HB4037 • 2026

individual income tax; credit; education

HB4037 - individual income tax; credit; education

Children Education Taxes

Passed Legislature

This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.

Sponsor: Michele Peña
Last action: 2026-02-25
Official status: House committee of the whole
Effective date: Not listed

Plain English Breakdown

The official text defines 'qualifying child' but does not explicitly list all federal dependency rules beyond referencing Internal Revenue Code section 152.

HB4037: Education Opportunity Tax Credit

This bill creates a new tax credit that reduces Arizona income taxes or provides refunds based on whether a qualifying child attends public school, uses an empowerment scholarship account, or neither.

What This Bill Does

Creates the education opportunity tax credit for eligible families with qualifying children starting in taxable years beginning after December 31, 2025.
Sets the credit amount at 80% of the base support level if the child was not enrolled in public school and did not participate in an Arizona Empowerment Scholarship Account during the year.
Sets the credit amount at 40% of the base support level if the child attended public school or participated in an empowerment scholarship account for 50% or less of instructional days.
Requires taxpayers to receive any excess credit as a refund if it is larger than their tax bill after other credits and setoffs are applied.
Orders the Department of Revenue to create short form returns for those claiming this credit and simplified forms for those also claiming the dependent tax credit.
Schedules reviews of this tax credit by lawmakers in years ending with 1 or 6.

Who It Names or Affects

Arizona individual taxpayers who have a qualifying child dependent eligible to enroll in public school.
The Arizona Department of Revenue, which must manage the forms and rules for the credit.
The Joint Legislative Income Tax Credit Review Committee, which will review the program periodically.

Terms To Know

Tax credit: A dollar-for-dollar reduction of a taxpayer's income tax liability that can result in a refund if it exceeds taxes owed.
Base support level: The amount of funding determined by state law for student education used to calculate the credit value.
Qualifying child: A dependent who meets federal tax rules, is eligible to enroll in public school, and was not enrolled in public school or an empowerment scholarship account for more than 50% of instructional days.

Limits and Unknowns

The bill does not state the specific dollar amount of the base support level, which is determined by other laws.
Eligibility requires that a child did not receive an educational scholarship or tuition grant from a school tuition organization for more than half the instructional days.

Amendments

These notes stay tied to the official amendment files and metadata from the legislature.

HOUSE - Ways & Means (Adopted)

Adopted

Plain English: This amendment sets a schedule for reviewing tax credits, creates rules for simplified and short paper tax forms, requires most professional tax preparers to file returns electronically starting in 2018, and establishes a new education opportunity tax credit beginning in the 2026 tax year.

It sets up a five-year schedule where different groups of income tax credits are reviewed by lawmakers every two years based on when the calendar year ends.
It requires state agencies to create short and simplified paper tax forms for taxpayers who have simple financial situations, such as those using standard deductions or claiming only specific basic credits.
It mandates that any professional tax preparer filing more than ten returns must use electronic filing starting in 2018, while also requiring corporations and partnerships to file electronically by 2020 unless they get a waiver for lacking internet access.
It creates a new education opportunity tax credit available after December 31, 2025, equal to eighty percent of the base support level for children not enrolled in public schools or using other specific scholarship programs.

The official text provided is truncated at the end and does not include the full definition of a 'qualifying child' or all rules needed to claim the new education credit.
Because many tax law section numbers are listed without their names, it is unclear exactly which specific credits will be reviewed in each year.

HOUSE - Ways & Means (Proposed)

Proposed

It sets up a five-year schedule where specific income tax credits are reviewed by lawmakers based on which years end in numbers like 0, 5, or 1.
It requires state agencies to create short and simplified paper tax forms for taxpayers who have simple financial situations and do not claim most special deductions or credits.
It mandates that any professional who prepares more than ten individual tax returns must file them electronically starting with the year after December 31, 2017, without charging extra fees for using the state's electronic system.
It creates a new education opportunity tax credit available to taxpayers for qualifying children starting in taxable years beginning after December 31, 2025.

The official text provided is cut off at the end of Section 3 and does not show the full amount or complete rules for the new education opportunity tax credit.
Because the amendment lists many specific law section numbers (like 43-1072.02) without explaining what those laws do, it is unclear exactly which existing credits are being reviewed in each year.

Bill History

2026-02-25 House
House committee of the whole
2026-02-24 House
House minority caucus
2026-02-24 House
House majority caucus
2026-02-10 House
House second read
2026-02-09 House
House Rules: C&P
2026-02-09 House
House Ways & Means: DPA
2026-02-09 House
House first read

Official Summary Text

HB4037 - 572R - House Bill Summary

ARIZONA HOUSE OF REPRESENTATIVES

57th
Legislature, 2nd Regular Session

Majority Research Staff

House
: WM DPA 5-3-0-1

HB
4037
: individual income tax; credit; education

Sponsor:
Representative Pe�a, LD 23

Caucus
& COW

Overview

Creates
the education opportunity tax credit, specifies how much the tax credit is
worth and how eligibility is determined.

