HB4026 • 2026

public infrastructure improvements; distribution limit

HB4026 - public infrastructure improvements; distribution limit

Taxes

Passed Legislature

This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.

Sponsor: Michael Carbone, Janeen Connolly, David Livingston, Tony Rivero, Jeff Weninger, Justin Wilmeth, Frank Carroll
Last action: 2026-03-10
Official status: Senate second read
Effective date: Not listed

Plain English Breakdown

The official text confirms the cap increase and percentage change but does not specify a calendar year for the general effective date other than noting the bill passed in 2026.

HB4026: Changes to Tax Funds for Manufacturing Infrastructure

This law raises the total limit on tax money given to local governments for building infrastructure near new factories, increases the amount of investment required from those factories, and changes how much funding each project can receive.

What This Bill Does

Increases the total cap on state transaction privilege tax revenue paid to cities, towns, and counties from $200 million to $300 million for infrastructure projects supporting manufacturing facilities.
Expands the definition of public infrastructure to include wastewater reclamation, recycling, treatment, and storage facilities in addition to water systems and roads.
Lowers the maximum percentage of project costs that state tax revenue can cover from 80 percent to 75 percent.
Requires cities, towns, or counties to provide at least 5 percent of the funding for these infrastructure improvements themselves.
Raises the minimum capital investment a manufacturing facility must make to qualify for funds to $3 billion in large counties and $100 million in smaller counties.

Who It Names or Affects

Cities, towns, and counties that receive state tax revenue for infrastructure projects near factories.
Manufacturing facilities planning construction or expansion in Arizona.
The Arizona Department of Revenue (ADOR) which manages agreements and posts documents online.
The State Treasurer who distributes the funds based on new rules.

Terms To Know

Transaction Privilege Tax (TPT): A tax collected from businesses, including prime contractors building factories, which is used to fund local infrastructure projects under this law.
Public Infrastructure: Facilities like water systems, roads, wastewater treatment plants, and recycling centers that support the activities of a manufacturing facility.
Capital Investment: Money spent by a factory to buy land, build structures, or purchase machinery required for its operations.

Limits and Unknowns

The law becomes effective on the general effective date but is retroactive to July 1, 2026.
Funding stops if a local government receives enough money to cover 75 percent of project costs or if the $300 million total cap is reached.

Amendments

These notes stay tied to the official amendment files and metadata from the legislature.

SENATE - Appropriations, Transportation and Technology (Adopted)

Adopted

Plain English: This amendment changes how much money local governments can receive to build infrastructure for new factories and raises the amount those factories must invest.

The maximum total funding available each year is lowered from $200 million to $75 million through June 30, 2026.
Starting after June 30, 2026, a new yearly limit of $100 million plus any unused funds from previous years will apply.
The state can now pay up to 80% of the cost for infrastructure improvements instead of only 75%.
Factories must promise to invest at least $3 billion in large counties or $100 million in smaller counties, which is higher than before.

The official text provided ends abruptly while describing rules for recovering money from tax refunds, so the full details of that rule are unknown.
Some specific legal terms like 'construction phase services' and references to other state laws were not defined in this document.

SENATE - Appropriations, Transportation and Technology (Proposed)

Proposed

Plain English: This amendment changes how much money local governments can receive to build infrastructure for new factories and raises the amount of investment those factories must promise.

The maximum total funding available each year is lowered from $200 million to $75 million through June 30, 2026.
Starting after June 30, 2026, the annual funding limit changes to a new formula based on previous spending rather than a fixed dollar amount.
The minimum investment required from factories in large counties increases from $500 million to $3 billion.
The minimum investment required from factories in smaller counties doubles from $50 million to $100 million.

The official text provided is cut off at the end, so some details about how money must be returned or recovered are incomplete.
Some specific rules regarding local government funding contributions were removed from the bill but may still exist in other parts of the law not shown here.

SENATE - Finance (Adopted)

Adopted

Plain English: This amendment changes how much money cities and counties can receive for building infrastructure near new factories by lowering the total funding cap and raising the amount of investment required from factory owners.

The maximum yearly state funding limit is lowered to $75 million per year through June 30, 2026, instead of a previous higher total or different structure.
Starting after June 30, 2026, the annual funding cap changes to $100 million plus any unused money from earlier years.
The required investment by factory owners increases significantly: factories in large counties must now invest at least $3 billion instead of $500 million.
Factories in smaller counties must now invest at least $100 million, which is double the previous requirement of $50 million.

The provided text ends abruptly while describing how money would be recovered from cities if tax audits happen later.
Some specific details about how unused funds are calculated after 2026 depend on complex math not fully explained in simple terms here.

