Tech Policy in Arizona

A review of successes and challenges in 2014 Legislature 

by Molly Castelazo

Tech-PolicyIn the course of the second regular session of the 51st Legislature, which began Jan. 13 and ended April 24, Arizona policymakers delivered some victories as well as some defeats for the Arizona Technology Council and its members. Here, we recap the key technology- and other business-related bills introduced during this legislative session.

2014 Tech-Related Legislative Victories 

Defeat of “Religious Freedom Bill”

Bill title: SB1062 (exercise of religion; state action)

Purpose: Amend existing law to give any individual or legal entity an exemption from any state law if that law substantially burdened their exercise of religion. Supporters said the legislation was intended to give business owners the right to refuse services based on religious objections (under the First Amendment right to free exercise of religion). Critics of the bill said it was designed to enable businesses to discriminate against certain groups, and targeted at the LGBT community.

Sponsor: Sen. Steve Yarbrough

Status: Vetoed by Gov. Jan Brewer on Feb. 26.

Passage of Renewable Energy Facility Tax Credit for Manufacturers

Bill title: SB1484 (tax credit; manufacturers; renewable energy)

Purpose: Creates a corporate and individual tax credit for investment in new renewable energy resources if the power will be used primarily for manufacturing. Eligibility requirements include: the taxpayer invests at least $300 million in new renewable energy facilities, at least 90% of the energy produced is used for self-consumption in the state and the energy is used primarily for manufacturing. Apple did not openly support the bill but its passage will significantly benefit the company as it builds its new facility in Mesa.

Sponsor: Sen. Bob Worsley

Status: Signed by Gov. Brewer as part of the budget package on April 11.

Passage of Energy Sales Tax Exemption for Manufacturers

Bill title: SB1413 (taxes; manufacturers’ electricity sales; exemption)

Purpose: Exempts manufacturing and smelting facilities from paying transaction privilege (sales) taxes on the electricity or natural gas they buy in order to create their products.

Prime Sponsors: Sens. Steve Yarbrough, Bob Worsley and Kimberly Yee; and Rep. Debbie Lesko

Status: Signed by Gov. Brewer as part of the budget package on April 11.

Passage of Computer Science for Math Credit

Bill title: HB2265 (computer science courses; math credit)

Purpose: Allows the State Board of Education, school district governing boards and charter school governing bodies to approve a rigorous computer science course that will satisfy a mathematics requirement. The law is essential to prepare Arizona’s next generation for work in technology fields that increasingly rely on programming skills.

Sponsor: Rep. Tom Forese

Status: Signed by Gov. Brewer on April 22.

Passage of University Intellectual Property Transfer Rules

Bill title: SB1392 (universities; intellectual property)

Purpose: Provides a framework within which a university employee can establish and maintain a substantial interest in a private entity which supplies equipment, materials, supplies or services to the university in order to facilitate the transfer of technology developed by the employee to commercial and industrial enterprises for economic development of the state and public benefit.

Prime Sponsors: Sen. Kimberly Yee and Rep. Lela Alston

Status: Signed by Gov. Brewer on April 23.

Passage of Expanded Angel Investment Tax Credit Program

Bill title: HB2272 (tax credits; capital investments; employment)

Purpose: Extends the life of the Angel Investment tax credit program by five years, increases the amount of qualified investment from $250,000 to $500,000 and provides employers a 90-day window to replace job vacancies to maintain benefits of the qualified job tax credit program.

Sponsor: Rep. Tom Forese

Status: Signed by Gov. Brewer on April 23. However, fund recapitalization must occur in the 2015 legislative session to keep the program going because the Arizona Commerce Authority will hit the $20 million cap on the program before the end of the year.

Defeat of Corporate Tax Credit Annual Reporting Requirements

Bill title: HB2586 (corporate tax credit; annual reporting)

Purpose: Would have required the Department of Revenue to submit public annual reports showing every corporation that claimed any of the following tax credits (and the amount claimed): Quality Jobs Tax Credit; Qualified Facility Tax Credit; Research and Development Tax Credit; the Credit for the Renewable Energy Industry; and the Renewable Energy Production Tax Credit.

Prime Sponsors: Reps. Darin Mitchell, John Allen, Adam Kwasman and Steve Montenegro

Status: The bill was defeated in the Senate Commerce, Energy and Military committee, and then again when there was an attempt to amend it onto the Angel Investment tax credit bill in the Senate Appropriations Committee.

Passage of Limited Liability for Space Flight Activities

Bill title: HB2163 (limited liability; space flight activities)

Purpose: Provides the statutory framework necessary for commercial space flight operators (including Tucson-based Tech Council member WorldView) to operate in Arizona. The legislation states that a space flight entity and space flight participant may enter into a legally valid liability release agreement in Arizona, thus providing insurance companies with the security they need to insure commercial space flight activities.

Prime Sponsors: Reps. Ethan Orr, Mark Cardenas, Jeff Dial, Andrew Sherwood and Victoria Steele

Status: Signed by Gov. Brewer on April 23.

2014 Tech-Related Legislative Defeats

Defeat of Refundable R&D Tax Credit Program Expansion

Bill title: HB2219 (tax credit; research activities; refunds)

Purpose: Increase the annual maximum R&D tax credit program refund from $5 million to $10 million in 2015 and $15 million in 2016 and thereafter. The Refundable R&D Tax Credit Program as it currently exists enables the Arizona Commerce Authority to award up to $5 million in income tax refunds to taxpayers for qualified research and development activities.

Sponsor: Rep. Karen Fann

Status: The bill passed out of the House of Representatives and was assigned to the Senate Finance Committee and Senate Government & Environment Committee, but neither committee heard the bill.

Defeat of State-sponsored Early Stage Fund for Technology Companies

Bill title: HB2432 (tax credit; insurance; investment fund)

Purpose: Establish an insurance premium tax credit for investments by the insurer in the newly established Technology Business Investment Fund. The bill would have created a one-to-one insurance premium tax credit of $10 million in 2015, $20 million in 2016, and $20 million in 2017. After the initial $50 million from the state was repaid, the fund would be continually replenished by new returns from existing investments.

Prime Sponsors: Reps. Bob Thorpe, Lupe Chavira Contreras, Jeff Dial, David Livingston, Ethan Orr and David Stevens

Status: The bill was assigned to the House Ways and Means Committee but was never heard.

This information was synthesized by Molly Castelazo, chief content strategist at Castelazo Content, from the “2014 Arizona Legislative Wrap-Up” prepared by Public Policy Partners.

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