ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Please click on the blue text to access the areas described. TABLE OF CONTENTS DEPARTMENT ORGANIZATION Organization & Organization Chart Strategic Measurement Highlights Administrative Services Audit Collections Director’s Office 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 Measurement Highlights Administrative Services Audit Collections Director’s Office Information Technology Process Administration Property Tax Taxpayer and External Services Tax Policy and Research Organization The mission of the Arizona 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, fiduciary, bingo, and severance. The Director is responsible for the direction, operation, and control of the department to ensure that the administration and collections of taxes are cost effective and performed with high quality to meet taxpayers’ needs. 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 or efficient tax collection and processing, timely enforcement of tax laws, and accurate valuation of property. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 1 ARIZONA DEPARTMENT OF REVENUE DIRECTOR DEPUTY DIRECTOR CHIEF DEPUTY DIRECTOR INTERNAL AUDIT Chief Legislative Liason PROBLEM RESOLUTION OFFICER Economic Research & Analysis Quality Executive COLLECTIONS TAXPAYER & EXTERNAL SERVICES PROPERTY TAX ASST DIRECTOR ASST DIRECTOR ASST DIRECTOR Office Collections Administrative Services Special Operations Community Outreach and Education Field Collections Debt Set-Off Administrative Support Bankruptcy Collections Information Technology Assessment Standards & Equalization Taxpayer Information & Assistance License & Registration TAX POLICY & RESEARCH ASST DIRECTOR Tax Research & Analysis Centrally Valued Property Corporate Income Tax Appeals Property Systems Development Individual Income Tax Appeals Special Projects Criminal & Civil Investigations Tobacco Enforcement Quality Executive Transaction Privilege Tax Appeals Disclosure & Federal Relations Program Manager RV EXEC. ASST. to the DIRECTOR HUMAN RESOURCES ADMINISTRATIVE SERVICES AUDIT DIVISION INFORMATION TECHNOLOGY PROCESS ADMINISTRATION ASST DIRECTOR ASST DIRECTOR ASST DIRECTOR ASST DIRECTOR Budget Office Accounting Purchasing Payroll Facilities Hearing Office Unclaimed Property Employee Development Unit Corporate Income Tax Audit Information Security Processing Services Individual Income Tax Audit Special Taxes - Luxury - Nexus - Bingo Application Development & Support Error Resolution Transaction Privilege Tax Audit Technical Services Audit Information Technology Project Management DOR Treasury Managed Services Revenue Accounting Records Management Audit Processing Special Programs & Projects Section ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 2 STRATEGIC MEASUREMENT HIGHLIGHTS KEY MEASURE RESULT HIGHLIGHTS The results of these key measures for fiscal year 2015 are presented as well as comparisons to prior years. TOTAL GROSS REVENUES COLLECTED 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 FY15 Transaction Privilege .......... $ 7,450,437,208 Income & Withholding ...... $ 4,996,434,635 Corporate ............................ $ 788,990,459 Other ................................... $ 558,001,962 Total ................................. $ 13,793,864,264 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 .....................1,684,936 Individual Income ..........................3,227,067 Withholding ......................................626,325 Corporate Income..............................192,192 Total Returns Processed .................5,730,520 Total Number of Tax Returns Processed by Tax Type 625,819 TOTAL NUMBER OF E-FILED INDIVIDUAL INCOME TAX RETURNS RECEIVED Tax returns submitted via electronic filing are processed virtually error free. Interest in alternative filing continues to increase. FY13 ............................................ 2,146,479 FY14 ............................................ 2,490,000 FY15 ............................................ 2,526,171 Number of E-Filed Individual Income Tax Returns (in Millions) 2.60 2.50 2.40 2.30 2.20 2.10 2.00 1.90 2.49 2.14 FY13 FY15 TOTAL NUMBER OF INDIVIDUAL INCOME TAX REFUNDS The total number of income tax refunds processed includes both electronic direct deposits and paper refund warrants. FY13 ............................................ 1,998,845 FY14 ............................................ 2,053,037 FY15 ............................................ 2,036,563 Number of Individual Income Tax Refunds Processed (in Millions) 192,192 3,257,718 FY14 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 2.06 1,684,936 2.53 Corporate 2.04 Income 2.02 TPT W/H 2.00 2.05 2.04 1.99 1.98 1.96 FY13 FY14 FY15 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 3 AVERAGE TIME TO ISSUE INCOME TAX REFUNDS The average time to process an individual income tax refund is measured in calendar days. The data includes cycle times for both paper and electronic refunds. A portion of those filers also elect to receive their refunds via direct deposit. Average time to issue refunds in FY15 was higher due to a two week delay in Individual Income Tax Implementation over FY14. FY13 ............................................ 7.40 days FY14 ............................................ 9.38 days FY15 .......................................... 10.22 days 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. Lean project began in April 2015 reducing processing time to an overall average of 2.2 days. FY13 ................................................ 5.0 days FY14 ................................................ 8.0 days FY15 ................................................ 5.0 days Lean Project ..................................... 2.2 days Average New Business License Turnaround Times Average Time To Issue Income Tax Refunds (in Calendar Days) 12.00 10.22 9.38 10.00 7.40 8.00 10.0 6.0 6.00 8.0 8.0 5.0 5.0 4.0 4.00 2.0 2.00 0.0 0.00 FY13 FY14 FY13 FY15 FY14 FY15 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ NUMBER OF NEW TRANSACTION PRIVILEGE TAX LICENSES PROCESSED New transaction privilege tax licenses are processed at walk-in counters, through the mail and via online services. TOTAL NET ENFORCEMENT DOLLARS Total net enforcement dollars represent all revenue collected by collectors and auditors through various enforcement programs. FY13 ...................................................41,604 FY14 ...................................................40,269 FY15 ...................................................45,639 FY13 ......................................$ 503,986,414 FY14 ......................................$ 525,555,010 FY15 ......................................$ 540,514,821 Number of New Business Licenses Processed Net Enforcement Dollars 48,000 45,639 46,000 44,000 42,000 41,604 40,000 40,269 38,000 36,000 FY13 FY14 FY15 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ (in Millions) $550.0 $540.0 $530.0 $520.0 $510.0 $500.0 $490.0 $480.0 $540.5 $525.6 $504.0 FY13 FY14 FY15 ~~~~~~~~~~~~~~~~~~~~~~~~~~~ ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 4 NET ENFORCEMENT REVENUE WITH GENERAL FUND TOTALS The enforcement program generated results at 115.8% of goal, surpassing fiscal year 2015 targets. This chart also shows how much of the enforcement revenues went to the General Fund. FY15 Net Targets Collections ...................................... $213.0M Accounts Receivable ...................... $144.6M All Audit ......................................... $109.1M Total Revenue ................................ $466.7M General Fund Revenue ................... $301.7M FY15 Net Actual Collections ...................................... $242.0M Accounts Receivable ...................... $150.5M All Audit ......................................... $148.0M Total Revenue ................................ $540.5M General Fund Revenue ................... $341.0M Net Enforcement Dollars Compared to Targets (in Millions) $600.0 $500.0 $400.0 $300.0 $200.0 $100.0 $0.0 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 2015, $187.28 was produced for each dollar spent in the total DOR budget. FY13 .................................................$191.57 FY14 .................................................$176.90 FY15 .................................................$187.28 Return on Investment $1,000.00 $191.57 $176.90 $187.28 FY13 FY14 FY15 $100.00 $10.00 $1.00 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ FY15 Net Targets FY15 Net Actual 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 2015, $7.66 of enforcement revenue was collected for each dollar spent in the total DOR budget. FY13 .....................................................$7.10 FY14 .....................................................$7.12 FY15 .....................................................$7.66 Return on Investment for Enforcement Program $8.00 $7.10 $7.12 $7.66 FY13 FY14 FY15 $4.00 $2.00 $1.00 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 5 AVERAGE GROSS COLLECTIONS GENERATED BY COLLECTORS AND AUDITORS Collector ......................................$1,505,255 Corporate Auditor .......................$2,051,970 Individual Income Auditor ..........$1,070,439 TPT Auditor ................................$1,990,931 Collections averaged $1.51 million dollars collected per collector in fiscal year 2015. Auditors collected at different levels depending upon the type of audit work they performed. 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. FY13 ............................................... 100.0 % FY14 ............................................... 100.0 % FY15 .................................................. 95.0% Computer System Availability 100.0% Millions Average Gross Collections Generated by Collectors and Auditors (in Millions) $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 $1.51 $2.05 100.0% 95.0% $1.99 $1.07 FY13 FY14 FY15 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ TAXPAYER SATISFACTION RATINGS FOR THE TAXPAYER & EXTERNAL SERVICES DIVISION These ratings were received from taxpayers evaluating the services of the employees in the Taxpayer Information & Assistance call center. (All satisfaction ratings tracked at the department have a 1 to 5 scale, 5 being the highest rating.) FY13 ..................................................... 4.44 FY14 ..................................................... 4.60 FY15 ..................................................... 4.60 Satisfaction Ratings for Taxpayer & External Services Division 5.00 4.60 4.60 4.44 4.00 3.00 2.00 1.00 FY13 FY14 FY15 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT PAGE 6 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 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. Employee Development The Employee Development Unit 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 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 Unit coordinates building facility maintenance, including troubleshooting building utility issues (i.e. chillers, UPS, elevators etc.) remodeling office areas at the department’s four locations 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 unit oversees safety issues such as fire drills, safety inspections, risk management issues and interaction with the State Fire Marshall. The unit 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. Procurement The Procurement 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 administrator for the State Purchasing Card Program. Unclaimed Property The Unclaimed Property Unit is responsible for returning abandoned property such as dormant bank accounts, insurance policy proceeds, security deposits, unclaimed stocks, bonds, and mutual fund accounts, safe deposit box contents and various types of uncashed checks to the property’s rightful owner(s). Through a variety of methods, the unclaimed property staff locates the owners and processes claims in order to return the property. The unit 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 2015 ANNUAL REPORT Page 7 HIGHLIGHTS IN FISCAL YEAR 2015 Accounting  Processed 97% of all invoices within 30 days.  Received and completed 786 reimbursement claims. Budget Prepared FY16 budget submittal including decision packages.  Successfully modified all internal tools/structures to accommodate transition to the new AFIS.  Employee Development  Upgraded audio/visual technology in training rooms.  Implemented WebEx functionality to conduct remote in-classroom or desktop training at satellite locations.  Updated five computer based training modules using new Captivate software. Facilities  Relocated several sections/divisions within the department. Relocation included painting and renovation of modular offices. rd  Constructed three conference rooms on the 3 floor.  Renovated the B-1 Conference room, which included painting and installing new carpet. st st  Remodeled 1 floor TIA area and 1 floor Facilities area. Remodeling included constructing new modular offices, walls and painting.    New sliding glass doors in the customer entry (south side) and in the parking garage entry were installed (Contractor project). Expansion joints and windows were resealed on the exterior of the building, west and north sides (Contractor project). Completed 100% of all work orders submitted within 24 hours and received an average annual customer survey rating of 4.75 out of a possible 5.0. Payroll  Modified the monthly payroll deduction cycle for bus cards so deductions are within the same month. Procurement  Lead the department in two Request for Proposal (RFP) projects.  Renewal of several expiring contracts and three new contracts. Hearing Office  50% + in new cases.  40%+ increase in decisions issued. Unclaimed Property  Returned nearly $43 million to current and former Arizona residents.  Returned more than 65,000 properties to over 17,000 owners.  The average time to process and pay a claim was 31 days, and reports were processed, on average, within 21 days.  Added nearly $126 million in new property to the database, and received over 20,000 claims for property.  Processed nearly 9,000 reports and added over 763,000 new properties to the database. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 8 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. 