the Personal Property class associated with appraiser training under the format of the redesigned manual for the 2015 training cycle. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 22 TAXPAYER AND EXTERNAL SERVICES Mission Statement: To meet the needs of our customers in a professional manner, with the highest standards of integrity. Community Outreach Resources and Education (CORE) Community Outreach Resources and Education provides the department’s outreach and education program for taxpayers and tax practitioners. CORE’s primary goal is to promote voluntary compliance with tax laws through education. CORE continues to work with the Internal Revenue Service, other federal, state, and local agencies, and Small Business Development Centers, as well as the Small Business Administration and other business associations to strengthen its outreach efforts and audience scope. CORE continues to coordinate state tax training for the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. VITA and TCE sites provide vital free tax preparation services for low income, elderly and non-English speaking populations. This section is responsible for the creating and maintaining the department’s publications as well as preparing the Annual Report. Criminal and Civil Investigations The Criminal and Civil Investigations Section includes the Tobacco Enforcement Unit and the Criminal Investigations Unit. The Tobacco Enforcement Unit enforces the tobacco luxury taxes by educating retailers and wholesale suppliers, inspecting tobacco products for compliance with tax stamp requirements and seizing products that are not being sold legally in Arizona. The unit also investigates criminal activity, such as the importation and sale of counterfeit tobacco products. The Criminal Investigations Unit investigates tax evasion, improper or fraudulent tax activity by both taxpayers and preparers, and other related issues. Both units work with other law enforcement organizations to prosecute tax-related crimes. Forms This unit is responsible for designing and printing all official department forms, except Property Tax related forms, and review and approval of all substitute forms used by software vendors in preparing Arizona tax returns. Legislative Liaison The liaison represents the department at the Legislature. The liaison coordinates the analysis, research and testimony of tax legislation, reads, analyzes, and tracks bills through the legislative process; coordinates implementation of legislation after passage. Also acts as the liaison between legislators and the department including handling constituent issues for legislators and the Governor’s office, and monitoring federal law changes. License and Registration (L&R) The License and Registration section provides assistance to taxpayers, business owners, corporate officers, tax practitioners, companies and other representatives who wish to conduct business within the State, to obtain required licensing, make payments to the State or to purchase tobacco stamps. The L&R customer service team (CS) is responsible for assisting this group of constituents when they visit one of the three department locations. The CS team provides education and assistance with establishing and securing a Transaction Privilege Tax License, a Withholding Registration or a Use Tax Certificate. Additionally, the CS team provides education and assistance by responding to general inquiries regarding notices or taxes and they also collect and post payments made to the State. The L&R maintenance unit (MU) is responsible for assisting the same group of constituents when they call into the license and registration or bond lines. The unit is also responsible for working and resolving all mailed in correspondence regarding licenses or registration, including applications, signature cards and business updates. The maintenance unit provides education and assistance with establishing and securing a Transaction Privilege Tax License, a Withholding Registration or a Use Tax Certificate. Moreover, the maintenance unit administers the bond program, solar registration program and portions of the tobacco stamp program. The team is responsible for providing specialized education, assistance and support to companies in these unique lines of ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 23 business and other department units. Additionally, the unit provides maintenance support to customers and other department units by researching and resolving the most complicated account license, registration or bond problems. Office of Economic Research and Analysis The Office of Economic Research & Analysis provides statistical analysis and research services to the department, the Governor’s Office, the Legislature and other political subdivisions as well as the private sector. Fiscal impacts, when possible, and analysis are provided for proposals of changes to taxes administered by the department. This Office provides forecasts of general fund revenues from the major three tax types for consideration in the Governor’s budget proposal. Staff support is provided for the Economic Estimates Commission, the Debt Oversight Commission and the Property Tax Oversight Commission. An individual income tax simulation model is maintained to analyze proposed changes to Arizona’s individual income tax. The department’s annual report tables are prepared by this Office, as well as the Tax Expenditure Report and the Report on Bonded Indebtedness. Other reports are prepared throughout the year providing statistics and information on various tax types, including the monthly publication Tax Facts. The Quality Office is also a part of the Office of Economic Research and Analysis. The Quality Office coordinates the strategic planning efforts of the department with programs focusing on agencywide quality initiatives. Included in these initiatives are customer satisfaction survey improvements, feedback and analysis and benchmarking studies. Public Information Officer This position is the official spokesperson for the department, facilitates the flow of information to the public, and responds to all media contacts and inquiries. Taxpayer Information and Assistance (TIA) The mission in Taxpayer Information and Assistance is to provide exceptional service in an effective, efficient and fair manner for all our customers. Customers include taxpayers who report their own personal income tax, tax practitioners, certified public accountants, enrolled agents, attorneys, payroll service companies, business owners and corporations. TIA is also contacted by staff from local state representatives’ offices and the governor’s office for assistance in resolving matters brought to their attention by their constituents. Means of contacting TIA are by telephone, written correspondence, email, and walk-in service. Calls are received through three published primary telephone lines as well as two tax practitioner telephone hotlines to obtain expedited service. Email is received through the department’s two websites: azdor.gov and AZTaxes.gov. Walk-in service is available at two locations, Phoenix and Tucson. TIA provides a wide range of assistance to the taxpayer community, answering general questions, researching and resolving refund and billing disputes, assisting with account reconciliation, answering tax code questions, providing statutory reference, offering guidance and instruction on tax form preparation, assisting with registration and licensing of a new business and changes to existing licenses. The administrative support team processes Power of Attorney (POA) forms and delivers professional and courteous guidance to the walk-in customers at the lobby reception desks in Phoenix and Tucson. TIA takes a positive approach and makes every effort to educate our customers about their tax requirements and helps them understand what to expect when they register their business or file their tax return. Tax types include personal income tax, corporate tax, transaction privilege and use tax and withholding tax. HIGHLIGHTS IN FISCAL YEAR 2014 • • • The Community OutReach and Education Section (CORE) renewed partnerships with the cities of Phoenix, Mesa, Scottsdale and Chandler to present joint state-city TPT workshops. CORE assisted in the promotion of the Free File Alliance, a nonprofit coalition of industryleading tax software companies partnered with the IRS to help taxpayers prepare and e-file their tax returns for free. The Criminal Investigation Unit stopped nearly $74 million in fraudulent refunds. This is an increase of over $41 million over last fiscal year (nearly a 100% increase). ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 24 • • The Tobacco Enforcement Unit conducted approximately 3,100 retail and wholesale tobacco inspections. During this time period the unit also conducted 64 separate seizures of illegal tobacco products. Over 100,000 sticks of cigarettes and 8,000 cigars were among the untaxed other tobacco products seized. The Office of Economic Research and Analysis accomplished several things over the fiscal year. These include:  Participated in the planning and implementation of TPT Reform.  Updated the Individual Income Tax model simulation for tax years 2007 and 2008.  Issued 765 Certificates of Eligibility for the Health Insurance Premium Tax Credit to individuals and small businesses.  Approved 214 corporate donations for the Corporate Income Tax Credit for Donations to School Tuition Organizations and the Corporate Income Tax Credit for Donations to School Tuition Organizations for Disabled/Displaced Student Scholarships.  Confirmed 356 Disabled/Displaced Student Scholarship Awards. Processed 428 Disabled/Displaced Student Eligibility Applications.  Approved 73 new charities as Qualified Charitable Organizations 12 new charities as Qualified Charitable Foster Care Organizations for purposes of the income tax credit for contributions to charities that provide assistance to the working poor.  Approved 12 Renewable Energy Production Tax Credit applications. • • •  Administered the fiscal year 2014 Employee Satisfaction Survey.  Conducted the fiscal year 2015 Strategic Planning Process. The License and Registration team processed 40,269 applications with an average turnaround time of 8.0 days. Nearly 54% of these licenses were completed online. The team also processed another 14,514 account update and maintenance requests. Additionally, the License and Registration Maintenance Unit (MU) answered 22,114 calls, responded to problem resolution issues and emails, processed 3,277 taxpayers bonds totaling more than $25 million and collected another $29,872 in delinquencies. Finally, the Customer Service (CS) team assisted more than 15,000 walk-in customers over the counter and cashiered over $410 million in payments. Taxpayer Information and Assistance accomplishments include:  Answered 298,763 calls.  Replied to 5,947 emails.  Assisted 37,891 customers at the lobby windows.  Assisted 12,236 customers at the TIA walkin offices.  Responded to 10,282 Tax Practitioner Hotline inquiries.  Responded to 11,437 written inquiries.  Processed 11,282 Power of Attorney forms.  Answered 2,378 switchboard calls. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 25 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 26 TAX POLICY AND RESEARCH The Division provides administrative tax policy for the department, legal and interpretive support, case resolution and advocacy for the various divisions within the department. The division also acts as liaison to the Attorney General's Tax Section and coordinates the defense of litigation with the Tax Section attorneys. The division provides additional support to the director on an as-needed basis, including services in the area of protecting taxpayer confidentiality and privacy and also reviews all requests for public records. The division consists of Corporate Appeals, Individual Income Appeals, Transaction Privilege Tax Appeals, and the Tax Research & Analysis Section. Tax Research & Analysis The Tax Research & Analysis Section reviews, analyzes, develops and disseminates administrative tax policy for the department. The section also researches questions presented by other sections within the department, the Governor’s office, and the Legislature. The section is responsible for drafting substantive policy statements (rulings and procedures), as well as private taxpayer rulings. The section also responds to technical and complex inquiries by telephone and issues taxpayer information letters. The section is responsible for maintaining consistency in interpretation of policy and interpretation within the department. The section reviews and analyzes legislation, assists the department in setting tax policy, and develops and promulgates administrative rules. Additionally, the section provides policy support for the Audit Division and provides guidance and interpretative advice to other divisions within the department. Tax Appeals The office consists of three appeals sections: Transaction Privilege & Use Tax, Corporate Income Tax and Individual Income Tax. Use Tax Audit Section with case refinement and resolution services at the informal hearing as well as advocating the audit section’s position in cases before the State Office of Administrative Hearings (OAH), the department's Hearing Office, and the director. It also represents the department at OAH in matters involving other issues, such as tobacco, luxury tax, and administrative determinations. The section also assists the Tax Section of the Attorney General's Office with preparation of cases being heard before the Board of Tax Appeals, Tax Court and the appellate courts. The Corporate Income Tax Appeals Section reviews cases from the Corporate Income Audit Section and provides case refinement, resolution and advocacy services for those cases. The section works hand-inhand with the Corporate Audit Section, represents the Corporate Audit Section in informal hearings, before the Hearing Office, and before the director. The section also assists the Tax Section of the Attorney General's Office with preparation and research of cases being heard before the Board of Tax Appeals, Tax Court and the appellate courts. In addition, staff testifies at various levels of the appeals process. The section provides interpretative advice to the Corporate Income Audit staff. The Individual Income Tax Appeals Section reviews cases from the Individual Income Audit Section and provides case refinement, resolution and advocacy services for those cases, and represents the Individual Income Audit Section before the Hearing Office and before the director. The section also provides interpretative advice to the Individual Income Audit Staff. The section also assists the Tax Section of the Attorney General's Office with preparation and research of cases being heard before the Board of Tax Appeals, Tax Court and the appellate courts. In addition, the staff testifies at various levels of the appeals process. The Transaction Privilege & Use Tax (TPT) Appeals Section is headed by the department’s General Counsel and includes the TPT Protest unit. TPT Appeals assists the Transaction Privilege and ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 27 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 28 ARIZONA'S TAXES Revenue Summary (Table 1) Net Revenue to State General Fund (Table 2) Gross Collections of Audit Assessments and Delinquent Tax (Table 3) Transaction Privilege, Use and Severance Tax Income Tax Property Tax ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 29 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 30 TABLE 1 REVENUE SUMMARY GROSS REVENUE COLLECTED FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 SOURCE FY2009-10 FY2010-11 FY2011-12 FY2012-13 FY2013-14 $1,427,991,054 2,653,983,212 271,763,845 504,391,092 544,136 $1,493,036,999 2,719,128,171 229,250,912 514,345,951 835,801,251 $1,569,903,646 2,852,297,332 263,724,399 542,394,529 912,966,857 $1,644,471,588 2,994,447,622 257,899,313 567,824,410 965,620,521 $1,750,515,866 3,186,969,414 235,984,933 601,853,602 8,422,920 26,197,663 24,955,212 1,072,323,109 36,915,698 25,467,086 1,097,227,224 20,235,301 23,913,439 1,145,303,425 (25,356,945) 32,116,438 1,223,217,366 (25,642,747) 41,685,649 $1,303,960,087 Subtotal $5,982,149,321 $6,951,173,293 $7,330,738,929 $7,660,240,313 $7,103,749,724 INCOME TAX Withholding Individual Corporate 3,017,256,893 768,011,214 650,925,393 3,234,666,688 867,110,332 659,266,690 3,343,314,942 1,027,389,330 758,413,453 3,459,818,705 1,170,646,638 755,002,081 3,580,656,587 1,131,393,794 705,727,107 Subtotal $4,436,193,500 $4,761,043,709 $5,129,117,725 $5,385,467,424 $5,417,777,487 TRANSACTION PRIVILEGE USE AND SEVERANCE TAX Distribution Base Nonshared Portion Use Tax Education Tax Temporary Tax (4) Undistributed Estimated Transaction Privilege Tax Other State Revenue County and City Collections LUXURY TAX Spirituous Liquor Vinous Liquor Malt Liquor Tobacco - All Types (1) Licensing Subtotal 29,304,713 13,881,407 22,232,715 340,839,935 7,900 28,202,704 13,596,155 21,566,369 340,754,224 7,710 31,847,105 15,430,577 21,101,489 337,777,289 7,925 32,184,954 15,155,547 21,343,360 331,347,184 7,825 $33,588,102 15,583,934 21,974,061 $327,788,207 8,198 $406,266,670 $404,127,163 $406,164,385 363,755 161,637,025 320,538 437,372 121,263,602 370,786 200,825 115,160,041 186,322 $162,321,318 $122,071,760 $115,547,188 $131,725,361 520,655 9,451,430 1,335,091 1,569,091 7,925,216 504,905 9,673,124 1,283,026 1,812,420 8,155,363 508,145 10,585,261 1,065,773 1,782,028 8,518,868 519,998 7,375,052 3,698,193 2,153,517 8,732,325 Subtotal $20,801,482 $21,428,838 $22,460,074 $22,479,086 $21,444,247 TOTAL (2) $11,007,732,292 $12,259,844,763 $13,004,028,301 $13,599,951,055 $13,055,682,195 ESTATE TAX Estate (3) Unclaimed Property Escheated Estates Subtotal OTHER REVENUES Bingo Flight Property Tax Private Car Tax Nuclear Plan Assessment Waste Tire $400,038,871 $398,942,502 ----131,397,401 327,961 ----113,119,156 649,079 $113,768,235 (5) (5) 521,583 12,974,652 (5) (1,061,682) (5) ----- (6) $9,009,694 (1) Figures represent gross tobacco revenue less administrative expenses. (2) All revenues collected by the Department of Revenue, including those which are later refunded or distributed. (3) Arizona's estate tax was effectively repealed January 1, 2005, following the elimination of the Federal State Death Tax Credit by Congress. (4) On May 18, 2010, voters approved Proposition 100 which temporarily increased the state transaction privilege and use tax rates on most transactions by one percentage point beginning June 1, 2010, and ending May 31, 2013. (5) In FY13, $2,473,651.23 of the money deposited into Private Car Tax should have been deposited into Flight Property Tax. A correcting transfer was made in FY14. (6) The Nuclear Plan Assessment revenue was received after the final deposit for FY14. For additional detail on the current year revenue, please refer to the appropriate section within this report. