HB 4168

House Engrossed
taxation; omnibus;
  2026-2027
State of Arizona
House of Representatives
Fifty-seventh Legislature
Second Regular Session
2026
CHAPTER 140
HOUSE BILL 4168
AN
ACT
amending sections 20-224 and 20-224.01,
Arizona Revised Statutes; repealing SECTION 20-224.03, Arizona Revised
Statutes; amending sections 20-837, 20-1010, 20-1060 and 20-1097.07,
Arizona Revised Statutes; repealing sections 41-1507 and 41-1525, Arizona
Revised Statutes; amending sections 42-1001, 42-5032.02, 42-11111,
43-105, 43-222, 43-1021, 43-1022, 43-1041, 43-1042
and 43-1073.01, Arizona Revised Statutes; repealing section 43-1074,
Arizona Revised Statutes; amending sections 43-1074.01, 43-1083.03,
43-1121 and 43-1122, Arizona Revised Statutes; repealing section 43-1161,
Arizona Revised Statutes; amending sections 43-1164.04 and 43-1168,
Arizona Revised Statutes; repealing section 43-1170, Arizona Revised
Statutes; amending sections 43-1183 and 48-4203, Arizona Revised
Statutes; relating to taxation.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 20-224, Arizona Revised Statutes,
is amended to read:
START_STATUTE20-224. Premium tax; reports
A. On or before March 1 of each year, each
authorized domestic insurer, each other insurer and each formerly authorized
insurer referred to in section 20-206, subsection B shall file with the
director a report in a form prescribed by the director showing total direct
premium income including policy membership and other fees and all other
considerations for insurance from all classes of business whether designated as
a premium or otherwise received by it during the preceding calendar year on
account of policies and contracts covering property, subjects or risks located,
resident or to be performed in this state, after deducting from such total
direct premium income applicable cancellations, returned premiums, the amount
of reduction in or refund of premiums allowed to industrial life policyholders
for payment of premiums direct to an office of the insurer and all policy
dividends, refunds, savings coupons and other similar returns paid or credited
to policyholders within this state and not reapplied as premiums for new,
additional or extended insurance. No deduction shall be made of the
cash surrender values of policies or contracts. �Considerations received on
annuity contracts, as well as the unabsorbed portion of any premium deposit,
shall not be included in total direct premium income, and neither shall be
subject to tax. The report shall separately indicate the total direct
fire insurance premium income received from property located in the
incorporated cities and towns certified by the office of the state fire marshal
pursuant to section 9-951, subsection B, as procuring the services of a
private fire company.
B. Coincident with the filing of the tax report,
each insurer shall pay to the director for deposit, pursuant to sections 35-146
and 35-147, a tax on such net premiums at the following rates:
1. For fire insurance:
(a) On property located in a city or town certified
by the office of the state fire marshal pursuant to section 9-951,
subsection B, as procuring the services of a private fire company, .66 percent.
(b) On all other property, 2.2 percent.
2. For disability insurance, 2.0 percent.
3. For health care service plans, the rates
prescribed under sections 20-837, 20-1010 and 20-1060.
4. For other insurance:
(a) For premiums received in calendar year 2016,
1.95 percent.
(b) For premiums received in calendar year 2017,
1.90 percent.
(c) For premiums received in calendar year 2018,
1.85 percent.
(d) For premiums received in calendar year 2019,
1.80 percent.
(e) For premiums
received in calendar year 2020, 1.75 percent.
(f) For premiums
received in calendar year 2021 and for each subsequent calendar year, 1.70
percent.
C. Any payments of tax pursuant to subsection F of
this section shall be deducted from the tax payable pursuant to subsection B of
this section. Each insurer shall reflect the cost savings
attributable to the lower tax in fire insurance premiums charged on property
located in an incorporated city or town certified by the office of the state
fire marshal pursuant to section 9-951, subsection B, as procuring the
services of a private fire company.� No insurer shall be liable to the state or
to any other person, or shall be subject to regulatory action, relating to the
calculation or submittal of fire insurance premium taxes based in good faith on
the office of the state fire marshal's certification.
D. Eighty-five percent of the tax paid under
this section by an insurer on account of premiums received for fire insurance
shall be separately specified in the report and shall be apportioned in the
manner provided by sections 9-951, 9-952 and 9-972, except
that all of the tax so allocated to a fund of a municipality or fire district
that has no volunteer firefighters or pension obligations to volunteer
firefighters shall be appropriated to the account of the municipality or fire
district in the public safety personnel retirement system and all of the tax so
allocated to a fund of a municipality or fire district that has both full-time
paid firefighters and volunteer firefighters or pension obligations to full-time
paid firefighters or volunteer firefighters shall be appropriated to the
account of the municipality or fire district in the public safety personnel
retirement system where it shall be reallocated by actuarial procedures
proportionately to the municipality or fire district for the account of the full-time
paid firefighters and to the municipality or fire district for the account of
the volunteer firefighters. A municipality or fire district shall
provide to the public safety personnel retirement system all information that
the system deems necessary to perform the reallocation prescribed by this
section.� A full accounting of the reallocation shall be forwarded to the
municipality or fire district and its local boards.
E. This section does not apply to title insurance.
Title insurers shall be taxed as provided in section 20-1566.
F. Any insurer that paid or is required to pay a tax
of $50,000 or more on net premiums received during the preceding calendar year,
pursuant to subsection B of this section and sections 20-224.01, 20-837,
20-1010, 20-1060 and 20-1097.07, shall file on or before the
fifteenth day of each month from March through August a report for that month,
on a form prescribed by the director, accompanied by a payment in an amount
equal to fifteen percent of the amount paid or required to be paid during the
preceding calendar year pursuant to subsection B of this section and sections
20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07.�
The payments are due and payable on or before the fifteenth day of each month
and shall be made to the director for deposit, pursuant to sections 35-146
and 35-147.
G. Except for the tax paid on fire insurance
premiums pursuant to subsections B and D of this section, an insurer may claim
a premium tax credit if the insurer qualifies for a credit pursuant to section 20-224.03, 20-224.04, 20-224.06 or 20-224.07.
H. On receipt of a properly documented claim, a
refund shall be provided to an insurer from available funds for the excess
amount of any fire insurance premium improperly paid by the
insurer. The insurer shall reflect the refund in the fire insurance
premiums charged on the property that was charged the excessive amount.
I. On or before September 30 of each year, the
director of the department of insurance and financial institutions shall report
to the directors of the joint legislative budget committee and the governor's
office of strategic planning and budgeting on the amount of insurance premium
tax credits established by sections 20-224.03, 20-224.04,
20-224.05, 20-224.06 and 20-224.07 that were used during the
previous fiscal year.
J. For the purposes of:
1. Subsection B of this section, fire insurance is
one hundred percent of fire lines, forty percent of commercial multiple peril
nonliability lines, thirty-five percent of homeowners' multiple peril
lines, twenty-five percent of farm owners' multiple peril lines and
twenty percent of allied lines.
2. Section 20-416, fire insurance is eighty-five
percent of fire and allied lines.
K. From and after December 31, 2017, the director
may require that reports and payments under this section be submitted
electronically.� If the director requires electronic submission, the director
shall include on the department's official website a list of one or more
acceptable third-party services through which an insurer must submit
reports and payments. END_STATUTE
Sec. 2. Section 20-224.01, Arizona Revised
Statutes, is amended to read:
START_STATUTE20-224.01. Additional premium tax; civil penalty
A. Coincident with the filing of the tax report as required in section 20-224, each
insurer shall pay to the director, for deposit, pursuant to sections 35-146
and 35-147, a tax of .4312 percent of such net premiums received from all
insurance carried for or on vehicles as defined in section 28-101, in
addition to other applicable taxes.
B. The tax of .4312 percent of such net premiums
received by the director and paid by an insurer on account of premiums received
for insurance on certain vehicles as defined in section 28-101 shall be
separately specified in the insurer's report required in section 20-224
and is appropriated to the public safety personnel retirement system and shall
be transferred by the state treasurer to the board of trustees of the public
safety personnel retirement system for deposit in the highway patrol
account. If the tax received is greater than the amount necessary to
fund the highway patrol account, beginning in the 1991-1992
fiscal year the state treasurer shall deposit the excess in the Arizona
highway patrol fund established by section 41-1752 in any amount required
by legislative appropriation.
C. An insurer shall report and pay the taxes
required by this section in the manner prescribed by section 20-224. An
insurer who that fails to pay the
tax on or before the prescribed payment dates is subject to a civil penalty
determined pursuant to section 20-225.
D. An insurer shall not claim a
premium tax credit pursuant to section 20-224.03 for the premium taxes
paid pursuant to this section.END_STATUTE
Sec. 3. Repeal
Section 20-224.03, Arizona Revised
Statutes, is repealed.
Sec. 4. Section 20-837, Arizona Revised
Statutes, is amended to read:
START_STATUTE20-837. Tax exemption; exceptions
A. Every corporation doing
business pursuant to this article is declared to be a nonprofit and benevolent
institution and to be exempt from state, county, district, municipal and school
taxes, including the taxes prescribed by this title, and excepting only the
fees prescribed by section 20-167 and taxes on real and tangible personal
property located within this state. Each corporation is subject to a
state tax of 2.0 percent on net premiums that are received to effect or
maintain the corporation's subscription contracts, except that the tax shall
not apply with respect to any coverage concerning which the corporation's
relationship is as administrative or fiscal agent for national, state or
municipal government or any political subdivision or body thereof, and such tax
shall not apply with respect to any premiums received from funds of national,
state or municipal government or any political subdivision or body
thereof. The tax shall be determined, filed and reported in the
manner prescribed in section 20-224. The failure by a
corporation to pay the tax on or before the prescribed payment dates results in
a civil penalty determined pursuant to section 20-225.
B. A corporation may claim a premium
tax credit if the corporation qualifies for a credit pursuant to section 20-224.03.END_STATUTE
Sec. 5. Section 20-1010, Arizona Revised
Statutes, is amended to read:
START_STATUTE20-1010. Taxes
A. On the tax payment dates prescribed in section 20-224,
each prepaid dental plan organization shall pay to the director for deposit,
pursuant to sections 35-146 and 35-147, in a form prescribed by the
director a tax for transacting a prepaid dental plan in the amount of 2.0
percent of prepaid net charges received from members.
B. The failure by an organization to pay the tax
imposed by this section results in a civil penalty determined pursuant to
section 20-225.
C. A prepaid dental plan organization
may claim a premium tax credit if the organization qualifies for a credit
pursuant to section 20-224.03. END_STATUTE
Sec. 6. Section 20-1060, Arizona Revised
Statutes, is amended to read:
START_STATUTE20-1060. Taxes; exemption
A. Except as provided in subsection C of this
section, on the tax payment dates prescribed in section 20-224, each
health care services organization shall pay to the director for deposit,
pursuant to sections 35-146 and 35-147, in a form prescribed by the
director a tax for transacting a health care plan in the amount of 2.0 percent
of net charges received from enrollees.
B. The failure by an organization to pay the tax
imposed by this section results in a civil penalty determined pursuant to
section 20-225.
C. Payments received by health care services
organizations from the United States secretary of health and human services
pursuant to a contract issued pursuant to 42 United States Code section
1395mm(g) are not taxable under this section.
D. A health care services organization
may claim a premium tax credit if the organization qualifies for a credit
pursuant to section 20-224.03. END_STATUTE
Sec. 7. Section 20-1097.07, Arizona Revised
Statutes, is amended to read:
START_STATUTE20-1097.07. Fees and taxes
A. Any prepaid legal insurance
corporation licensed pursuant to this article shall pay those fees prescribed
by section 20-167 and those taxes prescribed by section 20-224.
B. A prepaid legal insurance
corporation may claim a premium tax credit if the corporation qualifies for a
credit pursuant to section 20-224.03. END_STATUTE
Sec. 8. Repeal
Sections 41-1507 and 41-1525, Arizona
Revised Statutes, are repealed.
Sec. 9. Section 42-1001, Arizona Revised
Statutes, is amended to read:
START_STATUTE42-1001. Definitions
In this title, unless the context otherwise requires:
1. "Board" or "state board"
means either the state board of tax appeals or the state board of equalization,
as applicable.
2. "Court" means the tax court or superior
court, whichever is applicable.
3. "Department" means the department of
revenue.
4. "Director" means the director of the
department.
5. "Electronically send" or "send
electronically" means to send by either email or the use of an electronic
portal.
6. "Electronic portal" means a secure
location on a website established by the department that requires the receiver
to enter a password to access.
7. "Email" means:
(a) An electronic transmission of a message to an
email address.
(b) If the message contains confidential
information, the electronic transmission of a message to an email address using
encryption software that requires the receiver to enter a password before the
message can be retrieved and viewed.
8. "Internal revenue code" means the
United States internal revenue code of 1986, as amended and in effect as of
January 1, 2025 2026, including
those provisions that became effective during 2024 2025 with the specific adoption of their retroactive effective
dates but excluding all changes to the code enacted after January 1, 2025 2026. END_STATUTE
Sec. 10. Section 42-5032.02, Arizona Revised
Statutes, is amended to read:
START_STATUTE42-5032.02. Distribution of revenues for city, town or county infrastructure
improvements related to manufacturing facilities; definitions
A. Subject to subsection B of this section, from and
after September 30, 2013 through September 30, 2033, the state treasurer
shall pay in monthly increments a city, town or county up to the amount
determined under subsection C of this section for public infrastructure
improvements for the benefit of a manufacturing facility.
B. The state treasurer shall not make any payments
under subsection C of this section until both of the following apply:
1. Ten percent of the qualifying capital investment
that is certified under subsection D of this section and that constitutes
construction phase services, as defined in section 42-5075, has been made
by the manufacturing facility.
