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Updated Apr 9, 2014 - 9:16 am

Arizona Legislature sets sights on tax cuts for Apple

PHOENIX — Just a day after adopting a $9.23 billion state budget, the
Arizona House and Senate gave final approval Tuesday to a pair of tax cuts for
manufacturers.

One of the cuts would give a multimillion-dollar tax credit to
the world’s biggest corporation to install and run a solar facility.

The Legislature approved Senate Bill 1413, pushed by Gov. Jan Brewer,
eliminating sales taxes on electricity purchased by manufacturers and mining
smelters. It is expected to cost the state general fund $17 million a year.
Brewer called for the elimination of the tax in her State of the State address
in January, saying it was needed to make Arizona more competitive and draw new
manufacturing to the state.

Many lawmakers believe the other bill, SB 1484, specifically targets Apple
Inc.’s planned Mesa sapphire glass manufacturing plant. It would provide a $5
million tax credit if a company installs at least $300 million in renewable
power capacity to supply its plant.

That proposal drew criticism from conservative Republicans in the House, who
said it was picking winners and losers among industries and subsidizing
renewable energy.

“We as conservatives have got to step away from this crony capitalist style of
development,” said Rep. Adam Kwasman, R-Oro Valley. “We cannot afford to pick
winners and losers in industry. We believe in low taxes for everybody. We
believe in simple rules for everybody.”

The so-called “Apple bill” could apply to at least one other manufacturer, if
one materializes.

Sen. Bob Worsley, R-Mesa, carried the Apple bill, saying he did it because the
Arizona Commerce Authority had made a commitment to the company as part of the
deal to draw them here.

“I believe that they did the right thing to bring Apple here,” Worsley said
in a recent interview. “And the dollars are very small in the whole scheme of
things with Apple being in the Valley. They could have gone to Texas, they could
have gone other places and we wanted them here. It’s a good decision.”

The commerce authority, a quasi-private agency that acts as the state’s
economic development arm, is charged with luring companies to the state and has
a series of incentive packages at its disposal.

In a statement, the Commerce Authority said it was not about one company, and
not an ACA bill.

“As we understand it, the bill would make a tax credit available to all
manufacturers meeting the bill’s criteria, and it is a response to Arizona’s
renewable energy industry as well as an increasing number of manufacturers who
seek to offset their power consumption through the production of renewable
energy used to power their manufacturing operations in our state.”

But many lawmakers pointed to how specific the language is, including a huge
new investment for a power facility, with 90 percent of the electricity used at
the recipient’s own facility.

“This is a tax break for, may I say, one specific business, and maybe one
more,” Rep. Debbie Lesko, R-Peoria. “And with that, I vote no.”

Lawmakers often mention Tesla Motors Inc., which is looking at different states
for a new battery plant, as the other company.

Tech giant Apple said in November it will open a manufacturing plant in the
Phoenix suburb of Mesa that will eventually employ 700 workers and provide
material used in its iPhone 5 cameras and fingerprint reading sensors. The
company said is expanding its U.S. manufacturing operations in a former First
Solar plant in Mesa. The city southeast of Phoenix already hosts a long list of
high-tech manufacturing firms.

In addition to the $10 million grant to Apple, the contractor that will run
sapphire-creating equipment at the plant may also qualify for a refundable
income tax credit equal to 10 percent of its capital investment, or $20,000 per
job, and for job training cash. At most, the tax credit is worth $14 million if
700 jobs are created, the agency said. GT Advanced Technologies plans to install
and own furnaces to create sapphire at the plant.

Andrew Wilder, Brewer’s spokesman, said she had taken no position on Worsley’s
bill. He said she pushed for the elimination of the sales tax on
manufacturer’s power use. Companies look closely at power costs, and only a
handful of other states tax it for industries, he said.

“Gov. Brewer’s mission all along has been to position Arizona for the
future,” Wilder said. “She said in her State of the State address that
manufacturing is more than just an industry. Manufacturing drives jobs, and
Arizona needs more of it and Arizona can be more competitive.”

Both bills passed with strong bipartisan majorities in each chamber, despite
the defection of roughly half the Republican caucus on the Apple bill in the
House. They now head to Brewer for action.

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