Title
2023 Intergovernmental Agreement with the Arizona Department of Revenue Providing for Uniform Administration of the City’s Transaction Privilege Tax (Resolution 22171)
Description
Request to adopt a resolution to authorize approval of an intergovernmental agreement between the City of Phoenix and the Arizona Department of Revenue regarding the uniform administration, licensing, collection, and auditing of transaction privilege tax, use tax, severance tax, jet fuel excise and use tax, and rental occupancy taxes imposed by the State or cities or towns.
Report
Summary
This intergovernmental agreement (IGA) was negotiated with the Arizona Department of Revenue (ADOR) and the Attorney General’s office by the City Tax Administrators Council (CTAC) Rulings Group which includes the League of Arizona Cities and Towns, and with the assistance of several City attorneys and a multitude of tax and information technology experts from many municipalities.
Local Transaction Privilege Tax (TPT) administration is governed by Arizona Revised Statute 42-6001. This statute requires the ADOR to administer the transaction privilege and use taxes imposed by all cities and towns and to enter into an IGA with each city and town to clearly define the working relationship between the ADOR and Arizona cities and towns.
This IGA establishes the framework for collaboration between the ADOR and the cities and towns for every aspect of TPT administration. It provides the principles, requirements, and responsibilities of both the city or town and the ADOR, and it defines the many specific operational processes related to tax collection, the protection of taxpayer confidentiality, and information security.
The 2023 IGA replaces the 2019 IGA and represents a complete rewrite of the prior IGA. Great emphasis was placed on improving the thoroughness and consistency of the IGA as well as minimizing the need to look through multiple sections to answer a single question or resolve a specific issue.
This is a high-level summary of the most notable changes compared to the 2019 IGA:
- The new IGA adds or clarifies the definitions of various terms including city services, collection, development fees, options chart, primary point of contact (PPOC), profile, independent contractor, State tax, tax information, authorized access lists, and qualified recipients of information, and all defined terms are now capitalized throughout the IGA for easy recognition.
- Taxpayer confidentiality measures have been significantly strengthened, placing additional emphasis on the protection of tax information provided under Arizona Revised Statutes, and refining the details surrounding authorized access, disclosure restrictions, and remedies for improper disclosure such as the possible suspension of tax information sharing.
- New procedures have been established for both the cities and the ADOR to regularly maintain the authorized access lists that control who can see detailed taxpayer information, including clarifying confidentiality training requirements and adding that all responsibilities and restrictions apply to independent contractors in the same manner as they apply to regular employees.
- The new IGA addresses the developing scope of city assistance offered to the ADOR with the addition of delinquent tax collection activities and new collections reports along with new language that covers cities assisting with reviews of selected refund claims. In addition to the services that have long been provided by city and town auditors, these new areas expand the ways that cities and towns can partner with the ADOR, leveraging municipal personnel to help the ADOR achieve more efficient operations.
- The 2023 IGA also provides new or improved coverage for several miscellaneous topics including the city or town's responsibility for reviewing its profile and the model city tax code website; workers' compensation issues when sharing office space with other jurisdictions; the expiration, termination, or amendment of the IGA; and the disclosure of aggregated financial information.
- Finally, this version rewrote much of Appendix A regarding the handling and protection of confidential taxpayer information. Changes were made relative to identifying retention requirements and authorized disposal methods, critical information security protocols, and various software system requirements that cities and towns must follow to protect any confidential taxpayer data stored on their computer systems.
Financial Impact
This agreement will not result in any budgetary impact to the City of Phoenix.
Department
Responsible Department
This item is submitted by City Manager Jeffrey Barton and the Finance Department.