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SB1466 - 572R - I Ver
REFERENCE TITLE:
tax expenditures; credits; review schedule
State of Arizona
Senate
Fifty-seventh Legislature
Second Regular Session
2026
SB 1466
Introduced by
Senators
Epstein: Alston, Gabald�n, Miranda, Sundareshan
AN
ACT
amending section 42-2003, Arizona
Revised Statutes; amending title 42, chapter 5, article 1, Arizona Revised
Statutes, by adding section 42-5046; amending sections 43-221, 43-222
and 43-223, Arizona Revised Statutes; relating to tax expenditures.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 42-2003, Arizona Revised Statutes,
is amended to read:
START_STATUTE
42-2003.
Authorized disclosure of confidential information
A. Confidential information relating to:
1. A taxpayer may be disclosed to the taxpayer, its successor
in interest or a designee of the taxpayer who is authorized in writing by the
taxpayer. A principal corporate officer of a parent corporation may
execute a written authorization for a controlled subsidiary. If a
taxpayer elects to file an Arizona small business income tax return under
section 43-302, a written authorization by the taxpayer to allow the
department to disclose personal income tax information to a designee includes
the corresponding Arizona small business income tax return.
2. A corporate taxpayer may be disclosed to any
principal officer, any person designated by a principal officer or any person
designated in a resolution by the corporate board of directors or other similar
governing body. If a corporate officer signs a statement under
penalty of perjury representing that the officer is a principal officer, the
department may rely on the statement until the statement is shown to be false.�
For the purposes of this paragraph, "principal officer" includes a
chief executive officer, president, secretary, treasurer, vice president of
tax, chief financial officer, chief operating officer or chief tax officer or
any other corporate officer who has the authority to bind the taxpayer on
matters related to state taxes.
3. A partnership may be disclosed to any partner of
the partnership.� This exception does not include disclosure of confidential
information of a particular partner unless otherwise authorized.
4. A limited liability company may be disclosed to
any member of the company or, if the company is manager-managed, to any
manager.
5. An estate may be disclosed to the personal
representative of the estate and to any heir, next of kin or beneficiary under
the will of the decedent if the department finds that the heir, next of kin or
beneficiary has a material interest that will be affected by the confidential
information.
6. A trust may be disclosed to the trustee or
trustees, jointly or separately, and to the grantor or any beneficiary of the
trust if the department finds that the grantor or beneficiary has a material
interest that will be affected by the confidential information.
7. A government entity may be disclosed to the head
of the entity or a member of the governing board of the entity, or any employee
of the entity who has been delegated the authorization in writing by the head
of the entity or the governing board of the entity.
8. Any taxpayer may be disclosed if the taxpayer has
waived any rights to confidentiality either in writing or on the record in any
administrative or judicial proceeding.
9. The name and taxpayer identification numbers of
persons issued direct payment permits may be publicly disclosed.
10. Any taxpayer may be disclosed during a meeting
or telephone call if the taxpayer is present during the meeting or telephone
call and authorizes the disclosure of confidential information.
B. Confidential information may be disclosed to:
1. Any employee of the department whose official
duties involve tax administration.
2. The office of the attorney general solely for its
use in preparation for, or in an investigation that may result in, any
proceeding involving tax administration before the department or any other
agency or board of this state, or before any grand jury or any state or federal
court.
3. The department of liquor licenses and control for
its use in determining whether a spirituous liquor licensee has paid all
transaction privilege taxes and affiliated excise taxes incurred as a result of
the sale of spirituous liquor, as defined in section 4-101, at the
licensed establishment and imposed on the licensed establishments by this state
and its political subdivisions.
4. Other state tax officials whose official duties
require the disclosure for proper tax administration purposes if the
information is sought in connection with an investigation or any other
proceeding conducted by the official.� Any disclosure is limited to information
of a taxpayer who is being investigated or who is a party to a proceeding
conducted by the official.