SENATE - Finance (Proposed)

Proposed

The maximum yearly state funding limit is lowered to $75 million per year through June 30, 2026, instead of a previous higher total or different structure.
Starting after June 30, 2026, the annual funding cap changes to $100 million plus any unused money from earlier years.
The required investment by factory owners increases significantly: factories in large counties must now invest at least $3 billion instead of $500 million.
Factories in smaller counties must now invest at least $100 million, which is double the previous requirement of $50 million.

The official text provided ends abruptly while describing how money would be recovered if tax refunds happen, so that specific rule cannot be fully explained.
Some technical details about exactly how unused funds from past years are calculated for the post-2026 cap may require reading the full untruncated law.

Bill History

2026-03-10 Senate
Senate second read
2026-03-09 Senate
Senate Rules: None
2026-03-09 Senate
Senate Appropriations, Transportation and Technology: DPA
2026-03-09 Senate
Senate Finance: DPA
2026-03-09 Senate
Senate first read
2026-03-04 Senate
Transmitted to Senate
2026-03-03 House
House third read passed
2026-03-03 House
House committee of the whole
2026-02-24 House
House minority caucus
2026-02-24 House
House majority caucus
2026-02-23 House
House consent calendar
2026-02-10 House
House second read
2026-02-09 House
House Rules: C&P
2026-02-09 House
House Commerce: DP
2026-02-09 House
House first read

Official Summary Text

HB4026 - 572R - Senate Fact Sheet

Assigned to
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PASSED BY COMMITTEE

ARIZONA STATE SENATE

Fifty-Seventh
Legislature, Second Regular Session

AMENDED

FACT SHEET FOR
H.B. 4026

public
infrastructure improvements; distribution limit

Purpose

Retroactive to July 1, 2026, increases the aggregate cap to $300 million
on the amount of state prime contracting transaction privilege tax (TPT)
revenues that must be paid to cities, towns and counties for public
infrastructure improvements for the benefit of a manufacturing facility. Increases
the minimum capital investment that a manufacturing facility must make before a
city, town or county may qualify for state prime contracting TPT revenue
distributions, modifies the public infrastructure funding apportionment and expands
the definition of
public infrastructure
to include wastewater reclamation,
recycling, treatment and storage facilities.

Background

TPT is imposed on the gross receipts of taxable businesses, with the
exception of prime contractors. The tax base for the prime contracting
classification is 65 percent of the gross proceeds of sales or gross income
derived from the business and certain amounts must be deducted before computing
the tax base. The TPT rate for prime contracting is 5.6 percent of the tax base
(A.R.S. ��
42-5010
;

42-5010.01
;
and
42-5075
).

From October 1, 2013, through September 30, 2033, the State Treasurer
must pay a city, town or county the total amount of state prime contracting TPT
revenues derived from contracts to construct buildings and associated
improvements for the benefit of a manufacturing facility for the purpose of
funding up to 80 percent of the cost of the public infrastructure improvements.

Public infrastructure
means: 1) water production, delivery and disposal
facilities; 2) wastewater production, delivery and disposal facilities; and 3)
roads that are necessary to support the activities of the manufacturing
facility. The aggregate amount of state prime contracting TPT revenues paid to
all cities, towns and counties for public infrastructure improvements may not
exceed $200 million. For a city, town or county to qualify for state prime
contracting TPT revenue distributions, the manufacturing facility must agree to
make a capital investment of at least: 1) $500 million in a county with a
population of more than 800,000 persons; or 2) $50 million in a county with a
population of fewer than 800,000 persons.

After receiving a manufacturing facility's sworn certification of the
initial investment, the city, town or county must enter into an agreement with the
Arizona Department of Revenue (ADOR) that includes specified public
infrastructure project and funding information. On notification by ADOR, the
State Treasurer must cease paying state prime contacting TPT revenues to the
city, town or county if: 1) the city, town or county has received 80 percent of
the cost of the public infrastructure improvements; or 2) the $200 million
aggregate cap has been met (
A.R.S.

� 42-5032.02
).

If increasing
the aggregate cap on the amount of state prime contracting TPT revenues that
must be paid to cities, towns and counties results in the payment of state
prime contracting TPT revenues to cities, towns and counties in an amount that
would otherwise exceed $200,000,000 and be directed to the state General Fund,
there may be a fiscal impact to the state General Fund.

Provisions

1.

Adds $100 million to the aggregate cap on the state prime contracting
TPT revenues paid to all cities, towns and counties for public infrastructure
improvements for the benefit of a manufacturing facility beginning on July 1,
2026.

2.

Expands the definition of
public infrastructure
to include wastewater
reclamation, recycling, treatment and storage facilities.

3.

Decreases, from 80 percent to 75 percent, the percentage of state prime
contracting TPT revenues that must be paid to a city, town or county to fund
the cost of public infrastructure improvements for the benefit of a
manufacturing facility.

