Approved Resolution, Changes to the Model City Tax Code:"2014-2018 Legislative Actions Amendment"
Article IV - Privilege Taxes
Sec. ___-480. Utility services.
(a) The tax rate shall be at an amount equal to _______ percent (___%) of the gross income from the business activity upon every person engaging or continuing in the business of producing, providing, or furnishing utility services, including electricity, electric lights, current, power, gas (natural or artificial), or water to:
(1) consumers or ratepayers who reside within the City.
(2) (Reserved)
++(Local Option #GG:
(2) consumers or ratepayers of this City, whether within the City or without, to the extent that this City provides such persons utility services, excluding consumers or ratepayers who are residents of another city or town which levies an equivalent excise tax upon this City for providing such utility services to such persons.)++
(b) Exclusion of certain sales of natural gas to a public utility. Notwithstanding the provisions of subsection (a) above, the gross income derived from the sale of natural gas to a public utility for the purpose of generation of power to be transferred by the utility to its ratepayers shall be considered a retail sale of tangible personal property subject to Sections ___-460 and ___-465, and not considered gross income taxable under this Section.
(c) Resale utility services. Sales of utility services to another provider of the same utility services for the purpose of providing such utility services either to another properly licensed utility provider or directly to such purchaser's customers or ratepayers shall be exempt and deductible from the cross income subject to the tax imposed by this Section, provided that the purchaser is properly licensed by all applicable taxing jurisdictions to engage or continue in the business of providing utility services, and further provided that the seller maintains proper documentation, in a manner similar to that for sales for resale, of such transactions.
(d) Tax credit offset for franchise fees. There shall be allowed as an offset any franchise fees paid to the City pursuant to the terms of a franchise agreement. However, such offset shall not be allowed against taxes imposed by any other Section of this Chapter. Such offsets shall not be deemed in conflict with or violation of subsection ___-400(b)
.
**(Model Option #13:
(d) (Reserved))**
(e) The tax imposed by this Section shall not apply to sales of utility services to a qualifying hospital, qualifying community health center or a qualifying health care organization, except when sold for use in activities resulting in gross income from unrelated business income as that term is defined in 26 U.S.C. Section 512.
(f) The tax imposed by this Section shall not apply to sales of natural gas or liquefied petroleum gas used to propel a motor vehicle.
(g) The tax imposed by this Section shall not apply to:
(1) revenues received by a municipally owned utility in the form of fees charged to persons constructing residential, commercial or industrial developments or connecting residential, commercial or industrial developments to a municipal utility system or systems if the fees are segregated and used only for capital expansion, system enlargement or debt service of the utility system or systems.
(2) revenues received by any person or persons owning a utility system in the form of reimbursement or contribution compensation for property and equipment installed to provide utility access to, on or across the land of an actual utility consumer if the property and equipment become the property of the utility. This exclusion shall not exceed the value of such property and equipment.
(h) The tax imposed by this Section shall not apply to sales of alternative fuel as defined in A.R.S. Section 1-215, to a used oil fuel burner who has received a Department of Environmental Quality permit to burn used oil or used oil fuel under A.R.S. Section 49-426 or A.R.S. Section 49-480.
(i) The tax imposed by this Section shall not apply to sales or other transfers of renewable energy credits or any other unit created to track energy derived from renewable energy resources. For the purposes of this paragraph, "renewable energy credit" means a unit created administratively by the corporation commission or governing body of a public power utility to track kilowatt hours of electricity derived from a renewable energy resource or the kilowatt hour equivalent of conventional energy resources displaced by distributed renewable energy resources.
(j) The tax imposed by this Section shall not apply to the portion of gross proceeds of sales or gross income attributable to transfers of electricity by any retail electric customer owning a solar photovoltaic energy generating system to an electric distribution system, if the electricity transferred is generated by the customer's system.
(k) (Reserved)
++(Local Option #PP:
(k) The tax imposed by this Section shall not apply to the gross proceeds of sales or gross income derived from THE BUSINESS OF PRODUCING, PROVIDING OR FURNISHING electricity, ELECTRIC LIGHTS, CURRENT, POWER, natural gas OR LIQUEFIED PETROLEUM GAS SOLD to:
(1) a QUALIFIED manufacturing or smelting BUSINESS. A UTILITY THAT CLAIMS THIS DEDUCTION SHALL REPORT EACH MONTH, ON A FORM PRESCRIBED BY THE DEPARTMENT OF REVENUE, THE NAME AND ADDRESS OF EACH QUALIFIED MANUFACTURING OR SMELTING BUSINESS FOR WHICH THIS DEDUCTION IS TAKEN. This paragraph APPLIES to gas transportation services. For the purposes of this paragraph:
(A) "Gas transportation services" means the services of transporting natural gas to a natural gas customer or to a natural gas distribution facility if the natural gas was purchased from a supplier other than the utility.
(B) "Manufacturing" means the performance as a business of an integrated series of operations that places tangible personal property in a form, composition or character different from that in which it was acquired and transforms it into a different product with a distinctive name, character or use. Manufacturing does not include job printing, PUBLISHING, PACKAGING, mining, generating electricity or operating a restaurant.
(C) "QUALIFIED MANUFACTURING OR SMELTING BUSINESS" MEANS ONE OF THE FOLLOWING:
(i) A BUSINESS THAT MANUFACTURES OR SMELTS TANGIBLE PRODUCTS IN THIS STATE, OF WHICH AT LEAST FIFTY-ONE PERCENT OF THE MANUFACTURED OR SMELTED PRODUCTS WILL BE EXPORTED OUT-OF-STATE FOR INCORPORATION INTO ANOTHER PRODUCT OR SOLD OUT-OF-STATE FOR A FINAL SALE.
(ii) A BUSINESS THAT DERIVES AT LEAST FIFTY-ONE PERCENT OF ITS GROSS INCOME FROM THE SALE OF MANUFACTURED OR SMELTED PRODUCTS MANUFACTURED OR SMELTED BY THE BUSINESS.
(iii) A BUSINESS THAT USES AT LEAST FIFTY-ONE PERCENT OF ITS SQUARE FOOTAGE IN THIS STATE FOR MANUFACTURING OR SMELTING AND BUSINESS ACTIVITIES DIRECTLY RELATED TO MANUFACTURING OR SMELTING.
(iv) A BUSINESS THAT EMPLOYS AT LEAST FIFTY-ONE PERCENT OF ITS WORKFORCE IN THIS STATE IN MANUFACTURING OR SMELTING AND BUSINESS ACTIVITIES DIRECTLY RELATED TO MANUFACTURING OR SMELTING.
(v) A BUSINESS THAT USES AT LEAST FIFTY-ONE PERCENT OF THE VALUE OF ITS CAPITALIZED ASSETS IN THIS STATE, AS REFLECTED ON THE BUSINESS'S BOOKS AND RECORDS, FOR MANUFACTURING OR SMELTING AND BUSINESS ACTIVITIES DIRECTLY RELATED TO MANUFACTURING OR SMELTING.
(D) "Smelting" means to melt or fuse a metalliferous mineral, often with an accompanying chemical change, usually to separate the metal.
(2) A BUSINESS THAT OPERATES AN INTERNATIONAL OPERATIONS CENTER IN THIS STATE AND THAT IS CERTIFIED BY THE ARIZONA COMMERCE AUTHORITY PURSUANT TO A.R.S. SECTION 41-1520.)++