Assigned to COM AS VETOED
ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
VETOED
AMENDED
FACT SHEET FOR S.B. 1658
critical infrastructure; prohibited agreements
Purpose
Prohibits a business or government entity in Arizona from entering into an agreement with
a company if the company would be able to access or control critical infrastructure in Arizona and
is owned or controlled by citizens or the government of, or headquartered in, China, Iran, North
Korea or Russia. Exempts a company from the outlined prohibition if the federal Committee on
Foreign Investment in the United States (CFIUS) determines that there are no unresolved national
security concerns.
Background
The Department of Public Safety (DPS) operates a statewide critical infrastructure
information system and makes critical infrastructure information available to local, state, federal
and tribal law enforcement agencies, certain state agencies and other organizations, as necessary
to safeguard personnel and property in Arizona. The critical infrastructure information program is
implemented based on the state-wide assessment of threat and vulnerability by the Arizona
Counterterrorism Information Center under DPS (A.R.S. §§ 41-1801 and 41-1803).
Current statute stipulates that loans, guarantees, investment management agreements and
investment contracts that are entered into by the Public Safety Personnel Retirement System Board
of Trustees (Board) are contracts memorializing obligations or interests in securities that the Board
has concluded, after thorough due diligence, do not involve investments in Sudan or Iran or
otherwise provide support to terrorists or in any way facilitate illegal immigration into the United
States (A.R.S. § 38-848). Additionally, a public entity is prohibited from entering into or renewing
a contract with a company to acquire or dispose of services, supplies, information technology,
goods or construction unless the contract includes a written certification that the company does
not currently, and agrees for the duration of the contract that it will not, use: 1) the forced labor of
ethnic Uyghurs in the People's Republic of China; 2) any goods or services produced by the forced
labor of ethnic Uyghurs in the People's Republic of China; or 3) any contractors, subcontractors
or suppliers that use the forced labor or any goods or services produced by the forced labor of
ethnic Uyghurs in the People's Republic of China (A.R.S. § 35-394).
The federal Foreign Investment and National Security Act of 2007 authorizes CFIUS to
conduct national security investigations of covered transactions that would result in the control of
any critical infrastructure of or within the United States by or on behalf of any foreign person.
CFIUS may take any necessary actions to protect U.S. national security if CFIUS determines that
the transaction could impair national security and the impairment has not been mitigated. The U.S. FACT SHEET – Amended/Vetoed
S.B. 1658
Page 2
President, on CFIUS's recommendation, may suspend or prohibit any covered transaction if there
is credible evidence that the transaction threatens U.S. national security. Covered transactions
include, but are not limited to, investments by a foreign person in any unaffiliated U.S. business
that owns, operates, manufactures or services critical infrastructure (50 U.S.C. § 4565).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
1. Prohibits a business or government entity in Arizona from entering into an agreement involving
critical infrastructure in Arizona with a company if both of the following apply:
a) under the agreement, the company, directly or remotely, would be able to access or control
critical infrastructure in Arizona, except for access that is specifically allowed for product
warranty and support purposes; and
b) the company is owned by or controlled by either of the following:
i. citizens of China, Iran, North Korea or Russia; or
ii. a company or other entity, including a governmental entity, that is owned or controlled
by citizens of or is directly controlled by the government of China, Iran, North Korea or
Russia or that is headquartered in China, Iran, North Korea or Russia.
2. Exempts, from the prohibition, a company if CFIUS or its successor committee determines
that there are no unresolved national security concerns regarding the transaction that created
the company's ownership or allowed the company to operate within the United States.
3. Allows, in consultation with DPS, the Governor to designate a country as a threat to critical
infrastructure in Arizona.
4. Defines critical infrastructure as systems and assets, whether physical or virtual, that are so
vital to Arizona and the United States that the incapacity or destruction of those systems and
assets would have a debilitating impact on security, economic security, public health or safety.
5. Defines company.
6. Becomes effective on the general effective date.
Amendments Adopted by the House of Representatives
• Exempts, from the prohibition, a company if CFIUS or its successor committee determines
that there are no unresolved national security concerns regarding the transaction that created
the company's ownership or allowed the company to operate within the United States.
Governor's Veto Message
The Governor indicates in her veto message that S.B. 1658 would broadly disqualify many
Arizonans who are dual citizens and jeopardize business entering the Arizona market and that the
state regularly engages with federal officials to evaluate potential threats in cases where there are
national security concerns. FACT SHEET – Amended/Vetoed
S.B. 1658
Page 3
Senate Action House Action
COM 2/16/23 DP 4-3-0 TI 3/16/23 DP 8-3-0-0
3
rd
Read 3/2/23 16-14-0 3
rd
Read 5/15/23 36-22-1-0-1
Final Read 6/13/23 16-12-2
Vetoed by the Governor 6/20/23
Prepared by Senate Research
June 21, 2023
JT/FB/sr