History

Arizona Empowerment Scholarship Accounts were established to
provide options for the education of students in Arizona. These funds must be
used for education in at least one of the subject areas of reading, grammar,
mathematics, social studies and science (
A.R.S � 15-2402
).

Individual income tax is levied on an Arizona resident's
taxable income at a single tax rate of 2.5%. The calculation of Arizona
individual income tax begins with the federal adjusted gross income. Statue
also authorizes various tax credits that reduce a taxpayer's income liability (
A.R.S. Title 43, Chapter 10
). A tax credit is a
dollar-for-dollar reduction of a taxpayer�s individual income tax liability. A
credit is different from a subtraction, exemption, or deduction, which reduces
the amount of income that will be taxed
JLBC 2025 Tax Handbook
.

Provisions

1.

Requires the
Joint Legislative Income Tax Credit Review Committee to review the education
opportunity tax credit, in years ending in a one or a six. (Sec. 1)

2.

Requires the
Department of Revenue (DOR) to prescribe a short form return for individual
taxpayers who elect to file for the education opportunity tax credit. (Sec. 2)

3.

Requires DOR
to provide a simplified return form for individual taxpayers who elect to claim
the dependent tax credit and the education opportunity tax credit. (Sec. 2)

4.

Specifies
the amount of the tax credit is:

a.

for a
qualifying child

who was not enrolled in a public school and did not participate in an Arizona
Empowerment Scholarship Account during the taxable year, the amount of the tax
credit is equal to 80% of the base support level.

b.

For a
qualifying child

who was either enrolled in a public school or participated in an Arizona Empowerment
Scholarship Account for 50% or less of the instructional days of the taxable
year, the amount of the tax credit is equal to 40% of the base support level. (Sec.
3)

5.

Specifies if
the allowable amount of the tax credit amount exceeds the taxes otherwise due
for the taxable year, after applying all other credits and after any setoffs to
state agencies, political subdivisions and courts, the taxpayer is entitled to the
excess amount and is required to be refunded by DOR. (Sec. 3)

6.

Requires DOR
to adopt rules and prescribe forms to administer these requirements and can
consult ADE to determine whether a
qualifying child
of a taxpayer who is
claiming the tax credit was enrolled in a public school or participated in an
Arizona Empowerment Scholarship Account. (Sec. 3)

7.

Defines
Qualifying
Child
. (Sec. 3)

8.

Applies to
taxable years beginning January 1. 2026. (Sec. 3)

9.

Contains a
purpose clause. (Sec. 4)

10.

�Makes
technical and conforming changes. (Sec. 1,2)

Amendments

1.

Requires that the qualifying
child did not receive an educational scholarship or tuition grant from a school
tuition organization for more than 50% of the instructional days to be eligible
for this tax credit. (Sec. 3)

2.

3.

4.

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4037

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Current Bill Text

Read the full stored bill text

HB4037 - 572R - I Ver

REFERENCE TITLE:
individual income tax; credit; education

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HB 4037

Introduced by

Representative
Pe�a

AN
ACT

amending sections 43-222 and 43-323,
Arizona Revised Statutes; amending title 43, chapter 10, article 5, Arizona
Revised Statutes, by adding section 43-1073.02; relating to 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,

43-1073.02,
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. 2. Section 43-323, Arizona Revised
Statutes, is amended to read:

START_STATUTE
43-323.

Place and form of filing returns

A. All returns required by this title shall be in
such a form as the department may from time to time prescribe and shall be
filed with the department.

B. The department shall prescribe a short form
return for individual taxpayers who:

1. Are eligible and elect to pay tax based on the
optional tax tables pursuant to section 43-1012.

2. Elect to claim the optional standard deduction
pursuant to section 43-1041, subsection A, but not the increased amount
for charitable deductions under section 43-1041, subsection I.

3. Elect not to file for credits against income tax
liability other than those contained in sections 43-1072, 43-1072.01,
43-1072.02, 43-1073
,

and

43-1073.01
and 43-1073.02
.

4. Are not required to add any income under section
43-1021 and do not elect any subtractions under section 43-1022,
except for the exemptions allowed under section 43-1023.