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 31 TABLE 2 NET REVENUE TO STATE GENERAL FUND FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 FY2009-10 FY2010-11 FY2011-12 FY2012-13 FY2013-14 Transaction Privilege, Use, and Severance Tax $3,418,261,171 $3,463,327,544 $3,657,481,499 $3,819,525,185 $4,026,707,269 Undistributed Estimated Transaction Privilege Tax 26,197,663 8,215,241 17,366,617 (21,908,400) (25,642,747) Income Tax 2,200,844,986 2,949,887,110 3,284,084,523 3,514,487,484 $3,445,061,022 Luxury Tax 55,352,260 53,599,408 56,357,085 56,184,596 58,754,227 363,755 437,372 200,825 0 0 100,034,835 49,120,855 45,819,445 60,899,609 49,165,753 520,655 504,905 508,145 519,998 521,583 Private Car Tax 1,335,091 1,283,026 1,065,773 3,698,193 (2) Nuclear Plan Assessment 1,569,091 1,812,420 1,782,028 2,153,517 $5,804,479,506 $6,528,187,881 $7,064,665,940 $7,435,560,183 SOURCE Estate Tax (1) Unclaimed Property Bingo Total (1,061,682) (2) 0 (3) $7,553,505,425 (1) Arizona's estate tax was effectively repealed January 1, 2005, following the elimination of the Federal State Death Tax Credit by Congress. (2) This figure includes $2,473,651.23 that should have been deposited to Flight Property Tax. (3) The Nuclear Plan Assessment was received after the close of the fiscal year. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 32 TABLE 3 GROSS COLLECTIONS OF AUDIT ASSESSMENTS AND DELINQUENT TAX FISCAL YEAR 2012-13 AND FISCAL YEAR 2013-14 FY2012-13 FY2013-14 % CHANGE Collections Audit Accounts Receivable $225,461,821 $158,788,915 $145,463,075 $232,213,615 $169,753,549 $152,861,783 3.0% 6.9% 5.1% TOTAL GROSS COLLECTIONS $529,713,811 $554,828,947 4.7% $25,727,397 $29,273,937 13.8% $503,986,414 $525,555,010 4.3% GROSS COLLECTIONS ADJUSTMENTS (1) Duplication, Credit Audits and Other Adjustments As Reported TOTAL ADJUSTED NET ENFORCEMENT COLLECTIONS (2) (1) Audits resulting in credit adjustments are subtracted to produce an actual figure representing the net gain to the state from the Audit Division's efforts. (2) Actual amounts resulting from the department's enforcement effort. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 33 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 34 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX MAJOR FEATURES MUNICIPAL PRIVILEGE AND USE TAX Arizona’s transaction privilege, use and severance taxes are imposed on the privilege of transacting business in the state. The department collects transaction privilege and use tax for 73 Arizona cities and towns at no charge to the municipalities. This is a service to the cities and to the taxpaying community who are therefore able to combine their reporting requirements on a single form and payment to a single governmental entity. Weekly distribution checks to the cities are processed after the department collects the local taxes (Refer to Tables 26 and 27). During fiscal year 2014, the state tax rates range from 2.5% to 6.6% depending on the type of business, with most rates at 5.6% (Refer to Table 5). Gross revenue exceeding $7.10 billion was remitted by Transaction Privilege, Severance and Use Tax license holders during fiscal year 2014 (Refer to Table 4). On May 18, 2010, voters approved Proposition 100 which temporarily increased the state transaction privilege and use tax rate on most transactions by one percentage point beginning June 1, 2010 and ending May 31, 2013. SEVERANCE TAX A severance tax is imposed in lieu of a transaction privilege tax on the businesses of mining metalliferous mineral. The severance rate is 2.5% on mining metalliferous minerals (Refer to Table 5). DISTRIBUTION The transaction privilege tax creates a tax base that is divided into two parts, distribution base and nonshared. The distribution base portion is divided among municipalities (25%), counties (40.51%), and the state general fund (34.49%). The nonshared portion is deposited directly to the state general fund (Refer to Tables 7 and 8). Use tax is deposited only to the state general fund. COUNTY TAX AND SURCHARGE COLLECTION All fifteen counties in Arizona levy some type of county tax or surcharge (Refer to Table 4). These taxes or surcharges are collected by the department. The rental car surcharge is imposed only in Maricopa and Pima Counties. A tax on hotels located in unincorporated areas of the county is levied in Pima County. Of the fourteen counties with statutory authority to impose a general excise tax, only thirteen do so. By statute, Maricopa County may not impose an excise tax. Although subject to voter approval, any county may levy a transportation excise tax or road tax. Only four counties, Gila, Maricopa, Pima, and Pinal, do so. The other types of county excise tax options are a hospital tax, a jail tax, capital projects, and health services district. USE TAX Use tax is imposed on the purchase price of tangible personal property when a transaction privilege tax equal to or greater than the Arizona rate was not paid. A use tax collection responsibility is imposed on retailers whose activities in the state are insufficient to require them to pay transaction privilege tax but are nonetheless substantial enough to fall outside the protective umbrella of the United States Constitutional provision governing interstate commerce. Firms without nexus may also voluntarily collect use tax for the benefit of their customers. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 35 TABLE 4 GROSS TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 SOURCE Distribution Base Nonshared Use Tax SUBTOTAL Education Tax Temporary Tax (2) Temporary Tax Estimated Payment Undistributed Estimated Payment Telecommunications Devices 911 Excise Municipal Water Nursing Facility Assessment (4) Waste Tire Accounts Receivable Collections GROSS STATE COLLECTIONS Municipal Privilege Tax FY2009-10 FY2010-11 FY2011-12 FY2012-13 FY2013-14 $1,427,991,054 $1,493,036,999 $1,569,903,646 $1,644,471,588 $1,750,515,866 2,653,983,212 2,719,128,171 2,852,297,332 2,994,447,622 3,186,969,414 271,763,845 229,250,912 263,724,399 257,899,313 235,984,933 $4,353,738,110 $4,441,416,082 $4,685,925,377 $4,896,818,522 $5,173,470,213 $504,391,092 $514,345,951 $542,394,529 $567,824,410 $601,853,602 544,136 (1) 835,801,251 912,966,857 965,620,521 8,422,920 ----- 28,700,457 2,868,684 (3,448,544) 0 26,197,663 8,215,241 17,366,617 (21,908,400) (25,642,747) 6,086,692 6,452,762 4,857,379 4,587,729 4,865,666 16,453,500 16,606,135 16,481,762 16,425,768 17,109,403 2,392,765 2,377,136 2,545,748 2,427,127 2,428,062 ----- ----- ----- 8,673,285 17,262,306 22,255 31,053 28,550 2,529 20,212 $4,909,826,212 $5,853,946,069 $6,185,435,504 $6,437,022,947 $5,799,789,636 $443,808,996 $450,148,563 $466,896,627 $506,978,968 546,725,301.41 Apache County Excise Tax 1,057,667 1,052,062 1,189,314 1,115,268 1,308,856 Cochise County Excise Tax 7,136,677 6,951,160 6,891,804 6,997,151 6,928,647 Coconino County Excise Tax 10,722,220 11,110,639 11,297,308 11,666,641 12,245,309 Coconino County Jail Tax 10,741,640 11,101,630 11,295,614 11,660,897 12,243,833 Coconino County Capitol Projects Tax 2,676,492 2,773,896 2,814,563 2,913,345 3,058,840 Gila County Excise Tax 2,689,763 2,690,335 2,779,139 2,899,476 3,045,271 Gila County Road Tax 2,799,473 2,766,830 2,879,485 3,005,463 3,131,228 Graham County Excise Tax 1,601,005 1,682,449 1,798,603 1,957,102 2,130,788 842,107 1,281,394 1,495,734 2,088,094 2,345,102 La Paz County Excise Tax 1,038,469 1,025,763 1,120,855 1,131,747 1,165,099 La Paz County Jail Tax 1,037,994 1,025,659 1,120,853 1,131,743 1,165,098 16 (7) 21 32 26 ----- ----- 590,955 1,112,052 2,215,639 Greenlee County Excise Tax La Paz County Health Services District (3) La Paz County Judgment Tax Maricopa County Road Tax Maricopa County Road Tax Extension Maricopa County Stadium Tax (3) 671,246 859,919 178,724 (93,903) (127,766) 298,352,305 308,374,052 323,991,403 341,670,551 365,688,468 1,736 252 174 1 6 107,492,524 111,547,857 117,547,456 124,019,899 133,581,417 Maricopa County Rental Car Surcharge 4,669,860 4,971,979 5,191,681 5,254,869 5,387,697 Mohave County Excise Tax 5,654,783 5,710,609 5,396,008 5,747,761 6,263,993 Navajo County Excise Tax 5,480,598 5,889,027 6,246,077 6,239,089 6,667,433 Pima County Hotel Tax 5,637,658 5,590,968 6,311,778 6,030,600 6,290,212 Pima County Rental Car Surcharge 1,339,960 1,372,901 1,463,761 1,398,973 1,389,855 180,969 164,805 145,559 136,195 121,726 Pima County Road Tax 62,936,950 64,540,737 67,504,860 70,893,757 72,390,485 Pinal County Excise Tax 12,130,566 12,032,993 12,449,204 12,761,984 13,594,230 2,414,381 2,401,515 2,468,346 2,541,837 2,713,674 12,599,660 12,561,088 12,952,327 13,300,223 14,110,597 Santa Cruz County Excise Tax 2,547,860 2,571,487 2,646,194 2,595,978 2,685,361 Santa Cruz County Jail Tax 2,445,901 2,609,373 2,641,677 2,594,044 2,684,802 Yavapai County Excise Tax 14,145,870 Maricopa County Jail Tax Pima County R.V. Surcharge Pinal County Health Services District Pinal County Road Tax 11,818,833 11,703,512 12,400,793 13,308,847 Yavapai County Jail Tax 5,908,756 5,850,290 6,199,337 6,653,214 7,072,702 Yuma County Excise Tax 10,463,855 10,761,578 11,230,569 11,610,142 11,710,103 Yuma County Jail Tax 10,463,970 10,761,452 11,230,580 11,610,076 11,710,110 18,633 37,106 18,947 16,966 3,243 2,083,126 2,138,596 2,235,486 2,311,386 2,526,105 20,856,461 21,164,757 22,681,609 27,956,898 25,640,725 $1,072,323,109 $1,097,227,224 $1,145,303,425 $1,223,217,366 $1,303,960,087 $5,982,149,321 $6,951,173,292 $7,330,738,929 $7,660,240,313 $7,103,749,723 Yuma County Capitol Projects Tax Yuma County Health Services District Sports & Tourism Authority COUNTY AND CITY COLLECTIONS TOTAL DEPARTMENT OF REVENUE RECEIPTS (1) The tax was in place for only a portion of the fiscal year. This figure does not represent a full year's collection. (2) On May 18, 2010, voters approved Proposition 100 which temporarily increased the state transaction privilege and use tax rates on most transactions by one percentage point beginning June 1, 2010, and ending May 31, 2013. (3) This county tax has expired. Collections are from periods prior to the expiration. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 36 (4) Laws of 2012, Chapter 213 established a Nursing Facilitiy Assessment to be remitted to the Department of Revenue on a quarterly basis. The FY13 figure represents a partial year's collection. TABLE 5 STATE TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX RATES FISCAL YEAR 2013-14 DISTRIBUTION TAXABLE ACTIVITIES 1. Transporting and Towing 2. Nonmetalliferous Mining, Oil and Gas Production 4. Utilities 5. Communications 6. Railroads and Aircraft 7/8. Private Car/Pipelines 9. Publishing 10. Printing 11. Restaurants and Bars 12. Amusements 14. Personal Property Rentals 15. Contracting 17. Retail 19. Mining Severance 25. Hotel/Motel Tax 29/30. Use and Use Inventory Tax 49. Jet Fuel (per gallon) 51. Jet Fuel Use (per gallon) TOTAL BASE NONSHARED EDUCATION TAX 1.0% 4.0% 0.6% 5.6% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 2.0% 2.0% 2.0% 1.0% 2.0% 2.0% 2.75% 0.0% $0.0122 $0 2.125% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 3.0% 3.0% 3.0% 4.0% 3.0% 0.5% 2.75% 5.0% $0.0183 $0.0305 0.0% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.0% 0.0% 0.6% $0 $0 3.1% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 2.5% 5.5% 5.6% 3.1% 3.1% ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 37 TABLE 6 NET TAXABLE SALES BY TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX CLASSIFICATIONS (1) FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 FY2009-10 % OF TOTAL Transporting $41,990,223 Mining, Oil & Gas 102,899,820 Mining Severance 1,164,231,217 Utilities 9,354,244,929 Communications 3,618,207,813 Private Car and Pipelines 1,639,838 Publishing 103,681,055 Job Printing 236,985,401 Restaurants and Bars 9,020,794,923 Amusements 1,051,919,242 Commercial Lease (3) 141,375 Personal Property Rentals 3,127,828,157 Contracting 9,311,612,411 Retail 42,913,931,049 Hotel/Motel 1,949,717,696 Rental Occupancy Tax (4) (62,113) Use Tax 5,464,504,380 Use Tax-Utilities (35,593,960) Membership Camping (4) 9,730 TOTAL $87,428,683,185 0.05 0.12 1.33 10.70 4.14 n/a 0.12 0.27 10.32 1.20 n/a 3.58 10.65 49.08 2.23 n/a 6.25 (0.04) n/a 100.00 CLASSIFICATION (2) (2) (2) (2) FY2010-11 % OF TOTAL $41,555,032 96,513,978 1,609,450,811 9,394,361,056 2,853,538,386 1,908,310 98,343,131 266,564,040 9,311,826,427 994,092,112 1,750 3,056,386,064 8,983,260,649 45,898,838,365 2,039,282,838 42,581 4,610,920,668 10,039,995 728 $89,266,926,922 0.05 0.11 1.80 10.52 3.20 n/a 0.11 0.30 10.43 1.11 n/a 3.42 10.06 51.42 2.28 n/a 5.17 0.01 n/a 100.00 (2) (2) (2) (2) FY2011-12 % OF TOTAL FY2012-13 $52,136,905 105,614,045 1,623,111,320 9,474,520,541 3,190,962,329 1,186,118 92,504,602 252,603,147 9,996,824,507 1,037,058,757 1,209 3,257,587,929 9,543,335,350 48,178,713,977 2,156,863,685 (2,602) 5,302,843,816 10,022,025 0 $94,275,887,660 0.06 0.11 1.72 10.05 3.38 n/a 0.10 0.27 10.60 1.10 n/a 3.46 10.12 51.10 2.29 0.00 5.62 0.01 0.00 100.00 $41,324,471 115,774,867 1,193,176,084 9,900,237,768 3,061,730,365 6,250,408 84,672,718 235,348,616 10,544,419,377 1,051,580,928 1,706 3,254,821,525 10,092,875,787 51,276,107,347 2,221,059,419 0 5,186,464,365 10,283,377 0 $98,276,129,127 (2) (2) (2) (2) % OF TOTAL 0.04 0.12 1.21 10.07 3.12 0.01 0.09 0.24 10.73 1.07 n/a (2) 3.31 10.27 52.18 2.26 0.00 (2) 5.28 0.01 0.00 (2) 100.00 FY2013-14 $54,981,256 116,677,749 1,047,580,204 9,923,489,526 2,965,233,344 5,615,642 101,751,218 321,225,074 11,085,651,538 1,096,945,152 1,553 3,355,048,345 11,269,502,981 55,257,510,004 2,334,372,656 (84) 4,749,508,210 62,511,267 0 $103,747,605,636 (1) Net taxable sales are based upon tax receipts. (2) Percent of total is less than 0.01%. (3) Commercial Lease rate dropped to 0% effective July 1, 1997. (4) Effective November 1, 2006, these rates were repealed. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 38 % OF TOTAL 0.05 0.11 1.01 9.57 2.86 0.01 0.10 0.31 10.69 1.06 n/a (2) 3.23 10.86 53.26 2.25 0.00 (2) 4.58 0.06 0.00 (2) 100.00 TABLE 7 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS BY CLASS FISCAL YEAR 2013-14 CLASSIFICATION DISTRIBUTION BASE NONSHARED TOTAL COLLECTIONS Transporting Nonmetal Mining, Oil and Gas Mining Severance Utilities Communications Private Car and Pipelines Publishing Job Printing Restaurants and Bars Amusements Commercial Lease (1) Rentals of Personal Property Contracting Retail Hotel/Motel Use Tax Utilities Use Tax License Fees Jet Fuel Tax Jet Fuel Use Tax Non Sufficient Funds Mandatory EFT Fees TOTAL $549,803 1,166,777 20,951,604 99,234,895 29,652,333 56,156 1,017,512 3,212,251 221,713,031 21,938,903 25 67,102,297 112,673,667 1,105,150,088 64,195,248 625,113 0 0 1,276,165 0 0 0 $1,750,515,868 $2,199,209 2,479,402 5,237,901 396,939,581 118,609,334 224,626 4,070,049 12,849,003 332,569,546 32,908,355 22 100,653,083 450,694,666 1,657,725,131 64,195,248 2,500,451 235,984,933 566,886 1,914,247 382,061 72,089 178,525 $3,422,954,347 $2,749,012 3,646,180 26,189,505 496,174,476 148,261,667 280,782 5,087,561 16,061,254 554,282,577 54,847,258 47 167,755,380 563,368,333 2,762,875,219 128,390,496 3,125,563 235,984,933 566,886 3,190,412 382,061 72,089 178,525 $5,173,470,215 (1) Commercial Lease rate dropped to 0% effective July 1, 1997. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 39 TABLE 8 DISTRIBUTION OF TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS FISCAL YEAR 2013-14 Net Regular to State General Fund Net Estimated Payments to General Fund Net to Cities Net to Counties Net to Education Fund Net to Temporary Tax 911 Wireline/Excise, 911 Wireless, Telecommunications Devices, Nursing Facility Assessment, Municipal Water, and Waste Tire Accounts Receivable Collections $4,026,707,269 (25,642,747) 437,628,967 709,133,978 601,853,602 8,422,920 TOTAL GROSS COLLECTIONS $5,799,789,637 41,685,649 ADDITIONAL DISTRIBUTION FROM TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS FISCAL YEAR 2013-14 Phoenix International Raceway - Highway Improvements Rio Nuevo Sports and Tourism Authority Tribal Community Colleges Convention Center Distribution adjustments for city collections $416,667 9,486,090 * 5,371,683 * 2,625,000 41,000,000 (91,498) * These figures include a reconciliation of June 2013 distributions as well as an estimate of the June 2014 distribution that occurred after the close of the fiscal year. Figures may not add total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 40 TABLE 9 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN APACHE COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $16,469,736 19,567,974 263,951 118,977 13,787,669 4,672,546 56,054,337 134,895,927 10,197,259 45,589,825 -7.7% 2.2% 58.1% 576.6% 15.0% -10.1% -6.7% 46.3% -0.6% NA $823,487 978,399 13,198 5,949 689,383 233,627 2,802,717 6,744,796 560,849 2,204,582 $301,618,202 -5.8% $15,056,987 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL FY2011-12 FY2012-13 FY2013-14 20 102 17 12 72 157 444 1,497 88 963 19 108 15 12 66 172 440 1,602 52 1,006 21 113 14 9 67 162 446 1,699 46 1,011 3,372 3,492 3,588 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. (2) For FY14, different categories have been classified under the Other Taxable Activities compared to FY13. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 41 TABLE 10 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN COCHISE COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $162,293,012 53,161,806 915,016 1,397,678 135,391,224 5,644,976 24,744,684 165,571,174 796,928,318 31,024,159 66,649,335 -9.3% -5.3% 2.2% 122.3% 4.5% 7.4% 9.5% -1.2% -1.2% -4.1% 1.8% $8,114,651 2,658,090 45,751 69,884 6,769,561 282,249 1,237,234 8,278,559 39,846,416 1,706,329 3,321,179 $1,443,721,383 -1.5% $72,329,902 . NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2011-12 FY2012-13 FY2013-14 57 188 25 27 349 55 339 1,117 3,591 152 1,558 56 187 26 16 335 48 339 1,083 3,696 157 1,576 54 198 26 17 338 54 355 1,064 3,872 155 1,693 7,458 7,519 7,826 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 42 TABLE 11 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN COCONINO COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $178,847,913 57,400,873 1,743,784 3,451,692 388,426,455 76,547,725 63,391,877 298,942,880 1,044,065,846 292,625,643 106,309,741 0.3% -4.3% 21.0% 44.0% 5.8% 7.5% -4.5% 20.5% 2.1% 6.9% 19.2% $8,942,396 2,870,044 87,189 172,585 19,421,323 3,827,386 3,169,594 14,947,144 52,203,292 16,094,410 5,231,198 $2,511,754,427 5.5% $126,966,561 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2011-12 FY2012-13 FY2013-14 44 222 36 48 486 99 464 1,671 4,614 261 1,956 50 225 40 39 490 94 459 1,609 4,737 291 2,008 44 234 35 44 507 87 448 1,673 4,980 328 2,032 9,901 10,042 10,412 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 43 TABLE 12 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN GILA COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $142,837,333 18,863,499 566,128 60,750,463 2,384,442 11,144,375 67,176,149 271,640,217 12,668,091 104,485,839 8.2% -5.3% 12.4% 6.3% 28.6% -18.9% -13.1% 5.4% 9.5% NA $7,141,867 943,175 28,306 3,037,523 119,222 557,219 3,358,778 13,582,011 696,745 3,715,407 $692,516,536 18.2% $33,180,252 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL FY2011-12 FY2012-13 FY2013-14 32 159 19 171 28 237 796 2,257 63 1,108 37 155 20 165 29 231 786 2,283 69 1,119 30 161 17 162 29 234 800 2,402 69 1,182 4,870 4,894 5,086 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. (2) For FY14, different categories have been classified under the Other Taxable Activities compared to FY13. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 44 TABLE 13 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN GRAHAM COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Communications Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $11,277,793 35,327,251 15,778,693 42,183,577 250,112,846 136,182,146 -2.4% 15.6% -0.3% 1.4% 11.7% -21.0% $563,890 1,766,363 788,935 2,109,179 12,505,642 5,508,694 $490,862,306 -1.0% $23,242,702 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Communications Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Other Taxable Activities TOTAL FY2011-12 FY2012-13 FY2013-14 112 64 163 352 1,433 951 112 64 158 334 1,468 957 118 64 164 356 1,596 979 3,075 3,093 3,277 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 45 TABLE 14 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN GREENLEE COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Communications Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $3,996,659 5,944,985 15,847,106 137,393,904 215,487,418 477,306,527 4.9% -8.4% 149.9% 28.2% -2.5% -5.7% $199,833 297,249 792,355 6,869,695 10,774,371 14,351,192 $855,976,598 0.6% $33,284,696 FY2011-12 FY2012-13 FY2013-14 76 23 63 131 552 428 63 28 76 140 681 509 62 33 86 146 754 527 1,273 1,497 1,608 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Communications Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Other Taxable Activities TOTAL (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 46 TABLE 15 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN LA PAZ COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publication Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $27,724,238 6,260,370 40,700 24,445,727 452,349 3,002,028 27,126,846 135,889,805 6,222,583 36,644,419 0.5% -14.3% -45.2% 3.2% NA 8.9% 11.2% 3.1% -6.2% NA $1,386,212 313,018 2,035 1,222,286 22,617 150,101 1,356,342 6,794,490 342,242 1,830,735 $267,809,065 6.5% $13,420,080 FY2011-12 FY2012-13 FY2013-14 23 113 15 106 NA 137 339 1,751 53 739 22 108 15 92 10 141 340 1,766 54 741 22 105 13 95 10 148 357 1,859 55 771 3,276 3,289 3,435 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publication Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. (2) For FY14, different categories have been classified under the Other Taxable Activities compared to FY13. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 47 TABLE 16 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN MARICOPA COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $6,251,798,471 1,953,314,008 69,782,707 267,266,946 7,649,063,363 798,080,542 2,542,313,403 7,455,647,810 37,984,151,826 1,385,433,170 3,798,238,476 0.9% -3.9% 29.2% 38.7% 5.6% 4.4% 2.9% 14.1% 9.2% 4.5% -6.5% $312,589,924 97,665,700 3,489,135 13,363,347 382,453,168 39,904,027 127,115,670 372,782,391 1,899,207,591 76,198,824 187,124,241 $70,155,090,723 6.8% $3,511,894,019 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2011-12 FY2012-13 FY2013-14 147 643 239 758 6,833 719 2,595 13,836 44,800 698 10,193 151 653 237 753 6,791 724 2,495 13,538 44,857 729 10,475 147 697 241 762 6,995 754 2,536 13,700 45,491 768 10,747 81,461 81,403 82,838 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 48 TABLE 17 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN MOHAVE COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $391,673,533 77,949,774 1,476,410 5,283,427 237,171,018 14,090,205 47,867,655 229,815,080 1,420,676,727 46,389,576 105,552,103 12.7% -14.0% 17.8% 83.5% 7.0% 2.8% -0.8% 26.2% 8.6% 9.1% -23.6% $19,583,677 3,897,489 73,820 264,171 11,858,551 704,510 2,393,383 11,505,599 71,033,836 2,551,427 4,905,917 $2,577,945,507 7.5% $128,772,381 FY2011-12 FY2012-13 FY2013-14 59 172 28 42 449 70 461 1,342 4,770 151 2,004 63 168 29 30 438 66 457 1,295 4,845 140 1,983 59 186 28 36 442 65 441 1,350 5,163 154 2,103 9,548 9,514 10,027 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 49 TABLE 18 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN NAVAJO COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $96,849,463 35,617,513 792,046 640,571 95,984,776 29,450,060 130,859,669 888,647,272 36,759,123 51,274,931 -2.4% -4.3% 2.7% -8.9% 5.7% 31.4% 21.7% 5.7% 13.1% NA $4,842,473 1,780,876 39,602 32,029 4,799,239 1,472,503 6,542,983 44,432,364 2,021,752 2,536,802 $1,366,875,425 7.1% $68,500,622 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL FY2011-12 FY2012-13 FY2013-14 41 144 20 21 237 298 907 2,755 142 1,331 43 145 26 14 227 280 862 2,890 134 1,356 35 158 23 17 227 284 877 3,018 141 1,400 5,896 5,977 6,180 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. (2) For FY14 more categories have been classified under the Other Taxable Activities compared to FY13 Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 50 TABLE 19 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN PIMA COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 $1,398,776,577 427,448,389 16,680,920 31,343,345 1,589,480,146 98,018,983 384,591,893 1,490,477,812 7,741,592,337 299,089,104 737,487,972 -4.8% 3.1% -3.1% 10.0% 2.5% -3.5% 1.8% 3.0% 3.8% 5.2% -13.0% $69,938,829 21,372,419 834,046 1,567,167 79,474,007 4,900,949 19,229,595 74,523,891 387,079,617 16,449,901 29,616,597 $14,214,987,477 1.5% $704,987,017 FY2011-12 FY2012-13 FY2013-14 91 314 82 149 1,738 222 1,000 4,504 14,352 267 4,082 87 316 80 131 1,684 223 966 4,421 14,349 282 4,165 83 333 78 133 1,700 206 945 4,440 14,642 292 4,224 26,801 26,704 27,076 COLLECTIONS NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 51 TABLE 20 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN PINAL COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $479,454,723 123,866,770 4,111,155 261,963,051 43,609,346 68,791,302 481,230,778 1,203,983,382 20,856,944 251,488,005 -5.3% -2.9% 13.4% 4.7% 10.1% -3.7% 21.1% 9.6% 2.4% NA $23,972,736 6,193,339 205,558 13,098,153 2,180,467 3,439,565 24,061,539 60,199,169 1,147,132 9,863,890 $2,939,355,457 7.2% $144,361,548 FY2011-12 79 206 28 465 90 451 2,721 4,782 109 1,955 FY2012-13 77 208 29 439 99 447 2,718 4,904 113 1,948 FY2013-14 82 218 31 430 94 450 2,833 5,116 108 2,031 10,886 10,982 11,393 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. (2) For FY14 more categories have been classified under the Other Taxable Activities compared to FY13. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 52 TABLE 21 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN SANTA CRUZ COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publications Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $52,909,981 21,758,501 95,627 285,653 49,687,424 3,853,014 11,679,569 58,456,643 323,634,815 11,823,884 23,932,598 9.3% -4.8% -25.5% 2.9% 3.4% -17.3% -0.5% -4.9% 6.6% -14.5% -4.9% $2,645,499 1,087,925 4,781 14,283 2,484,371 192,651 583,978 2,922,832 16,181,741 650,314 1,191,423 $558,117,711 3.3% $27,959,798 FY2011-12 FY2012-13 FY2013-14 22 129 13 19 133 22 228 583 2,119 40 1,001 17 131 14 12 132 21 224 542 2,198 44 1,030 18 139 14 17 139 20 239 579 2,374 46 1,052 4,309 4,365 4,637 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publications Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 53 TABLE 22 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN YAVAPAI COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $325,399,403 92,558,129 3,157,148 5,370,791 306,088,040 31,765,072 55,803,285 361,070,303 1,482,466,647 119,540,897 298,885,054 0.8% -0.6% 15.3% 56.0% 7.1% 17.5% 12.4% 5.2% 6.8% 11.0% 5.3% $16,269,970 4,627,906 157,857 268,540 15,304,402 1,588,254 2,790,164 18,053,515 74,123,332 6,574,749 10,210,505 $3,082,104,770 6.0% $149,969,195 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL FY2011-12 FY2012-13 FY2013-14 77 210 49 55 643 87 463 2,255 6,265 209 2,064 82 214 50 53 620 95 466 2,256 6,356 210 2,134 78 230 53 63 642 98 476 2,326 6,658 212 2,297 12,377 12,536 13,133 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 54 TABLE 23 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN YUMA COUNTY FOR THE PERIOD BEGINNING JULY 1, 2013 AND ENDING JUNE 30, 2014 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publications Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2012-13 COLLECTIONS $260,368,891 62,191,285 1,915,390 232,139,945 13,685,580 75,969,869 264,717,521 1,363,336,622 45,376,481 81,145,382 1.7% -4.5% 17.6% 3.1% NA 8.4% -10.7% 3.0% -6.3% NA $13,018,445 3,109,564 95,770 11,606,997 684,279 3,798,493 13,235,876 68,166,831 2,495,706 3,987,050 $2,400,846,968 0.6% $120,199,012 FY2011-12 FY2012-13 FY2013-14 36 194 18 371 NA 426 961 3,837 109 1,812 39 191 24 339 54 413 963 3,905 102 1,779 35 200 19 356 41 411 957 4,053 102 1,864 7,764 7,809 8,038 NUMBER OF ACCOUNTS FISCAL YEAR 2011-12 THROUGH FISCAL YEAR 2013-14 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publications Restaurants and Bars Amusement Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. (2) For FY14, more categories have been classified under the Other Taxable Activities compared to FY13. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 55 TABLE 24 STATE TRANSACTION PRIVILEGE AND SEVERANCE TAX DISTRIBUTION TO COUNTIES FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 COUNTY Apache Coconino Cochise Gila Graham Greenlee La Paz Maricopa Mohave Navajo Pima Pinal Santa Cruz Yavapai Yuma TOTAL FY2009-10 FY2010-11 FY2011-12 FY2012-13 FY2013-14 % CHANGE FROM FY 2012-13 $3,985,796 14,350,374 10,616,654 4,225,153 3,321,780 3,337,405 1,654,035 367,202,478 17,295,217 8,831,817 84,769,872 18,910,351 3,709,093 20,676,049 15,593,103 $4,116,316 15,586,920 10,880,090 4,381,303 3,234,712 3,945,202 1,717,668 383,243,745 17,551,555 9,326,061 88,630,774 20,318,239 3,874,088 21,703,058 16,319,557 $4,148,680 17,035,207 10,964,080 4,614,778 3,624,351 4,376,829 1,941,213 398,827,938 17,391,271 9,605,663 92,723,932 26,600,160 4,062,329 22,955,984 17,095,552 $4,339,846 17,805,463 12,165,517 4,752,150 3,606,256 4,983,640 2,116,238 416,999,312 18,652,134 10,088,685 97,196,166 27,498,147 4,216,541 23,792,545 17,962,799 $4,744,332 19,091,249 11,890,286 5,116,965 3,728,358 5,091,702 2,265,894 446,491,690 20,389,267 10,764,687 101,665,722 29,395,885 4,450,552 25,284,422 18,762,967 9.3% 7.2% -2.3% 7.7% 3.4% 2.2% 7.1% 7.1% 9.3% 6.7% 4.6% 6.9% 5.5% 6.3% 4.5% $578,479,176 $604,829,288 $635,967,967 $666,175,440 $709,133,978 6.4% Figures may not add to totals due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 56 TABLE 25 STATE TRANSACTION PRIVILEGE AND SEVERANCE TAX DISTRIBUTION TO MUNICIPALITIES FISCAL YEAR 2013-14 CITIES APACHE Eagar Springerville St. Johns COCHISE Benson Bisbee Douglas Huachuca City Sierra Vista Tombstone Willcox COCONINO Flagstaff Fredonia Page Tusayan Williams GILA Globe Hayden Miami Payson Star Valley Winkelman GRAHAM Pima Safford Thatcher GREENLEE Clifton Duncan LA PAZ Parker Quartzsite MARICOPA Avondale Buckeye Carefree Cave Creek Chandler El Mirage Fountain Hills Gila Bend Gilbert Glendale Goodyear Guadalupe Litchfield Park Mesa Paradise Valley Peoria Phoenix Queen Creek AMOUNT $425,204 170,691 302,909 $444,353 485,263 1,545,858 161,291 3,820,133 120,119 327,019 $5,733,507 114,374 630,799 48,570 263,130 $655,606 57,623 159,897 1,331,841 201,069 30,726 COUNTY TOTAL $898,804 $6,904,037 $6,790,381 $2,436,762 $207,771 832,651 423,463 $1,463,885 $288,199 60,582 $348,780 $268,353 320,056 $588,409 $6,635,966 4,428,388 292,725 436,520 20,604,292 2,767,698 1,957,505 167,296 18,118,706 19,734,423 5,681,717 480,737 476,646 38,215,342 1,115,888 13,410,244 126,211,277 2,294,534 CITIES Scottsdale Surprise Tempe Tolleson Wickenburg