2. From and after June 30, 2014.
C. The total amount paid to a city, town or county
under subsection A of this section shall not exceed the total amount of state
transaction privilege tax revenues collected under section 42-5010,
subsection A from persons conducting business under section 42-5075
derived from contracts to construct buildings and associated improvements for
the benefit of a manufacturing facility or eighty seventy-five percent of the total cost of the public
infrastructure improvements, whichever is less. The total amount
paid to all cities, towns and counties under this subsection shall not exceed a maximum of $200,000,000 the following:
1. Through June 30, 2027, a maximum
of $250,000,000
2. Through June 30, 2028, a maximum
of $300,000,000.
3. From and after june 30, 2028, a
maximum of $350,000,000.
D. Within one hundred eighty days after the
commencement of the construction of buildings and associated improvements for
the benefit of a manufacturing facility that will require a city, town or
county to make infrastructure improvements, the manufacturing facility shall
file a sworn certification with the Arizona commerce authority and submit a
copy of this sworn certification to the applicable city, town or county that
the manufacturing facility agrees to either:
1. Make at least $500,000,000 $3,000,000,000 in capital investment if the manufacturing
facility is located in a county that has a population of eight hundred thousand
persons or more.
2. Make at least $50,000,000 $100,000,000 in capital investment if the manufacturing
facility is located in a county that has a population of less than eight
hundred thousand persons.
E. The certification under subsection D of this
section shall contain a sworn statement or certification, signed by an officer
of the manufacturing facility under penalty of perjury, that the information
contained is true and correct according to the best belief and knowledge of the
person submitting the information after a reasonable investigation of the
facts.
F. Before submitting the certification to the
Arizona commerce authority, the manufacturing facility and the city, town or
county must enter into a written agreement that:
1. Identifies and states the cost of the public
infrastructure improvements that will be constructed.
2. Identifies the sources of monies, including
monies received pursuant to this section, that will be used to pay for the
public infrastructure improvements.
G. On receipt of the sworn certification from a
manufacturing facility pursuant to subsection D of this section, the city, town
or county shall enter into a written agreement with the
department. This agreement and any amendments or changes to the
agreement shall:
1. State the cost of the public infrastructure
improvements and separately identify the particular improvements that will be
made.
2. State that the monies received under this section
will be used exclusively to pay for public infrastructure improvements that are
necessary to support the activities of the manufacturing facility.
3. State that the city, town or county will commit
all of its portion of the revenue received pursuant to section 42-5029,
subsection D derived from contracts subject to section 42-5075 to
construct buildings and associated improvements for the benefit of the
manufacturing facility for public infrastructure improvements that benefit the
manufacturing facility.
4. State that the city, town or county will
immediately notify the department when monies received under this section
exceed eighty percent of the cost of the infrastructure
improvements the applicable percentage of the total cost
of the public infrastructure improvements prescribed by subsection C of this
section and will return the amount of the excess to the state treasurer
for deposit in the state general fund.
5. Stipulate the actual amount of the construction
funding that will be derived from sources other than this state.
6. State that the city, town or
county will provide at least five percent of the actual amount of the
construction funding stipulated to under paragraph 5 of this subsection.
6. 7. Identify
the persons who will be prime contractors on the construction of buildings and
associated improvements for the benefit of a manufacturing facility and state
that each prime contractor has been notified as to which portion of the contractor's
income shall be separately identified to the department pursuant to section 42-5075,
subsection H.
7. 8. State
that the city, town or county agrees that any amounts paid by the department to
a prime contractor as identified under paragraph 6  7 of this subsection resulting from an audit adjustment or
claim for credit or refund of taxes described in subsection C of this section
shall be recovered by the department from the city, town or county by reducing
the amount paid to the city, town or county under section 42-5029 from
monies designated as distribution base in the month next succeeding the month in
which the adjustment or claim is paid.
8. 9. State
that the city, town or county agrees that the department will use the amounts
subject to any distribution required under subsection A of this section in
calculating the maximum amount set by subsection C of this section.
9. 10. State
that the city, town or county agrees that if, on notification by the
department, the state treasurer ceases payments because of the condition
described in subsection H of this section, the city, town or county has no
claim to additional payments if the department subsequently pays amounts to a
prime contractor identified in an agreement with any city, town or county, as
described in paragraph 6  7 of
this subsection, due to an audit adjustment or claim for credit or refund of
taxes described in subsection C of this section.
11. State that the city, town or
county will provide to the department an analysis of the anticipated direct and
indirect revenues this state will receive as a result of constructing the
manufacturing facility. The analysis must include measures relating to the
anticipated new jobs to be directly created by the manufacturing facility,
including the total number of new jobs, the range of annual wages per employee
and the median annual wages per employee. The department shall retain the
analysis and may provide the analysis on request. Information in the analysis
that qualifies as a trade secret as defined in section 44-401 or as
confidential proprietary information that, if made public, could harm the
competitive position of the manufacturing facility is confidential, is not a
public record and may not be disclosed by the department.
10. 12. Provide
any other information deemed necessary by the department.
H. On notification by the department, the state
treasurer shall cease payments under subsection A of this section if either of
the following occurs:
1. The city, town or county has received monies that
meet or exceed eighty percent the
applicable percentage of the total cost of the
public infrastructure improvements prescribed by subsection C of
this section that are necessary to support the activities related to the
manufacturing facility as described in the written agreement pursuant to
subsection G of this section.
2. The total amount subject to any distribution
required under subsection A of this section has met the maximum amount set by
subsection C of this section.
I. Notwithstanding subsection h, paragraph 2 of
this section, the department's processing and payment of eligible requests for
payment are subject to all of the following:
1. The department may continue to
receive and process eligible requests for payment, including partial payments,
after the state treasurer has ceased payments pursuant to subsection h,
paragraph 2 of this section.
2. Amounts separately accounted for
under section 42-5075, subsection H that have not been distributed to the
applicable city, town or county shall be retained by the department and remain
available for distribution to the applicable city, town or county when the
remaining capacity and amounts separately accounted for under section 42-5075,
subsection H for the city, town or county are sufficient to process an eligible
request for payment, subject to paragraph 6 of this subsection.
3. The department shall process
eligible requests for payment during each reporting period in which the
department closes and reconciles transaction privilege tax collections under
this section. Payment of each eligible request for payment is subject to the
availability of amounts separately accounted for under section 42-5075,
subsection H for the applicable city, town or county. If the remaining capacity
is sufficient to pay all eligible requests for payment on hand, the department
shall instruct the state treasurer to pay each request. An eligible request for
payment, or any unpaid balance of a partially paid request, that cannot be
fully paid during a reporting period remains on hand for processing in
subsequent reporting periods, subject to this subsection.
4. If
the remaining capacity is insufficient to pay all eligible requests for payment
on hand, the department shall allocate the remaining capacity among the
eligible requests for payment on a pro rata basis according to the requested
amounts. If the pro rata share allocated to a city, town or county exceeds the
amounts separately accounted under section 42-5075, subsection H for that
city, town or county, the excess remaining capacity shall be reallocated on a
pro rata basis among the remaining eligible requests for payment.
5. A city, town or county that has
not submitted an eligible request for payment during a reporting period does
not reduce the remaining capacity available to cities, towns or counties that
have submitted eligible requests for payment during that reporting period.
6. When the remaining capacity is
zero and the maximum amount prescribed in subsection c, paragraph 3 of this
section has been met, the department shall distribute any amounts retained
under paragraph 2 of this subsection to the state general fund and to cities,
towns and counties pursuant to the distribution provisions of this chapter that
would have applied if the amounts had not been separately accounted for under
this section.
J. The department shall post on the
department's website the intergovernmental agreements entered into with a city,
town or county pursuant to this section and the development agreements entered
into in connection with this section. On request by the department, a city,
town or county that has entered into an agreement pursuant to Subsection G of
this section shall provide the department with a copy of any development
agreement between the city, town or county and a manufacturing facility entered
into in connection with this section. Before posting a development agreement,
the department shall:
1. Provide the manufacturing facility
with written notice and a reasonable opportunity to designate, within thirty
days after receiving the notice, specific information in the agreement that the
manufacturing facility considers to be either:
(a) a trade
secret as defined in section 44-401.
(b) confidential
proprietary information that, if made public, could harm the competitive
position of the manufacturing facility.
2. Redact information designated by
the manufacturing facility under paragraph 1 of this subsection before posting
the agreement, unless the department determines after consultation with the
manufacturing facility that the designation is not reasonable under the
circumstances. Information designated and redacted under this paragraph is
confidential, is not a public record and may not be disclosed by the
department.
I. K. For
the purposes of this section:
1. "Associated improvement" includes any
public infrastructure improvement that is made for the benefit of the
manufacturing facility outside of the parcel or parcels of real property where
the manufacturing facility is located.
2. "Capital investment" means an
expenditure to acquire, lease or improve property that is used for the benefit
of a manufacturing facility, including land, buildings, machinery and fixtures.
3. "Eligible request for
payment" means a request for payment submitted by a city, town or county
under an agreement entered into pursuant to subsection G of this section that
the department has determined complies with the applicable agreement.
3. 4. "Manufacturing
facility":
(a) Means an establishment that is engaged in the
mechanical, physical or chemical transformation or fabrication of materials,
substances or components into new products in this state, that is classified
within sections 31 through 33 inclusive of the 2007 edition of the North
American industry classification system as published by the national technical
information service of the United States department of commerce and that agrees
to either:
(i) Make at least $500,000,000 $3,000,000,000 in capital investment if the manufacturing
facility is located in a county that has a population of eight hundred thousand
persons or more.
(ii) Make at least $50,000,000 $100,000,000 in capital investment if the manufacturing
facility is located in a county that has a population of less than eight
hundred thousand persons.
(b) Does not include mining, milling or smelting
mineral ore or generating electricity.
4. 5. "Population"
means the population determined in the most recent United States decennial
census or the most recent special census as provided in section 28-6532.
5. 6. "Public
infrastructure" means water production, delivery and disposal facilities,
wastewater production, reclamation, recycling, treatment,
storage, delivery and disposal facilities and roads that are necessary
to support the activities of the manufacturing facility.
7. "Remaining capacity"
means the amount by which the applicable maximum amount prescribed in
subsection C of this section exceeds the total amount distributed to all
cities, towns and counties under subsection A of this section. END_STATUTE
Sec. 11. Section 42-11111, Arizona Revised Statutes, is amended to read:
START_STATUTE42-11111. Exemption for property; widows and widowers; persons with a total
and permanent disability; veterans with a disability; definitions
A. The property of widows
and widowers, of persons with total and permanent disabilities and of veterans
with service or nonservice connected disabilities who are residents of this
state is exempt from taxation as provided by article IX, section 2,
Constitution of Arizona, and subject to the conditions and limits prescribed by
this section.
B. Pursuant to article IX,
section 2, subsection F, Constitution of Arizona, the exemptions from taxation
under this section are allowed as provided in subsections C, D,
and E, f and g of this section.
C. The primary residence of a veteran with a service-connected disability whose
disability rating by the United States department of veterans affairs is one
hundred percent or whose disability status is total disability
based on individual unemployability is fully exempt from
taxation. The surviving spouse of a veteran whose
primary residence is receiving the exemption under this subsection may continue
to claim the full exemption for the surviving spouse's primary residence as
long as the surviving spouse does not remarry.� For the purposes of this
subsection, a primary residence that is owned by a veteran who is eligible for
the exemption under this subsection and the veteran's spouse shall be treated
as if owned solely by the veteran.
D. The property of a
veteran with a nonservice-connected disability whose disability rating by
the United States department of veterans affairs is one hundred percent or less
or with a service-connected disability whose disability rating by the
United States department of veterans affairs is less than one hundred percent
is exempt in the amount of $4,188. The limit under this subsection
is further limited by multiplying the total exemption amount by the percentage
of the veteran's disability, as rated by the United States department of
veterans affairs.
E. Except
as provided in subsection F or G of this section, the property of a
widow or widower or a person with a total and permanent disability whose income from all sources does not exceed the limits prescribed by
subsection J of this section is exempt in the amount of:
1. $4,188 if the person's
total assessment does not exceed the amount provided in paragraph 2 of this
subsection.
2. No exemption if the
person's total assessment exceeds $28,459.
F. The
primary residence of a widow or widower who is the surviving spouse of a
veteran who was eligible for the exemption under subsection C of this section
is fully exempt from taxation.
G. The
primary residence of a widow or widower who is the surviving spouse of a
veteran who was eligible for the exemption under subsection D of this section
is exempt in the amount of $4,188. The limit under this subsection is further
limited by multiplying the total exemption amount by the percentage of that
veteran's disability, as rated by the United States department of veterans
affairs.
F. H. On or before December 31 of each
year, the department shall increase the following amounts:
1. The total allowable
exemption amount under subsection D, and
subsection E, paragraph 1 and subsection G of this
section based on the average annual percentage increase, if any, in the GDP
price deflator in the two most recent complete state fiscal years.
2. Beginning in tax year
2026, the total assessment limit amount under subsection E, paragraph 2 of
this section based on the average annual percentage increase, if any, in the
federal house price index for the two most recent complete state fiscal years.
3. The total income limit
amounts under subsection H  J,
paragraphs 1 and 2 of this section based on the average annual percentage
increase, if any, in the GDP price deflator in the two most recent complete
state fiscal years.
G. I. For the purpose of determining the
amount of the allowable exemption pursuant to subsection E of this
section, the person's total assessment shall not include the value of any
vehicle that is taxed under title 28, chapter 16, article 3.
H. J. Pursuant to article IX, section 2,
subsection F, Constitution of Arizona, to qualify for an the exemption under prescribed
in subsection E of this section, the total income from all sources of
the claimant and the claimant's spouse and the income from all sources of all
of the claimant's children who resided with the claimant in the claimant's
residence in the year immediately preceding the year for which the claimant
applies for the exemption shall not exceed:
1. $34,901 if none of the
claimant's children under eighteen years of age resided with the claimant in
the claimant's residence.
2. $41,870 if one or more
of the claimant's children residing with the claimant in the claimant's
residence either:
(a) Were under eighteen
years of age.