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. Individual Income Tax (IIT) Audit The primary goal of the Individual Income Tax Audit Section (IIT) is providing quality service. The staff is dedicated to using the audit process as an educational and cooperative process that assists in improving voluntary compliance and ensuring taxpayers report and pay the correct amount of tax due. At times, taxpayers can find that the process of an audit to be confusing and frustrating and the Section strives to reduce the stress by placing emphasis on treating taxpayers in a courteous and professional manner with as little disruption to their normal activities as possible. Auditors are working faster and more efficient 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. In addition to normal duties, IIT dedicated staff to assist in the Transaction Privilege and Use Tax’s License Renewal Program. Other staff was dedicated to the Fraud Group to prevent invalid refunds from being issued. Transaction Privilege and Use Tax (TPT) Audit The Transaction Privilege and Use Tax Audit Section is comprised of the Field Audit, License Compliance and the newly created HUB units. The overall goal of the Section is to improve voluntary compliance by providing education to taxpayers. The Field Unit conducts the 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 or those businesses needing updates to their current license, so taxpayers can voluntarily comply with tax laws. Under TPT Simplification, single source audits became effective January 1, 2015. This means an audit will be conducted by state trained staff and will include any cities in which you conduct business. The HUB unit was developed to aide in the transition of audits completed by local jurisdictions. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 9 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. 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. 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. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 10 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. HIGHLIGHTS IN FISCAL YEAR 2015 Corporate Income Tax Audit Section  Assessed over $40 million.  Collected $19 million.  Denied $25 million in refund claims.  Implemented focused audit scopes.  Reduced travel costs by adopting an office audit approach versus the traditional field audit.  Assisted with efforts to combat fraud. Individual Income Tax Audit  Completed over 73,000 audits for total assessments of $36 million and collected $23.6 million in additional revenue.  The computer generated assessment (CGA) program continues to be successful with the issuance of over 18,000 audits for total assessments of $5.5 million.  The quality of the initial audit assessment is constantly improving. For the fiscal year, over 94.3% of our initial audit assessments required no additional changes. The goal was to achieve a rate of 89%.  In addition to regular duties, IIT staff provided staff to assist in the TPT License Renewal Program. Other staff was dedicated to the Department’s Fraud Team which helped to prevent invalid refunds from being issued. Transaction Privilege and Use Tax Audit  Field Audit Unit audited 214 taxpayers, produced 1,811 units, assessed over $17 million and collected in excess of $21 million in tax revenue.  License Compliance Unit licensed 1,348 new taxpayers and collected over $66.5 million.  Successfully implemented the single audit process under TPT Simplification.  Employees from all units worked on various special projects and committees throughout the year for the continuing implementation of TPT Simplification. Special Programs and Projects  The Penalty Review Unit closed 2,479 cases. Special Taxes  The Luxury Tax Unit implemented a new E-file system.  The Luxury Tax Unit held a Tobacco Symposium in October 2014, 70 attended.  The Luxury Tax Unit assessed $3 million and collected $4.7 million this fiscal year.  Over 300 taxpayers came forward in the department’s Voluntary Disclosure program and approximately 95% were out-of-state companies doing business in Arizona. The Nexus Unit collected approximately $27.8 million.  The Desk Audit Unit collected $6.1 million from 4,185 audits.  The Bingo Unit issued 14 licenses and collected $507,212 in revenue. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 11 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 12 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. Income Collections After the Accounts Receivable system has completed the prescribed billing cycle, income cases are referred to Income Collections. Collectors attempt to reach account resolution via the telephone and with targeted mailings. Income 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. Cases that cannot be resolved internally (significant liabilities) are reviewed for potential assignment to Business Collections, referrals to the Attorney General’s BCE unit or to 3rd party collection agencies. Business Collections (Business tax cases) Business Collections is separated into Office and Field Collections. Office collectors are responsible for collection of all business tax types. Office collectors attempt to reach resolution via the telephone. Field collectors are assigned a territory (by ZIP code) and are responsible for all business tax types (mainly large TPT liabilities) in the territory. Field collectors use a combination of telephone and field visits. In addition to recommending lien and levy actions, Field collectors may subpoena records, investigate Offers-in-Compromise, conduct seizures and recommend write off of 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 been exhausted. Administrative Support Provides support functions for the division. Staff reviews and sorts the mail, responds to correspondence and processes return mail. Support personnel enter Powers of attorney, process fax requests, process levy releases and process certifications of compliance. They also enter payment plan requests into the computer and do additional data entry as needed. They do the maintenance on collection accounts, file and release tax liens, and perform compliance reviews for Letters of Good Standing, Dissolution and Withdrawal. Administrative Support employees also provide courier services to state and county agencies in the performance of their duties. Debt Set-Off The area is responsible for the offset of income tax refunds to pay other delinquent taxes and debts owed to other state agencies or courts. 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 $242 million, a $10 million (4%) increase over prior fiscal year 2014. The successful reclassification of all Field personnel positions was accomplished. The reclassification was to adjust compensation based on critical responsibilities, which in turn will improve retention and recruitment of highly qualified personnel. FIDM (Financial Institution Data Match) was successfully deployed. This will result in tangible efficiency gains and added revenue in fiscal year 2016. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 13 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 14 DIRECTOR’S OFFICE Human Resources The Human Resources Office is responsible for managing all strategic and operational aspects of and is the single point of integration within the department for all disciplines of personnel administration. The office also coordinates the customer satisfaction survey improvements and feedback. Internal Audit The DOR Internal Audit Unit conducts financial, operational, investigative and consultative reviews. It provides value-added recommendations to assist management in establishing and maintaining a control environment that allows management to achieve the Department’s goals and objectives. The Internal Audit Unit’s authorization to properly conduct the reviews is applicable to all areas and levels within the department. 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. 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. Other reports are prepared throughout the year providing statistics and information on various tax types. Problem Resolution Officer This position acts as the taxpayer advocate within the department. The Problem Resolution Officer assists taxpayers in obtaining easily understandable tax information and information on audits, corrections and appeals procedures for the department. He receives and evaluates complaints of improper, abusive or inefficient service by employees of the department and recommends to the director appropriate action to correct such service. This officer provides expeditious service to taxpayers whose problems are not resolved through normal channels. 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. Quality Office The Quality Office coordinates the strategic planning efforts of the department with programs focusing on agency-wide quality initiatives. Included in these initiatives are benchmarking studies. HIGHLIGHTS IN FISCAL YEAR 2015  The Office of Economic Research and Analysis accomplished several things over the fiscal year. These include:  Identified errors and requested corrections to the minimum school tax rate calculation per § 15-992 that resulted in a savings of $7.5 million to the state general fund to aid in school financial assistance  Updated the Individual Income Tax simulation model for tax years 2009 and 2012  Approved 174 corporate donations for the Corporate Income Tax Credit for Donations to School Tuition Organizations  Approved 35 corporate donations for the Corporate Income Tax Credit for Donations ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 15     to School Tuition Organizations for Disabled/Displaced Student Scholarships Approved 70 new organizations as Qualified Charitable Organizations and 6 new organizations as Qualified Foster Care Charitable Organizations for purposes of the Credit for Donations made to Qualifying Charitable Organizations Recertified 559 organizations as Qualified Charitable Organizations and 23 organizations as Qualified Charitable Foster Care Organizations for purposes of the Credit for Donations made to Qualifying Charitable Organizations Issued 645 Certificates of Eligibility for the Health Insurance Premium Tax Credit to individuals and small businesses Approved 20 Renewable Energy Production Tax Credit applications.  The Human Resources Unit, through strategic partnerships and networking, saved the Agency over $25,000 in advertising costs.  The department, through the Human Resources Unit, was presented with a plaque from the Office of the Secretary of Defense for “Patriotic Employer” for contributing to the hiring and employee participation of National Guard and Reserve Forces.  The Human Resources Unit analyzed all Employee Survey data for FY2015, prepared booklet summaries and presented the results to the agency leadership team.  The Problem Resolution Office responded to 10,274 emails during the fiscal year. ARIZONA DEPARTMENT OF REVENUE 2015 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. This section provides operational support and maintenance services for all department tax processing systems including: Taxpayer Administration System (TAS), electronic filing (MEFile), Data Entry, Cashier and Remittance, and Property and Audit mainframe applications. The section also ensures system scheduling and processing services are completed successfully as well as supports, manages, and monitor 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. Technical Services The Technical Services teams consist of the Server and Engineering, Data Administration, and Data Center Operations. Information Security 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: ensuring compliance to policy and regulatory mandates, managing risks and vulnerabilities in accordance with NIST800-53 and IRS Pub 1075, participating in Vendor Oversight Committee Audits employing BS27001, coordinating/performing InfoSec Forensic activities, as well as assisting and reviewing information security policy standards and procedures, and providing Employee Awareness of Information Security. 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 top tier business leaders. 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. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 17 HIGHLIGHTS IN FISCAL YEAR 2015 • • • • Supported a new processing record of more than 2.3 million electronically filed individual income tax returns. Installed and maintained the Tobacco Electronic Filing and Tobacco Stamp System (ARS § 42-3053) in support of Tobacco Master Settlement compliance management. Researched, purchased, trained and implemented multiple information security investments to sustain taxpayer data protection. Managed lifecycle upgrades to business applications, servers, databases and other operating environments to assure services. • • Addressed critical legislative mandate from the legislative session regarding Page 2 Data Capture for individual income returns (ARS §41-714 Automation Fund). Supported the receipt of 5.7 million tax documents for the main four tax types. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 18 PROCESS ADMINISTRATION Mission Statement: The mission of the Process Administration Division is to provide quality service by processing all tax returns and payments accurately and timely for Arizona taxpayers. the reconciliation and reporting of tax dollars deposited to the State’s financial institution, 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 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 departments’ 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. HIGHLIGHTS IN FISCAL YEAR 2015 • The Process Administration Division along with the Taxpayer and External Services Division implemented a new Cashier system. The new system electronically deposits taxpayer checks to the bank the same day they are processed so the State can use the funds to invest, pay bills, earn interest, and distribute revenues to other government agencies, including counties, cities, and state agencies. The electronic storage feature of the new system allow users in TES, Audit, and Collections to research payments on their own without the need to request check images from the bank. Additionally, this upgrade mitigated the increasing risk of potential system failure due to the age of the previous Cashier system. • Received and processed 5.7 million tax documents for the main four tax types. Received, processed, and deposited 4.1 million payments with an average deposit time of 0.71 days. Issued 2.0 million refunds to individual income taxpayers with an average turn-around time of 10.22 days. Processing Services Document Staging is responsible for the opening, batching and processing of tax documents for the largest four tax types: Individual Income, TPT, Withholding, and Corporate and a few of the smaller tax types; i.e., Tobacco, Liquor, and Bingo. Document Processing is responsible for batching documents and identifying any documents missing proper information prior to data being entered for all taxes. 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 • • ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 19 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 20 PROPERTY TAX MISSION STATEMENT: To ensure fair and uniform property values for Arizona taxpayers. throughout the yearly valuation cycle to assist counties in complying with valuation standards. The Property Tax Division is responsible for general oversight of the 15 county assessors in the administration of Arizona’s property tax laws and for the valuation of complex, geographically disbursed properties. GIS/Annexations Team The GIS/Annexation 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. The Team also reviews annexation documents from local taxing jurisdictions to make sure the documentation meets State standards. Assessment Procedures and Forms Team The Assessment Procedures 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 and assistance to county assessor appraisal staff. The Forms Team is responsible for updating forms prescribed for use in the administration of the property tax system. CAMA / Construction Cost Team The Computer-Assisted Mass Appraisal (CAMA) and Construction Cost Team maintains the Add-On Component Costs as well as the Residential and Commercial Depreciation schedules in order to promote the use of uniform 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. Centrally Valued Properties Team The Centrally Valued Properties (CVP) Team annually determines the full cash value of all utilities, railroads, mines and other complex or geographically dispersed properties. Values determined for such properties, with the exception of flight property and private rail cars, are transmitted to the appropriate county assessors for collection of property taxes through the county treasurers. 