5. The following agencies, officials and
organizations, if they grant substantially similar privileges to the department
for the type of information being sought, pursuant to statute and a written
agreement between the department and the foreign country, agency, state, Indian
tribe or organization:
(a) The United States internal revenue service,
alcohol and tobacco tax and trade bureau of the United States treasury, United
States bureau of alcohol, tobacco, firearms and explosives of the United States
department of justice, United States drug enforcement agency and federal bureau
of investigation.
(b) A state tax official of another state.
(c) An organization of states, federation of tax
administrators or multistate tax commission that operates an information
exchange for tax administration purposes.
(d) An agency, official or organization of a foreign
country with responsibilities that are comparable to those listed in
subdivision (a), (b) or (c) of this paragraph.
(e) An agency,
official or organization of an Indian tribal government with responsibilities
comparable to the responsibilities of the agencies, officials or organizations
identified in subdivision (a), (b) or (c) of this paragraph.
6. The auditor general, in connection with any audit
of the department subject to the restrictions in section 42-2002,
subsection D.
7. Any person to the extent necessary for effective
tax administration in connection with:
(a) The processing, storage, transmission,
destruction and reproduction of the information.
(b) The programming, maintenance, repair, testing
and procurement of equipment for purposes of tax administration.
(c) The collection of the taxpayer's civil
liability.
8. The office of administrative hearings relating to
taxes administered by the department pursuant to section 42-1101, but the
department shall not disclose any confidential information without the
taxpayer's written consent:
(a) Regarding income tax or withholding tax.
(b) On any tax issue relating to information
associated with the reporting of income tax or withholding tax.
9. The United States treasury inspector general for
tax administration for the purpose of reporting a violation of internal revenue
code section 7213A (26 United States Code section 7213A), unauthorized
inspection of returns or return information.
10. The financial management service of the United
States treasury department for use in the treasury offset program.
11. The United States treasury department or its
authorized agent for use in the state income tax levy program and in the
electronic federal tax payment system.
12. The Arizona commerce authority for its use in:
(a) Qualifying renewable energy operations for the
tax incentives under section 42-12006.
(b) Qualifying businesses with a qualified facility
for income tax credits under sections 43-1083.03 and 43-1164.04.
(c) Fulfilling its annual reporting responsibility
pursuant to section 41-1512, subsections U and V and section 41-1517,
subsection L.
(d) Certifying computer data centers for tax relief
under section 41-1519.
(e) Certifying applicants for the tax credit for
motion picture production costs under sections 43-1082 and 43-1165.
13. A prosecutor for purposes of section 32-1164,
subsection C.
14. The office of the state fire marshal for use in
determining compliance with and enforcing title 37, chapter 9, article 5.
15. The department of transportation for its use in
administering taxes, surcharges and penalties prescribed by title 28.
16. The Arizona health care cost containment system
administration for its use in administering nursing facility provider
assessments.
17. The department of administration risk management
division and the office of the attorney general if the information relates to a
claim against this state pursuant to section 12-821.01 involving the
department of revenue.
18. Another state agency if the taxpayer authorizes
the disclosure of confidential information in writing, including an
authorization that is part of an application form or other document submitted
to the agency.
19. The department of economic security for its use
in determining whether an employer has paid all amounts due under the
unemployment insurance program pursuant to title 23, chapter 4.
20. The department of health services for its use in
determining the following:
(a) Whether a medical marijuana dispensary is in
compliance with the tax requirements of chapter 5 of this title for the
purposes of section 36-2806, subsection A.
(b) Whether a marijuana establishment, marijuana
testing facility or dual licensee licensed under title 36, chapter 28.2 is in
compliance with the tax obligations under this title or title 43.
21. The Arizona department of agriculture for the
purpose of ascertaining compliance with the licensing provisions in title 3.
22. The office of economic opportunity for the
purpose of performing the duties and obligations to or on behalf of this state
prescribed by title 41, chapter 53.
C. Confidential information may be disclosed in any
state or federal judicial or administrative proceeding pertaining to tax
administration pursuant to the following conditions:
1. One or more of the following circumstances must
apply:
(a) The taxpayer is a party to the proceeding.
(b) The proceeding arose out of, or in connection
with, determining the taxpayer's civil or criminal liability, or the collection
of the taxpayer's civil liability, with respect to any tax imposed under this
title or title 43.
