The failure of Gov. Doug Ducey and Republican legislative leaders to appoint members to an obscure but technically important council that reviews tax issues is causing big headaches for local governments trying to administer their tax codes.
And state auditors say the reluctance to fill vacancies on the board — which hasn’t met in more than three years because it can’t muster a quorum — calls into question whether the commission must continue to exist.
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Arizona Auditor General published a scathing report this month on the failures of the Arizona Municipal Tax Code Commission. State auditors found that the commission has not been able to meet for three years because it does not have enough members to constitute a quorum. This means, they wrote, that the commission “has failed in its statutory purpose to review, hold hearings, and approve or deny changes to the Model City Tax Code,” a uniform sales law and use which provides cities and towns in Arizona with the ability to exempt certain taxes.
The commission last met in May 2019. And that poses problems for cities and businesses.
“It’s the only tool we have to deal with the issues that arise, the clarifications and simplifications that need to be made, the changes in laws passed by the legislature that affect cities and towns,” said Lee Grafstrom, analyst tax policies for the Arizona League. Big cities and towns. “Our only way to change our city and town level sales tax code is through the MTCC.”
There is a requirement for the commission to have nine members consisting of mayors or members of local governments in Arizona. Five are nominated by the Governor and two each are nominated by the President of the State Senate Speaker and the Speaker of the State House of Representatives.
At the time of the auditor’s review, the commission’s website listed four members, including Queen Creek Mayor Gail Barney, who died in June. (Barney has since been removed from the website.)
There are currently three appointed members listed on the commission’s website: Chandler council member Rene Lopez, who is also the commission’s chair, Phoenix council member Jim Waring, and Glendale mayor, Jerry Weiers. All three serve on the commission past the end of their terms, the last of which expired in October 2021. Members of state boards and commissions whose terms have expired are permitted to continue in office until they are reappointed or a successor is appointed.
Lopez was nominated by the Speaker of the House, while Waring and Weiers were both nominated by the Governor, according to a spokesperson for the Department of Revenue. Three vacancies are to be nominated by the Governor, two by the Speaker of the Senate, and one by the Speaker of the House.
A spokesman for the House of Representatives told state auditors that vacancies were not being filled because they were “occupied with other priorities.” The office did not receive responses from the Senate or Ducey.
The Arizona Mirror asked Ducey’s office and a spokesman for House Speaker Rusty Bowers when the vacancies would be filled, but neither provided an answer. A spokeswoman for Senate Speaker Karen Fann said she was “weighing her options at this time” but did not elaborate.
The lack of quorum creates what Grafstrom called a “bottleneck and a backlog of issues that need to be addressed.” Since the commission’s last meeting in May 2019, the Arizona Department of Revenue, which provides administrative and staff support to the commission, has received three code change proposals from two local organizations regarding lien tax exemptions. transactions and deductions for construction contracts for commission. revise.
But the commission failed to hold a hearing to review the proposals, violating a law requiring a public hearing to be held within six months of receiving a proposal. The commission’s inactivity risks rendering the Model City Tax Code obsolete or no longer meeting the changing needs of Arizona businesses and taxpayers.
This poses a problem: unless the responsibility for amending the model city’s tax code is transferred to another entity, no other government agency can perform the functions of the commission. Grafstrom told the Mirror that the commission is “essential to the cities and towns and taxpayers of Arizona”.
Other concerns noted during the review were that a member of the commission failed to comply with the Arizona Department of Revenue’s conflict of interest policies regarding the disclosure of material financial or decision-making interests. .
However, Jeff Gove, director of performance audit at the Arizona Auditor General, clarified that this was an issue with the member not completing the disclosure form and not a real conflict of interest. But the board has recommended to the MTCC that all members complete the required disclosure forms annually.
In an August letter, MTCC accepted the Auditor General’s recommendations which included the convening to review and consider proposed changes to the code. But this depends on the appointment of additional members to the commission. The office said it would conduct a progress check with the commission in six months to ensure implementation of the recommendations.