Bill
HB 4151
HB 4151 continues IT system modernization funding by local fees and state transfers, capping total ITSPF fees for FY27 and defining apportionment and use rules.
HB 4151 (57th Legislature, 2nd Regular Session) – Arizona
Topic: Revenue; integrated tax system modernization fund (ITSPF)
Overview
HB 4151 amends Section 42-5041 and related provisions to extend, refine, and constrain the fees assessed on local governments for the Department of Revenue’s Integrated Tax System Modernization Project (ITSPF). The bill sets maximum total annual fees, prescribes apportionment rules based on prior-year distributions, and clarifies transfers and use of ITSPF funds. It also establishes session-law-based fiscal targets for FY27 and outlines mechanisms for collection, withholding, and fund administration.
Purpose and intent
- To continue funding the state’s integrated tax system modernization project (ITSPF) through fees charged to local governments (counties, cities, towns, councils of governments, and certain regional transportation authorities) and through designated state revenue sources.
- To limit the total ITSPF fee burden in FY2026-2027 and prescribe how the fees are allocated among local governments in counties with populations over 800,000.
- To clarify transfer mechanics from existing state revenue streams to the ITSPF and ensure funds are used exclusively for ITSP modernization costs.
Key provisions and changes
- Expanded assessment window: The ITSPF fees will be assessed and collected from June 30, 2022 through June 30, 2029 (extended from 2028 initially).
- Who pays: Fees assessed to counties, cities, towns receiving state shared revenues; councils of governments receiving certain state revenues; and regional transportation authorities in counties with populations > 800,000.
- Timing and delinquency: Fees are due by October 31 each year; if unpaid by December 31, the state treasurer will withhold the delinquent amount from respective distributions to the local government or RTA until paid.
- Cost-sharing flexibility: Local governments may pay ITSPF fees from any designated revenue source.
- Funding transfers: The department must transfer actual, reasonable ITSPF upgrade costs from specified state funds (42-5010.01, 42-5155, and 42-5452) to the ITSPF to cover project costs.
- Fund administration: ITSPF fund is established and administered by the Revenue Department; funds are subject to legislative appropriation and used solely for ITSPF-related administrative, development, and operating costs.
- Legislative intent (session law constraints for FY27):
- Cap on total ITSPF fees for FY27: up to $6,286,300 total across all counties, cities, towns, councils of governments, and RTAs in the defined population area.
- Apportionment framework: Fees for each category (counties, cities/towns, councils of governments, RTAs) are allocated based on relative prior-year distributions from specified statutes, with adjustments tied to population and distribution data in counties over 800,000.
- Specific FY27 transfer caps: ITSPF transfer from certain funds not to exceed $762,300 (Section E) and $169,800 (Section F) for FY27.
- Population baselines: Apportionment uses U.S. Census-derived population figures, as currently defined in statute, for counties and municipalities.
Affected parties
- Local governments: 15+ jurisdictions including counties, cities, towns, and councils of governments within Arizona.
- Regional transportation authorities in Maricopa County (and similarly situated authorities in high-population counties).
- Arizona Department of Revenue (administration of the ITSPF and project fund).
- State treasurer: Withholding authority for delinquent ITSPF payments.
Procedural and timeline notes
- Effective window for assessments: 2022–2029 (extending the project funding period).
- Annual assessment timing: Fees assessed by Oct 31; delinquency remedies apply if paid after Dec 31.
- FY27 budgeting: Legislation provides explicit caps and apportionment rules for the 2026-2027 fiscal year (the FY27 period corresponding to the FY2026-2027 budget year), with subsequent years following established apportionment formulas.
Context and purpose in budget process
- The bill aligns with ongoing state budgeting practices to reconcile ITSPF funding with the FY2027 budget and to codify the mechanism for funding IT system modernization through a combination of local fees and targeted state transfers.
- It preserves the dedicated ITSPF fund for project-related expenses and tightens the fiscal guardrails around fee levels and distribution.
Compiled from official sources — confirm details with the bill’s official record.
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