AN ACT

 

Amending title 41, chapter 10, article 1, Arizona Revised Statutes, by adding section 41-1510.01; amending sections 42-5061, 42-5075 and 42-11054, Arizona Revised Statutes; Amending section 43-222, Arizona Revised Statutes, as amended by Laws 2005, chapter 12, section 1, chapter 264, section 1, chapter 316, section 2 and chapter 317, section 10; repealing section 43-222, Arizona Revised Statutes, as amended by Laws 2005, chapter 292, section 1; Amending section 43-1083, Arizona Revised Statutes; amending title 43, chapter 10, article 5, Arizona Revised Statutes, by adding section 43-1085; amending title 43, chapter 11, article 6, Arizona Revised Statutes, by adding section 43-1164; relating to solar energy incentives.

 

 

(TEXT OF BILL BEGINS ON NEXT PAGE)

 

 

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

Section 1.  Title 41, chapter 10, article 1, Arizona Revised Statutes, is amended by adding section 41-1510.01, to read:

START_STATUTE41-1510.01.  Solar energy tax incentives; qualification

A.  The department shall establish a procedure for identifying commercial solar energy projects that qualify for the purposes of the commercial solar energy income tax credits under sections 43-1085 and 43‑1164.

B.  To qualify for the tax credits, a business must apply in a form prescribed by the department, including:

1.  The name, address and telephone number of the business purchasing the solar energy device or system.

2.  The name, address and telephone number of a contact person with the business.

3.  The projected date that the installation of the solar energy device or system will begin and the projected finish date.

4.  The location where the solar energy device or system will be installed.

5.  The type of solar energy device or system, its total cost, excluding financing costs, and the estimated annual performance level.

6.  The projected amount of the credit against state income taxes.

C.  Applications to the department under this section are confidential and are not subject to disclosure under title 39 for eighteen months after the date of application.

D.  The department shall:

1.  Review and evaluate each submitted application.

2.  Determine within thirty days after receiving the application whether the application meets the criteria for the purposes of the commercial solar energy income tax credits.

3.  Provide its initial certification of a project to the applicant and to the department of revenue.  The initial certification shall include a unique identifying number for each certified installation.

E.  On the completion of each certified installation:

1.  The business must:

(a)  Certify that the installed solar energy device or system is operational.

(b)  Provide the total amount of income tax credits to be claimed.

2.  The department shall review the installation expenses and issue a credit certificate to the business.  The credit certificate shall include the assigned identifying number.

3.  The department of commerce shall transmit the credit information and certificate number to the department of revenue.

4.  The department of commerce shall not certify tax credits under this section in any calendar year that exceed a total of seven million dollars.

F.  The department of commerce and the department of revenue shall collaborate in adopting rules that are necessary to accomplish the intent and purpose of this section. END_STATUTE

Sec. 2.  Section 42-5061, Arizona Revised Statutes, is amended to read:

START_STATUTE42-5061.  Retail classification; definitions

A.  The retail classification is comprised of the business of selling tangible personal property at retail.  The tax base for the retail classification is the gross proceeds of sales or gross income derived from the business.  The tax imposed on the retail classification does not apply to the gross proceeds of sales or gross income from:

1.  Professional or personal service occupations or businesses which involve sales or transfers of tangible personal property only as inconsequential elements.

2.  Services rendered in addition to selling tangible personal property at retail.

3.  Sales of warranty or service contracts.  The storage, use or consumption of tangible personal property provided under the conditions of such contracts is subject to tax under section 42‑5156.

4.  Sales of tangible personal property by any nonprofit organization organized and operated exclusively for charitable purposes and recognized by the United States internal revenue service under section 501(c)(3) of the internal revenue code.

5.  Sales to persons engaged in business classified under the restaurant classification of articles used by human beings for food, drink or condiment, whether simple, mixed or compounded.

6.  Business activity which is properly included in any other business classification which is taxable under article 1 of this chapter.

7.  The sale of stocks and bonds.

8.  Drugs and medical oxygen, including delivery hose, mask or tent, regulator and tank, on the prescription of a member of the medical, dental or veterinarian profession who is licensed by law to administer such substances.

9.  Prosthetic appliances as defined in section 23‑501 prescribed or recommended by a health professional licensed pursuant to title 32, chapter 7, 8, 11, 13, 14, 15, 16, 17 or 29.

10.  Insulin, insulin syringes and glucose test strips.

11.  Prescription eyeglasses or contact lenses.

12.  Hearing aids as defined in section 36‑1901.

13.  Durable medical equipment which has a centers for medicare and medicaid services common procedure code, is designated reimbursable by medicare, is prescribed by a person who is licensed under title 32, chapter 7, 8, 13, 14, 15, 17 or 29, can withstand repeated use, is primarily and customarily used to serve a medical purpose, is generally not useful to a person in the absence of illness or injury and is appropriate for use in the home.

14.  Sales to nonresidents of this state for use outside this state if the vendor ships or delivers the tangible personal property out of this state.

15.  Food, as provided in and subject to the conditions of article 3 of this chapter and section 42‑5074.

16.  Items purchased with United States department of agriculture food stamp coupons issued under the food stamp act of 1977 (P.L. 95‑113; 91 Stat. 958) or food instruments issued under section 17 of the child nutrition act (P.L. 95‑627; 92 Stat. 3603; P.L. 99‑661, section 4302; 42 United States Code section 1786).

17.  Textbooks by any bookstore that are required by any state university or community college.

18.  Food and drink to a person who is engaged in business which is classified under the restaurant classification and which provides such food and drink without monetary charge to its employees for their own consumption on the premises during the employees' hours of employment.

19.  Articles of food, drink or condiment and accessory tangible personal property to a school district if such articles and accessory tangible personal property are to be prepared and served to persons for consumption on the premises of a public school within the district during school hours.

20.  Lottery tickets or shares pursuant to title 5, chapter 5, article 1.

21.  The sale of precious metal bullion and monetized bullion to the ultimate consumer, but the sale of coins or other forms of money for manufacture into jewelry or works of art is subject to the tax.  For the purposes of this paragraph:

(a)  "Monetized bullion" means coins and other forms of money which are manufactured from gold, silver or other metals and which have been or are used as a medium of exchange in this or another state, the United States or a foreign nation.

(b)  "Precious metal bullion" means precious metal, including gold, silver, platinum, rhodium and palladium, which has been smelted or refined so that its value depends on its contents and not on its form.

22.  Motor vehicle fuel and use fuel which are subject to a tax imposed under title 28, chapter 16, article 1, sales of use fuel to a holder of a valid single trip use fuel tax permit issued under section 28‑5739, sales of aviation fuel which are subject to the tax imposed under section 28‑8344 and sales of jet fuel which are subject to the tax imposed under article 8 of this chapter.

23.  Tangible personal property sold to a person engaged in the business of leasing or renting such property under the personal property rental classification if such property is to be leased or rented by such person.

24.  Tangible personal property sold in interstate or foreign commerce if prohibited from being so taxed by the Constitution of the United States or the constitution of this state.

25.  Tangible personal property sold to:

(a)  A qualifying hospital as defined in section 42‑5001.