Youngtown MOHAVE Bullhead City Colorado City Kingman Lake Havasu City NAVAJO Holbrook Pinetop-Lakeside Show Low Snowflake Taylor Winslow PIMA Marana Oro Valley Sahuarita South Tucson Tucson PINAL Apache Junction Casa Grande Coolidge Eloy Florence Kearny Mammoth Maricopa Superior SANTA CRUZ Nogales Patagonia YAVAPAI Camp Verde Chino Valley Clarkdale Cottonwood Dewey-Humboldt Jerome Prescott Prescott Valley Sedona YUMA San Luis Somerton Wellton Yuma TOTAL City Distributions are based on relative population. Figures may not add to total due to rounding. AMOUNT COUNTY TOTAL $18,921,791 10,229,004 14,076,468 569,695 553,854 535,835 $307,916,551 $3,441,671 419,633 2,443,116 4,572,096 $10,876,516 $439,827 372,717 927,876 486,569 357,920 840,398 $3,425,307 $3,043,102 3,569,711 2,198,614 491,966 45,272,335 $54,575,727 $3,119,613 4,227,755 1,029,281 1,447,608 2,222,724 169,733 124,123 3,784,793 246,940 $16,372,569 $1,813,710 79,470 $1,893,180 $946,416 941,542 356,615 980,537 338,944 38,647 3,468,045 3,379,174 873,126 $11,323,046 $2,812,692 1,243,580 250,857 7,507,882 $11,815,011 $437,628,967 $437,628,967 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 57 TABLE 26 MUNICIPAL PRIVILEGE TAX COLLECTION PROGRAM COLLECTIONS BY CITY FISCAL YEAR 2013-14 CITY Apache Junction (1) Benson Bisbee Buckeye Bullhead City (2) Camp Verde Carefree Casa Grande Cave Creek Chino Valley Clarkdale Clifton Colorado City Coolidge Cottonwood Dewey-Humboldt Douglas (3) Duncan Eagar El Mirage Eloy Florence Fountain Hills Fredonia Gila Bend Gilbert Globe Goodyear Guadalupe Hayden Holbrook Huachuca City Jerome Kearny Kingman Lake Havasu City Litchfield Park Mammoth Marana Maricopa RATE * (PERCENT) 2.50 2.50 3.00 3.00 3.00 2.00 3.00 4.00 3.00 3.00 2.00 3.00 3.00 2.00 2.00 3.00 3.00 3.00 2.00 2.60 4.00 3.00 1.50 2.00 2.50 4.00 3.00 3.00 1.50 3.50 3.00 2.50 2.00 2.80 2.00 2.00 2.00 COLLECTIONS $11,024 2,969,291 2,029,276 17,042,149 55,525 2,594,832 2,853,766 20,188,802 6,308,543 4,927,065 867,591 852,425 258,246 5,104,318 12,185,715 425,013 5,396 140,804 806,886 6,463,816 5,513,224 4,084,190 8,389,449 346,419 2,576,749 66,187,929 3,761,295 43,103,276 1,738,120 1,695,926 3,256,878 186,553 701,689 538,065 15,484,419 17,493,788 4,299,643 91,274 26,037,249 9,342,848 CITY Miami Oro Valley Page Paradise Valley Parker Patagonia Payson Pima Pinetop-Lakeside Prescott Valley Quartzsite Queen Creek Safford Sahuarita St. Johns San Luis Sedona (4) Show Low Sierra Vista Snowflake Somerton (5) South Tucson Springerville Star Valley Superior Surprise Taylor Thatcher Tolleson Tombstone Tusayan Wellton Wickenburg Willcox (6) Williams Winkelman Winslow Youngtown Yuma RATE * (PERCENT) 2.50 2.00 3.00 2.50 2.00 3.00 2.12 2.00 2.50 2.33 2.50 2.25 2.50 2.00 3.00 4.00 2.00 1.75 2.00 2.50 3.00 2.00 4.00 2.20 2.00 2.50 2.50 3.50 2.00 2.50 2.20 3.50 3.50 3.00 3.00 1.70 TOTAL COLLECTIONS $382,505 15,330,434 7,854,872 12,915,450 1,232,027 209,503 6,435,777 276,032 3,484,164 13,433,740 1,193,514 18,415,324 6,607,750 6,828,649 874,436 6,750,517 30,822 9,931,755 16,650,008 966,657 17,477 1,767,858 1,621,871 258,569 422,851 38,805,666 639,646 3,339,155 15,494,880 925,121 2,713,670 1,516,181 2,986,477 5,261 4,430,162 110,087 6,419,336 1,351,862 33,175,771 $546,725,301 * Jurisdictions may have levied at more than one rate during the fiscal year. Rate shown is the rate charged on most transactions. Current rates, are located here: http://www.azdor.gov/Business/TransactionPrivilegeTax/TPTRates.aspx (1) Effective July 1, 2007, Apache Junction no longer participates in the municipal privilege tax collection program. (2) Effective March 1, 2009, Bullhead City no longer participates in the municipal privilege tax collection program. (3) Effective October 1, 2010, Douglas no longer participates in the municipal privilege tax collection program. (4) Effective January 1, 2011, Sedona no longer participates in the municipal privilege tax collection program. (5) Effective February 1, 2011, Somerton no longer participates in the municipal privilege tax collection program. (6) Effective March 1, 2011, Willcox no longer participates in the municipal privilege tax collection program. For those cities who have left the program, collections shown include periods up to the effective date. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 58 TABLE 27 MUNICIPAL PRIVILEGE TAX COLLECTION PROGRAM FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 FISCAL YEAR TOTAL COLLECTIONS NUMBER OF CITIES IN PROGRAM 2009-10 $443,808,887 76 2010-11 $450,148,563 73 2011-12 $466,896,627 73 2012-13 $506,978,968 73 2013-14 $546,725,301 73 NON PROGRAM CITY MUNICIPAL PRIVILEGE TAX COLLECTIONS (1) APACHE JUNCTION AVONDALE BULLHEAD CITY CHANDLER DOUGLAS FLAGSTAFF GLENDALE MESA NOGALES PEORIA PHOENIX PRESCOTT SCOTTSDALE SEDONA SOMERTON TEMPE TUCSON WILLCOX FY 2011-12 $10,392,302 32,789,899 10,163,746 95,151,159 5,790,053 24,595,088 97,237,309 126,777,870 9,841,089 60,719,649 674,425,999 23,721,779 151,052,744 10,670,880 1,337,769 126,124,000 190,629,228 2,295,667 FY 2012-13 $10,877,057 35,577,512 10,336,537 102,200,516 5,389,897 26,328,187 124,890,480 133,506,015 9,835,973 65,950,235 699,735,964 26,932,232 144,909,078 11,389,664 1,378,727 130,087,000 196,209,066 2,376,729 FY 2013-14 $10,962,018 37,389,523 10,820,754 101,290,665 5,461,114 27,360,279 135,267,254 140,049,323 10,046,503 71,237,000 718,074,238 28,228,604 155,705,177 12,182,879 did not report 137,074,000 196,486,876 2,169,901 (1) Pursuant to HB 2513, Chapter 154, Second Regular Session, 2010. This is for informational purposes only as reported by the cities. The department does not collect for these cities. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 59 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 60 INCOME TAX The State of Arizona imposes two types of income tax: corporate, which applies to incorporated businesses and certain other entities operating in this state; and individual, which is levied upon those persons who reside in or earn income in the state (Refer to Table 28). CORPORATE INCOME TAX MAJOR FEATURES Every corporation doing business in Arizona is required to file a corporate income tax return. Corporations filed returns with the state and made payments of $575.2 million during fiscal year 2014 (Refer to Table 28). INDIVIDUAL INCOME TAX MAJOR FEATURES For tax year 2011 filed in 2012, approximately 2.7 million individual filers reported Arizona gross income (defined as federal adjusted gross income) totaling more than $134.9 billion. Individuals with Arizona gross income of more than $75,000, in the preceding or current year, are required to file Arizona estimated tax payments. An individual can apply any portion of an income tax refund toward the following year's income tax as an estimated payment. DISTRIBUTION State income tax collections are shared with Arizona municipalities in an Urban Revenue Sharing Program. (Refer to Tables 28 and 29). Voluntary taxpayer contributions to Arizona Wildlife Fund, Child Abuse Prevention Fund, Citizens Clean Elections Fund, Domestic Violence Shelter Fund, I Did Not Pay Enough Fund, National Guard Relief Fund, Neighbors Helping Neighbors Fund, Solutions Teams Assigned to Schools Fund (formerly known as Aid to Education Fund), Special Olympics Fund, Veteran’s Donation Fund, and political parties are distributed to the appropriate agency, political party or organization (Refer to Table 28). Pursuant to HB 2001, Chapter 1, 2nd Special Session, 2011, $31.5 million of withholding tax revenues is transferred annually to the Job Creation Withholding Clearing Account. The graduated rate structure for the 2010 tax year ranged from 2.59 percent to a maximum of 4.54 percent on an individual's income over $150,000 (or joint income over $300,000). ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 61 CORPORATE AND INDIVIDUAL INCOME TAX CREDITS CREDIT Agricultural Pollution Control Equipment AVAILABLE TO Taxpayers that incur expenses during the taxable year to purchase agricultural pollution control equipment. Agricultural Water Conservation System Airline Bankruptcy Payments Taxpayers that incur expenses to purchase and install an agricultural water conservation system in Arizona. This credit is a one-time individual income tax credit for tax year 2013. The FAA Modernization and Reform Act allowed individual taxpayers that received qualified airline bankruptcy-related payments between 2001 and 2011 to make contributions to a traditional IRA and treat the contributions as if they were made in the year in which the payments were received. Taxpayers who take advantage of this provision are required to file amended federal income tax returns. Instead of filing Arizona amended returns, taxpayers will be allowed a credit on their 2013 Arizona tax return based on the reduction in tax that would have occurred if they would have been allowed to amend their Arizona 2001 through 2011 tax returns. Individual taxpayers that make cash contributions to certain charities that provide help to the working poor. The credit varies depending upon filing status. Taxpayers may also contribute to a Qualifying Foster Care Charitable Organization (QFCO). If a contribution is made to a QFCO, the credit available to the taxpayer varies depending upon filing status. Corporate credit that allows taxpayers to make cash contributions to school tuition organizations. The amount of the donation must be pre-approved by the department. There is an annual limit to the aggregate amount of donations made. Corporate credit that allows taxpayers to make cash contributions to school tuition organizations that provides scholarships or grants to displaced students or students with disabilities. The amount of the donation must be pre-approved by the department. There is an annual limit to the aggregate amount of donations made. Taxpayers certified by the Arizona Department of Commerce as a qualified defense contractor for qualified increases in employment. Credit for employers who have an employee that is a member of the Arizona National Guard if the employee is placed on active duty. The credit is $1,000 for each employee placed on active duty. Taxpayers that employ recipients of Temporary Assistance for Needy Families (TANF). Taxpayers whose business is located in an Arizona enterprise zone that have a net increase in qualified employment positions. Taxpayers that incur expenses in constructing a qualified environmental technology manufacturing, producing, or processing facility as describes in ARS § 41-1514.02. A credit for taxpayers below certain income levels, with differing amounts for different household sizes. Contributions to Qualifying Charitable Organizations Corporate Contributions to School Tuition Organizations Corporate Contributions to School Tuition Organizations for Displaced Students with Disabilities Defense Contracting Employing Arizona National Guard Members Employment of TANF Recipients Enterprise Zone Environmental Technology Facility Family ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 62 CREDIT Healthy Forest Enterprises Income Taxes Paid to Another State or Country AVAILABLE TO Businesses that operate a healthy forest enterprise may receive a nonrefundable credit against corporate and individual income tax liabilities. Taxpayers claiming this credit must be certified by the Arizona Commerce Authority (ACA). Taxpayers that paid a net income tax to Arizona and another qualified state or foreign country, on the same income. Increased Excise Taxes A refundable credit for Arizona residents whose federal adjusted gross income is beneath a certain threshold ($25,000 or less for Married Filing Joint or Head of Household, or $12,500 for Married Filing Separately or Single) and who cannot be claimed as a dependent by any other taxpayer to mitigate the increase in transaction privilege tax rate for education. Investment in Qualified Small Businesses Allows a credit for investments in qualified small businesses to individuals. The credit must be pre-approved by the ACA. Military Family Relief Fund Individual taxpayers that make contributions to the fund which helps service members and their families faced with unforeseen expenses when a loved one becomes a casualty of war. The credit varies depending upon filing status. Military Reuse Zone Taxpayers with a net increase in employment of full-time employees working in a military reuse zone. Motion Picture Productions Costs Provides a transferable tax credit against corporate and individual income tax liabilities for motion picture production companies that produce motion pictures completely or partially in Arizona. New Employment Provides nonrefundable individual and corporate credits for net increases in qualified employment positions in Arizona at a business location in Arizona. The credit must be pre-approved by the ACA. Pollution Control Taxpayers that purchase real or personal property that is used within Arizona in the taxpayer's trade or business to control or prevent pollution. Qualified Health Insurance Plans The nonrefundable credit is available to employers who provide qualified health insurance plans or contributions to health savings accounts for its employees who are Arizona residents. The credit amount is $360 for every employee who is enrolled in the plan. Qualified Facilities Provides a refundable credit, available in five equal installments, for those that expanded or located a qualified facility in Arizona. The credit must be approved by the ACA. There is an aggregate cap on approvals of $70 million (in conjunction with the renewable energy industry credit) and a per taxpayer cap of $30 million. The amount of the credit is 10% of the lesser of the taxpayer’s total capital investment in the qualified facility or $200,000 for each net new fulltime employment position at the qualified facility. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 63 CREDIT AVAILABLE TO Private School Tuition Organizations Individual taxpayers that made contributions to a school tuition organization that provides scholarships or grants to qualified schools. The credit varies depending upon filing status. An additional credit is available for contributions that exceed the maximum allowable credit depending upon filing status. Property Tax A refundable credit for property taxes accrued if certain age and income level conditions are met. Public School Extra Curricular Activity Individual taxpayers that make contributions or paid certain fees to public schools in Arizona. The credit varies depending upon filing status. Taxpayers who acquire and place in service recycling equipment in Arizona. This credit was repealed for corporations not individuals. Recycling Equipment Renewable Energy Industry This credit provides refundable individual and corporate income tax credits for expanding or locating qualified renewable energy operations in this state. The credit must be pre-approved by the ACA. Renewable Energy Investment and Production for Self-Consumption by Manufacturers A nonrefundable corporate and individual tax credit for investment in new renewable energy resources that produce energy for selfconsumption using renewable resources if the power will be used primarily for manufacturing. Renewable Energy Production This credit provides nonrefundable individual and corporate credits for production of electricity by a qualified energy generator that produces electricity using a qualified energy resource. The credit must be pre-approved by the ACA. Research and Development A nonrefundable individual and corporate income tax credit for an increase in qualifying research and development expenses conducted in Arizona. There is also a refundable credit for small businesses that must be pre-approved by the ACA. Research and Development – University Research This is an additional individual or corporate research and development income tax credit for research conducted through Arizona State University, Northern Arizona University or University of Arizona. This credit requires pre-approval through the Arizona Department of Revenue School Site Donation This tax credit is for the donation of real property and improvements to an Arizona school district or Arizona charter school for use as a school or as a site for the construction of a school. Solar Energy Devices Individual taxpayers who install a solar energy device in his or her residence located in Arizona. Solar Energy Devices – Commercial and Industrial Applications This credit is available to individuals, corporations and S corporations. The credit is 10% of the cost of the installed device, not to exceed $25,000 with respect to the same building in the same tax year, or $50,000 in total credits in any given year. The credit must be pre-approved by the ACA. Solar Liquid Fuel Provides nonrefundable individual and corporate credits for increased research activities related to solar liquid fuel. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 64 CREDIT Solar Hot Water Heater Plumbing Stub Outs and Electric Vehicle Recharge Outlets AVAILABLE TO Provides a nonrefundable individual or corporate credit for the installation of solar hot water heater plumbing stub outs and electric vehicle recharge outlets in houses or dwelling units constructed by the taxpayer. The houses or dwelling units must be located in Arizona. Taxes Paid for Coal Consumed in Generating Electrical Power Allows corporate taxpayers a credit equal to 30 percent of the amount paid by the seller or purchaser as transaction privilege tax or use tax for coal sold to the taxpayer that is consumed in the generation of electrical power in Arizona. Water Conservation System An individual may qualify for this credit if the taxpayer installed a qualifying water conservation system in the taxpayer’s residence located in Arizona. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 65 TABLE 28 INCOME TAX COLLECTIONS FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 SOURCE Withheld from Wages Gross Revenue Refunds and Charge-offs NET Individuals & Fiduciaries Gross Revenue Regular Refunds and Charge-offs NET Corporations Gross Revenue Refunds and Charge-offs NET Subtotal Net Collections Less distributions for: Urban Revenue Sharing Child Abuse Prevention Veteran's Donation Fund Solutions Teams Assigned to Schools (1) Domestic Violence Shelter Special Olympics Wildlife Contributions Neighbors Helping Neighbors Clean Elections National Guard Relief Fund I Did Not Pay Enough Fund Democratic Party Libertarian Party Republican Party Green Party Americans Elect Job Creation W/H Clearing Acct (2) Subtotal Distributions NET REVENUE TO STATE GENERAL FUND WQARF Distribution Sports and Tourism Authority Use Tax on Income Tax Return (3) PERCENT OF NET COLLECTIONS IN FY2013-14 FY2009-10 FY2010-11 FY2011-12 FY2012-13 FY2013-14 $3,017,256,893 (10,152,178) $3,234,666,688 (7,044,562) $3,343,314,942 (10,751,762) $3,459,818,705 (9,321,721) $3,580,656,587 (11,985,321) $3,007,104,715 $3,227,622,125 $3,332,563,180 $3,450,496,984 $3,568,671,265 $768,011,214 (1,351,901,223) $867,110,332 (1,224,167,109) $1,027,389,330 (1,260,775,055) $1,170,646,638 (1,222,241,845) $1,131,393,794 (1,236,793,482) ($583,890,008) ($357,056,777) ($233,385,726) ($51,595,207) ($105,399,688) $650,925,393 (237,644,455) $659,266,690 (98,958,514) $758,413,453 (110,525,973) $755,002,081 (92,975,683) $705,727,107 (130,546,886) $413,280,938 $560,308,176 $647,887,480 $662,026,398 $575,180,221 14.2% $2,836,495,645 $3,430,873,524 $3,747,064,934 $4,060,928,175 $4,038,451,798 100.0% $628,644,630 220,098 69,746 84,117 161,673 98,752 202,627 52,383 6,019,188 71,775 ----14,595 1,162 9,335 578 --------- $474,006,520 159,694 88,604 65,775 118,629 72,928 156,130 33,099 6,199,220 48,845 17,121 10,691 1,094 7,744 319 --------- $424,423,442 156,194 97,546 67,806 122,343 74,582 154,626 31,315 6,273,004 43,577 14,523 11,597 568 8,649 638 ----31,500,000 $513,584,045 158,556 103,323 84,949 115,625 63,923 143,775 32,549 579,740 40,660 15,124 11,266 444 5,986 518 210 31,500,000 $561,001,195 169,281 124,357 34,413 133,282 68,267 169,110 34,375 82,845 39,340 15,244 11,274 847 5,696 494 756 31,500,000 $635,650,660 $480,986,414 $462,980,411 $546,440,691 $593,390,776 $2,200,844,986 $2,949,887,110 $3,284,084,523 $3,514,487,484 $3,445,061,022 $7,000,000 $6,419,515 ----- $7,000,000 $5,810,440 ----- $7,000,000 $6,168,488 $1,705,724 $7,000,000 $5,337,915 $166,277 $7,000,000 $5,519,253 $31,070 (1) Pursuant to SB 1447, Chapter 251, 1st Regular Session, 2013, monies in the Assitance for Education Fund are to be distributed to fund the Solutions Teams Assigned to Schools. (2) Pursuant to HB 2001, Chapter 1, 2nd Special Session, 2011, $31.5m of withholding tax revenues is to be transferred annually to the Job Creation Withholding Clearing Account. (3) Pursuant to HB 2332, Chapter 128, 1st Regular Session, 2011, taxpayers are to declare their annual amount of use tax on their individual income tax return beginning with taxable year 2011. Pursuant to SB1214, Chapter 323 , 2nd Regular Session, 2012, the provision was repealed retroactively to tax years beginning January 1, 2012. The use tax amount has been adjusted out of Individual Gross Revenue and is included in the Transaction Privilege, Use and Severance tables. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 66 88.4% -2.6% TABLE 29 EXEMPTIONS, DEDUCTIONS AND CREDITS TAX YEAR 2009 THROUGH TAX YEAR 2012 TAX YEAR PERSONAL EXEMPTION (2) BLIND EXEMPTION AGE 65 AND OVER EXEMPTION DEPENDENT EXEMPTION STANDARD DEDUCTION LIMIT (1) MAXIMUM PROPERTY TAX CREDIT MAXIMUM FAMILY TAX CREDIT 2009 2010 2011 2012 2,100 2,100 2,100 2,100 1,500 1,500 1,500 1,500 2,100 2,100 2,100 2,100 2,300 2,300 2,300 2,300 4,677/9,354 4,677/9,354 4,703/9,406 4,833/9,665 502 502 502 502 240 240 240 240 (1) Amounts shown are for individual and married-filing-jointly returns. (2) Beginning with tax year 1997, married filers claiming at least one dependent are entititled to an additional $2,100 personal exemption INDIVIDUAL INCOME TAX CREDITS TAX YEAR 2010 THROUGH TAX YEAR 2012 CREDIT Agricultural Pollution Control Agricultural Water Conservation Clean Elections Commercial & Industrial Solar Energy Contributions to Charities that Provide Assistance to the Working Poor Defense Contracting Donations to Military Family Relief Fund Employing National Guard Members Employment of TANF Recipients Enterprise Zone Environmental Technology Family Tax Credit Healthy Forest Enterprises Income Taxes Paid to Other States Increased Excise Taxes Paid Investment in Qualified Small Buiness Military Reuse Zone Motion Picture Production & Infrastructure New Employment Credit Pollution Control Device Private School Tuition Organization (3) Private School Tuition Organization Switcher (3) Property Tax Public School Extra Curricular Activity (3) Qualified Health Insurance Plans Recycling Equipment Renewable Energy Industry Investment & Employment Renewable Energy Production Research and Development Additional Research & Development for University Research School Site Donation Solar Energy Solar Hot Water Heater & Plumbing Stub Outs Solar Liquid Fuel Research & Development Water Conservation Systems Total TAX YEAR 2010 CLAIMANTS CREDITS TAX YEAR 2011 CLAIMANTS CREDITS TAX YEAR 2012 CLAIMANTS CREDITS (1) 114 24,908 129 (1) $729,979 $644,314 $543,109 (1) 96 25,275 119 (1) $1,020,611 $596,451 $504,027 5 89 28,320 (2) $27,350 $1,420,014 $537,541 (2) 61,602 0 3,052 (1) 3 100 (1) 516,513 0 36,535 656,524 220 (1) 7 $16,727,074 $0 $995,849 (1) $20,822 $650,253 (1) $5,594,106 $0 $84,093,029 $35,278,230 $766,806 (1) $182,637 $21,835,458 $2,466 $43,183,534 $18,012,263 $0 $996,695 (1) (1) $340,268 (1) $5,905,317 $0 $82,151,564 $35,659,215 $853,710 (1) $54,053 $0 (2) $49,100,712 78,736 3 62,940 66,396 0 3,007 (1) (1) 77 (1) 533,345 0 39,174 672,009 223 (1) 4 0 (2) 71,792 2,967 (1) (1) (2) (1) 520,448 0 32,281 638,208 (2) (2) 3 0 9 73,854 $989,868 (1) (1) (2) (1) $5,399,635 $0 $93,394,010 $33,367,298 (2) (2) $11,423 $0 $221,039 $51,892,576 $12,579,495 $7,222,443 $51,287,359 $0 $0 ----- ----- ----- ----- ----- ----- ----- ----- 17,526 250,004 $6,750,770 $43,718,717 18,503 250,216 $7,183,778 $48,442,987 0 $0 0 $0 15,994 18,767 253,134 0 0 $0 $0 $0 $6,961,536 0 0 173 $0 $0 $5,176,831 ----- 0 ----- ----- ----- ----- ----- 492 $6,697,689 0 0 535 ----- ----- ----- ----- 30 11,440 $224,989 $5,857,614 20 8,200 $89,461 $5,300,000 0 10 (2) $0 $35,054 (2) 15 $1,662 232 1,642,396 $104,780 $252,790,723 24 0 185 1,689,212 $1,876 $0 $86,178 $263,298,113 13 0 (2) 1,663,016 $1,125 $0 (2) $285,401,065 ----- ----- (1) Too few claimants to allow release of information without violating confidentiality laws. (2) Credits claimed for tax years are being reviewed. No data is available at this time. (3) Data reported is based on donation information provided to the Department of Revenue by the Private School Tuition Organizations and the Public Schools. For the purposes of this report, it is assumed that all credit was used in the tax year. Figures for all credits shown here are subject to change, due to the verification process. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 67 TABLE 30 RESIDENT INDIVIDUAL INCOME TAX LIABILITY BY FEDERAL ADJUSTED GROSS INCOME TAX YEAR 2011 (1) FEDERAL ADJUSTED GROSS INCOME # OF FILERS % OF TOTAL LIABILITY % OF TOTAL Negative Income $0.01 to $1,999 $2,000 to $5,999 $6,000 to $9,999 $10,000 to $13,999 $14,000 to $19,999 $20,000 to $24,999 $25,000 to $29,999 $30,000 to $39,999 $40,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $199,999 $200,000 to $499,999 $500,000 to $999,999 $1,000,000 to $4,999,999 $5,000,000 and over 44,910 44,992 122,562 157,794 175,196 257,184 187,176 157,835 261,815 189,507 322,102 200,851 235,305 53,991 7,608 3,129 298 1.85% 1.86% 5.06% 6.51% 7.23% 10.62% 7.73% 6.52% 10.81% 7.82% 13.30% 8.29% 9.71% 2.23% 0.31% 0.13% 0.01% $737,828 33,649 73,632 2,771,443 10,360,771 28,658,378 38,098,289 50,122,725 126,894,669 132,792,590 336,077,997 327,267,072 705,301,912 454,851,095 181,401,344 219,257,167 217,872,934 0.03% 0.00% 0.00% 0.10% 0.37% 1.01% 1.35% 1.77% 4.48% 4.69% 11.86% 11.55% 24.90% 16.06% 6.40% 7.74% 7.69% 2,422,255 100.00% $2,832,573,495 100.00% TOTAL (1) This summary combines all liability reported on the Arizona Form 140 and 140A Individual Income tax returns for tax year 2011, filed from January 2012 forward. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 68 TABLE 31 NONRESIDENT/PART YEAR RESIDENT INDIVIDUAL INCOME TAX LIABILITY BY FEDERAL ADJUSTED GROSS INCOME TAX YEAR 2011 (1) ARIZONA PORTION OF FEDERAL ADJUSTED GROSS INCOME # OF FILERS % OF TOTAL LIABILITY % OF TOTAL Negative Income $0.01 to $1,999 $2,000 to $5,999 $6,000 to $9,999 $10,000 to $13,999 $14,000 to $19,999 $20,000 to $24,999 $25,000 to $29,999 $30,000 to $39,999 $40,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $199,999 $200,000 to $499,999 $500,000 to $999,999 $1,000,000 to $4,999,999 $5,000,000 and over 52,241 27,883 37,527 25,363 18,607 19,647 11,439 8,661 12,424 8,340 12,098 6,053 6,950 2,642 582 357 51 20.82% 11.11% 14.96% 10.11% 7.42% 7.83% 4.56% 3.45% 4.95% 3.32% 4.82% 2.41% 2.77% 1.05% 0.23% 0.14% 0.02% 4,304,057 269,468 1,043,805 1,730,580 2,349,589 4,214,057 3,779,404 3,770,303 7,436,075 7,117,006 15,295,470 11,940,828 24,956,212 24,806,302 14,435,097 26,377,920 24,012,342 2.42% 0.15% 0.59% 0.97% 1.32% 2.37% 2.13% 2.12% 4.18% 4.00% 8.60% 6.71% 14.03% 13.95% 8.12% 14.83% 13.50% 250,865 100.00% $177,838,515 100.00% TOTAL (1) This summary combines all liability reported on the Arizona Form 140NR and 140PY Individual Income tax returns for tax year 2011, filed from January 2012 forward. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 69 TABLE 32 CORPORATE INCOME TAX CORPORATE TAXPAYER BY SIZE OF TAX LIABILITY TAX YEAR 2011 (1) CORPORATE TAX LIABILITY $50 Minimum $50.01 to $99.99 $100 to $999.99 $1,000 to $4,999.99 $5,000 to $9,999.99 $10,000 to $49,999.99 $50,000 to $99,999.99 $100,000 to $499,999.99 $500,000 to $999,999.99 $1,000,000 to $45,000,000 TOTAL # OF FILERS 34,412 897 4,152 3,387 983 1,409 368 515 102 123 46,348 % OF TOTAL 74.2% 1.9% 9.0% 7.3% 2.1% 3.0% 0.8% 1.1% 0.2% 0.3% 100.0% LIABILITY $1,706,744 65,278 1,714,596 8,186,431 6,854,474 31,802,009 26,561,145 114,713,838 71,617,641 407,192,074 $670,414,230 % OF TOTAL 0.3% 0.0% 0.3% 1.2% 1.0% 4.7% 4.0% 17.1% 10.7% 60.7% 100.0% CORPORATE INCOME TAX CREDITS TAX YEAR 2011 CREDIT TYPE Agricultural Pollution Control Equipment Clean Elections Commercial & Industrial Solar Energy Contributions to School Tuition Organizations Contributions to School Tuition Organizations for Disabled/Displaced Students Defense Contracting Employing National Guard Members Employment of TANF Recipients Enterprise Zone Environmental Technology Healthy Forest Enterprises Military Reuse Zone Motion Picture Production & Infrastructure New Employment Credit Pollution Control Equipment Renewable Energy Industry Renewable Energy Production Research & Development Research & Development - Refundable (2) School Site Donation Solar Hot Water Heater Plumbing Stub-Outs Solar Liquid Fuel Research & Development Taxes Paid on Coal Used in Electric Generation Water Conservation TOTAL (3) # OF FILERS 0 255 11 83 CREDIT USED $0 $1,635 $181,978 $12,900,592 3 0 5 8 70 * 0 3 5 * 17 0 * 318 54 * 0 0 * 0 792 $170,000 $0 $7,000 $64,550 $5,759,396 * $0 $5,100 $3,825,900 * $1,364,968 $0 * $81,859,853 $3,939,816 * $0 $0 * $0 $119,606,479 CARRYFORWARD AVAILABLE $0 $0 $92,642 $2,464,583 $0 $0 $0 $69,694 $4,705,162 * $0 $131,670 $486,894 * $4,685,391 $0 * $981,177,183 $0 * $0 $0 * $0 $1,000,603,121 (1) This summary combines all liability on the Arizona Form 120 Corporate Income Tax returns for tax year 2011 filed from January 2012 forward. (2) These taxpayers are already included in the research and development credit count. (3) Total is for all credits, including those for which information cannot be divulged individually. * The single asterisk indicates that no information can be released due to confidentiality laws in Arizona. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 70 TABLE 33 AVERAGE FEDERAL ADJUSTED GROSS INCOME AND AVERAGE TAX LIABILITY PER RETURN BY COUNTY FOR TAX YEAR 2011 APACHE COCONINO Average FAGI $33,161 Average Liability $336 Average FAGI $49,511 Average Liability $1,000 MOHAVE Average FAGI $37,810 Average Liability $641 NAVAJO Average FAGI $38,184 Average Liability $560 GREENLEE YAVAPAI Average FAGI $53,289 Average Liability $1,127 Average FAGI $43,551 Average Liability $804 LA PAZ GILA Average FAGI $33,601 Average Liability $513 Average FAGI $43,270 Average Liability $761 MARICOPA Average FAGI $57,389 Average Liability $1,328 YUMA Average FAGI $38,208 Average Liability $662 STATEWIDE AVERAGES Average FAGI $53,488 Average Liability $1,172 PINAL Average FAGI $43,933 Average Liability $760 PIMA COCHISE Average FAGI $51,574 Average Liability $1,030 Average FAGI is the average federal adjusted gross income reported on the Arizona resident income tax return. Average liability is the average tax liability for all resident Arizona income tax returns filed. GRAHAM Average FAGI $44,212 Average Liability $834 Average FAGI $45,587 Average Liability $865 SANTA CRUZ Average FAGI $38,155 Average Liability $697 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 71 TABLE 34 URBAN REVENUE SHARING FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 FISCAL YEAR AMOUNT 2009-10 $628,644,630 2010-11 $474,006,520 2011-12 $424,423,442 2012-13 $513,584,045 2013-14 $561,001,194 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 72 TABLE 35 DISTRIBUTION OF INCOME TAX AS URBAN REVENUE SHARING TO MUNICIPALITIES IN FISCAL YEAR 2013-14 CITIES BY COUNTY AMOUNT % OF TOTAL $2,938,268 24,230,317 13,098,761 18,025,635 729,523 709,237 686,164 0.52% 4.32% 2.33% 3.21% 0.13% 0.13% 0.12% $4,407,235 537,362 3,128,535 5,854,801 0.79% 0.10% 0.56% 1.04% $563,221 477,283 1,188,192 623,077 458,335 1,076,172 0.10% 0.09% 0.21% 0.11% 0.08% 0.19% $3,896,847 4,571,196 2,815,436 629,987 57,973,530 0.69% 0.81% 0.50% 0.11% 10.33% $3,994,823 5,413,854 1,318,046 1,853,736 2,846,311 217,352 167,194 4,846,621 316,220 0.71% 0.97% 0.23% 0.33% 0.51% 0.04% 0.03% 0.86% 0.06% $2,322,548 167,194 0.41% 0.03% $1,211,934 1,205,692 456,663 1,255,627 434,036 167,194 4,441,008 4,327,205 1,118,082 0.22% 0.21% 0.08% 0.22% 0.08% 0.03% 0.79% 0.77% 0.20% $3,559,275 1,592,467 321,235 9,656,745 0.63% 0.28% 0.06% 1.72% City distributions are based on relative population. TOTAL $561,001,194 *Population adjusted to reflect minimum requirement of 1,500 per HB 2391, Chapter 290, 2nd Regular Session, 2008 Figures may not add to total due to rounding. 