(b) Had a total and
permanent physical or mental disability, as certified by competent medical
authority as provided by law.
I. For the
purposes of subsection H of this section, "income
from all sources" means the sum of the following, excluding the items
listed in subsection J of this section:
1. Adjusted
gross income as defined by the department.
2. The
amount of capital gains excluded from adjusted gross income.
3. Nontaxable
strike benefits.
4. Nontaxable
interest that is received from the federal government or any of its
instrumentalities.
5. Payments
that are received from a retirement program and paid by:
(a) This
state or any of its political subdivisions.
(b) The
United States through any of its agencies, instrumentalities or programs,
except as provided in subsection J of this section.
6. The gross
amount of any pension or annuity that is not otherwise exempted.
J. Notwithstanding
subsection I of this section, income from all sources does
not include monies received from:
1. Cash
public assistance and relief.
2. Railroad
retirement benefits.
3. Payments
under the federal social security act (49 Stat. 620).
4. Payments
under the unemployment insurance laws of this state.
5. Payments
from any veterans pensions.
6. Workers'
compensation payments.
7. Loss of
time insurance.
8. Gifts
from nongovernmental sources, surplus foods or other relief in kind supplied by
a governmental agency.
K. A
widow or widower, a person with a total and permanent
disability or a veteran with a disability person shall
establish eligibility for exemption under this section by filing an affidavit
with the county assessor under section 42-11152 when initially claiming
the exemption and, if claiming the exemption under subsection F
or G of this section, providing evidence of the veteran spouse's disability
rating by the United States department of veterans affairs or total disability
based on individual unemployability to the county assessor. Each
year thereafter, the person who claims the exemption prescribed
in subsection E of this section or the person's representative shall
annually calculate income from the preceding year to ensure that the person
still qualifies for the exemption. and
The person or the person's representative shall notify
the county assessor in writing of any disqualifying event
that disqualifies the person from further exemption.�
Regardless of whether the person or the person's representative
notifies the county assessor as required by this
subsection, the property is subject to tax as provided by law from the date of disqualification the disqualifying event,
including interest, penalties and proceedings for tax delinquencies.� Disqualifying events include A disqualifying
event includes:
1. Except as provided in subsection C
of this section, The person's death.
2. The remarriage of a widow or widower.
3. for the exemption prescribed in
subsection E of this section, the person's income from all sources
exceeding the limits prescribed by subsection H  J of this section.
4. The conveyance of title to the property to
another owner.
L. in order for a subsequent primary
residence of a person who claims any of the exemptions prescribed by this
section to be eligible for exemption, within sixty days after the subsequent
primary residence becomes the person's primary residence the person must file
with the county assessor of the county in which the subsequent primary
residence is located a fully completed exemption transfer form as prescribed by
the department.
L. M. Any
dollar amount of exemption that is unused in a tax year against the limited
property value of property and improvements owned by the individual may be
applied for the tax year against the value of personal property subject to
special property taxes, including the taxes collected pursuant to title 5,
chapter 3, article 3 and title 28, chapter 16, article 3.
M. N. The
property tax exemptions provided prescribed
in subsections C, D, and E, F and g of this section are exclusive from each other, and an individual is not entitled to property tax exemptions under
more than one category as a widow or widower, a person with a
total and permanent disability or a veteran with a disability subsection even if the individual is eligible for an exemption
in more than one category subsection.
N. O. For
the purposes of this section:
1. "Competent medical authority" means any
of the following:
(a) An individual licensed under title 32, chapter
8, 13, 14, 17, 19.1, 25 or 29 or a comparable law of another state.
(b) A registered nurse practitioner as defined in
section 32-1601.
(c) The United States department of veterans
affairs, as evidenced by a disability award letter.
2. "Federal house price index" means the average
measure of movement of single-family house prices in the United States
published by the federal housing finance agency, or its successor, for this
state.
3. "GDP price deflator" means the average
of the four implicit price deflators for the gross domestic product reported by
the United States department of commerce or its successor for the four quarters
of the state fiscal year.
4. "Income
from all sources":
(a) means the sum of the following:
(i) Adjusted gross income as defined by the department.
(ii) The amount of capital gains excluded from adjusted gross
income.
(iii) Nontaxable strike benefits.
(iv) Nontaxable interest that is received from the federal
government or any of its instrumentalities.
(v) Payments that are received from a retirement program and
paid by this state or any political subdivision of this state or the United
States through any of its agencies, instrumentalities or programs, except as
provided in subdivision (b) of this paragraph.
(vi) The gross amount of any pension or annuity that is not
otherwise exempted.
(b) Does not include monies received from:
(i) Cash public assistance and relief.
(ii) Railroad retirement benefits.
(iii) Payments under the federal social security act (49 Stat.
620).
(iv) Payments under the unemployment insurance laws of this
state.
(v) Payments from any veterans pensions.
(vi) Workers' compensation payments.
(vii) Loss of time insurance.
(viii) Gifts from nongovernmental sources, surplus foods or
other relief in kind supplied by a governmental agency.
(iv) Veterans disability PAYMENTS due to the disability rating
or status of total disability based on individual unemployability.
4. 5. "Person
with a total and permanent disability" means a person who is unable to
engage in any substantial gainful activity, for pay or profit, by reason of any
physical or mental impairment that is expected to last for a continuous period
of at least twelve months or result in death within twelve months as certified
by a competent medical authority.
5. 6. "Veteran"
means an individual who has served in, and been discharged, separated or
released under honorable conditions from, active or inactive service in the
uniformed services of the United States, including:
(a) All regular, reserve and national guard
components of the United States army, navy, air force, marine corps and coast
guard.
(b) The commissioned corps of the national oceanic
and atmospheric administration.
(c) The commissioned corps of the United States
public health service.
(d) A nurse in the service of the American red cross
or in the army and navy nurse corps.
(e) Any other civilian service that is authorized by
federal law to be considered active military duty for the purpose of laws
administered by the United States secretary of veterans affairs. END_STATUTE
Sec. 12. Section 43-105, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-105. Internal revenue code; definition; application
A. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2025, "internal revenue code"
means the United States internal revenue code of 1986, as amended, in effect on
January 1, 2026, including those provisions that became effective during 2025
with the specific adoption of all retroactive effective dates, but excluding
any changes to the code enacted after January 1, 2026.
A. B. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2024 through December 31,
2025, "internal revenue code" means the United States internal
revenue code of 1986, as amended, in effect on January 1, 2025, including those
provisions that became effective during 2024 with the specific adoption of all
retroactive effective dates, but excluding any changes to the
code enacted after January 1, 2025 and including those
provisions of public law 119-21 that are retroactively effective during
taxable years beginning from and after December 31, 2024 through December 31,
2025.
B. C. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2023 through December 31, 2024,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2024, including those provisions
that became effective during 2023 with the specific adoption of all retroactive
effective dates, and including those provisions of public law
119-21 that are retroactively effective during taxable years beginning
from and after December 31, 2023 through December 31, 2024.
C. D. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2022 through December 31, 2023,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2023, including those provisions
that became effective during 2022 with the specific adoption of all retroactive
effective dates, and including those provisions of public law
119-21 that are retroactively effective during taxable years beginning
from and after December 31, 2022 through December 31, 2023.
D. E. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2021 through December 31, 2022,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2022, including those provisions
that became effective during 2021 with the specific adoption of all retroactive
effective dates, and including those provisions of the chips and science act of
2022 (P.L. 117-167), the inflation reduction act of 2022 (P.L. 117-169), and the consolidated appropriations act,
2023 (P.L. 117-328) and public law 119-21 that are
retroactively effective during taxable years beginning from and after December
31, 2021 through December 31, 2022.
E. F. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2020 through December 31, 2021,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on March 11, 2021, including those provisions
that became effective during 2020 with the specific adoption of all retroactive
effective dates and including those provisions of the PPP extension act of 2021
(P.L. 117-6) and the infrastructure investment and jobs act
(P.L. 117-58) that are retroactively effective during taxable years
beginning from and after December 31, 2020 through December 31, 2021.
F. G. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2019 through December 31, 2020,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2020, including those provisions
that became effective during 2019 with the specific adoption of all retroactive
effective dates, and including those provisions of the families first
coronavirus response act (P.L. 116-127), the coronavirus aid,
relief, and economic security act (P.L. 116-136), the paycheck
protection program flexibility act of 2020 (P.L. 116-142), the
consolidated appropriations act, 2021 (P.L. 116-260) and the
American rescue plan act of 2021 (P.L. 117-2) that are retroactively
effective during taxable years beginning from and after December 31, 2019
through December 31, 2020.
G. H. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2018 through December 31, 2019,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2019, including those provisions
that became effective during 2018 with the specific adoption of all retroactive
effective dates, and including those provisions of the taxpayer first act
(P.L. 116-25), the further consolidated appropriations act, 2020
(P.L. 116-94), the coronavirus aid, relief, and economic security
act (P.L. 116-136) and the consolidated appropriations act, 2021
(P.L. 116-260) that are retroactively effective during taxable years
beginning from and after December 31, 2018 through December 31, 2019.
H. I. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2017 through December 31, 2018,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2018, including those
provisions that became effective during 2017 with the specific adoption of all
retroactive effective dates, and including those provisions of the bipartisan
budget act of 2018 (P.L. 115-123), the consolidated appropriations
act, 2018 (P.L. 115-141), the further consolidated appropriations
act, 2020 (P.L. 116-94), the coronavirus aid, relief, and economic
security act (P.L. 116-136) and the consolidated appropriations act,
2021 (P.L. 116-260) that are retroactively effective during taxable
years beginning from and after December 31, 2017 through December 31, 2018.
I. J. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2016 through December 31, 2017,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2017, including those provisions
that became effective during 2016 with the specific adoption of all federal
retroactive effective dates, and including those provisions of the disaster tax
relief and airport and airway extension act of 2017 (P.L. 115-63), the tax
cuts and jobs act (P.L. 115-97), the bipartisan budget act of 2018 (P.L.
115-123), the consolidated appropriations act, 2018 (P.L. 115-141),
the further consolidated appropriations act, 2020 (P.L. 116-94) and
the coronavirus aid, relief, and economic security act (P.L. 116-136) that
are retroactively effective during taxable years beginning from and after
December 31, 2016 through December 31, 2017.
J. K. For
the purposes of computing income tax pursuant to this title, for taxable years
beginning from and after December 31, 2015 through December 31, 2016,
"internal revenue code" means the United States internal revenue code
of 1986, as amended, in effect on January 1, 2016, including those provisions
that became effective during 2015 with the specific adoption of all federal
retroactive effective dates, and including those provisions of the United
States appreciation for olympians and paralympians act of 2016 (P.L. 114-239),
the tax cuts and jobs act (P.L. 115-97), the consolidated
appropriations act, 2018 (P.L. 115-141), the further consolidated
appropriations act, 2020 (P.L. 116-94) and the coronavirus aid,
relief, and economic security act (P.L. 116-136) that are retroactively
effective during taxable years beginning from and after December 31, 2015
through December 31, 2016.
K. For the purposes of computing
income tax pursuant to this title, for taxable years beginning from and after
December 31, 2014 through December 31, 2015, "internal revenue
code" means the United States internal revenue code of 1986, as amended,
in effect on January 1, 2015, including those provisions that became effective
during 2014 with the specific adoption of all federal retroactive effective
dates, and including those provisions of the slain officer family support act
of 2015 (P.L. 114-7), the don't tax our fallen public safety heroes
act (P.L. 114-14), the surface transportation and veterans health
care choice improvement act of 2015 (P.L. 114-41), the consolidated
appropriations act, 2016 (P.L. 114-113), the consolidated
appropriations act, 2018 (P.L. 115-141) and the coronavirus aid,
relief, and economic security act (P.L. 116-136) that are retroactively
effective during taxable years beginning from and after December 31, 2014
through December 31, 2015.END_STATUTE
Sec. 13. Section 43-222, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-222. Income tax credit review schedule
The joint legislative income tax credit review committee shall
review the following income tax credits:
1. For years ending in 0 and 5, sections 43-1079.01,
43-1088, 43-1089.04, 43-1167.01 and 43-1175.
2. For years ending in 1 and 6, sections 43-1072.02,
43-1074.02, 43-1075, 43-1076.01, 43-1077,
43-1078, 43-1083, 43-1083.02, 43-1162, 43-1164.03
and 43-1183.
3. For years ending in 2 and 7, sections 43-1073,
43-1082, 43-1085, 43-1086, 43-1089, 43-1089.01,
43-1089.02, 43-1089.03, 43-1164, 43-1165, and 43-1181.
4. For years ending in 3 and 8, sections 43-1074.01,
43-1168, 43-1170 and 43-1178.
5. For years ending in 4 and 9, sections 43-1073.01,
43-1081.01, 43-1083.03, 43-1084, 43-1164.04, 43-1164.05
and 43-1184. END_STATUTE
Sec. 14. Section 43-1021, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1021. Addition to Arizona gross income
In computing Arizona adjusted gross income, the following
amounts shall be added to Arizona gross income:
1. A beneficiary's share of the fiduciary adjustment
to the extent that the amount determined by section 43-1333 increases the
beneficiary's Arizona gross income.
2. An amount equal to the ordinary income portion of
a lump sum distribution that was excluded from federal adjusted gross income
pursuant to the special rule for individuals who attained fifty years of age
before January 1, 1986 under Public Law 99-514, section 1122(h)(3).
3. The amount of interest
income received on obligations of any state, territory or possession of the
United States, or any political subdivision thereof, located outside of this
state, reduced, for taxable years beginning from and after December 31, 1996,
by the amount of any interest on indebtedness and other related expenses that
were incurred or continued to purchase or carry those obligations and that are
not otherwise deducted or subtracted in arriving at Arizona gross income.
4. The excess of a
partner's share of partnership taxable income required to be included under
chapter 14, article 2 of this title over the income required to be reported
under section 702(a)(8) of the internal revenue code.
