Small Business Bill of Rights, protection of independent contractors, regulatory fairness highlight accomplishments
Victories from the 54th Arizona State Legislature (2019-2020)
Achieved Equity on Online Retail Sales Tax
NFIB successfully lobbied the 2019 state legislature for equity between sales taxes imposed on retail brick-and-mortar sales and those made by out-of-state, online retailers. The final legislation, effective October 1, simpliﬁes the Arizona retail tax base in a way that is also fair to remote sellers, many of which are small businesses. The changes included in this legislation will simplify the system that all small retail businesses face when conducting business in the state.
Stopped a Sales Tax on Services
NFIB supported Arizona’s Proposition 126, which was passed by the voters on November 6, 2018. This proposition prohibits the state and local governments from enacting new taxes, or increasing tax rates in eﬀect on December 31, 2018, on services performed in Arizona.
Victories from the 53rd Arizona Legislature (2017-2018)
Stopped Local Governments from Imposing Health-Insurance Mandates
Senate Bill 1247 is a pre-emption bill that prohibits local governments from mandating employers to provide health insurance to their employees. If left unchecked, it could have resulted in a patchwork of laws throughout the state that would have posed a hardship for many Arizona small businesses.
Won Needed Clarification for Independent Contractors
Senate Bill 1500 provides for a series of clarifications that will help ensure that a small business which contracts with independent contractors for their services will not be liable to pay unemployment insurance claims. This will ensure proper implementation of the Declaration of Independent Contractor Status rebuttable presumption that an independent contractor relationship exists.
Secured New Avenue to Petition Governor’s Regulatory Review Council
Senate Bill 1273 provides an additional avenue for small businesses to petition the Governor’s Regulatory Review Council to review:
- an existing state agency practice
- a substantive policy statement
- or a final rule or regulatory licensing requirement not specifically authorized by law based on a person’s belief that it is unduly burdensome or not demonstrated to be necessary to specifically fulfill a public health, safety or welfare concern.
Senate Bill 1273 can help small businesses fight back against unnecessary and burdensome regulations.
Obtained Return-to-Work Incentives for the Unemployed
Senate Bill 1398 discontinues unemployment benefits for individuals who do not accept an offer of employment after the first four weeks of receiving unemployment compensation benefits if the job pays at least 120 percent of the individual’s weekly unemployment benefit.
SB 1398 also includes a return-to-work program that provides a supervised training opportunity to individuals for 20 to 32 hours per week for up to six weeks through employers who volunteer to participate in the program. Individuals participating in the program continue to receive unemployment compensation. SB 1398 should ultimately help get unemployed individuals back to work thus reducing the length and time of unemployment insurance claims and hopefully reducing UI rates paid by small businesses.
Secured Workers’ Compensation Change
House Bill 2047 expands mandatory workers’ compensation coverage to all working members of limited liability companies (LLCs) with less than 50 percent membership interest in the LLC, as well as to working shareholders of corporations who own less than 50 percent of the beneficial interest in the corporation. If the individual’s membership interest or beneficial interest is 50 percent or more, then workers’ compensation coverage may be extended “on the written acceptance, by endorsement, of an application for coverage” by the working member at the discretion of the insurance carrier for the LLC.
Made Hiring of Ex-Offenders Less Legally Challenging
House Bill 2311 limits liability for employers who hire an employee or contract with an independent contractor “who has previously been convicted of a criminal offense.” However, “criminal offense” is specifically defined not to include “violent offenses and sexual offenses.” The new law also prohibits claimants from introducing “the fact that the employee or independent contractor was previously convicted of a criminal offense before the employee’s employment or independent contractor’s contractual obligation began with the employer” into evidence.
The new law also puts limits on claims that an employer failed to provide adequate supervision, a claim sometimes used in such lawsuits against employers. HB 2311 will help protect Arizona small businesses from potential lawsuits should they hire employees with prior criminal records.
Won New Law Curbing Drive-By Lawsuits
NFIB/Arizona worked with a broad coalition of business groups, advocates for the disabled, and key legislators to develop and pass legislation (Senate Bill 1406) designed to halt gross abuse of the state’s version of the civil rights law that prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public.