(b)  A qualifying health care organization as defined in section 42‑5001 if the tangible personal property is used by the organization solely to provide health and medical related educational and charitable services.

(c)  A qualifying health care organization as defined in section 42‑5001 if the organization is dedicated to providing educational, therapeutic, rehabilitative and family medical education training for blind, visually impaired and multihandicapped children from the time of birth to age twenty‑one.

(d)  A qualifying community health center as defined in section 42‑5001.

(e)  A nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that regularly serves meals to the needy and indigent on a continuing basis at no cost.

(f)  For taxable periods beginning from and after June 30, 2001, a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code and that provides residential apartment housing for low income persons over sixty‑two years of age in a facility that qualifies for a federal housing subsidy, if the tangible personal property is used by the organization solely to provide residential apartment housing for low income persons over sixty‑two years of age in a facility that qualifies for a federal housing subsidy.

26.  Magazines or other periodicals or other publications by this state to encourage tourist travel.

27.  Tangible personal property sold to a person that is subject to tax under this article by reason of being engaged in business classified under the prime contracting classification under section 42‑5075, or to a subcontractor working under the control of a prime contractor that is subject to tax under article 1 of this chapter, if the property so sold is any of the following:

(a)  Incorporated or fabricated by the person into any real property, structure, project, development or improvement as part of the business.

(b)  Used in environmental response or remediation activities under section 42‑5075, subsection B, paragraph 6.

(c)  Incorporated or fabricated by the person into any lake facility development in a commercial enhancement reuse district under conditions prescribed for the deduction allowed by section 42‑5075, subsection B, paragraph 8.

28.  The sale of a motor vehicle to:

(a)  A nonresident of this state if the purchaser's state of residence does not allow a corresponding use tax exemption to the tax imposed by article 1 of this chapter and if the nonresident has secured a special ninety day nonresident registration permit for the vehicle as prescribed by sections 28‑2154 and 28‑2154.01.

(b)  An enrolled member of an Indian tribe who resides on the Indian reservation established for that tribe.

29.  Tangible personal property purchased in this state by a nonprofit charitable organization that has qualified under section 501(c)(3) of the United States internal revenue code and that engages in and uses such property exclusively in programs for mentally or physically handicapped persons if the programs are exclusively for training, job placement, rehabilitation or testing.

30.  Sales of tangible personal property by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4) or 501(c)(6) of the internal revenue code if the organization is associated with a major league baseball team or a national touring professional golfing association and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.

31.  Sales of commodities, as defined by title 7 United States Code section 2, that are consigned for resale in a warehouse in this state in or from which the commodity is deliverable on a contract for future delivery subject to the rules of a commodity market regulated by the United States commodity futures trading commission.

32.  Sales of tangible personal property by a nonprofit organization that is exempt from taxation under section 501(c)(3), 501(c)(4), 501(c)(6), 501(c)(7) or 501(c)(8) of the internal revenue code if the organization sponsors or operates a rodeo featuring primarily farm and ranch animals and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.

33.  Sales of seeds, seedlings, roots, bulbs, cuttings and other propagative material to persons who use those items to commercially produce agricultural, horticultural, viticultural or floricultural crops in this state.

34.  Machinery, equipment, technology or related supplies that are only useful to assist a person who is physically disabled as defined in section 46‑191, has a developmental disability as defined in section 36‑551 or has a head injury as defined in section 41‑3201 to be more independent and functional.

35.  Sales of tangible personal property that is shipped or delivered directly to a destination outside the United States for use in that foreign country.

36.  Sales of natural gas or liquefied petroleum gas used to propel a motor vehicle.

37.  Paper machine clothing, such as forming fabrics and dryer felts, sold to a paper manufacturer and directly used or consumed in paper manufacturing.

38.  Coal, petroleum, coke, natural gas, virgin fuel oil and electricity sold to a qualified environmental technology manufacturer, producer or processor as defined in section 41‑1514.02 and directly used or consumed in the generation or provision of on-site power or energy solely for environmental technology manufacturing, producing or processing or environmental protection.  This paragraph shall apply for fifteen full consecutive calendar or fiscal years from the date the first paper manufacturing machine is placed in service.  In the case of an environmental technology manufacturer, producer or processor who does not manufacture paper, the time period shall begin with the date the first manufacturing, processing or production equipment is placed in service.

39.  Sales of liquid, solid or gaseous chemicals used in manufacturing, processing, fabricating, mining, refining, metallurgical operations, research and development and, beginning on January 1, 1999, printing, if using or consuming the chemicals, alone or as part of an integrated system of chemicals, involves direct contact with the materials from which the product is produced for the purpose of causing or permitting a chemical or physical change to occur in the materials as part of the production process.  This paragraph does not include chemicals that are used or consumed in activities such as packaging, storage or transportation but does not affect any deduction for such chemicals that is otherwise provided by this section.  For the purposes of this paragraph, "printing" means a commercial printing operation and includes job printing, engraving, embossing, copying and bookbinding.

40.  Through December 31, 1994, personal property liquidation transactions, conducted by a personal property liquidator.  From and after December 31, 1994, personal property liquidation transactions shall be taxable under this section provided that nothing in this subsection shall be construed to authorize the taxation of casual activities or transactions under this chapter.  For the purposes of this paragraph:

(a)  "Personal property liquidation transaction" means a sale of personal property made by a personal property liquidator acting solely on behalf of the owner of the personal property sold at the dwelling of the owner or upon the death of any owner, on behalf of the surviving spouse, if any, any devisee or heir or the personal representative of the estate of the deceased, if one has been appointed.

(b)  "Personal property liquidator" means a person who is retained to conduct a sale in a personal property liquidation transaction.

41.  Sales of food, drink and condiment for consumption within the premises of any prison, jail or other institution under the jurisdiction of the state department of corrections, the department of public safety, the department of juvenile corrections or a county sheriff.

42.  A motor vehicle and any repair and replacement parts and tangible personal property becoming a part of such motor vehicle sold to a motor carrier who is subject to a fee prescribed in title 28, chapter 16, article 4 and who is engaged in the business of leasing or renting such property.

43.  Livestock and poultry feed, salts, vitamins and other additives for livestock or poultry consumption that are sold to persons who are engaged in producing livestock, poultry, or livestock or poultry products or who are engaged in feeding livestock or poultry commercially.  For the purposes of this paragraph, "poultry" includes ratites.

44.  Sales of implants used as growth promotants and injectable medicines, not already exempt under paragraph 8 of this subsection, for livestock or poultry owned by or in possession of persons who are engaged in producing livestock, poultry, or livestock or poultry products or who are engaged in feeding livestock or poultry commercially.  For the purposes of this paragraph, "poultry" includes ratites.

45.  Sales of motor vehicles at auction to nonresidents of this state for use outside this state if the vehicles are shipped or delivered out of this state, regardless of where title to the motor vehicles passes or its free on board point.

46.  Tangible personal property sold to a person engaged in business and subject to tax under the transient lodging classification if the tangible personal property is a personal hygiene item or articles used by human beings for food, drink or condiment, except alcoholic beverages, which are furnished without additional charge to and intended to be consumed by the transient during the transient's occupancy.

