The Arizona House gave final approval Monday to a bill granting new tax breaks of $50 million over three years for insurance companies that invest in high technology companies.
The bill being pushed by Republican House Speaker Andy Tobin is designed to funnel savings that insurance companies receive from lowered premium taxes into a new high-tech fund overseen by the Arizona Commerce Authority.
The bill gives insurers a credit against their premium taxes of up to $10 million in the budget year beginning July 1 and $20 million in the next two years for the investments. They can carry unused credits forward for 15 years if they can’t use it in the year it’s earned.
“What we’re trying to do is figure out ways to move capital into investment,” Tobin said after the 45-15 House vote. The money would be used by the Commerce Authority to help high-tech businesses relocate or expand. The state would recover the first $50 million in credits from profits earned from their investments and split any additional revenue, but there’s no guarantee any of the money would be repaid.”
“It’s an interesting dynamic, we’ve not tried that before,’ Tobin said.
A second tax credit bill that had been set for its initial approval was pulled from consideration Monday. That bill, by Rep. Tom Forese and backed by Tobin, would lower the property tax rate assessed on fixtures and other so-called “personal” property for businesses that expand and add jobs. It was amended in committee to give a new tax break for the self-employed. The value of the business tax break isn’t known, but the self-employed reduction is valued at $58 million a year.
The amendment caused some heartburn and Forese said more changes would be needed before he tries again to bring it to the floor.
Together, the bills build on previous Republican efforts to make Arizona’s tax climate more business friendly.
But they come before the bulk of a Republican-championed 2011 economic development package comes on line. Business tax cuts valued at $538 million when fully in place in 2018 and a capital gains tax cut benefiting high-income Arizonans valued at $108 million are key parts of that package.
They also come during a tight budget year when a temporary sales tax that brought in about $1 billion a year and helped the state avoid more budgets cuts is set to expire.
Minority Democrats generally oppose additional tax cuts, arguing the state needs to restore funding to schools and services cut during the Great Recession.
Still, the bill that passed Monday drew bipartisan support, mainly because it was targeted and did not contain across-the-bard tax cuts.