Throughout the first half of 2016, thousands of Americans With Disability Act-based “drive-by” lawsuits were filed in state courts against Arizona small businesses for alleged violations of ADA parking lot rules. NFIB/Arizona responded on behalf of its members by first working with Attorney General Mark Brnovich to save more than 1,100 small-business owners from having to pay a $3,500 to $7,500 shakedown settlement price to predatory lawyers.
By early 2017, state courts had ruled in favor of the targeted small businesses after the attorney general petitioned the court to intervene in all the open cases on the grounds that the state’s ADA law specifically empowers the attorney general’s office to enforce the law. Though the attorney general’s court victory was total, nothing in state law discouraged or prohibited other ‘entrepreneurial’ lawyers from developing new schemes that abuse the ADA—like non-compliant websites or other hyper-technical violations.
Before the legislative session, NFIB/Arizona proactively reached out to the disability rights community to develop comprehensive legislation that would end the abuse of the state’s ADA law. With the leadership of Rep. Maria Syms of Paradise Valley, NFIB drafted consensus legislation limiting who may file an enforcement lawsuit to an actual aggrieved person rather than literally any person in the world. The proposal also instituted tough new legal sanctions on the lawyers who abuse the ADA as a shakedown scheme, effectively removing the profit motive for drive-by lawsuits.
After two competing versions of reform stalled, compromise legislation ending drive-by ADA lawsuits in Arizona was ultimately forged and signed into law by Gov. Doug Ducey. The final legislation combines the main provisions of the Syms legislation detailed above with those of another bill authored by Sen. John Kavanagh of Scottsdale that establishes a 30-day notice and cure period allowing a business to come into compliance before any ADA-based lawsuit could be filed. A longer 60-day notice and cure period is also available to a business that is required to obtain a building permit or similar form of government approval in order to make the changes necessary to comply or cure the violation.
Obtained ADA Compliance Costs Write-Off
NFIB authored a new law (House Bill 2214) that allows small businesses to immediately write-off the costs of complying with the Americans With Disability Act on their state income taxes in the tax year they are incurred rather than over the normal 39-years allowed for amortization under the IRS tax code.
Secured Municipal Tax Reform for Property Owners
Gov. Doug Ducey signed a pair of important bills that help protect small businesses from municipalities placing the interests of the city government or favored special interests ahead of the property taxpayer. House Bill 2011 reforms county and municipal bond levies (funded by property taxes) so excess tax collections are not allowed to be higher than 10 percent of the annual payments of principal and interest. This law became necessary because some Arizona cities had allowed large fund balances to accumulate thereby allowing them to divert excess dollars to projects not included in the original bond question. Lawmakers also passed NFIB/Arizona-backed legislation (House Bill 2213) limiting the power of cities to shift the property tax burden to small businesses through the abatement of taxes for redevelopment projects.
Helped Pass Clarification of Joint Employer Relationships
A new state law backed by NFIB/Arizona (House Bill 2322) clarifies the definition of joint employment relationships for franchises and their franchisees. The legislation was in response to an Obama-era National Labor Relations Board ruling that could make a franchiser have control over a franchisee’s employment decisions, and a business hiring a subcontractor could essentially be taking on all the subcontractors’ employees as their own.
Championed Federal Balanced Budget Amendment
NFIB/Arizona successfully partnered with the Balanced Budget Amendment Task Force to make Arizona the 28th state to pass (34 states are required) the necessary resolution calling for a convention of the states to propose a federal balanced budget amendment. House Concurrent Resolution 2013 states:
That, pursuant to Article V of the Constitution of the United States, the Legislature of the State of Arizona formally applies to the Congress of the United States to call a convention of the states only for the purpose of proposing an amendment to the Constitution of the United States requiring that, in the absence of a national emergency, the total of all federal appropriations made by the Congress for any fiscal year may not exceed the total of all estimated federal revenue for that fiscal year, together with any related and appropriate fiscal restraints.