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. Equalization Team 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 Manuals Team The Manuals Team is responsible for producing and updating manuals and guidelines. The Team also reviews legislative enactments and changes to existing property tax statues, and prepares an extract of the property tax statutes found in Title 42. Personal Property Team The Personal Property Team oversees the development and application of personal property valuation procedures and manuals, and provides technical workshops to county personnel. Systems Development Team The Systems Development 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. HIGHLIGHTS IN FISCAL YEAR 2015 • The Assessment Procedures Team handled four property tax appeals for the 2015 tax year as the result of conflicts of interest in a county assessor’s office. All of the appeals involved administrative level appeals to the Assessor and the Board of Equalization. One of the appeals progressed to superior court, one was settled, one was reduced at the Board of Equalization and the Department prevailed on behalf of the county in one case. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 21 • • • • The Centrally Valued Property Team valued approximately 860 taxpayers totaling $38.9 billion in full cash value. There were 30 taxpayers (approximately 3%) who appealed their values to the department in the first level of appeal; four taxpayers went on to file petitions with the State Board of Equalization. Of those four petitions, one was withdrawn and three were heard before the Board. The Board decided in favor of the Department in two cases and reduced the value of one property. The Forms Team reviewed and updated 27 property tax forms. The update included a complete revision of tax roll correction forms to incorporate statutory changes. The Team also updated return forms, instructions and tax rate charts for use with the Government Property Lease Excise Tax (GPLET) program for the 2014 tax year. The GIS/Annexations Team processed a total of 420 Resolutions and Ordinances. Taxing jurisdictions are required to notify the Department each time they annex property within their existing district. The Team reviews each annexation document to verify that all the information is provided to meet minimum state standards. Research is also done to determine the new tax area code(s) for each annexation. The tax area code(s) number is then forwarded on to appropriate centrally valued property (CVP) taxpayers. Tax area codes are important because it’s a standard by which most CVP taxpayers report their values to the Department. The Training and Certification Team provided training to 45 students participating in Provisional courses, 41 students attending Level 1 certification courses and 17 students attending • • • Level 2 certification courses in the DOR Appraiser Training and Certification program this year. After completing 18 months of work experience, or the equivalent toward work experience, a total of 54 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 36 students completed the Level 1 series of courses and 18 students completed the Level 2 series 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, mobile home valuation and improvements on possessory rights. The Team also traveled to two counties to give presentations on the square foot method of valuing mobile homes. Work to deliver depreciation tables electronically to the 15 counties has also begun. The Sales Affidavit Team processed a total of 138,580 affidavits of real property value. Affidavits are required to be filed in most instances when there is a transfer of ownership of property. The county assessor forwards a copy to the Department for processing. The Team also published the Sales Ratio Summary based on the sales price taken from the affidavit. ARIZONA DEPARTMENT OF REVENUE 2015 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 Arizona Commerce Authority 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 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. Electronic Services (e-Services) Electronic Services (e-Services) provides the technical aspect to customer services. This work is carried out by focusing on two work flows: 1. Focusing on internal customer needs by supporting and maintaining system readiness and usability for demographic aspects of the tax system and online filing websites for most tax types, and bulk filing; and 2. Creating new functionalities so we can streamline processes and increase efficiencies to benefit all internal and external customers. 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. 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 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 23 support to companies in these unique lines of 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. 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. During this fiscal year we’ve had significant changes to business tax and internal processes and with limited resources this has impacted our ability to resolve taxpayer disputes and meet the demands of our taxpayers in a timely fashion. As a result, our agent satisfaction rating has declined from 86% to 67%. However, our goal for the future is to improve services and increase customer satisfaction. HIGHLIGHTS IN FISCAL YEAR 2015 • • • • • • • • CORE partnered with several contracting industry/associations to educate taxpayers with the new contracting statutes. Attendance drew over 6,000 attendees at 121 classes. CORE continued partnerships with the cities of Phoenix, Mesa, Scottsdale, Prescott, Flagstaff, Tucson and Chandler to present joint state-city TPT workshops. CORE also communicated to city staff updates to the TPT Simplification program. CORE also partnered with staff internally to deliver training to employees on TPT Simplification-related processes – educating over 300 employees at nine classes. CORE launched the Department’s social media presence by creating Facebook and Twitter pages in May 2015. LinkedIn presence grew 62% to end the year with 588 followers. With the assistance of the City of Chandler recording one of the department’s contracting classes, we were able to create our YouTube channel. This channel allows training to taxpayers 24/7 and had 24 subscribers and over 3,500 views. Also the department’s Facebook page averaged 10 visitors per day. The Criminal Investigation Unit stopped nearly $70 million in fraudulent refunds. The Tobacco Enforcement Unit conducted over 3,000 inspections throughout Arizona and the Navajo nation. The License and Registration Unit processed 45,639 applications with an average turnaround time of 5.0 days. After the implementation of a Lean Initiative in April of 2015 to streamline the license process, the turnaround time dropped to 2.2 business days with 94.5% completed within 1 business day. Of the 45,639 applications completed 59% were completed via AzTaxes.gov. The team also processed another 13,749 account update and maintenance requests. The L&R unit, aided by resources throughout the department, completed the first annual TPT ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 24 • renewal as required by HB 2389. The unit completed approximately 120,000 renewal and maintenance forms on accounts located in the program cities. Additionally, the License and Registration Maintenance Unit (MU) answered 25,806 calls, responded to problem resolution issues and emails, processed 1,567 taxpayers bonds totaling nearly $15 million and collected another $85,676 in delinquencies. Finally, the Customer Service (CS) team assisted more than 10,000 walk-in customers over the counter and cashiered over $562 million in payments. • Taxpayer Information and Assistance accomplishments include:  Answered 386,538 calls.  Replied to 7,463 emails.  Assisted 37,139 customers at the lobby windows.  Assisted 10,645 customers at the TIA walkin offices.  Responded to 12,655 Tax Practitioner Hotline inquiries.  Responded to 16,501 written inquiries.  Processed 11,964 Power of Attorney forms.  Answered 1,758 switchboard calls. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 25 ARIZONA DEPARTMENT OF REVENUE 2015 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 2015 ANNUAL REPORT Page 27 ARIZONA DEPARTMENT OF REVENUE 2015 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 2015 ANNUAL REPORT Page 29 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 30 TABLE 1 REVENUE SUMMARY GROSS REVENUE COLLECTED FISCAL YEAR 2010-11 THROUGH FISCAL YEAR 2014-15 SOURCE FY2010-11 FY2011-12 FY2012-13 FY2013-14 FY2014-15 $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 $1,836,707,857 3,285,088,928 281,143,731 626,400,822 1,760,338 36,915,698 25,467,086 1,097,227,224 $6,951,173,293 20,235,301 23,913,439 1,145,303,425 $7,330,738,929 (25,356,945) 32,116,438 1,223,217,366 $7,660,240,313 (25,642,747) 41,685,649 1,303,960,087 $7,103,749,724 62,907 44,364,312 1,375,048,446 $7,450,577,341 $3,234,666,688 867,110,332 659,266,690 $4,761,043,709 $3,343,314,942 1,027,389,330 758,413,453 $5,129,117,725 $3,459,818,705 1,170,646,638 755,002,081 $5,385,467,424 $3,580,656,587 1,131,388,277 705,730,762 $5,417,775,626 $3,699,577,473 1,297,323,652 788,991,384 $5,785,892,509 LUXURY TAX Spirituous Liquor Vinous Liquor Malt Liquor Tobacco - All Types (1) Licensing Subtotal $28,202,704 13,596,155 21,566,369 340,754,224 7,710 $404,127,163 $31,847,105 15,430,577 21,101,489 337,777,289 7,925 $406,164,385 $32,184,954 15,155,547 21,343,360 331,347,184 7,825 $400,038,871 $33,588,102 15,583,934 21,974,061 327,788,207 8,198 $398,942,502 $33,963,657 15,624,518 21,682,060 331,926,341 6,775 $403,203,351 ESTATE TAX Estate (3) Unclaimed Property Escheated Estates Subtotal $437,372 121,263,602 370,786 $122,071,760 $200,825 115,160,041 186,322 $115,547,188 $0 131,397,401 327,961 $131,725,361 $0 113,119,156 649,079 $113,768,235 $0 126,763,806 736,221 $127,500,027 $504,905 9,673,124 1,283,026 1,812,420 8,155,363 $21,428,838 $508,145 10,585,261 1,065,773 1,782,028 8,518,868 $22,460,074 $519,998 7,375,052 3,698,193 2,153,517 8,732,325 $22,479,086 $12,259,844,763 $13,004,028,301 $13,599,951,055 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 Subtotal INCOME TAX Withholding Individual Corporate Subtotal OTHER REVENUES Bingo Flight Property Tax Private Car Tax Nuclear Plan Assessment Waste Tire Subtotal TOTAL (2) (5) (5) $521,583 12,974,652 (5) (1,061,682) (5) ----- (6) 9,009,694 $21,444,247 $13,055,680,334 $507,212 9,727,092 3,484,442 4,673,096 8,906,743 $27,298,585 $13,794,471,813 (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 2015 ANNUAL REPORT Page 31 TABLE 2 NET REVENUE TO STATE GENERAL FUND FISCAL YEAR 2010-11 THROUGH FISCAL YEAR 2014-15 FY2010-11 FY2011-12 FY2012-13 FY2013-14 FY2014-15 $3,463,327,544 $3,657,481,499 $3,819,525,185 $4,026,707,269 $4,199,713,199 8,215,241 17,366,617 (21,908,400) (25,642,747) 62,907 Income Tax 2,949,887,110 3,284,084,523 3,514,487,484 $3,445,061,022 $3,783,445,387 Luxury Tax 53,599,408 56,357,085 56,184,596 58,711,664 56,746,947 437,372 200,825 ----- ----- ----- 49,120,855 45,819,445 60,899,609 49,165,753 54,034,910 504,905 508,145 519,998 521,583 507,212 Private Car Tax 1,283,026 1,065,773 3,698,193 (2) Nuclear Plan Assessment 1,812,420 1,782,028 2,153,517 $6,528,187,881 $7,064,665,940 $7,435,560,183 SOURCE Transaction Privilege, Use, and Severance Tax Undistributed Estimated Transaction Privilege Tax Estate Tax (1) Unclaimed Property Bingo Total (1,061,682) (2) 3,484,442 ----- (3) 4,673,096 $7,553,462,862 $8,102,668,100 (1) Arizona's estate tax was effectively repealed January 1, 2005, following the elimination of the Federal State Death Tax Credit by Congress. (2) 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. (3) The Nuclear Plan Assessment revenue was received after the final deposit for FY14. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 32 (3) TABLE 3 GROSS COLLECTIONS OF AUDIT ASSESSMENTS AND DELINQUENT TAX FISCAL YEAR 2013-14 AND FISCAL YEAR 2014-15 FY2013-14 FY2014-15 % CHANGE Collections Audit Accounts Receivable $232,213,615 $169,753,549 $152,861,783 $242,000,155 $173,815,515 $150,495,968 4.2% 2.4% -1.5% TOTAL GROSS COLLECTIONS $554,828,947 $566,311,638 2.1% ADJUSTMENTS (1) Duplication, Credit Audits and Other Adjustments As Reported $29,273,937 $25,796,817 -11.9% TOTAL ADJUSTED NET ENFORCEMENT COLLECTIONS (2) $525,555,010 $540,514,821 2.8% GROSS COLLECTIONS (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 2015 ANNUAL REPORT Page 33 ARIZONA DEPARTMENT OF REVENUE 2015 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 76 Arizona cities and towns at no charge to the municipalities. This is a service to the cities and to the taxpaying community who are able to combine their reporting requirements on a single form and payment to a single governmental entity. Weekly distributions to the cities are processed after the department collects the local taxes (Refer to Tables 26 and 27). During fiscal year 2015, 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 $7.4 billion was remitted by Transaction Privilege, Severance and Use Tax license holders during fiscal year 2015 (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 minerals. 