Post on 28-Dec-2015
TPT Reform Update
League Annual ConferenceAugust 19, 2015
Presented by
Lee Grafstrom, Tax Policy Analyst – League of AZ Cities & Towns
Ken Jones, Deputy City Manager/Chief Financial Officer – City of Tempe
TPT Reform Update
Where Are We Now?
• Delayed State Administration
• Single Audit – New rules began January 2015
• Contracting issues addressed through legislation (SB1446) – Refer to TPN 15-1
TPT Reform Update
Auditing
• Cities can do any “local” or City-Tax-Only audits
• DOR will do all “multijurisdictional” audits
• Technically, DOR “leads” all audits
• City auditors may perform any audit functions and work on behalf of DOR
TPT Reform Update
Contractor Types and Licensing• Contractors that never do MRRA work – Prime ContractorsAll new construction, home and commercial builders, road builders
– This group MUST KEEP their TPT License
• Contractors that do both MRRA and Prime ContractingMost remodelers, most subcontractors, pool contractors
– This group MUST KEEP their TPT License
• Contractors that only do MRRA workHandymen, residential electrical, plumbing, HVAC, etc. – All of the pick-up trucks with a magnet or hand painted sign on the door
– This group MAY CANCEL their TPT license(and they can also keep it if they are uncertain)
TPT Reform Update
Contracting – “MRRA”An Exclusion from Contracting
• Taxed based on materials purchase price only
• MRRA is an acronym for activities taxed on materials:
M – Maintenance, to keep things in working order
R – Repair, of an existing part or unit
R – Replacement, of the same component or system
A – Alteration, changes to existing real property
TPT Reform Update
Alteration: Residential
• Original Contract Value must be no more than 25% of the Full Cash Value per the County Assessor
• If the Full Cash Value changes between the bid and the contract, the higher value is always used
• Final Contract Value can overrun by 25%
TPT Reform UpdateAlterations: Non-ResidentialALL THREE criteria must be met:
1. Original Contract is < $750,000 AND,
2. Scope of the job ALTERS < 40% of the existing square footage, AND,
3. Scope of the job ADDS < 10% of the original square footage as new sq. ft. to the building
Roads and heavy construction jobs subject to a public procurement process are ALWAYS taxed as Contracting
TPT Reform Update
New Agreements
• New IGA between DOR and each City/Towno Major issues: Audit, Closing Agreements, Taxpayer
Confidentiality, New Reports, “SLUG”, etc.o Permanent, Required by Statute
• New MOU between DOR and Municipalitieso DOR Performance Measures/Standards/Reportso Ongoing, came out of Budget Talks
TPT Reform Update
Taxpayer Data
Match & Merge: Identifying City accounts to the DOR accounts, verifying demographics
• All City and Town taxpayers need to be represented in the DOR system
• Data Extracts – Due dates for matching to DOR; Monthly updating; Iterative process
• Must be completed before we can “Go Live”
TPT Reform Update
2016 License Renewals
• Non-program cities do their own License Renewalo Capture SSN/EIN for Match & Mergeo Renewal fees are one per owner, not locationo Overlap with State license renewal request
• DOR will handle license renewals for all Program city and town business locations
TPT Reform Update
New Reports to Cities and Towns
• Weekly Distribution• Reconciled to Cash Disbursements• By taxpayer, business location and
business activity
TPT Reform Update
New Reporting to the Cities
• New License Report• License Update Report• City Payment Journal / Summary Reports• No-Money Report• Deduction Report• Fund Distribution / Summary Reports