“Arizona is sending a message that if the federal government can’t get their fiscal house in order, the states will do it for them, just as our Founding Fathers envisioned,” said HCR 2013’s sponsor, Speaker of the House J.D. Mesnard of Chandler. “Arizona is at the forefront of efforts urging states to flex their muscles by exercising their constitutionally prescribed powers to push back against the federal government. I look forward to talking with our counterparts in other states to begin work organizing an Article V amendments convention that will finally put our national government on a more solvent fiscal path.”
Defeated Big Labor Agenda
NFIB/Arizona successfully opposed the perennial Big Labor agenda items from moving forward in 2017. Their top priority, the Employment Omnibus (House Bill 2347 and Senate Bill 1353), would have required all employers to create an elaborate new employee training program that includes workplace counseling, sexual harassment training, and information on relevant professional employment organizations (i.e., promote union membership); and, employers would only be allowed to terminate if the employee commits at least four violations of the employer’s policies or if they commit sexual harassment or a felony. Moreover, employers would be guilty of a Class 2 misdemeanor if they “retaliate against, harass or intimidate” someone for joining a union.
Victories from the 52nd Arizona State Legislature (2015-2016)
Certainty for 1099 Independent Contractors
NFIB-authored legislation provides an optional Declaration of Independent Business Status (DIBS) process to ensure state regulators won’t declare a small business’ 1099 independent contractors misclassified and retroactively declare them W-2 employees. (House Bill 2114)
Opportunity to Correct Regs Violations
NFIB-authored legislation firmly establishes a cooperative and pro-compliance approach to enforcing Arizona’s regulations by requiring regulators to offer small-business owners an opportunity to correct a rule violation before issuing any citation or fine. (House Bill 2337)
Exempt Rule-Making Loophole Closed
NFIB-authored legislation closes a dangerous loophole that allowed state bureaucracies to create new regulations under an exemption from the Administrative Procedures Act and have them stay in place for five years without any review, public comment, small business impact report and other oversight controls. (Senate Bill 1388)
Regulatory Overreach by Cities Slapped Back
NFIB successfully supported a series of bills reining in the regulatory overreach of Arizona municipalities in redefining what goes into calculating the minimum wage (House Bill 2579); requiring predictive scheduling penalties on businesses (House Bill 2191); imposing recycling fees, mandating energy-usage reporting and banning retail plastic bags (House Bills 2130 & 2131); and, devastating the ability of pet stores to operate and survive (Senate Bill 1248).
Won Landmark Regulatory Reform
NFIB worked with Rep. Warren Petersen, chairman of the House Commerce Committee, to pass House Bill 2213, landmark legislation making Arizona the first state in the nation to require its inspectors and auditors to offer small-business owners an opportunity to correct a rule violation before issuing any citation or fine.
Reduced Section 179 Equipment Expensing
NFIB teamed up with Gov. Doug Ducey’s office to convert an unexpected and late-developing $30 million revenue surplus into a tax cut for small business by matching the federal Section 179 equipment expensing and bonus depreciation provisions in Arizona’s tax code for 2014.
Held Workers’ Compensation Premiums Down
NFIB helped pass a pair of workers’ compensation tweaks that should serve to keep small business’ premiums down. House Bill 2346 makes it clear in state law that workers’ compensation benefits are not required to cover medical marijuana costs, and House Bill 2331 requires workers’ compensation claimants to sign-off on knowing that making false statements to attain benefits opens them to penalties, fines and forfeiture of benefits.
Repealed Regressive Tax on Unemployment Insurance Premiums
Working with legislative leaders and the governor’s office, NFIB accomplished a long-held policy objective of Arizona small-business owners by getting a repeal of the 0.1 percent tax on unemployment insurance premiums included in the state budget deal (Senate Bill 1471). This regressive tax was paid by private sector employers—95 percent of whom are small businesses—to fund a job-training program. The $7-per-employee tax collected approximately $13 million annually for the fund, which had accumulated a positive balance of more than $50 million due in large part to small businesses’ inability to qualify for it or see sufficient value in seeking grants from the program.
Leveled the Playing Field in Tax Disputes
What if you were given a choice between settling a tax judgment you knew was unjust or fighting and beating the taxman in court only to be left poorer for it in the end? Not much of a choice is it? That was the situation in Arizona until NFIB helped pass House Bill 2131 this session raising the amount of fees for expert witnesses, certified public accountants, enrolled agents, attorneys and other representatives that taxpayers may reimburse when they prevail in a tax dispute with the state or locality.
