2023 Arizona Revised Statutes › Title 43 - Taxation of Income › § 43-1089.02 - Credit for donation of school site

43-1089.02.
Credit for donation of school site
A. A credit is allowed against the taxes imposed by this title in the amount of thirty percent of the value of real property and improvements donated by the taxpayer to a school district or a charter school for use as a school or as a site for the construction of a school.
B. To qualify for the credit:
1. The real property and improvements must be located in this state.
2. The real property and improvements must be conveyed unencumbered and in fee simple,  except that:
(a) The conveyance must include as a deed restriction and protective covenant running with title to the land the requirement that as long as the donee holds title to the property the property shall be used only as a school or as a site for the construction of a school,  subject to subsection I or J of this section.
(b) In the case of a donation to a charter school,  the donor shall record a lien on the property as provided by subsection J,  paragraph 3 of this section.
3. The conveyance shall not violate section 15-341,  subsection D or section 15-183,  subsection U.
C. For the purposes of this section,  the value of the donated property is the property's fair market value as determined in an appraisal as defined in section 32-3601 that is conducted by an independent party and that is paid for by the donee.
D. If the property is donated by co-owners,  including partners in a partnership and shareholders of an S corporation as defined in section 1361 of the internal revenue code,  each donor may claim only the pro rata share of the allowable credit under this section based on the ownership interest. If the property is donated by a husband and wife who file separate returns for a taxable year in which they could have filed a joint return,  they may determine between them the share of the credit each will claim. The total of the credits allowed all co-owner donors may not exceed the allowable credit.
E. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income,  or if there are no taxes due under this title,  the taxpayer may carry the amount of the claim not used to offset the taxes under this title forward for not more than five consecutive taxable years' income tax liability.
F. The credit under this section is in lieu of any deduction pursuant to section 170 of the internal revenue code taken for state tax purposes.
G. On written request by the donee,  the donor shall disclose in writing to the donee the amount of the credit allowed pursuant to this section with respect to the property received by the donee.
H. A school district or charter school may refuse the donation of any property for purposes of this section.
I. If the donee is a school district:
1. The district shall notify the division of school facilities within the department of administration and furnish the division with any information the division requests regarding the donation. A school district shall not accept a donation pursuant to this section unless the division has reviewed the proposed donation and has issued a written determination that the real property and improvements are suitable as a school site or as a school. The division shall issue a determination that the real property and improvements are not suitable as a school site or as a school if the expenses that would be necessary to make the property suitable as a school site or as a school exceed the value of the proposed donation.
2. The district may sell any donated property pursuant to section 15-342,  but the proceeds from the sale shall be used only for capital projects. The school facilities oversight board shall direct the division of school facilities within the department of administration to withhold an amount that corresponds to the amount of the proceeds from any monies that would otherwise be due the school district from the board pursuant to section 41-5741.
J. If the donee is a charter school:
1. The charter school shall:
(a) Immediately notify the sponsor of the charter school by certified mail and shall furnish the sponsor with any information requested by the sponsor regarding the donation during the ten-year period after the conveyance is recorded.
(b) Notify the sponsor by certified mail,  and the sponsor shall notify the state treasurer,  in the event of the charter school's financial failure or if the charter school:
(i) Fails to establish a charter school on the property within forty-eight months after the conveyance is recorded.
(ii) Fails to provide instruction to pupils on the property within forty-eight months after the conveyance is recorded.
(iii) Establishes a charter school on the property but subsequently ceases to operate the charter school on the property for twenty-four consecutive months or fails to provide instruction to pupils on the property for twenty-four consecutive months.
2. The charter school,  or a successor in interest,  shall pay to the state treasurer the amount of the credit allowed under this section,  or if that amount is unknown,  the amount of the allowable credit under this section,  if any of the circumstances listed in paragraph 1,  subdivision (b) of this subsection occurs. If the amount is not paid within one year after the treasurer receives notice under paragraph 1,  subdivision (b) of this subsection,  a penalty and interest shall be added,  determined pursuant to title 42,  chapter 1,  article 3.
3. A tax credit under this section constitutes a lien on the property,  which the donor must record along with the title to the property to qualify for the credit. The amount of the lien is the amount of the allowable credit under this section,  adjusted according to the average change in the GDP price deflator,  as defined in section 41-563,  for each calendar year since the donation,  but not exceeding twelve and one-half percent more than the allowable credit. The lien is subordinate to any liens securing the financing of the school construction. The lien is extinguished on the earliest of the following:
(a) Ten years after the lien is recorded. After that date,  the charter school,  or a successor in interest,  may request the state treasurer to release the lien.
(b) On payment to the state treasurer by the donee charter school,  or by a successor in interest,  of the amount of the allowable credit under this section,  either voluntarily or as required by paragraph 2 of this subsection. After the required amount is paid,  the charter school or successor in interest may request the state treasurer to release the lien.
(c) On conveyance of fee simple title to the property to a school district.
(d) On enforcement and satisfaction of the lien pursuant to paragraph 4 of this subsection.
4. The state treasurer shall enforce the lien by foreclosure within one year after receiving notice of any of the circumstances described in paragraph 1,  subdivision (b) of this subsection.
5. Subject to paragraphs 3 and 4 of this subsection,  the charter school may sell any donated property.