100.000% APACHE Eagar St. Johns Springerville COCHISE Benson Bisbee Douglas Huachuca City Sierra Vista Tombstone* Willcox COCONINO Flagstaff Fredonia* Page Tusayan* Williams GILA Globe Hayden* Miami Payson Star Valley Winkelman* GRAHAM Pima Safford Thatcher GREENLEE Clifton Duncan* LA PAZ Parker Quartzsite MARICOPA Avondale Buckeye Carefree Cave Creek Chandler El Mirage Fountain Hills Gila Bend Gilbert Glendale Goodyear Guadalupe Litchfield Park Mesa Paradise Valley Peoria Phoenix AMOUNT % OF TOTAL $544,495 387,890 218,578 0.10% 0.07% 0.04% $569,017 621,405 1,976,038 206,540 4,891,875 167,194 418,765 0.10% 0.11% 0.35% 0.04% 0.87% 0.03% 0.07% $7,342,048 167,194 807,770 167,194 336,952 1.31% 0.03% 0.14% 0.03% 0.06% $839,537 167,194 204,778 1,705,491 257,479 167,194 0.15% 0.03% 0.04% 0.30% 0.05% 0.03% $266,062 1,066,252 542,266 0.05% 0.19% 0.10% $369,053 167,194 0.07% 0.03% $343,639 409,848 0.06% 0.07% $8,497,693 5,670,776 374,849 558,985 26,379,401 3,544,179 2,506,685 214,231 23,204,633 25,270,933 7,275,727 615,608 610,370 48,936,692 1,428,952 17,172,500 161,579,859 1.51% 1.01% 0.07% 0.10% 4.70% 0.63% 0.45% 0.04% 4.14% 4.50% 1.30% 0.11% 0.11% 8.72% 0.25% 3.06% 28.80% CITIES BY COUNTY Queen Creek Scottsdale Surprise Tempe Tolleson Wickenburg Youngtown MOHAVE Bullhead City Colorado City Kingman Lake Havasu City NAVAJO Holbrook Pinetop-Lakeside Show Low Snowflake Taylor Winslow PIMA Marana Oro Valley Sahuarita South Tucson Tucson PINAL Apache Junction Casa Grande Coolidge Eloy Florence Kearny Mammoth* Maricopa Superior SANTA CRUZ Nogales Patagonia* YAVAPAI Camp Verde Chino Valley Clarkdale Cottonwood Dewey-Humboldt Jerome* Prescott Prescott Valley Sedona YUMA San Luis Somerton Wellton Yuma ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 73 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 74 PROPERTY TAX In Arizona, property taxation is an "ad valorem" tax (ad valorem, meaning "according to value"). The tax is calculated from two different bases: full cash value (market value) and limited value (i.e., statutorily-controlled value). The full cash value is used to calculate tax rates to pay for voter-initiated bonds, overrides, and special district levies (Refer to Table 37). Taxes based upon the limited value provide revenues to maintain the basic operations of state, county and city government, schools, and other public entities (Refer to Table 36). Limited values cannot exceed the full cash value of each property. Taxes calculated on the limited value, called primary taxes, are added to those derived from the full cash value, or secondary taxes, to produce the total annual tax bill. All taxable property in Arizona is classified according to its actual use. Each classification is assigned a specific assessment ratio prescribed by law, which is multiplied by the full cash and limited values to produce an assessed value (See Figure 1). The assessed value is the basis for calculating tax bills. GENERAL PROPERTY TAX ADMINISTRATION The duties of valuing property for tax purposes are divided between the department and the fifteen county assessors’ offices. The department values utilities, airlines, railroads, mines, telecommunication companies, and other geographically-dispersed properties (Centrally Valued Properties). The values for those properties the department appraises are transmitted to the County Boards of Supervisors for entry upon the county tax rolls for levy and collection of property taxes. The county assessors, using the appraisal standards, guidelines and manuals the department adopted, are responsible for the appraisal and assessment of other classes of property, including residential, commercial, and agricultural properties (Locally Assessed Properties). Appeals of valuation or classification for locally assessed properties originate with the property owner’s petition for review filed with the county assessor. Subsequent appeals may be filed with either the local County Board of Equalization or the State Board of Equalization or the Arizona Tax Court, a division of the Maricopa County Superior Court. TAX COLLECTION AND DISTRIBUTION County treasurers collect all property taxes (except those assessed upon airline flight properties and private rail car companies) and distribute receipts to all taxing entities. The department collects taxes levied on airline flight property and private rail cars and deposits the taxes with the Arizona State Treasurer. Taxes on airline flight properties and private rail car companies are levied at the average state tax rate. This rate is derived by dividing the total of all of the levies in the state by the total net assessed value in the state. This calculation produces the weighted average of all of the levies in the state and is referred to as the "average state tax rate." EQUALIZATION The department’s primary tool in evaluating assessors’ assessment performance is its sales ratio study, which compares values established by the county assessors with sales prices of recently sold properties. These studies are performed several times each year by county, type of property, and market area. Sales ratios are derived by dividing full cash values by sales prices of recently sold properties. The median ratio is the middle ratio in a sorted (low to high) array of sales ratios; 50% of the ratios lie above the median and 50% fall below it. The median ratio is the most commonly used. The sales ratio studies include coefficients of dispersion which are a measure of how all taxpayers are treated. Coefficient of dispersion targets are currently 25% for vacant land and commercial properties, 15% for residential properties in Maricopa and Pima counties, and 20% on residential properties in all other counties. Lower coefficients of dispersion indicate greater equity in property assessments. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 75 The assessment and appeals calendar for centrally valued properties coincides with the calendar for locally assessed properties. Centrally Valued Properties The Centrally Valued Property Unit is responsible for the annual valuation of 11 industries for ad valorem property tax purposes. Generally, these are large, complex properties which are often located in more than one county and/or in more than one state. Values determined for such properties are apportioned to the individual taxing jurisdictions. They are referred to as centrally valued because they are valued by the department rather than the 15 county assessors. Figure 1 Class Legal Classification Assessment Ratio 1.1 1.3-1.7, 1.11 1.12 1.13 Mines Utilities Commercial Real Commercial Personal 2R 2P Agricultural Real; Vacant Land Agricultural Personal 3 4.1 4.2 5 6 Primary Residence Non-Primary Residence Rental Residential Railroads, Airlines Non-Commercial Historic Property; Foreign Trade Zones; Qualified Environmental Technology Facilities Commercial Historic Combination 1% and 19.0% Rental Residential Historic Combination 1% and 10% Improvements on government property 1% 7 8 9 19.0% 19.0% 19.0% First $141,385 exempt; 19.0% on the remainder 16% First $141,385 exempt; 16% on the remainder 10% 10% 10% 16% 5% ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 76 INDUSTRIES VALUED BY THE DEPARTMENT Industry Number of Taxpayers 2012 2013 2014 Airlines (Flight Property) ................................................................... 28 ................ 29 ...............30 Electric & Gas* Generation ................................................................................... 53 ................ 71 ...............75 Transmission and Distribution ..................................................... 32 ................ 36 ...............32 Electric Co-ops.............................................................................. -- ................. -- .................9 Mines (non-producing) ........................................................................ 1 .................. 0 .................1 Mines (producing).............................................................................. 30 ................ 35 ...............35 Pipelines ............................................................................................... 8 .................. 8 .................8 Private Rail Cars .............................................................................. 289 .............. 278 .............279 Producing Oil & Gas Interests ............................................................. 3 .................. 2 .................2 Railroads ............................................................................................ 11 ................ 12 ...............12 Telecommunications ......................................................................... 63 ................ 62 ...............61 Water and Wastewater Utilities ....................................................... 316 .............. 311 .............317 Total ................................................................................................ 834 .............. 844 .............861 * Includes Salt River Project ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 77 TABLE 36 STATE OF ARIZONA 2014 PRIMARY PROPERTY TAX LEVIES TAX AUTHORITY APACHE COCHISE COCONINO GILA GRAHAM GREENLEE LA PAZ MARICOPA MOHAVE NAVAJO PIMA PINAL SANTA CRUZ YAVAPAI YUMA TOTAL STATE NET ASSESSED VALUATION $513,655,622 $955,783,522 $1,512,794,264 $416,099,715 $211,469,611 $458,425,787 $205,814,389 $33,519,795,354 $1,727,793,369 $845,018,236 $7,518,481,988 $2,005,151,766 $320,999,663 $2,217,272,811 $1,112,447,688 $53,541,003,785 STATE $2,613,993 $5,051,743 $9,322,197 $2,117,531 $1,093,904 $4,701,130 $1,047,389 $199,396,545 $8,792,740 $5,440,783 $41,014,340 $10,207,253 $1,637,592 $15,022,665 $5,661,246 $313,121,053 COUNTY $2,470,684 $25,114,168 $8,541,236 $17,434,578 $4,608,769 $2,521,342 $4,705,534 $443,026,211 $31,438,928 $6,916,474 $321,704,655 $76,262,685 $11,707,179 $43,108,218 $24,067,955 $1,023,628,616 CITIES and TOWNS COMMUNITY COLLEGES $0 $2,381,549 $6,162,697 $1,626,626 $241,809 $276,255 $0 $227,383,150 $4,232,725 $350,427 $15,026,704 $16,985,533 $0 $2,064,502 $10,126,168 $286,858,146 AVERAGE STATE PRIMARY TAX RATE PER $100 SCHOOLS $0 $19,430,123 $7,243,259 $3,992,061 $5,652,160 $0 $4,117,111 $429,857,856 $21,104,996 $14,035,753 $100,326,624 $38,304,414 $1,437,115 $41,254,578 $22,253,404 $709,009,453 $10,854,810 $51,049,280 $56,859,447 $19,448,221 $10,543,575 $7,559,221 $5,860,385 $1,473,054,722 $75,277,505 $27,858,346 $382,670,240 $90,692,158 $15,546,587 $78,142,442 $46,457,367 $2,351,874,304 ALL OTHER $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 TOTAL 15,939,487 $103,026,863 $88,128,836 $44,619,018 $22,140,216 $15,057,948 $15,730,420 $2,772,718,483 $140,846,895 $54,601,783 $860,742,563 $232,452,043 $30,328,473 $179,592,405 $108,566,140 $4,684,491,572 PRIMARY RATE 3.10 10.78 5.83 10.72 10.47 3.28 7.64 8.27 8.15 6.46 11.45 11.59 9.45 8.10 9.76 8.75 8.75 2013 PRIMARY PROPERTY TAX LEVIES TAX AUTHORITY APACHE COCHISE COCONINO GILA GRAHAM GREENLEE LA PAZ MARICOPA MOHAVE NAVAJO PIMA PINAL SANTA CRUZ YAVAPAI YUMA TOTAL STATE NET ASSESSED VALUATION $525,723,278 $1,006,475,403 $1,519,086,333 $438,624,843 $192,240,653 $335,715,128 $216,835,366 $31,996,204,979 $1,771,371,872 $903,351,854 $7,559,129,097 $1,988,882,373 $338,356,662 $2,232,629,599 $1,112,115,440 $52,136,742,880 STATE $2,693,280 $5,183,314 $9,443,949 $2,247,075 $984,849 $1,785,707 $1,110,848 $178,373,045 $9,074,738 $5,399,931 $39,310,735 $10,192,203 $1,737,595 $15,173,455 $5,697,367 $288,408,092 COUNTY $2,414,647 $26,446,148 $8,303,326 $18,378,381 $4,558,218 $2,467,506 $4,251,708 $410,044,984 $32,231,883 $6,318,946 $277,226,982 $75,666,420 $11,576,873 $43,107,612 $22,952,064 $945,945,698 CITIES and TOWNS COMMUNITY COLLEGES $0 $2,360,230 $6,118,013 $1,885,803 $241,614 $273,142 $0 $228,440,179 $4,178,240 $394,572 $16,388,179 $16,689,980 $0 $2,007,428 $10,009,586 $288,986,965 AVERAGE STATE PRIMARY TAX RATE PER $100 SCHOOLS $0 $18,627,847 $7,042,484 $3,814,282 $5,267,586 $0 $4,086,696 $412,623,059 $20,413,289 $13,341,604 $96,348,659 $37,625,677 $1,421,098 $40,725,397 $20,960,040 $682,297,718 $9,424,926 $43,096,250 $56,919,248 $19,377,138 $8,591,376 $7,539,842 $5,404,328 $1,387,193,981 $72,650,529 $31,978,568 $360,616,228 $88,221,308 $16,782,977 $79,444,410 $49,436,282 $2,236,677,392 ALL OTHER $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 TOTAL $14,532,853 $95,713,789 $87,827,021 $45,702,679 $19,643,643 $12,066,196 $14,853,580 $2,616,675,248 $138,548,680 $57,433,621 $789,890,784 $228,395,587 $31,518,543 $180,458,301 $109,055,339 $4,442,315,864 PRIMARY RATE $3 $10 $6 $10 $10 $4 $7 $8 $8 $6 $10 $11 $9 $8 $10 8.52 8.52 NOTE: Some increase/decrease due to reporting tax levies in different authorities than in previous years. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 78 TABLE 37 STATE OF ARIZONA 2014 SECONDARY PROPERTY TAX LEVIES TAX AUTHORITY APACHE COCHISE COCONINO GILA GRAHAM GREENLEE LA PAZ MARICOPA MOHAVE NAVAJO PIMA PINAL SANTA CRUZ YAVAPAI YUMA TOTAL STATE NET ASSESSED VALUATION STATE $517,650,758 $959,542,199 $1,534,483,938 $419,257,531 $213,508,436 $462,439,380 $210,720,562 $35,079,646,593 $1,757,074,571 $846,247,083 $7,579,898,868 $2,040,749,841 $323,843,644 $2,267,389,484 $1,139,598,176 $55,352,051,064 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 COUNTY CITIES and TOWNS $4,689,135 $4,453,574 $11,716,967 $1,257,773 $309,637 $1,180,078 $210,721 $67,128,616 $17,203,407 $5,492,978 $110,171,539 $6,314,526 $2,472,680 $9,806,493 $12,183,402 $254,591,524 $0 $319,053 $5,611,045 $0 $0 $0 $0 $231,574,325 $0 $0 $30,621,097 $7,055,651 $0 $76,624 $0 $275,257,795 AVERAGE STATE SECONDARY TAX RATE PER $100 COMMUNITY COLLEGES $1,975,873 $0 $1,945,726 $0 $0 $0 $800,527 $82,893,205 $0 $0 $0 $7,203,847 $0 $5,058,546 $4,329,333 $104,207,057 SCHOOLS $2,197,864 $4,762,956 $17,195,139 $5,585,417 $2,585,660 $1,789,432 $1,165,844 $865,414,029 $16,803,781 $12,107,687 $104,824,994 $33,950,629 $3,221,152 $16,617,267 $11,845,202 $1,100,067,054 ALL OTHER $5,463,735 $9,095,082 $15,801,285 $6,691,890 $579,566 $39,689 $4,419,932 $203,346,581 $20,531,168 $14,032,405 $83,275,942 $29,160,097 $6,157,086 $38,647,290 $883,221 $438,124,969 TOTAL $14,326,607 $18,630,665 $52,270,161 $13,535,079 $3,474,863 $3,009,198 $6,597,025 $1,450,356,756 $54,538,357 $31,633,070 $328,893,572 $83,684,750 $11,850,918 $70,206,220 $29,241,158 $2,172,248,400 SECONDARY RATE 2.77 1.94 3.41 3.23 1.63 0.65 3.13 4.13 3.10 3.74 4.34 4.10 3.66 3.10 2.57 3.92 3.92 2013 SECONDARY PROPERTY TAX LEVIES TAX AUTHORITY APACHE COCHISE COCONINO GILA GRAHAM GREENLEE LA PAZ MARICOPA MOHAVE NAVAJO PIMA PINAL SANTA CRUZ YAVAPAI YUMA TOTAL STATE NET ASSESSED VALUATION STATE $531,638,110 $1,011,138,917 $1,533,065,282 $440,187,536 $194,024,943 $336,148,250 $224,552,041 $32,229,006,810 $1,809,668,423 $904,776,433 $7,623,691,280 $2,005,343,534 $339,878,006 $2,279,676,521 $1,131,581,406 $52,594,377,492 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 COUNTY $4,247,257 $4,629,166 $11,753,574 $1,320,563 $292,424 $796,984 $224,552 $57,859,000 $17,992,149 $5,403,608 $109,387,792 $6,162,892 $2,473,562 $9,771,398 $12,211,163 $244,526,081 CITIES and TOWNS $0 $179,611 $5,530,453 $0 $0 $0 $0 $202,263,121 $0 $0 $29,148,173 $5,612,505 $0 $189,071 $0 $242,922,934 AVERAGE STATE SECONDARY TAX RATE PER $100 COMMUNITY COLLEGES $2,116,983 $0 $1,905,340 $0 $0 $0 $758,761 $78,767,693 $0 $0 $1,425,630 $7,197,178 $0 $5,076,840 $3,823,614 $101,072,038 SCHOOLS $2,521,195 $4,886,682 $16,631,147 $5,306,985 $2,683,080 $1,586,882 $1,515,214 $850,450,417 $16,021,211 $12,646,421 $120,541,156 $38,242,035 $3,221,295 $16,191,707 $13,290,437 $1,105,735,865 ALL OTHER $5,523,293 $9,075,046 $15,741,813 $6,932,478 $552,457 $37,324 $4,474,245 $189,163,901 $21,214,817 $14,497,153 $79,718,089 $27,811,746 $6,314,246 $37,290,488 $863,032 $419,210,129 TOTAL $14,408,728 $18,770,504 $51,562,327 $13,560,026 $3,527,960 $2,421,190 $6,972,772 $1,378,504,131 $55,228,177 $32,547,182 $340,220,841 $85,026,356 $12,009,103 $68,519,503 $30,188,246 $2,113,467,047 SECONDARY RATE $3 $2 $3 $3 $2 $1 $3 $4 $3 $4 $4 $4 $4 $3 $3 4.02 4.02 NOTE: Some increase/decrease due to reporting tax levies in different authorities than in previous years. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 79 TABLE 38 AVERAGE PROPERTY TAX RATES PER $100 OF ASSESSED VALUATION 2011 THROUGH 2014 2011 PRIMARY School Districts Counties State Cities and Towns Community Colleges Special Districts 2012 SECONDARY PRIMARY $3.63 1.70 0.46 0.44 1.05 0.00 $1.88 0.48 0.00 0.48 0.16 0.67 $4.00 1.72 0.50 0.49 1.17 0.00 $2.02 0.49 0.00 0.47 0.17 0.71 $7.28 $3.67 $7.89 $3.87 TOTAL $10.94 $11.75 2013 PRIMARY School Districts Counties State Cities and Towns Community Colleges Special Districts TOTAL SECONDARY 2014 SECONDARY PRIMARY SECONDARY $4.29 1.81 0.55 0.55 1.31 0.00 $2.10 0.46 0.00 0.46 0.19 0.80 $4.39 1.91 0.58 0.54 1.32 0.00 $1.99 0.46 0.00 0.50 0.19 0.79 $8.52 $4.02 $8.75 $3.92 $12.54 $12.67 School district rate includes Unorganized School Districts. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 80 ALL OTHER SOURCES OF REVENUE Bingo Estate Tax Luxury Tax Unclaimed Property & Escheated Estates Waste Tire Fees ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 81 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 82 BINGO The tax on state licensed bingo operations is based on a multi-tiered licensing structure. There are three classes of bingo licenses, each of which has a different tax rate. Each licensee’s tax rate is based on bingo receipts. Class A licensees, whose gross receipts do not exceed $15,600 per year, are taxed at 2.5 percent of their adjusted gross receipts. (Adjusted gross receipts are the monies left after paying prizes.) Class B and Class C licensees are taxed on their gross receipts. Class B licensees, whose gross receipts do not exceed $300,000, are taxed at 1.5 percent of their gross receipts. Class C licensees, whose gross receipts exceed $300,000 per year, are taxed at 2 percent of their gross receipts from bingo. All taxes collected are deposited in the state general fund (Refer to Table 39). TABLE 39 BINGO COLLECTIONS FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 Fiscal Year Amount 2009-10 $520,655 2010-11 $504,905 2011-12 $508,145 2012-13 $519,998 2013-14 $521,583 BINGO COLLECTIONS FY2009-10 FY2010-11 FY2011-12 FY2012-13 FY2013-14 Licenses Proceeds Penalty, Interest and Miscellaneous $19,718 499,206 $27,576 476,482 $18,164 486,056 $18,175 497,493 $17,580 499,608 1,731 847 3,926 4,331 4,395 TOTAL $520,655 $504,905 $508,145 $519,998 $521,583 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 83 ESTATE TAX Arizona’s Estate Tax was effectively repealed January 1, 2005, following the elimination of the Federal State Death Tax Credit by Congress. No Arizona estate tax is owed on the estate of a person who dies after 2004 and there is no requirement to file an Arizona Form 76. We continue to receive late original returns and amended tax returns for decedents with a date of death prior to 2005 as it can take years to settle a complicated estate. Only estates that are required to file a federal estate tax return are required to file an Arizona Estate Tax return. The Arizona estate tax for an Arizona resident decedent is an amount equal to the federal credit for state death taxes. If the decedent owned real or tangible personal property located in another state, the Arizona tax is reduced by either the amount of death tax paid to the other state or a prorated share of the federal credit, whichever is less. The Arizona estate tax for a nonresident decedent is a prorated share of the federal credit, based on the value of real property and tangible personal property having actual situs in Arizona this year. The Arizona estate tax is a tax on the transfer of property or interest in property that takes effect upon the owner’s death. The estate tax is imposed on the net taxable estate before distribution, differing from the inheritance tax, which is imposed on the portion of the estate received by a beneficiary. Arizona does not impose inheritance or gift taxes. Estate taxes are deposited into the state general fund. (Refer to Table 40.) The Collections Division of the Arizona Department of Revenue is responsible for the collection of estate taxes and the processing of estate tax returns and reports of personal representative of decedent. TABLE 40 ESTATE TAX COLLECTIONS FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 Collections FY2009-10 FY2010-11 FY2011-12 FY2012-13 FY2013-14 $363,755 $437,372 $200,825 $0 $0 $0 $0 $0 $0 $0 $363,755 $437,372 $200,825 $0 $0 Refunds Net Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 84 LUXURY TAX Arizona’s luxury tax applies to cigarettes, other tobacco products, and alcoholic beverages. The department is responsible for issuing tobacco licenses and stamps and collecting taxes on tobacco products and alcoholic beverages. The department also investigates and confiscates contraband tobacco products. During fiscal year 2014, over $383 million was received in luxury tax collections. Of the monies collected per the Tobacco Products Referendum (Prop 303), $38.1 million was distributed to the Prop 204 Protection Account, $25.1 million to the Medically Needy Account, $18.6 million for Emergency Health Services, $4.6 million for Health Research, and $1.9 million for Health Education. Due to the passage of the Tobacco Tax and Health Care Initiative in November 1994, $43.4 million was distributed to the Medically Needy Fund, $15.1 million to the Health Education Fund and $3.3 million to the Health Research Fund. The Corrections Fund, established by the Legislature in 1984 to pay for prison construction, received $29.3 million. The Drug Treatment and Education Fund received $9.1 million, and the Corrections Revolving Fund received $3.6 million due to the passage of Proposition 200 in 1994. The Smoke Free AZ fund received $2.9 million due to the passage of Proposition 201 in 2006. The Early Childhood Development and Health Fund received $124.4 million due to the passage of Proposition 203 in 2006. The remaining $58.7 million was deposited into the state general fund. (Refer to Table 41) Luxury Tax Rates per cigarette package of 20 package of 25 $ 0.10 $ 2.00 $ 2.50 Cigars small cigars weighing not more than 3 lbs/1,000 package of 20 or less selling for $0.05 or less (each 3 cigars) selling for more than $0.05 (each cigar) $ 0.441 $ 0.218 $ 0.218 Smoking Tobacco snuff, fine cut, chewing, etc. (per ounce) Cavendish, plug, or twist (per ounce) $ 0.223 $ 0.055 Spirituous Liquors per gallon $ 3.00 Vinous Liquors more than 24% alcohol (per gallon) $ 4.00 Vinous Liquors less than 24% alcohol (per gallon) $ 0.84 Malt Liquor (Beer) per gallon per barrel (31 gallons) $ 0.16 $ 4.96 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 85 TABLE 41 LUXURY TAX COLLECTIONS FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 SOURCE: Spirituous Liquor Vinous Liquor Malt Liquor Liquor Collections FY2009-10 FY2010-11 FY2011-12 FY2012-13 FY2013-14 PERCENT OF COLLECTIONS IN FY2012-13 $29,304,713 $28,202,704 $31,847,105 $32,184,954 $33,588,102 8.8% 13,881,407 13,596,155 15,430,577 15,155,547 15,583,934 4.1% 5.7% 22,232,715 21,566,369 21,101,489 21,343,360 21,974,061 $65,418,835 $63,365,229 $68,379,171 $68,683,862 $71,146,096 $340,839,935 $340,754,224 $337,777,289 $331,347,184 $327,788,207 (6,635,450) (12,281,284) (17,978,338) (15,583,872) (15,299,166) Tobacco - All Types Gross Revenue Refunds Licenses Administrative Expenses Net Tobacco Collections TOTAL COLLECTIONS 7,900 7,710 7,925 7,825 8,198 (662,742) (673,071) (677,280) (676,090) (574,345) $333,549,643 $327,807,579 $319,129,597 $315,095,046 $311,922,894 81.4% $398,968,478 $391,172,807 $387,508,768 $383,778,908 $383,068,990 100.0% $55,352,260 $53,599,408 $56,357,085 $56,184,596 $58,711,664 DISTRIBUTIONS: State General Fund Tobacco Tax & Health Care Fund 65,051,516 (1) 64,799,725 61,879,113 61,958,027 58,050,632 Tobacco Products Tax Fund 96,335,427 (1) 95,586,289 90,953,118 91,044,441 91,923,081 Drug Treatment & Education Fund 8,551,873 8,303,445 8,805,071 8,822,752 9,111,608 DOC Revolving Fund 3,407,130 3,307,459 3,512,659 3,520,473 3,636,704 28,587,983 27,130,247 28,518,897 28,468,675 29,253,753 637,075 1,322,335 1,259,100 1,259,414 1,343,199 Prop 200 Transfer from Prop 303 Funds 4,037,828 3,982,185 3,789,120 3,792,927 3,748,474 Smoke Free AZ 3,888,483 3,058,479 3,043,448 2,956,134 2,918,213 133,118,902 130,083,235 129,391,158 125,771,470 124,371,662 $398,968,478 $391,172,807 $387,508,768 $383,778,908 $383,068,990 Department of Corrections Fund DOC Transfer from Prop 200 Funds Early Childhood Development and Health Fund TOTAL DISTRIBUTIONS (1) The Tobacco Tax & Health Care Fund and the Tobacco Products Fund holding accounts had undistributed balances of $706,653.52 and $1,943,037.88 respectively at the end of fiscal year 2009. These amounts were distributed in fiscal year 2010. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 86 UNCLAIMED PROPERTY Responsibilities of the Unclaimed Property Program include the collection, safekeeping, and disposition of abandoned property and escheated estates. The Unclaimed Property staff establishes and maintains records of these types of funds along with other intangible and tangible personal property that is presumed to be abandoned. This property is received from business associations, banking and financial institutions, insurance companies, fiduciaries, state courts, and governmental agencies. Common examples of unclaimed property are: • • • • • • • • • • State warrants not cashed after six months. Payroll checks written to employees not cashed after one year. Contents of safe deposit boxes on which rent has not been paid for three years. Government and Court property not claimed in two years. Stock or other equity interest in a business association or financial institution with no activity for three years. Bank or credit union accounts with no activity for three years. Cashier and other official checks not cashed in three years. Checks written to vendors or customers not cashed after three years. Money orders not cashed in three years. Traveler’s checks not cashed in fifteen years. There is no statute of limitations for filing a claim for unclaimed property. Owners may recover their property at any time with proper documentation. ESCHEATED ESTATES In addition to their Unclaimed Property responsibilities, staff members also establish and maintain records of Escheated Estates. An Escheated Estate is created when a person dies without leaving a will and has no known heirs. When this condition exists, his or her property reverts to the state as the original and ultimate proprietor after seven years. Funds received from escheated estates are deposited into the Permanent State School Fund. (Refer to Table 42.) ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 87 TABLE 42 UNCLAIMED PROPERTY COLLECTIONS AND DISTRIBUTIONS FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 SOURCE: FY2009-10 FY2010-11 FY2011-12 FY2012-13 FY2013-14 $161,637,025 (24,207,862) $137,429,163 $121,263,602 (34,677,629) $86,585,973 $115,160,041 (40,049,513) $75,110,528 $131,397,401 (40,013,520) $91,383,881 $113,119,156 (34,059,189) $79,059,967 ESCHEATED ESTATES Refunds NET 320,538 (94,959) $225,579 370,786 (230,340) $140,446 186,322 (158,988) $27,334 327,961 (302,974) $24,987 649,079 (283,812) $365,267 TOTAL NET REVENUE $137,654,742 $86,726,419 $75,137,862 $91,408,868 $79,425,235 100,034,835 10,500,000 (2) ----739,422 1,634,300 24,500,000 49,120,855 10,500,000 ----1,143,835 1,262,200 24,500,000 45,819,445 2,500,000 (3) 2,000,000 100,540 ----24,500,000 60,899,609 2,500,000 2,000,000 612,703 514,700 24,500,000 49,165,753 2,500,000 2,000,000 684,584 ----24,500,000 UNCLAIMED PROPERTY Refunds NET DISTRIBUTIONS: General Fund Housing Fund SMI Housing Fund (3) Victim Restitution Fund Operating transfers Admin Fund (2) Net to Permanent State School Fund: Escheated Estates Unclaimed Shares/dividends Storage Facility TOTAL DISTRIBUTION 225,579 19,914 692 140,446 58,381 701 27,334 184,618 5,925 24,987 332,985 23,884 $137,654,742 $86,726,419 $75,137,862 $91,408,868 365,267 190,053 (1) 19,578 $79,425,235 (1) FY14 Escheated Estates will be transferred in FY15. (2) Pursuant to SB 1003, Chapter 3, 4th Special Session, 2009. (3) Pursuant to SB 1616, Chapter 28, 1st Regular Session, 2011. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 88 WASTE TIRE The Arizona waste tire fee is a fee applied to the sale of new motor vehicle tires. The fee is to be collected quarterly at a rate of two percent of the purchase price not to exceed two dollars per tire. During fiscal year 2014, the department collected $9,009,694 and distributed 3.5% percent to the Arizona Department of Environmental Quality with the remainder being distributed to the counties based on the number of motor vehicles registered in the county (Refer to Tables 43). The distribution is performed quarterly. TABLE 43 WASTE TIRE FEE DISTRIBUTIONS FISCAL YEAR 2009-10 THROUGH FISCAL YEAR 2013-14 Apache Cochise Coconino Gila Graham Greenlee La Paz Maricopa Mohave Navajo Pima Pinal Santa Cruz Yavapai Yuma Arizona Department of Environmental Quality Total FY2009-10 FY2010-11 FY2011-12 FY2012-13 FY2013-14 $97,963 204,708 191,303 105,054 47,450 15,395 45,573 4,296,301 370,916 160,731 1,057,356 365,864 73,531 372,547 243,142 $103,880 215,256 200,347 110,165 48,835 15,231 49,117 4,357,598 390,315 168,210 1,092,320 393,137 77,565 387,234 260,715 $110,216 225,450 211,898 115,502 51,514 16,315 52,807 4,531,883 413,996 176,949 1,133,099 414,977 82,081 407,032 276,990 $113,633 227,680 218,206 118,562 53,295 16,991 54,978 4,645,996 425,534 182,631 1,146,478 431,565 84,896 419,652 286,595 $118,662.36 231,444 226,483 121,854 54,820 17,421 56,558 4,800,866 439,690 189,926 1,169,151 449,131 87,754 434,938 294,940 277,383 285,438 298,160 305,631 316,056 $7,925,216 $8,155,363 $8,518,868 $8,732,325 $9,009,694 Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 89 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 90 LEGISLATIVE SUMMARY ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 91 ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 92 LEGISLATIVE SUMMARY The following is intended to give a brief summary of the 2014 tax-related legislation impacting the Department of Revenue (DOR) and not intended to discuss the details of any specific enactment. Detailed summaries of these bills can also be found at www.azleg.gov. Please refer to the particular legislation for more definitive information. The general effective date for legislation enacted during the First Regular Session is July 24, 2014. All legislation will have this effective date unless otherwise noted in the summary. Copies of these bills can be downloaded at www.azleg.state.az.us/FinalDisposition.asp or may be requested from the Secretary of State’s Office by calling (602) 542-4086. Income Tax House Bill 2377 (Chapter 10) House Bill 2046, (Chapter 43) Income tax brackets; inflation index Disaster recovery; businesses; tax; regulation For tax year 2015, the Department is required to adjust the income dollar amounts for each individual income tax rate bracket by the average annual change in the metropolitan Phoenix consumer price index. See Multiple Tax Types. House Bill 2272 (Chapter 168) Tax Credits; capital investments; employment Small Business Investment Tax Credit The Small Business Investment Tax Credit is extended through tax year 2024. The Arizona Commerce Authority (ACA) is authorized to approve tax credits through fiscal year 2021. The maximum amount of an investment in any single small business that a taxpayer can apply towards a tax credit is increased from $250,000 to $500,000. The deadline for application for a credit is extended from 30 to 90 days after the investment. Senate Bill 1081 (Chapter 68) Quality Jobs Tax Credit Allows a taxpayer to remain eligible for the Quality Jobs Tax Credit in all three years of eligibility if a full-time employee in the newly created job leaves the position, as long as the position is filled by another qualified full-time employee and is not vacant for more than 90 days from the original date the position was filled to the end of the current TY. Internal revenue code conformity R&D Tax Credit Beginning TY 2015, taxpayers must obtain certification from the ACA that basic research payments meet statutory requirements prior to application to DOR for preapproval of additional income tax credits for increased research activities involving basic research payments to a university. Tax credit; excise; SSN Beginning in tax year 2015, eligibility for the Tax Credit for Increased Excise Taxes Paid requires a valid social security number or federal tax identification number for the claimant, spouse, and qualifying children. Senate Bill 1300 (Chapter 223) Incorporates the federal changes made in 2013 into Arizona’s definition of “internal revenue code.” Senate Bill 1301 (Chapter 245) 2014 tax corrections See Multiple Tax Types. Senate Bill 1326 (Chapter 120) State parks; donations; fund; transportation The Department is required to provide a check off box on the individual income tax return form in which a taxpayer may designate an amount of the taxpayer’s refund as a voluntary contribution to the ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 93 newly established Sustainable State Parks and Roads Fund. Monies in the Fund are specified to be used by the Arizona State Parks Board to operate, maintain and make capital improvements to state parks. the business of refining coal is not deemed as being engaged in business classified under the TPT retail classification. House Bill 2288 (Chapter 141) Sales tax; reduced reporting requirements Senate Bill 1484 (Chapter 8) Tax credit; manufacturers; renewable energy Establishes an individual and corporate income tax credit for taxpayers who invest at least $300 million in a three-year period in new "renewable energy facilities" in Arizona. To qualify, the facilities must produce energy for self-consumption and used primarily for manufacturing. The amount of the credit is $1 million per year for five years for