Lengthened Time for Unemployment Insurance Challenges
NFIB worked with the Arizona Restaurant Association to pass House Bill 2347 giving employers more time to protest an unworthy claim of unemployment benefits by adding the word “business” before “days” in the law. This one-word change has the effect of excluding Sundays and state holidays from the calculation of the 10-day deadline employers have to register a challenge to benefits eligibility.
Made Small Businesses Eligible for Corporate Tuition Tax Credits
Small-business owners who file their income taxes as S corporations are now eligible to participate in a dollar-for-dollar state tax credit program previously available only to taxpayers who file as C corporations. These credits are for donations to K-12 school tuition organizations (STO) that use at least 90 percent of their contributions to provide scholarships or tuition grants to low-income, disabled or displaced children. Prior to passage of House Bill 2153, S corporation filers were only eligible to participate in the individual STO program that limits their donation/credit to $1,067 annually or $2,134 for a married couple filing jointly (2015). The only limit under the separate corporate STO program is an aggregate cap of $43 million (2015) in credits for the entire program. Under the NFIB-supported new law, S corporation taxpayers may now apply for credit pre-approval from the Arizona Department of Revenue which awards credit certificates on a first-come-first-serve basis until all the $43 million is allocated.
Obtained Greater County Rule-Making Transparency
NFIB helped pass Senate Bill 1298 that requires counties to adopt rulemaking transparency procedures like the state’s, which include public notice and comment periods and voids any new county regulation that is created without complying with this new law.
Secured Municipal Uniformity in Bag Bans
NFIB worked with grocers, restaurants and commercial real estate allies to relieve city councils of the burden of having to contemplate adopting bans on certain types of containers like plastic bottles or bags as well as Styrofoam—the devil’s packaging. Several municipalities have indulged in passing these scientifically dubious regulations that threaten to create a maddening patchwork of conflicting rules across the state that increases costs on small businesses while making efforts to attract out-of-state investment and job creation much more difficult. Senate Bill 1241 effectively preempts local governments from issuing their own bans.
Succeeded in Ballot-Clarity Efforts
Arizona’s taxing authorities will no longer be able to muddle the language explaining local ballot questions to hide the fact that the measure raises taxes. NFIB worked with the Arizona Tax Research Association to help pass House Bill 2109 and Senate Bill 1184 requiring that the actual ballot language and explanatory information provided in the official publicity pamphlets for municipal elections to approve a bond, sales tax or property tax measure must specifically tell the voters that the new spending initiative would be paid for with higher taxes and how much those new taxes amount to for the typical taxpayer.
Won a Small Business Seat on the Regulatory Review Council
In his State of the State Address, Governor Ducey laid down a challenge. “[W]e have a Regulatory Review Council that’s stacked with lobbyists? Who’s advocating for the small business person, the startup, the entrepreneur who can’t afford an attorney to navigate the endless maze of bureaucracy? I ask that you pass a bill requiring a small business owner on that Council and I’ll sign it.” NFIB made sure the echo of his challenge reverberated throughout the legislative session and eventually prevailed with passage of House Bill 2526.
Victories from the 51st Arizona State Legislature (2013-2014)
Won a Small Business Bill of Rights for Arizona Entrepreneurs
NFIB/Arizona-written legislation sponsored by state Rep. Tom Forese makes real progress to end the pernicious practice of “regulator bullying” employed by some state inspectors, auditors and enforcement officers against small business owners. The Small Business Bill of Rights legislation, House Bill 2260, which was signed into law by Gov. Jan Brewer, requires each state agency that conducts audits, inspections or other regulatory enforcement actions to create and post on their website a Small Business Bill of Rights outlining the due process rights of small businesses and specify the information and notice requirements for all licenses, fees, inspections, rule-making and written comments to which small businesses are entitled. Also, for the first time, these due process rights are extended to small-business owners subject to audits from the Arizona Division of Occupational Safety and Health (ADOSH) and the Arizona Department of Economic Security’s Office of Employment and Rehabilitation Services, which administers unemployment insurance claims.