4.

Requires a participating city, town or county to provide at least 5
percent of the funding for the cost of public infrastructure improvements for
the benefit of a manufacturing facility.

5.

Increases
the minimum capital investment that a manufacturing facility must make before a
city, town or county may qualify for state prime contracting TPT revenue
distributions to:

a)

$3 billion, rather than $500 million, if the manufacturing facility is
located in a county with a population of 800,000 persons or more; or

b)

$100
million, rather than, $50 million, if the manufacturing facility is located in
a county with a population of fewer than 800,000 persons.

6.

Requires the agreement between ADOR and the city, town or county where
the manufacturing facility is located to provide for an analysis to the Arizona
Commerce Authority of the anticipated direct and indirect revenues the state
will receive as a result of constructing the manufacturing facility.

7.

Requires ADOR to post development agreements and intergovernmental
agreements entered into with a city, town or county on ADOR's website.

8.

Makes conforming changes.

9.

Becomes effective on the general effective date, retroactive to July 1,
2026.

Amendments Adopted by
Committees

1.

Reinstates the aggregate cap and increases the cap to $300 million.

2.

Increases the minimum capital investment that must be made by each
manufacturing facility to qualify for state prime contracting TPT revenue
distributions.

3.

Decreases, from 80 percent to 75 percent, the percentage of state prime
contracting TPT revenues that must be paid to a city, town or county for the
benefit of a manufacturing facility to fund the cost of public infrastructure
improvements.

4.

Requires a participating city, town or county to provide at least 5
percent of the funding for the cost of public infrastructure improvements.

5.

Applies the modified cap and investment and funding requirements
retroactively to July 1, 2026.

House Action

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Prepared by
Senate Research

March 18, 2026

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Current Bill Text

Read the full stored bill text

HB4026 - 572R - H Ver

House Engrossed

public infrastructure
improvements; distribution limit

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HOUSE BILL 4026

AN
ACT

amending section 42-5032.02,
Arizona Revised Statutes; relating to transaction privilege tax.

(TEXT OF BILL BEGINS ON NEXT PAGE)

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

Section 1. Section 42-5032.02, Arizona Revised
Statutes, is amended to read:

START_STATUTE
42-5032.02.

Distribution of revenues for city, town or county infrastructure
improvements related to manufacturing facilities; definitions

A. Subject to subsection B of this section, from and
after September 30, 2013 through September 30, 2033, the state treasurer
shall pay in monthly increments a city, town or county up to the amount determined
under subsection C of this section for public infrastructure improvements for
the benefit of a manufacturing facility.

B. The state treasurer shall not make any payments
under subsection C of this section until both of the following apply:

1. Ten percent of the qualifying capital investment
that is certified under subsection D of this section and that constitutes
construction phase services, as defined in section 42-5075, has been made
by the manufacturing facility.

2. From and after June 30, 2014.

C. The total amount paid to a city, town or county
under subsection A of this section shall not exceed the total amount of state
transaction privilege tax revenues collected under section 42-5010,
subsection A from persons conducting business under section 42-5075
derived from contracts to construct buildings and associated improvements for
the benefit of a manufacturing facility or eighty percent of the total cost of
the public infrastructure improvements, whichever is less. The total
amount paid to all cities, towns and counties under this subsection shall not
exceed a maximum of
$200,000,000

$75,000,000 each fiscal year
.

D. Within one hundred eighty days after the
commencement of the construction of buildings and associated improvements for
the benefit of a manufacturing facility that will require a city, town or
county to make infrastructure improvements, the manufacturing facility shall
file a sworn certification with the Arizona commerce authority and submit a
copy of this sworn certification to the applicable city, town or county that
the manufacturing facility agrees to either:

1. Make at least $500,000,000 in capital investment
if the manufacturing facility is located in a county that has a population of
eight hundred thousand persons or more.

2. Make at least $50,000,000 in capital investment
if the manufacturing facility is located in a county that has a population of
less than eight hundred thousand persons.

E. The certification under subsection D of this
section shall contain a sworn statement or certification, signed by an officer
of the manufacturing facility under penalty of perjury, that the information
contained is true and correct according to the best belief and knowledge of the
person submitting the information after a reasonable investigation of the
facts.

F. Before submitting the certification to the
Arizona commerce authority, the manufacturing facility and the city, town or
county must enter into a written agreement that:

1. Identifies and states the cost of the public
infrastructure improvements that will be constructed.

2. Identifies the sources of monies, including
monies received pursuant to this section, that will be used to pay for the
public infrastructure improvements.

