Fennemore Craig Client Alert: Model City Tax Code Gets Proposed Edits

2019 Speculative Builder Amendment and New Sections Presented
PHOENIX - April 9, 2019 - PRLog -- Fennemore Craig, a leading Mountain West law firm shares perspective on the recent updates to the Model City Tax Code, which will impact developers in Arizona. At the February 22, 2019 meeting of the Municipal Tax Code Commission (MTCC) meeting, cities and towns presented an amendment to the Model City Tax Code (MCTC), the "2019 Speculative Builder Amendment". The purpose of this amendment is to address certain issues in recent bills at the legislature by resolving the concerns of proponents, along with clean-up edits, and the transfer of selected Regulations to the main body of the MCTC as new Sections.

WHAT TO KNOW

All changes are effective on April 1, 2019
Definition changes for:

Improved Real Property - to clarify that only the first sale after the Certificate of Occupancy or similar document is issued is subject to tax, and any subsequent improvements, remodeling or expansion of the original building is not considered taxable as reconstruction or the creation of a new structure.
Partially Improved Residential Real Property -- removing the word "residential" in several places and making grammatical edits, opening up the exemption for sales between two developers for both residential and commercial builders, including those who only do non-structural improvements to vacant land or add water, power, and streets.

Eliminated:
• Local Option #M which allowed a deduction from the selling price for the cost of land.
• The requirement that developers attach a written statement to their tax return for any sale to another developer.

Added:
• An exemption for in-place leases allowing a reduction in total selling price for the present value of obligated future lease receipts.
• Language clarifying that a tax credit is allowed for any Spec builder tax paid by a prior owner if a subsequent sale is subjected to the tax.
• "Qualified Trust" to the list of persons who can make a bona fide sale of a home and thus be exempt from the tax, provided at least one resident in the home is a beneficiary of the trust.

• Review timing for projects governed by the Model City Tax Code
For projects impacted after April 1, work with a legal practitioner to review new language accordingly

For expanded detail on the updates, review the entire Client Alert.
For additional background on the alert authors, see the bios for Pat Irvine (https://www.fclaw.com/people/attorneys/e-j/irvine-patrick) and Jay Kramer (https://www.fclaw.com/people/attorneys/k-n/kramer-jay-s).

Contact
Robyn Itule
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Tags:Taxes, Real Estate, Arizona
Industry:Legal
Location:Phoenix - Arizona - United States
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