47.  Sales of alternative fuel, as defined in section 1‑215, to a used oil fuel burner who has received a permit to burn used oil or used oil fuel under section 49‑426 or 49‑480.

48.  Sales of materials that are purchased by or for publicly funded libraries including school district libraries, charter school libraries, community college libraries, state university libraries or federal, state, county or municipal libraries for use by the public as follows:

(a)  Printed or photographic materials, beginning August 7, 1985.

(b)  Electronic or digital media materials, beginning July 17, 1994.

49.  Tangible personal property sold to a commercial airline and consisting of food, beverages and condiments and accessories used for serving the food and beverages, if those items are to be provided without additional charge to passengers for consumption in flight.  For the purposes of this paragraph, "commercial airline" means a person holding a federal certificate of public convenience and necessity or foreign air carrier permit for air transportation to transport persons, property or United States mail in intrastate, interstate or foreign commerce.

50.  Sales of alternative fuel vehicles if the vehicle was manufactured as a diesel fuel vehicle and converted to operate on alternative fuel and equipment that is installed in a conventional diesel fuel motor vehicle to convert the vehicle to operate on an alternative fuel, as defined in section 1‑215.

51.  Sales of any spirituous, vinous or malt liquor by a person that is licensed in this state as a wholesaler by the department of liquor licenses and control pursuant to title 4, chapter 2, article 1.

52.  Sales of tangible personal property to be incorporated or installed as part of environmental response or remediation activities under section 42‑5075, subsection B, paragraph 6.

53.  Sales of tangible personal property by a nonprofit organization that is exempt from taxation under section 501(c)(6) of the internal revenue code if the organization produces, organizes or promotes cultural or civic related festivals or events and no part of the organization's net earnings inures to the benefit of any private shareholder or individual.

B.  In addition to the deductions from the tax base prescribed by subsection A of this section, the gross proceeds of sales or gross income derived from sales of the following categories of tangible personal property shall be deducted from the tax base:

1.  Machinery, or equipment, used directly in manufacturing, processing, fabricating, job printing, refining or metallurgical operations. The terms "manufacturing", "processing", "fabricating", "job printing", "refining" and "metallurgical" as used in this paragraph refer to and include those operations commonly understood within their ordinary meaning.  "Metallurgical operations" includes leaching, milling, precipitating, smelting and refining.

2.  Mining machinery, or equipment, used directly in the process of extracting ores or minerals from the earth for commercial purposes, including equipment required to prepare the materials for extraction and handling, loading or transporting such extracted material to the surface.  "Mining" includes underground, surface and open pit operations for extracting ores and minerals.

3.  Tangible personal property sold to persons engaged in business classified under the telecommunications classification and consisting of central office switching equipment, switchboards, private branch exchange equipment, microwave radio equipment and carrier equipment including optical fiber, coaxial cable and other transmission media which are components of carrier systems.

4.  Machinery, equipment or transmission lines used directly in producing or transmitting electrical power, but not including distribution. Transformers and control equipment used at transmission substation sites constitute equipment used in producing or transmitting electrical power.

5.  Neat animals, horses, asses, sheep, ratites, swine or goats used or to be used as breeding or production stock, including sales of breedings or ownership shares in such animals used for breeding or production.

6.  Pipes or valves four inches in diameter or larger used to transport oil, natural gas, artificial gas, water or coal slurry, including compressor units, regulators, machinery and equipment, fittings, seals and any other part that is used in operating the pipes or valves.

7.  Aircraft, navigational and communication instruments and other accessories and related equipment sold to:

(a)  A person holding a federal certificate of public convenience and necessity, a supplemental air carrier certificate under federal aviation regulations (14 Code of Federal Regulations part 121) or a foreign air carrier permit for air transportation for use as or in conjunction with or becoming a part of aircraft to be used to transport persons, property or United States mail in intrastate, interstate or foreign commerce.

(b)  Any foreign government for use by such government outside of this state.

(c)  Persons who are not residents of this state and who will not use such property in this state other than in removing such property from this state.  This subdivision also applies to corporations that are not incorporated in this state, regardless of maintaining a place of business in this state, if the principal corporate office is located outside this state and the property will not be used in this state other than in removing the property from this state.

8.  Machinery, tools, equipment and related supplies used or consumed directly in repairing, remodeling or maintaining aircraft, aircraft engines or aircraft component parts by or on behalf of a certificated or licensed carrier of persons or property.

9.  Railroad rolling stock, rails, ties and signal control equipment used directly to transport persons or property.

10.  Machinery or equipment used directly to drill for oil or gas or used directly in the process of extracting oil or gas from the earth for commercial purposes.

11.  Buses or other urban mass transit vehicles which are used directly to transport persons or property for hire or pursuant to a governmentally adopted and controlled urban mass transportation program and which are sold to bus companies holding a federal certificate of convenience and necessity or operated by any city, town or other governmental entity or by any person contracting with such governmental entity as part of a governmentally adopted and controlled program to provide urban mass transportation.

12.  Groundwater measuring devices required under section 45‑604.

13.  New machinery and equipment consisting of tractors, tractor‑drawn implements, self‑powered implements, machinery and equipment necessary for extracting milk, and machinery and equipment necessary for cooling milk and livestock, and drip irrigation lines not already exempt under paragraph 6 of this subsection and that are used for commercial production of agricultural, horticultural, viticultural and floricultural crops and products in this state.  For the purposes of this paragraph:

(a)  "New machinery and equipment" means machinery and equipment which have never been sold at retail except pursuant to leases or rentals which do not total two years or more.

(b)  "Self‑powered implements" includes machinery and equipment that are electric‑powered.

14.  Machinery or equipment used in research and development.  For the purposes of this paragraph, "research and development" means basic and applied research in the sciences and engineering, and designing, developing or testing prototypes, processes or new products, including research and development of computer software that is embedded in or an integral part of the prototype or new product or that is required for machinery or equipment otherwise exempt under this section to function effectively.  Research and development do not include manufacturing quality control, routine consumer product testing, market research, sales promotion, sales service, research in social sciences or psychology, computer software research that is not included in the definition of research and development, or other nontechnological activities or technical services.

15.  Machinery and equipment that are purchased by or on behalf of the owners of a soundstage complex and primarily used for motion picture, multimedia or interactive video production in the complex.  This paragraph applies only if the initial construction of the soundstage complex begins after June 30, 1996 and before January 1, 2002 and the machinery and equipment are purchased before the expiration of five years after the start of initial construction.  For the purposes of this paragraph:

(a)  "Motion picture, multimedia or interactive video production" includes products for theatrical and television release, educational presentations, electronic retailing, documentaries, music videos, industrial films, CD‑ROM, video game production, commercial advertising and television episode production and other genres that are introduced through developing technology.

(b)  "Soundstage complex" means a facility of multiple stages including production offices, construction shops and related areas, prop and costume shops, storage areas, parking for production vehicles and areas that are leased to businesses that complement the production needs and orientation of the overall facility.

16.  Tangible personal property that is used by either of the following to receive, store, convert, produce, generate, decode, encode, control or transmit telecommunications information:

(a)  Any direct broadcast satellite television or data transmission service that operates pursuant to 47 Code of Federal Regulations parts 25 and 100.