G. On receipt of the sworn certification from a
manufacturing facility pursuant to subsection D of this section, the city, town
or county shall enter into a written agreement with the
department. This agreement and any amendments or changes to the
agreement shall:

1. State the cost of the public infrastructure
improvements and separately identify the particular improvements that will be
made.

2. State that the monies received under this section
will be used exclusively to pay for public infrastructure improvements that are
necessary to support the activities of the manufacturing facility.

3. State that the city, town or county will commit
all of its portion of the revenue received pursuant to section 42-5029,
subsection D derived from contracts subject to section 42-5075 to
construct buildings and associated improvements for the benefit of the
manufacturing facility for public infrastructure improvements that benefit the
manufacturing facility.

4. State that the city, town or county will
immediately notify the department when monies received under this section
exceed
eighty percent of the cost of the infrastructure
improvements

the total amount the city, town or county
may receive pursuant to subsection C of this section
and will return the
amount of the excess to the state treasurer for deposit in the state general
fund.

5. Stipulate the actual amount of the construction
funding that will be derived from sources other than this state.

6. Identify the persons who will be prime
contractors on the construction of buildings and associated improvements for
the benefit of a manufacturing facility and state that each prime contractor
has been notified as to which portion of the contractor's income shall be
separately identified to the department pursuant to section 42-5075,
subsection H.

7. State that the city, town or county agrees that
any amounts paid by the department to a prime contractor as identified under
paragraph 6 of this subsection resulting from an audit adjustment or claim for
credit or refund of taxes described in subsection C of this section shall be
recovered by the department from the city, town or county by reducing the
amount paid to the city, town or county under section 42-5029 from monies
designated as distribution base in the month next succeeding the month in which
the adjustment or claim is paid.

8. State that the city, town or county agrees that
the department will use the amounts subject to any distribution required under
subsection A of this section in calculating the maximum amount set by
subsection C of this section.

9. State that the city, town or county agrees that
if, on notification by the department, the state treasurer ceases payments
because of the condition described in subsection H of this section, the city,
town or county has no claim to additional payments if the department
subsequently pays amounts to a prime contractor identified in an agreement with
any city, town or county, as described in paragraph 6 of this subsection, due
to an audit adjustment or claim for credit or refund of taxes described in
subsection C of this section.

10. provide an analysis of the
anticipated direct and indirect revenues this state will receive as a result of
constructing the manufacturing facility to the Arizona commerce authority.

10.

11.
Provide
any other information deemed necessary by the department.

H. On notification by the department, the state
treasurer shall cease payments under subsection A of this section if either of
the following occurs:

1. The city, town or county has received monies that
meet or exceed eighty percent of the cost of the public infrastructure
improvements that are necessary to support the activities related to the
manufacturing facility as described in the written agreement pursuant to
subsection G of this section.

2. The total amount subject to any distribution
required under subsection A of this section has met the maximum amount set by
subsection C of this section
as of JUNE 30 of each year
.

i. If there are monies eligible to be
paid to a city, town or county pursuant to this section that exceed the maximum
amount set by subsection C of this section for the fiscal year, the department
shall retain those monies and direct the state treasurer to resume paying those
monies to the city, town or county the following fiscal year.� The state
treasurer shall make payments pursuant to this section in the order in which
the expense is submitted for reimbursement.

J. The department shall post
development agreements and intergovernmental agreements entered into with a
city, town or county pursuant to this section on the department's website.

I.
K.
For
the purposes of this section:

1. "Associated improvement" includes any
public infrastructure improvement that is made for the benefit of the
manufacturing facility outside of the parcel or parcels of real property where
the manufacturing facility is located.

2. "Capital investment" means an
expenditure to acquire, lease or improve property that is used for the benefit
of a manufacturing facility, including land, buildings, machinery and fixtures.

3. "Manufacturing facility":

(a) Means an establishment that is engaged in the
mechanical, physical or chemical transformation or fabrication of materials,
substances or components into new products in this state, that is classified
within sections 31 through 33 inclusive of the 2007 edition of the North
American industry classification system as published by the national technical
information service of the United States department of commerce and that agrees
to either:

(i) Make at least $500,000,000 in capital investment
if the manufacturing facility is located in a county that has a population of
eight hundred thousand persons or more.

(ii) Make at least $50,000,000 in capital investment
if the manufacturing facility is located in a county that has a population of
less than eight hundred thousand persons.

(b) Does not include mining, milling or smelting
mineral ore or generating electricity.

4. "Population" means the population
determined in the most recent United States decennial census or the most recent
special census as provided in section 28-6532.

5. "Public infrastructure" means water
production, delivery and disposal facilities, wastewater production,
reclamation, recycling, treatment, storage,
delivery and
disposal facilities and roads that are necessary to support the activities of
the manufacturing facility.
END_STATUTE