A bill that offers tax credits for business owners who employ at least one individual who has a mental illness has passed the Arizona State Senate and is currently being held in the House of Appropriations.
Senate Bill 1142 establishes the credit for employing individuals with serious mental illness, allowed against individual and corporate income tax liability for taxable years 2022 through 2024.
The bill sets the credit amount $2 for each hour worked by a seriously mentally ill employee during the calendar year. It is not to exceed $20,000 per taxpayer and sets an aggregate total cap of $1 million for credits claimed by individuals and corporations. The bill outlines additional requirements for the credit.
A two-page amendment to the bill removes the requirement that the taxpayer must employ 100 employees or fewer and removes the sunset of the credit in taxable year 2024. In order to qualify for the credit, the employer must not be a regional behavioral health authority or a contracting service provider for them, the mentally ill employee must be an Arizona resident and the employee must have been unemployed for at least six months.
In the event that the credit exceeds the amount of taxes due for a taxpayer in a given year, the taxpayer is allowed to carry the tax credit over for up to five calendar years.
The bill has received a large amount of support from the community. Deborah Geesling, a mother and advocate for the bill, shared her story about her son who battled schizophrenia.
“He tried several state job programs but found them inflexible and lacking in meaning,” Geesling said. “No one enjoys sitting around all day, putting little screws away in a warehouse or scraping gum off of a sidewalk.”
Geesling said that her son eventually got a job through a friend serving at the local restaurant Fire and Brimstone and hasn’t missed a day since he started working three years ago.
“This is about more opportunity and choice,” Geesling said. “Business owners who are willing to invest their resources in training someone with (mental illness) should be allowed to small credit.”
The bill also received some pushback from senators and representatives. Sen. Juan Mendez voted against it because it does not align with his beliefs of how government should be meeting its responsibilities.
“I wish the state was able to do more instead of just leaving it up to the people who want to take advantage of a tax cut,” Mendez said.
House Member Randy Friese also said that the bill needed some revision. He asked to consider a grant program instead of a tax credit to get broader bipartisan support.
“A tax credit results in decreased revenue, a grant program requires appropriation, but it’s still a net zero difference,” Friese said.
Friese said that he understands the concern with identifying an employee as someone who qualifies as mentally ill, but if they can find a way to self-identify then a grant program can work.
Sponsor of the bill, Sen. Nancy Barto, calls it an “intentional next step of recovery for many with serious mental health illness in Arizona.”
She said that the state’s public mental health system has failed for several decades, which is one reason why a large percentage of those with mental illnesses are homeless, hospitalized dozens of times a year and eventually imprisoned.
Barto said most business owners need some initial help to take on the risk and cost to employ a person with mental illness or high needs, which entails a longer training period. The Department of Economic Security pays $35,000 per year to prepare and train individuals, but an effectively structured tax incentives can do better for less.
“Nothing builds self-esteem like learning useful skills, interacting with others in the community and having an opportunity to build lasting friendships,” Barto said. “Employment for individuals with (mental illness) can do all three.”