(b)  Any satellite television or data transmission facility, if both of the following conditions are met:

(i)  Over two‑thirds of the transmissions, measured in megabytes, transmitted by the facility during the test period were transmitted to or on behalf of one or more direct broadcast satellite television or data transmission services that operate pursuant to 47 Code of Federal Regulations parts 25 and 100.

(ii)  Over two‑thirds of the transmissions, measured in megabytes, transmitted by or on behalf of those direct broadcast television or data transmission services during the test period were transmitted by the facility to or on behalf of those services.

For the purposes of subdivision (b) of this paragraph, "test period" means the three hundred sixty‑five day period beginning on the later of the date on which the tangible personal property is purchased or the date on which the direct broadcast satellite television or data transmission service first transmits information to its customers.

17.  Clean rooms that are used for manufacturing, processing, fabrication or research and development, as defined in paragraph 14 of this subsection, of semiconductor products.  For the purposes of this paragraph, "clean room" means all property that comprises or creates an environment where humidity, temperature, particulate matter and contamination are precisely controlled within specified parameters, without regard to whether the property is actually contained within that environment or whether any of the property is affixed to or incorporated into real property.  Clean room:

(a)  Includes the integrated systems, fixtures, piping, movable partitions, lighting and all property that is necessary or adapted to reduce contamination or to control airflow, temperature, humidity, chemical purity or other environmental conditions or manufacturing tolerances, as well as the production machinery and equipment operating in conjunction with the clean room environment.

(b)  Does not include the building or other permanent, nonremovable component of the building that houses the clean room environment.

18.  Machinery and equipment used directly in the feeding of poultry, the environmental control of housing for poultry, the movement of eggs within a production and packaging facility or the sorting or cooling of eggs.  This exemption does not apply to vehicles used for transporting eggs.

19.  Machinery or equipment, including related structural components, that is employed in connection with manufacturing, processing, fabricating, job printing, refining, mining, natural gas pipelines, metallurgical operations, telecommunications, producing or transmitting electricity or research and development and that is used directly to meet or exceed rules or regulations adopted by the federal energy regulatory commission, the United States environmental protection agency, the United States nuclear regulatory commission, the Arizona department of environmental quality or a political subdivision of this state to prevent, monitor, control or reduce land, water or air pollution.

20.  Machinery and equipment that are sold to a person engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state and that are used directly and primarily to prevent, monitor, control or reduce air, water or land pollution.

21.  Machinery or equipment that enables a television station to originate and broadcast or to receive and broadcast digital television signals and that was purchased to facilitate compliance with the telecommunications act of 1996 (P.L. 104‑104; 110 Stat. 56; 47 United States Code section 336) and the federal communications commission order issued April 21, 1997 (47 Code of Federal Regulations part 73).  This paragraph does not exempt any of the following:

(a)  Repair or replacement parts purchased for the machinery or equipment described in this paragraph.

(b)  Machinery or equipment purchased to replace machinery or equipment for which an exemption was previously claimed and taken under this paragraph.

(c)  Any machinery or equipment purchased after the television station has ceased analog broadcasting, or purchased after November 1, 2009, whichever occurs first.

22.  Qualifying equipment that is purchased from and after June 30, 2004 through June 30, 2014 by a qualified business under section 41-1516 for harvesting or the initial processing of qualifying forest products removed from qualifying projects as defined in section 41-1516.  To qualify for this deduction, the qualified business at the time of purchase must present its certification approved by the department.

23.  Machinery, equipment and other tangible personal property used directly in motion picture production by a motion picture production company.  To qualify for this deduction, at the time of purchase, the motion picture production company must present to the retailer its certificate that is issued pursuant to section 42‑5009, subsection H and that establishes its qualification for the deduction.

C.  The deductions provided by subsection B of this section do not include sales of:

1.  Expendable materials.  For the purposes of this paragraph, expendable materials do not include any of the categories of tangible personal property specified in subsection B of this section regardless of the cost or useful life of that property.

2.  Janitorial equipment and hand tools.

3.  Office equipment, furniture and supplies.

4.  Tangible personal property used in selling or distributing activities, other than the telecommunications transmissions described in subsection B, paragraph 16 of this section.

5.  Motor vehicles required to be licensed by this state, except buses or other urban mass transit vehicles specifically exempted pursuant to subsection B, paragraph 11 of this section, without regard to the use of such motor vehicles.

6.  Shops, buildings, docks, depots and all other materials of whatever kind or character not specifically included as exempt.

7.  Motors and pumps used in drip irrigation systems.

D.  In addition to the deductions from the tax base prescribed by subsection A of this section, there shall be deducted from the tax base the gross proceeds of sales or gross income derived from sales of machinery, equipment, materials and other tangible personal property used directly and predominantly to construct a qualified environmental technology manufacturing, producing or processing facility as described in section 41‑1514.02.  This subsection applies for ten full consecutive calendar or fiscal years after the start of initial construction.

E.  In computing the tax base, gross proceeds of sales or gross income from retail sales of heavy trucks and trailers does not include any amount attributable to federal excise taxes imposed by 26 United States Code section 4051.

F.  In computing the tax base, gross proceeds of sales or gross income from the sale of use fuel, as defined in section 28‑5601, does not include any amount attributable to federal excise taxes imposed by 26 United States Code section 4091.

G.  If a person is engaged in an occupation or business to which subsection A of this section applies, the person's books shall be kept so as to show separately the gross proceeds of sales of tangible personal property and the gross income from sales of services, and if not so kept the tax shall be imposed on the total of the person's gross proceeds of sales of tangible personal property and gross income from services.

H.  If a person is engaged in the business of selling tangible personal property at both wholesale and retail, the tax under this section applies only to the gross proceeds of the sales made other than at wholesale if the person's books are kept so as to show separately the gross proceeds of sales of each class, and if the books are not so kept, the tax under this section applies to the gross proceeds of every sale so made.

I.  A person who engages in manufacturing, baling, crating, boxing, barreling, canning, bottling, sacking, preserving, processing or otherwise preparing for sale or commercial use any livestock, agricultural or horticultural product or any other product, article, substance or commodity and who sells the product of such business at retail in this state is deemed, as to such sales, to be engaged in business classified under the retail classification.  This subsection does not apply to businesses classified under the:

1.  Transporting classification.

2.  Utilities classification.

3.  Telecommunications classification.

4.  Pipeline classification.

5.  Private car line classification.

6.  Publication classification.

7.  Job printing classification.

8.  Prime contracting classification.

9.  Owner builder sales classification.

10.  Restaurant classification.

J.  The gross proceeds of sales or gross income derived from the following shall be deducted from the tax base for the retail classification:

1.  Sales made directly to the United States government or its departments or agencies by a manufacturer, modifier, assembler or repairer.

2.  Sales made directly to a manufacturer, modifier, assembler or repairer if such sales are of any ingredient or component part of products sold directly to the United States government or its departments or agencies by the manufacturer, modifier, assembler or repairer.

