tax credit; health reimbursement arrangement

HB2694 - 572R - I Ver

REFERENCE TITLE:
tax credit; health reimbursement arrangement

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HB 2694

Introduced by

Representative
Livingston

AN
ACT

amending section 43-222, Arizona
Revised Statutes; amending title 43, chapter 10, article 5, Arizona Revised
Statutes, by adding section 43-1080; relating to individual income tax
credits.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 43-222, Arizona Revised
Statutes, is amended to read:

START_STATUTE
43-222.

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,
43-1080,
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. 2. Title 43, chapter 10, article 5,
Arizona Revised Statutes, is amended by adding section 43-1080, to read:

START_STATUTE
43-1080.

Credit for individual coverage health reimbursement arrangement;
definition

A.
For
taxable years beginning from and after December 31, 2026, a credit is allowed
against the taxes imposed by this title for a taxpayer that:

1. Employs at least one and not more
than fifty employees, cumulatively and regardless of an employee's length of
tenure during the taxable year.

2. Provides an individual coverage
health reimbursement arrangement to the taxpayer's employees.

3. contributes at least $400 for each
employee to the individual coverage health reimbursement arrangement during the
taxable year.

B. The amount of the credit is equal
to $400 multiplied by the number of employees who received health care benefits
under the individual coverage health reimbursement arrangement during the
taxable year.

C. If the allowable 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 amount of the claim not used to offset
taxes under this title may be carried forward for not more than five
consecutive taxable years as a credit against subsequent years' income tax
liability.

D. Co-owners of a business,
including partners in a partnership 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 such owners of the business may
not exceed the amount that would have been allowed for a sole owner of the
business.

E. The department may request that a
taxpayer that claims a credit under this section provide necessary information
to support the amount of the credit the taxpayer is claiming. The department
may not authorize the credit UNTIL the requested information is received.

F. For the purposes of this section,
"Individual coverage health reimbursement arrangement" means a health
reimbursement arrangement as prescribed in 45 code of federal regulations
section 146.123.
END_STATUTE

Sec. 3.
Purpose

Pursuant to section 43-223, Arizona
Revised Statutes, the legislature enacts section 43-1080, Arizona Revised
Statutes, as added by this act, to support small businesses that provide an
individual coverage health reimbursement arrangement to their employees.