5. The excess of a
partner's share of partnership losses determined pursuant to section 702(a)(8)
of the internal revenue code over the losses allowable under chapter 14,
article 2 of this title.
6. Any amount of agricultural water conservation
expenses that were deducted pursuant to the internal revenue code for which a
credit is claimed under section 43-1084.
7. The amount by which the depreciation or
amortization computed under the internal revenue code with respect to property
for which a credit was taken under section 43-1081.01 or that is
pollution control equipment for which a credit was taken before taxable year
2022 exceeds the amount of depreciation or amortization computed pursuant to
the internal revenue code on the Arizona adjusted basis of the property.
8. The amount by which the adjusted basis computed
under the internal revenue code with respect to property for which a credit was
claimed under section 43-1074.02 or 43-1081.01 or that is pollution
control equipment for which a credit was taken before taxable year 2022 and
that is sold or otherwise disposed of during the taxable year exceeds the
adjusted basis of the property computed under section 43-1074.02 or 43-1081.01 or
for pollution control equipment, the section in which the credit was taken, as
applicable.
9. The deduction referred to in section 1341(a)(4)
of the internal revenue code for restoration of a substantial amount held under
a claim of right.
10. The amount by which a net operating loss
carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of
the internal revenue code exceeds the net operating loss carryover or capital
loss carryover allowable pursuant to section 43-1029, subsection F.
11. The amount of any depreciation allowance allowed
pursuant to section 167(a) of the internal revenue code to the extent not
previously added.
12. The amount of a nonqualified withdrawal, as
defined in section 15-1871, from a college savings plan established
pursuant to section 529 of the internal revenue code that is made to a
distributee to the extent the amount is not included in computing federal
adjusted gross income, except that the amount added under this paragraph shall
not exceed the difference between the amount subtracted under section 43-1022
in prior taxable years and the amount added under this section in any prior
taxable years.
13. If a subtraction is or has been taken by the
taxpayer under section 43-1024, in the current or a prior taxable year
for the full amount of eligible access expenditures paid or incurred to comply
with the requirements of the Americans with disabilities act of 1990
(P.L. 101-336) or title 41, chapter 9, article 8, any amount of
eligible access expenditures that is recognized under the internal revenue
code, including any amount that is amortized according to federal amortization
schedules, and that is included in computing taxable income for the current
taxable year.
14. For taxable years beginning from and after
December 31, 2017, the amount of any net capital loss included in Arizona gross
income for the taxable year that is derived from the exchange of one kind of
legal tender for another kind of legal tender. For the purposes of
this paragraph:
(a) "Legal tender" means a medium of
exchange, including specie, that is authorized by the United States
Constitution or Congress to pay debts, public charges, taxes and dues.
(b) "Specie" means coins having precious
metal content.
15. For taxable years beginning from and after
December 31, 2021, the amount deducted by the partnership or S corporation
pursuant to the internal revenue code for the amount paid to this state under
section 43-1014 and for taxes that the department determines are
substantially similar to the tax imposed under section 43-1014.� This
amount shall be reflected in the partner's or shareholder's Arizona gross
income and the partnership's or S corporation's Arizona taxable income.
16. The amount of any motion picture production
costs that was deducted pursuant to the internal revenue code for which a tax
credit is claimed under section 43-1082.
17. for taxable years beginning from
and after December 31, 2025, the amount of the special depreciation allowance
for qualified production property allowed pursuant to section 168(n) of the internal revenue code for the taxable year to the extent not
previously added. END_STATUTE
Sec. 15. Section 43-1022, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1022. Subtractions from Arizona gross income
In computing Arizona adjusted gross income, the following
amounts shall be subtracted from Arizona gross income:
1. The amount of exemptions allowed by section 43-1023.
2. Benefits, annuities and pensions in an amount
totaling not more than $2,500 received from one or more of the following:
(a) The United States government service retirement
and disability fund, the United States foreign service retirement and
disability system and any other retirement system or plan established by
federal law, except retired or retainer pay of the uniformed services of the
United States that qualifies for a subtraction under paragraph 26 of this
section.
(b) The Arizona state retirement system, the
corrections officer retirement plan, the public safety personnel retirement
system, the elected officials' retirement plan, an optional retirement program
established by the Arizona board of regents under section 15-1628, an
optional retirement program established by a community college district board
under section 15-1451 or a retirement plan established for employees of a
county, city or town in this state.
3. A beneficiary's share of the fiduciary adjustment
to the extent that the amount determined by section 43-1333 decreases the
beneficiary's Arizona gross income.
4. Interest income received on obligations of the
United States, minus any interest on indebtedness, or other related expenses,
and deducted in arriving at Arizona gross income, that were incurred or
continued to purchase or carry such obligations.
5. The excess of a partner's share of income
required to be included under section 702(a)(8) of the internal revenue code
over the income required to be included under chapter 14, article 2 of this
title.
6. The excess of a partner's share of partnership
losses determined pursuant to chapter 14, article 2 of this title over the
losses allowable under section 702(a)(8) of the internal revenue code.
7. The amount allowed
by section 43-1025 for contributions during the taxable year of
agricultural crops to charitable organizations.
8. The portion of any
wages or salaries paid or incurred by the taxpayer for the taxable year that is
equal to the amount of the federal work opportunity credit, the empowerment
zone employment credit, the credit for employer paid social security taxes on
employee cash tips and the Indian employment credit that the taxpayer received
under sections 45A, 45B, 51(a) and 1396 of the internal revenue code.
9. The amount of exploration expenses that is
determined pursuant to section 617 of the internal revenue code, that has been
deferred in a taxable year ending before January 1, 1990 and for which a
subtraction has not previously been made. The subtraction shall be
made on a ratable basis as the units of produced ores or minerals discovered or
explored as a result of this exploration are sold.
10. The amount included in federal adjusted gross
income pursuant to section 86 of the internal revenue code, relating to
taxation of social security and railroad retirement benefits.
11. To the extent not already excluded from Arizona
gross income under the internal revenue code, compensation received for active
service as a member of the reserves, the national guard or the armed forces of
the United States, including compensation for service in a combat zone as
determined under section 112 of the internal revenue code.
12. The amount of unreimbursed medical and hospital
costs, adoption counseling, legal and agency fees and other nonrecurring costs
of adoption.� The subtraction under this paragraph may be taken for the costs
that are described in this paragraph and that are incurred in prior years, but
the subtraction may be taken only in the year during which the final adoption
order is granted.� The amount subtracted may not exceed:
(a) In taxable years beginning before December 31,
2025, $3,000. In the case of a husband and wife who file separate returns, the
subtraction may be taken by either taxpayer or may be divided between them, but
the total subtractions allowed both husband and wife may not exceed $3,000.�
(b) In taxable years beginning from and after
December 31, 2025, $5,000 for a single individual or head of household.
(c) For taxable years beginning from and after
December 31, 2025, $10,000 for a married couple filing a joint return.� In the
case of a husband and wife who file separate returns, the subtraction may be
taken by either taxpayer or may be divided between them, but the total
subtractions allowed both husband and wife may not exceed $10,000.�
13. The amount authorized by section 43-1027
for the taxable year relating to qualified wood stoves, wood fireplaces or gas
fired fireplaces.
14. The amount by which a net operating loss
carryover or capital loss carryover allowable pursuant to section 43-1029,
subsection F exceeds the net operating loss carryover or capital loss carryover
allowable pursuant to section 1341(b)(5) of the internal revenue code.
15. Any amount of qualified educational expenses
that is distributed from a qualified state tuition program determined pursuant
to section 529 of the internal revenue code and that is included in income in
computing federal adjusted gross income.
16. Any item of income resulting from an installment
sale that has been properly subjected to income tax in another state in a
previous taxable year and that is included in Arizona gross income in the
current taxable year.
17. For property placed in service:
(a) In taxable years beginning before December 31,
2012, an amount equal to the depreciation allowable pursuant to section 167(a)
of the internal revenue code for the taxable year computed as if the election
described in section 168(k) of the internal revenue code had been made for each
applicable class of property in the year the property was placed in service.
(b) In taxable years beginning from and after
December 31, 2012 through December 31, 2013, an amount determined in the year
the asset was placed in service based on the calculation in subdivision (a) of
this paragraph. In the first taxable year beginning from and after
December 31, 2013, the taxpayer may elect to subtract the amount necessary
to make the depreciation claimed to date for the purposes of this title the
same as it would have been if subdivision (c) of this paragraph had applied for
the entire time the asset was in service. Subdivision (c) of this
paragraph applies for the remainder of the asset's life. If the
taxpayer does not make the election under this subdivision, subdivision (a) of
this paragraph applies for the remainder of the asset's life.
(c) In taxable years beginning from and after
December 31, 2013 through December 31, 2015, an amount equal to the
depreciation allowable pursuant to section 167(a) of the internal revenue code
for the taxable year as computed as if the additional allowance for
depreciation had been ten percent of the amount allowed pursuant to section
168(k) of the internal revenue code.
(d) In taxable years beginning from and after
December 31, 2015 through December 31, 2016, an amount equal to the
depreciation allowable pursuant to section 167(a) of the internal revenue code
for the taxable year as computed as if the additional allowance for
depreciation had been fifty-five percent of the amount allowed pursuant
to section 168(k) of the internal revenue code.
(e) In taxable years beginning from and after
December 31, 2016, an amount equal to the depreciation allowable pursuant to
section 167(a) of the internal revenue code for the taxable year as computed as
if the additional allowance for depreciation had been the full amount allowed
pursuant to section 168(k) of the internal revenue code.
18. With respect to property that is sold or
otherwise disposed of during the taxable year by a taxpayer that complied with
section 43-1021, paragraph 11 with respect to that property, the amount
of depreciation that has been allowed pursuant to section 167(a) of the
internal revenue code to the extent that the amount has not already reduced
Arizona taxable income in the current or prior taxable years.
19. The amount contributed during the taxable year
to college savings plans established pursuant to section 529 of the internal
revenue code on behalf of the designated beneficiary to the extent that the
contributions were not deducted in computing federal adjusted gross income.�
The amount subtracted may not exceed:
(a) $2,000 per beneficiary for a single individual
or a head of household.
(b) $4,000 per beneficiary for a married couple
filing a joint return. In the case of a husband and wife who file
separate returns, the subtraction may be taken by either taxpayer or may be
divided between them, but the total subtractions allowed both husband and wife
may not exceed $4,000 per beneficiary.
20. The portion of the net operating loss
carryforward that would have been allowed as a deduction in the current year
pursuant to section 172 of the internal revenue code if the election described
in section 172(b)(1)(H) of the internal revenue code had not been made in the
year of the loss that exceeds the actual net operating loss carryforward that
was deducted in arriving at federal adjusted gross income.� This subtraction
only applies to taxpayers who made an election under section 172(b)(1)(H) of
the internal revenue code as amended by section 1211 of the American recovery
and reinvestment act of 2009 (P.L. 111-5) or as amended by section
13 of the worker, homeownership, and business assistance act of 2009
(P.L. 111-92).
21. For taxable years beginning from and after
December 31, 2013, the amount of any net capital gain included in federal
adjusted gross income for the taxable year derived from investment in a
qualified small business as determined by the Arizona commerce authority
pursuant to section 41-1518.
22. An amount of any net long-term capital gain
included in federal adjusted gross income for the taxable year that is derived
from an investment in an asset acquired after December 31, 2011, as follows:
(a) For taxable years beginning from and after
December 31, 2012 through December 31, 2013, ten percent of the net long-term
capital gain included in federal adjusted gross income.
(b) For taxable years beginning from and after
December 31, 2013 through December 31, 2014, twenty percent of the net
long-term capital gain included in federal adjusted gross income.
(c) For taxable years
beginning from and after December 31, 2014, twenty-five percent of the
net long-term capital gain included in federal adjusted gross income.� For the
purposes of this paragraph, a transferee that receives an asset by gift or at
the death of a transferor is considered to have acquired the asset when the asset
was acquired by the transferor. If the date an asset is acquired
cannot be verified, a subtraction under this paragraph is not allowed.
23. If an individual is not claiming itemized
deductions pursuant to section 43-1042, the amount of premium costs for
long-term care insurance, as defined in section 20-1691.
24. The amount of eligible access expenditures paid
or incurred during the taxable year to comply with the requirements of the
Americans with disabilities act of 1990 (P.L. 101-336) or title 41,
chapter 9, article 8 as provided by section 43-1024.
25. For taxable years beginning from and after
December 31, 2017, the amount of any net capital gain included in Arizona gross
income for the taxable year that is derived from the exchange of one kind of
legal tender for another kind of legal tender. For the purposes of
this paragraph:
(a) "Legal tender" means a medium of
exchange, including specie, that is authorized by the United States
Constitution or Congress to pay debts, public charges, taxes and dues.
(b) "Specie" means coins having precious
metal content.
26. Benefits, annuities and pensions received as
retired or retainer pay of the uniformed services of the United States in
amounts as follows:
(a) For taxable years through December 31, 2018, an
amount totaling not more than $2,500.
(b) For taxable years
beginning from and after December 31, 2018 through December 31, 2020, an amount
totaling not more than $3,500.
(c) For taxable years beginning from and after
December 31, 2020, the full amount received.
27. For taxable years beginning from and after
December 31, 2020, the amount contributed during the taxable year to an
achieving a better life experience account established pursuant to section 529A
of the internal revenue code on behalf of the designated beneficiary to the
extent that the contributions were not deducted in computing federal adjusted
gross income.� The amount subtracted may not exceed:
(a) $2,000 per beneficiary for a single individual
or a head of household.
(b) $4,000 per beneficiary
for a married couple filing a joint return.� In the case of a husband and wife
who file separate returns, the subtraction may be taken by either taxpayer or
may be divided between them, but the total subtractions allowed both husband
and wife may not exceed $4,000 per beneficiary.