(c) The treatment of an item reflected on the
taxpayer's return is directly related to the resolution of an issue in the
proceeding.
(d) Return information directly relates to a
transactional relationship between a person who is a party to the proceeding
and the taxpayer and directly affects the resolution of an issue in the
proceeding.
2. Confidential information may not be disclosed
under this subsection if the disclosure is prohibited by section 42-2002,
subsection C or D.
D. Identity information may be disclosed for
purposes of notifying persons entitled to tax refunds if the department is
unable to locate the persons after reasonable effort.
E. The department, on the request of any person,
shall provide the names and addresses of bingo licensees as defined in section
5-401, verify whether or not a person has a privilege license and number,
a tobacco product distributor's license and number or a withholding license and
number or disclose the information to be posted on the department's website or
otherwise publicly accessible pursuant to section 42-1124, subsection F
and section 42-3401.
F. A department employee, in connection with the
official duties relating to any audit, collection activity or civil or criminal
investigation, may disclose return information to the extent that disclosure is
necessary to obtain information that is not otherwise reasonably
available. These official duties include the correct determination
of and liability for tax, the amount to be collected or the enforcement of
other state tax revenue laws.
G. Confidential information relating to transaction
privilege tax, use tax, severance tax, jet fuel excise and use tax and any
other tax collected by the department on behalf of any jurisdiction may be
disclosed to any county, city or town tax official if the information relates
to a taxpayer who is or may be taxable by a county, city or town or who may be
subject to audit by the department pursuant to section 42-6002. Any
taxpayer information that is released by the department to the county, city or
town:
1. May be used only for internal purposes, including
audits and communication with taxpayers for the purposes of the notice required
by section 9-499.15, subsection C. If there is a legitimate
business need relating to enforcing laws, regulations and ordinances pursuant
to section 9-500.39 or 11-269.17, a county, city or town tax
official may redisclose transaction privilege tax information relating to a
vacation rental or short-term rental property owner or online lodging
operator from the new license report and license update report, subject to the
following:
(a) The information redisclosed is limited to the
following:
(i) The transaction privilege tax license number.
(ii) The type of organization or ownership of the
business.
(iii) The legal business name and doing business as
name, if different from the legal name.
(iv) The business mailing address, tax record
physical location address, telephone number, email address and fax number.
(v) The date the business started in this state, the
business description and the North American industry classification system
code.
(vi) The name, address and telephone number for each
owner, partner, corporate officer, member, managing member or official of the
employing unit.
(b) Redisclosure is limited to nonelected officials
in other units within the county, city or town. The information may
not be redisclosed to an elected official or the elected official's staff.
(c) All redisclosures of confidential information
made pursuant to this paragraph are subject to paragraph 2 of this subsection.
2. May not be disclosed to the public in any manner
that does not comply with confidentiality standards established by the
department. The county, city or town shall agree in writing with the
department that any release of confidential information that violates the
confidentiality standards adopted by the department will result in the
immediate suspension of any rights of the county, city or town to receive
taxpayer information under this subsection.
H. The department may disclose statistical
information gathered from confidential information if it does not disclose
confidential information attributable to any one taxpayer.� The department may
disclose statistical information gathered from confidential information, even
if it discloses confidential information attributable to a taxpayer, to:
1. The state treasurer in order to comply with the
requirements of section 42-5029, subsection A, paragraph 3.
2. The joint legislative
income
tax
credit
expenditure
review
committee, the joint legislative budget committee staff and the legislative
staff in order to comply with the requirements of section 43-221.
I. The department may disclose the aggregate amounts
of any tax credit, tax deduction or tax exemption enacted after January 1,
1994. Information subject to disclosure under this subsection shall not be
disclosed if a taxpayer demonstrates to the department that such information
would give an unfair advantage to competitors.
J. Except as provided in section 42-2002,
subsection C, confidential information, described in section 42-2001,
paragraph 1, subdivision (a), item (ii), may be disclosed to law enforcement
agencies for law enforcement purposes.
K. The department may provide transaction privilege
tax license information to property tax officials in a county for the purpose
of identification and verification of the tax status of commercial property.
