Arizona Legislature Once Again Shirks its Responsibility to Review Billions of Dollars in Tax Credits
State law requires the Joint Legislative Income Tax Credit Review Committee to submit a report of its findings and recommendations to the Governor and legislative leadership by December 15. Four tax credits were scheduled for review this year, including the largest credit available to Arizonans, the Research and Development Tax Credit, which has nearly $2 billion in available credits.
Tax credits continue even when the legislative committee fails to complete its review. Since 2016, the tax credit review committee has met only once. The last time the committee met to review the four credits scheduled for this year was ten years ago.
Most of the work required of the committee is actually performed by the Joint Legislative Budget Committee (JLBC) staff with input from the Department of Revenue. Even when the committee has failed to meet, the JLBC conducts the research and produces reports. Since 2003, JLBC has made the same recommendations for improving the Research and Development Tax Credit by gathering and reporting the following data:
- Total research dollars spent in AZ each year
- Number of persons employed in research activities
- Total research payrolls
- Introduction of new products
In 2013, the committee voted to amend state law to adopt some of the performance measures. However, no legislation was ever introduced to enact those recommendations.
Arizona taxpayers have more than $2.8 billion in tax credits available to use to offset their state income tax liability. According to the Department of Revenue, only 52 of the 279 corporations that claimed the Research and Development tax credit in 2011 paid any taxes that year after using their tax credits.
“Arizonans expect our legislators to do the jobs they were elected to do,” said Joanna Mendoza, Executive Director of the Arizona Center for Economic Progress. “Especially as the state faces a $400 million budget deficit, it is vital that policymakers are making sure that these credits that divert dollars from the state budget are producing the benefits that were promised when they were put into place.”