C. The department may provide a simplified return
form for individual taxpayers who:

1. Are eligible and elect to pay tax based on the
optional tax tables pursuant to section 43-1012.

2. Are residents for the full taxable year.

3. File as single individuals or married couples
filing joint returns under section 43-309.

4. Are not sixty-five years of age or older or
blind at the end of the taxable year.

5. Claim no exemptions under section 43-1023
for the taxable year.

6. Elect to claim the optional standard deduction
under section 43-1041, subsection A, but not the increased amount for
charitable deductions under section 43-1041, subsection I.

7. Are not required to add any income under section
43-1021 and do not elect to claim any subtractions under section 43-1022
or file for any credits under chapter 10, article 5 of this title, except the
credits provided by sections 43-1072.01, 43-1072.02
,

and
43-1073
, 43-1073.01 and 43-1073.02
.

8. Do not elect to contribute a portion of any tax
refund as provided by any provision of chapter 6, article 1 of this title.�
Notwithstanding any provision of chapter 6, article 1 of this title, a
simplified return form under this subsection shall not include any space for
the taxpayer to so contribute a portion of a refund.

D. The department shall prepare blank forms for the
returns and furnish them on request.� Failure to receive or secure the form
does not relieve any taxpayer from making any return required.

E. An individual income tax preparer who prepares
more than ten original income tax returns that are timely filed during any
taxable year that begins from and after December 31, 2017 shall file
electronically all individual tax returns prepared by that tax preparer, for
that taxable year and each subsequent taxable year.� An individual income tax
preparer may not charge a separate fee to the taxpayer for filing a return
using the department's electronic filing program.� This subsection does not
apply if the taxpayer elects to have the return filed on paper or if the return
cannot be filed electronically for reasons outside of the tax preparer's
control.

F. Fiduciary returns, partnership returns,
withholding returns and corporate returns shall be filed electronically for
taxable years beginning from and after December 31, 2019, or when the
department establishes an electronic filing program, whichever is
later. Any person who is required to file electronically pursuant to
this subsection may apply to the director, on a form prescribed by the
department, for an annual waiver from the electronic filing requirement.� The
director may grant the waiver, which may be renewed for one subsequent year, if
any of the following applies:

1. The taxpayer has no computer.

2. The taxpayer has no internet access.

3. Any other circumstance considered to be worthy by
the director exists.

G. A waiver is not required if the return cannot be
electronically filed for reasons beyond the taxpayer's control, including
situations in which the taxpayer was instructed by either the internal revenue
service or the department of revenue to file by paper.
END_STATUTE

Sec. 3. Title
43, chapter 10, article 5, Arizona Revised Statutes, is amended by adding
section 43-1073.02, to read:

START_STATUTE
43-1073.02.

Education opportunity tax credit; rules; definition

A. For taxable years beginning from
and after December 31, 2025, a credit is allowed against the taxes imposed by
this chapter for
each qualifying child of a taxpayer
as provided by this section.

B. the amount of the credit is:

1. For a qualifying child who was not
enrolled in a public school and did not participate in an Arizona empowerment
scholarship account pursuant to section 15-2402 during the taxable year,
equal to eighty percent of the amount of the base support level as determined
by section 15-943 for the qualifying child of the taxpayer.

2. For a qualifying child who was
either enrolled in a public school or participated in an Arizona empowerment
scholarship account pursuant to section 15-2402 for not more than fifty
percent of the instructional days of the taxable year, equal to forty percent
of the amount of the base support level as determined by section 15-943
for the qualifying child of the taxpayer.

C. If the allowable amount under
subsection B of this section exceeds the taxes otherwise due under this title
for the taxable year, after applying all other credits to which the claimant
may be entitled and after any setoff under section 42-1122, the excess
amount shall be paid in the same manner as a refund under section 42-1118.

D. The department of revenue shall
adopt rules and prescribe forms to administer this section and may consult with
the department of education to determine whether a qualifying child of a
taxpayer who is claiming the credit under this section was enrolled in a public
school or participated in an Arizona empowerment scholarship account pursuant
to section 15-2402.

E. For the purposes of this section,
"qualifying child" means a child who:

1. is a dependent of the taxpayer as
defined in section 152 of the internal revenue code.

2. is eligible to enroll in a public
school in this state but was not enrolled in a public school in this state for
more than fifty percent of the instructional days during the taxable year.

3. Did not participate in an Arizona
empowerment scholarship account pursuant to section 15-2402 for more than
fifty percent of the instructional days during the taxable year.
END_STATUTE

Sec.
4.
Purpose

Pursuant to section 43-223,
Arizona Revised Statutes, the legislature enacts section 43-1073.02,
Arizona Revised Statutes, as added by this act, to open and improve the
statewide educational landscape by providing additional stronger educational
choices for families in this state.