Forced Registrar of Contractors to Stay in Their Lane
Sen. Gail Griffin sponsored NFIB/Arizona-backed legislation that blunts an alarming power grab from the agency charged with licensing contractors. Senate Bill 1160 allows the Registrar of Contractors to suspend or revoke a contractor’s license only after being notified by the Department of Revenue that a licensee has failed to pay taxes collected in the course of doing business as a licensed contractor. Prior to the session, the Registrar had posted on their website a new condition of licensure or renewal that required contractors to sign over to the agency access to all their state tax records so the Registrar could independently determine if the contractor had paid all their taxes regardless if they were incurred in the course of doing business as a contractor or not. No provision was made for the due process rights afforded to every taxpayer by the Department of Revenue during their audit procedures or for the security of the tax records once obtained by the Registrar. This action by a typically inert state agency is an excellent example in glorious Technicolor of monumental overreach by the bureaucracy asserting enhanced and expanded powers over the public in the absence of a legislative mandate.
Preserved Right to Use Independent Contractors
House Bill 2279 pushes back on the relentless efforts of the unions and the Left to restrict small businesses’ use of independent contractors. The latest example: NFIB/Arizona members who contract with school districts, municipalities and independent groups to provide referees, umpires and game officials to youth and amateur sports leagues came under attack recently by the state agency that administers Arizona’s unemployment insurance system. Referees and umpires have always been compensated as independent contractors and therefore do not have taxes and other charges withheld from their pay—that was until the Arizona Department of Economic Security (DES) reversed this traditional interpretation and began reclassifying them as regular employees. DES then began declaring judgments against the small businesses that provide these game officials work for back unemployment taxes along with penalties and interest.
In response, NFIB/Arizona and Rep. Tom Forese drafted legislation to check this unreasonable bureaucratic over-reach that would have effectively abolished the business model of an entire industry and thereby devastate Arizona’s youth and amateur sports programs and their tens-of-thousands of contests every year.
Strengthened the Regulatory Bill of Rights
House Bill 2443, sponsored by Rep. Justin Olson, makes further refinements and enhancements to the Regulatory Bill of Rights applied to municipal, county and flood control districts that NFIB helped pass in 2011. The original legislation ensured fair and open regulation by local governments by recognizing the right of the regulated:
- to receive information and notice regarding inspections
- to not have a local government base a licensing decision in whole or in part on factors which are not specifically authorized by statute
- to have a license application approved within a predetermined period of time
- to receive written or electronic notice regarding the denial of a license application.
New provisions found in HB 2443 include prohibiting a local government from requesting or initiating discussions with a person about waiving that person’s rights under the Regulatory Bill of Rights. The new law also includes refinements to licensing time frames, requests for corrections to application as well as application fees and withdrawals.
Secured a Reduction in Sales Tax Reporting
NFIB/Arizona spearheaded passage and enactment of House Bill 2288, a reduction in the frequency of sales tax filings that had stalled for many years in past legislatures. Sponsored by Rep. Debbie Lesko and Sen. Steve Farley, it raises the thresholds that trigger how often a business owner must remit transaction privilege (or sales) tax revenues.
Repealed State Income Tax Bracket-Creep for 2014
As part of the state budget agreement, Arizonans will no longer be at risk of being pushed into a higher income tax bracket simply because their earnings kept pace with inflation—at least for this year. After vetoing a permanent indexing measure last session, Governor Brewer signed House Bill 2377, sponsored by Rep. Justin Olson, that adjusts the income dollar amounts for each individual income tax rate bracket for tax year 2014 by the annual change in the consumer price index. This “bracket creep” is one of the most unfair features of a tax code lousy with unfair features and permanently repealing it remains a top legislative priority going forward for NFIB/Arizona.