28. For taxable years beginning from and after
December 31, 2020, Arizona small business gross income but only if an
individual taxpayer has elected to separately report and pay tax on the
taxpayer's Arizona small business adjusted gross income on the Arizona small
business income tax return.
29. To the extent not already excluded from Arizona
gross income under the internal revenue code, the value of virtual currency and
non-fungible tokens the taxpayer received pursuant to an airdrop at the
time of the airdrop. This paragraph may not be interpreted as
providing a subtraction for any appreciation in value that occurs from holding
the virtual currency after the initial receipt of the airdrop. For
the purposes of this paragraph:
(a) "Airdrop" means the receipt of virtual
currency through a means of distribution of virtual currency to the distributed
ledger addresses of multiple taxpayers.
(b) "Non-fungible token" has the
same meaning prescribed in section 43-1028.
(c) "Virtual currency" has the same
meaning prescribed in section 43-1028.
30. The amount allowed as a subtraction by section
43-1028 for gas fees not already included in the taxpayer's virtual
currency or non-fungible token basis.
31. for taxable years beginning from
and after december 31, 2024, To the extent not already excluded from Arizona
gross income under the internal revenue code, the amount of qualified tips
received during the taxable year that is deducted under section 224 of the
internal revenue code.
32. for taxable years beginning from
and after december 31, 2024, To the extent not already excluded from Arizona
gross income under the internal revenue code, the amount of qualified overtime
compensation received during the taxable year that is deducted under section
225 of the internal revenue code.
33. For taxable years beginning from
and after December 31, 2025, to the extent not already excluded from Arizona
gross income under the internal revenue code, the amount of a distribution from
an account established pursuant to section 530A of the internal revenue code.
34. for taxable years beginning from
and after december 31, 2025, To the extent not already excluded from Arizona
gross income under the internal revenue code, the amount of child and dependent
care expenses for a qualifying individual under section 21 of the internal
revenue code paid or incurred by the taxpayer for the taxable year that exceeds
the amount of the federal credit that the taxpayer received under section 21 of
the internal revenue code.
35. For taxable years beginning from and after December 31,
2024, to the extent not already excluded from Arizona gross income under the
internal revenue code, the amount deducted for a qualified individual under
section 151(d)(5)(C) of the internal revenue code.
36. For taxable years beginning from
and after December 31, 2024 through December 31, 2025, to the extent not
already excluded from Arizona gross income under the internal revenue code, the
amount deducted for qualified passenger vehicle loan interest
under section 163(h)(4) of the internal revenue code. END_STATUTE
Sec. 16. Section 43-1041, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1041. Optional standard deduction
A. A taxpayer may elect to take a standard deduction
as follows:
1. In the case of a single person or a married
person filing separately, the standard deduction is $12,200 $15,750, subject to subsection H of this section.
2. In the case of a single person who is a head of a
household, the standard deduction is $18,350 $23,625, subject to subsection H of this section.
3. In the case of a married couple filing a joint
return, the standard deduction is $24,400
$31,500, subject to subsection H of this section.
B. The standard deduction provided for in subsection
A of this section is in lieu of all itemized deductions allowed by section 43-1042,
which are to be subtracted from Arizona adjusted gross income in computing
taxable income.
C. The standard deduction is allowed if the taxpayer
so elects. The election is made by the taxpayer claiming on the tax
return the amount provided for in this section in lieu of the itemized deductions
allowed under section 43-1042. Electing to file a short form
return or a simplified return that does not allow itemized deductions to be
claimed is considered to be an election to claim the standard deduction.
D. In the case of a husband and wife, the standard
deduction provided for in subsection A of this section is not allowed to either
if the taxable income of one of the spouses is determined without regard to the
standard deduction.
E. The standard deduction provided for by subsection
A of this section is not allowed in the case of a taxable year of less than
twelve months on account of a change in the accounting period.
F. Except as provided in subsection G of this
section, a change of an election to take, or not to take, the standard
deduction for any taxable year may be made after the filing of the return for
that year.
G. A taxpayer is not allowed to change an election
to take, or not to take, the standard deduction if:
1. The spouse of the taxpayer filed a separate
return for any taxable year corresponding, for the purposes of subsection D of
this section, to the taxable year of the taxpayer unless both of the following
apply:
(a) The spouse makes a change of election with
respect to the standard deduction for the taxable year covered in the separate
return consistent with the change of election sought by the taxpayer.
(b) The taxpayer and spouse consent in writing to
the assessment, within such a period as may be agreed on with the department,
of any deficiency, to the extent attributable to the change of election, even
though at the time of filing the consent the assessment of the deficiency would
otherwise be prevented by the operation of any law or rule of law.
2. The tax liability of the taxpayer or the
taxpayer's spouse for the taxable year has been compromised.
H. For each taxable year beginning from and after
December 31, 2019, the department shall adjust the dollar amounts prescribed by
subsection A, paragraphs 1, 2 and 3 of this section for inflation in the same
manner in which the federal basic standard deduction is adjusted for inflation
pursuant to section 63 of the internal revenue code.
I. For taxable years beginning from
and after December 31, 2018, The standard deduction allowed under
subsection A of this section shall be increased as follows:
1. For taxable years beginning from
and after December 31, 2018 through December 31, 2025, by the amount
equal to twenty-five percent of the total amount of a taxpayer's
charitable deductions that would have been allowed if the taxpayer elected to
claim itemized deductions under section 43-1042 rather than elect the
standard deduction. For taxable years beginning from and after
December 31, 2021 through December 31, 2025, the
department shall adjust the percentage prescribed in this subsection paragraph according to the average annual change in the
metropolitan Phoenix consumer price index published by the United States
department of labor, bureau of labor statistics, except that the adjusted
percentage may not exceed one hundred percent. The revised
percentage shall be raised to the nearest whole percent and may not be revised
below the amounts prescribed in the prior taxable year.
2. For taxable years beginning from
and after December 31, 2025, by an amount equal to the total amount of a
taxpayer's charitable contributions as defined in section 170(c) of the internal revenue code.� The increase allowed by this
paragraph may not exceed:
(a) In the case
of a single person or a married person filing separately, $1,000.
(b) In the case
of a married couple filing a joint return, $2,000. END_STATUTE
Sec. 17. Section 43-1042, Arizona Revised Statutes, is amended to read:
START_STATUTE43-1042. Itemized deductions
A. Except as provided by subsections B, and C and D of
this section, at the election of the taxpayer, and in lieu of the standard
deduction allowed by section 43-1041, in computing taxable income the
taxpayer may take the amount of itemized deductions allowable for the taxable
year pursuant to subtitle A, chapter 1, subchapter B, parts VI and VII, but
subject to the limitations limits prescribed
by sections 67, 68 and 274 of the internal revenue code.
B. In lieu of the amount of the federal itemized
deduction for expenses paid for medical care allowed under section 213 of the
internal revenue code, the taxpayer may deduct the full amount of such
expenses.
C. A taxpayer shall not claim both a deduction
provided by this section and a credit allowed by this title with respect to the
same charitable contributions. This subsection applies to any contribution for
which a credit is allowed by this title even if the contribution is treated as
a payment of state income tax.
D. for taxable years beginning from
and after december 31, 2025, In lieu of the amount of the federal itemized
deduction for state and local taxes allowed under section 164(b)(7) of the internal revenue code, the taxpayer may deduct up to
$10,000 of that amount for such state and local taxes.
D. E. The
taxpayer may add any interest expense paid by the taxpayer for the taxable year
that is equal to the amount of federal credit for interest on certain home
mortgages allowed by section 25 of the internal revenue code. END_STATUTE
Sec. 18. Section 43-1073.01, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1073.01. Dependent tax credit
A. A credit is allowed against the taxes imposed by
this title for a taxable year for each dependent of a taxpayer as provided by
this section.
B. For taxpayers whose federal adjusted gross income
is less than $200,000 for a taxpayer who is a single person, a married person
filing separately or a head of household or is less than $400,000 for a married
couple filing a joint return, the amount of the credit is:
1. $100 $125 for
each dependent who is under seventeen years of age at the end of the taxable
year.
2. $25 for each dependent who is at least seventeen
years of age at the end of the taxable year.
C. For taxpayers whose federal adjusted gross income
is $200,000 or more for a taxpayer who is a single person, a married person
filing separately or a head of household or is $400,000 or more for a married
couple filing a joint return, the amount of the credit is:
1. $100 $125 minus
five percent for each $1,000, or fraction thereof, by which the taxpayer's
federal adjusted gross income exceeds the applicable threshold provided in this
subsection for each dependent who is under seventeen years of age at the end of
the taxable year.
2. $25 minus five percent for each $1,000, or
fraction thereof, by which the taxpayer's federal adjusted gross income exceeds
the applicable threshold provided in this subsection for each dependent who is
at least seventeen years of age at the end of the taxable year.
D. In the case of a nonresident or part-year
resident taxpayer, the credit allowed under this section is allowed in the
percentage that the taxpayer's Arizona gross income is of the federal adjusted
gross income. END_STATUTE
Sec. 19. Repeal
Section 43-1074, Arizona Revised
Statutes, is repealed.
Sec. 20. Section 43-1074.01, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1074.01. Credit for increased research activities
A. A credit is allowed against the taxes imposed by
this title in an amount determined pursuant to section 41 of the internal
revenue code, except that:
1. The amount of the credit is based on the excess,
if any, of the qualified research expenses for the taxable year over the base
amount as defined in section 41(c) of the internal revenue code and is computed
as follows:
(a) If the excess is $2,500,000 or less:
(i) For taxable years beginning before December 31,
2030, the credit is equal to twenty-four percent of that amount.
(ii) For taxable years beginning from and after
December 31, 2030, the credit is equal to twenty percent of that amount.
(b) If the excess is over $2,500,000:
(i) For taxable years beginning before December 31,
2030, the credit is equal to $600,000 plus fifteen percent of any amount
exceeding $2,500,000.
(ii) For taxable years beginning from and after
December 31, 2030, the credit is equal to $500,000 plus eleven percent of
any amount exceeding $2,500,000.
(c) For taxable years beginning from and after
December 31, 2011, an additional credit amount is allowed if the taxpayer made
basic research payments during the taxable year to a university under the
jurisdiction of the Arizona board of regents. The additional credit
amount is equal to ten percent of the excess, if any, of the basic research
payments over the qualified organization base period amount for the taxable
year. The department shall not allow credit amounts under this
subdivision and section 43-1168, subsection A, paragraph 1, subdivision
(d) that exceed, in the aggregate, a combined total of $10,000,000 in any
calendar year.� Subject to that limit, on application by the taxpayer, the
department shall certify credit amounts under this subdivision and section 43-1168,
subsection A, paragraph 1, subdivision (d) based on priority placement
established by the date that the taxpayer filed the application.� For taxable
years beginning from and after December 31, 2014, any basic research payments
used to determine the additional credit under this subdivision must first
receive certification from the Arizona commerce authority pursuant to section
41-1507.01. The additional credit amount under this
subdivision shall not exceed the amount allowed based on actual basic research
payments or the department's certification, whichever is less. If an
application, if certified in full, would exceed the $10,000,000 limit, the
department shall certify only an amount within that limit. After the
limit is attained, the department shall deny any subsequent applications
regardless of whether other certified amounts are not actually claimed as a
credit or other taxpayers fail to qualify to actually claim certified amounts.�
Notwithstanding subsections subsection B
and C of this section, any amount of the additional credit
under this subdivision that exceeds the taxes otherwise due under this title is
not refundable, but may be carried forward to the next five consecutive taxable
years. For the purposes of this subdivision, "basic research
payments" and "qualified organization base period amount" have
the same meanings prescribed by section 41(e) of the internal revenue code
without regard to whether the taxpayer is or is not a corporation.
2. Qualified research includes only research
conducted in this state, including research conducted at a university in this
state and paid for by the taxpayer.
3. If two or more taxpayers, including partners in a
partnership and shareholders of an S corporation, as defined in section 1361 of
the internal revenue code, share in the eligible expenses, each taxpayer is
eligible to receive a proportionate share of the credit.
4. The credit under this section applies only to
expenses incurred from and after December 31, 2000.
5. The termination provisions of section 41 of the
internal revenue code do not apply.
B. Except as provided by subsection C
of this section, If the allowable credit under this section exceeds the
taxes otherwise due under this title on the claimant's income, or if there are
no taxes due under this title, the amount of the credit that is claimed for
taxable years beginning before January 1, 2022 and that is not used to offset
taxes may be carried forward to the next fifteen consecutive taxable years and
the amount of the credit that is claimed for taxable years beginning from and
after December 31, 2021 and that is not used to offset taxes may be carried
forward to the next ten consecutive taxable years. The amount of
credit carryforward from taxable years beginning from and after December 31,
2002 that may be used in any taxable year may not exceed the taxpayer's tax
liability under this title minus the credit under this section for the current
taxable year's qualified research expenses.� A taxpayer who
carries forward any amount of credit under this subsection may not thereafter
claim a refund of any amount of the credit under subsection C of this section.
C. For taxable years beginning from
and after December 31, 2009, if a taxpayer who claims a credit under this
section employs fewer than one hundred fifty persons in the taxpayer's trade or
business and if the allowable credit under this section exceeds the taxes
otherwise due under this title on the claimant's income, or if there are no
taxes due under this title, in lieu of carrying the excess amount of credit
forward to subsequent taxable years under subsection B of this section, the
taxpayer may elect to receive a refund as follows:
1. The taxpayer must apply to the
Arizona commerce authority for qualification for the refund pursuant to section
41-1507 and submit a copy of the authority's certificate of qualification
to the department of revenue with the taxpayer's income tax return.
2. The amount of the refund is limited
to seventy-five percent of the amount by which the allowable credit under this
section exceeds the taxpayer's tax liability under this title for the taxable
year.� The remainder of the excess amount of the credit is waived.
3. The refund shall be paid in the
manner prescribed by section 42-1118.
4. The refund is subject to setoff
under section 42-1122.