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 five counties, Coconino, 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 2015 ANNUAL REPORT Page 35 TABLE 4 GROSS TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS FISCAL YEAR 2010-11 THROUGH FISCAL YEAR 2014-15 SOURCE Distribution Base Nonshared Use Tax SUBTOTAL Education Tax Temporary Tax (2) Temporary Tax Estimated Payment Undistributed Estimated Payment Telecommunications Devices 911 Excise 911 Prepaid Wireless Municipal Water Nursing Facility Assessment (4) Waste Tire Accounts Receivable Collections GROSS STATE COLLECTIONS Municipal Privilege Tax Apache County Excise Tax Cochise County Excise Tax Coconino County Excise Tax Coconino County Jail Tax Coconino County Capitol Projects Tax Coconino County Road Tax Gila County Excise Tax Gila County Road Tax Gila Road Extension Tax Graham County Excise Tax Greenlee County Excise Tax La Paz County Excise Tax La Paz County Jail 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) Maricopa County Jail Tax Maricopa County Rental Car Surcharge Mohave County Excise Tax Navajo County Excise Tax Pima County Hotel Tax Pima County Rental Car Surcharge Pima County R.V. Surcharge Pima County Road Tax Pinal County Excise Tax Pinal County Health Services District Pinal County Road Tax Santa Cruz County Excise Tax Santa Cruz County Jail Tax Yavapai County Excise Tax Yavapai County Jail Tax Yuma County Excise Tax Yuma County Jail Tax Yuma County Capitol Projects Tax Yuma County Health Services District Sports & Tourism Authority COUNTY AND CITY COLLECTIONS TOTAL DEPARTMENT OF REVENUE RECEIPTS FY2010-11 FY2011-12 FY2012-13 FY2013-14 FY2014-15 $1,493,036,999 2,719,128,171 229,250,912 $4,441,416,082 $1,569,903,646 2,852,297,332 263,724,399 $4,685,925,377 $1,644,471,588 2,994,447,622 257,899,313 $4,896,818,522 $1,750,515,866 3,186,969,414 235,984,933 $5,173,470,213 1,836,707,857 3,285,088,928 281,143,731 5,402,940,516 $514,345,951 835,801,251 28,700,457 8,215,241 6,452,762 16,606,135 $542,394,529 912,966,857 2,868,684 17,366,617 4,857,379 16,481,762 $567,824,410 965,620,521 (3,448,544) (21,908,400) 4,587,729 16,425,768 $601,853,602 8,422,920 ----(25,642,747) 4,865,666 17,109,403 2,377,136 ----31,053 $5,853,946,069 2,545,748 ----28,550 $6,185,435,504 2,427,127 8,673,285 2,529 $6,437,022,947 2,428,062 17,262,306 20,212 $5,799,789,636 626,400,822 1,760,338 ----62,907 4,852,778 15,959,537 1,891,140 2,455,869 19,064,855 140,133 $6,075,528,895 $450,148,563 1,052,062 6,951,160 11,110,639 11,101,630 2,773,896 $466,896,627 1,189,314 6,891,804 11,297,308 11,295,614 2,814,563 $506,978,968 1,115,268 6,997,151 11,666,641 11,660,897 2,913,345 546,725,301 1,308,856 6,928,647 12,245,309 12,243,833 3,058,840 2,690,335 2,766,830 2,779,139 2,879,485 2,899,476 3,005,463 3,045,271 3,131,228 1,682,449 1,281,394 1,025,763 1,025,659 (7) ----859,919 308,374,052 252 111,547,857 4,971,979 5,710,609 5,889,027 5,590,968 1,372,901 164,805 64,540,737 12,032,993 2,401,515 12,561,088 2,571,487 2,609,373 11,703,512 5,850,290 10,761,578 10,761,452 37,106 2,138,596 21,164,757 $1,097,227,224 1,798,603 1,495,734 1,120,855 1,120,853 21 590,955 178,724 323,991,403 174 117,547,456 5,191,681 5,396,008 6,246,077 6,311,778 1,463,761 145,559 67,504,860 12,449,204 2,468,346 12,952,327 2,646,194 2,641,677 12,400,793 6,199,337 11,230,569 11,230,580 18,947 2,235,486 22,681,609 $1,145,303,425 1,957,102 2,088,094 1,131,747 1,131,743 32 1,112,052 (93,903) 341,670,551 1 124,019,899 5,254,869 5,747,761 6,239,089 6,030,600 1,398,973 136,195 70,893,757 12,761,984 2,541,837 13,300,223 2,595,978 2,594,044 13,308,847 6,653,214 11,610,142 11,610,076 16,966 2,311,386 27,956,898 $1,223,217,366 2,130,788 2,345,102 1,165,099 1,165,098 26 2,215,639 (127,766) 365,688,468 6 133,581,417 5,387,697 6,263,993 6,667,433 6,290,212 1,389,855 121,726 72,390,485 13,594,230 2,713,674 14,110,597 2,685,361 2,684,802 14,145,870 7,072,702 11,710,103 11,710,110 3,243 2,526,105 25,640,725 $1,303,960,087 583,920,974 1,213,088 7,102,794 13,418,497 13,414,793 1,301,271 2,973,234 2,830,513 1,809,066 1,131,853 1,937,227 1,491,594 1,150,267 1,150,262 6,641 2,217,941 (144,505) 382,335,381 41 140,021,448 4,906,997 6,337,181 6,674,867 6,160,652 1,384,095 137,298 74,197,062 13,936,172 2,778,759 14,450,578 2,504,647 2,503,979 14,951,596 7,474,794 11,857,358 11,859,175 13,600 2,427,008 31,210,248 $1,375,048,446 $6,951,173,292 $7,330,738,929 $7,660,240,313 $7,103,749,723 $7,450,577,341 (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. (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. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT PAGE 36 TABLE 5 STATE TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX RATES FISCAL YEAR 2014-15 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% $0.0305 $0.0305 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 37 TABLE 6 NET TAXABLE SALES BY TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX CLASSIFICATIONS (1) FISCAL YEAR 2010-11 THROUGH FISCAL YEAR 2014-15 % OF CLASSIFICATION % OF % OF % OF % OF FY2010-11 TOTAL FY2011-12 TOTAL FY2012-13 TOTAL FY2013-14 TOTAL FY2014-15 TOTAL $41,555,032 0.05 $52,136,905 0.06 $41,324,471 0.04 $54,981,256 0.05 $57,587,947 0.05 Mining, Oil & Gas 96,513,978 0.11 105,614,045 0.11 115,774,867 0.12 116,677,749 0.11 111,808,143 0.10 Mining Severance 1,609,450,811 1.80 1,623,111,320 1.72 1,193,176,084 1.21 1,047,580,204 1.01 994,478,291 0.92 Utilities 9,394,361,056 10.52 9,474,520,541 10.05 9,900,237,768 10.07 9,923,489,526 9.57 9,856,234,343 9.11 Communications 2,853,538,386 3.20 3,190,962,329 3.38 3,061,730,365 3.12 2,965,233,344 2.86 2,565,400,083 2.37 6,250,408 0.01 5,615,642 0.01 6,498,110 0.01 Transporting Private Car and Pipelines 1,908,310 n/a (2) 1,186,118 n/a (2) Publishing 98,343,131 0.11 92,504,602 0.10 84,672,718 0.09 101,751,218 0.10 106,356,511 0.10 Job Printing 266,564,040 0.30 252,603,147 0.27 235,348,616 0.24 321,225,074 0.31 259,671,784 0.24 9,311,826,427 10.43 9,996,824,507 10.60 10,544,419,377 10.73 11,085,651,538 10.69 12,053,485,604 11.14 994,092,112 1.11 1,037,058,757 1.10 1,051,580,928 1.07 1,096,945,152 1.06 1,252,513,666 1.16 Restaurants and Bars Amusements Commercial Lease (3) 1,750 n/a (2) 1,209 n/a (2) 1,706 n/a (2) 1,553 n/a (2) 5,572 n/a (2) Personal Property Rentals 3,056,386,064 3.42 3,257,587,929 3.46 3,254,821,525 3.31 3,355,048,345 3.23 3,453,882,481 3.19 Contracting 8,983,260,649 10.06 9,543,335,350 10.12 10,092,875,787 10.27 11,269,502,981 10.86 10,653,405,099 9.84 45,898,838,365 51.42 48,178,713,977 51.10 51,276,107,347 52.18 55,257,510,004 53.26 58,463,542,614 54.01 26,816,169 0.02 2,675,509,733 2.47 Retail MRRA Amount Hotel/Motel ----2,039,282,838 Rental Occupancy Tax (4) Use Tax Use Tax-Utilities 2.28 42,581 n/a (2) 2,156,863,685 (2,602) ----2.29 2,221,059,419 n/a (2) 0 ----2.26 2,334,372,656 n/a (2) (84) 2.25 n/a (2) 0 n/a (2) 4,610,920,668 5.17 5,302,843,816 5.62 5,186,464,365 5.28 4,749,508,210 4.58 5,659,093,999 5.23 10,039,995 0.01 10,022,025 0.01 10,283,377 0.01 62,511,267 0.06 48,069,635 0.04 Membership Camping (4) TOTAL ----- 728 $89,266,926,922 n/a (2) 100.00 0 $94,275,887,660 0.00 (2) 100.00 0 $98,276,129,127 0.00 (2) 100.00 0 $103,747,605,636 0.00 (2) 100.00 0 $108,244,359,783 (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 2015 ANNUAL REPORT Page 38 0.00 (2) 100.00 TABLE 7 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS BY CLASS FISCAL YEAR 2014-15 DISTRIBUTION CLASSIFICATION TOTAL BASE NONSHARED COLLECTIONS Transporting $575,879 $2,303,518 $2,879,397 Nonmetal Mining, Oil and Gas 1,118,081 2,375,923 3,494,004 Mining Severance 19,889,566 4,972,391 24,861,957 Utilities 98,562,344 394,249,374 492,811,718 Communications 25,654,001 102,616,003 128,270,004 64,981 259,924 324,906 Publishing 1,063,565 4,254,260 5,317,826 Job Printing 2,596,718 10,386,871 12,983,589 241,069,712 361,604,568 602,674,280 25,050,273 37,575,410 62,625,683 95 84 179 69,077,154 103,615,731 172,692,885 106,541,575 426,166,298 532,707,873 1,169,270,918 1,753,906,314 2,923,177,232 536,323 804,485 1,340,808 73,576,737 73,576,737 147,153,473 480,696 1,922,785 2,403,482 Use Tax 0 281,143,731 281,143,731 License Fees 0 839,717 839,717 1,579,239 2,368,859 3,948,098 Jet Fuel Use Tax 0 671,606 671,606 Non Sufficient Funds 0 71,943 71,943 Mandatory EFT Fees 0 546,125 546,125 $1,836,707,857 $3,566,232,660 $5,402,940,516 Private Car and Pipelines Restaurants and Bars Amusements Commercial Lease (1) Rentals of Personal Property Contracting Retail MRRA Amount Hotel/Motel Use Tax Utilities Jet Fuel Tax TOTAL (1) Commercial Lease rate dropped to 0% effective July 1, 1997. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 39 TABLE 8 DISTRIBUTION OF TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS FISCAL YEAR 2014-15 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 $4,199,713,199 62,907 459,176,964 744,050,353 626,400,822 1,760,338 TOTAL GROSS COLLECTIONS $6,075,528,895 44,364,312 ADDITIONAL DISTRIBUTION FROM TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS FISCAL YEAR 2014-15 Phoenix International Raceway - Highway Improvements Rio Nuevo Sports and Tourism Authority Tribal Community Colleges Convention Center Distribution adjustments for city collections $416,667 6,958,022 * 10,143,971 * 2,625,000 42,000,000 (48,030) * These figures include a reconciliation of June 2014 distributions. Figures may not add total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 40 TABLE 9 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN APACHE COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY 2013-14 COLLECTIONS $17,465,146 6.0% $873,257 20,354,170 4.0% 1,017,708 115,641 -56.2% 5,782 15,081,140 9.4% 754,057 8,645,446 85.0% 432,272 49,304,767 -12.0% 2,465,238 114,158,825 -15.4% 5,707,941 9,844,265 -3.5% 541,435 83,867,541 NA 4,079,343 $318,836,941 5.7% $15,877,034 Utilities Communications Publishing Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS FY2012-13 FY2013-14 FY2014-15 19 21 22 108 113 106 Publishing 15 14 14 Job Printing 12 9 10 Restaurants and Bars 66 67 71 Rentals of Personal Property 172 162 162 Contracting (All) 440 446 433 1,602 1,699 1,848 52 46 48 1,006 1,011 1,054 3,492 3,588 3,768 Utilities Communications 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 FY15, different categories have been classified under the Other Taxable Activities compared to FY14. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 41 TABLE 10 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN COCHISE COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY 2013-14 COLLECTIONS $159,053,978 -2.0% $7,952,699 Utilities Communications 44,968,851 -15.4% 2,248,443 Publishing 977,616 6.8% 48,881 Job Printing 906,593 -35.1% 45,330 139,476,585 3.0% 6,973,829 5,413,522 -4.1% 270,676 21,862,871 -11.6% 1,093,144 Contracting (All) 155,425,329 -6.1% 7,771,266 Retail Restaurants and Bars Amusements Rentals of Personal Property 846,269,548 6.2% 42,313,477 Hotel/Motel 32,909,371 6.1% 1,810,015 Other Taxable Activities 69,816,083 4.8% 3,479,042 $1,477,080,347 2.3% $74,006,802 TOTAL . NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities FY2012-13 FY2013-14 FY2014-15 56 54 51 187 198 190 Publishing 26 26 20 Job Printing 16 17 16 335 338 341 48 54 55 339 355 350 Contracting (All) 1,083 1,064 984 Retail 3,696 3,872 4,086 157 155 164 1,576 1,693 1,763 7,519 7,826 8,020 Communications Restaurants and Bars Amusements Rentals of Personal Property 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 2015 ANNUAL REPORT Page 42 TABLE 11 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN COCONINO COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 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 2013-14 COLLECTIONS $176,476,425 55,015,569 1,600,366 2,938,533 424,957,837 88,576,925 74,511,629 315,738,471 1,148,404,724 339,545,429 118,714,506 -1.3% -4.2% -8.2% -14.9% 9.4% 15.7% 17.5% 5.6% 10.0% 16.0% 11.7% $8,823,821 2,750,778 80,018 146,927 21,247,892 4,428,846 3,725,581 15,786,924 57,420,236 18,674,999 5,838,516 $2,746,480,414 9.3% $138,924,539 NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 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 FY2012-13 FY2013-14 FY2014-15 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 44 236 39 41 535 100 505 1,595 5,271 342 2,219 10,042 10,412 10,927 (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 2015 ANNUAL REPORT Page 43 TABLE 12 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN GILA COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 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 (2) TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2013-14 COLLECTIONS $105,424,357 17,738,604 593,922 374,765 67,240,265 2,631,309 11,506,276 56,366,280 284,206,903 13,128,925 116,651,283 -26.2% -6.0% 4.9% NA 10.7% 10.4% 3.2% -16.1% 4.6% 3.6% 11.6% $5,271,218 886,930 29,696 18,738 3,362,013 131,565 575,314 2,818,314 14,210,345 722,091 3,333,608 $675,862,889 -2.4% $31,359,833 NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 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 (2) TOTAL FY2012-13 FY2013-14 FY2014-15 37 155 20 ----165 29 231 786 2,283 69 1,119 30 161 17 ----162 29 234 800 2,402 69 1,182 28 153 19 9 169 29 246 778 2,612 69 1,195 4,894 5,086 5,307 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. (2) For FY15, different categories have been classified under the Other Taxable Activities compared to FY14. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 44 TABLE 13 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN GRAHAM COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 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 2013-14 COLLECTIONS $10,628,639 34,603,796 17,778,605 23,384,943 235,685,650 107,411,888 -5.8% -2.0% 12.7% -44.6% -5.8% -21.1% $531,432 1,730,190 888,930 1,169,247 11,784,283 4,671,485 $429,493,522 -12.5% $20,775,567 NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Communications Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Other Taxable Activities TOTAL FY2012-13 FY2013-14 FY2014-15 112 64 158 334 1,468 957 118 64 164 356 1,596 979 119 68 178 316 1,697 1,004 3,093 3,277 3,382 (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 2015 ANNUAL REPORT Page 45 TABLE 14 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN GREENLEE COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 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 2013-14 COLLECTIONS $3,595,052 5,549,436 9,244,289 39,448,013 144,738,951 580,719,763 -10.0% -6.7% -41.7% -71.3% -32.8% 21.7% $179,753 277,472 462,214 1,972,401 7,236,948 17,311,206 $783,295,504 -8.5% $27,439,993 FY2012-13 FY2013-14 FY2014-15 63 28 76 140 681 509 62 33 86 146 754 527 68 26 90 137 854 545 1,497 1,608 1,720 NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 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 2015 ANNUAL REPORT Page 46 TABLE 15 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN LA PAZ COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publication Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2013-14 COLLECTIONS $28,069,148 6,857,220 48,627 26,218,130 444,904 2,982,736 20,681,178 134,459,267 6,439,181 32,325,115 1.2% 9.5% 19.5% 7.3% -1.6% -0.6% -23.8% -1.1% 3.5% -11.8% $1,403,457 342,861 2,431 1,310,907 22,245 149,137 1,034,059 6,722,963 354,155 1,613,073 $258,525,505 -3.5% $12,955,288 FY2012-13 FY2013-14 FY2014-15 22 108 15 92 10 141 340 1,766 54 741 22 105 13 95 10 148 357 1,859 55 771 22 106 11 108 11 148 327 1,932 56 836 3,289 3,435 3,557 NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publication 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 2015 ANNUAL REPORT Page 47 TABLE 16 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN MARICOPA COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY 2013-14 COLLECTIONS $6,212,322,691 -0.6% $310,616,135 1,648,899,728 -15.6% 82,444,986 Publishing 73,123,704 4.8% 3,656,185 Job Printing 214,577,091 -19.7% 10,728,855 8,378,446,900 9.5% 418,922,345 944,773,247 18.4% 47,238,662 Rentals of Personal Property 2,645,963,305 4.1% 132,298,165 Contracting (All) 7,307,422,325 -2.0% 365,371,803 40,358,486,607 6.3% 2,017,923,643 Hotel/Motel 1,640,915,147 18.4% 90,250,333 