Corrected Oversight in Small Business Lease Tax Exemption
House Bill 2324 by Rep. Eddie Farnsworth, corrects an oversight when Arizona exempted corporations from the local commercial lease tax when the corporation rents to one of its subsidiaries – defined as each corporation sharing at least 80 percent common ownership. With support from NFIB, HB 2324 expands the exemption to include leases between “affiliated companies, businesses or persons” who also meet the 80 percent ownership interest standard. This means a small business that is organized as a pass through entity like an S corp, partnership or limited liability company is treated no differently than a C corporation when leasing to another one of their businesses. The classic example of this is when a small-business person owns a multi-unit building where, for tax and liability purposes, the real estate is owned by a separate entity from one or more tenant businesses that are also owned by the property owner. Sen. Michele Reagan also introduced this session similar legislation to HB 2324 that passed the Senate unanimously before giving way to the House version.
Helped End Back-Door Property Taxation
Rep. Justin Olson sponsored the new law that closes a gaping loophole is state statute that the Town of Paradise Valley abused to levy a property tax in all but name without first asking their voters to create the tax as all new property taxes must be under Arizona law. Specifically, House Bill 2378 prohibits a municipality from levying or assessing a municipal-wide tax or fee against property owners based on the size or value of their property in order to fund any public service. NFIB supported passage of HB 2378 throughout its legislative hurdles.
Stopped Double-Dipping of Severance Pay and UI Benefits
NFIB supported House Bill 2115 by Rep. Karen Fann, which ensures that a former employee must exhaust all their severance pay before becoming eligible to receive unemployment benefits and begin drawing down the employer’s reserve account. The new law became necessary due to a recent Arizona court case (Wynn v. Arizona Department of Economic Security) that ruled a worker was due unemployment benefits beginning two weeks after of separation from his job despite receiving a $75,600 lump sum (equivalent to 12 months’ pay) severance from his former employer. Specifically, the new law clarifies that for unemployment insurance eligibility purposes “severance pay” includes all amounts that an employer pays to an employee due to the employee’s resignation, termination or participation in an exit incentive program or inclusion in a reduction in force or in consideration for the employee’s release of actual or potential claims for the termination of employment. “Severance pay” does not include any amounts the employer pays for health benefits or pursuant to any employee benefit plan.
Unemployment Burden of Proof
House Bill 2147, sponsored by Rep. Warren Petersen, reverses the Department of Economic Security’s practice of routinely waiving through as eligible all claims for unemployment benefits.
This forced employers to have to pursue the lengthy appeals process to protect their unemployment accounts from being charged for the benefits paid to these erroneously eligible claimants. Legally, eligibility is based on a worker being unemployed through no fault of their own and available for work. Workers who are fired for cause or abandon their jobs have never been eligible for benefits and requiring employers to make an extraordinary effort to ensure this has been a top concern of small-business owners.
Erroneous unemployment insurance benefit payments are epidemic in Arizona. Over the last three years (July 1, 2009 to June 30, 2012), Arizona has paid out more than $2 billion ($2,028,983,482) in unemployment benefits for the state’s portion of unemployment insurance benefits (the first 26 weeks). A report from the U.S. Department of Labor’s Benefit Accuracy Measurement program found that during that same period, Arizona has made $391 million ($391,807,767) in improper payments or over-payments for a 19.31-percent rate of all benefits paid. Passage of HB 2147 and other reforms being pursued in other legislation this session are part of NFIB/Arizona’s effort to improve this dreadful state of affairs.
Won Workers’ Compensation Reciprocity
Senate Bill 1148, sponsored by Sen. John McComish, clarifies that a worker employed in Arizona, who leaves the state temporarily for work incidental to that employment, and receives a job-related injury, is entitled to Arizona workers’ compensation benefits. The bill exempts out-of-state workers and employers from Arizona workers’ compensation statutes if certain requirements are met. This legislation became necessary due to reciprocity issues regarding claim filings that attempt to use other states’ definitions of what is a compensable claim when Arizona statutes do not cover such a claim.
Won Criminal Background Checks on Obamacare Navigators
Arizona now requires all Obamacare navigators operating in this state to pass a criminal background check and be licensed by the state’s insurance regulator.
House Bill 2508 sponsored by Reps. Phil Lovas and Paul Boyer was a top priority for NFIB/Arizona after a pre-session member survey found 81 percent in favor of state regulation and criminal background checks for navigators while only 7 percent opposed and 12 percent were unsure.