5. If the department determines that a
credit refunded pursuant to this subsection is incorrect or invalid, the excess
credit issued may be treated as a tax deficiency pursuant to section 42-1108.END_STATUTE
Sec. 21. Section 43-1083.03, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1083.03. Credit for qualified facilities
A. For taxable years beginning from and after
December 31, 2012 through December 31, 2030, a credit is allowed against the
taxes imposed by this title for qualifying investment and employment in
expanding or locating a qualified facility in this state. To qualify
for the credit, after June 30, 2012 the taxpayer must invest in a new
qualified facility or expand an existing qualified facility in this state and
produce new full-time employment positions where the job duties are
associated with the location of the qualifying investment. The
taxpayer must meet the employee compensation and employee health benefit
requirements prescribed by section 41-1512.
B. The amount of the credit is computed as follows:
1. Ten percent of the lesser of:
(a) The total qualifying investment in the qualified
facility.
(b) Either:
(i) If the total
qualifying investment is less than $2,000,000,000, $200,000 for each net new
full-time employment position that has duties associated with the
qualified facility.
(ii) If the total qualifying investment is
$2,000,000,000 or more, $300,000 for each net new full-time employment
position that has duties associated with the qualified facility.
2. The amount of the credit shall not exceed the
postapproval amount determined by the Arizona commerce authority under section
41-1512, subsection P.
3. Subject to subsections G and J
I of this section:
(a) The credit amount computed under paragraph 1 of
this subsection is apportioned, and the taxpayer shall claim the credit in five
equal annual installments in each of five consecutive taxable years.
(b) The taxpayer may claim all five annual
installments of a credit that was preapproved before January 1, 2031 by the
Arizona commerce authority notwithstanding any intervening repeal or other
termination of the credit.
C. To claim the credit the taxpayer must:
1. Conduct a business that qualifies under section
41-1512.
2. Receive preapproval and postapproval from the
Arizona commerce authority pursuant to section 41-1512.
3. Submit to the department a copy of a current and
valid certification of qualification issued to the taxpayer by the Arizona
commerce authority.
D. To be counted for the purposes of the credit, an
employee must have been employed with job duties associated with the qualified
facility for at least ninety days during the taxable year in a permanent full-time
employment position of at least one thousand seven hundred fifty hours per
year.� An employee who is hired during the last ninety days of the taxable year
shall be considered a new employee during the next taxable year. To
be counted for the purposes of the credit during the first taxable year of
employment, the employee must not have been previously employed by the taxpayer
within twelve months before the current date of hire.� The terms of employment
must comply in all cases with the requirements of section 41-1512 and be
certified by the Arizona commerce authority.
E. Co-owners of a business, including partners
in a partnership, members of a limited liability company and shareholders of an
S corporation, as defined in section 1361 of the internal revenue code,
may each claim only the pro rata share of the credit allowed under this section
based on the ownership interest. The total of the credits allowed
all owners of the business may not exceed the amount that would have been
allowed for a sole owner of the business.
F. If the allowable
tax credit for a taxable year exceeds the income taxes otherwise due on the
claimant's income, or if there are no state income taxes due on the claimant's
income, the amount of the claim not used as an offset against income taxes
shall be paid to the taxpayer in the same manner as a refund under section 42-1118. Refunds
made pursuant to this subsection are subject to setoff under section 42-1122.�
If the department determines that a refund is incorrect or invalid, the excess
refund may be treated as a tax deficiency pursuant to section 42-1108.
G. Except as provided by subsection H
of this section, If, within five taxable years after first receiving a
credit pursuant to this section, the certification of qualification of a
business is terminated or revoked under section 41-1512, other than for
reasons beyond the control of the business as determined by the Arizona
commerce authority, the taxpayer is disqualified from credits under this
section in subsequent taxable years.� On a determination that the taxpayer has
committed fraud or relocated outside of this state within five taxable years
after first receiving a credit pursuant to this section, the credits allowed
the taxpayer in all taxable years pursuant to this section are subject to
recapture pursuant to this subsection. This subsection applies only
in the case of the termination or revocation of a certification of
qualification under section 41-1512. This subsection does not
apply if, in any taxable year, a taxpayer otherwise does not qualify for or
fails to claim the credit under this section. The recapture of
credits is computed by increasing the amount of taxes imposed in the year
following the year of termination or revocation by the full amount of all
credits previously allowed under this section.
H. A taxpayer who claims a credit
under section 43-1074 may not claim a credit under this section with
respect to the same full-time employment positions.
I. H. The
department of revenue shall adopt rules and prescribe forms and procedures as
necessary for the purposes of this section. The department of
revenue and the Arizona commerce authority shall collaborate in adopting rules
as necessary to avoid duplication and contradictory requirements while
accomplishing the intent and purposes of this section.
J. I. Each
taxable year after the postapproval of the credit under section 41-1512,
subsection P, when the taxpayer files the taxpayer's income tax return, the
taxpayer shall:
1. Notify the department, on a form prescribed by
the department, of any full-time employment position for which a credit
was claimed under this section and that was vacant for more than one hundred
fifty days after the date the full-time employment position was
originally filled to the end of that taxable year.� The period that a full-time
employment position was vacant may not include the period before the full-time
employment position was filled for the first time.
2. Reduce the portion of the credit claimed for the
taxable year pursuant to subsection B, paragraph 3 of this section by $4,000
for each full-time employment position reported pursuant to paragraph 1
of this subsection. END_STATUTE
Sec. 22. Section 43-1121, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1121. Additions to Arizona gross income; corporations
In computing Arizona taxable income for a corporation, the
following amounts shall be added to Arizona gross income:
1. The amount of interest income received on
obligations of any state, territory or possession of the United States, or any
political subdivision thereof, located outside this state, reduced, for taxable
years beginning from and after December 31, 1996, by the amount of any interest
on indebtedness and other related expenses that were incurred or continued to
purchase or carry those obligations and that are not otherwise deducted or
subtracted in arriving at Arizona gross income.
2. The excess of a partner's share of partnership
taxable income required to be included under chapter 14, article 2 of this
title over the income required to be reported under section 702(a)(8) of the
internal revenue code.
3. The excess of a partner's share of partnership
losses determined pursuant to section 702(a)(8) of the internal revenue code
over the losses allowable under chapter 14, article 2 of this title.
4. The amount of any depreciation allowance allowed
pursuant to section 167(a) of the internal revenue code to the extent not
previously added.
5. The amount of dividend income received from
corporations and allowed as a deduction pursuant to sections 243, 245, 245A and
250(a)(1)(B) of the internal revenue code.
6. Taxes that are based on income paid to states,
local governments or foreign governments and that were deducted in computing
federal taxable income.
7. Expenses and interest relating to tax-exempt
income on indebtedness incurred or continued to purchase or carry obligations
the interest on which is wholly exempt from the tax imposed by this title.�
Financial institutions, as defined in section 6-101, shall be governed by
section 43-961, paragraph 2.
8. Commissions, rentals and other amounts paid or
accrued to a domestic international sales corporation controlled by the payor
corporation if the domestic international sales corporation is not required to
report its taxable income to this state because its income is not derived from
or attributable to sources within this state. If the domestic
international sales corporation is subject to article 4 of this chapter, the
department shall prescribe by rule the method of determining the portion of the
commissions, rentals and other amounts that are paid or accrued to the
controlled domestic international sales corporation and that shall be deducted
by the payor.� For the purposes of this paragraph, "control" means
direct or indirect ownership or control of fifty percent or more of the voting
stock of the domestic international sales corporation by the payor corporation.
9. The amount of net operating loss taken pursuant
to section 172 of the internal revenue code.
10. The amount of exploration expenses determined
pursuant to section 617 of the internal revenue code to the extent that they
exceed $75,000 and to the extent that the election is made to defer those
expenses not in excess of $75,000.
11. Amortization of costs incurred to install
pollution control devices and deducted pursuant to the internal revenue code or
the amount of deduction for depreciation taken pursuant to the internal revenue
code on pollution control devices for which an election is made pursuant to
section 43-1129.
12. The amount of depreciation or amortization of
costs of child care facilities deducted pursuant to section 167 or 188 of the
internal revenue code for which an election is made to amortize pursuant to
section 43-1130.
13. The loss of an insurance company that is exempt
under section 43-1201 to the extent that it is included in computing
Arizona gross income on a consolidated return pursuant to section 43-947.
14. The amount by which the depreciation or
amortization computed under the internal revenue code with respect to property that is pollution control equipment for which a credit was
taken under section 43-1170 before
taxable year 2026 exceeds the amount of depreciation or amortization
computed pursuant to the internal revenue code on the Arizona adjusted basis of
the property.
15. The amount by which the adjusted basis computed
under the internal revenue code with respect to property that is
pollution control equipment for which a credit was claimed
under section 43-1170 taken before taxable year
2026 and that is sold or otherwise disposed of during the taxable year
exceeds the adjusted basis of the property computed under section
43-1170 the section in which the credit was
taken.
16. The deduction referred to in section 1341(a)(4)
of the internal revenue code for restoration of a substantial amount held under
a claim of right.
17. The amount by which a capital loss carryover
allowable pursuant to section 1341(b)(5) of the internal revenue code exceeds
the capital loss carryover allowable pursuant to section 43-1130.01,
subsection F.
18. Any wage expenses deducted pursuant to the
internal revenue code for which a credit is claimed under section 43-1175
and representing net increases in qualified employment positions for employment
of temporary assistance for needy families recipients.
19. Any amount of expenses that were deducted
pursuant to the internal revenue code and for which a credit is claimed under
section 43-1178.
20. Any amount deducted pursuant to section 170 of
the internal revenue code representing contributions to a school tuition
organization for which a credit is claimed under section 43-1183 or 43-1184.
21. If a subtraction is or has been taken by the
taxpayer under section 43-1124, in the current or a prior taxable year
for the full amount of eligible access expenditures paid or incurred to comply
with the requirements of the Americans with disabilities act of 1990
(P.L. 101-336) or title 41, chapter 9, article 8, any amount of
eligible access expenditures that is recognized under the internal revenue
code, including any amount that is amortized according to federal amortization
schedules, and that is included in computing Arizona taxable income for the
current taxable year.
22. For taxable years beginning from and after
December 31, 2017, the amount of any net capital loss included in Arizona gross
income for the taxable year that is derived from the exchange of one kind of
legal tender for another kind of legal tender. For the purposes of
this paragraph:
(a) "Legal tender" means a medium of
exchange, including specie, that is authorized by the United States
Constitution or Congress to pay debts, public charges, taxes and dues.
(b) "Specie" means coins having precious
metal content.
23. The amount of any deduction that is claimed in
computing Arizona gross income and that represents a donation of a school site
for which a credit is claimed under section 43-1181.
24. The amount of any motion picture production
costs that was deducted pursuant to the internal revenue code for which a tax
credit is claimed under section 43-1165.
25. For taxable years beginning from
and after December 31, 2025, the amount of the special depreciation allowance
for qualified production property allowed pursuant to section 168(n) of the internal revenue code for the taxable year to the extent not
previously added. END_STATUTE
Sec. 23. Section 43-1122, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1122. Subtractions from Arizona gross income; corporations
In computing Arizona taxable income for a corporation, the
following amounts shall be subtracted from Arizona gross income:
1. The excess of a partner's share of income
required to be included under section 702(a)(8) of the internal revenue code
over the income required to be included under chapter 14, article 2 of this
title.
2. The excess of a
partner's share of partnership losses determined pursuant to chapter 14,
article 2 of this title over the losses allowable under section 702(a)(8) of
the internal revenue code.
3. The amount allowed
by section 43-1025 for contributions during the taxable year of
agricultural crops to charitable organizations.
4. The portion of any wages or salaries paid or
incurred by the taxpayer for the taxable year that is equal to the amount of
the federal work opportunity credit, the empowerment zone employment credit,
the credit for employer paid social security taxes on employee cash tips and
the Indian employment credit that the taxpayer received under sections 45A,
45B, 51(a) and 1396 of the internal revenue code.
5. With respect to property that is sold or
otherwise disposed of during the taxable year by a taxpayer that complied with
section 43-1121, paragraph 4 with respect to that property, the amount of
depreciation that has been allowed pursuant to section 167(a) of the internal
revenue code to the extent that the amount has not already reduced Arizona
taxable income in the current taxable year or prior taxable years.
6. With respect to a financial institution as
defined in section 6-101, expenses and interest relating to tax-exempt
income disallowed pursuant to section 265 of the internal revenue code.
7. Dividends received from another corporation owned
or controlled directly or indirectly by a recipient corporation. For
the purposes of this paragraph, "control" means direct or indirect
ownership or control of fifty percent or more of the voting stock of the payor
corporation by the recipient corporation. Dividends shall have the meaning
provided in section 316 of the internal revenue code. This
subtraction shall apply without regard to section 43-961, paragraph 2 and
article 4 of this chapter.
8. Interest income received on obligations of the
United States.
9. The amount of dividend income from foreign
corporations.� For the purposes of this paragraph, gross up income as described
in section 78 of the internal revenue code, global intangible low-taxed
the income as defined described in section 951A of the internal revenue code and
subpart F income as defined in section 952 of the internal revenue code shall
be considered foreign dividends.
10. The amount of net operating loss allowed by
section 43-1123.
11. The amount of any state income tax refunds
received that were included as income in computing federal taxable income.
12. The amount of expense recapture included in
income pursuant to section 617 of the internal revenue code for mine
exploration expenses.
13. The amount of deferred exploration expenses
allowed by section 43-1127.
14. The amount of
exploration expenses related to the exploration of oil, gas or geothermal
resources, computed in the same manner and on the same basis as a deduction for
mine exploration pursuant to section 617 of the internal revenue code. This
computation is subject to the adjustments contained in section 43-1121,
paragraph 10 and paragraphs 12 and 13 of this section relating to
exploration expenses.
15. The amortization of pollution control devices
allowed by section 43-1129.