Other Taxable Activities 4,462,871,387 17.5% 222,280,817 $73,887,802,133 5.3% $3,701,731,930 Utilities Communications Restaurants and Bars Amusements Retail TOTAL NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS FY2012-13 FY2013-14 FY2014-15 Utilities 151 147 155 Communications 653 697 722 Publishing 237 241 249 Job Printing 753 762 766 6,791 6,995 6,975 724 754 755 2,495 2,536 2,530 Contracting (All) 13,538 13,700 13,155 Retail 44,857 45,491 46,737 729 768 872 10,475 10,747 11,330 81,403 82,838 84,246 Restaurants and Bars Amusements Rentals of Personal Property 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 2015 ANNUAL REPORT Page 48 TABLE 17 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN MOHAVE COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Job Printing CALCULATED NET % CHANGE TAXABLE INCOME FROM FY 2013-14 COLLECTIONS $357,881,267 -8.6% $17,894,063 70,546,257 -9.5% 3,527,313 1,127,300 -23.6% 56,365 2,274,293 -57.0% 113,715 255,545,163 7.7% 12,777,258 Amusements 14,462,573 2.6% 723,129 Rentals of Personal Property 52,868,162 10.4% 2,643,408 210,877,478 -8.2% 10,543,874 Restaurants and Bars Contracting (All) Retail 1,487,169,588 4.7% 74,358,479 Hotel/Motel 49,944,030 7.7% 2,746,922 Other Taxable Activities 96,586,815 -8.5% 4,603,952 $2,599,282,926 0.8% $129,988,478 FY2013-14 FY2014-15 TOTAL NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities FY2012-13 63 59 56 168 186 197 Publishing 29 28 25 Job Printing 30 36 33 438 442 433 Communications Restaurants and Bars Amusements 66 65 69 457 441 446 Contracting (All) 1,295 1,350 1,281 Retail 4,845 5,163 5,366 Rentals of Personal Property Hotel/Motel Other Taxable Activities TOTAL 140 154 158 1,983 2,103 2,199 9,514 10,027 10,263 (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 2015 ANNUAL REPORT Page 49 TABLE 18 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN NAVAJO COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL CALCULATED NET TAXABLE INCOME % CHANGE FROM FY 2013-14 COLLECTIONS $98,648,494 39,752,360 768,305 105,508,778 24,812,637 128,136,586 886,975,882 36,189,528 53,959,745 1.9% 11.6% -3.0% 9.9% -15.7% -2.1% -0.2% -1.5% 5.2% $4,932,425 1,987,618 38,415 5,275,439 1,240,632 6,406,829 44,348,794 1,990,424 2,673,951 $1,374,752,313 0.6% $68,894,527 NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing Restaurants and Bars Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL FY2012-13 FY2013-14 FY2014-15 43 145 26 227 280 862 2,890 134 1,370 35 158 23 227 284 877 3,018 141 1,417 36 160 22 211 293 859 3,115 143 1,448 5,977 6,180 6,287 (1) License fees, Jet Fuel, Jet Fuel Use, Timber Severance, NSF, and Telecommunications Service Assistance are not included. (2) For FY15 more categories have been classified under the Other Taxable Activities compared to FY14 Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 50 TABLE 19 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN PIMA COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY 2013-14 COLLECTIONS $1,424,982,535 1.9% $71,249,127 368,784,213 -13.7% 18,439,211 Utilities Communications Publishing 18,300,902 9.7% 915,045 Job Printing 29,508,450 -5.9% 1,475,422 1,691,684,299 6.4% 84,584,215 99,349,919 1.4% 4,967,496 Restaurants and Bars Amusements Rentals of Personal Property 421,152,445 9.5% 21,057,622 Contracting (All) 1,284,620,463 -13.8% 64,231,023 Retail 8,146,456,368 5.2% 407,322,818 Hotel/Motel 320,225,197 7.1% 17,612,386 Other Taxable Activities 757,981,158 2.8% 33,014,837 $14,563,045,950 2.4% $724,869,203 FY2012-13 FY2013-14 FY2014-15 87 83 75 316 333 342 TOTAL NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing 80 78 77 Job Printing 131 133 138 1,684 1,700 1,767 223 206 224 Restaurants and Bars Amusements Rentals of Personal Property Contracting (All) Retail Hotel/Motel Other Taxable Activities TOTAL 966 945 969 4,421 4,440 4,269 14,349 14,642 15,016 282 292 294 4,165 4,224 4,473 26,704 27,076 27,644 (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 2015 ANNUAL REPORT Page 51 TABLE 20 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN PINAL COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 TAXABLE ACTIVITIES AND CALCULATED NET % CHANGE BUSINESS CLASSIFICATIONS TAXABLE INCOME FROM FY 2013-14 COLLECTIONS $496,875,487 3.6% $24,843,774 113,499,811 -8.4% 5,674,991 4,491,147 9.2% 224,557 Utilities Communications Publishing Job Printing 1,665,605 NA 83,280 277,833,256 6.1% 13,891,663 Amusements 42,130,232 -3.4% 2,106,512 Rentals of Personal Property 67,936,534 -1.2% 3,396,827 Restaurants and Bars Contracting (All) Retail Hotel/Motel Other Taxable Activities (2) TOTAL 396,597,344 -17.6% 19,829,867 1,321,598,271 9.8% 66,079,913 21,698,110 4.0% 1,193,396 228,004,075 NA 9,633,879 $2,972,329,873 1.1% $146,958,659 FY2012-13 FY2013-14 FY2014-15 77 82 77 208 218 216 NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 TAXABLE ACTIVITIES AND BUSINESS CLASSIFICATIONS Utilities Communications Publishing 29 31 25 Job Printing ----- ----- 30 Restaurants and Bars 439 430 420 99 94 98 Amusements Rentals of Personal Property 447 450 461 Contracting (All) 2,718 2,833 2,736 Retail 4,904 5,116 5,535 113 108 98 1,948 2,031 2,121 10,982 11,393 11,817 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 FY15 more categories have been classified under the Other Taxable Activities compared to FY14. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 52 TABLE 21 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN SANTA CRUZ COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 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 2013-14 COLLECTIONS $48,945,474 17,182,045 79,492 233,599 52,094,085 4,309,403 (4,663,745) 41,929,450 323,169,353 13,299,812 25,306,939 -7.5% -21.0% -16.9% -18.2% 4.8% 11.8% -139.9% -28.3% -0.1% 12.5% 5.7% $2,447,274 859,102 3,975 11,680 2,604,704 215,470 (233,187) 2,096,472 16,158,468 731,490 1,264,874 $521,885,906 -6.5% $26,160,322 FY2012-13 FY2013-14 FY2014-15 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 16 138 13 16 128 23 225 534 2,550 50 1,130 4,365 4,637 4,823 NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 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 2015 ANNUAL REPORT Page 53 TABLE 22 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN YAVAPAI COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 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 201-14 COLLECTIONS $326,818,736 90,252,781 2,967,827 4,279,003 332,969,432 27,692,284 56,307,894 383,156,022 1,591,780,386 132,653,966 262,532,447 0.4% -2.5% -6.0% -20.3% 8.8% -12.8% 0.9% 6.1% 7.4% 11.0% -12.2% $16,340,937 4,512,639 148,391 213,950 16,648,472 1,384,614 2,815,395 19,157,801 79,589,019 7,295,968 9,160,231 $3,211,410,779 4.2% $157,267,417 NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 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 FY2012-13 FY2013-14 FY2014-15 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 84 253 56 66 641 105 508 2,261 6,985 231 2,431 12,536 13,133 13,621 (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 2015 ANNUAL REPORT Page 54 TABLE 23 TRANSACTION PRIVILEGE, USE AND SEVERANCE TAX COLLECTIONS (1) IN YUMA COUNTY FOR THE PERIOD BEGINNING JULY 1, 2014 AND ENDING JUNE 30, 2015 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 2013-14 COLLECTIONS $258,641,553 57,324,783 1,917,616 246,276,501 14,235,645 42,973,396 240,316,450 1,439,982,291 48,375,920 74,230,636 -0.7% -7.8% 0.1% 6.1% 4.0% -43.4% -9.2% 5.6% 6.6% -8.5% $12,932,078 2,866,239 95,881 12,313,825 711,782 2,148,670 12,008,523 71,999,115 2,660,676 3,683,399 $2,424,274,790 1.0% $121,420,187 FY2012-13 FY2013-14 FY2014-15 39 191 24 339 54 413 963 3,905 102 1,779 35 200 19 356 41 411 957 4,053 102 1,864 33 201 15 341 47 416 901 4,273 112 1,958 7,809 8,038 8,297 NUMBER OF ACCOUNTS FISCAL YEAR 2012-13 THROUGH FISCAL YEAR 2014-15 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 FY15 more categories have been classified under the Other Taxable Activities compared to FY14. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 55 TABLE 24 STATE TRANSACTION PRIVILEGE AND SEVERANCE TAX DISTRIBUTION TO COUNTIES FISCAL YEAR 2010-11 THROUGH FISCAL YEAR 2014-15 COUNTY Apache Coconino Cochise Gila Graham Greenlee La Paz Maricopa Mohave Navajo Pima Pinal Santa Cruz Yavapai Yuma TOTAL % CHANGE FROM FY2014-15 FY 2013-14 FY2010-11 FY2011-12 FY2012-13 FY2013-14 $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 $4,839,048 19,874,734 12,338,129 5,291,050 3,584,450 5,537,109 2,201,275 473,705,321 20,525,025 10,892,343 105,207,881 30,449,266 4,453,950 25,791,153 19,359,619 2.0% 4.1% 3.8% 3.4% -3.9% 8.7% -2.9% 6.1% 0.7% 1.2% 3.5% 3.6% 0.1% 2.0% 3.2% $604,829,288 $635,967,967 $666,175,440 $709,133,978 $744,050,353 4.9% Figures may not add to totals due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 56 TABLE 25 STATE TRANSACTION PRIVILEGE AND SEVERANCE TAX DISTRIBUTION TO MUNICIPALITIES FISCAL YEAR 2014-15 COUNTY COUNTY COUNTY CITIES AMOUNT TOTAL CITIES AMOUNT TOTAL CITIES AMOUNT TOTAL CITIES APACHE Thatcher 444,606 $1,536,976 Tempe 14,779,296 Kearny Eagar $446,434 GREENLEE Tolleson 598,140 Mammoth Springerville 179,213.09 Clifton $302,588 Wickenburg 581,507 Maricopa St. Johns 318,032.85 $943,680 Duncan 63,607 $366,195 Youngtown 562,589 $323,011,031 Superior COCHISE LA PAZ MOHAVE SANTA CRUZ Benson $466,539 Parker $281,751 Bullhead City $3,613,511 Nogales Bisbee 509,492 Quartzsite 336,036 $617,788 Colorado City 440,585 Patagonia Douglas 1,600,126 MARICOPA Kingman 2,565,099 YAVAPAI Huachuca City 169,344 Avondale $6,967,295 Lake Havasu City 4,800,376 $11,419,571 Camp Verde Sierra Vista 4,010,869 Buckeye 4,649,494 NAVAJO Chino Valley Tombstone 126,117 Carefree 307,340 Holbrook $461,787 Clarkdale Willcox 343,347 $7,225,834 Cave Creek 458,315 Pinetop-Lakeside 391,327 Cottonwood COCONINO Chandler 21,597,535 Show Low 974,204 Dewey-Humboldt Flagstaff $6,019,776 El Mirage 2,905,888 Snowflake 510,863 Jerome Fredonia 120,085 Fountain Hills 2,055,241 Taylor 375,790 Prescott Page 662,294 Gila Bend 175,649 Winslow 882,358 $3,596,330 Prescott Valley Tusayan 50,995 Gilbert 19,041,027 PIMA Sedona Williams 276,268 $7,129,418 Glendale 20,719,747 Marana $3,195,042 YUMA GILA Goodyear 5,965,400 Oro Valley 3,747,944 San Luis Globe $688,340 Guadalupe 504,740 Sahuarita 2,308,388 Somerton Hayden 60,499 Litchfield Park 500,445 South Tucson 516,529 Wellton Miami 167,881 Mesa 40,123,403 Tucson 47,532,746 $57,300,649 Yuma Payson 1,398,339 Paradise Valley 1,171,604 PINAL Star Valley 211,108 Peoria 14,079,806 Apache Junction $3,275,373 Winkelman 32,260 $2,558,428 Phoenix 132,251,202 Casa Grande 4,438,843 GRAHAM Queen Creek 2,409,099 Coolidge 1,080,672 Pima $218,145 Scottsdale 19,866,541 Eloy 1,519,886 Safford 874,225 Surprise 10,739,730 Florence 2,333,703 City Distributions are based on relative population TOTAL Figures may not add to total due to rounding. COUNTY TOTAL AMOUNT 178,208 130,320 3,973,765 259,270 $17,190,039 $1,904,267 83,438 $1,987,705 $993,670 988,552 374,420 1,029,494 355,868 40,577 3,641,202 3,547,894 916,721 $11,888,396 $2,550,568 1,305,671 263,383 8,285,303 $12,404,925 $459,176,964 $459,176,964 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 57 TABLE 26 MUNICIPAL PRIVILEGE TAX COLLECTION PROGRAM COLLECTIONS BY CITY FISCAL YEAR 2014-15 CITY RATE * (PERCENT) COLLECTIONS CITY RATE * (PERCENT) COLLECTIONS CITY Apache Junction (1) $4,707 Flagstaff $62,835 Avondale 33,710 Florence 2.00 3,596,690 Oro Valley RATE * (PERCENT) COLLECTIONS CITY Nogales RATE * (PERCENT) COLLECTIONS $481 Snowflake 2.00 $1,041,751 2.00 16,128,759 Somerton 3.30 737,520 Page 3.00 9,014,013 South Tucson 2.50 2,254,961 Paradise Valley 2.50 14,089,670 Springerville 3.00 1,506,531 Parker 2.00 1,315,453 Star Valley 2.00 263,933 Patagonia 3.00 244,484 Superior 4.00 547,233 Payson 2.12 6,870,982 Surprise 2.20 41,700,577 2.00 704,314 Benson 2.50 2,818,286 Fountain Hills 2.60 8,968,970 Bisbee 2.50 2,082,795 Fredonia 4.00 298,050 Buckeye 3.00 19,677,204 Gila Bend 3.00 2,330,911 Bullhead City 2.00 4,753,274 Gilbert 1.50 71,411,488 Camp Verde 3.00 2,863,327 Glendale Carefree 3.00 3,299,979 Globe 2.00 3,848,926 Peoria 18,648 Taylor Casa Grande 2.00 21,598,113 Goodyear 2.50 44,763,918 Phoenix 274,492 Tempe Cave Creek 3.00 5,793,729 Guadalupe 4.00 1,651,477 Pima 2.00 332,288 Thatcher 2.50 3,067,718 Hayden 3.00 1,383,519 Pinetop-Lakeside 2.50 3,543,376 Tolleson 2.50 17,564,422 Holbrook 3.00 3,527,284 Prescott Tombstone 3.50 966,195 Chandler 69,052 35,355 Chino Valley 4.00 5,018,421 Clarkdale 3.00 845,927 Huachuca City 1.50 160,229 Prescott Valley 2.33 15,462,656 Tucson Clifton 3.00 767,172 Jerome 3.50 730,285 Quartzsite 2.50 1,168,548 Tusayan 2.00 3,323,096 Colorado City 2.00 257,283 Kearny 3.00 499,209 Queen Creek 2.25 21,598,915 Wellton 2.50 677,432 Coolidge 3.00 4,982,600 Kingman 2.50 16,103,275 Safford 2.50 5,986,306 Wickenburg 2.20 3,581,768 Cottonwood 3.00 12,759,682 Lake Havasu City 2.00 18,767,551 Sahuarita 2.00 6,641,918 Willcox 3.00 976,681 Dewey-Humboldt 2.00 447,298 Litchfield Park 2.80 4,072,840 St. Johns 3.00 844,828 Williams 3.50 5,534,872 Mammoth 2.00 100,056 San Luis 4.00 7,358,190 Winkelman 3.50 112,570 Douglas (2) 8,805 24,799 37,628 113,685 Duncan 2.00 132,526 Marana 2.00 27,378,301 Scottsdale 140,255 Winslow 3.00 5,060,498 Eagar 3.00 868,315 Maricopa 2.00 9,483,013 Sedona (3) (48,988) Youngtown 3.00 1,435,303 El Mirage 3.00 6,675,920 Mesa 61,911 Show Low 2.00 10,443,961 Yuma 1.70 33,565,336 Eloy 3.00 4,788,947 Miami 354,725 Sierra Vista 1.75 17,555,027 2.50 * 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 TOTAL $583,920,974 (1) Effective July 1, 2007, Apache Junction no longer participates in the municipal privilege tax collection program. Figures may not add to total due to rounding. (2) Effective October 1, 2010, Douglas no longer participates in the municipal privilege tax collection program. (3) Effective January 1, 2011, Sedona 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. Page 58 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT TABLE 27 MUNICIPAL PRIVILEGE TAX COLLECTION PROGRAM FISCAL YEAR 2010-11 THROUGH FISCAL YEAR 2014-15 FISCAL TOTAL NUMBER OF CITIES YEAR COLLECTIONS IN PROGRAM 2010-11 $450,148,563 73 2011-12 $466,896,627 73 2012-13 $506,978,968 73 2013-14 $546,725,301 73 2014-15 $583,920,974 76 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 59 ARIZONA DEPARTMENT OF REVENUE 2015 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 2015 (Refer to Table 28). INDIVIDUAL INCOME TAX MAJOR FEATURES For tax year 2012 filed in 2013, approximately 2.7 million individual filers reported Arizona gross income (defined as federal adjusted gross income) totaling more than $145.1 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 Didn’t 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, Sustainable State Parks and Road 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 2012 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 2015 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 2015 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. 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. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 63 CREDIT Property Tax AVAILABLE TO 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 2015 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 2015 ANNUAL REPORT Page 65 TABLE 28 INCOME TAX COLLECTIONS FISCAL YEAR 2010-11 THROUGH FISCAL YEAR 2014-15 SOURCE PERCENT OF NET COLLECTIONS FY2014-15 IN FY2014-15 FY2010-11 FY2011-12 FY2012-13 FY2013-14 Withheld from Wages Gross Revenue Refunds and Charge-offs NET $3,234,666,688 (7,044,562) $3,227,622,125 $3,343,314,942 (10,751,762) $3,332,563,180 $3,459,818,705 (9,321,721) $3,450,496,984 $3,580,656,587 (11,985,321) $3,568,671,265 $3,699,577,473 (8,309,159) $3,691,268,315 83.4% Individuals & Fiduciaries Gross Revenue Regular Refunds and Charge-offs NET $867,110,332 (1,224,167,109) ($357,056,777) $1,027,389,330 (1,260,775,055) ($233,385,726) $1,170,646,638 (1,222,241,845) ($51,595,207) $1,131,388,277 (1,236,793,482) ($105,405,205) $1,297,323,652 (1,226,827,539) $70,496,113 1.6% $659,266,690 (98,958,514) $560,308,176 $758,413,453 (110,525,973) $647,887,480 $755,002,081 (92,975,683) $662,026,398 $705,730,762 (130,546,886) $575,183,876 $788,991,384 (125,987,439) $663,003,945 15.0% $3,430,873,524 $3,747,064,934 $4,060,928,175 $4,038,449,937 $4,424,768,372 100.0% $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 --------$480,986,414 $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 $462,980,411 $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 $546,440,691 $2,949,887,110 $3,284,084,523 $3,514,487,484 $3,445,061,022 $3,783,445,387 $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 $7,000,000 $6,987,979 $4,584 Corporations Gross Revenue Refunds and Charge-offs NET Subtotal Net Collections Less distributions for: Urban Revenue Sharing Child Abuse Prevention Veterans' Donation Fund Solutions Teams Assigned to Schools (1) Domestic Violence Shelter Special Olympics Wildlife Contributions Neighbors Helping Neighbors Clean Elections National Guard Relief Fund Sustainable State Parks and Road 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 (4) $561,001,195 169,215 124,316 34,373 133,220 73,088 169,110 34,364 76,503 39,299 ----15,244 11,274 847 5,696 415 756 31,500,000 $593,388,915 (3) $608,935,729 172,806 121,994 27,898 131,840 76,482 165,427 30,122 36,555 42,494 40,936 25,466 9,508 519 4,792 240 177 31,500,000 $641,322,984 (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) Correction to reported FY14 distribution amounts. (4) 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 2015 ANNUAL REPORT Page 66 TABLE 29 EXEMPTIONS, DEDUCTIONS AND CREDITS TAX YEAR 2010 THROUGH TAX YEAR 2013 TAX YEAR 2010 2011 2012 2013 PERSONAL EXEMPTION (2) $2,100 $2,100 $2,100 $2,100 BLIND EXEMPTION $1,500 $1,500 $1,500 $1,500 AGE 65 AND OVER EXEMPTION $2,100 $2,100 $2,100 $2,100 DEPENDENT EXEMPTION $2,300 $2,300 $2,300 $2,300 STANDARD DEDUCTION LIMIT (1) $4,677/$9,354 $4,703/$9,406 $4,833/$9,665 $4,945/$9,883 MAXIMUM PROPERTY TAX CREDIT (1) Amounts shown are for single 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. $502 $502 $502 $502 MAXIMUM FAMILY TAX CREDIT $240 $240 $240 $240 INDIVIDUAL INCOME TAX CREDITS TAX YEAR 2011 THROUGH TAX YEAR 2013 CREDIT Agricultural Pollution Control Agricultural Water Conservation Airline Bankruptcy Payments Clean Elections Commercial & Industrial Solar Energy Contributions to Qualifying Charitable Organizations 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 Facilities - Refundable Qualified Health Insurance Plans Recycling Equipment Renewable Energy Industry - Refundable Renewable Energy Production Research & Development Research & Development - Refundable (4) Research & Development - 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 2011 CLAIMANTS CREDITS (1) 97 (1) $1,014,711 25,275 119 66,396 0 3,007 (1) (1) 112 (1) 533,345 0 39,174 672,009 223 (1) 4 0 (1) 71,801 $596,451 $504,027 $18,012,263 $0 $996,695 (1) (1) $469,034 (1) $5,905,317 $0 $82,151,564 $35,659,215 $849,766 (1) $52,115 $0 (1) $49,104,660 18,503 250,216 $7,183,778 $48,442,987 ----- ------------- ----- ------------- 0 0 0 535 16 $0 $0 $0 $7,080,526 $423,709 20 9,210 24 0 258 1,690,340 $89,461 $4,919,842 $1,876 $0 $105,671 $263,601,079 ----- ----- TAX YEAR 2012 CLAIMANTS CREDITS 5 93 $27,350 $1,492,176 28,320 157 78,736 $537,541 $604,741 $21,835,458 2,967 (1) (1) 113 (1) 520,448 0 32,281 638,208 281 0 3 0 9 73,156 16,518 18,767 253,134 $989,868 (1) (1) $290,660 (1) $5,399,635 $0 $93,394,010 $33,367,298 $965,521 $0 $16,505 $0 $221,039 $51,303,169 $12,947,997 $7,222,443 $51,287,359 0 0 0 0 550 14 0 11 7,744 13 0 37 1,671,556 $0 $0 $0 $0 $7,694,498 $132,142 $0 $38,578 $3,875,034 $1,125 $0 $6,672 $293,653,365 ----- ----- ----- TAX YEAR 2013 CLAIMANTS CREDITS ----- ----- ----- 0 43 0 $0 $838,183 $0 (2) 100,398 (2) $24,503,609 2,936 0 0 39 (1) 538,319 0 43,362 648,116 (2) 0 0 0 0 75,870 28,932 19,012 253,842 0 0 0 0 0 607 10 0 14 7,672 12 0 24 1,719,198 $989,606 $0 $0 $84,118 (1) $5,017,004 $0 $96,608,047 $33,418,364 (2) $0 $0 $0 $0 $54,490,234 $23,201,403 $7,327,176 $50,972,856 $0 $0 $0 $0 $0 $9,109,799 $152,013 $0 $102,449 $3,823,334 $975 $0 $3,974 $310,643,144 ----- ----- ----- ----- (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. (4) These taxpayers are already included in the research and development credit count. Figures for all credits shown here are subject to change, due to the verification process. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 67 TABLE 30 RESIDENT INDIVIDUAL INCOME TAX LIABILITY BY FEDERAL ADJUSTED GROSS INCOME TAX YEAR 2012 (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 42,523 44,097 119,710 157,229 172,274 255,272 187,031 158,115 263,144 192,704 330,083 207,104 251,454 59,067 9,000 4,036 474 1.73% 1.80% 4.88% 6.41% 7.02% 10.41% 7.62% 6.44% 10.73% 7.85% 13.45% 8.44% 10.25% 2.41% 0.37% 0.16% 0.02% $339,740 36,020 42,897 2,642,977 10,286,985 29,155,870 38,559,690 50,711,816 129,225,909 136,919,402 350,374,549 343,032,558 764,271,929 504,037,714 217,752,474 290,280,574 264,216,751 0.01% 0.00% 0.00% 0.08% 0.33% 0.93% 1.23% 1.62% 4.13% 4.37% 11.19% 10.95% 24.40% 16.09% 6.95% 9.27% 8.44% 2,453,317 100.00% $3,131,887,855 100.00% TOTAL (1) This summary combines all liability reported on the Arizona Form 140 and 140A Individual Income tax returns for tax year 2012, filed from January 2013 forward. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 68 TABLE 31 NONRESIDENT/PART YEAR RESIDENT INDIVIDUAL INCOME TAX LIABILITY BY FEDERAL ADJUSTED GROSS INCOME TAX YEAR 2012 (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 49,561 29,727 39,299 26,891 19,733 20,434 12,447 9,335 13,610 9,032 13,004 6,528 8,120 2,961 773 469 88 18.92% 11.35% 15.00% 10.26% 7.53% 7.80% 4.75% 3.56% 5.19% 3.45% 4.96% 2.49% 3.10% 1.13% 0.30% 0.18% 0.03% $6,264,363 322,275 1,246,190 1,878,848 2,617,013 4,481,309 4,155,731 4,094,511 8,261,164 7,718,222 16,506,955 13,063,421 29,817,048 28,411,055 18,992,800 35,467,387 39,787,526 2.81% 0.14% 0.56% 0.84% 1.17% 2.01% 1.86% 1.84% 3.70% 3.46% 7.40% 5.86% 13.37% 12.74% 8.51% 15.90% 17.84% 262,012 100.00% $223,085,818 100.00% TOTAL (1) This summary combines all liability reported on the Arizona Form 140NR and 140PY Individual Income tax returns for tax year 2012, filed from January 2013 forward. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 69 TABLE 32 CORPORATE INCOME TAX CORPORATE TAXPAYER BY SIZE OF TAX LIABILITY TAX YEAR 2012 (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 $30,000,000 TOTAL # OF FILERS 33,986 754 4,139 3,338 1,037 1,477 373 547 109 124 45,884 % OF TOTAL 74.1% 1.6% 9.0% 7.3% 2.3% 3.2% 0.8% 1.2% 0.2% 0.3% 100.0% LIABILITY $1,699,300 55,549 1,726,540 8,016,641 7,271,523 33,753,225 27,101,699 121,175,003 75,775,892 421,706,235 $698,281,607 % OF TOTAL 0.2% 0.0% 0.2% 1.1% 1.0% 4.8% 3.9% 17.4% 10.9% 60.4% 100.0% CORPORATE INCOME TAX CREDITS TAX YEAR 2012 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 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 Qualified Health Insurance Plans Renewable Energy Industry Renewable Energy Production Research & Development Research & Development - Refundable (2) Research & Development for University Research 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 0 259 17 90 CREDIT USED $0 $1,370 $183,016 $24,086,470 4 5 9 57 * 0 3 6 10 20 * 0 * 313 38 * * 0 0 * 0 812 $279,470 $6,000 $87,498 $3,633,754 * $0 $100 $2,538,984 $3,843,100 $1,872,337 * $0 * $71,645,940 $4,184,353 * * $0 $0 * $0 $120,728,787 CARRYFORWARD AVAILABLE $0 $0 $82,634 $4,254,116 $0 $0 $74,480 $4,090,390 * $0 $143,120 $652,132 $230,900 $5,018,998 * $0 * $1,033,877,705 $0 * * $0 $0 * $0 $1,064,745,567 (1) This summary combines all liability on the Arizona Form 120 Corporate Income Tax returns for tax year 2012 filed from January 2013 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 2015 ANNUAL REPORT Page 70 TABLE 33 AVERAGE FEDERAL ADJUSTED GROSS INCOME AND AVERAGE TAX LIABILITY PER RETURN BY COUNTY FOR TAX YEAR 2012 APACHE COCONINO Average FAGI $35,406 Average Liability $367 Average FAGI $52,296 Average Liability $1,097 MOHAVE Average FAGI $38,854 Average Liability $681 NAVAJO Average FAGI $40,026 Average Liability $603 GREENLEE YAVAPAI Average FAGI $56,037 Average Liability $1,228 Average FAGI $45,710 Average Liability $878 LA PAZ GILA Average FAGI $34,508 Average Liability $553 Average FAGI $44,519 Average Liability $786 MARICOPA Average FAGI $61,019 Average Liability $1,464 YUMA Average FAGI $38,671 Average Liability $685 STATEWIDE AVERAGES Average FAGI $56,491 Average Liability $1,277 PINAL Average FAGI $44,773 Average Liability $830 PIMA COCHISE Average FAGI $53,994 Average Liability $1,144 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 $47,224 Average Liability $912 Average FAGI $45,904 Average Liability $870 SANTA CRUZ Average FAGI $39,838 Average Liability $749 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 71 TABLE 34 URBAN REVENUE SHARING FISCAL YEAR 2010-11 THROUGH FISCAL YEAR 2014-15 FISCAL YEAR AMOUNT 2010-11 $474,006,520 2011-12 $424,423,442 2012-13 $513,584,045 2013-14 $561,001,194 2014-15 $608,935,729 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 72 TABLE 35 DISTRIBUTION OF INCOME TAX AS URBAN REVENUE SHARING TO MUNICIPALITIES IN FISCAL YEAR 2014-15 CITIES BY COUNTY AMOUNT % OF TOTAL $3,191,162 26,315,799 14,226,160 19,577,085 792,313 770,281 745,222 0.52% 4.32% 2.34% 3.21% 0.13% 0.13% 0.12% $4,786,562 583,612 3,397,805 6,358,718 0.79% 0.10% 0.56% 1.04% $611,697 518,363 1,290,459 676,704 497,783 1,168,797 0.10% 0.09% 0.21% 0.11% 0.08% 0.19% $4,232,245 4,964,635 3,057,758 684,210 62,963,258 0.70% 0.82% 0.50% 0.11% 10.34% $4,338,654 5,879,820 1,431,489 2,013,285 3,091,291 236,060 181,584 5,263,765 343,436 0.71% 0.97% 0.24% 0.33% 0.51% 0.04% 0.03% 0.86% 0.06% $2,522,448 181,584 0.41% 0.03% $1,316,244 1,309,465 495,967 1,363,698 471,393 181,584 4,823,242 4,699,643 1,214,315 0.22% 0.22% 0.08% 0.22% 0.08% 0.03% 0.79% 0.77% 0.20% $3,378,557 1,729,530 348,884 10,974,954 0.55% 0.28% 0.06% 1.80% City distributions are based on relative population. TOTAL $608,935,729 *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. 100.00% 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 $591,359 421,276 237,391 0.10% 0.07% 0.04% $617,992 674,888 2,119,573 224,317 5,312,914 181,584 454,808 0.10% 0.11% 0.35% 0.04% 0.87% 0.03% 0.07% $7,973,971 181,584 877,294 181,584 365,953 1.31% 0.03% 0.14% 0.03% 0.06% $911,795 181,584 222,380 1,852,281 279,640 181,584 0.15% 0.03% 0.04% 0.30% 0.05% 0.03% $288,961 1,158,023 588,938 0.05% 0.19% 0.10% $400,817 181,584 0.07% 0.03% $373,216 445,124 0.06% 0.07% $9,229,081 6,158,854 407,112 607,097 28,608,724 3,849,224 2,722,433 232,670 25,222,298 27,445,979 7,901,942 668,593 662,904 53,148,628 1,551,940 18,650,521 175,183,794 1.52% 1.01% 0.07% 0.10% 4.70% 0.63% 0.45% 0.04% 4.14% 4.51% 1.30% 0.11% 0.11% 8.73% 0.25% 3.06% 28.77% 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 2015 ANNUAL REPORT Page 73 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 74 PROPERTY TAX Since 1980, Arizona has operated under two distinct valuation bases for levying ad valorem property tax, (ad valorem, meaning "according to value"). Every property has two values, referred to as the "limited" (primary) value and the "full cash" (secondary) value. On November 6, 2012 voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning in Tax Year 2015, both primary and secondary taxes are levied against the limited (primary) value. Limited (Primary) Value The limited property value can equal but cannot exceed the full cash value of a property. Limited property valuations are derived on an individual parcel basis by using one of the following methods: (a) For parcels in existence in the previous year that did not undergo modification through construction, destruction, split, assemblage or change in use, limited values are established at the previous year limited property value and cannot increase by more than 5%. (b) For parcels that were subject to modification through construction, destruction, or change in use, and for new parcels, including those that were the result of a split or assemblage, limited values are established by applying a ratio of limited property values to full cash value of existing properties of the same use or legal classification. The limited and full cash values of personal property (except mobile homes) and most centrally valued property are the same. All taxes are levied against the primary net assessed value. Primary taxes are tax dollars generated and used for the maintenance and operation of counties, cities/towns, school districts and community college districts. Secondary taxes are tax dollars generated and used for debt retirement, voter-approved budget overrides, and the maintenance and operation of special service districts such as sanitary, fire, and road improvement districts. Full Cash (Secondary) Value Full cash value means the value determined as prescribed by statute. If no statutory method is prescribed, full cash value is synonymous with market value. 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 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 75 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." 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. CENTRALLY VALUED PROPERTIES EQUALIZATION The Centrally Valued Property Unit is responsible for the annual valuation of 11 industries for ad valorem property tax purposes. 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. 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. 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 assessment and appeals calendar for centrally valued properties coincides with the calendar for locally assessed properties. 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 18.5% Rental Residential Historic Combination 1% and 10% Improvements on government property 1% 7 8 9 18.5% 18.5% 18.5% First $146,973 exempt; 18.5% on the remainder 16% First $146,973 exempt; 16% on the remainder 10% 10% 10% 15% 5% ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 76 INDUSTRIES VALUED BY THE DEPARTMENT Industry Number of Taxpayers 2013 2014 2015 Airlines (Flight Property) ................................................................... 