L. The department may provide transaction privilege
tax, luxury tax, use tax, property tax and severance tax information to the
ombudsman-citizens aide pursuant to title 41, chapter 8, article 5.
M. Except as provided in section 42-2002,
subsection D, a court may order the department to disclose confidential
information pertaining to a party to an action.� An order shall be made only on
a showing of good cause and that the party seeking the information has made
demand on the taxpayer for the information.
N. This section does
not prohibit the disclosure by the department of any information or documents
submitted to the department by a bingo licensee.� Before disclosing the
information, the department shall obtain the name and address of the person
requesting the information.
O. If the department is required or allowed to
disclose confidential information, it may charge the person or agency
requesting the information for the reasonable cost of its services.
P. Except as provided in section 42-2002,
subsection D, the department of revenue shall release confidential information
as requested by the department of economic security pursuant to section 42-1122
or 46-291. Information disclosed under this subsection is
limited to the same type of information that the United States internal revenue
service is authorized to disclose under section 6103(l)(6) of the internal
revenue code.
Q. Except as provided in section 42-2002,
subsection D, the department shall release confidential information as
requested by the courts and clerks of the court pursuant to section 42-1122.
R. To comply with the requirements of section 42-5031,
the department may disclose to the state treasurer, to the county stadium
district board of directors and to any city or town tax official that is part
of the county stadium district confidential information attributable to a
taxpayer's business activity conducted in the county stadium district.
S. The department shall release to the attorney
general confidential information as requested by the attorney general for
purposes of determining compliance with or enforcing any of the following:
1. Any public health control law relating to tobacco
sales as provided under title 36, chapter 6, article 14.
2. Any law relating to reduced cigarette ignition
propensity standards as provided under title 37, chapter 9, article 5.
3. Sections 44-7101 and 44-7111, the
master settlement agreement referred to in those sections and all agreements
regarding disputes under the master settlement agreement.
T. For proceedings before the department, the office
of administrative hearings, the state board of tax appeals or any state or
federal court involving penalties that were assessed against a return preparer,
an electronic return preparer or a payroll service company pursuant to section
42-1103.02, 42-1125.01 or 43-419, confidential information
may be disclosed only before the judge or administrative law judge adjudicating
the proceeding, the parties to the proceeding and the parties' representatives
in the proceeding prior to its introduction into evidence in the
proceeding. The confidential information may be introduced as
evidence in the proceeding only if the taxpayer's name, the names of any
dependents listed on the return, all social security numbers, the taxpayer's
address, the taxpayer's signature and any attachments containing any of the
foregoing information are redacted and if either:
1. The treatment of an item reflected on such a
return is or may be related to the resolution of an issue in the proceeding.
2. Such a return or the return information relates
or may relate to a transactional relationship between a person who is a party
to the proceeding and the taxpayer that directly affects the resolution of an
issue in the proceeding.
3. The method of payment of the taxpayer's
withholding tax liability or the method of filing the taxpayer's withholding
tax return is an issue for the period.
U. The department and attorney general may share the
information specified in subsection S of this section with any of the
following:
1. Federal, state or local agencies located in this
state for the purposes of enforcement of the statutes or agreements specified
in subsection S of this section or for the purposes of enforcement of
corresponding laws of other states.
2. Indian tribes located in this state for the
purposes of enforcement of the statutes or agreements specified in subsection S
of this section.
3. A court, arbitrator, data clearinghouse or
similar entity for the purpose of assessing compliance with or making
calculations required by the master settlement agreement or agreements
regarding disputes under the master settlement agreement, and with counsel for
the parties or expert witnesses in any such proceeding, if the information
otherwise remains confidential.
V. The department may provide the name and address
of qualifying hospitals and qualifying health care organizations, as defined in
section 42-5001, to a business that is classified and reporting
transaction privilege tax under the utilities classification.
W. The department may disclose to an official of any
city, town or county in a current agreement or considering a prospective
agreement with the department as described in section 42-5032.02,
subsection G any information relating to amounts that are subject to
distribution and that are required by section 42-5032.02. Information
disclosed by the department under this subsection:
1. May be used only by the city, town or county for
internal purposes.