3.  Overhead materials or other tangible personal property that is used in performing a contract between the United States government and a manufacturer, modifier, assembler or repairer, including property used in performing a subcontract with a government contractor who is a manufacturer, modifier, assembler or repairer, to which title passes to the government under the terms of the contract or subcontract.

4.  Sales of overhead materials or other tangible personal property to a manufacturer, modifier, assembler or repairer if the gross proceeds of sales or gross income derived from the property by the manufacturer, modifier, assembler or repairer will be exempt under paragraph 3 of this subsection.

K.  There shall be deducted from the tax base fifty per cent of the gross proceeds or gross income from any sale of tangible personal property made directly to the United States government or its departments or agencies, which is not deducted under subsection J of this section.

L.  The department shall require every person claiming a deduction provided by subsection J or K of this section to file on forms prescribed by the department at such times as the department directs a sworn statement disclosing the name of the purchaser and the exact amount of sales on which the exclusion or deduction is claimed.

M.  In computing the tax base, gross proceeds of sales or gross income does not include:

1.  A manufacturer's cash rebate on the sales price of a motor vehicle if the buyer assigns the buyer's right in the rebate to the retailer.

2.  The waste tire disposal fee imposed pursuant to section 44‑1302.

N.  There shall be deducted from the tax base the amount received from sales of solar energy devices. , but the deduction shall not exceed five thousand dollars for each solar energy device.  Before deducting any amount under this subsection, The retailer shall register with the department as a solar energy retailer.  By registering, the retailer acknowledges that it will make its books and records relating to sales of solar energy devices available to the department for examination.

O.  In computing the tax base in the case of the sale or transfer of wireless telecommunications equipment as an inducement to a customer to enter into or continue a contract for telecommunications services that are taxable under section 42‑5064, gross proceeds of sales or gross income does not include any sales commissions or other compensation received by the retailer as a result of the customer entering into or continuing a contract for the telecommunications services.

P.  For the purposes of this section, a sale of wireless telecommunications equipment to a person who holds the equipment for sale or transfer to a customer as an inducement to enter into or continue a contract for telecommunications services that are taxable under section 42‑5064 is considered to be a sale for resale in the regular course of business.

Q.  Retail sales of prepaid calling cards or prepaid authorization numbers for telecommunications services, including sales of reauthorization of a prepaid card or authorization number, are subject to tax under this section.

R.  For the purposes of this section, the diversion of gas from a pipeline by a person engaged in the business of operating a natural or artificial gas pipeline, for the sole purpose of fueling compressor equipment to pressurize the pipeline, is not a sale of the gas to the operator of the pipeline.

S.  If a seller is entitled to a deduction pursuant to subsection B, paragraph 16, subdivision (b) of this section, the department may require the purchaser to establish that the requirements of subsection B, paragraph 16, subdivision (b) of this section have been satisfied.  If the purchaser cannot establish that the requirements of subsection B, paragraph 16, subdivision (b) of this section have been satisfied, the purchaser is liable in an amount equal to any tax, penalty and interest which the seller would have been required to pay under article 1 of this chapter if the seller had not made a deduction pursuant to subsection B, paragraph 16, subdivision (b) of this section.  Payment of the amount under this subsection exempts the purchaser from liability for any tax imposed under article 4 of this chapter and related to the tangible personal property purchased.  The amount shall be treated as transaction privilege tax to the purchaser and as tax revenues collected from the seller to designate the distribution base pursuant to section 42‑5029.

T.  For the purposes of section 42‑5032.01, the department shall separately account for revenues collected under the retail classification from businesses selling tangible personal property at retail:

1.  On the premises of a multipurpose facility that is owned, leased or operated by the tourism and sports authority pursuant to title 5, chapter 8.

2.  At professional football contests that are held in a stadium located on the campus of an institution under the jurisdiction of the Arizona board of regents.

U.  In computing the tax base for the sale of a motor vehicle to a nonresident of this state, if the purchaser's state of residence allows a corresponding use tax exemption to the tax imposed by article 1 of this chapter and the rate of the tax in the purchaser's state of residence is lower than the rate prescribed in article 1 of this chapter, and the nonresident has secured a special ninety day nonresident registration permit for the vehicle as prescribed by sections 28‑2154 and 28‑2154.01, there shall be deducted from the tax base a portion of the gross proceeds or gross income from the sale so that the amount of transaction privilege tax that is paid in this state is equal to the excise tax that is imposed by the purchaser's state of residence on the nonexempt sale or use of the motor vehicle.

V.  For the purposes of this section:

1.  "Aircraft" includes:

(a)  An airplane flight simulator that is approved by the federal aviation administration for use as a phase II or higher flight simulator under appendix H, 14 Code of Federal Regulations part 121.

(b)  Tangible personal property that is permanently affixed or attached as a component part of an aircraft that is owned or operated by a certificated or licensed carrier of persons or property.

2.  "Other accessories and related equipment" includes aircraft accessories and equipment such as ground service equipment that physically contact aircraft at some point during the overall carrier operation.

3.  "Selling at retail" means a sale for any purpose other than for resale in the regular course of business in the form of tangible personal property, but transfer of possession, lease and rental as used in the definition of sale mean only such transactions as are found on investigation to be in lieu of sales as defined without the words lease or rental.

W.  For the purposes of subsection J of this section:

1.  "Assembler" means a person who unites or combines products, wares or articles of manufacture so as to produce a change in form or substance without changing or altering the component parts.

2.  "Manufacturer" means a person who is principally engaged in the fabrication, production or manufacture of products, wares or articles for use from raw or prepared materials, imparting to those materials new forms, qualities, properties and combinations.

3.  "Modifier" means a person who reworks, changes or adds to products, wares or articles of manufacture.

4.  "Overhead materials" means tangible personal property, the gross proceeds of sales or gross income derived from which would otherwise be included in the retail classification, and which are used or consumed in the performance of a contract, the cost of which is charged to an overhead expense account and allocated to various contracts based upon generally accepted accounting principles and consistent with government contract accounting standards.

5.  "Repairer" means a person who restores or renews products, wares or articles of manufacture.

6.  "Subcontract" means an agreement between a contractor and any person who is not an employee of the contractor for furnishing of supplies or services that, in whole or in part, are necessary to the performance of one or more government contracts, or under which any portion of the contractor's obligation under one or more government contracts is performed, undertaken or assumed and that includes provisions causing title to overhead materials or other tangible personal property used in the performance of the subcontract to pass to the government or that includes provisions incorporating such title passing clauses in a government contract into the subcontract. END_STATUTE

Sec. 3.  Section 42-5075, Arizona Revised Statutes, is amended to read:

START_STATUTE42-5075.  Prime contracting classification; exemptions; definitions

A.  The prime contracting classification is comprised of the business of prime contracting and dealership of manufactured buildings.  The sale of a used manufactured building is not taxable under this chapter. 

B.  The tax base for the prime contracting classification is sixty‑five per cent of the gross proceeds of sales or gross income derived from the business.  The following amounts shall be deducted from the gross proceeds of sales or gross income before computing the tax base:

1.  The sales price of land, which shall not exceed the fair market value.

2.  Sales and installation of groundwater measuring devices required under section 45‑604 and groundwater monitoring wells required by law, including monitoring wells installed for acquiring information for a permit required by law.