29 ................ 30 ...............25 Electric & Gas* Generation ................................................................................... 71 ................ 75 ...............98 Transmission and Distribution ..................................................... 36 ................ 32 ...............24 Electric Co-ops.............................................................................. -- .................. 9 .................9 Mines (non-producing) ........................................................................ 0 .................. 1 .................1 Mines (producing) .............................................................................. 35 ................ 35 ...............35 Pipelines ............................................................................................... 8 .................. 8 .................8 Private Rail Cars .............................................................................. 278 .............. 279 .............271 Producing Oil & Gas Interests ............................................................. 2 .................. 2 .................1 Railroads ............................................................................................ 12 ................ 12 ...............12 Telecommunications ......................................................................... 62 ................ 61 ...............63 Water and Wastewater Utilities ....................................................... 311 .............. 317 .............309 Total ................................................................................................ 844 .............. 861 .............856 * Includes Salt River Project ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 77 TABLE 36 STATE OF ARIZONA 2015 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 $489,723,731 $920,583,366 $1,537,418,218 $482,515,161 $203,987,445 $465,533,779 $201,755,860 $34,623,670,323 $1,685,788,538 $832,770,173 $7,620,360,873 $2,057,547,528 $317,370,907 $2,279,183,448 $1,120,339,479 $54,838,548,829 STATE $4,269,135 $4,853,676 $9,444,733 $2,438,632 $1,048,574 $4,830,511 $1,217,546 $205,826,452 $8,874,685 $5,116,802 $40,840,598 $10,401,781 $1,607,574 $15,130,241 $5,662,196 $321,563,137 COUNTY $2,547,543 $24,189,249 $8,817,093 $20,217,385 $4,706,194 $2,619,093 $4,757,403 $471,455,751 $33,203,291 $7,009,427 $334,424,674 $82,379,301 $12,087,388 $44,026,987 $27,068,877 $1,079,509,657 CITIES and TOWNS $0 $2,411,857 $6,233,822 $1,563,724 $247,857 $407,883 $0 $232,070,202 $4,282,498 $361,469 $16,688,073 $17,467,111 $0 $2,143,834 $11,349,068 $295,227,397 AVERAGE STATE PRIMARY TAX RATE PER $100 COMMUNITY COLLEGES $0 $20,028,212 $7,478,002 $4,111,994 $5,887,078 $0 $4,368,014 $437,227,709 $21,792,188 $14,509,355 $104,315,120 $47,323,593 $1,483,709 $42,668,593 $24,255,350 $735,448,917 SCHOOLS $8,206,040 $50,501,577 $62,417,926 $21,547,013 $8,795,036 $7,563,185 $5,814,134 $1,484,573,491 $74,852,444 $28,079,681 $376,294,083 $91,765,063 $14,151,131 $78,111,435 $50,258,656 $2,362,930,895 ALL OTHER $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 TOTAL $15,022,717 $101,984,571 $94,391,577 $49,878,748 $20,684,740 $15,420,671 $16,157,098 $2,831,153,604 $143,005,106 $55,076,733 $872,562,548 $249,336,850 $29,329,802 $182,081,091 $118,594,147 $4,794,680,003 PRIMARY RATE $3.07 11.08 6.14 10.34 10.14 3.31 8.01 8.18 8.48 6.61 11.45 12.12 9.24 7.99 10.59 $8.74 $8.74 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 $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 COMMUNITY COLLEGES $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 SCHOOLS $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 NOTE: Some increase/decrease due to reporting tax levies in different authorities than in previous years. Page 78 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT TABLE 37 STATE OF ARIZONA 2015 SECONDARY PROPERTY TAX LEVIES TAX AUTHORITY NET ASSESSED VALUATION STATE COUNTY CITIES and TOWNS COMMUNITY COLLEGES SCHOOLS ALL OTHER TOTAL SECONDARY RATE APACHE COCHISE COCONINO GILA GRAHAM GREENLEE LA PAZ MARICOPA MOHAVE NAVAJO PIMA PINAL SANTA CRUZ YAVAPAI YUMA $490,430,671 $920,583,366 $1,540,028,458 $482,515,161 $203,987,445 $465,533,779 $201,755,860 $34,623,670,323 $1,685,788,538 $832,770,173 $7,620,360,873 $2,057,547,528 $317,370,907 $2,279,183,448 $1,120,339,479 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $4,750,516 $4,299,422 $11,771,386 $1,652,614 $301,046 $1,315,625 $201,756 $72,779,242 $13,084,502 $5,491,430 $117,854,379 $6,350,353 $2,494,180 $10,170,117 $12,580,610 $0 $280,130 $5,717,291 $0 $0 $0 $0 $231,710,214 $0 $0 $33,217,111 $5,855,213 $0 $76,927 $0 $2,036,759 $0 $1,911,175 $0 $0 $0 $785,436 $80,049,926 $0 $0 $0 $7,197,301 $0 $4,968,620 $4,361,482 $2,436,353 $5,021,094 $16,086,317 $4,428,506 $1,823,890 $1,578,515 $689,908 $858,489,419 $9,822,067 $11,488,751 $103,613,310 $32,042,747 $3,329,998 $17,140,288 $11,363,601 $5,275,994 $9,123,204 $16,434,508 $7,256,157 $571,925 $37,700 $4,422,295 $245,240,094 $20,332,347 $13,799,302 $85,032,399 $29,466,305 $6,079,598 $41,073,477 $884,877 $14,499,621 $18,723,850 $51,920,678 $13,337,278 $2,696,861 $2,931,840 $6,099,394 $1,488,268,895 $43,238,916 $30,779,483 $339,717,198 $80,911,920 $11,903,776 $73,429,429 $29,190,570 $2.96 2.03 3.37 2.76 1.32 0.63 3.02 4.30 2.56 3.70 4.46 3.93 3.75 3.22 2.61 TOTAL STATE $54,841,866,009 $0 $265,097,178 $276,856,885 $101,310,698 $1,079,354,765 $485,030,182 $2,207,649,709 $4.03 SCHOOLS ALL OTHER AVERAGE STATE SECONDARY TAX RATE PER $100 $4.03 2014 SECONDARY PROPERTY TAX LEVIES TAX AUTHORITY NET ASSESSED VALUATION STATE COUNTY CITIES and TOWNS COMMUNITY COLLEGES TOTAL SECONDARY RATE APACHE COCHISE COCONINO GILA GRAHAM GREENLEE LA PAZ MARICOPA MOHAVE NAVAJO PIMA PINAL SANTA CRUZ YAVAPAI YUMA $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 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $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 $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 $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 $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 $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 $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 $2.77 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 TOTAL STATE $55,352,051,064 $0 $254,591,524 $275,257,795 $104,207,057 $1,100,067,054 $438,124,969 $2,172,248,400 $3.92 AVERAGE STATE SECONDARY TAX RATE PER $100 $3.92 NOTE: Some increase/decrease due to reporting tax levies in different authorities than in previous years. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 79 TABLE 38 AVERAGE PROPERTY TAX RATES PER $100 OF ASSESSED VALUATION 2012 THROUGH 2015 2012 PRIMARY 2013 SECONDARY PRIMARY SECONDARY School Districts $4.00 $2.02 $4.29 $2.10 Counties 0.49 1.81 0.46 State 1.72 0.50 0.00 0.55 0.00 Cities and Towns 0.49 0.47 0.55 0.46 Community Colleges 1.17 0.17 1.31 0.19 Special Districts 0.00 0.71 0.00 0.80 $7.89 $3.87 $8.52 $4.02 TOTAL $11.75 $12.54 2014 PRIMARY 2015 SECONDARY PRIMARY SECONDARY School Districts $4.39 $1.99 $4.31 $1.97 Counties 1.91 0.46 1.97 0.48 State 0.58 0.00 0.59 0.00 Cities and Towns 0.54 0.50 0.54 0.50 Community Colleges 1.32 0.19 1.34 0.18 Special Districts 0.00 0.79 0.00 0.79 $8.75 $3.92 $8.74 $4.03 TOTAL $12.67 $12.77 School district rate includes Unorganized School Districts. Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 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 2015 ANNUAL REPORT Page 81 ARIZONA DEPARTMENT OF REVENUE 2015 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 2010-11 THROUGH FISCAL YEAR 2014-15 Fiscal Year Amount 2010-11 $504,905 2011-12 $508,145 2012-13 $519,998 2013-14 $521,583 2014-15 $507,212 BINGO COLLECTIONS FY2010-11 FY2011-12 FY2012-13 FY2013-14 FY2014-15 Licenses Proceeds Penalty, Interest and Miscellaneous $27,576 476,482 $18,164 486,056 $18,175 497,493 $17,580 499,608 $17,136 482,440 847 3,926 4,331 4,395 7,636 TOTAL $504,905 $508,145 $519,998 $521,583 $507,212 ARIZONA DEPARTMENT OF REVENUE 2015 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 2010-11 THROUGH FISCAL YEAR 2014-15 Collections FY2010-11 FY2011-12 FY2012-13 FY2013-14 FY2014-15 $437,372 $200,825 $0 $0 $0 $0 $0 $0 $0 $0 $437,372 $200,825 $0 $0 $0 Refunds Net Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 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 2015, over $385 million was received in luxury tax collections. Of the monies collected per the Tobacco Products Referendum (Prop 303), $40.7 million was distributed to the Prop 204 Protection Account, $26.2 million to the Medically Needy Account, $19.4 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, $48.0 million was distributed to the Medically Needy Fund, $15.8 million to the Health Education Fund and $3.4 million to the Health Research Fund. The Corrections Fund, established by the Legislature in 1984 to pay for prison construction, received $29.2 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 $122.2 million due to the passage of Proposition 203 in 2006. The remaining $56.7 million was deposited into the state general fund. (Refer to Table 41) Luxury Tax Rates Tobacco Tax Rate $ 0.10 $ 2.00 $ 2.50 Indian Reservation Tobacco Tax Rate $ 0.05 $ 1.00 $ 1.25 Cigars small cigars weighing not more than 3 lbs/1,000 package of 20 or less retailing for $0.05 or less (each 3 cigars) retailing for more than $0.05 (each cigar) $ 0.441 $ 0.218 $ 0.218 $ 0.223 $ 0.11 $ 0.11 Smoking Tobacco snuff, fine cut, chewing, etc. (per ounce) Cavendish, plug, or twist (per ounce) $ 0.223 $ 0.055 $ 0.113 $ 0.028 per cigarette package of 20 package of 25 Luxury Tax Rate 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 2015 ANNUAL REPORT Page 85 TABLE 41 LUXURY TAX COLLECTIONS FISCAL YEAR 2010-11 THROUGH FISCAL YEAR 2014-15 SOURCE: Spirituous Liquor Vinous Liquor Malt Liquor Liquor Collections Tobacco - All Types Gross Revenue Refunds Licenses Administrative Expenses Net Tobacco Collections TOTAL COLLECTIONS FY2010-11 FY2011-12 FY2012-13 FY2013-14 FY2014-15 PERCENT OF COLLECTIONS IN FY2014-15 $28,202,704 13,596,155 21,566,369 $63,365,229 $31,847,105 15,430,577 21,101,489 $68,379,171 $32,184,954 15,155,547 21,343,360 $68,683,862 $33,588,102 15,583,934 21,974,061 $71,146,096 $33,963,657 15,624,518 21,682,060 $71,270,235 8.8% 4.1% 5.6% 18.5% $340,754,224 $337,777,289 $331,347,184 $327,788,207 $331,926,341 (12,281,284) (17,978,338) (15,583,872) (15,299,166) (17,161,399) 7,710 7,925 7,825 8,198 6,775 (673,071) (677,280) (676,090) (574,345) (679,500) $327,807,579 $319,129,597 $315,095,046 $311,922,894 $314,092,217 81.5% $391,172,807 $387,508,768 $383,778,908 $383,068,990 $385,362,452 $53,599,408 64,799,725 95,586,289 8,303,445 3,307,459 27,130,247 1,322,335 3,982,185 3,058,479 $56,357,085 61,879,113 90,953,118 8,805,071 3,512,659 28,518,897 1,259,100 3,789,120 3,043,448 $56,184,596 61,958,027 91,044,441 8,822,752 3,520,473 28,468,675 1,259,414 3,792,927 2,956,134 $58,711,664 58,050,632 91,923,081 9,111,608 3,636,704 29,253,753 1,343,199 3,748,474 2,918,213 $56,746,947 63,194,425 93,055,529 9,092,642 3,630,371 29,249,936 1,426,934 3,876,853 2,848,986 130,083,235 $391,172,807 129,391,158 $387,508,768 125,771,470 $383,778,908 124,371,662 $383,068,990 122,239,828 $385,362,452 DISTRIBUTIONS: State General Fund Tobacco Tax & Health Care Fund Tobacco Products Tax Fund Drug Treatment & Education Fund DOC Revolving Fund Department of Corrections Fund DOC Transfer from Prop 200 Funds Prop 200 Transfer from Prop 303 Funds Smoke Free AZ Early Childhood Development and Health Fund TOTAL DISTRIBUTIONS Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 86 100.0% 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 2015 ANNUAL REPORT Page 87 TABLE 42 UNCLAIMED PROPERTY COLLECTIONS AND DISTRIBUTIONS FISCAL YEAR 2010-11 THROUGH FISCAL YEAR 2014-15 SOURCE: FY2010-11 FY2011-12 FY2012-13 FY2013-14 FY2014-15 $121,263,602 $115,160,041 $131,397,401 $113,119,156 $126,763,806 Refunds (34,677,629) (40,049,513) (40,013,520) (34,059,189) (42,673,868) NET $86,585,973 $75,110,528 $91,383,881 $79,059,967 $84,089,938 370,786 186,322 327,961 649,079 736,221 Refunds (230,340) (158,988) (302,974) (283,812) (697,553) NET $140,446 $27,334 $24,987 $365,267 $38,668 $86,726,419 $75,137,862 $91,408,868 $79,425,235 $84,128,606 General Fund 49,120,855 45,819,445 Housing Fund 10,500,000 UNCLAIMED PROPERTY ESCHEATED ESTATES TOTAL NET REVENUE DISTRIBUTIONS: 60,899,609 49,165,753 54,034,910 2,500,000 (3) 2,500,000 2,500,000 2,500,000 ----- 2,000,000 2,000,000 2,000,000 2,000,000 Victim Restitution Fund 1,143,835 100,540 612,703 684,584 683,239 Operating transfers 1,262,200 ----- 514,700 ----- ----- 24,500,000 24,500,000 24,500,000 24,500,000 24,500,000 SMI Housing Fund (3) Admin Fund (2) Net to Permanent State School Fund: Escheated Estates Unclaimed Shares/dividends 140,446 27,334 27,334 24,987 58,381 184,618 332,985 190,053 701 5,925 23,884 19,578 16,558 $86,726,419 $75,137,862 $91,411,215 $79,084,954 $84,128,606 Storage Facility TOTAL DISTRIBUTION 38,668 355,232 (1) (1) FY15 Escheated Estates will be transferred in FY16. (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 2015 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 2015, the department collected $8,906,743 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 2010-11 THROUGH FISCAL YEAR 2014-15 Apache Cochise Coconino Gila Graham Greenlee La Paz Maricopa Mohave Navajo Pima Pinal Santa Cruz Yavapai Yuma Arizona Department of Environmental Quality Total FY2010-11 FY2011-12 FY2012-13 FY2013-14 FY2014-15 $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 $118,662 231,444 226,483 121,854 54,820 17,421 56,558 4,800,866 439,690 189,926 1,169,151 449,131 87,754 434,938 294,940 $11,372 227,946 224,115 120,219 53,919 17,578 56,305 4,731,031 188,345 188,345 1,160,602 447,688 86,986 433,130 292,174 285,438 298,160 305,631 316,056 312,114 $8,155,363 $8,518,868 $8,732,325 $9,009,694 $8,906,743 Figures may not add to total due to rounding. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 89 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 90 LEGISLATIVE SUMMARY ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 91 ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 92 LEGISLATIVE SUMMARY The following is intended to give a brief summary of the 2015 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 3, 2015. 