16. The amount of amortization of the cost of child
care facilities pursuant to section 43-1130.
17. The amount of income from a domestic
international sales corporation required to be included in the income of its
shareholders pursuant to section 995 of the internal revenue code.
18. The income of an insurance company that is
exempt under section 43-1201 to the extent that it is included in
computing Arizona gross income on a consolidated return pursuant to section 43-947.
19. The amount by which a capital loss carryover
allowable pursuant to section 43-1130.01, subsection F exceeds the
capital loss carryover allowable pursuant to section 1341(b)(5) of the internal
revenue code.
20. An amount equal to the depreciation allowable
pursuant to section 167(a) of the internal revenue code for the taxable year
computed as if the election described in section 168(k)(7) of the internal
revenue code had been made for each applicable class of property in the year
the property was placed in service.
21. The amount of eligible access expenditures paid
or incurred during the taxable year to comply with the requirements of the
Americans with disabilities act of 1990 (P.L. 101-336) or title 41,
chapter 9, article 8 as provided by section 43-1124.
22. For taxable years beginning from and after
December 31, 2017, the amount of any net capital gain included in Arizona gross
income for the taxable year that is derived from the exchange of one kind of
legal tender for another kind of legal tender. For the purposes of
this paragraph:
(a) "Legal tender" means a medium of
exchange, including specie, that is authorized by the United States
Constitution or Congress to pay debts, public charges, taxes and dues.
(b) "Specie" means coins having precious
metal content.
23. With respect to a public service corporation
operating a water system or sewage disposal facility, the amount of monies or
property received as a contribution in aid of construction.� For the purposes
of this paragraph:
(a) "Contribution in aid of construction"
means any amount of monies or other property contributed to a public service
corporation that provides water or sewage disposal services to the extent that
the purpose of the contribution is to provide for expanding, improving or
replacing the public service corporation's water system or sewage disposal
facilities, including any amount of monies or other property contributed to a
public service corporation for a water system or sewage disposal facility
subject to a contingent obligation to repay the amount, in whole or in part, to
the contributor.
(b) "Public service corporation" means a
public service corporation as defined in article XV, section 2, Constitution of
Arizona, that is regulated by the corporation commission. END_STATUTE
Sec. 24. Repeal
Section
43-1161, Arizona Revised Statutes, is repealed.
Sec. 25. Section 43-1164.04, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1164.04. Credit for qualified facilities
A. For taxable years beginning from and after
December 31, 2012 through December 31, 2030, a credit is allowed against the
taxes imposed by this title for qualifying investment and employment in
expanding or locating a qualified facility in this state.� To qualify for the
credit, after June 30, 2012 the taxpayer must invest in a new qualified
facility or expand an existing qualified facility in this state and produce new
full-time employment positions where the job duties are associated with
the location of the qualifying investment.� The taxpayer must meet the employee
compensation and employee health benefit requirements prescribed by section 41-1512.
B. The amount of the credit is computed as follows:
1. Ten percent of the lesser of:
(a) The total qualifying investment in the qualified
facility.
(b) Either:
(i) If the total qualifying investment is less than
$2,000,000,000, $200,000 for each net new full-time employment position
that has job duties associated with the qualified facility.
(ii) If the total qualifying investment is
$2,000,000,000 or more, $300,000 for each net new full-time employment
position that has job duties associated with the qualified facility.
2. The amount of the credit shall not exceed the
postapproval amount determined by the Arizona commerce authority under section
41-1512, subsection P.
3. Subject to subsections G and J
I of this section:
(a) The credit amount computed under paragraph 1 of
this subsection is apportioned, and the taxpayer shall claim the credit in five
equal annual installments in each of five consecutive taxable years.
(b) The taxpayer may claim all five annual
installments of a credit that was preapproved before January 1, 2031 by the
Arizona commerce authority notwithstanding any intervening repeal or other
termination of the credit.
C. To claim the
credit the taxpayer must:
1. Conduct a business
that qualifies under section 41-1512.
2. Receive preapproval and postapproval from the
Arizona commerce authority pursuant to section 41-1512.
3. Submit to the department a copy of a current and
valid certification of qualification issued to the taxpayer by the Arizona
commerce authority.
D. To be counted for the purposes of the credit, an
employee must have been employed with job duties associated with the qualified
facility for at least ninety days during the taxable year in a permanent full-time
employment position of at least one thousand seven hundred fifty hours per
year.� An employee who is hired during the last ninety days of the taxable year
shall be considered a new employee during the next taxable year. To
be counted for the purposes of the credit during the first taxable year of
employment, the employee must not have been previously employed by the taxpayer
within twelve months before the current date of hire. The terms of
employment must comply in all cases with the requirements of section 41-1512
and be certified by the Arizona commerce authority.
E. Co-owners of a business, including
corporate partners in a partnership and members of a limited liability company,
may each claim only the pro rata share of the credit allowed under this section
based on the ownership interest. The total of the credits allowed
all owners of the business may not exceed the amount that would have been
allowed for a sole owner of the business.
F. If the allowable tax credit for a taxable year
exceeds the income taxes otherwise due on the claimant's income, or if there
are no state income taxes due on the claimant's income, the amount of the claim
not used as an offset against income taxes shall be paid to the taxpayer in the
same manner as a refund under section 42-1118. Refunds made
pursuant to this subsection are subject to setoff under section 42-1122.�
If the department determines that a refund is incorrect or invalid, the excess
refund may be treated as a tax deficiency pursuant to section 42-1108.
G. Except as provided by subsection H
of this section, If, within five taxable years after first receiving a
credit pursuant to this section, the certification of qualification of a
business is terminated or revoked under section 41-1512, other than for
reasons beyond the control of the business as determined by the Arizona
commerce authority, the taxpayer is disqualified from credits under this
section in subsequent taxable years.� On a determination that the taxpayer has
committed fraud or relocated outside of this state within five taxable years
after first receiving a credit pursuant to this section, the credits allowed
the taxpayer in all taxable years pursuant to this section are subject to
recapture pursuant to this subsection. This subsection applies only
in the case of the termination or revocation of a certification of
qualification under section 41-1512. This subsection does not
apply if, in any taxable year, a taxpayer otherwise does not qualify for or
fails to claim the credit under this section. The recapture of
credits is computed by increasing the amount of taxes imposed in the year
following the year of termination or revocation by the full amount of all
credits previously allowed under this section.
H. A taxpayer that claims a credit
under section 43-1161 may not claim a credit under this section with
respect to the same full-time employment positions.
I. H. The
department of revenue shall adopt rules and prescribe forms and procedures as
necessary for the purposes of this section. The department of
revenue and the Arizona commerce authority shall collaborate in adopting rules
as necessary to avoid duplication and contradictory requirements while
accomplishing the intent and purposes of this section.
J. I. Each
taxable year after the postapproval of the credit under section 41-1512,
subsection P, when the taxpayer files the taxpayer's income tax return, the
taxpayer shall:
1. Notify the department, on a form prescribed by
the department, of any full-time employment position for which a credit
was claimed under this section and that was vacant for more than one hundred
fifty days after the date the full-time employment position was
originally filled to the end of that taxable year.� The period that a full-time
employment position was vacant may not include the period before the full-time
employment position was filled for the first time.
2. Reduce the portion of the credit claimed for the
taxable year pursuant to subsection B, paragraph 3 of this section by $4,000
for each full-time employment position reported pursuant to paragraph 1
of this subsection. END_STATUTE
Sec. 26. Section 43-1168, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1168. Credit for increased research activity
A. A credit is allowed against the taxes imposed by
this title in an amount determined pursuant to section 41 of the internal
revenue code, except that:
1. The amount of the credit is computed as follows:
(a) Add:
(i) The excess, if any, of the qualified research
expenses for the taxable year over the base amount as defined in section 41(c)
of the internal revenue code.
(ii) The basic research payments determined under
section 41(e)(1)(A) of the internal revenue code.
(b) If the sum computed under subdivision (a) of
this paragraph is $2,500,000 or less:
(i) For taxable years beginning before December 31,
2030, the credit is equal to twenty-four percent of that amount.
(ii) For taxable years beginning from and after
December 31, 2030, the credit is equal to twenty percent of that amount.
(c) If the sum
computed under subdivision (a) of this paragraph is over $2,500,000:
(i) For taxable years
beginning before December 31, 2030, the credit is equal to $600,000 plus
fifteen percent of any amount exceeding $2,500,000.
(ii) For taxable years beginning from and after
December 31, 2030, the credit is equal to $500,000 plus eleven percent of any
amount exceeding $2,500,000.
(d) For taxable years beginning from and after
December 31, 2011, an additional credit amount is allowed if the taxpayer made
basic research payments during the taxable year to a university under the
jurisdiction of the Arizona board of regents. The additional credit
amount is equal to ten percent of the excess, if any, of the basic research
payments over the qualified organization base period amount for the taxable
year. The department shall not allow credit amounts under this
subdivision and section 43-1074.01, subsection A, paragraph 1,
subdivision (c) that exceed, in the aggregate, a combined total of $10,000,000
in any calendar year. Subject to that limit, on application by the
taxpayer, the department shall certify credit amounts under this subdivision
and section 43-1074.01, subsection A, paragraph 1, subdivision (c) based
on priority placement established by the date that the taxpayer filed the
application.� For taxable years beginning from and after December 31, 2014, any
basic research payments used to determine the additional credit under this
subdivision must first receive certification from the Arizona commerce
authority pursuant to section 41-1507.01. The additional
credit amount under this subdivision shall not exceed the amount allowed based
on actual basic research payments or the department's certification, whichever
is less. If an application, if certified in full, would exceed the
$10,000,000 limit, the department shall certify only an amount within that
limit. After the limit is attained, the department shall deny any
subsequent applications regardless of whether other certified amounts are not
actually claimed as a credit or other taxpayers fail to qualify to actually
claim certified amounts.� Notwithstanding subsections subsection B and C of this section, any
amount of the additional credit under this subdivision that exceeds the taxes
otherwise due under this title is not refundable, but may be carried forward to
the next five consecutive taxable years. For the purposes of this
subdivision, "basic research payments" and "qualified
organization base period amount" have the same meanings prescribed by
section 41(e) of the internal revenue code.
2. Qualified research includes only research
conducted in this state, including research conducted at a university in this
state and paid for by the taxpayer.
3. If two or more taxpayers, including corporate
partners in a partnership, share in the eligible expenses, each taxpayer is
eligible to receive a proportionate share of the credit.
4. The credit under this section applies only to
expenses incurred from and after December 31, 1993.
5. The termination provisions of section 41 of the
internal revenue code do not apply.
B. Except as provided by subsection C
of this section, If the allowable credit under this section exceeds the
taxes otherwise due under this title on the claimant's income, or if there are
no taxes due under this title, the amount of the credit claimed for taxable
years beginning before January 1, 2022 not used to offset taxes may be carried
forward to the next fifteen consecutive taxable years, and the amount of the
credit claimed for taxable years beginning from and after December 31, 2021 not
used to offset taxes may be carried forward to the next ten consecutive taxable
years. The amount of credit carryforward from taxable years
beginning from and after December 31, 2002 that may be used under this
subsection in any taxable year may not exceed the taxpayer's tax liability
under this title minus the credit under this section for the current taxable
year's qualified research expenses. A taxpayer that
carries forward any amount of credit under this subsection may not thereafter
claim a refund of any amount of the credit under subsection C of this
section.
C. For taxable years beginning from
and after December 31, 2009, if a taxpayer that claims a credit under this
section employs fewer than one hundred fifty persons in the taxpayer's trade or
business and if the allowable credit under this section exceeds the taxes
otherwise due under this title on the claimant's income, or if there are no
taxes due under this title, in lieu of carrying the excess amount of credit
forward to subsequent taxable years under subsection B of this section, the
taxpayer may elect to receive a refund as follows:
1. The taxpayer must apply to the
Arizona commerce authority for qualification for the refund pursuant to section
41-1507 and submit a copy of the authority's certificate of qualification
to the department of revenue with the taxpayer's income tax return.
2. The amount of the refund is limited
to seventy-five percent of the amount by which the allowable credit under this
section exceeds the taxpayer's tax liability under this title for the taxable
year. The remainder of the excess amount of the credit is waived.
3. The refund shall be paid in the
manner prescribed by section 42-1118.
4. The refund is subject to setoff
under section 42-1122.
5. If the department determines that a
credit refunded pursuant to this subsection is incorrect or invalid, the excess
credit issued may be treated as a tax deficiency pursuant to section 42-1108.END_STATUTE
Sec. 27. Repeal
Section 43-1170, Arizona Revised
Statutes, is repealed.
Sec. 28. Section 43-1183, Arizona Revised
Statutes, is amended to read:
START_STATUTE43-1183. Credit for contributions to school tuition organization
A. Beginning from and after June 30, 2006, a credit
is allowed against the taxes imposed by this title for the amount of voluntary
cash contributions made by the taxpayer during the taxable year to a school
tuition organization that is certified pursuant to chapter 15 of this title at
the time of donation.
B. The amount of the credit is the total amount of
the taxpayer's contributions for the taxable year under subsection A of this
section and is preapproved by the department of revenue pursuant to subsection
D of this section.
C. The department of revenue:
1. Shall not allow tax credits under this section
and section 20-224.06 that exceed in the aggregate a combined total of $135,000,000 $110,000,000 in fiscal year 2024-2025 2026-2027 and each
fiscal year thereafter.
2. Shall preapprove tax credits under this section
and section 20-224.06 subject to subsection D of this section.
3. Shall allow the tax credits under this section
and section 20-224.06 on a first-come, first-served basis.