3.  The sales price of furniture, furnishings, fixtures, appliances, and attachments that are not incorporated as component parts of or attached to a manufactured building or the setup site.  The sale of such items may be subject to the taxes imposed by article 1 of this chapter separately and distinctly from the sale of the manufactured building.

4.  The gross proceeds of sales or gross income received from a contract entered into for the construction, alteration, repair, addition, subtraction, improvement, movement, wrecking or demolition of any building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement located in a military reuse zone for providing aviation or aerospace services or for a manufacturer, assembler or fabricator of aviation or aerospace products within an active military reuse zone after the zone is initially established or renewed under section 41‑1531.  To be eligible to qualify for this deduction, before beginning work under the contract, the prime contractor must have applied for a letter of qualification from the department of revenue.

5.  The gross proceeds of sales or gross income derived from a contract to construct a qualified environmental technology manufacturing, producing or processing facility, as described in section 41‑1514.02, and from subsequent construction and installation contracts that begin within ten years after the start of initial construction.  To qualify for this deduction, before beginning work under the contract the prime contractor must obtain a letter of qualification from the department of revenue.  This paragraph shall apply for ten full consecutive calendar or fiscal years after the start of initial construction.

6.  The gross proceeds of sales or gross income from a contract to provide for one or more of the following actions, or a contract for site preparation, constructing, furnishing or installing machinery, equipment or other tangible personal property, including structures necessary to protect exempt incorporated materials or installed machinery or equipment, and tangible personal property incorporated into the project, to perform one or more of the following actions in response to a release or suspected release of a hazardous substance, pollutant or contaminant from a facility to the environment, unless the release was authorized by a permit issued by a governmental authority:

(a)  Actions to monitor, assess and evaluate such a release or a suspected release.

(b)  Excavation, removal and transportation of contaminated soil and its treatment or disposal.

(c)  Treatment of contaminated soil by vapor extraction, chemical or physical stabilization, soil washing or biological treatment to reduce the concentration, toxicity or mobility of a contaminant.

(d)  Pumping and treatment or in situ treatment of contaminated groundwater or surface water to reduce the concentration or toxicity of a contaminant.

(e)  The installation of structures, such as cutoff walls or caps, to contain contaminants present in groundwater or soil and prevent them from reaching a location where they could threaten human health or welfare or the environment.

This paragraph does not include asbestos removal or the construction or use of ancillary structures such as maintenance sheds, offices or storage facilities for unattached equipment, pollution control equipment, facilities or other control items required or to be used by a person to prevent or control contamination before it reaches the environment.

7.  The gross proceeds of sales or gross income that is derived from a contract entered into for the installation, assembly, repair or maintenance of machinery, equipment or other tangible personal property that is deducted from the tax base of the retail classification pursuant to section 42‑5061, subsection B, or that is exempt from use tax pursuant to section 42‑5159, subsection B, and that does not become a permanent attachment to a building, highway, road, railroad, excavation or manufactured building or other structure, project, development or improvement.  If the ownership of the realty is separate from the ownership of the machinery, equipment or tangible personal property, the determination as to permanent attachment shall be made as if the ownership were the same.  The deduction provided in this paragraph does not include gross proceeds of sales or gross income from that portion of any contracting activity which consists of the development of, or modification to, real property in order to facilitate the installation, assembly, repair, maintenance or removal of machinery, equipment or other tangible personal property that is deducted from the tax base of the retail classification pursuant to section 42‑5061, subsection B or that is exempt from use tax pursuant to section 42‑5159, subsection B.  For the purposes of this paragraph, "permanent attachment" means at least one of the following:

(a)  To be incorporated into real property.

(b)  To become so affixed to real property that it becomes a part of the real property.

(c)  To be so attached to real property that removal would cause substantial damage to the real property from which it is removed.

8.  The gross proceeds of sales or gross income received from a contract for constructing any lake facility development in a commercial enhancement reuse district that is designated pursuant to section 9‑499.08 if the prime contractor maintains the following records in a form satisfactory to the department and to the city or town in which the property is located:

(a)  The certificate of qualification of the lake facility development issued by the city or town pursuant to section 9‑499.08, subsection D.

(b)  All state and local transaction privilege tax returns for the period of time during which the prime contractor received gross proceeds of sales or gross income from a contract to construct a lake facility development in a designated commercial enhancement reuse district, showing the amount exempted from state and local taxation.

(c)  Any other information that the department considers to be necessary.

9.  The gross proceeds of sales or gross income attributable to the purchase of machinery, equipment or other tangible personal property that is exempt from or deductible from transaction privilege and use tax under:

(a)  Section 42‑5061, subsection A, paragraph 25 or 29.

(b)  Section 42‑5061, subsection B.

(c)  Section 42‑5159, subsection A, paragraph 13, subdivision (a), (b), (c), (d), (e), (f), (i), (j) or (l).

(d)  Section 42‑5159, subsection B.

10.  The gross proceeds of sales or gross income received from a contract for the construction of an environmentally controlled facility for the raising of poultry for the production of eggs and the sorting, cooling and packaging of eggs.

11.  The gross proceeds of sales or gross income that is derived from a contract entered into with a person who is engaged in the commercial production of livestock, livestock products or agricultural, horticultural, viticultural or floricultural crops or products in this state for the construction, alteration, repair, improvement, movement, wrecking or demolition or addition to or subtraction from any building, highway, road, excavation, manufactured building or other structure, project, development or improvement used directly and primarily to prevent, monitor, control or reduce air, water or land pollution.

12.  The gross proceeds of sales or gross income that is derived from the installation, assembly, repair or maintenance of clean rooms that are deducted from the tax base of the retail classification pursuant to section 42‑5061, subsection B, paragraph 17.

13.  For taxable periods beginning from and after June 30, 2001, the gross proceeds of sales or gross income derived from a contract entered into for the construction of a residential apartment housing facility that qualifies for a federal housing subsidy for low income persons over sixty‑two years of age and that is owned by a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code.

14.  For taxable periods beginning from and after December 31, 1996 and ending before January 1, 2011, the gross proceeds of sales or gross income derived from a contract to provide and install a solar energy device.  The deduction shall not exceed five thousand dollars for each contract.  Before deducting any amount under this paragraph, The contractor shall register with the department as a solar energy contractor.  By registering, the contractor acknowledges that it will make its books and records relating to sales of solar energy devices available to the department for examination.

15.  The gross proceeds of sales or gross income derived from a contract entered into for the construction of a launch site, as defined in 14 Code of Federal Regulations section 401.5.

16.  The gross proceeds of sales or gross income derived from a contract entered into for the construction of a domestic violence shelter that is owned and operated by a nonprofit charitable organization that has qualified under section 501(c)(3) of the internal revenue code.

17.  The gross proceeds of sales or gross income derived from contracts to perform postconstruction treatment of real property for termite and general pest control, including wood destroying organisms.

18.  The gross proceeds of sales or gross income received from contracts entered into before July 1, 2006 for constructing a state university research infrastructure project if the project has been reviewed by the joint committee on capital review before the university enters into the construction contract for the project.  For the purposes of this paragraph, "research infrastructure" has the same meaning prescribed in section 15‑1670.

