With a massive package of tax cuts approved last session, the business community is turning its legislative focus this year on other issues.
But that does not mean the Arizona Chamber of Commerce and Industry will not be looking for some additional tax breaks when lawmakers convene Monday.
One of the proposals is quite broad. It seeks to give businesses a longer period of time to offset profits for income tax purposes against prior losses.
Under current Arizona law, if a corporation incurs a loss in one year, it can carry that figure forward for up to five years. So a $100 million loss could eliminate future income taxes for up to $100 million of income during that period.
“Most states allow you to carry forward that loss for up to 20 years,” said chamber lobbyist Marc Osborn. “We want to have that state conform more to the national trend.”
Osborn said this is particularly important for start-up companies which tend to lose money for their first few years of operation. He said changing the law might encourage more new firms to set up shop in Arizona.
He also said existing corporations, particularly manufacturers, also need the change. He said many have been struggling and some have used the recession to retool.
“That five years isn’t enough for them to generate enough profits to take advantage of that tax benefit,” he said.
But some of what’s on the chamber’s tax agenda is much narrower in focus. In fact, one appears to be aimed at benefitting a single company: the Apollo Group, parent of the University of Phoenix.
Lawmakers already have voted to give a special tax break to manufacturers that operate in many states, letting them compute their Arizona state income taxes based solely on the percentage of their sales here. That provides a major benefit to companies like Raytheon, which manufactures missiles, and Intel, which fabricates computer chips: With most of their output exported elsewhere, that can sharply cut what they have to pay Arizona.
Now the chamber wants that expanded to the service sector.
“It’s the same concept as for a manufacturer who’s exporting a vast majority of their product out of the state,” said Suzanne Taylor, a chamber vice president. “Online learning is one example of that.”
In this case, the University of Phoenix has much of its staff, including faculty, in Arizona, with students taking courses — and sending in money — from elsewhere. If the proposal is adopted, the company would get to adjust its Arizona tax liability downward to account only for those students living here.
Taxes aside, the chamber is pushing for more legislative restrictions on the ability of agencies to enact new rules and regulations.
Osborn said that hasn’t been much of a problem since Jan Brewer took over as governor three years ago. But he said that wasn’t the case during the prior administration of Janet Napolitano.
“We learned a lot of some of the holes that were created in terms of if you have a governor that has a very aggressive regulatory agenda,” he said. Osborn said the chamber wants some limits on the process “regardless of who is the governor.”
One prime example occurred when the state Department of Environmental Quality, at Napolitano’s direction, pushed through rules to enact California-style vehicle emission standards. These set limits on greenhouse gases on cars and trucks to be sold in Arizona.
Chamber lobbyists and their allies in the auto industry fought the rules, unsuccessfully. And they specifically disputed contentions by DEQ both about how much the requirements would add to the price of the vehicle and how quickly that cost could be recouped in better mileage.
One specific change governs the conduct of the Governor’s Regulatory Review Council. Virtually all new rules have to be approved by its members.
Under the proposal, if a state agency is relying on certain scientific studies as the basis for its rules, GRRC would use the same factors as a court to determine if that evidence is reliable.
In essence, that involves a multi-part test, including:
• Can the theory be tested and has it been tested?
• Has it been subject to peer review and publication?
• What’s the known or potential error rate?
• Does it have widespread acceptance within the relevant scientific community?
Osborn said disputes over evidence will still arise even when both sides do competent studies. But he said new restrictions should prevent an agency from adopting rules solely because someone said they read a study and like the results.
Along the same lines, the chamber wants a limit on the ability of state agencies to adopt “substantive policy statements.”
These are supposed to be published interpretations of laws and formal rules. But they do not have to be approved either by the Legislature or GRRC.
Osborn said there have been situations where agencies, finding they could not get proposed rules approved, instead adopted policy statements.
“They were de facto rules,” he said. Osborn said the chamber wants to give GRRC more power to unilaterally review those statements and determine if they really are rules that should have gone through the formal process.