Legislative Victory! NAIOP scores huge win for developers with amendments to the Speculative Builders Tax! The Speculative Builders Tax is a city tax, outlined in the Model City Tax Code (MCTC), that is levied by cities on the sale of property by speculative builders. Due to broad definitions in the Model City Tax Code and the ability of each city to determine taxability, developers have faced unexpected tax bills and a lack of uniformity in tax treatment from city to city and from project to project.
Recently, NAIOP successfully achieved major changes to the MCTC that will effectively eliminate these problems. These improvements will go into effect on April 1:
Clarify that redevelopment is not taxable. Only newly constructed buildings will be subject to the tax moving forward.
Prohibit pyramiding of the tax. An owner/developer will receive a tax credit for speculative builder taxes paid by the previous owner(s).
Prior improvements to land not taxed. When a developer sells raw land on which an improvement was constructed more than 24 months prior to sale, the property will not be subject to speculative builder tax.
Commercial property shells not taxed. When a developer builds a shell building and sells the property more than 24 months after substantial completion (certificate of completion) the property will not be subject to speculative builder tax. The addition of tenant improvements after the completion of the shell will not impact the taxability.
Other priority issues for 2019 include:
Oppose legislation that could increase taxes, fees, and regulations for the commercial real estate industry. When it comes to commercial property taxes, NAIOP will work to retain improvements made in recent years and support further action to make Arizona more economically competitive.
Protect existing economic development tools so they remain availability for projects that create jobs and contribute to regional economic growth. Additionally, we will monitor legislative proposals that could impact how state universities can utilize the property they own.
Support policies that improve K-12 and post-secondary education and address labor shortages without increasing commercial property taxes.