19.  The gross proceeds of sales or gross income received from a contract for the construction of any building, or other structure, project, development or improvement owned by a qualified business under section 41‑1516 for harvesting or the initial processing of qualifying forest products removed from qualifying projects as defined in section 41‑1516 if actual construction begins before January 1, 2010.  To qualify for this deduction, the prime contractor must obtain a letter of qualification from the department of commerce before beginning work under the contract.

20.  The gross proceeds of sales or gross income received from a contract for the construction of any building or other structure associated with motion picture production in this state.  To qualify for the deduction, at the time the contract is entered into the motion picture production company must present to the prime contractor its certificate that is issued pursuant to section 42‑5009, subsection H and that establishes its qualification for the deduction.

C.  Entitlement to the deduction pursuant to subsection B, paragraph 7 of this section is subject to the following provisions:

1.  A prime contractor may establish entitlement to the deduction by both:

(a)  Marking the invoice for the transaction to indicate that the gross proceeds of sales or gross income derived from the transaction was deducted from the base.

(b)  Obtaining a certificate executed by the purchaser indicating the name and address of the purchaser, the precise nature of the business of the purchaser, the purpose for which the purchase was made, the necessary facts to establish the deductibility of the property under section 42‑5061, subsection B, and a certification that the person executing the certificate is authorized to do so on behalf of the purchaser.  The certificate may be disregarded if the prime contractor has reason to believe that the information contained in the certificate is not accurate or complete.

2.  A person who does not comply with paragraph 1 of this subsection may establish entitlement to the deduction by presenting facts necessary to support the entitlement, but the burden of proof is on that person.

3.  The department may prescribe a form for the certificate described in paragraph 1, subdivision (b) of this subsection.  The department may also adopt rules that describe the transactions with respect to which a person is not entitled to rely solely on the information contained in the certificate provided in paragraph 1, subdivision (b) of this subsection but must instead obtain such additional information as required in order to be entitled to the deduction.

4.  If a prime contractor is entitled to a deduction by complying with paragraph 1 of this subsection, the department may require the purchaser who caused the execution of the certificate to establish the accuracy and completeness of the information required to be contained in the certificate which would entitle the prime contractor to the deduction.  If the purchaser cannot establish the accuracy and completeness of the information, the purchaser is liable in an amount equal to any tax, penalty and interest which the prime contractor would have been required to pay under article 1 of this chapter if the prime contractor had not complied with paragraph 1 of this subsection.  Payment of the amount under this paragraph exempts the purchaser from liability for any tax imposed under article 4 of this chapter.  The amount shall be treated as a transaction privilege tax to the purchaser and as tax revenues collected from the prime contractor in order to designate the distribution base for purposes of section 42‑5029.

D.  Subcontractors or others who perform services in respect to any improvement, building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement are not subject to tax if they can demonstrate that the job was within the control of a prime contractor or contractors or a dealership of manufactured buildings and that the prime contractor or dealership is liable for the tax on the gross income, gross proceeds of sales or gross receipts attributable to the job and from which the subcontractors or others were paid.

E.  Amounts received by a contractor for a project are excluded from the contractor's gross proceeds of sales or gross income derived from the business if the person who hired the contractor executes and provides a certificate to the contractor stating that the person providing the certificate is a prime contractor and is liable for the tax under article 1 of this chapter.  The department shall prescribe the form of the certificate. If the contractor has reason to believe that the information contained on the certificate is erroneous or incomplete, the department may disregard the certificate.  If the person who provides the certificate is not liable for the tax as a prime contractor, that person is nevertheless deemed to be the prime contractor in lieu of the contractor and is subject to the tax under this section on the gross receipts or gross proceeds received by the contractor.

F.  Every person engaging or continuing in this state in the business of prime contracting or dealership of manufactured buildings shall present to the purchaser of such prime contracting or manufactured building a written receipt of the gross income or gross proceeds of sales from such activity and shall separately state the taxes to be paid pursuant to this section.

G.  For the purposes of section 42‑5032.01, the department shall separately account for revenues collected under the prime contracting classification from any prime contractor engaged in the preparation or construction of a multipurpose facility, and related infrastructure, that is owned, operated or leased by the tourism and sports authority pursuant to title 5, chapter 8.

H.  The gross proceeds of sales or gross income derived from a contract for lawn maintenance services are not subject to tax under this section if the contract does not include landscaping activities.  Lawn maintenance service is a service pursuant to section 42‑5061, subsection A, paragraph 1, and includes lawn mowing and edging, weeding, repairing sprinkler heads or drip irrigation heads, seasonal replacement of flowers, refreshing gravel, lawn de‑thatching, seeding winter lawns, leaf and debris collection and removal, tree or shrub pruning or clipping, garden and gravel raking and applying pesticides, as defined in section 3‑361, and fertilizer materials, as defined in section 3‑262.

I.  The gross proceeds of sales or gross income derived from landscaping activities are subject to tax under this section.  Landscaping includes installing lawns, grading or leveling ground, installing gravel or boulders, planting trees and other plants, felling trees, removing or mulching tree stumps, removing other imbedded plants, building or modifying irrigation berms, repairing sprinkler or watering systems, installing railroad ties and installing underground sprinkler or watering systems.

J.  The portion of gross proceeds of sales or gross income attributable to the actual direct costs of providing architectural or engineering services that are incorporated in a contract is not subject to tax under this section.  For the purposes of this subsection, "direct costs" means the portion of the actual costs that are directly expended in providing architectural or engineering services.

K.  For the purposes of this section:

1.  "Contracting" means engaging in business as a contractor.

2.  "Contractor" is synonymous with the term "builder" and means any person, firm, partnership, corporation, association or other organization, or a combination of any of them, that undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does personally or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement, or to do any part of such a project, including the erection of scaffolding or other structure or works in connection with such a project, and includes subcontractors and specialty contractors.  For all purposes of taxation or deduction, this definition shall govern without regard to whether or not such contractor is acting in fulfillment of a contract.

3.  "Dealership of manufactured buildings" means a dealer who either:

(a)  Is licensed pursuant to title 41, chapter 16 and who sells at retail manufactured buildings.

(b)  Supervises, performs or coordinates the excavation and completion of site improvements, setup or moving of a manufactured building including the contracting, if any, with any subcontractor or specialty contractor for the completion of the contract.

4.  "Manufactured building" means a manufactured home, mobile home or factory‑built building, as defined in section 41‑2142.

5.  "Prime contracting" means engaging in business as a prime contractor.

6.  "Prime contractor" means a contractor who supervises, performs or coordinates the construction, alteration, repair, addition, subtraction, improvement, movement, wreckage or demolition of any building, highway, road, railroad, excavation, manufactured building or other structure, project, development or improvement including the contracting, if any, with any subcontractors or specialty contractors and who is responsible for the completion of the contract.

7.  "Sale of a used manufactured building" does not include a lease of a used manufactured building. END_STATUTE

Sec. 4.  Section 42-11054, Arizona Revised Statutes, is amended to read:

START_STATUTE42-11054.  Standard appraisal methods and techniques

A.  The department shall:

1.  Prescribe guidelines for applying standard appraisal methods and techniques that shall be used by the department and county assessors in determining the valuation of property.

