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HB2288 - 572R - I Ver
REFERENCE TITLE:
income tax; subtraction; foreign dividends
State of Arizona
House of Representatives
Fifty-seventh Legislature
Second Regular Session
2026
HB 2288
Introduced by
Representative
Olson
AN
ACT
amending section 43-1122, Arizona
Revised Statutes; relating to corporate income tax.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 43-1122, Arizona Revised
Statutes, is amended to read:
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43-1122.
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
income
or net controlled foreign corporation tested income
as
defined 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.
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