2. May not be disclosed to the public in any manner
that does not comply with confidentiality standards established by the
department. The city, town or county must agree with the department
in writing that any release of confidential information that violates the
confidentiality standards will result in the immediate suspension of any rights
of the city, town or county to receive information under this subsection.
X. Notwithstanding any other provision of this
section, the department may not disclose information provided by an online
lodging marketplace, as defined in section 42-5076, without the written
consent of the online lodging marketplace, and the information may be disclosed
only pursuant to subsection A, paragraphs 1 through 6, 8 and 10, subsection B,
paragraphs 1, 2, 7 and 8 and subsections C, D and G of this section.� Such
information:
1. Is not subject to disclosure pursuant to title
39, relating to public records.
2. May not be disclosed to any agency of this state
or of any county, city, town or other political subdivision of this state.
END_STATUTE
Sec. 2. Title 42, chapter 5, article 1, Arizona
Revised Statutes, is amended by adding section 42-5046, to read:
START_STATUTE
42-5046.
Sunset review of transaction privilege and use tax expenditures;
report; definition
A. In addition to the
responsibilities prescribed in section 43-221, the joint legislative tax
expenditure review committee shall review each transaction privilege and use
tax expenditure under this chapter according to the same standards prescribed
in section 43-221, subsection B to determine whether the tax expenditure
should be amended, retained or repealed.� The committee shall report its
recommendations to the president of the senate, the speaker of the house of
representatives and the governor on or before December 15 of the year the
committee reviews the tax expenditure and shall provide a copy of the report to
the secretary of state and the director of the department.
B. For
the purposes of this section, "tax expenditure" means any provision
in this chapter that exempts, in whole or in part, any person, income, goods,
services or property from the impact of established taxes and tax
classifications, including deductions, subtractions, exclusions, exemptions,
allowances and credits.
END_STATUTE
Sec. 3. Section 43-221, Arizona Revised
Statutes, is amended to read:
START_STATUTE
43-221.
Joint legislative tax expenditure review committee; report
A. The joint legislative
income
tax
credit
expenditure
review
committee is established consisting of the following members:
1. Five members of the house of representatives ways
and means committee
who are
appointed by the speaker of
the house of representatives.� Not more than three appointees shall be of the
same political party.
2. Five members of the senate finance committee
who are
appointed by the president of the senate.� Not more
than three appointees shall be of the same political party.
B. The committee
shall determine the original purpose of existing tax
credits
expenditures
under
title 42, chapter 5 and chapters 10 and 11 of this title
and establish a
standard for evaluating and measuring the success or failure of
the
each
tax
credits
expenditure
. The
standard for evaluating
a
tax
credits
expenditure
may include:
1. The history, rationale and estimated revenue
impact of the
credit
tax expenditure
.
2. Whether the
credit
tax expenditure
has provided a benefit to this state including,
for corporate
income
tax credits, measurable economic
development, new investments, creation of new jobs or retention of existing
jobs in this state.
3. Whether the
credit
tax expenditure
is unnecessarily complex in the application,
administration and approval process.
C. The committee shall adopt and
review the tax expenditures under title 42, chapter 5 according to a ten-year
review schedule.
C.
D.
The
committee shall review the individual and corporate income tax credits pursuant
to the schedule prescribed in section 43-222.�
E.
The committee shall use the
joint legislative budget committee staff and may use the staff of the
department of revenue and legislative council for assistance.
D.
F.
After
completing the review process, the committee shall determine whether the
credit
tax expenditure
should be amended,
repealed or retained.� If the
credit
tax
expenditure
is recommended to be retained or amended, the committee
shall recommend
a new review
date and
that the
credit
tax
expenditure
be returned to the income tax credit review schedule
prescribed in section 43-222
or the schedule for reviewing
tax expenditures under title 42, chapter 5 adopted pursuant to subsection C of
this section
.�
G. For individual and corporate
income tax credits,
the next review year shall be
the
fifth
not later than the tenth
full calendar year
following the date the credit was reviewed.