2.  Prepare and maintain manuals and other necessary guidelines, consistent with this section, reflecting the standard methods and techniques to perpetuate a current inventory of taxable property and the valuation of that property.

B.  In applying prescribed standard appraisal methods and techniques: , 

1.  Current usage shall be included in the formula for reaching a determination of full cash value.

2.  Solar energy devices, as defined in section 44-1761, and any other device or system designed for the production of solar energy for on-site consumption are considered to add no value to the property.

C.  If the methods and techniques prescribe using market data as an indication of market value, the price paid for future anticipated property value increments shall be excluded.

C.  D.  For purposes of determining full cash value the department and county assessors shall use and apply the ratio standard guidelines issued by the department for tax year 1993 in the same manner as they were applied in tax year 1993.  This subsection does not apply to property that is valued according to prescribed statutory methods or to property for which values are determined in the year after an appeal pursuant to section 42‑16002. END_STATUTE

Sec. 5.  Section 43-222, Arizona Revised Statutes, as amended by Laws 2005, chapter 12, section 1, chapter 264, section 1, chapter 316, section 2 and chapter 317, section 10, is amended to read:

START_STATUTE43-222.  Income tax credit review schedule

Each year the joint legislative income tax credit review committee shall review the following income tax credits:

1.  In 2005, sections 43‑1087, 43‑1088 and 43‑1175.

2.  In 2006, sections 43‑1073, 43‑1089, 43‑1089.01, 43‑1089.02, 43‑1090, 43‑1176 and 43‑1181.

3.  In 2007, sections 43‑1077, 43‑1078, 43‑1079, 43‑1080, 43‑1165, 43‑1166, 43‑1167 and 43‑1169.

4.  In 2008, sections 43‑1074.01, 43‑1081, 43‑1168, 43‑1170 and 43‑1178.

5.  In 2009, sections 43‑1076, 43‑1081.01, 43‑1083, 43‑1084, 43‑1162 and 43‑1170.01.

6.  In 2010, sections 43‑1075, and 43‑1163.

7.  In 2010, sections 43‑1079.01, and 43-1090.01, 43-1163, 43‑1167.01 and 43‑1182.

8.  7.  In 2011, section sections 43‑1074.02, 43-1083, 43-1085 and 43‑1164. END_STATUTE

Sec. 6.  Repeal

Section 43-222, Arizona Revised Statutes, as amended by Laws 2005, chapter 292, section 1, is repealed.

Sec. 7.  Section 43-1083, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1083.  Credit for solar energy devices; residential applications

A.  For taxable years through December 31, 2012, a credit is allowed against the taxes imposed by this title for each resident who is not a dependent of another taxpayer for installing a solar energy device, as defined in section 42-5001, during the taxable year in the taxpayer's residence located in this state.  The credit is equal to twenty-five per cent of the cost of the device.

B.  The maximum credit in a taxable year may not exceed one two thousand dollars.  The person who provides the solar energy device shall furnish the taxpayer with an accounting of the cost to the taxpayer.  A taxpayer may claim the credit under this section only once in a tax year and may not cumulate over different tax years total tax credits under this section exceeding, in the aggregate, one five thousand dollars for the same residence.

C.  If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the amount of the claim not used to offset taxes under this title may be carried forward for not more than five consecutive taxable years as a credit against subsequent years' income tax liability.

D.  A husband and wife who file separate returns for a taxable year in which they could have filed a joint return may each claim only one-half of the tax credit that would have been allowed for a joint return.

E.  The credit allowed under this section is in lieu of any allowance for state tax purposes for exhaustion, wear and tear of the solar energy device under section 167 of the internal revenue code.

F.  To qualify for the credit under this section the solar energy device and its installation shall meet the requirements of title 44, chapter 11, article 11.

G.  A solar hot water heater plumbing stub out that was installed by the builder of a house or dwelling unit before title was conveyed to the taxpayer does not qualify for a credit under this section, but the taxpayer may claim a credit for the device under section 43‑1090 or 43‑1176 under the circumstances, conditions and limitations prescribed by section 43‑1090, subsection C or 43-1176, subsection C, as applicable. END_STATUTE

Sec. 8.  Title 43, chapter 10, article 5, Arizona Revised Statutes, is amended by adding section 43-1085, to read:

START_STATUTE43-1085.  Credit for solar energy devices; commercial and industrial applications

A.  For taxable years beginning from and after December 31, 2005 through December 31, 2012, a credit is allowed against the taxes imposed by this title for installing one or more solar energy devices, as defined in section 42-5001, during the taxable year for commercial or industrial purposes in the taxpayer's trade or business located in this state or financed by a third-party organization.

B.  The amount of the credit is equal to ten per cent of the installed cost of the device.

C.  The person who provides or installs the device shall FURNISH the taxpayer with an accounting of the cost to the taxpayer.

D.  The taxpayer may not cumulate total tax credits under this section exceeding twenty-five thousand dollars with respect to the same building in the same year or fifty thousand dollars in total credits in any year.

E.  If the allowable credit exceeds THE taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the amount of the claim not used to offset taxes under this title may be Carried forward for not more than five consecutive taxable years as a credit against subsequent years' income tax liability.

F.  Co-owners of a business, including partners in a partnership and shareholders of an S corporation, as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest or financial investment in the system.  The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner. END_STATUTE

Sec. 9.  Title 43, chapter 11, article 6, Arizona Revised Statutes, is amended by adding section 43-1164, to read:

START_STATUTE43-1164.  Credit for solar energy devices; commercial and industrial applications

A.  For taxable years beginning from and after December 31, 2005 through December 31, 2012, a credit is allowed against the taxes imposed by this title for installing one or more solar energy devices, as defined in section 42-5001, during the taxable year for commercial or industrial purposes in the taxpayer's trade or business located in this state or financed by a third-party organization.

B.  The amount of the credit is equal to ten per cent of the installed cost of the device.

C.  The person who provides or installs the device shall furnish the taxpayer with an accounting of the cost to the taxpayer.

D.  The taxpayer may not cumulate total tax credits under this section exceeding twenty-five thousand dollars with respect to the same building in the same year or fifty thousand dollars in total credits in any year.

E.  If the allowable credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the amount of the claim not used to offset taxes under this title may be Carried forward for not more than five consecutive taxable years as a credit against subsequent years' income tax liability.

F.  Co-owners of a business, including corporate partners in a partnership, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest or financial investment in the system.  The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner. END_STATUTE

Sec. 10.  Purpose

Pursuant to section 43-223, paragraph 2, Arizona Revised Statutes, the objective of the income tax credits enacted in sections 43-1085 and 43-1164, Arizona Revised Statutes, is to stimulate the production and use of solar energy in commercial and industrial applications in this state by subsidizing the initial cost of solar energy equipment purchased and installed for those purposes.

Sec. 11.  Retroactivity

Section 43-1083, Arizona Revised Statutes, as amended by this act, and sections 43-1085 and 43-1164, Arizona Revised Statutes, as added by this act, apply retroactively to taxable years beginning from and after December 31, 2005.