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 2001, (Chapter 91) Income tax brackets; inflation index Beginning with tax year 2016, the income dollar amounts for each individual income tax rate bracket are required to be annually adjusted by the average annual change in the metropolitan Phoenix consumer price index. House Bill 2066 (Chapter 47) Public school tax credit; testing Retroactive to tax year 2015, the Individual Income Tax Credit for Public School Fees and Contributions is expanded to allow cash contributions to a public school to be used for the support of standardized testing for college credit or readiness offered by a widely recognized and accepted educational testing organization, for the career and technical education industry certification assessment or for preparation courses and materials for standardized testing. House Bill 2153 (Chapter 301) Tax credits; STOs; preapproval; entities Owners of businesses organized as S-Corporations may claim corporate income tax credits for contributions to School Tuition Organizations based on the pro rata amount of contributions to STOs if the aggregate contribution in the tax year is at least $5,000 and the contributions meet the statutory requirements. The claims made by co-owners of an S-Corporation cannot exceed the amount that would have been allowed a sole owner of the corporation. An S-Corporation or a shareholder may not claim a tax credit for contributions made to an STO if the contribution is made for the benefit of a shareholder’s dependent, an S-Corporation or shareholder designates a student beneficiary as a condition of making the contribution, or an SCorporation or shareholder agrees with other taxpayers to designate reciprocal contributions for the benefit of each other’s dependents. Certified STOs are prohibited from awarding grants or scholarships to students who are simultaneously enrolled in a district or charter school and a qualifying school. House Bill 2274 (Chapter 208) Emergency and military affairs omnibus Repeals the National Guard Relief Fund and the check off box on the income tax return form for contributions of tax refunds to the Fund. All unexpended and unencumbered monies remaining in the Fund are transferred to the Department of Veterans’ Services for distribution to a nonprofit organization that provides financial assistance to National Guard members and their families. House Bill 2483 (Chapter 217) School tax credit; classroom expenses Specifies that cash contributions for the Individual Income Tax Credit for Public School Fees and Contributions that is made on or before April 15th may be applied to either the current or preceding tax year and is considered to have been made on the last day of that tax year. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 93 School tuition organizations (STOs) must include on their websites, if one exists, the percentage and total dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year to students whose family income meets the eligibility requirements for free or reduced-price lunches, and to students whose family income exceeds that threshold but does not exceed 185 percent of the eligibility requirements for free or reduced-price lunches. This information is required to be included in the STO's annual report to the Department of Revenue. House Bill 2670 (Chapter 6) International operations centers See Multiple Tax Types. House Bill 1103 (Chapter 250) Charitable tax credit; foster children The definition of a qualifying foster care charitable organization is expanded to include organizations that provide services to a person who is under 21 years of age and who is participating in a transitional independent living program after being in an out-of-home placement. network services are exempted from the transporting classification of the transaction privilege tax. House Bill 2147 (Chapter 72) Multiple tax; pole attachment The leasing or renting of space to make attachments to utility poles by or to a person engaged in business under the utilities or telecommunications classifications or to a person that is a cable operator from the utilities, is exempted from the telecommunications, commercial lease and personal property rental classifications of transaction privilege taxes and municipal excise tax. House Bill 2670 (Chapter 6) International operations centers See Multiple Tax Types. Senate Bill 1216 (Chapter 6) International operations centers See Multiple Tax Types. Senate Bill 1446 (Chapter 4) Senate Bill 1188 (Chapter 227) Internal Revenue code conformity Incorporates the federal changes made in 2014 into Arizona’s definition of “internal revenue code.” Senate Bill 1216 (Chapter 230) Tax corrections See Multiple Tax Types. Transaction Privilege Tax/ Use Tax House Bill 2135, (Chapter 235) Transportation network companies Transportation network companies that have been issued a permit by the Arizona Department of Transportation and transportation network company drivers on transactions involving transportation TPT reform; contractors A prime contractor, or subcontractor working under the control of a prime contractor, may purchase tangible personal property to be incorporated into a maintenance, repair, replacement or alteration (MRRA) project exempt from retail TPT or use tax. The prime contractor, or subcontractor, is liable for an amount equal to any tax a seller would be required to pay. Additionally, any person who uses a canceled TPT license is liable for tax if property is purchased exempt from retail TPT or use tax and subsequently used or consumed. In the event that if a final determination concludes the project was prime contracting, a person may be entitled to an offset for tax paid on tangible personal property believed to be for a MRRA project. The gross proceeds of sales or income derived from a de minimis amount of modification activity does not subject a contract or any part of a contract to TPT under the prime contracting classification. Tangible personal property incorporated or ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 94 fabricated into a MRRA project is subject to retail TPT. Each contract is independent of any other contract, except that any change order that directly relates to the scope of work of the original contract must be treated the same as the original contract regardless of the amount of modification. Change orders that do not directly relate to the scope of work of the original contract must be treated as a new contract, with the tax treatment of any subsequent change order to follow tax treatment of the contract to which the scope of work of the subsequent change order directly relates. Contracts with political subdivisions, with the exception of certain special taxing districts, that primarily involve surface or subsurface and vertical improvements and subject to specific highway and public building statutes are subject to TPT under the prime contracting classification without regard to whether the contract includes MRRA activities. For purposes of the exclusion from prime contracting, alteration is defined as an activity or action that causes a direct physical change to existing property. For existing residential property, projects are not taxable under prime contracting if the contract amount is less than 25 percent of the higher value of the most recently available full cash value as of the date of any bid or the date of the contract. For existing commercial property, contracts are not taxable under prime contracting if the contract amount is less than $750,000, the scope of work directly relates to less than 40% of the existing square footage of the existing property or the scope of the work involves expanding the square footage of less than 10 percent of the existing property. A contract qualifies as an alteration if a project for which the owner and the person performing the work reasonably believed, at the inception of the contract, would be treated as an alteration and if on completion the project exceeded the applicable threshold by no more than 25 percent. Project elements may not be artificially separated from a contract to cause a project to qualify as an alteration. The Department of Revenue (DOR) has the burden of proof that project elements have been artificially separated. A person who canceled a TPT license on or before April 30, 2015 may be subject to an amount equal to the amount of retail TPT on the value of any materials purchased tax exempt that are on hand at the time of cancellation. The person may make a reasonable estimate on the value of the materials. If the reasonable estimate of the value is $10,000 or less, the person is not liable. If the reasonable estimate of value is more than $10,000, the person is not liable for the retail equivalent amount on the first $10,000, and the value in excess is subject to the retail equivalent amount under any of the following: • If the materials are incorporated into an MRRA project, the retail equivalent amount due is based on the purchase price of the materials and if the materials are sold or disposed, the retail equivalent amount is based on the revenue received; • In a single payment with the tax based on the person’s principal place of business; or • In 12 equal monthly installments with the tax based on the person’s principal place of business. For any contract that was bid or entered into or for any binding obligation executed on or before April 30, 2015, a person may treat the contract as a contract that is taxable under the prime contracting classification. Contractors will be held harmless from any additional tax, penalty and interest if DOR determines, under audit, that the person’s good faith treatment of the contract as, either subject or excluded from TPT under the prime contracting classification during this time period, was incorrect. Cities, towns and counties may no longer require a building permit applicant to have a TPT or business license as a condition for the issuance of a permit. Additionally, the requirement that an applicant possess a TPT license in order to obtain or renew a Registrar of Contractor’s license has been eliminated. Property Tax House Bill 2108 (Chapter 233) Property tax; class nine; conventions Improvements located on federal, state, county or municipal property and owned by the lessee of the property may only qualify for the class 9 property tax classification if the improvements become the property of the government on termination of the leasehold interest in the property and if both the ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 95 improvements and the property are used exclusively for convention activities. House Bill 2110 (Chapter 98) Taxing district boundaries; deadline extensions The deadline Department of Revenue may extend for municipal, school district, community college district and other special taxing district governing bodies to file information relating to changes in boundaries and the boundaries of newly created taxing jurisdictions is shortened to December 20 of the year preceding the year in which assessments or taxes are to be levied, instead of to February 15 of the year in which the assessments or taxes are to be levied. House Bill 2128 (Chapter 49) Leased religious property; class nine Classifies property, buildings and fixtures, or any portion thereof, that are leased to a nonprofit church, religious assembly or religious institution and that are primarily used for religious worship as class 9 property for property tax purposes. House Bill 2615 (Chapter 221) Illegal tax levies; review; notice Beginning in 2016, the Property Tax Oversight Commission is required to review the secondary property tax levy of each county, city, town and community college district for the purpose of identifying violations of constitutional and statutory requirements. The requirements relating to reporting on the issuance of government bonds, securities and incurred debt and the administration of the Debt Oversight Commission are transferred from the Department of Revenue to the State Treasurer. Senate Bill 1216 (Chapter 230) Tax corrections See Multiple Tax Types. Senate Bill 1476 (Chapter 15) Budget; BRB; K-12 education; FY2015-2016 Beginning in FY 2016, the amount of additional state aid required to offset primary property taxes in excess of the 1 percent cap provided to school districts from the state General Fund is limited to $1,000,000 per county. The Property Tax Oversight Commission (PTOC) is required to evaluate each county with a school district or districts who require more than the state-funded amount and determine the proportion attributable to each taxing jurisdictions located within the affected school district or districts. The PTOC is also required to determine the amounts each identified taxing jurisdiction must transfer to the impacted school district or districts during the fiscal year. Multiple Tax Types/Miscellaneous House Bill 2617 (Chapter 323) Regulatory relief tax credit (NOW: counties, municipalities, budgets) Includes Councils of Governments and Regional Transportation Authorities to the political subdivisions that are assessed a fee to recover administrative and operating costs incurred by the Department of Revenue in providing administrative and collections services to local governments. House Bill 2670 (Chapter 6) International operations centers The gross proceeds of sales or gross income derived from sales of electricity or natural gas to a business that operates a certified international operations center is exempted from the utilities TPT classification and use tax. Renewable energy generation facilities that produce power primarily for an international operations center may qualify for the individual or corporate tax credit for renewable energy investment and production for self-consumption. A taxpayer is eligible for the tax credit if the power is generated primarily for a certified international operations center and the taxpayer invests at least $100 million in one or more new renewable energy facilities in Arizona that produce energy for selfconsumption using renewable energy resources, a ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 96 portion of the energy produced at each renewable energy facility is used for self-consumption in Arizona and the power used for self-consumption is used for an international operations center. A lessor of an international operations center facility that uses power for self-consumption satisfies this requirement if the lessee is an international operations center and the power is transferred as part of the lease to the lessee. The maximum tax credit is increased from $1 million to $5 million per year for five years for each renewable energy facility. The amount of total aggregate tax credit an owner of an international operations center may claim is capped at $25 million. Senate Bill 1216 (Chapter 230) Tax corrections Makes numerous, technical, clarifying and conforming changes in the tax-related Arizona Revised Statutes. Senate Bill 1471 (Chapter 10) Budget; BRB; K-12 education; FY2015-2016 The Department of Revenue (DOR) is required to assess and collect fees from local governments in FY 2015-1016 for costs incurred in providing administrative and collections services. Each non-program city is assessed a fee of $0.76 per capita in FY 2016. Local governments may meet their cost sharing obligation from any source of revenue designated by the appropriate county, city or town and the contributions are excluded from applicable expenditure limitations. DOR is required to establish a tax recovery (amnesty) program from September 1, 2015, through October 31, 2015, for the purposes of reducing or waiving civil penalties and interest for unpaid tax liabilities for any period before January 1, 2014, for annual filers, and February 1, 2015, for all other filers. ARIZONA DEPARTMENT OF REVENUE 2015 ANNUAL REPORT Page 97