D. For the purposes of subsection C, paragraph 2 of
this section, before making a contribution to a school tuition organization,
the taxpayer under this title or title 20 must notify the school tuition
organization of the total amount of contributions that the taxpayer intends to
make to the school tuition organization. Before accepting the
contribution, the school tuition organization shall request preapproval from
the department of revenue for the taxpayer's intended contribution amount.� The
department of revenue shall preapprove or deny the requested amount within
twenty days after receiving the request from the school tuition
organization. If the department of revenue preapproves the request,
the school tuition organization shall immediately notify the taxpayer, and the
department of insurance and financial institutions in the case of a credit
under section 20-224.06, that the requested amount was preapproved by the
department of revenue.� In order to receive a tax credit under this subsection,
the taxpayer shall make the contribution to the school tuition organization
within twenty days after receiving notice from the school tuition organization
that the requested amount was preapproved. If the school tuition
organization does not receive the preapproved contribution from the taxpayer
within the required twenty days, the school tuition organization shall
immediately notify the department of revenue, and the department of insurance and financial institutions in the case of a
credit under section 20-224.06, and the department of revenue shall no
longer include this preapproved contribution amount when calculating the limit
prescribed in subsection C, paragraph 1 of this section.
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. Co-owners of a business, including
corporate partners in a partnership and stockholders of an S corporation as
defined in section 1361 of the internal revenue code, may each claim only the
pro rata share of the credit allowed under this section based on the ownership
interest.� The total of the credits allowed all such owners may not exceed the
amount that would have been allowed a sole owner.
G. The credit allowed by this section is in lieu of
any deduction pursuant to section 170 of the internal revenue code and taken
for state tax purposes.
H. A taxpayer shall not claim a credit under this
section and also under section 43-1184 with respect to the same
contribution.
I. The tax credit is not allowed if the taxpayer
designates the taxpayer's contribution to the school tuition organization for
the direct benefit of any specific student.
J. The department of revenue, with the cooperation
of the department of insurance and
financial institutions, shall adopt rules and publish and prescribe forms and
procedures necessary to administer this section. END_STATUTE
Sec. 29. Section 48-4203, Arizona Revised
Statutes, is amended to read:
START_STATUTE48-4203. Powers and duties of board of directors; reporting requirements;
conflict of interest
A. The board of directors, on behalf of the
district, may:
1. Adopt and use a corporate seal.
2. Sue and be sued.
3. Enter into contracts, including intergovernmental
agreements under title 11, chapter 7, article 3, as necessary to carry out the
purposes and requirements of this chapter. The district may contract
with a county sports authority established under title 11, chapter 5 to carry
out any power of the district.
4. Adopt administrative rules as necessary to
administer and operate the district and any property under its jurisdiction.
5. Adopt rules that allow weighted voting by board
members and establish conditions for terminating the district.
6. Employ an
executive director and administrative and clerical employees, or contract for other
management personnel, and prescribe the terms and conditions of their
employment as necessary to carry out the purposes of the district.
7. Acquire by any lawful means and operate,
maintain, encumber and dispose of real and personal property and interests in
property. A district established under section 48-4202,
subsection A in a county with a population of less than one million five
hundred thousand persons may acquire real property by eminent domain.� A
district established under section 48-4202, subsection A in a county with
a population of one million five hundred thousand persons or more or section
48-4202, subsection B shall not acquire real
property by eminent domain. A district established under section 48-4202,
subsection C shall not acquire or own real property or interests in real
property.
8. Administer trusts declared or established for the
district, receive and hold in trust or otherwise property located in or out of
this state and, if not otherwise provided, dispose of the property for the
benefit of the district.
9. Retain legal counsel and other consultants as
necessary to carry out the purposes of the district.
B. The board of directors, on behalf of a district
established pursuant to section 48-4202, subsection B, may:
1. Use revenues paid to the district pursuant to
section 42-5031 and other revenues the district may receive from other
sources, for the purposes set forth in section 48-4204, subsection B.
2. Enter into agreements with developers,
contractors, tenants and other users of all or part of a multipurpose facility
as determined appropriate.
3. Pledge all or part of the revenues described in
section 42-5031, subsection B to secure the district's bonds or other
financial obligations issued or incurred under this chapter for the
construction of all or part of a multipurpose facility.
C. The board of directors of a district established
pursuant to section 48-4202, subsection B shall provide public outreach
and education on the purpose and activities of the district, including:
1. Presentations to the governing bodies of the
municipalities in the county in which the district is located.
2. Presentations to community, civic and business
organizations.
3. Printed or electronic materials that support the
purposes of this subsection.
D. The board of directors shall:
1. Appoint from among its members a chairperson, a
secretary and such other officers as may be necessary to conduct its
business. The board of directors may appoint the chief financial
officer of the county as the district treasurer of a countywide district
established under section 48-4202, subsection A in a county with a
population of less than one million five hundred thousand persons. If
the board does not appoint the chief financial officer, the county treasurer is
designated ex officio as the treasurer. The board of directors of a
district that is established pursuant to section 48-4202, subsection A in
a county with a population of one million five hundred thousand persons or more
or section 48-4202, subsection B shall designate a
member of the board with financial management or accounting experience or a
person with whom the board has contracted for financial management as treasurer
of the district.� The county treasurer is designated ex officio as the treasurer
of a district that is established pursuant to section 48-4202,
subsection C.
2. Keep and maintain a complete and accurate record
of all its proceedings. All proceedings and records of the board
shall be open to the public as required by title 38, chapter 3, article 3.1 and
title 39, chapter 1.
3. Provide for the use, maintenance and operation of
the properties and interests controlled by the district.
E. The board of directors of a district that is
established pursuant to section 48-4202, subsection B shall:
1. Determine by agreement the distribution of
revenues from operating and using the multipurpose facilities among the
municipalities and any participating Indian tribe or community.
2. Ensure that from the amount of
budgeted income that remains after paying operating expenses and debt service
at least eighty percent of the grants and other financial support provided by
the district in a fiscal year is provided for projects that generate
transaction privilege tax revenues.
2. 3. Report
to the legislature by October 1 of each year regarding the activities,
operations, revenues and expenditures of the district for the immediately
preceding fiscal year.� The board shall submit the annual report to the
president of the senate and the speaker of the house of representatives and
provide a copy of the report to the secretary of state. At the
discretion of the chairpersons of the senate finance committee and the house of
representatives ways and means committee, or their successor committees, the
committees may hold separate or joint hearings to consider the annual report
prepared by the district.
3. 4. Present
to the joint legislative committee on capital review each project for the
construction or reconstruction of any facility, structure, infrastructure or
other improvement to real property of any kind in an amount exceeding $500,000.
F. The board of directors of a district that is
established pursuant to section 48-4202, subsection A in a county with a
population of more than one million five hundred thousand persons:
1. May enter into agreements with contractors,
tenants and other users of all or part of the major league baseball facility or
any adjacent building that is owned by the district and operated by the
district or the professional baseball franchise organization that occupies the
major league baseball facility or adjacent building as determined appropriate,
including agreements for reconstructing, equipping, repairing, maintaining or
improving the major league baseball facility or adjacent building.
2. On or before November 1 of each year through
2055, shall report to the joint legislative budget
committee and the governor's office of strategic planning and budgeting
regarding all new projects for reconstructing, equipping, repairing,
maintaining or improving a major league baseball facility or any adjacent building that is
paid for by the district from the county stadium district fund established
pursuant to section 48-4231. The report shall indicate which
projects the professional baseball franchise organization contributed monies
toward and the amount of the contribution.
G. The directors, officers and employees of the
district are subject to title 38, chapter 3, article 8 relating to conflicts of
interest.
H. This state and political subdivisions of this
state other than the district are not liable for any financial or other
obligations of the district and the financial or other obligations do not
constitute a debt or liability of this state or any political subdivision of
this state, other than the district. END_STATUTE
Sec. 30. Pinal county
transportation excise tax monies; retroactivity; definition
A. Notwithstanding any
other law, all Pinal county transportation excise tax monies that remain in the
escrow account established to hold those monies or that are held by the
department of revenue after the processing of refunds is complete must remain
in the escrow account or with the department of revenue until otherwise
appropriated by the legislature.
B. This section applies
retroactively to from and after April 9, 2026.
C. For the purposes of this
section, "Pinal county transportation excise tax monies" means net
revenues that are collected pursuant to section 42-6106, Arizona Revised
Statutes, and that are not distributed pursuant to section 42-6106,
subsection D, Arizona Revised Statutes, or refunded pursuant to section 42-1118,
Arizona Revised Statutes, and interest earned on those monies.
Sec. 31. Arizona commerce
authority; computer data center tax relief;
moratorium; retroactivity; delayed repeal
A. Notwithstanding any
other law, beginning on July 1, 2026 through June 30, 2029, the Arizona
commerce authority may not accept applications for any new computer data center
pursuant to section 41-1519, Arizona Revised Statutes, and no new
computer data centers qualify for tax relief under section 41-1519,
Arizona Revised Statutes.
B. This section applies
retroactively to from and after June 30, 2026.
C. This section is repealed
from and after June 30, 2029.
Sec. 32. Public
infrastructure distribution; interim processing
Eligible requests for payment received
by the department of revenue pursuant to section 42-5032.02, Arizona
Revised Statutes, as amended by this act, between June 1, 2026 and the
effective date of this act shall be processed and paid beginning on the
effective date of this act, subject to section 42-5032.02, subsection C,
Arizona Revised Statutes, as amended by this act, and section 42-5032.02,
subsection I, Arizona Revised Statutes, as added by this act.
Sec. 33. Unemployment
insurance operating fund; exemption; calculation; delayed repeal
A. Notwithstanding the
contribution rate imposed by section 23-730, Arizona Revised Statutes, for
calendar year 2027 each employer with an experience rating account shall pay an
amount equal to 3.15 percent of the contributions payable in that calendar
quarter to be deposited as follows:
1. In the unemployment
insurance operating fund established by subsection C of this section, except
not more than $8,000,000 may be deposited in the fund in calendar year 2027.
2. Any monies in excess of
the amount listed in paragraph 1 of this subsection, in the unemployment
compensation fund established by section 23-701, Arizona Revised
Statutes.
B. Notwithstanding section
23-730, Arizona Revised Statutes, the department of economic security
shall reduce an employer's contribution by 3.15 percent on a quarterly basis or
as otherwise prescribed by law.
C. The unemployment
insurance operating fund is established consisting of monies collected or
received by the department of economic security pursuant to subsection A of
this section. The department of economic security shall administer
the fund. Monies in the fund are continuously appropriated and
exempt from the provisions of section 35-190, Arizona Revised Statutes,
relating to lapsing of appropriations.
D. On notice from the
department of economic security, the state treasurer shall invest and divest
monies in the unemployment insurance operating fund as provided by section
35-313, Arizona Revised Statutes, and monies earned from investment shall be
credited to the unemployment insurance operating fund.
E. The department of
economic security shall use monies in the unemployment insurance operating fund
to administer the fund and pay expenses for administering the federal-state
unemployment compensation program under title 23, chapter 4, Arizona Revised
Statutes.
F. The director of the
department of economic security may transfer all or a portion of the monies
from the unemployment insurance operating fund to the unemployment compensation
fund established by section 23-701, Arizona Revised Statutes.
G. This section is
repealed from and after December 31, 2027.
Sec. 34. Applicability
A. Sections
20-224.03, 41-1507, 41-1525, 43-1074, 43-1161 and
43-1170, Arizona Revised Statutes, as repealed by this act, apply to
taxable years beginning from and after December 31, 2025.
B. Section 42-11111,
Arizona Revised Statutes, as amended by this act, applies to tax years
beginning from and after December 31, 2026.
C. Section 42-5032.02, subsection C, paragraphs 1, 2 and
3, Arizona Revised Statutes, as added by this act, apply to all agreements
entered into pursuant to section 42-5032.02, Arizona Revised Statutes, as
amended by this act, regardless of when the agreement was entered into.
Sec. 35. Retroactivity
A. Sections 42-1001,
43-105, 43-1022, 43-1041, 43-1121 and 43-1122,
Arizona Revised Statutes, as amended by this act, apply retroactively to
taxable years beginning from and after December 31, 2024.
B. Sections 43-1021,
43-1042, 43-1073.01, 43-1074.01 and 43-1168, Arizona
Revised Statutes, as amended by this act, apply retroactively to taxable years
beginning from and after December 31, 2025.
C. Section 42-5032.02,
subsection C, paragraphs 1, 2 and 3, Arizona Revised Statutes, as added by this
act, apply retroactively to from and after June 30, 2026.
Sec. 36. Saving clause
A. The repeal of the
premium and income tax credits by this act does not affect the continuing
validity of any amount of the credit carried forward from previous taxable
years for application against subsequent tax liabilities as allowed by prior
law.
B. Section 42-5032.02, subsection C, Arizona Revised Statutes, as amended by this
act, to reduce the percentage of the total cost of public infrastructure
improvements from eighty percent to seventy-five percent applies only to
agreements entered on or after the effective date of this act. Agreements
entered into before the effective date of this act remain subject to the eighty
percent limit in effect at the time of execution for the duration of the
agreement.
C. Section 42-5032.02,
subsection D and subsection K, paragraph 4, Arizona Revised Statutes, as
amended by this act, apply only to certifications filed on or after the
effective date of this act. Certifications filed before the effective date of
this act remain valid under the thresholds in effect at the time the
certification was filed.
D. Section 42-5032.02,
subsection G, paragraph 6, Arizona Revised Statutes, as added by this act,
applies only to agreements entered into on or after the effective date of this
act and does not apply to amendments or changes to agreements entered before
the effective date of this act.
E. Section
42-5032.02, subsection G, paragraph 11, Arizona Revised Statutes, as
added by this act, applies only to agreements entered into on or after the
effective date of this act.
F. Section
42-5032.02, subsection J, Arizona Revised Statutes, as added by this act,
applies only to development agreements entered into in connection with
agreements entered into pursuant to section 42-5032.02, subsection G,
Arizona Revised Statutes, as amended by this act, on or after the effective
date of this act.
APPROVED BY THE GOVERNOR JUNE 13, 2026.
FILED IN THE OFFICE OF THE SECRETARY OF STATE JUNE 13, 2026.