each renewable energy facility, and the maximum credit allowed per taxpayer per year is $5 million. A credit may not be claimed for any tax year after 2025. Transaction Privilege Tax/ Use Tax House Bill 2283, (Chapter 139) TPT; postmark; filing by mail See Multiple Tax Types. House Bill 2285 (Chapter 54) TPT; refined coal transfer; exemption Exempts the transfer of title or possession of coal from an owner or operator of a power plant to a person in the business of refining coal from TPT and municipal taxes if the transfer of title or possession of the coal is for the purpose of refining coal and the title or possession of the coal is transferred back to the owner or operator of the power plant after completion of the coal refining process. Coal acquired from an owner or operator of a power plant by a person who is responsible for refining coal is exempt from use tax if the transfer of title or possession of the coal is for the purpose for refining the coal and the title or possession of the coal is transferred back to the owner or operator of the power plant after completion of the coal refining process. The transfer of title or possession of coal from an owner or operator of a power plant to a person in Beginning January 1, 2015, the Department is required to allow taxpayers with an annual transaction privilege tax liability between $2,000 and $8,000 (increased from $500 and $1,250) to pay TPT on a quarterly basis; taxpayers with annual TPT liability of less than $2,000 (increased from less than $500) are authorized to pay on an annual basis. House Bill 2389 (Chapter 263) Transaction privilege tax changes Licensing Standardizes state and municipal transaction privilege tax (TPT) licensing processes by requiring a person engaging or continuing in business to annually apply for a license. TPT licenses are valid for only the calendar year in which it is issued and must be renewed by January 1. There is no state fee for license renewal. Municipal TPT licensing and renewal fees may be imposed up to $50. A penalty of up to $25 for failure to timely renew a municipal TPT license may be imposed. Taxpayers who operate in multiple locations or under multiple names must obtain a TPT and municipal TPT license for each location. Taxpayers who operate in multiple locations or under multiple names and files a consolidated tax return is required to pay only one municipal TPT renewal fee for each jurisdiction. Taxpayers who operate in multiple locations or under multiple names and does not file a consolidated tax return is required to pay a license renewal fee for each location in each jurisdiction. Requires, beginning October 1, 2014, the Department, to mail a single TPT license renewal notice to each taxpayer. The notice must include all locations maintained by the taxpayer. Administrative Procedures ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 94 The cost of credit card convenience fees that are paid by taxpayers for tax payments can now be extended to other fees and payments. Eliminates the expanded online portal for filing and paying municipal TPT and allows, rather than requires, current non-program cities to pay for the electronic system maintained by the Department. Municipal TPT levied by a city or town will be governed by state tax administration statutes and appeals of audit assessments are administered pursuant to state procedures. Trained and certified third-party auditors are precluded from representing a taxpayer in any tax matter. Establishes procedures to address refund requests related to municipal TPT returns filed prior to January 1, 2015. The Department may establish a system to allow for e-signatures on all returns, statements, and other filed tax documents regardless of whether the system complies with current electronic and digital signature statutory requirements. Taxpayers operating in multiple locations or under multiple names are required to e-file tax returns. Hearings pursuant the Model City Tax Code for non-program cities relating to liabilities established before January 1, 2013 and appeals from supplementary audits performed by program cities for all audits and assessments initiated prior to January 1, 2015 will be heard by the Municipal Tax Hearing Office. Qualifying transactions made with benefits issued to members of the Supplemental Nutrition Assistance Program (SNAP) under the Restaurant Program are exempted from TPT. Prime Contracting Classification The Department is required to provide a specific exemption certificate for contractors who are no longer required to be licensed and pay TPT under the prime contracting classification. Clarifies that the gross proceeds of sales or gross income derived from a contract with the owner of real property for the maintenance, repair, replacement or alteration of existing property is not subject to TPT. The definition of modification is clarified by eliminating “addition” and “subtraction”. 2014 tax corrections Restaurant Classification House Bill 2415 (Chapter 228) Prime contracting deductions; waste facility Retroactive to January 1, 2013, establishes a deduction under the prime contracting classification of the TPT for the gross proceeds of sales or gross income derived from a contract for the construction of a mixed waste processing facility located on a municipal solid waste landfill that is constructed for the purpose of recycling solid waste or producing renewable energy from landfill waste. House Bill 2546 (Chapter 174) Alarm businesses; alarm agents; regulation Beginning January 1, 2015, exempts alarm system monitoring services from municipal transaction privilege tax. House Bill 2701 (Chapter 276) TPT; health sciences institutions; exemption Personal property that is sold to or purchased by a qualified health sciences educational institution is exempt from transaction privilege, use and municipal excise tax. Senate Bill 1301 (Chapter 245) See Multiple Tax Types. Senate Bill 1331 (Chapter 121) Model City Tax Code; changes Specifies that retroactively to taxable periods beginning July 2, 1988, any changes to the model city tax code that are not reflected in the official copy on file with the Department of Revenue are void and have no effect. Any claim for a refund of transaction privilege tax paid based on the retroactive application of this legislation must be submitted to the Department or the appropriate city by December 31, 2014. The burden is on the taxpayer to establish by competent ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 95 evidence the amount of any such refund claim. The total amount of refunds issued based on the retroactive application cannot exceed $10,000. Senate Bill 1413 (Chapter 7) Taxes; manufacturers’ electricity sales; exemption The gross proceeds of sales or gross income derived from the sale of electricity or natural gas to, and purchases of electricity and natural gas made by, a business that is principally engaged in manufacturing or smelting operations from transaction privilege tax under the utility classification and use tax. Qualified manufacturing or smelting operations must use at least 51% of its electricity in the manufacturing or smelting operation. Property Tax House Bill 2283 (Chapter 139) TPT; postmark; filing by mail See Multiple Tax Types. House Bill 2395 (Chapter 209) Property tax calculations; school districts The county school superintendent is required to annually certify the amount of Equalization Assistance and additional amount to be levied from primary property taxes to the Property Tax Oversight Commission (PTOC) by July 25. Additionally, the county school superintendent must annually file an estimate of the amount of monies required by each school district in the ensuing year, based on each school district budget, with the governing board of each school district and the PTOC by July 25. The PTOC is required to review the primary property tax calculations. The county school superintendent must annually file the amount required to be levied for each school district, for primary property taxes, with the County Board of Supervisors and PTOC by the third Monday in August. If the PTOC notifies a school district of an incorrect calculation and the school district disputes the finding, a hearing may be held before the PTOC. House Bill 2403 (Chapter 264) Renewable energy equipment; valuation For purposes of valuing renewable energy equipment, taxable original cost is defined as the original cost of the renewable energy equipment minus the value of applicable investment and production tax credits or cash grants. Senate Bill 1301 (Chapter 245) 2014 tax corrections See Multiple Tax Types. Senate Bill 1352 (Chapter 249) Property tax roll; corrections Updates statutes related to corrections to the tax roll. Annual Notice of Full Cash Value If an assessor discovers an incorrect opinion of value, the assessor has 60 days to amend a notice of valuation. The assessor must inform the property owner of any amendments to a notice of valuation and to certify the amended notices with the Board of Supervisors and the Department of Revenue. Before mailing amended notices of valuation, the assessor must receive approval from DOR. Destruction of Property after Closure of the Tax Roll Property owners may file a notice of claim to prorate a property’s value from the date of destruction, in the event that property is destroyed after the assessor has closed the tax roll. The assessor is required to prorate the property value from the lien date to the date of destruction. Notice of Proposed Correction The tax officer (the Department of Revenue, county assessor or county treasurer, as applicable) is required to mail a taxpayer a notice of the proposed correction after a determination that real or personal property has been assessed improperly as a result of a property tax error. Taxpayers may appeal any valuation or legal classification issue that arises from the proposed correction made by the tax officer. The tax officer must meet with the taxpayer to discuss the proposed correction. The tax roll must be corrected ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 96 immediately if the tax officer and taxpayer agree on all or part of the proposed correction, which must be ratified in a signed agreement. If the parties fail to agree on all or part of the proposed correction, the tax officer is required to serve a notice to the taxpayer within thirty days after the meeting date, informing the taxpayer that the tax roll will be corrected to the extent agreed. The taxpayer may file a petition with the State Board of Equalization within 30 days after the date of the notice. Notice of Property Tax Error Claim If the tax officer disputes a property tax error brought forth by a notice of claim, the tax officer must notify the taxpayer of the time and place of a meeting between the taxpayer and the tax officer within sixty days of receiving a notice of claim. The tax roll is required be corrected immediately should both parties come to an agreement. The taxpayer may file a petition with the State Board of Equalization in the event that an agreement cannot be reached. Corrected Billing Notice The County Treasurer must mail a corrected billing to the taxpayer after the taxpayer consents to a tax roll correction, the tax officer consents to the notice of claim, the Board makes a final decision, or the final ruling by a court of competent jurisdiction. The assessed taxes must be paid within 90 days after the date the corrected billing is mailed to the taxpayer, or be declared delinquent. month, with a maximum penalty of $500, for any single report or return. Codifies wholesaler, distributor and retailer requirements currently contained in the Arizona Administrative Code. Establishes conditions for the issuance, suspension and cancelation of distributors’ licenses. End dates the current 1-4% tiered structure discount rate for cigarette tax stamps to the periods prior to October 1, 2014. Establishes a new discount cigarette tax stamp rate at 96% of the stamp’s face value for periods beginning October 1, 2014. Refunds or rebates will be given in an amount equal to 96% of the stamp’s face value. DOR is authorized to enter into intergovernmental agreements with tribes for the purpose of collecting and administering tribal tobacco taxes on behalf of the tribe, provided that such agreements include a uniform or coordinated audit process. Senate Bill 1180 (Chapter 110) Luxury privilege tax Specifies that tax returns and payments that are mailed and do not contain a postmark date are considered timely if received within 5 days of the due date of the filing. For taxpayers choosing to file and pay by mail, transaction privilege tax returns and payments are considered delinquent if not received by the second to last business day of the month. Multiple Tax Types/Miscellaneous Luxury Tax House Bill 2046, (Chapter 43) House Bill 2674 (Chapter 160) Disaster recovery; businesses; tax; regulation Tobacco settlement agreement Out-of-state companies and employees who are in Arizona temporarily to perform disaster recovery work during a disaster period are exempt from income, withholding, use and property taxes. Beginning July 1, 2015, all tobacco product distributors must electronically file returns and reports using the DOR e-file program. Additionally, distributors of other tobacco products must remit taxes by electronic funds transfer on or before the due date. Failure to comply will result in a 5% penalty. Any tobacco distributor or liquor wholesaler who fails to file a required report or return is subject to a civil penalty of $100 per House Bill 2283 (Chapter 139) TPT; postmark; filing by mail Specifies that tax returns and payments that are mailed and do not contain a postmark date are considered timely if received within five days of the due date of the filing. ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 97 For taxpayers choosing to file and pay by any other method, transaction privilege tax returns and payments are considered delinquent if not received by the second to last business day of the month. House Bill 2694 (Chapter 275) Theme park districts; formation; bonds Makes statutory changes for the formation and regulation of Theme Park Districts (Districts). A District may include a combination of a county with a population between 125,000 and 150,000 persons and a city with a population between 3,000 and 5,000 persons that is located entirely in that county. Additionally, a District may be established with a single theme park site. After the District is initially established, additional sites may be added and the geographical boundaries be modified. Removes the requirement that negotiable revenue bonds issued by a District be insured. operations, revenues and expenditures of the District for the preceding fiscal year. The requirement that monies distributed to the District can only be used until a notice to proceed is issued for a hotel and convention center located on the multipurpose facility site is eliminated. For public funds distributed and expenditures of greater than $500,000 or more, each board member must provide advance notice of the consideration of the expenditure. The notice must be provided at least two weeks before the date of the meeting and must be posted to the District’s website on the day the notice is mailed. Each board member must also provide a written statement as to whether the member has financial interest in the subject of the proposed expenditure. The Board may not artificially divide or fragment planned expenditures in order to circumvent the expenditure requirements. Senate Bill 1160 (Chapter 185) Registrar of contractors; discipline grounds The Registrar of Contractors is required to temporarily suspend or permanently revoke the license of a person upon notice from the Department of Revenue that a tax debt related to income taxes, withholding taxes or transaction privilege taxes incurred in the operation of the licensed business has become final and the person neglects to pay or refuses to pay the tax debt. Senate Bill 1301 (Chapter 245) 2014 tax corrections Makes numerous, technical, clarifying and conforming changes in the tax-related statutes in the Arizona Revised Statutes. Senate Bill 1351 (Chapter 80) Multipurpose facilities districts; rio nuevo Modifies the membership of the Rio Nuevo Multipurpose Facilities District Board of Directors to include residents of the county in which the District is located, at least four of whom must reside in the municipality in which the District is located. The Board is required to submit an annual report by October 1 of each year regarding the activities, ARIZONA DEPARTMENT OF REVENUE 2014 ANNUAL REPORT Page 98