For all
other tax expenditures, the next review year shall be not later than the tenth
full calendar year following the date the tax expenditure was reviewed.
H.
The committee shall report
its findings and recommendations to the president of the senate, the speaker of
the house of representatives and the governor by December 15 of
the
each review
year
that the committee reviews
the credit
.� The committee shall provide a copy of the report to the
secretary of state.
I. For
the purposes of this section, "tax
expenditure
":
1. Means:
(
a
) Any provision in title
42, chapter 5 or chapter 10 or 11 of this title that exempts, in whole or in
part, any person, income, goods, services or property from the impact of
established taxes and tax classifications, including deductions, subtractions,
exclusions, exemptions, allowances and credits.
(
b
) Individual and
corporate income tax credits established by chapter 10, article 5 and chapter
11, article 6 of this title.
2. does
not include deductions under section 42-5061, subsection A, paragraph 50,
section 42-5061, subsection G or the omission of any business activity from the
transaction privilege tax classifications under title 42, chapter 5, article 2.
END_STATUTE
Sec. 4. Section 43-222, Arizona Revised
Statutes, is amended to read:
START_STATUTE
43-222.
Income tax credit review schedule
The joint legislative
income
tax
credit
expenditure
review committee shall
review the following income tax credits:
1. For years ending in 0 and 5,
sections 43-1079.01, 43-1088, 43-1089.04, 43-1167.01
and 43-1175.
2. For years ending in 1 and 6,
sections 43-1072.02, 43-1074.02, 43-1075, 43-1076.01,
43-1077, 43-1078, 43-1083, 43-1083.02, 43-1162, 43-1164.03
and 43-1183.
3. For years ending in 2 and 7,
sections 43-1073, 43-1082, 43-1085, 43-1086, 43-1089,
43-1089.01, 43-1089.02, 43-1089.03, 43-1164 43-1165,
and 43-1181.
4. For years ending in 3 and 8,
sections 43-1074.01, 43-1168, 43-1170 and 43-1178.
5. For years ending in 4 and 9,
sections 43-1073.01, 43-1081.01, 43-1083.03, 43-1084,
43-1164.04, 43-1164.05 and 43-1184.
1. For years ending in 1, sections 43-1074.02,
43-1077, 43-1078, 43-1083, 43-1083.02, 43-1167.01,
43-1175 and 43-1181.
2. For years ending in 2, sections 43-1082,
43-1084, 43-1162 and 43-1165.
3. For years ending in 3, sections 43-1073,
43-1164.03 and 43-1183.
4. For years ending in 4, sections 43-1085
and 43-1089.
5. For years ending in 5, sections 43-1089.01,
43-1089.02, 43-1089.03 and 43-1164.
6. For years ending in 6, sections 43-1074.01,
43-1076.01, 43-1077 and 43-1078.
7. For years ending in 7, sections 43-1086,
43-1168, 43-1170 and 43-1178.
8. For years ending in 8, sections 43-1072.02,
43-1074, 43-1081.01 and 43-1161.
9. For years ending in 9, sections 43-1073.01,
43-1083.03, 43-1164.04, 43-1164.05 and 43-1184.
10. For years ending in 0, sections
43-1079.01, 43-1088 and 43-1089.04.
END_STATUTE
Sec. 5. Section 43-223, Arizona Revised Statutes, is amended to read:
START_STATUTE
43-223.
Requirements for new income tax credits established by the
legislature
Any new individual or corporate
income tax credit that is enacted by the legislature shall include in its
enabling legislation:
1. A specific review year for the joint legislative
income
tax
credit
expenditure
review
committee to review the credit. The specific
review year shall be the fifth full calendar year following the date the credit
is enacted.
2. A purpose clause that explains the rationale and
objective of the tax credit.
END_STATUTE
Sec. 6.
Transaction
privilege tax expenditure review schedule
Pursuant to section 43-221, subsection
C, Arizona Revised Statutes, as added by this act, the joint legislative tax
expenditure review committee shall compile and adopt a ten-year review schedule
for transaction privilege tax expenditures under title 42, chapter 5, Arizona
Revised Statutes, on or before December 15, 2026.